2.6 Policy instruments and options

The final step in laying a factual groundwork for choosing key policy issues is the identification of policy instruments by which a given situation could be improved. Three general points should be made. First, sometimes there are no feasible policy instruments available to a national government with which to tackle policy issues or problems. In some cases, e.g. with land reform, entrenched domestic interest groups may be simply too strong for effective action. In other cases, e.g. with the price of export or import commodities, it may be international market forces that override the efforts of national governments. Change, in such cases, may be very slow.

The second and third general points repeat what was said in module 1. The same objective can often be served by several alternative policy instruments; and the same policy instruments can affect the attainment of several policy objectives.

It is very easy to believe that there is only one way (instrument) to tackle a problem or set an objective. This can lead to governments fruitlessly trying to do things they have no resources or advantage in doing. For example, suppose the "problem" is that consumers in country A cannot buy as much milk as they want. The "obvious" solution is for country A to produce more milk. But if country A has serious livestock disease problems and an unfavourable climate, it may make much more sense for it to grow and export agricultural products which its climate does favour and to use the foreign exchange earned by those exports to buy the milk it needs.

To prevent ourselves from getting caught in the "single instrument" trap, it is useful to search systematically for alternative instruments. This search can be assisted by grouping the possible instruments into broad categories. Tables 2.14-2.15 provide alternative ways of categorising instruments. Table 2.14 categorises the instruments in two ways: first, at the level of direct impact (border, domestic market - i.e. retail or wholesale, the point of production on farm or on range); and second, by whether the instrument has its entry point through input/production activities or the outputs and their processing.

Table 2.14. Policy instruments classified by level of direct impact and entry point.¹

Level of direct impact	Associated with entry points through
Border level (International trade)	Inputs or production activities	Outputs or output-processing activities
	· Procurement through aid funds	· Export subsidy (tax)
	· Bulk buying by government to achieve economies of scale	· Inter-government export contract or similar agreements (e.g. Lomé)
	· Allocation of foreign exchange	· Parastatal export-oriented abattoir
		· Protectionist import tariffs or quotas on competing imports
		· Food aid
		· Export or import livestock health quarantines or regulations
Domestic market (Internal trade or distribution)	Price control regulations
	· Licensing of trader (e.g. pharmaceutical firms)	· Auction or other regulated market
	· Input subsidies	· Infrastructure/regulations to ensure purchase by grade and/or weight
	· Quality control regulations	· Price control regulations
	· Input rationing systems	· Market information service
	· Special credit systems for inputs (e.g. loan to purchase half-bred heifers)	· Credit scheme to livestock trade
	· Government provision of direct services (e.g. veterinary, artificial	· Direct purchasing by parastatal from producer insemination)
		· Guaranteed price/commodity stock scheme
		· Provision of transport infrastructure (e.g. stock routes)
On farm/on range	· Land tenure legislation	· Research and extension in on-farm processing
	· Farmers' training and extension
	· Production research
	· Government-supplied water points
	· Government-supplied fire-breaks
	· Progeny testing, bull culling and similar schemes for genetic improvement
	· Range management regulations

¹ The list is illustrative and not intended to be all-inclusive.

Table 2.15 looks back at the problems listed in Table 2.8 and categorises the instruments which might be used to tackle each of these in terms of the nature of the instruments themselves, e.g. whether they are legal/institutional, involve public investments etc. Both Tables 2.14 and 2.15 are intended essentially to act as check-lists or memory-aids. The method of categorization is only good or bad insofar as it helps people identify different ways of tackling the same problem or objective.

Table 2.15. Policy instruments categorised by nature of instrument and problem to be solved: Some examples.

	Nature of instrument
Problems	Legal and institutional framework	Price policies	Quantity controls	Public investment and services	Research and extension
Inadequate supplies		Support for prices of output and subsidies on inputs	Minimum market quotas, forced deliveries	Road building in inaccessible areas	Expanded research and extension services
Excessive imports	Licences to import matched to domestic purchase	High import tariffs and consumption taxes	Import quotas
Unproductive resources	Reform of land tenure to prevent open access		Maximum stocking quotas		Improved livestock breeds
Desertification	Erosion control regulation	Subsidies for non-use of vulnerable land		Public fuel forests and shelter belts
Unstable supplies		Counter-cyclical pricing subsidies and taxes	Conservative stocking quotas	Long-term refrigeration and storage facilities	Development of drought-resistant forage species
Inefficient services	Privatisation	Material incentives for performance			Programmes to promote awareness of user rights
Distorted prices	More competitive markets		Counter- distortion import licensing		Market information services
Inadequate markets	More competition			Improved communication and transport facilities
Concentrated livestock ownership	Open up alternative investment opportunities	Progressive cattle taxes	Maximum herd size quotas
Unfair access to land	Land tenure reform	Progressive tax on land holdings	Maximum land holdings	Open up inaccessible land e.g. by developing new water supplies

Important points (2.4-2.6) · Information about a government's policy objectives and the ranking of these objectives is essential in prioritising policy issues on which to focus. · Government policy objectives for the livestock subsector are guided by overall political philosophy and the envisaged changes in the present functions of the subsector. · Government policy objectives are broadly classified into five groups: - independence objectives - economic efficiency objectives - resource conservation objectives - stability objectives - equity objectives. · Often, policy objectives pursued by a government differ from the declared objectives. · Policy analysts must resolve the problems arising from conflicts between declared and undeclared objectives and present sound choices to the policy maker. · The analyst should try to identify the policy maker's rough ranking of policy objectives. · After knowing and ranking policy objectives, the next step in identifying key policy issues is to assess sector performance with respect to each objective. · Sector performance can be judged qualitatively in terms of problems rather than "unfulfilled objectives". · Quantitative performance monitoring of the livestock sector will require appropriate quantifiable criteria, an acceptable minimum standard and pertinent data. · The final step in prioritising policy issues is the identification of policy instruments by which a situation can be improved. · Three points to remember in identifying policy instruments to tackle policy issues or problems are: - Sometimes, no feasible policy instruments may be available to a government to tackle the problem. - The same objective can often be served by several alternative policy instruments. - The same policy instruments can assist in the attainment of several policy objectives.