European set-aside programs that pay farmers not to produce; or
they may be positive, such as price supports tied to specific crop
yields and acres of production.
The goal of U.S. domestic agricultural policy in the Bush admin-
istration is generally to eliminate policies that are most distortive of
production decisions (“Red Light” policies), including large set-
asides and high price supports, and to phase out (“Yellow Light”
policies) those that have tended to distort production over time, such
as crop-specific acreage bases. What remains (“Green Light” pol-
icies) will be programs in which farmers are relatively free to plant
whatever crops are most in market demand, with support paid, not
to specific crops, but on the basis of some type of income criteria.
Overall, progress in the present GATT negotiations can be defined
as an agreement to eliminate a specific set of “Red Light” policies in
each realm (exports, imports, and output) with a well-defined time-
table, and to designate a set of “Yellow Light” policies for discussion
in subsequent years.
Aggregate Measures ‘Underidentify’ Problem
It seems inevitable that successful negotiations will ultimately in-
volve agreements to end specific policies, and that such political de-
cisions cannot be finessed by an agreement simply to achieve an ag-
gregate level of support or level of tariff or subsidy. This is the route
sometimes suggested by advocates of a single aggregate measure,
such as the Producer Subsidy Equivalent (PSE). As Hertel has re-
cently shown, a given reduction in the aggregate level of support can
be achieved with a myriad of different options, many of which have
extremely different effects on exports, imports and output. His
analysis shows that aggregate measures, because they abstract from
this complexity, “underidentify” the problem, and thus do not pro-
vide sufficient discipline to achieve Ionglasting reform (1989a, 1989b).
Key Battles Identified
Before turning to the bilateral and home fronts, let me touch on
the relationship between agriculture and several other key areas of
the Uruguay Round negotiations. While publicly stating that all fif-
teen areas are crucial, the tactical importance attached to some is
greater than to others. This is sufficiently well-known to the nego-
tiators themselves that it does not seem seditious to state them. The
“enemy” already knows which battles will be key.
Agriculture, throughout the Uruguay Round, has been crucial,
and remains so. Minimum results must be achieved in agriculture for
the U.S. trade strategy to be successful.
31