to estimates of the Organization for Economic Cooperation and Development
(OECD), a major shift occurred in support of agricultural producer receipts
among NAFTA countries between 1982-92 and 1999. While Mexico's producer
subsidy equivalent (PSE, or proportion of farm receipts from the public
sector) remained at approximately one-fifth, Canada's PSE fell from 35 percent
in 1982-92 to 20 percent in 1999. While Canada's PSE was being cut, the
U.S. PSE rose slightly, going from 23 percent to 24 percent in the same period.
The form of programs contributing to the PSE has a major impact on
domestic resources and trade as apparent for the United States in Table 1.
Massive direct payments increased U.S. farm output only 0.15 to 0.25 percent
Results in Table 1 suggest important implications for farm structure
under a liberalized NAFTA:
* output-increasing tendencies of farm commodity programs not only
distort trade, they also offset some and perhaps most of the intended
economic benefits to farmers;
According to Table 1, coupled public programs increased output, depressed
U.S. farm prices, and possibly reduced receipts by $18 to $25 billion, enough
to offset benefits of direct payments to U.S. farmers in recent years. Thus an
end to decoupled programs under free trade might have only modest impact on
farm economic welfare and farm structure.
* direct payments (production flexibility contract, AMTA, or transition
payments) only modestly affect output.