A Framework of the Agricultural Policy Reform

Facing WTO/DDA and FTA Negotiations in Japan

Abstract

The paper makes a survey of analytical challenges in recent literature regarding (1) Japanese agricultural policy reforms in terms of PSE and multifunctionality, and (2) possible impacts of FTAs for which negotiations are under way. In the context of the WTO, the movement from market price supports (MPS) to decoupled measures of direct payment delays compared with those of other OECD countries. The Japanese government wants to justify its protection policies which promote multifunctionality, of paddy fields or rice production in particular. The author's analysis employing the Policy Evaluation Matrix (PEM) approach, which has been developed by the OECD, shows large impacts of support measures on functions of land conservation, parts of multifunctionality, and effectiveness of border measures (MPS) is less than that of measures of direct payment. Alternative frameworks analyzing possible impacts of FTAs on Japanese agriculture are also considered. Default numbers from the ongoing database in GTAP being applied very often in recent studies would be dubious in cases of Japanese rates of duty. Careful applications of GTAP are suggested and the classical Viner's approach would be helpful in the first step, intuitive considerations. The Bertrand's game approach would be also useful for ex-post analyses. Using this approach, we could evaluate possible reactions by non-member countries using data in cases of GSP provisions. In general, support policies critical in Japanese agriculture, e.g., rice, sugar, and starch, are managed by quantitative measures such as TRQ and sometimes by measures not necessarily transparent, which makes it difficult to estimate possible impacts of FTAs.