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This Selected Issues paper assesses the distributional effects of increased fuel prices on Mali. The paper applies cointegration analysis to simulate the evolution of Mali’s long-term equilibrium real exchange rate during the period 1982–2004. It assesses the impact of structural reforms on Mali’s aggregate output growth, using a growth accounting framework that disaggregates output growth into factor accumulation and total factor productivity (TFP). The paper also explores the scope for creating and using fiscal space over the medium term under a range of illustrative policy scenarios.

Prior to the 1994 Uruguay Round Agreement on Agriculture, many developed countries supported production largely through support prices and government procurement. Since mid-1990s these countries have increasingly favored income support or direct payments over price support policies. In this study, we outline the farm policy changes in the European Union, EU, and the United States, US, since 1996 and compare their levels of support under various policies. The producer support estimates for the EU are more than twice that of the US, although the value of EU agricultural production is only 30% more than the US production value. In the EU, reductions in the intervention (support) prices for cereals, oilseeds and beef sector have been compensated by increased direct payments, i.e., payments based on historical acreage and yield or animal head counts. In 1996, the US eliminated target prices and deficiency payments for major crops, and acreage set-sides for supply control. They have been replaced with fixed and emergency payments. However price floors (loan rate with deficiency payments) have been retained for major crops. The sugar and dairy sector policies of the EU and the US have undergone few changes since 1996. In the case of major crops, support is generally higher in the EU (ranging from $67 per ton for cereals to over $1,100 per ton for olive oil) than in the US except in the case of cotton ($456 per ton) and rice ($111 per ton). The intervention support and direct payments for major crops as a percent of border price have remained relatively constant in the EU. The US price support and direct payment for major crops as a percent of either farm or fob price has shown an increasing trend from 1996-2000, with marginal declines in 2001. The US support levels have at least doubled for most major crops between 1996 and 2001. The direct payments are categorized as minimally trade distorting support by the EU and the US, which led to their placement in the blue box and green box/de minimis exemptions, respectively. The EU and US have increasingly used direct payments, which are fully or partially decoupled from current market conditions. Whether or not payments with varying degrees of decoupling affect production decisions has been a subject of debate. Although decoupled payments do not depend on current acreage or yield, they could impact production under uncertainty or in a dynamic context. These payments help farmers cover fixed costs, and reduce constraints in capital and labor markets. They also change farmers' attitudes towards risk and create expectations about future payments being contingent on current planting. Under uncertainty "partially coupled policies," like the US emergency payments, can induce a production response through the insurance effect (reduction in the degree of risk) in addition to the wealth effect. A review of modeling attempts shows a consensus that the wealth effects induce a relatively weaker production response than the insurance effect, but some find it of similar or even greater magnitude than the traditional subsidy effects. However, there is a wide range of estimates and substantial disagreement on the absolute magnitude of the insurance effect and its relative impact on production vis-à-vis the traditional subsidy effect. In addition, while many studies have acknowledged the importance of the expectations effects of decoupled payments, few have attempted to quantify it. The initial EU and US agricultural proposals for the Doha round focused on reducing market access barriers and export subsidies, but refrained from limiting domestic support measures. Developing countries' effective opposition to these proposals led to the collapse of the 2003 WTO Ministerial Meeting at Cancun, Mexico. The recently announced Doha Work Program proposes complete elimination of export subsidies and significant reductions in market access barriers. In the case of domestic support, developing countries' views such as the reductions in product and non-product specific de minimis provisions, and the criteria for blue box payments are reflected in the proposal. At the same time, developed countries' views on the continued placement of direct payments in either blue or green box have been included in the proposal. However, agreement on the extent of reductions and the specific modalities is expected in the next 16 months. The final agreement, scheduled for presentation to members at the Hong Kong WTO Ministerial Conference in December 2005, likely depends on whether or not the new proposals and their modalities would result in meaningful limits on domestic support.

In this study, we outline the farm policy changes in the European Union, EU, and the United States, US, since 1996 and compare their levels of support under various policies. The producer support estimates for the EU are more than twice that of the US, although the value of EU agricultural production is only 30% more than the US production value. In the EU, reductions in the intervention (support) prices for cereals, oilseeds and beef sector have been compensated by increased direct payments, i.e., payments based on historical acreage and yield or animal head counts. In 1996, the US eliminated target prices and deficiency payments for major crops, and acreage set-sides for supply control. They have been replaced with fixed and emergency payments. However price floors (loan rate with deficiency payments) have been retained for major crops. The sugar and dairy sector policies of the EU and the US have undergone few changes since 1996....The initial EU and US agricultural proposals for the Doha round focused on reducing market access barriers and export subsidies, but refrained from limiting domestic support measures. Developing countries' effective opposition to these proposals led to the collapse of the 2003 WTO Ministerial Meeting at Cancun, Mexico. The recently announced Doha Work Program proposes complete elimination of export subsidies and significant reductions in market access barriers. In the case of domestic support, developing countries' views such as the reductions in product and non-product specific de minimis provisions, and the criteria for blue box payments are reflected in the proposal. At the same time, developed countries' views on the continued placement of direct payments in either blue or green box have been included in the proposal. However, agreement on the extent of reductions and the specific modalities is expected in the next 16 months. The final agreement, scheduled for presentation to members at the Hong Kong WTO Ministerial Conference in December 2005, likely depends on whether or not the new proposals and their modalities would result in meaningful limits on domestic support.

Why did EC enlargement negotiations with Spain take so long? This thesis argues that agricultural issues dominated negotiations despite the political and strategic aims of stabilizing Western Europe's southern flank that underpinned the raison d'être of this enlargement. The framework of Historical New Institutionalism is used to argue that several 'biases' operating at three levels account for the length and nature of these negotiations. At the first level, the 'bilateral' format of the negotiation procedure between Spain and the EC favoured existing EC members and protected the acquis communautaire. The Community's negotiating positions, as bargains in themselves, tended to be inflexible, and reduced Spain's input in the discussions and in the agenda-setting process. At the EC level, the CAP exhibited an unusual capacity to withstand the changes required by enlargement. This was because the EC's decisionmaking structure was fragmented into sectors and levels which allowed a closely knit 'policy community' to run the CAP in a way that was relatively insulated from other issue-areas. Change in the CAP occurred to cope with enlargement, but in a path-dependent way, passing the cost of adaptation on to Spain. At the national level, member states' so-called national interests with regard to enlargement were mixed, with no clear priority, and conflicting sectoral views. This resulted from the mechanisms of interest intermediation and inter-departmental co-ordination, which shaped the formulation and representation of national views in Brussels. Spain's accession was finally made possible when new redistributive policies for the Mediterranean and fresh budgetary resources were agreed. These were approved as part the wider package-deals surrounding the Single Market project and the Single European Act. HNI provides a new and persuasive framework with which to understand the difficulties of institutional change associated with enlargement negotiations.