Producers' entitlement guarantees: A serious option for liberalizing Japan's rice and dairy sectors
Abstract Liberalization of Japan's rice and dairy markets along the lines proposed by GATT in December 1991 is politically and financially feasible. Tradable producers' entitlement guarantees (PEGs) are an income support measure which is partly decoupled from price support. The fact that PEGs would still bear some relationship to output would make a gradual liberalization of trade much more acceptable to farmers, who could be fully compensated for the loss in income caused by greater exposure to foreign competition. PEGs would still cause moderate trade distortions, however, which would decrease as tariffs were reduced and eventually disappear with them. PEGs could thus provide a useful platform for persuading the Japanese government to liberalize agriculture.
Japanese Agriculture Under Siege: The Political Economy of Agricultural Policies . By Yujiro Hayami. New York: St. Martin's Press, 1988. xiv, 145 pp. $45.00.
An intelligent layman seeking more than a superficial understanding of the history, politics, and theories underlying Japan's difficult international agricultural relations will find this book ideal for his purpose. It deals with the agricultural adjustment problem that lies at the root of most economic difficulties associated with the farm. This problem surfaces because the demand for agricultural products grows more slowly than demand for the products of other industries as the nation's income rises. This requires the transfer of labor and other resources to other industries. Historically, this transfer has not taken place rapidly enough to prevent a relative decline in farm income. When this fall takes place in more developed countries (MDCs), a farm lobby emerges to shift a part of the adjustment costs to the nonfarm population. In Japan, in tne more than forty years after the Pacific War, farm circumstances have changed many times. Farmers benefited substantially from the food shortage and the land reform program in the first decade after the war. Nevertheless, by the end of the 1950s, because of the extraordinarily rapid growth of industrial productivity, rural household income had fallen much below (about twenty-three percent) that of urban households. This prompted the appearance of an agricultural lobby consisting of the farmers, the Agricultural Collective Associations, and the Liberal Democratic Party. This powerful trilateral coalition spearheaded the passage of the 1961 Agricultural Basic Law whose primary goal was to make agricultural income levels equal to those in other industries. Farm household income was raised by increasing the prices of some agricultural products by decree, erecting barriers against the import of competing agricultural products, and subsidizing agricultural inputs. Meanwhile another transformation also helped to raise farm income. This was the increasing availability of full-time nonfarm jobs for members of agricultural households who could continue to work part-time on the farms.
PRICE VERSUS STOCK EFFECT POLICIES FOR REDUCING EXCESS MILK PRODUCTION
This article presents a comparative dynamic analysis of the market impact of alternative U.S. policies designed to reduce excess capacity in milk production. Two policy options are examined based on an econometric model of the dairy industry and a dynamic simulation of the system. The stock effect policy relies on voluntary reductions in cow numbers to reduce milk supplies, while the price effect policy makes use of reductions in the support price levels to achieve the same goal. The simulation results are used to evaluate equilibrium prices and quantities for the farm and retail markets, government costs, and consumer and producer surpluses from 1986 to 1995 for each policy alternative. The analysis shows that farmers are better off under a voluntary supply control program, while consumers are better off under a support price reduction policy.