Rurale Économie

Rennes

INTRODUCTION

In 1986, the Uruguay Round was launched by the declaration of Punta dei Este.

Although this declaration expresses a consensus on the need for policy reforms, the contracting parties of the GATT have quickly shown large divergences in their expectations from the Round and in their willingness to make concessions. The economic and political fundamentals of agricultural sectors in the various countries have reappeared in the open and the negotiating positions expressed in the first stages of the Round have proved to be far apart.

The Round has been going on for six years now and lasted longer than any previous Round. This is a1so the first time that agricultural issues played such an important role, with several crises triggered by the deterrnination of the United States and developing countries to condition any general agreement on a successful solution of pending agricultural disputes.

The United States (US) and the European Community (BC) have been the major actors in this Round and agricultural issues have for most of the time been at the front scene, a place which is out of proportion with respect to the relative share of agriculture in world trade and the importance of emerging issues, like trade in services or intellectual property, which have received Jess coverage from the medias.

Although at several occasions it was feared that the Round would collapse, it never did and failures to conclude agreements at important stages (Montréal in 1988, Bruxelles in 1990, or Geneva in 1991) were soon followed by initiatives to restart the process. In fact lots of policy changes have occurred since the negotiations started and the wide discrepancies between the early negotiating positions of the major players have narrowed down. The prospects for a final agreement are now within reach after the successful meeting of Washington where the EC Commission and the US have found a bilateral compromise.

The major reforms proposed by the European Community Commission in July 1991 (CCE, 1991) set the stage for this bilateral compromise. These reforms changed drastically the negotiating position of the EC even though the process of adopting these reforms by the Council of Ministers has led to numerous changes, changes that tended to lesson the extent of the reform initially proposed (CCE, 1992). Nevertheless, reform has been initiated and, a1though it does not cover ail sectors, it does introduce a new instrumentation for providing economic support that lessons incentives to distort markets. The most deeply affected are the markets for cereals, the commodity at the core of European agriculture, and the c10sely related products not controlled by production quotas.

Several other countries have unilaterally accomplished policy reforms involving significant deregulation (Sweden and New-Zealand), or a freeze of price supports with a decoupling of subsidies and an increased role of market forces (United States FACT of 1990).

Agricultural trade relations have improved between the US and Japan after the limited access concessions made by the latter on beef and citrus imports. The trade conflict between the EC and the US has however become more tense, culminating in the export subsidy war and the soya panels.

Effective progress in trade liberalisation has indeed been made, aside from the Uruguay round itself, but influenced by the general context of the negotiations. However, the last few months brought sorne uncertainty on the conclusion of a general accord as the EC-US dispute on oilseeds and EC grain export volumes overshadowed all the other issues.

The purpose of this paper is to put the Washington deal into perspective. A first assessment of what has been achieved in the Uruguay Round as it approaches its conclusion is made in the light of research we have carried on the fundamentals of the EC-US conflict and on the nature of the agricultural game in the GATT.

Our main point is that, due to interest group influence in protected sectors in ail countries, a full multilateral deregulation is not likely so that the public good of international coordination will be under supplied. However, the politicalleverage exerted by special interests in a country can induce it to exert strong leverage on other countries to compromise. This explains why the negotiation has eut down on the ambitions and progressively reduced the targets on domestic support reduction because of interior political influence of interest groups.

This explains also the increasing focus on trade barriers, and more narrowly on export subsidies. Furthermore, it is consistent with the increased tendency of the negotiations to largely be an EC-US matter with little mention of other parties involved in the negotiations.

Section 1 deals with the economic and political economy framework which is used to explain the developments of the Round. Section 2 gives sorne empirical evidence based on the compatibility between the Dunkel compromise, the CAP reform and the US FACT. Section 3 looks at the Washington compromise in the light of the sore points in EC and US policies that an agreement strictly based on the Draft Final Act would have revealed. Section 4 concludes that the deal minimizes domestic political costs, but constrains trade policy to alleviate international spillover effects of domestic policies.

AGRICULTURAL POLICY REFORMS IN THE GATI: BETWEEN RENT SEEKING AND

MERCANTILISM

There is ample evidence that free trade in agriculture is unlikely to result from spontaneous unilateral government actions, even if extensive reforms of agricultural policies have occurred recently in a few countries. In spite of economic gains to the society as a whole, the political balance appears to favour specific group interests as opposed to the long-mn general interest. Governments also appear to have a tendency to weight heavily the short-mn political costs that trade liberalization would entai! relative to the longer mn gains that would most surely be obtained. These long-mn gains are delayed, dispersed and furthermore difficult to demonstrate. The collective action approach shows why interest groups are able to make their case to the politicians.

They are effective, as [START_REF] Oison | The Logic of Collective Action[END_REF] has pointed out, because their small number in proportion to their country's population and the large share of their income from specialization lower their individual costs of lobbying and seeking legislation in their favour. At the same time, since food is a smal1 proportion of total household expenditures, it is not in individual consumer's interest to incur the costs of forming a countervailing lobby body to induce policy reform.

Interest groups can also efficiently influence public opinions because specific income losses are less costly to demonstrate than potential gains of economic growth due to freer trade. Moreover, these gains are also a public good without an organized constituency to lobby for its provision.

The resistance to deregulation is difficult to circumvent for both institutional and economic reasons. The institutional reasons lie in the various channels of political connections, congressional committees, legal statutes and structures and other institutions that support, implement and provide communication mechanisms to the agricultural policies in deve10ped countries. Policy reform entails a substantive dismantling of this structure, not too unlike the dismantling that has been associated with the structural adjustment and stabilization policies pursued by many developing countries fol1owing reform.

The first economic feature that facilitates agricultural interests in gathering political support is price instability. Price instability generates an asymmetry in the development of regulation in agriculture. When financial stress occurs as a result of adverse price conditions, policies are often introduced to alleviate income losses. But, these policies are seldom withdrawn when economic conditions improve. Part of the reason is that agriculture is characterized by sector specific resources that cannot be easi!y reallocated to other sectors.

Consequently, the value of protection becomes embodied in these specifie factors. When conditions are better, the rise in the value of these resources is associated with both improved economic conditions and economic policy. Hence, the withdrawal of the previously given economic support witt tend to dampen the recovery, or if withdrawn after a recovery, it witt tend to induce another albeit modest decline. Producers are aware of this potential decline in value of their sector specifie assets and therefore have an incentive to engage in political actions to avert this eventuality. Hence, stabilisation tends to degenerate over time into permanent support.

The second economic force that makes reform difficult is that capital deepening in land improvements, buildings, irrigation or Iivestock has occurred in US and EC agriculture in anticipation of continued agricultural policies. Moreover, under protection, agriculture in the US and the EC has experienced significant productivity growth during the last two decades.

However, capital deepening and economic growth were attained in a economy that, at the margin, was protected and cannot Iikely be sustained in the presence of free and open world markets. That is, at the margin and in the absence of compensatory payments, policy reform witl almost surely lead to a decrease in returns to resources in US and EC agricultures. Since the value of economic policy that protects (subsidizes) a cornrnodity gets embodied in the sector's specifie assets (i.e., the very assets that have experienced capital deepening), removal of the subsidy implies a decrease in the value of these assets to the extent that they cannot be reatlocated to a more profitable activity. This decline in wealth is wetl known to US producers as shown by the decline in land values during the 198û's and the relatively high value ofland in more protected (sugar) as compared to less protected cornrnodities (grains). Accordingly, they have an economic incentive to even more vigorously engage in collective action to countervail the threat to policy reforms.

Land is also related to space, to environmental amenities, to rural development and to natural resources. The increasing concern about the rural environment has attracted attention to discipline agricultural practices harmful to natural resources, but has also created new support for the country life in general, a support which policy makers have a hard time to provide through instruments decoupled from income and production incentives.

Food being c10sely associated with health has therefore a c1ear emotional content. In its early forrn, this concern was related to food security that further motivated the development of agricultural policies in Europe and Japan after the second world war. Its more recent version is food safety which can easily serves as a justification for non-tariff barriers and extensive regulation.

Together, the institutional and economic forces make reform particularly difficult.

Hence, there has been insufficient incentive to deregulate farm policies unilaterally, and instead 1 an incentive to "free ride" by encouraging other countries to reform.

Free trade is in general a preferable policy for a small country, but it also benefits to other countries so that free trade among nations is a public good, a good which in itself requires collective action to ensure its procurement. When government actions disproportionately reflect the preferences of specifie interests, they tend to make protectionism a dominant strategy. Therefore, the political game prevents the society as a whole from capturing the benefits that free trade can provide and the discrepancy between government behaviour and welfare of the society creates an international situation similar to the prisoner's dilemma. In this case, the political incentive is biased toward protection, while welfare gains from liberalization exist but are not attainable given the rules ofthe game. Jonhson et al. (1991) have iIlustrated this gap between the solution oftwo EC-US trade games. In the first, where the pay-off matrix is classical welfare, the Nash equilibrium is free trade . In the second, where the pay-off matrix is based on political preference functions of governments, the solution is that both countries prefer protection.

Without new policy instruments, trade liberalization is unlikely since game two appears more appropriate than game one in providing insights into the trade-offs underlying the CUITent stage of the negotiations. The apparent influence of special interests casts sorne uncertainty over the longer run nature of a GATT agreement. If special interests play such an important implicit role in the negotiations, then changes in technology, weather and other conditions may induce a country to accept the penalties that violating a treaty might otherwise impose rather than tackling the political costs of domestic reforms made necessary by these exogeneous changes.

Notice that the results reported in Table 2 suggest that it is in the interest for the US (BC) to induce the other to deregulate because a player can benefit from the resulting change in world prices that in turn alleviates the burden on its tax payers, increases its producer incomes or both. It is therefore politically beneficial for any one country to induce the other to liberalize, but own political costs prevent the country itself to do so. Can policy reform be made easier in agame enlarged to other players in the GATT or by introducing new instruments ? Johnson et al. have shown the existence ofthese political externalities in the agricultural trade negotiations. One example is that when the rest of OECD countries liberalize their agricultural policies, it becomes feasible -politically -for the US to liberalize partly. The public good nature of economic gains due to agriculturaltrade deregulation therefore extends to the political gains to be expected from multilateral action. The need for a treaty to ensure that commitments are fulfilled and to give incentive to everybody to move in concert is therefore Free-trade (-2.1, 1.0) (-0.9 -4.4)

Source : Johnson et al., 1991 demonstrated, and the improvement of the rules of dispute settlement as a way to make the enforcement of the GATT treaty more efficient is important in that respect. This also higWights the interest of having the other players participate in a reform agreement and therefore not to limit the negotiation to an EC-US bilateral deal but to make it extendable to other contracting parties.

In the same study, new instruments were introduced in the game where tax payer money saved from trade liberalization is used to compensate the losers according to their decreasing political weights. This new game shows that, with compensation, free trade whereby support is reduced on commodities exported with subsidies is likely but free trade is not.

Eventually it appears that a potential exists for limited multilateral reform particularly if, i) all players join in the move, and ii) governments are allowed to compensate the losers.

Compensation has been easily accepted during the Uruguay Round as illustrated by the decreasing role devoted to the Aggregate Measure of Support (AMS) as a basis for negotiation and the increasing tolerance with respect to measures put in the green box. This has increased the domestic political feasibilities of reform, but has left intact the lack of incentive for collective international action due to the free rider problem.

In a multilateral framework such as the GATT, mutual trade concessions are less likely to occur since the Most Favoured Nation principle extends to all other contracting parties the benefit of the concession made by any country in a bilateral agreement. When a large number of countries is involved, they have less incentives to make reciprocal concessions since the gain one country might "pay for" by a mutual concession must, in a multilateral framework, be shared by ail. The sharing of the benefits means, for example, that other countries can also compete for the markets that have been liberalized. Effectively, the sharing of benefits from a concession with other countries implies that a particular country has less incentives to enter into or invest in a multilateral agreement. This is another consequence of the free-rider problem. The proliferation of free trade areas, bilaterai trade agreements, and trade blocks is a c1ear illustration of the attempt to circumvent this externality which is built into the GATT principles.

The collective nature of the benefits from freer trade and the faet that political costs dominate economic benefits in ail countries, makes therefore a treaty unlikely. In order to initiate and support the process leading to such a treaty, sorne players have to take the role of catalysts in a collective action capable to ensure political gains to every country. If all countries were of equal size and small, no one would have the incentive to initiate a costly negotiation process. [START_REF] Oison | The Logic of Collective Action[END_REF] suggested that organisation of interest groups is more likely when the group is heterogeneous with players having high stakes in successful collective action. It seems that big actors provide such a case in the Uruguay Round.

The incentive of big players to get the negotiation moving is enhanced by the existence of trade gains in sorne sectors and by relatively less drastic politicai trade-offs between social groups. On the other hand, to the extent that governments have mercantilist motives in trade relations [START_REF] Siamwalla | Agriculture, the Uruguay Round and Developing Countries[END_REF], bilateral agreements are more Iikely to occur between large countries with strong interactions. Agreements are more likely in that case because gains can be obtained to both countries from trading a reduction in protection of import competing sectors for access to markets in which the countries have a comparative advantage. In the case of numerous small countries, agreements are more problematic since these types of gains tend to be dispersed among many parties.

The increased competition faced by producers of grains and feed grains in the US and the Cairns Group from European grain exports provided them with strong incentives to support making agriculture a central part of the Uruguay Round. Producers of grains and feed grains in the US and, to a lesser extent, the Cairns Group faced the possibility of losing domestic support because the costs of providing this support was increasing due to the growing policy induced competition from EC exports. Multilateralliberalization would lead to higher world prices which, together with decoupled income transfers, could sustain returns to resources in grains and feed grains in the US and the Cairns countries. Without multilateral liberalization, these returns could be foregone because rising program costs could give rise to domestic pressures for unilateral Iiberalization in grains and feed grains. In this case, as game two in Table 2 suggests, world prices would rise only marginally and decoupled transfers alone would Iikely not sustain historical levels of income transfers to these sectors. Hence, the incentive to support making agriculture a central part of the Uruguay Round, and the incentive for European producers to resist including agriculture in the Round.

This rationale explains also the concentration of the effort on the EC and, to a lesser extent, on Japan. It is less costly to concentrate the pressure on big defensive players than on hundreds of tiny protectionist countries. Moreover, broadening the issues of negotiations into more general methods of deregulation than pure reciprocal concessions will force the minor, follower countries to conform to the agreement cooked up by the big players, thus opening further outlets for exporters, reducing the domestic political cost of reforms, and including bilateral deals into the multilateral framework.

The capability of the US to strongly determine the course of events in agriculture is of course reinforced by its general economic size as well as its political power. The EC is weaker in that respect, and it is more passive in the negotiations because of much less obvious short run trade interests to balance the political costs and also because of diverging agricultural trade interests between Member States.

In SUIn, the political balance behind farm policies and the cost of organizing collective action requires the catalyst role of big players, further induced by c1ear trade interests for international action to take place. It also suggests that a GATT agreement would have a wide margin of manoeuvre in the continuation of income support and would focus on trade measures. were to be the more rapid. The EC rejected this demand and proposed to negotiate a 30 %.

reduction in global support, considering that border protection would adjust downward as a consequence.

The Cairns Group countries were broadly supportive of the US position on market access and export competition. Canada has however expressed the desire to give special treatment to domestic support in the context of supply control policies. Japan and sorne Nordic countries expressed concern. about food security, but supported the objective of export subsidy reductions.

The concept of differential treatment of policy instruments is a central feature of the 1991 Dunkel compromise (Draft Final Act). This draft of final agreement is more demanding on import access (tariff equivalent cut by 36 %) than on domestic support (AMS reduced by 20 %). 1t is particularly constraining on export subsidies (36 % reduction on expenditures and 24 % reduction on subsidized exported quantities).

This section is devoted to a quantitative analysis of the Dunkel compromise to uncover the extent to which it will constrain developments of EC and US agricultures under the new CAP and the 1990 FACT. This assessment is based on comparative analysis of AMS, imports and exports of the EC and the US under the CAP reform and the FACT, simulated down to 1999 with the MISS mode!. A sensitivity test on the trend ofworld prices is done to qualify the likelihood ofthe more binding commitments to materialize. The estimations are based on historical data untilI992/93 and on projections by the MISS model after that date.

(1) AMS (1986-88) =4.6 % ofbeef sales income.

THEAMS COMMITMENTS: HARDLYBITING

Tables 3 and4 exhibit the changes over time of AMS in the EC and the US from the base period (average 1986-88) to 1998/89. The estimations are based on quantities eligible for support and effective guaranteed prices when they exits. Direct subsidies or taxes are accounted for in alternative definitions of AMS, depending on the degree of eligibility of the aids for the green box. EURDSTAT and USDA data were used as far as possible when administered prices were available. DECD data set on PSE's were used in other cases.

These tables illustrate the distribution of adjustment burden resuIting from an extensive use ofthe AMS as a yardstick to discipline policy reforms.

Consider first the case of the EC and total AMS (including aids and premiums) per commodity group. A strict application of the 20 % abatement before 1998/99 would require price and subsidy cuts in all sectors except for oilseeds. The reduction in support would be particularly severe for sugar and to a lesser extent for dairy, beef and grains. Dilseeds support does not need further reduction after the change in market regime implemented by the EC after the first GATT panel on soya. It is worth noting that even an aggregation of AMS's over ail sectors and a 20 % reduction of the global AMS would require price cuts in the range of 5 to 15 % depending on the distribution of cuts retained by policy makers after a GATT agreement along these lines.

A first relief to European farmers is allowed by the exclusion of aids granted on land set aside. This provides a credit in the crop seetor (save sugar) and would save it from further adjustments than those implied by the CAP reform decided in May 1992. If all subsidies per hectare and per head of cattle are eligible for the green box or a variant of it, then ail commodity groups fall within the Dunkel requirements except dairy and sugar which have not been included in the CAP reform package. Interestingly enough, these are the groups which were found to have the highest political weights by Johnson et al.

Now if, as recent developments in the negotiation suggest, the cut in AMS is applied to the global AMS for the whole farm sector and if direct aids are excluded, then this area of commitment should not hurt European farmers in the next six years or so. This drift of the negotiation is in part due to the very firm insistence by the EC that the compensatory payments be included in the green box ever since the reform was decided, but it also reflects the pressure felt by policy makers to minimize income losses offarrners in the process of policy reforms.

. In the US, the pieture is similar in part but \Vith sorne specifics. Dairy and sugar AMS's are also markedly above the Dunkel requirements in 1998/99. Even if sorne assumptions are necessary in these calculations (in both countries), our approach may be seen as rather conservative. Again, a strict enforcement of the AMS cut would have hurt two US sectors among the harder to reform. The .major crop sector has no problem to satisfy the Ounkel requirements, even if deficiency payments are included in the AMS because of the freeze in price support and the land set aside. The eligibility of the deficiency payments for the green box on the argument that they are decoupled from yields and a global approach to the AMS cut requirements make even things better. The grain AMS is now quite small and this provides a credit to the US which lets it free from any further adjustment in the global AMS. In such a case, beef, dairy and sugar producers would escape any adjustment. Beef producers would be made particularly happy by this global approach if the DECO method of AMS calculation had been accepted rather than USOA's which leads to a less than 5 % rate of AMS relative to gross income (and therefore excluded that sector from commitments).

This diverging interpretation in the calculation of the PSE's and AMS is an extra reason to understand why the AMS has not played a role in the negotiation as great as was expected from the PSE's analyses made by many authors in the early stages of the Round. But the main reason for the secondary role of the AMS is that flexibility in this area allows policy makers to sell the reforms to the more powerful producer groups as was expected from the political economy analysis. This is true for most countries since all have sorne non competitive sectors whereby cuts in income support are politically hard to achieve. The progressive acceptance by the US to exclude from the AMS the post CAP reform compensatory payments is consistent with its own difficulty to reform the dairy and sugar sectors. Hence, the focus on the quantitative constraints on access and subsidized exports to compel the EC to deliver the adjustments expected from the CAP reform. It remains to see how binding are the commitments on trade and border instruments included in the Ounkel draft agreement.

MARKET ACCESS, EXPORT COMPETITION AND TARIFFICATION

In the Ounkel compromise, the basic disciplines are tariffication, reduction of tarif!' equivalents and minimum access regarding import barriers and reduction of subsidized exports in value and in volume for export competition.

Minimum access requirements in 1993/94 are 3 % of domestic consumption of the 1986-88 base period and rise to 5 % at the end of the transition period in 1998/99. These minimum access opportunities are implemented on the basis of a tarif!' quota at a low or minimal rate. When current access opportunities (i.e., during the base period) exceed these minimum levels, they are to be maintained at these higher levels at least. Finally, a safeguard mechanism may be temporarily used to limit imports if, i) the volume of imports exceeds a

i) European Community

A strict application of these proposais would result in significant increases of EC imports with respect to current levels. These increases would be larger for animal products than for vegetal products. As EC imports have declined from 1986 to 1992, these increases would a1so be larger with respect to current levels of imports than with respect to base period quantities. The minimum access constraint would be particularly binding for pork, poultry, eggs and sorne dairy products. For grains in 1998/99, assuming that the commitments apply separately to wheat and coarse grains, wheat imports would have to increase by 12 % only with respect to the base period, but by 119 % with respect to 1991/92 levels (see Annex, Table A.l., panel l.a).

The proposed 24 % cut in the volume of subsidized exports would imply significant decreases of EC exports for most products with respect to current levels (see Annex, Table A.l., panel l.b). The only exceptions are sorne dairy products and beefineat for which reductions are smaller in relative terms. \rross exports ofwheat should fall to 22.5 million tons in 1998/99, i.e., 7.l. million tons less than in 1986-88 but more than 11 billion tons below the 1991/92 level. Furthermore, the required cut would be much greater for wheat (-39.7 % with respect to 1991192) than for coarse grains (-20.0 %). The reduction of subsidized export volumes would be more important for pork, poultry and eggs than for dairy products (except cheese and whole milk powder) and beefineat. , "the problem (may) be orny apparent in so far as the reduction in cereals prices would allow the export of a large part of these products without refund". It is interesting to note that the level of protection in that sector is small in our scenarios (1.02 in 1999), and a complete liberalization in that sector appears as the "orny• solution to insure the compatibility of the CAP reform with Dunkel commitments which would no longer apply in such a case. This is within reach and would not mean a significant further adjustment than the CAP reform implications. But, of course, market organizations in that sectors would become irrelevant. For beef, the non compatibility is more serious and difficult to solve without additional measures. In the case of dairy products, the compatibility is verified for butter and skimmed milk powder, but is not for other dairy products, especially cheese and whole milk powder.

ii) United States

The Dunkel commitments on export competition will basically limit the possibilities to subsidize exports of US agricultural products via the Export Enhancement programme (BEP).

The most serious constraint is placed on wheat because EEP expenditures on that product represent more than 80 % of total EEP expenditures on average. Minimum access requirements would have little impact on the US, except for sorne dairy products (butter and nonfat dry milk), cotton and peanuts. Butter imports should increase by 23 million tons with respect to the base period and current levels. For nonfat dry milk, the necessary increase would amount to 15 million tons.

Tariffication has not yet been assessed in quantitative tenns, but a qualitative analysis suggests that it should not be a major leverage to induce support cuts.

First, the simple average fonnula allows for wide possibilities to minimize effective tariff concessions. Second, the 15 % minimum on any tariff Une could in principle be more binding on commodities wbich escape the holes in the net by import access and export subsidy requirements (sugar in both the EC and the US, dairy in the US are potential targets), but larger price reductions are unlikely since significant world price increases, as a result of the very tariffication, should dampen the impact on domestic prices. The multilateralization of the tariffication should strengthen the world price effect.

To summarize, a strict application of AMS reduction per commodity would constrain the EC grain, dairy and sugar sectors, but the globalization of AMS and the eligibility of aids for the blue box relieve the EC from any support cuts further than those implied by the CAP refonn. The globalization of AMS also saves the US dairy, beef and dairy sectors from adjustments.

Tariffication could in principle keep sorne pressures on these sectors, but they are expected to be minimal.

Subsidized export volume requirements are different in the case of the EC. Nearly ail sectors bit the ceiling in 1999 and sorne, by far. The grain case is however contingent on a possible boost in world demand.

Altogether, the decreasing role of the AMS does appear as a necessary tolerance to buy the refonn politically. The commitments on trade barriers are more stringent, and particularly on EC subsidized exports.

Table 6. The Dunkel and Washington compromises

THE WASHINGTON COMPROMISE BETWEEN THE EC AND THE US

Following the negotiation position of the US and the logic of the Dunkel paper, the EC-US agreement ofNovember 23, 1992, mainly deals with the three basic topics of the talks, i.e., internai support, import access and export competition. Furthermore, the Washington compromise takes into account the follow-up to the oilseeds panel, includes a peace clause and mentions, in vague and not binding terms, the rebalancing issue which is a diplomatic way to throw this issue out of the negotiation talks.

The basic disciplines proposed in the Washington compromise are summarized in Table 6 according to the EC Commission interpretation (CCE, 1992).

As regards internai support, the Washington compromise follows the Dunkel paper by recommending a 20 % reduction of domestic support over six years. Furthermore, the agreement makes c1ear that, i) this reduction should be achieved by a cut of the AMS for the whole agricultural sector, and ii) direct payments appropriately Iinked to production limiting programmes would neither be subject to reduction nor challenged under GATT rules (at least during the six-year of implementation of the compromise according to US sources). In other words, US deficiency payments and EC compensatory aids are eligible for the green box in contrast with a strict application of the Dunkel paper. The two previous dispositions imply that the 20 % reduction in global AMS will not be binding in both the US and the EC in so far as, i) the reduction has already been achieved in the US, and ii) the reduction will be easily achieved in the EC due to the blue box classification of compensatory aids whereas a restrictive interpretation of the Dunkel text (Final Draft Act, Annex 6, paragraph 2) suggests that the reduction of AMS is made per commodity individually, at least for the products subject to "equivalent commitments 1 ".

With respect to market access, the basic principle is tariffication which implies a new instrumentation of border protection for both the US (beef, sugar, dairy products, ...) and the EC (variables levies) in order to bring agriculture more in conformity with GATT rules.

Nevertheless, effects of tariffication on imports, productions and incomes would probably be modest due to, i) the use of a simple arithmetic and not a weighted average (on the basis of trade volumes for example) to calculate the 36 % reduction commitment, ii) the possibility to Iimit the cut to 15 % on "sensitive" products, iii) the high tariff equivalent of the base period (low world prices and high domestic prices 2), iv) the safeguard clause 3, and v) tariff

1"Equivalent commitments" relate 10 products for which the AMS calculation is "malerially impossible". 2For example, in the EC, inlervention prices increased by 10 % and by the monthly increments (CCE, 1992).

3 Il is inleresting 10 noIe \hal this safeguard clause corresponds roughly 10 the first point of the "modified" tariffication proposed by the EC (see the November 1990 GATI proposaI of the EC). Nevertheless, the second protection at the end of the six year period would be stiII enough to prevent significant import increases and, more specifically in the EC case, to guarantee a significant Community preference.

With respect to minimum access rules, the Commission states that this clause does not correspond to an obligation but rather only to a possibility (CCE, 1992, p.5). It is worth noting that a rigourous interpretation of the market access commitments defined in the Dunkel paper was not expected by most experts (see, for example, Toepfer, 1992).

Therefore, the market access commitments are unlikely to impose larger increases of imports in the US, the EC and other countries save those who have banned imports. Therefore, the commitments will not result in significant increases in agricultural trade aIthough they may be considered as a first step in the right direction for a freer agricultural trade.

Regarding export competition, the Washington compromise requires a 36 % cut in budgetary expenditures combined with a 21 % reduction in the subsidized export volumes, over a six-year period and with 1986-90 as the base period. It appears that the Washington compromise corresponds to the Dunkel paper except that the volume reduction is aIleviated (21 % and not 24%) and processed products are not covered by the reduction requirements.

Obviously, the export reduction commitments keep being the most serious constraint placed on the EC in both drafts of agreement. Take grains as an example, and assume that the commitments apply to grains as a whole. In the first scenario, exportable surplus in 1999 would not be within the limits authorized by the EC-US agreement, and therefore the CAP reforrn would not be compatible with the Washington compromise. Nevcrtheless, in the second scenario where world priee increases of imported ingredients favour the substitution of these items by EC grains in feed rations, the CAP reforrn appears compatible with the EC-US GATT agreement, even in 1999 (see Table 5). The compatibility of the CAP reforrn with the Washington compromise obviously depends on the developments ofEC and worId demand and supply4. On the demand side, grain used will depend on the following parameters, i) the effective market priee eut of grains, ii) the capability of imported feed ingredients (oil-cakes and grain substitutes) to adapt to this grain priee eut, and iii) the supply of animal productions in the EC. Points i) and li)

correspond to substitution effects whereas point iii) correspond to an expansion effect. With point of this "modified" tariffication, i.e., the rebalancing obtained by raising sorne taritfs the Community considers 100 low (non grain feeds and oilseeds), is not presented in the Washington compromise. 4 Assuming that the minimum access constraint will not be binding and that imports will remain al current levels.

respect to point i), Guyomard and Mahé (1992) have shown the significant impact on feed ration composition of setting EC grain market price either to the target price level or to the intervention price leveI. Furthermore, in a modelling framework with an imperfect price transmission of grains, Guyomard et al. (1992) have shown that market prices would be significantly greater than intervention prices, leading to a net exportable surplus equal to 22.5 milIion tons rather than 15.1 million tons as in the fust scenario. With respect to point ii), different scenarios more or less favourable to EC grains may be proposed. EC imports of corn gluten feed could, for example, decrease in larger proportions if the new US price ratio between maïze and corn gluten feed, which is Iikely to make the latter more competitive in the US, induces a strong demand from US compounders.

It should be stressed that the compatibility issue of the CAP reform with the Washington compromise in the grain area is hard to decrete a priori because ofuncertainties on economic changes over the next six years or so. Scenario 2 reveals that a non dramatic recovery of world price trends due to a boosted demand for grains in developing countries, as foreseen by the World Bank, would Iikely make the 21 % grain export cut constraint on the EC not effective. Furthermore, the world price increase means that the EC is now in a position to export with hardly any subsidies. Moreover, productivity trends after the CAP reform have been cut by one third with respect to last decade evolutions. This may be the higher Iimit of a reasonable bracket offorecasts.

The basic features of the Draft Final Act have been kept in the Washington compromise, except for the cuts in AMS which are no longer effective. This is the major concession of the US in view of the result of the first oilseeds panel which had rejected the compensatory payments for the green box. This concession makes Iife easier for ail countries since most have sorne sore points in their farro policies.

The Washington deal and the tense meetings which preceded have accentuated the drift ofthe negotiations toward trade issues, and more precisely export competition.

The soya panel and the crucial necessity for the EC to get direct payments tolerated and the peace clause ratified gave leverage to the US to obtain the requirements on trade, nearly as they wanted. As for the rebalancing issue, diverging positions and interests among Member

States gave it no chance to go through.

Eventually, the agreement will force the EC and other countries nearly to abandon the practice of export subsidies and to contribute more to world price stability as a result of the tariffication.

The Uruguay Round is going to force the EC Council of Ministers to make decisions on the future CAP more in line with the initial projects ofthe Commission.

SUMMARY AND CONCLUDING COMMENTS

The assessment of the Dunkel and Washington draft agreements suggests the following outcomes;

Minimum access in itself would not be so demanding for the EC, even with a strict interpretation of the Dunkel paper save for the pork and poultry sector and cheese. The EC Commission reading of the Washington deal reduces this constraint to Iittle. The US is hardly affected by minimum access. Tariffication is potentially more binding since sectors Iittle affected by the CAP reform and the FACT should not escape from the 15 % minimum cut in the tarlff equivalent. But the simple averaging of the 36 % cut requirement allows for a wide margin ofmanoeuvre.

Export competition commitments are the most binding commitment in the long run for the EC and the less easy to spread since it applies to individual commodities. Pork and poultry exports overshoot the ceiling by far and have no real alternative than to face full foreign competition. Grains exports, for wheat especially, will hit the 21 % limit not in 1996 but before 1999, unless world market prices of primary products turn upward. Sugar and beef exports pass their limit before 1996. The latter commodities should face lower support prices or reductions in production quotas and cattle headage eligible for premiums. Beef price support in the EC should be under further pressure. The grain sector has two possibilities, i.e., either increase the set aside or play the international competition card by doing away with systematic export subsidies. The restitutions may even not be necessary any more if world market prospects improve a Iittle. The US and other countnes are not made uncomfortable by this item of the agreement since the reduced EEP programme could still be used to target sorne export markets.

A1together, the real binding constraints which have survived the negotiations down to the Washington deal are the export subsidy cuts, while domestic support and even market access commitments have been more or less fulfilled by recent policy reforms

It is probably too early to draw the lessons of the Uruguay Round as it approaches its end. The apparent break-through that took place in Washington in November stillleaves room for interpretation as to what was actually agreed. A few broad points may still be made on the way in which various issues have developed.

The objective to cut agricultural support significant1y and to reduce drastically tax payers burden has not been achieved. Domestic policies have proved difficult to reform and even in the EC context further budget out1ays have been the economic cost to pay to persuade farmer groups to accept price policy reforms. This devt:lopment is quite consistent with the revealed relative political power of producer groups. It appears that economic costs of the dairy and sugar programmes in particular have not yet rocked the political balance which is still in favour of producers. For the major traded commodities and, to a lesser extent, for meat, more progress has been made and direct aids have been designed so as to decouple income support from producer incentives. This is an achievement in itself since efficiency gains in resource costs and pollution abatement are to be expected. The new instrumentation ofsupport with visible transfers will also improve the decision making process, by increasing the cost for the rent seekers to maintain their influence. Payments targeted to reward the positive externalities of agriculture should be seen as legitimate and therefore should last long. The current regressive income support tied to the size of operation will be harder to defend politically, so that budget savings could prevail in the long run.

The two other areas of negotiations which dealt with trade barriers (import access and export competition) have become the really important issues and the driving forces toward a deal. Commitments in these areas required by the US, the Cairns Group and the various compromises have been more stringent than on AMS.

Tax payer and consumer interests are not weil defended in the GATT game, and ail countries were more or less relieved to be a1lowed to compensate their farmers. There was an organized constituency however, Le., countries with trade interests, to support a stricter discipline of trade barriers and particularly export competition a10ng the antidumping philosophy of the GATT.

The GATT deal is becoming lenient on AMS and strict on export competition. This is consistent with the political balance on both the domestic scene and the international arena.

Organized collective action within countries forces the negotiators to yield on domestic support to minimize political costs. Organized collective action on the international front was led by clear interests of the more competitive exporters to maximize trade gains.

Both forces explain why freer trade is going to prevail but not free trade and why agriculture is coming under the GATT framework more firm1y than in the past, but it keeps most of its status of exception.

Agriculture has made progress in the Uruguay Round toward multilateralism, but a petty multilateralism.

ANNEX2

The simulations used in this paper (scenarios 1 and 2) are carried out with a "trend• augmented" version of the MISS model (Modèle International Simplifié de Simulation). MISS is a price-equilibrium projection model, but time shifters in supply and demand equations are used in order to take into account technical change effects [START_REF] Guyomard | Technical Change and EC-US Agricultural Trade Liberalisation[END_REF].

The world is divided into four zones: EC, US, Centrally Planned Economies and Rest ofWorid. The agricultural sector is disaggregated into eleven outputs and ten inputs, i.e., six inputs of agricultural origin for animal feed and four inputs not produced by the farm sector.

The behaviour of the model is driven by matrices of direct and cross price elasticities of agricultural output supply, derived demand and final demand. The complete system of agricultural output supply and derived demand is derived from a sector restricted profit function which satisfies the theoretical properties of symmetry, Iinear homogeneity and convexity with respect to prices. Domestic prices can be either exogeneously fixed or linked to world prices by protection rates as in the case of fixed ad-valorem tariffs, subsidies or taxes for example. Shifts of supply and demand due to technical change, set-aside, extensification or income growth can be implemented, as weIl as production and import quotas. Supply and derived demand shifters were calibrated on the basis of the 1978-88 period by correcting actual trends of production and disappearance volumes for price changes in order to get estimates of pure technical change effects. Final demand trends were also corrected for price effects.

The base period is 1990 for budget costs, protection estimates and animal products ; it is 1989/90 for crop products. Animal feed use is represented by its ingredients and the oil included in supply corresponds to the oil content of oilseeds which are domestically produced.

Data and parameters were calibrated so as to approximate budget, income and trade as weIl as possible. The shifters were calibrated so as to reproduce, in a base-run scenario corresponding to a simulation of past policies ("old" CAP and FACT 1985), the evolutions of world prices observed over the period 1978-88.

These shifters are used in the first scenario, called scenario 1, which corresponds to an simulation of the CAP reforrn adopted in May, 1992, in the EC (for more details, see Guyomard and Mahé, 1992) and to an application of the FACT 1990 in the US. This scenario is applied from 1993/94 to 1995/96 from a base year "1993" obtained by applying price and quota changes observed on 1990/91 and 1991/92, and price and quota decisions for 1992/93.

From 1996/97 to 1998/99, institutional prices and quota volumes are kept constant (in nominal terrns for the prices) in both the EC and the US. Scenario 2 corresponds to the same

  2. THE COMPATIBILITY OF THE DUNKEL COMPROMISE WITH THE CAP REFORM AND THEUSFACTNegotiating positions were far apart at the beginning of the Round when the US issued its zero option (total elimination offarm programmes) and the EC proposed to take short-term measures to stabilize world markets first, and to undertake reduction later on in the Global Measures of Support, later on.The Ministerial meeting in Montréal in December 1988 failed to reduce the gap between the negotiation approaches. After the Geneva meeting in April 1989, the negotiation were revived when countries accepted to work for an agreement before the end of 1990 on both short-term measures and long-run reforms. More precise proposais were tabled in fall 1989. The US position of October 1989 proposed to give differential treatments to policy measures and to introduce specific commitments in four areas : Domestic support, market access, export competition and sanitary and phytosanitary issues. The cuts in export subsidies

Table 1 .

 1 Game one: pay-off based on equal weights to social groups

	EC	Protection	Free trade
	US
	Protection	(0.0)	(0.3,8.5)
	Free trade	(3.0,0.9)	(2.7,8.8)
	Source: Johnson et al., 1991
	Table 2. Game two : pay-offbased on a political preference funetion with different weights
	EC	Protection	Free-trade
	US
	Protection	(0.01	(0.6, -5,4)

Table 3 .

 3 CAP reform compatibility with the Dunkel compromise (the case ofAMS) % base mioECU % base mioECU % base mioECU % base % base mioUS $ % base mioUS $ % base mioUS $ % base

	AMS	Base 1986-88	1992/93	1995196	1998/99
	• Cereals
	(1) market support (2) market + aids except on set aside 18269 18269 (3) =(2) + set-aside compensation 18269	100 100 100	15903 ---16301 89 16718 92 87 6962 38 7379 40 ---17206 94 17623 96
	-Oilseeds
	(1) market support	2740	100		0	0	0	0	0
	(2) market + aids except on set aside 2740 (3) =(2) + set-aside compensation 2740	100 100		na na	2012 2149	73 78	2012 2149	73 78
	-Dairy(l)
	(1) market support (2) =(1) + aids with silage maize premiums(2)	27373 27373	100 100	25624 -	94 -25563 93 25563 93 24807 90 24807 90
	-Sugar
	(1) market support (2) = 1 • sugar levy	5280 4486	100 100	5202 4290	98 96	5461 4549	103 lOI	5461 4549	103 lOI
	-Beer
	(1) market support (2) =(1) + premiums	12195 12665	100 100	9435 --	77 --	6026 7346	49 58	3160 4480	26 35
	The estimations are based on historical data unti11992/93 and on projections by the MISS model after !hat
	date.
	(1) Assuming no quota eut.
	(2) 75 % allocated to dairy cows.

mioECU

Table 5 .

 5 Compatibility of the CAP reform with Dunkel compromise requirements on Iimited both in level and duration, are imposed. As regards export competition, budgetary expenditures on export subsidies are to be reduced by 35 % and the volume of subsidized exports by 24 %, both from a 1986-90 base period. These reductions are to be phased over the 1993-99 period.

	subsidized exports (million tons)
		Scenario 1		Scenario 2
		1995196	1998/99	1995196	1998/99
	i) Grains
	Gross exports
	-Dunkel requirements	-3.7	+10.8	-8.2	+1.5
	ii) Beef
	Gross exports
	-reouirements	+0.15	+0.47	+0.02	+0.23
	iii) Pork, poultry and
	eggs
	Gross exports-
	requirements	+2.05	+3.85	+2.98	+5.85
	iv) Sugar
	Gross exports-
	reauirements	+0.1	+0.5	+0.1	+0.5
	v) Milk products
	Butter and butteroil
	Gross exports-
	requirements	-164.8	-102.9
	Cheese
	Gross exports-
	requirements	+141.1	+219.5
	Skimmed mük powder
	Gross exports-
	requirements	-32.1	+9.7
	Whole milk powder
	Gross exports-
	requirements	+47.0	+115.2
	Concentrated milk
	Gross exports-
	requirements	+8.7	+57.6

Note. ln scenario l, world price changes as specified in Annex 2, Table

A

.l. In scenario 2, world priee changes as specified in Annex 2, Table

A

.2. The commitments on gross subsidized exports assume !hat market aceess clauses apply strictly as in Annex l, Table

1

.1. Gross exports are net imparts derived frOIU tbe MISS simulations added ta market access requirements. trigger level, or ii) the CIF price of imports falls below a trigger level : in that case, additional duties,

Table 5 (

 5 for more details, see Annex 1, TableA.2.) shows to what extent the outcomes of the CAP reform scenarios is compatible with the Dunkel compromise commitments in market access and export competition area.

	For grains, the compatibility is feasible in 1995/96 but subsidized export volumes in
	1998/99 are in excess of levels authorized under Dunkel by nearly 11 million tons.
	Nevertheless, ifworld price trends are greater than in the last decade as reflected in the second
	scenario, grain use in European feed rations increases due to their improved price

competitiveness with respect to other feed ingredients. The Community is then in a position to fulfil Dunkel commitments in 1998/99, without further adjustments than the CAP reform provisions. This sensitivity shows that the compatibility issue is contingent on future developments in world markets which may be different from the decade of the 1980's.

  Budgetary outlays on wheat export subsidies should be reduced by 165 million US $ in 1999 with respect to base period data. But, the required cut is much larger with respect to current EEP expenditures on wheat (554.2 million US $ with respect to USDA data). The volume of subsidized wheat exports would be reduced by about 3.8 million tons with respect to 1986-90 quantities, but this requirement represents a cut by more than 8 million tons with respect to current levels. As more than 80 % in average ofUS barley exports benefit from the EEP (USDA data, see Annex 1, Table A.3.), the US would have to reduce expenditures on that product by nearly 20 million US. In total, EEP expenditures would be limited to about 340 million US $, i.e., about 200 millions US $less than in the base period (see Annex, TableA,3., panel Lb.).

  In scenario l, world priee changes as specified in Annex 2, Table A.1. In scenario 2, world priee changes as specified in Annex 2, Table A.2.Table A.3. Implications ofthe Dunkel compromise on the US ; minimum access and subsidized exports l.a. Subsidized exports : EEP programme (source; OECD and casual informations for In parentheses, percentage of exports under EEP with respect to total exports.

	Whole milk Dowder
	Netexoorts Impart commitments iD volumes	519 10.3	519 12.8
	Scenario 1 (million tons) 1996 528.9 481.9 X 1986-90 (million tons) 1999 531.4 416.2 X 1992/93 15.0 25.7 7.3 7.7 2.5 2.5 2.5 2.5 22.3 33.3 26.0 22.5 -3.7 +10.8 0.50 0.69 0.49 0.49 +47.0 +115.2 341 341 9.2 11.6 349.8 352.2 341.1 294.6 +8.7 +57.6 X 1986-90 (nùllion X 1992/93 (nùllion Requirements 1999 Scenario 2 1996 Requirements 1996 1 Requirements 1999 2 1999 10.5 16.4 7.3 7.7 2.5 2.5 2.5 2.5 17.8 24.0 26.0 22.5 -8.2 +1.5 0.37 0.45 0.49 US $) US $) 459.24 (47.86) 523.8 (48.94) 293.91 15.18 19.77 13.35 11.54 0.48 0.25 0.42 0.36 1.70 1.54 1.50 1.29 0.04 0.03 0.Q35 0.Q30 0.04 0.36 0.Q35 0.Q30 8.76 24.29 17.71 6.66 0.04 0.03 0.Q35 0.Q30 0.11 0.46 0.10 0.08 41.96 (82.90) 47.1 (86.09) 26.85 2.46 (7.49) 4.5 (13.00) 1.57 22.74 (8.97) 10.4 (3.12) 1) In 1996, requirement =0.88 x X 1986-90. Gross exoorts Reauirements Grains Gross exports-i) Grains Net eXDOrts from Miss Import commitments Corrections Durum wheat exports Gross exports ReQuirements Gross exports -Dunkel reauirements li) Beef Net eXDOrts from Miss ImPOrt commitments Dunkel reauirements Concentrated milk Netexports Imoort commitments Gross exports Reauirements Gross exports -Dunkel reauirements i) expenditures Grains Wheat Wheat Flour Feed ln'3Ïns BarIey malt Riee EJ(J(s 3) Poultrv4)) VeJ(etabIe oil Note. 1992/93) Barlev Eggs Poultry 2) In 1999, requirement =0.76 x X 1986-90. 14.55 3) Dozen. 0.49 Gross exoorts 0.99 1.18 0.86 0.94 Reculrements 0.84 0.71 0.84 0.71 Gross exports -Dunkel reauirements +0.15 +0.47 +0.02 +0.23 4) Frozen pouilly. I.e. Minimum access 1) ii) volumes Iii) Park, poultry and el!l!S Net exports from Miss 2.03 3.49 2.96 X 1986-90 X 1992/93 Requirements 1996 1 Requirements 1999 2 (nùIlion tons) (nùIlion tons) M 1986-88 Domestie use 1986-Requirements 5.49 Imoorts commitments 0.91 1.14 0.91 88 Grains 1.14 Gross exports 2.94 4.63 3.87 6.63 Recuirements 0.88 0.78 0.88 0.78 Gross exports-Dunkel recuirements +2.05 +3.85 +2.98 +5.85 Gross exoorts from Miss 3.2 3.2 3.2 Recuirements 3.1 2.7 3.1 2.7 2) In 1999, requirement = 0.76 x X 1986-90. 3.2 1) In 1996, requirement =0.88 x X 1986-90. Iv) SUl!ar Wheat 16.47 15.65 12.52 Dairv Droduets 1996 1999 14.49 Barlev 1.81 1.63 1.38 Butler 2.0 505 20.2 25.3 1.59 Eggs 5.78 14.5 4.39 Cheese 122.7 2622 104.9 131.0 5.09 Poultrv 35.42 19.8 31.17 Non fat dry milk 1 321 12.84 16.05 26.92 SUJ(ar 1563.3 7269 1563.5 1563.5
	Gross exports-
	Dunkel reQuirements	+0.1	+0.5	+0.1	+0.5
	v) Milk oroducts
	Butter and butteroil
	Net exports	122.0	122.0
	Imoort commitments Gross exports iii) expenditures ReQulrements Gross exports-	80.0 202.2 364.8 X 1986-90 (nùIlion X 1992/93 (nùllion Requirements 1999 90.1 212.1 315.0 US $) US $)
	Dunkel reculrements Grains Cheese NeteXDorts Wheat Imoort commitments Flour Gross e:morts Feed Imlins Recuirements Barlevrnalt Rice Gross exports-Dunkel recuirements Eggs	-164.8 343 403.77 164 40.60 507 54.70 365.9 4.36 3.19 +141.1 2.51	-102.9 813.19 343 25.43 205 54.31 548 2.09 328.5 23.44 +219.5 4.89	258.42 25.98 35.01 2.79 2.04 1.61
	Skimmed milk l10wder Poultrv 1)	22.74	14.41	14.55
	Netexports Vegetable oil	180 13.42	180 30.21	8.59
	Imoort commitments Gross eXPOrts 1) Frozen pouilly	57.2 237.2	71.5 251.5
	Reeuirements	269.3	241.8
	Gross experts-
	Dunkel reeuirements	-32.1	+9.7

l.b. Subsidized exports; EEP programme (source USDA, Foreign Agricultural Service, data compiled by USDA, ERS).

2.3. TARIFFICATION

 =0,88 x X 1986-902) In 1999, requirement = 0.76 x X 1986-90 3) For grains, X 1991/92 (source: ONIC) simulation, but shifters have been modified so that world prices of commodities increase with respect to evolutions obtained in scenario 1. World price changes obtained with the fust scenario are detailed in Table A


l.INTRODUCTION

The recent compatibility controversy about the CAP reform package and the agricultural Uruguay Round agreement revealed the importance of the cereal productivity evolution. Most certainly, the CAP reform set-aside and other provisions will contribute to keep the cereal EC production below the ceiling which would be imposed by EC-US Blair House agreement. Nevertheless, a few doubts remain, related in particular to the intending grain use in European feed rations and the evolution of cereal yield. On this last issue, the opinions differ notably. Some say that cereal yields will not continue to increase as a result of genetic improvement at a rate close to the recent historical rate ; in other respects, the farms operating at lower levels of efficiency, have no access to improved husbandry methods ; after all, there will be no incentive to produce beyond the average regional yield. On the other hand, the farmers will be stimulated to increase efficiency by the "shock" of the new lower returns resulting from CAP reform : the cereal price decrease should provide a stimulus to increase the productive efficiency.

Moreover, the future land transactions due to CAP reform, can explicitly entail trades of land from "low ability" to "high ability" farmers which should lead to the extension of improved husbandry methods upon a greater portion of the national acreage; in other words, the global adjustment of the agricultural economy towards a Pareto optimum requires a technical efficiency level for the global production possibilities set : that leads to the eviction of the lower efficient farmers.

In a general way, the preceding different arguments agree on the fact that the microeconomic efficiency level will probably govern the success of the cereal market price regulation. We adopt this last assumption in this work providing two models, nonparametric and parametric. Different micro efficiency levels are considered since technical inefficiency until the profit maximisation behaviour.

TECHNOLOGY ENVELOPMENT

Standard production theory assumes that farmers are profit maximisers (or cost minimisers). This approach specifies a parametric form for the production function. It uses standard statistical techniques to estimate the unknown parameters from the observed data set.

this process suffers from the weakness of the maintained hypothesis.

The nonparametric approach to agricultural production relies on less stronger assumptions. It examines the consistency of observed production behaviour with the profit maximisation hypothesis. It's based on the formal economic definition of a production function.

A production frontier is determined by using linear programming techniques.

This approach identifies the level of technical efficiency for each observation relative to this frontier. It doesn't provide the path to reach the frontier of production but it only provides a set of points on this frontier that can be achieved. Consider a production unit j (i = L,...,J) transforming a vector of inputs x, e Rf into an output vector !1 e R(, subject to the technological constraints. We assume that at least one output and one input are positive and that every production unit 7 used for efhciency comparisons has the same inputs and produces the same outputs, although in varying amounts.

To represent the technology, ïr/e use the following observed envelope (or production possibility set) P : p ={(*,y)l y, o can be produced from x > o} (l) and we postulate following properties (Banker, Charnes, CoopeE 1984) tPU (x,y j) e P for all i = L,...,J Each observed input-output vector is contained in the set P lP2l P is a regular set P is not empty, P is closed, the null input vector yields zero output and finite inputs can not produce infinite outputs.

tP3l Free (or strong) disposability of inputs and outputs If (x,y) ePand x>x andy-<ythen (î,!)eP [P4] Convexity: If (.r,y) e P and (t,y-) eP,if a e[0,1] then a(x,y)+(1-a)(7,!) eP Based on these properties, we can write the technical envelope of the observed data as following [START_REF] Piot | Mesure non paramétrique des efficacités : une approche duale[END_REF]):

(2)

(3) J p = { @,y) / x>ll",x,l >ll,l,,Zx, =l,Ai >0 for alli =1, ,tj g) j=l j=l J=l However, some factors cannot be adjusted to their optimal level. Most of farms can only adjust a sub-vector of inputs, labelled variable inputs.

Suppose that (x",,xr) e Rfis a decomposition of the input vector x, into variable and quasi-fixed inputs, respectively, we have : P ={ (xr,xr,y)/x, >ll",xr,,xr ) l)",xr1,/ =Zl,y, j=l j=l i=1 J ,21, -l, I i >-Tfor all j = 1,...,./](5)

J=l P is the same data envelope as before but now this writing of the production set would allow the distinction between being efficient when some inputs are fixed or when all inputs are variable.

MEASURING TECHNICAL EFFICIENCY

We consider, here, the definition of a technically inefficient unit in the context of input reduction where the objective is to minimise the consumption of factors, given a particular output level. Thus, in this context, a given firm is considered to be technically inefficient if some other firms or some convex combinations of other units can : (i) produce at least the same amount of each output and (ii) use less of at least one input and no more of any other inputs.

The following programming measures technical efficiency, for each firm :

Min h! subject to h,.x, > f).,x, j=t t, < fÂ',r, EA, =t i=t j=1 ( 6)
)", à0 for all j = 1,...,1

In this problem, the inability to be on the frontier of a technology set P is described by the inverse of the function distance of [START_REF] Shephard | Theory of cost and production functions[END_REF] Aj. fnis formulation has been introduced by Banker, Charnes and Cooper (198a).

The vectors x, and !1 arc the inputs and outputs of the i'o frt . The scalar hr, can range from zero to one. One represents a farm that is technically efhcient ; it is impossible to produce the outputs of farm j using a linear combination of inputs used by the other firms.

Alternative specifications for technical efficiency can be found in Fâre, Grosskopf and Lovell (1985).

To measure technical efficiency conditional upon quasi-fixed inputs, we need to divide the input vector into two components: the quasi-fixed inputs x, and the variable inputs xn, with (.r", ,xu) eRf . So, we have the following linear programming problem : ).,> ofor alli =1, J

In this context of resource reduction with quasi-fixed inputs, a given firm is considered to be technically inefficient if some other firms or some convex combinations of other units can : (i) produce at least the same amounts of all outputs, (ii) use less of at least one variable input and no more of any other variable inputs and (iii) conserve the same level of quasi-fixed inputs.

Figure I gives an illustration, in the particular case of single output technology [START_REF] Tauer | Short-Run and Long-Run Efficiencies of New-York Dairy Farms[END_REF]. Gven an piece wise linear isoquant, which manifests the convexity assumption and given an efficient firm in the interior at point A the technical efficient point for that firm is E. xu and NF can be reduced, for a saving in xu of (xr -xo). However, if x, is fixed at xo, the amount that x, must be reduced to reach the isoquant is the larger amount of (xr^-xo), leading to a larger inefficient measure. Farms are specialised into cereal production : hard wheat, soft wheat, corn, summer barley and winter barley. Rice producers are not included in the sample. The data set contains 188 complete farm records. 91 0/o of them are individual producers and most of them are located in different areas. Nevertheless, near 30 percent are from the region Centre, 16 Yo from Ile-de- France and 12 Yo from Aquitaine.

The nonparametric approach allows us to describe multiple outputs. These farms primarily produced cereals, on average, for 7l Yo of total output. Other productions are aggtegated into the other products variable. The total sale is, on average, 686 180 F for 82 ha of land, divided into 59 ha of land for cereal and 22 ha for other productions.

Land will constitute the quasi-fixed input of this analysis. The three variables input defined were labour (both family and hired labour), material expenditures of the year and raw materials. The last variable contained all the spending concerning production : fertilisers, fuel, feed for animals,...

x F FR R A x V A E R x x x 0
The means and standard deviations of these variables are listed in Table l.

Tabte 1. Summary of Data for Efficiency Analysis, (188 cereal producers' (1)F: Frenchfrancs

(2) UTA : Labour units per year (l UTA = 2200 hours of labour).

RESULTS

Technical inefficiency of a farm is determined relative to other similar units and depends on the number of observed data in the sample and on the selection of variables. The introduction of new characteristics about farms would modify the results.

First, when all inputs are variables, these 188 observed farms are, on average, 0.89 technically efficient. About 55 of them are technically efficient and 59 are nearly so (> 0.99).

A radial reduction of the variable inputs will lead to a I I o proporlional contraction of them . But, when model ( 6) is solved by linear programming techniques, there is a transformation of it, which can be formulated as : where e > 0 is a small non Archimedean quantity and .9* and ,S-the slack variables.

Model (8) provides extra information pertaining to efficiency improvement. From the objective functioq it is clear that the conditions for a farm to be Pareto efficient are hj = I and ,S*' = ^9-' = o where "*" indicates an optimal solution. If a farm is not efficient, the constraints in model (S) imply that by increasing !^1 by.Srl and decreasing xni by (t-4')tr+,Sj.the associated farm becomes efficient [START_REF] Charnes | Measuring the Efficiency of Decision Making Units[END_REF]. Of course. every efiicient farm must have zero value for all slack variables.

Means and standard deviations of the optimal level of the variables are listed in table 2.

There is, on average, a L7.9% total resource reduction and a 1.6% total product augmentation. The input reduction could be broken down into, on average, 21.7 yo for land and 15.3 % for other factors. Now, suppose that land allocation is a quasi-fixed input. These 188 observed farms are, on average, 0.88 technically efficient. About 54 of them are technically efficient and 59 are nearly so (> 0.99). The radial reduction of the variables will conduce to a l2Yo proportional contraction . Nevertheless, with the existence of stock variables, we obtain on average a 16.8 % reduction for all inputs. It can be divided into I 8. 1 6 o for quasi-fixed factors and 16 % for the other ones. It's associated with a 1.6 o output increase. (1)F:Frenchfrancs (2) UTA : Labour units per year. So, the average farm could obtain a total sale of 694 770F for 65.3 ha of land when all inputs are variable. If land is a quasi-fixed input, then the average farm could obtain a total sale of 694 296F for 67.9 ha of land. Notice that the variation of variable factors is more important. Therefore, if all farm reduce their technical inefficiency, an increase in production would be possible in response to a reduction of total inputs. Now, suppose that all farms reduce their technical inefficiency. it could result an increase of cereal yields (Table ). When all inputs are variable, on average a 17.9 Yo contraction for all the inputs associated with a 1.8 % output expansion will allow a ma:<imal 22 Yo increase in cereal yield. In the other case (land being quasi-fixed) a maximal 17 Yo increase in cereal yield is possible associated with a 16.S % input decrease and a 1.6 o output increase.

Increasing farms efficiency implies private and social benefits. The efficiency measures are based on the hypothesis: that producers are not to be on the technology frontier.

Moreover, these measures don't provide the path to reach the frontier of production but a set of points on this frontier that can be achieved. Consequently, an inefiiciency measure could seem to be possible and only reflects the ignorance of economists. Other factors, like risk aversion, for example, could explain producer behaviour.

In the next section, we consider stronger hypothesis since producers are supposed to be on the technolory frontier. The potential evolution of cereal yields, is then described in this context.

PARAMETRIC MODEL WITH TWO FACTORS

In the fourth part, ri/e consider a monoproduct cereal technology described by the following production function :

d Ax v T7 (e)
Quantity y is the cereal product, valued before the CAP reform with price p,.

Assuming a+y<1, we dispose of a "Cobb-Douglas" technology with decreasing returns to scale and two production factors. The aggregate quantity x (corresponding to price w,)

indicates the different materials (fertilisers, pesticides, seeds, ...) when Z (conesponding to price w") represents land input which is supposed to be fixed in the short run. The constant parameter I denotes the other production inputs (capital, labour) and should combine an index oftechnical progress. l1 Formally, the cereal reform is described by :

-a new cereal price : p, (after a three years decrease)

a distinction between small producers and professional ones colresponding to a threshold of 92 tonnes of cereals a rate of set-aside applied to the professional producers and equal to lp (:15 %) -a regional average yield, r, on which is indexJinked the compensatory payment.

The farmers are assumed to be price-efficient. Therç they maximise before the CAP reform the profit :

Mg (poAxoTY -w,.x-wr.T)

(lo)

The production possibility set related to (9) being convex, the first order conditions are sufficient ; in terms of optimal cereal yield, that leads to the following solution :

fo= lo-

T; wT PoT ( 1 1)
This last expression denotes a first effect attenuating the expected yield decrease in the close future of the CAP reform. Indeed, (l l) shows thatif po decreases, there is an increase in the cereal yield.

This outcome is due to the decreasing returns to scale property of the technology which implies when po decreases, a relatively more important decrease of fr than yi.

Program (10) occurs in the long run when land allocation can be freely adjusted.

According to the different regions, the farmers could take advantage of possibilities of restructurations allowing an optimal adjustment of land allocation. In the case where this last factor is fixed, farmers maximise the restricted profit :

Mac (poAx"Tr -w,.x) Q2)

One may deduce the optimal yield before CAP reform :

wlTt-"-r ( l3) A( poa)" Situation in the post-reform differs also according to the following modalities : small producers (pp), professional producers (PP). In this last case, and assuming land freely ]*'-variable, the behaviour program is now Mç (prAx " (eI)' -w ".x -wrT + (p" -p)rT) (14) The (PP) producers are constrained by a 15 Yo set-aside in order to profit by the compensatory payment ( p" -p,)rT which can be decomposed in :

. ( p" -p,)r pT: for the cultivated hectares (45 F,Oultonne for a target price equal to 110 Ecuitonne)

. ( p" -p,)r( I -p)T : compensatory payment for a 15 0/o set-aside.

In fact, the regional average yield can vary following the distinction between inigated acreage, area in set-aside, cultivated acreage, ... . Program ( 14) ditrers also in the case of "small producers" and according to the land fixity; table 5 recapitulates the different cases in terms of optimal cereal yield.

Table 5. Optimal Cereal Yield Evolution

In the short run (characterised by land fixity), the optimal yield is a function of the variable input prices (ra,) and the other fixed factors (constant A);their foreseeable evolution (decrease of relative prices (w,) provided by a lower demand, pursuit of technological innovations) would operate a new yield increase. In the long run where land is at optimum level, the cereal yield depends solely on the cereal-land price ratio and the related production Our purpose nolv is to compare for each group (I, U, III, IV) the situations before and after the CAP reform. The first group (I : professional producers, fixed land) shows two contrary effects as for the evolution of the cereal yields : a negative impact deriving from the cereal price decrease; a positive effect following on from the obligation of set-aside at rate (tp).Taking into account the known values of p, A et po, the consequence of these two effects leads without ambiguity to a cereal yield decrease.

We notice three effects for the second group (II: professional producers, land at optimum level) ; two positive impacts : the price-effect in a situation of decreasing returns to scale, a "negative direct payment effect". What will be the result ? The cereal farmers will be motivated to increase the cereal yield if :

wr -(Po -h)r (l s)

PoT PtTP so that : ** ,(I -A)p.r ' (I -hp) (16) with l,=4. Nevertheless, the present level of 2 doesn't allow the precedent Po inequality to be verified. In fact, the right term of [5] can be compared to a "threshold price" for land. We calculated this threshold for each region (French "department") according to the regional average yield. The computed price ranges from 418 Ecu/trectare to 824 Eculhectare. Actually, these high values implicitly incorporate the allowance (p" -pJr, foreshadowing so a risk in the medium run, namely a catching of the subsidy in land transactions (ust as dairy farmers did when quotas were introduced in 1984). Each EEC member must be vigilant with respect to this latter effect ; indeed, the additional costs relative to land or to production rights will contribute to delay the acquiring of new gains in productivity stemmed from the adoption of technological innovations.

There is no ambiguity about the third group (III : small producers, land as fixed factor)

insofar as there appears only one negative price-effect on cereal yield evolution. Lastly, wo meet again in the fourth group (IV : small producers, land as variable factor) the effects which have been observed in the second group, except the set-aside one. For these two groups, the CAP reform finds expression in a variation of the cereal-land price ratio, from wr lpo to w' -(p" -p')r

: the direct payment leads to a decrease of land net cost. pr

We make clear also in table one the relative variation of the cereal yields provided by the CAP reform. Notation is slightly modified : wor = lrr : land price before the reform vtr = wor -(p, -pr)r : net land price in the post reform' Table 6. Relative Cereal Yield Variation

The groups I and III (where land is hold fixed) rather describe the evolution in the short run. Group II and fV show that the yield decrease will be cancelled since net land price evolution follows the cereal price evolutiorq so that : In connection with that, it seems important to model the prospective expectations relative to land transactions and taking into account the implicit rent provided by the subsidy quota. Recent work (Cavailhès et Richard, 1992) observes, at least in a few French regions, the necessary conditions for a rising land market. However, the long run dynamics of adjustment will be also strongly conditioned by the level of r, the regional average yield. Using the notion of shadow price, the next section states more precisely the future of cereal yields in terms of land adjustments.

SHADOW PRICE FOR LAI\ID AND CORRELATIVE EVOLUTION OF CEREAL YMLDS

First of all we will recall the shadow price expression in the case of @P) professional producers, constrained in the post-reform to land fixity. (PP) maximise the restricted profit, Assuming that this function is twice differentiable with respect to its different arguments, we can define :

Txt Xù dl (20)
wv is the shadow price for land and represents the marginal increasing of the restricted profit consecutive to a marginal increasing of Z The previous computation is reiterated according to the different cases (before the CAP reform, (pp)). Then, it is possible to express the optimal yields as functions of the shadow price [ : the outcome is presented in tableT.

Table 7. Shadow price, net price and cereal yield evolution 'lily P"T (IV)

The analysis of table 7 shows that the shadow price identifies with the net land price in the case where land input is at a long run equilibrium. Indeed, taking again the (pp) example, the total profit function zr", solution of ( 14) can still be written. i.e. the equality between the shadow price and the net land cost in the post CAP reform. So, beyond the incitement provided by the CAP reform to reduce the technical inefficiencies, the direct payment per hectare will probably modifr the dynamics of price-inefEciencies reduction.

Consequently, we must know if f < T* or T) T*, 7* being the long run solution of ( 14) for Z. In the short run of the post CAP reform, it seems likely that T < Z* insofar as the direct payment implies a negative effect on the net land price. An econometric application on the restricted profit function should allow to compare (20) et (22) ; since n*awr-(p,-pr)r, r^(w,,pt,p,D concave inTr, one may deduce that Z<?*. In a similar way, observing table 7, a shadow price greater than the net land price indicates a long run cereal yield lower than the optimal yield constrained by T: hence the land fixity in the short run reduces the expected yield decrease.

On the contrary, the Le Châtelier-samuelson principle 2 expresses a reverse evolution if we consider a land fixity at a long run equilibrium. At this optimum, Le Châtelier principle says that the more markets v/e allow to adjust to the effects of a price increase in the first factor, the larger in absolute value the own-price elasticity for this first factors. The mechanism can be illustrated in our model ; let us consider the (pp) case. In the case where land is variable, the optimal yield before the reform is : r-

as A < po and a+ y <t, ri is lower that the optimal yield obtained with Zfreely variable, i.e. equal to wr lprfp, without the direct payment effect.

I r^(w,,pr,p,T) is concave in ?because the production possibility set related to [8] is convex.

2 See, for example, [START_REF] Lau | A characterization of the normalized restricted profit function[END_REF] , Diewert (l9Sl).

wr PoT Identifying this expression with the land constrained optimal yield, we thus derive the optimal level f ", i.e. : * -l wi-' p"Aa"1/'*- '-LqJ rrrul i = ', ;'l-,(^\'-'

AnP \h )

Let us assume now that in the post CAP reform, farmers may not adjust the preceding allocation for land. In that case, the optimal cereal yield is formalised as the expression (Ia) in The same argument can be applied to other factors such as family labour, hired labour or capital which cannot be instantaneously adjusted to the cereal price decrease. Moreover, the yield evolution will be strongly governed by the land transactions among cereal farms ; indeed, the CAP reform will explicitly entail trades from "low ability" to "high ability' farmers 3. In other words, micro inefficiency reduction will probably occur at the same time as an adjustment of the overall agricultural economy towards a global production optimum, requiring an ever lower number of farms.

S. MODEL GEI\'ERALISATION -COMPARISONS BETWEEN REGIONAL AVERAGE YIELD AI{D OPTIMAL YMLD Whatever the choice of the functional form and the number of inputs-outputs fixed or freely variable, the optimal yield expression presented in table 7 remains unchanged if we characterise f as the estimated production elasticity at the observation level (y" or T).

Let us first assume an optimal adjustment for every input and output. The farmer behaviour is expressed by : M# p, .! -r,'. The optimal cereal yield can be written as -.* Q" t"

,/c, 6r -&r -'t" r atcr 3 See, fot example, Leathers, 1992.

(26)

with u : âl'y", the cereal production elasticity relative to land input. Moreover, by ' âlnx, differentiating the technological constraint (a) we obtain : t/r" and, by using (24) : n -v' p"r i.e. the general expression of table 6 in the case of variable land.

Ay" dxr Let's consider the more general case of a fixity for a sub-vector z. Expression Q4) becomes:

t-w"'x

!" = .f (x,!-c,z)

Without loss of generality, the transformation function is expressed under an explicit form.

First-order conditions lead to:

(3 l) E n (p y,w,, z1 = Mgx(n r. ! -w',. xi ! c = .f (x, y -", r) = P r., (P,w', z) -*',.i(P r,v *, z)

x, y being the solution of (29). One may deduce the expression of the shadow price for land by differentiating (31) 30) and the fact that y" = .f (x,!-c,z) *, =g:=r"(t^)iy*.,_, t" =_r"_4_r( a\ '-i-T-vlc),"*.,_, (33) Theq the optimal cereal yield, in presence of fixed netputs becomes or, by using (33) WT PcT (34) Therefore, we find again the general expression of table 7 ; in particular, the shadow price F, and the production elasticity y are fvnctions of z which characterises the desequilibrium levels relative to certain netputs. We noted earlier that the future of cereal yields will be explained from the reduction of the allocative inefficiency related to the land input, otherwise from the convergence of fr, towards ur. This reduction will be obtained as much by the land adjustment as by the adjustment of the other quasi-fixed netputs, according to their flexibility.

The functional form f can include also a technical progress parameter which affects temporally the technology ; it concerns for example family labour concerns saving,... So technological innovations leads to gains in productivity, these gains are lending themselves with difficulty to an econometric estimation : indeed, we meet identifiability problems with, for example, scale effects.

The preceding outcomes allow us to present a general measure of the yield relative variation including the different modalities ; such as : wor alitd vrr represent respectively the land shadow prices before and after the CAP reform. These prices are, in away, a dual measure of the netput desequilibrium insofar as they are derived from the restricted profit function ; they are equal to the net land price in the case where this last input is optimally adjusted. The terms yo and y, refer to the land production elasticities respectively estimated before and after the CAP reform. The corrective term p is added in (35) for the modality "professional producers". Whatever the situation" small producer or professional one, land as fixed input or freely variable, the cereal price effect implies clearly a yield decrease. However, an econometric application should allow to measure the range of the other yield increasing effects : set-aside, decreasing returns to scale, quasi-fixity,... fn other respects, this application demands a dual approach to estimate the land shadow prices (expression (35), hence the construction of prices (cost for capital services, implicit prices,...). Such an approximation is risky on individual farm data and catches the technical and allocative inefficiencies which characterise number of farms. An other reason leads to be very careful in using the econometric approach. Indeed, we argued our model in a partial equilibrium framework, taking into account some netputs which can freely be adjusted in the medium or long run. Therefore, is the subset of variable inputs relevant in the case of a cereal price decrease ? Otherwise, the idea lies to take into account a partial equilibrium analysis including prices and quantities the more flexible to the cereal price decrease. For example, observing the recent price fluctuations of raw materials, it seems likely that the cereal price effect will be also attenuated in the short run by an price- adjustment of the other agricultural inputs : fertilisers, pesticides,... So, we recall the generalised Le Châtelier principle according to the more markets that adjust to the price decrease in the first market, the smaller the elasticity of derived supply becomes in the first market (Diewert, 198 1).

CONCLUSION

The cereal yield evolution has been analysed considering the different situations of microeconomic efficiency, since technical ineftïciency until price efficiency. This level will probably influence the efficiency of the cereal market regulation. In other respects, the model displays the different effects of the direct payments on the agricultural supply structure.

6.

Parametric model with two factors 7. Shadow price for land and correlative evolution of cereal yields 8. Model generalisationcomparaisons between regional average yield and optimal yield...

[

  P5] Minimum extrapolation P is the intersection set of all F satisfying Pl to P4.

Figure 1 .

 1 Figure 1. Maximum Reduction in Input xu, Given Fixed fnput xt

  such as: r^(w",Pt,p,T)= Mm(p,Ax"(pT)" -w.x) x, , the solution of [7], the restricted profit function can stillbe written(1e)

  îr(w*,w7,po,pr,p,r)=uy(r^(r*,pr,p,I)-l*r-(p,-p)rlr)

  denote respectively the input and output price-vectors ; f represents the transformation function. Relatively to cereal-price p" and land price w", first-

  1.990)

		Units	Mean	Std-Dev
	Outputs Cereals	F (1)	487 17r.7	303 618.2
	Other products	F	199 014.0	t4r 786.4
	Quasi-fixed inputs Cereal acreage	ha	59.5	32.4
	Other acreage	ha	22.4	18.l
	Variable inputs Labour	1/100 urA (2)	r36.3	50.9
	Material expenditures	F	t36 443.2	83 787.8
	Raw materials	F	225 425.8	125 972.0

Table 2 .

 2 Summary of Optimal Level of the Variables (land is variable)

		Units	Mean	Std-Dev
	Outputs Cereals	F (l)	489 692.9	302 733.6
	Other products	F	205 075.2	r38 tt2.4
	Inputs
	Cereal acreage	ha	48.5	28.3
	Other acreage Labour	ha 1/100 urA (2)	16.8 115.9	t6.4 43.9
	Material expenditures Raw materials	F F	tt6 623.2 188 033.6	75 257.1 ll2 231.6

(l)F:Frenchfrancs (2) UTA : Labour units per year {n {\'r.E'r)l

Table 3 .

 3 Summary of Optimal Level of the Variables (land isquasi-fixed)

		Units	Mean	Std-Dev
	Outputs Cereals	F (l)	489 986.2	302 533.0
	Other products	F	204 310.t	138 463.0
	Quasi-fixed inputs Cereal acreage	ha	50. I	28.0
	Other acreage	ha	17.8	16.3
	Variable inputs Labour	l/100 urA (2)	I14.5	44.t
	Material expenditures	F	115 060.9	75 707.7
	Raw materials	F	188 285.2	I I I 988.0

Table 4 .

 4 Cereal yield evolution

	Flha	Mean	Std-Dev
	Initial yields	8 063	2 425
	Optimal yields
	land is quasi-fixed land is variable	e 447 1+17 %) 9 838 (+22%)	2 566 2 652

TABLE OF CONTENTS 1 .

 OF1 Introduction ................ 2. Technology envelopment 3. Measuring technical efficiency 4.Data......

	5. Results