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SUMMARY AND POLICY IMPLICATIONS 201


payments do not distort agricultural production and trade and therefore do not influence farm decisions.


Decoupled payments to farmers have been tried in the E.U., Mexico, and the United States, among other countries (see Baffes and de Gorter 2004). We summarize these three experiences as follows: • In the 1985 U.S. farm bill, the basis for payments was shifted from cur- rent production to current area and historical yield. The 1996 farm bill, known as the Federal Agriculture Improvement and Reform Act, replaced traditional agricultural programs with decoupled payments under produc- tion flexibility contracts that were to be phased out over six years. The act was undermined by the U.S. Congress, which provided supplemental farm aid in the form of emergency relief and loan deficiency payments almost every year.


• The E.U. has also moved toward decoupled payments to farmers. In 1992 the E.U. reformed the common agricultural policy to reduce price sup- ports and switch from current planted area to area planted in a base year. Over the 1990s, decoupled payments rose so that they accounted for more than 20 percent of total producer support, while import protection was reduced. In 2003 the E.U. decided to increase decoupled payments to account for three-quarters of the support for crop production.


• Mexico introduced a decoupled payment program in 1994 in preparation for the North American Free Trade Agreement. The Procampo program shifted Mexican agricultural policy from support prices and input subsidies to a system of fixed payments based on historical area, thus compensating farmers for the reduction in import protection associated with the new agreement. The program was made more progressive by setting a mini- mum 1 hectare even for farms below this size and by capping the maxi- mum payment allowed. As in the United States, the program was partially undermined in 2002 by the reintroduction of price supports.


Perhaps most relevant to the MENA countries is the case of Turkey. In 2000 Turkey was providing US$6.4 billion in support for agriculture, of which US$1.4 billion was price support and input subsidies and US$5 billion was in the form of import protection. In 2001 Turkey launched its Agricultural Reform Implementation Program with support from the World Bank. The objectives of the program were to (1) introduce direct income support pay- ments, decoupled from production decisions; (2) phase out agricultural price supports and input subsidies; and (3) implement a system of direct income payments, decoupled from production levels. The program began with a pilot project to experiment with alternative methods of establishing a registry of farms. Then a massive farm registration program was launched that eventu-


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