PROMOTING MULTIFUNCTIONALITY WHILE MINIMIZING TRADE DISTORTION EFFECTS: THE RELATIVE MERITS OF TRADITIONAL POLICY INSTRUMENTS

In relation to the growing debate around multifunctionality, this paper attempts to classify alternative measures of agricultural income support according to their ability in achieving three policy objectives (supporting agricultural income, promoting positive externalities and reducing negative ones) as well as to their induced trade distortion effects. Four income support programs are considered: a production-linked payment program, a land-based payment program and two decoupled payment programs. Their effectiveness as regards to the three policy objectives and their relatives induce trade distortion effects are examined on an equal cost/support basis through a conceptual framework that allows for free entry in the sector and the land price to adjust endogenously. Analytical results show clearly that no program uniformly dominates others. They also allow to identify the key parameters that have a substantial bearing on the relative merits of these programs.