François Bonnieux
email: bonnieux@roazhon.inra.fr

Brigitte Desaigues

MUNICIPAL WASTE STRATEGY AND HOUSEHOLDS' BEHAVIOUR AND ATTITUDES

Keywords: Waste policy, contingent valuation, open-ended question, vote

The objeclive of wasle policy is 10 increase recycling and to accept only ultilllale waste in landfills. To achieve Ihis, a number of new recycling facilities will be required and landfilloperating slandards will also be lightened and enforced. Modemised and new installations will operate on a lw-gel' scale. The success of this policy will heavily depend on households' behaviour and atlitudes. Therefore a survey was carried out in Paris and ils outskirts. The behaviour regarding wasle colleclion and recycling was considered and then people were asked 10 slale Iheir maximum willingness-Io-pay (WTP) for improving Ihe present situation. Finally Ihe)' had 10 vole for one of five incinerator types with differenl levels of pollution conlrol and cosls, Ihe first one being the one currenlly usal, wilh no tax increase. Nobody reji./sed to answer Ihe WTP question, but 34% of Ihe respondenls gave a zero value. Low-income people are more likely 10 give a zero WTP. This point is corroborated by the influence of educalion, since the probability of a posilive answer increases wilh the level of education. According 10 economic IheOl)! WTP increases wilh income. As far as age is concerned, people under forty are willing to pay more than olher respondents. People suff'ering headache, sinus pain and Ihroal irrilation are willing to pay quite a large additional amounl. Scrutinising Ihe votes shows thal most people prefer Ihe best available technology and accepllo pay for il_ AClually municipalities do not implement il as Ihey lend 10 choose the cheapeslleclmology, Ihus meeling the minimum standards enforced by Law.

Introduction.

Waste from ail sources has been increasing for years and its management has become an important environmental issue. Municipal solid waste (MSW) 1 amounted to 26 million tonnes in France in 1995, 80% coming from households (Ministry of the Environment, 1998). The average yearly production of MSW by household is now about 425 kilogram per capita, twice the amount of 1960. Similar figures are observed among the other European Union members (European Commission, 1999a). The CUITent Fifth Environmental Action Programme reinforces the European Union's strategy for waste management and places more emphasis on waste reduction and solving waste problems at their source. It calls for the promotion of recycling and re-use in order to limit the volume of waste requiring final treatment. Moreover, the Landfill Directive (European Commission, 1999b) of July 1999, ai ms to harmonise controls, throughoUl the European Union, by setting corn mon standards for the design, operation and aftercare of landfill sites. Since biodegradable waste breaks down and produces the greenhouse gas methane, the Landfill Directive sets progressive tm'gets to reduce biodegradable waste going to landfill. Member States shall set up a national strategy complying with these targets. By 2016, biodegradable municipal waste 2 going to landfills must be reduced to 35% of the total amount (by weight) produced in 1995. Intermediate targets of 75% by 2006, and 50% by 2009 have also been set. The Landfill Directive objectives are consistent with French law. Indeed, the 1992 Waste Disposai Act which became effective in April 1993, defines a comprehensive waste management policy whose objectives are to establish a hierarchy for waste disposai: recycling, then processing and finally dumping. Final waste only should be received in landfill sites by the year 2002. France currently disposes of an important part of its MSW by dumping it at landfill sites, and meeting the targets presents a substantial challenge. About 40% of MSW are incinerated, over 45% are dumped at 10000 landfill sites (but 6000 of them are not controlled), about 5% are recycled (Ministry of the Environment, 1998). The objective is to increase recycling up to 25%, and by 2002, to accept only ultimate waste in landfills (ash from incinerators, toxic products, asbestos, etc). To achieve this, a number of new treatment or recycling facilities will be required to ensure that the waste is made inert, stabilised or solidified. Landfill-operating standards will also be tightened and enforced. The decrease in the number of incinerators and of landfill sites is expected to continue in the future since the c10sing of obsolete facilities is planned. Modernised and new installations will therefore operate on a larger scale. Waste policy combines regulation, economic incentives and persuasion. Costs imposed on collection, transport, sorting, processing, recycling and disposai of waste are likely to increase. A number of operators are involved among which households are key players. They will have to bear an increasing financial burden and they are expected to voluntarily participate in extensive sorting, using separale rubbish bins provided by municipalities. Disposai fees are a separate component of the local taxes collected by municipalities and regional authorities. There is a public debate about the amount of local taxes and people have felt uneasy about their increase during the eighties and nineties. The success of the waste policy will heavily depend on households' behaviour and attitudes. For that reason we carried out a survey of 403 persons in a densely populated area of 10 million inhabitants, Paris and its outskirts. First the present behaviour regarding waste collection and recycling is considered.

J MSW includcs wastc originating l'rom households and from businesses that dispose of waste al the same facilities. 2The biodegradable CQl1lent of municipal wasle is around 60%.

Then people are asked to state their maximum willingness-to-pay (WTP) for improving the present situation. Finally they have to vote for one of five incinerator types with different levels of pollution control and costs, the first one being the one currently used, with no tax increase. Despite sorne similarities, the context we considered contrasts with the Huhtala's one (1999) in which people were asked to rank two future options, large-scale recycling system and incineration. Actually, the scenario of our study does not include the recycling option but focuses on incineration.

Questionnaire and survey.

In order to formulate the questionnaire it was necessary to understand how much the public knows about waste management. For this purpose the focus group technique was used to identify the main issues. The interview of two ten-person groups was conducted by a psychologist familiar with contingent valuation. Upper and lower middle c1ass people living in an area close to a landfill or close to an incinerator were selected to participate in these groups. People were paid for their participation and sessions were video recorded. The focus group exercise led to a first version of the questionnaire which was tested by using verbal protocols. A twenty-person sample was asked to read aloud and to answer the questionnaire. It is an interactive survey approach which allows the questionnaire to be tailored to the specific application [START_REF] Mcclelland | Methods for measuring non-use values: a contingent valuation study of groundwater cleanup[END_REF]. This process led to the final questionnaire which is divided into three sections. ln the first part one the usual socio-economic variables (sex. age, occupation) are considered in order to comply with the quota method to construct a representative sample. Then people were asked to clescribe their current behaviour and attitudes about waste management. How many rubbish bins do they use? (These rubbish bins are provided by their municipality). What do they cio with specific waste like batteries or lubricating oil? Do they sort and bring specific waste like paper or glass to collection points which can be far from their dwellings? Do they know the quantity of MSW they produce each year? According to their location (near a landfill, or an incinerator), people were asked in an open question, to state the harmful effects they spontaneously associate with the existence (if they are aware of it) of the landfill or the incinerator. Information on the waste management problem is provided in the second part of the questionnaire (Box 1). Specific information on the adverse effects of landfill and incineration is given. Recycling 25% of the waste is stated as an objective, but it will result into an increase of the cost of waste management. Then people were asked to participate in the implementation of a new waste policy in their community. At this stage of the questionnaire, interviewees were asked to express their WTP for an improvement in the municipal waste management. The question is voluntarily general, and the only information given is the tax bill paid yearly by a couple with two children. People were askecl to choose a type of incinerator in the third part of the questionnaire. The more sophisticated the technology ancl less polluting the plant is, the more expensive the treatment of waste is (Box 2). Costs were provided by waste treatment firms whereas the benefits of pollution control have been estimated for the Paris area [START_REF] Spadaro | Impact Assessment and Authorization Procedure for Installations with Major Environmental Risks[END_REF]. Benefit estimation relies on the impact pathways methodology of the external cost of energy project, which is a European research programme (ExternE, 1998). This involves four main steps: • specification of the relevant technologies and the environmental burdens they impose (e.g.

kg/s of particles releasecl by a power plant), • calculation of increased pollutant concentration in ail affected regions (e.g. Ilg/m3 of particles, using models of atmospheric dispersion and chemistry), • calculation of the resulting dose and the physical impacts (e.g. number of cases of asthma clue to these particles, using a close-response function),

• economic valuation of these impacts (e.g. multiplication by the cost of a case of asthma). Health impacts, both on mortality and morbidity, are predominant. Impacts on building, materials and crops represent about 1% of the total economic damage. The main value in this estimation is the statistical value of life, based on the social willingness to pay to save one statistical life. For mortality, a French estimation of the statistical value of life has been considered [START_REF] Desaigues | Reference values for human life: an econometric analysis of contingent valuation in France[END_REF]. As for morbidity, a number of European and North American sources have been used due to the lack of a comprehensive French data base (ExternE, 1998). Interviewees requesting more information were given a copy of a review paper [START_REF] Desaigues | Reference values for human life: an econometric analysis of contingent valuation in France[END_REF].

Box J. Eliciting WTP.

Imagine that you are in charge of choosing the waste management poliey in your community.

Suppose that unlil now your community has becn dumping waste. but the new legislation requires a reduction in environrnental and health impacts of \Vaste disposai by 2002. Suppose that 25% of \Vaste will be recycled, and a destination must be found for the remaining 75%.

Today collecling waste COSIS FF* 250 a ton; landfill adds FF 300 a ton. A family of four people Box 2. Choosing one largeascale type of incinerator.

An incÎnerator releases a cerrain amount of pollutants into the atmosphere (as cars, furnaces, etc do). Therc is a variety of different technologies that can greatly reduce the quantity of pollutanls relcased by an incineralOf, but the cleanest technologies involve Ihe highest costs. The main objective is to Iîmit the emission of dus!, sulphur oxides and nitrogen oxides (which cause respiratory hcallh problems) and of dioxins (which causes cancer). Suppose that there arc four availablc options for the incinerator Ihat could be built in your community. These options are ranked according 10 increased pollution control:

Option 1: An incinerator Ihat meels Ihe new European regulations concerning dusl and sulphur axidcs. This incinerator will release one Ihird of the dust and one sixth of the sulphur oxides a currenlly comman incineralor would. It is estimated that the resulting benefit for the population's health is FF 80 per ton of wasle. comparcd ta a currently common incinerator. However, it would add FF 65 per ton of waste (FF 1Il per family per year), ta [he FF 450 per ton of waste for a currently comlllon incincrator.

Option 2: An incinerator that oflers the advantages of Oplion 1 and in addition releases fewcr dioxins. This incinerator will rclcase one tenrh of the dioxins a currently common incinerator wou Id. It is cSlilllatcd that the resulting benelït for the population's health is FF 8S pel' ton of waste, compared ta a currenlly common incinerator. However, it would add FF 73 pel' ton of \Vaste (FF 124 per family per year), 10 the FF 450 pel' ton of waste for a currently cam mon incinerawf.

Option 3: An incinerator that offers the advamages of Option 2 and in addition releases fewer nitrogen oxidcs. This incinerator corresponds to current regulatiol1s in Germany; it will release approximately half the nitrogen oxidcs a currently cammon incinerator would. h is estimated that the resulting benefit for Ihe population's health is FF 118 pel' ton of waste, eompared ta a currently common incincrator. However, it would add FF 120 per ton of waste (FF 204 per family per year), [0 the FF 450 pel' ton of waste for a currently common incinerator.

Option 4: An incinerator that offers the advantages of Option 3 and in addition releases fewer nitrogcn oxidcs. This incineralor corresponds to current regulations in the Netherlands. Il is estimated that the resulting beoefit for the population's health is FF 160 per ton of waste, compared 10 a currently cOl1lmon incincrator. However, it would add FF 160 pel' ton of waste (FF 272 per family per year), 10 the FF 450 pel' ton of waste for a currently common incineralOr. The wording emphasised that the interviewees were free to prefer the present situation. That they accepted to pay the stated amount (recalled by the interviewer) if they chose any other option. Finally, the respondent was asked whether he/she, or a member of his/her family, was suffering From symptoms related to air pollution, and whether he/she was smoking or nol. Other questions concerned the respondent's education, the household's income and the number of people in the family. This questionnaire was administered in 403 face-to-face interviews at home, distributed in three communities:

• 100 in Paris 13 th Arrondissement,

• 100 in Paris IS'h Arrondissement,

• 203 in Villeparisis, located IS km Northeast of Paris. These communities were chosen because they are either close to an existing incinerator (Paris 13 th and IS'h) or close to an existing landfill (Villeparisis). Each sub-sample is representative of the corresponding population in terms of age, sex and occupation.

Sample characteristics

The age ranges from 18 to 87 years, mean and median ages are equal among the sub-samples, but statistical distributions show differences, with a higher percentage of respondents between 40 and SO years in the Villeparisis sub-sample (Table 1). This is consistent with the relatively high number of couples with children in this area. In addition, there are more people over 70 in Paris IS th sub-sample. 6.3% of the sample refused to rank their income in one of the 9 classes proposed. Retired people gave their last occupation. In comparison with the Villeparisis sub-sample, the Paris IS th sub-sample is biased toward wealthy and highly educated people. Besides, the Paris 13 th one is between these IWO exlreme cases. This ranking is consistent with differences in the cost of living among these areas. . ,

As far as morbidity is concerned, 47% of the respondents reported at least one symptom for themselves and 49% for one member of their family. The most freqllent symptoms are given in Table 2. There is no relationship between age and nllmber of symptoms, but people reporting headaches are YOllnger, and those reporting breathing difficulties are older. Moreover rhinitis cases are relatively more frequent in Paris and breathing difficulties in Villeparisis. Smokers did not report more symptoms than non-smokers. Waste separation at the source depends on the availability of several rubbish bins, offered by the mllnicipality, in each dwelling. People living in the 13'h Arrondissement of Paris are engaged in the largest effort of sOl•ting out waste (Table 3). In comparison sorting out is very limited in Villeparisis, whereas the Paris IS'h sub-sample is between these two extreme cases. Il clearly appears that respondents are not well-infonned about MSW production and management. First of ail they tend to underestimate the amount of waste produced by their family, the bias is increasing with the number of people in the household. In the Paris subsampi es 46% of the interviewees know that their waste is incinerated, most of them knowing the precise location of the plant. 62% of the interviewees explicitly state that incinerators are not harmful. Other people consider that incinerators are Iikely to generate air pollution, some of them precisely refer to the green house effect and dioxin emission. With respect to the Villeparisis sub-sample, 75% of the respondents know that waste is dumped nearby and 52% of them report harmful effects (i.e. 39% of the respondents). Those living close to the landfill (Jess than one km) mention a series of specifie nuisances such as odours, noise (due to the traffic) and health effects, they directly suffer. In contrast, respondents living further away refer to more general categories and mention air and water pollution.

Modelling and estimating WTP.

Nobody refused to answer the WTP question, but 34% of the respondents gave a zero value (Table 5), 30% for the 15 1h Arrondissement, 25% for the l3 1h Arrondissement, and 41 % for Villeparisis. The lowest value stated was FF 10 and the highest was FF 2000. Let us recall that before asking this question we gave information about the average MSW tax paid by a household with two children, FF 1000. One-fourth of the respondents are willing to accept a rather high increase (over FF 300) in disposai fees to improve the present situation Ali the data were merged and a Probit model was estimated in order to discriminate the population between those who accept to pay something and those who state a zero amount of money (Table 6). The most significant variables are income, education, age and symptoms of morbidity. Low-income people and non-respondents to the income question are more likely to give a zero WTP. This point is corroborated by the influence of education, since the probability of a positive answer increases with the level of former education of the respondenl. Other things being equal, respondents whose age ranges between 40 and 60 are more willing to bid positively. A significant influence of morbidity symptoms of one member of the family is also observed. Symptoms suffered by the respondent does not have a significant effect with the Probit specification, but a significant one was found with a Logit specification. So people suffering morbidity symptoms or people whose relatives suffer such symptoms are more inclined to state a positive WTP. This result is consistent with prior expectations regarding the influence of morbidity on WTP. In addition, according to a Logit model, one in a couple with children is more inclined to bid positively. This is consistent with a bequest behaviour. Probit and Logit models do not use ail the information available. To go further, let us consider the dual programme of a respondent who minimises his/her expenditures providing his/her utility level Ua and a vector p of priees (Mas Colle! el al., 1995). The programme is written as follows:

{ Minp'x U(x,Qo,m)~Uo
x is the vector of market commodities while m describes the respondent's socio-economic characteristics (age, sex, income, education). Finally, Qo is the current waste management policy. This programme admits a solution which is the restricted expenditure function :

e'(p, QO,I11,U O )

Ils value is the minimum expenditure, given prices, respondent's characteristics, required utility level and waste management policy. But in addition, the respondent has to paya certain amount of disposai fees equal to V(Qa). Therefore total expenditure is:

e o =e'(p,Qo,I11,U o )+V(Qo)
Let us now imagine an improvement in waste management policy associated with an increase in disposai fees. The reference situation being defined by Ua and by the current policy Qo, this results into a welfare gain associated with an increase in compensating surplus. Indeed, the following relationship holds:

e'(p, Qo' 111, U o ) + V(Qo) =e'(p, Q" 111, Uo) + V(Q,)
where QI is the new policy and V(QI) the new amount of disposai fees.

Given utility level and total expenditures, the respondent's WTP is defined as follows:

WTP =V(Q,) -V(Qo) =e'(p,Qo,I11,U o ) -e'(p,Q"I11,U o )
This is the c1assical definition of the compensating surplus 111 terms of a variation 111 the restricted expenditure function. This leads to:

{ WTP*(~Q) = f(p,I11,Uo,~Q)+E ~Q=Q, -Qo
where E is a random variable, which allows to specify the econometric mode!. However, many observations are equal to zero, so least squares regression would be inappropriate. A censored regression model has been considered to deal with the data [START_REF] Maddala | Limited-dependent and qualitative variables in econometrics[END_REF]. Besides, there is some evidence that some people feel they already pay too much for disposing of waste. Thus, for this category a negative WTP would have been logical. As they did not have the opportunity to state a negative amount they gave a zero value. Let us denote by WTP the gl ven answer:

WTP = WTP* if WTP > 0 and WTP = Ootherwise.
Since the real bid is only observed when it is strictly positive, the Tobit procedure is relevant.

Il uses the observations associated with a strictly positive answer to derive what would have been the other bids if respondents had had the opportunity to state a negative value. This procedure has been applied to the whole sample by considering the non-response answers to the income question as a specific modality and also to a restricted sample in which respondents refusing to fill the income question are omitted. In addition the Heckman procedure [START_REF] Maddala | Limited-dependent and qualitative variables in econometrics[END_REF] was also used for both cases, but the results were not satisfactory.

Table 7 provides the outcome of the Tobit one. Otherwise, estimations based on a restricted sample in which observations with no answer to the income question have been omitted also lead to the same results. First of ail the constant is significantly positive. Otherwise, a rapid inspection of the results shows a significant influence of income, education, age, opinion about landfill and the respondent's symptoms. However, relatives' symptoms do not significantly influence the bid leve!. According to economic theory WTP increases with income. With respect to the influence of income, it must be noted that the non-response modality effect is close to that of the lowest-class of income effect. Formai education up to secondary school makes it less likely that respondents state a high bid. With respect to age, people under fort y are willing to pay more than other respondents. Both education and age influence are non-linear. Finally, respondents suffering headache, sinus pain and throat irritation are willing to pay quite a large additional amount.

Il The constant of the Tobit equation (Table 7) provides an estimate of WTP for a hypothetical respondent defined by the reference level of each explanatory variable. Since, reference levels are associated with the most observed modalities, this constant corresponds to a kind of 'average'. The constant equals FF 181 which is in the range defined by the median and the mean of the empirical distribution.

Choosing the type of incinerator

In order to test whether a precise information given to an interviewee induces a modification in his/her behaviour, the vote for a type of incinerator was submitted ta each interviewee, even if he/she had previously expressed a null WTP. Table 8 refers to those having stated a zero WTP and Table 9 ta the others. Accorcling to Table 8, 103 among the 137 respondents who expressed a zero amount c1id not vote for the statu quo option and selected one solution among options 1 to 4. But only 58 confirmecl their vote and did accept a voluntary increase in taxes. Finally this category of people expressed a positive WTP and therefore revised their former statement. Thus 42% of those stating a zero WTP accept a tax increase when a clear policy choice is offerecl. Otherwise, 92% of those having given a positive WTP voted for option 1,2,3 or 4 and finally confirmed their votes (Table 9). In this category, a very limited number of responclents votecl for the statu quo option or c1id not confirm their votes. The votes made by people with a positive WTP, show that the large majority express stable preferences. A relatively small number (20 out of 266) modified their preferences and enclecl with a zero increase in tax. Finally, 360 responclents did not vote for the statu quo option but only 304 were likely to accept to pay (Table 10). In other words, 99 in the whole sample (25%) refused an increase in tax fees and therefore implicitly expressed a zero WTP. The majority of the respondents voted for the best available technology (option 4). The increase in disposai fees induced by each choice may be interpreted as an estimate of a minimum acceptable WTP. So a mean WTP equal to FF 235 is derived for the 304 people who accepted to pay. By adding a zero amount for the 99 people who diclnot, another estimation for the mean WTP is obtained. It equals FF 177 and it is therefore very close to the FF 181 amount derived from the Tobit mode!. Concluding comments.

This paper emphasises households' behaviour and attitudes with respect to waste management from two perspectives: (i) ex post, it discusses voluntary participation in sorting out and recycling programmes, (ii) ex ante, it considers WTP for improving waste management at the community level and the choice of a large-scale incinerator among four available options. Ex pOSI perspecti ve refers to households' actual behaviour which is observed, whereas the ex ante perspective is related to their contingent one which is derived from a scenario. Ali empirical materials come from a survey made in Paris and its outskirts.

Recycling policy combines waste separation in each dwelling and the use of central collection facilities for materials such as glass, paper and batteries. It only relies on education and moral persuasion since there is no market incentive to encourage voluntary participation. The success of this policy primarily depends on the suppl Y of specific facilities such as rubbish bins and central collection centres by municipalities. Well-educated people as weil as retired people are relatively more involved in these programmes. In addition willingness to participate increases with income. Information of the public on MSW production and management is poor. People seem more confident with respect to negative externalities from incineration than from dumping: 62% of the Paris sub-samples stated that incinerators are not harmful whereas 39% of the Villeparisis one reported nuisances.

The number of zero bids (34%) in the contingent exercise is quite low and low-income respondents are more Iikely to give a zero WTP. Otherwise interviewees with a higher level of former education and whose age is between 40 and 60 are more inclined to bid positively.

Other things being equal, those suffering specific symptoms (sinus pain, headache, throat irritation) or those whose relatives suffered such symptoms tend to bid positively. Modelling the level of WTP indicates that the bid increases with income, depends on age, education and morbidity, those suffering sinus pain, headache, throat irritation stating quite a large additional amount. Despite the weakness of the econometric results ail these points are consistent with economic theory and prior expectations involved by current behaviour. 50 to a certain extent, similar factors are prevailing in both ex ante and ex post behaviours. When more information is given and interviewees are asked to participate in a precise public choice, those having given a zero bid and those having given a positive WTP behave differently. A majority of those stating a zero WTP revise their choice by refusing the statu quo option and finally 42% explicitly accept an increase in disposai fees. In the second category associated with positive bids, only 7.5% of the interviewees revised their choice and ended with a no increase in taxes. Although these points illustrate the effect of additional information on contingent behaviour, the sample is sm ail and does not allow a firmed statistical comparison of the different cases.

A precise definition of the competing policy options induces a number of people to enter the contingent market and to accept a transaction. In conclusion 25% implicitly stated a zero WTP, instead of 34% when the scenario is less clearly focused. This involves a mean WTP around FF 180 (Euro 27), which amounts to 18% of the total disposai fees an average household pays annually. In a different context [START_REF] Huhtala | How much do money, inconvenience and pollution matter? Analysing households' demand for large-scale recycling and incineration[END_REF] obtained around FIM 60 (Euro 10) for incineration. One of the most interesting findings for policy making is that people prefer by a large majority the best available technology and are consistent since they accept to pay for il. This is contrary to what municipalities are doing because they are willing to prefer the least costly technology just complying with the minimum standards enforced by the legislation.

  produccs 1.7 tonnes of \Vaste a year -as one person produces an average 425 kg -and pays about FF 1000 per year for \'Vaste disposai, as part of their local taxes. Incineration costs more tllan landfilling. But the regulations imposed by the European Commission are very strict and allow only technologies that entail negligible heallh risks. So can you tell what maximum increase of tax per year you would acccpt ta pay for an improvcl11cm of waslC processing'! FF _ _ How much do you currently pay for local taxes? FF _ _ * FF = French Franc. 1 FF =0.15245 €.

  To summarise: Option 0: the currcnt situatÎon Option 1: incrcased cast of FF Il 1 per family pcr year Option 2: increased cost of FF 128 per f'amily per year Option 3: increascd cost of FF 204 per family per year Option 4: increased cast of FF 272 per family per year Which option would you vote for? (you may chaose the present situation) Do you therefo!'e accept Cl voluntary increase of YOUf laxes of FF__ (cost of the chosen option) pel' yeM'!

  = non-response, l'cf = reference, N = number of observatIOns, OF = degree of freedom. (a): hkehhood ratio test statislic for joint significance of the variables.

Table 1 Basic statistics Nûle. ThIS calegory Includcs exccullVCS, managers and profCSSlOnals. 2 Available Illonthly incomc \Vas catcgorised iota 9 classes and respondents were asked ta indicate the relevant class l'or thcir household. Mid-points arc uscd lo calculate the various statistics but the four households in the highest income c1ass arc excluded.

 1

	Variable	Sample	Number	Mean	Median	Standard Deviation
	Sex (1 -men, 0 otherwise)	Ali	403	0.50
	A"e (vcars)	Ali	403	48	47	082
	Type of houschold (1 = couple Paris 13\1	99	0.29
	wilh childrcn, 0 otherwise)	Paris [5 th	100	0.34
		Villeparisis	200	0.52
		Ali	399	0.42
	Education (1 :;;:; over secondary Paris 13 th	100	0.48
	school, OOlhcrwise)	Paris 15 th	100	0.55
		Villeparisis	202	015
		Ail	402	0.39
	Active (1 :;;:; cmployed persan, Paris 13 11 oothenvisc) Paris 15 1h	100 100	068 0.66
		Villeparisis	203	0.75
		Ali	403	0.71
	Occupation (1 :;;:; high position ' , Paris 13 11 oolherwise) Paris 15 th	100 100	021 0.33
		Villeparisis	203	0.09
		Ali	403	0.18
	Monthly incarne pel' household Paris 13 11	93	15962	12500	8305
	(FF) 2	Paris 15 1h	92	18353	17500	8989
		Villeparisis	189	14047	12500	6398
		Ali	374	15583	12500	7777

Table 2 .

 2 Data on respondents' morbidity

	SvnlDLOms	Number	%	Mean aoe (vears)
	Breathing diffïcultics : asthma, chronic bronchitis	67	35.8	51
	Rhinilis (COol mon cold)	50	26.7	52
	Headaches	48	257	39
	Throat irritation	22	11.8	46
	Total	187	100	47

Table 3 .

 3 Percentage of households that sort waste al the source Sorling OUI and recycling strategy also relies on the use of central collection facilities which are available for glass and paper in most municipalities. There is no financial incentive to separate different types of waste and to dispose of them at the relevant collection centre. So, public policy is based on education and moral persuasion. People who regularly use collection centres act voluntarily and bear additional costs. As shown in Table4, the distance from home to the nearest centre influences negatively the willingness to use them. Voluntary use is quite popular since 59.2% of the respondents state that they al ways or often use them (but we must be careful with this assertion because of the weil known tendency to overstate a "good" behaviour). Higher level of education and income are positively correlated with sorting out, and retired people are relatively more involved in these programmes. It appears that both programmes (sOt•ting out at the source and bringing to a collection centre) are complementary.

	NUl11ber of rubbish bins	1	2	3 or more	Total
	Paris 13 1	\	34.0	170	490	100
	Paris IS 1h	230	72.0	5.0	100
	Villenarisis	96.0	1.5	2.5	100
	Ail		62.6	22.8	146	100

Table 4 .

 4 Willingness to use collection centres

	Tvnc or use	Number	%	Distance From home (m)
	Always	184	47.1	248
	Onen	47	12.1	214
	Occasîonally	63	16.2	487
	Never	96	24.6	472
	Total	390	100	338

Table S .

 S Annually WTP (in FF) to improve the present situation.

		N	Mean	Standard-	1"	Median	3'"	Min	Max	Mode
				errer	ouarlile		Cluartile
	Ali WTP	403	244	340	0	ISO	300	0	2000	0
	WTP> 0	266	370	3S9	ISO	2S0	SOO	10	2000	SOO
	Note. N

= numbcr 01 observations.

Table 6 .

 6 Probabilitv to "ive a zero WTP (Probit oroeedure).

	Variable	Estimate	Std Error	ChiSquare	Pr> Chi
	Constant	-0.50	032	237	0.12
	lncome			10.08	0.04
	< FF 10000	043	0.23	342	0.06
	FF 10000-15000	0.05	0.21	0.05	0.83
	FF 15000-20000	0.03	0.22	0.02	090
	NR	0.71	0.30	5.65	0.02
	> FF 20000 (re 1)	-	-
	Education			5.53	0.06
	Primary	034	0.22	2.44	0.12
	Secondary	0.39	0.17	5.37	0.02
	Higher (rel)	-	-
	Age (years)			20.54	0.00
	< 40	-0.70	0.18	1540	0.00
	> 60	0.13	0.20	044	051
	40-60 (rel)	-	-
	Type of household			3.60	0.31
	One persan	0.02	0.22	001	0.93
	Couple with childrel1	0.36	021	309	0.08
	Other	0.11	0.25	0.20	0.65
	Couple without ehildren (rel)
	Landrill disamcnilics			1.18	0.55
	NR	0.11	0.17	040	0.53
	No	-0.09	0.23	015	0.70
	Ycs (rel)	-	-
	Respondent's symptoms			2.76	043
	NR	-0.06	0.20	0.08	0.78
	Sinus/1hroa!	-035	0.24	205	015
	Hcadache	0.00	0.27	0.00	0.99
	Brcathing diftïculties (rel)	-	-
	Family's symptoms			9.50	0.02
	NR	-037	0.18	444	0.04
	SinUS/lhroat	-0.57	0.26	4.75	0.03
	Headachc	-0.72	031	5.31	0.02
	Breathing difficullies (rel)	-	-
	X' (a)	DF=19		43.99	0.00

--

Concordant predictions;;;; 69.80% N =403 Nole. NR = non-rcsponse, rel' = reference, N ;;;; nurnber of observations, DF = degree of freedolll. (a): likelihood ratio test statistic for joint signi ficance of the variables.

Table 7

 7 Estimation of WTP

	Variable	DF	Estimate	Std Error	t	ChiSquare	Pr> Chi
	Constant	1	181	109	1.66	2.75	0.10
	Tncome	4				24.82	0.00
	< FF 10000	1	-320	80	-4.03	16.22	0.00
	FF 10000-15000	1	-144	71	-2.03	4.10	004
	FF 15000-20000	1	-31	74	-0.42	0.18	067
	NR		-343	112	-3.07	9.42	0.00
	> FF 20000 (l'cf)	0	0	0
	Education	2				5.44	0.07
	Primary	1	-53	77	-0.69	0.47	0.49
	Secondary	1	-127	56	-2.29	5.22	0.02
	Higher (l'et)	0	0	0
	Age (years)	2				Il.85	000
	< 40	1	197	59	335	11.20	0.00
	> 60	1	51	69	0.74	0.55	0.46
	40-60 (rel)	0	0	0
	Type of houschold	3				3.39	034
	One person	[	-90	74	-1.22	1.48	0.22
	Couple \Vith children	1	-118	68	-1.72	2.97	0.09
	Other	1	-60	84	-0.71	0.51	0.48
	Couple without children	0	0	0
	Landfill disamenities	2				4.51	0.11
	NR	1	-32	60	-0.53	0.28	0.59
	No	1	104	76	1.37	1.87	0.17
	Yes (ref)	0	0	0
	Respondent's symptoms	3				8.03	0.05
	NR	1	54	70	0.77	0.60	0.44
	Sinus/throm	1	210	82	2.55	6.51	0.01
	Hcadachc	1	141	92	1.53	2.34	0.13
	Breathing diflïcultics (l'cO	0	0	0
	Family's symptoms	3				3.49	0.32
	NR	1	115	61	1.87	3.49	0.06
	SÎnus/throm	1	61	82	074	0.55	0.46
	Headache	1	59	97	0.60	0.36	0.55
	Breathing diflïculties (ref)

con Ifme 'Jy respOIl ents statJn<Y a zero Votes No confirmation Confirmation

	WTP otes expresse an Total d d d fi db T bl 8 V a c
	Option 0	34		34
	Options 1 ta 4	45	58	103
	Ali	79	58	137

Table 10 .

 10 Number of votes by option, expressed and confirmed.

	Option	Vote	Accept
			to Dav
	1 (FF III)	26	23
	2(FF 124)	24	23
	3 (FF 204)	61	59
	4 (FF 272)	249	199
	1,2,3&4	360	304

Acknowledgements.

The authors acknowledge the French Ministry of the Environment for financial support.


Public policy in vertically related markets: a Cournot oligopoly

We use a partial equilibrium two-country model, with two vertically related markets, with perfect competition in the primary good sector and with a fixed number of processing firms in each country, characterized by a Cournot behavior upstream and downstream. In the first stage of the game, the government of the exporting country chooses the level of price instruments on both goods. The targeting principle is used to charucterize optimal intervention in presence of a minimum revenue constraint towards primary producers.

Introduction

International trade in vertically related agricultural markets has already been the subject of various studies, where competition at the processing level is modelled either as perfect (e.g. [START_REF] Paarlberg | Agricultural Export Subsidies and International Goods Trade[END_REF], or as monopolistic competition (e.g.Lanclos and Hertel, 1996), or as oligopolistic (e.g. McCorriston and Sheldon, 1996). In this paper, we argue that market power may be exercised by the processing firms not only towards final consumers but also towards primary agricultural producers, i.e. that it is relevant to consider an oligopsonistic-oligopolistic structure.

In fact, the exercise of market power upstream by agri-food firms has probably not been a major concern until now, at least in the European Union (EU), as it has certainly been limited due to the existence of guaranteed prices on some bulk goods. However, the implementation of the Uruguay Round GATT agreements now tends'to reduce the support given to farmers by means of guaranteed market prices, to the benefit of direct aids, and thus tends to diminish the protection of farmers from oligopsonistic pressures a direction that should be reinforced by the forthcoming WTO negotiations.

The example of the cereals-poultry sectors in the EU has the main features of the framework evoked above. Cereals account for one third of poultry total production costs, and poultry can thus be considered as "processed cereals". The EU compound feed industry is concentrated, with 15 groups of more that 3Mt representing around 3OVo of the production, and 50 groups of more than 0.5Mt representing around 60Vo of the production (Janet and [START_REF] Roux | L'Organisation de I'Industrie des Aliments Composés dans l'Union Européenne[END_REF]. This suggests that market power could be exercised by compound feed industries when buying cereals. In the poultry industry, concentration is also high, with ten processors having a market share of 337o in Europe and with mainly two groups, Bourgoin and Doux, being involved in exports towards third countries [START_REF] Dunn | EU top 10 in Poultry Meat: More Convenience Foods -More Concentration[END_REF]. This suggests imperfect competition behaviours on the poultry sales market. Thus, considering the activities of purchase of cereals / production of poultry / slaughtering and processing of poultry as an unique integrated activity, our model may be illustrated by the example of cereals -processed poultry, with imperfect competition present at both ends, and with trade on both products.

In the paper, we use a partial equilibrium two-country two-good model, with vertically related markets, one country exporting both goods towards the other. The sector producing the intermediate good is in perfect competition and the sector producing the final good has a fixed number of firms, in Cournot competition upstream and downstream. We consider the public policy in the exporting country, and we assume that there is no intervention in the foreign country. 'We assume that the government wishes to support primary agricultural income, and we account for this in our model with a redistribution constraint stating that the revenue of the agricultural sector must be at least equal to a target revenue. The government of the exporting country seeks to maximise the national welfare, under this redistributive constraint, using price policy instruments (i.e., production, consumption and export taxes/subsidies). Our objective is then to characterise the results for optimal intervention using the targeting principle (Bhagwati, I97I), which specifies that the government should use instruments correcting each distortion at its source.

The model has some features of the "strategic trade policy" literature [START_REF] Brander | Export Subsidies and International Market Share Rivalry[END_REF], the presence of positive rents on export markets at the equilibrium giving a rationale for public intervention in order to shift these rents to domestic firms.

As it is well-known, the results for intervention in this literature are very sensitive to the assumptions retained on the nature of the competition between firms (Eaton and Grossman, 1986). However, the use of the targeting principle allows us to separate the profirshifting argument from the other rationales for intervention and to explain why the government intervenes in order to correct the various distortions.

Equilibrium equations of the model

The model is a partial equilibrium model with two countries, H andF, and two goods 1 and2, with good I being an intermediate input for the production of good 2. Country H exports goods I and 2 towards country F. In each country, good I is produced with perfect competition, while there exists a fixed number of firms producing good 2, m (resp. rn-) firms in country Il (resp. F). These firms exert market power upstream (producers of good 1) and downstream (final consumers of good 2) (see graphic 1). Thus, the processing firms of both countries compete for the purchases of good I in country H and the sales of good 2 in country F ; the processing firms of country H arc in oligopolistic competition for selling good 2 in country H ; and the processing firms of country F are in oligopsonistic competition for buying good 1 in country F.

The technology of production of good 2 is assumed laeontief with respect to good 1, one unit of good I being used for the production of one unit of good 2. We consider the special case where the firms adopt a Cournot behaviour on the upstream and downstream markets where they compete. Markets of goods I and 2 are assumed to be segmented (i.e., each firm sets its quantities independently in both countries). The equilibrium results from a two-stage game: in a first stage, the government of country 11 sets the level of the production, consumption and export taxes/subsidies ; in a second stage, each firm chooses its levels of purchases/sales in each market.

The producers of good I in country H are characterised by an inverse offer function g(Sr), where S, is the production of good 1. Their profit function is noted lI115,; . The derivative of lltwith respect to s, is then: flr'=S,g')O. Jhe inverse demand function for good 2 in country Il is noted d(Dr), and the surplus function of consumers of good 2 is noted V"(D), where D, is the consumption of good Z.The derivative of { with respect to D, is then: Y,'= -Drd'> 0. We adopt similar notations in country F, where the variables are distinguished with an asterisk.

The ith firm producing good 2 in country rl consumes a quantity Di of good I and produces a quantity Si of good 2, of which Dj is consumed in the internal market and Xi, is exported. The jth firm producing good 2 in country F consumes a total quantity Dl. of good 1, of which X,/ is imported from country H and S,/. is produced locally. It produces a quantity Sl" of good 2 entirely consumed in country F. In country H,let prr = g(sr) be the offer price of good l, pd, the internal demand price for good 1, pdz= d(Dr) the final demand price for good2, psi, the offer price of good 2 on the internal market and pse, the offer price of good 2 in country F (these last two prices being possibly different from the assumption of market segmentation). In country F,let pi be the offer price of good 1, equal to the demand price for good I produced in country F, per the demand price for good 1 produced in country F1, pi = d. (Di) the offer price of good 2 in F, equal to the demand price for good 2 in F.

The unit production, consumption and export taxes/subsidies of good i in country H arc called spi, sci and se, respectively(i=I,2).

Section 3 and section 4 present the resolution of the second and the first stage of the game, respectively.

Second stage of the game: determination of the equilibrium quantities

In the second stage of the game, the ift firm 2 of country 11 maximises its profit with respect to its domestic sales, Dtr, and its exports, Xj, taking as given the purchases of good I in 11by the firms 2 of country F, X, the domestic sales of good 2 by the other firms 2 of country H, D;', as well as the sales of good 2 in country F by the firms 2 of country F and by the other firms 2 of country H, S; and Xri, from the assumption of Cournot competition. The profit of the ith firm 2 in country I/ is: ( I ) Il t' (D;, x i,si, x,, D;', x ;', 0,e\ = tl'' (Di, x ;, s;, x, D r', x ;' ) + 0D; + ryx ; with û2' = d.(D)DL + d. (x, + silx', -g(Dz + x2 + x,)Dici,J), 0 = (sh* sc,) + (spz+ scr) = (p\ -pd) + (psir-pd), e=(spr+sc,) *(ser+scr) =(psr -pd)*(pser-p;), where li" is the profit net of budgetary transfers, QD:r+qXi) are.the budgetary transfers, and C:r(S:r) is the cost of the production factors except the cost of the intermediate good.

The two first order conditions of profit maximisation are: @ fi';(D;,xi,x,,Di',x;')+0 =0 with rli, = d +d'D)-g-g'Dï -cL

(3) f i;(D;,x;,si,x,,D;',x;')*n =0 with fi';,i = d* +d*'x;-g -e'Di -cL wtrere û1, and fi';, are fhe partial derivatives of û2i with respectto D) and Xi, respectively, and where cL = cL(Si ) is the marginal cost of production.

These two first orders conditions indicate that in the absence of intervention (0 = 4 = 0), the ith firm 2 of country.F/ equalises the perceived marginal revenue of its sales on the internal market (i.e., the marginal revenue based on its Cournot behaviour) , d + d'Di, as well as the perceived marginal revenue of its export sales, d* +d* 'Xj, with its perceived marginal outlays, g+ g'D', +c'r.For the sales of good 2 on the internal market, optimality requires the equalisation of the price and the marginal cost of production, and thus the correction of two distortions, i.e. the oligopsonistic distortion upstream and the oligopolistic distortion downstream. For the sales of good 2 on the export market, optimality requires the equalisation of the real marginal outlay (taking into account the adjustment of the sales of firms 2 of F as well as the adjustment of the sales of the other firms 2 of country II) and of the production costs, thus the correction of three distortions, i.e. the oligopsonistic distortion upstream, and two distortions downstream: first, a "strategic distortion", because if acting as Stackelberg leaders, the home firms could attain a higher profit level in the competition with the foreign firms ; second, a terms of trade distortion, because each home finn 2 does not internalise the effects of its output decisions on the price faced by the other home firms 2i.

In the same way, the jth firm} of country F maximises its profit with respect to 51. and X/, taking as given the purchases of good I in H by the firms 2 of f1 and by the other firms 2 of F, D, and X,i, the purchases of good I in country F by the other firms 2 of F, ^t;i-, and the sales of the firms 2 of H in F, X r. The profit of the jth firm 2 of F is:

(4) rI2i-1g i.,x i, Dt,x z,s;1*,x r i ; = fi 2;-1s/*, x i, D, x z,sl i*, x, i ) + # i The first order conditions of the profit maximisation are:

(t fr3Ë(sl.,xl,x2,s;i*,x, i) =0 with û3,i: = d* +d* 'si* -g* -g*'si. -rl" (O ûii:(sl.,xl,xz,D1,,s;i.,xii) +€=0 with rl|f; =d* +d*'Sl. -g-g'Xi -cl- where nl',I anO nf,i are the partial derivatives of ûz'-with respect to S/-and X,/, respectively, and where ,ir. = cl. (S/. ) is the marginal cost of production.

These two first order conditions indicate that in the absence of intervention ( f = 0 ), the 1û firm 2 of F equalises the perceived marginal revenue of its sales on the internal market, d* +d*'S'., with the perceived marginal outlay for imports of the intermediate good 1, g + g'Xl + rl. , as well as with the perceived marginal outlay for local purchases of good 1, g* + g*',S,'. + rl. . The introduction of f < 0 leads to an increase in the perceived marginal outlay for imports, from g + g'Xi +cl. to g + g'X{ + rl. -É.

In other words, it leads to a shift in the equilibrium, the net marginal profitability of imports of good I by the firm of ,, n?;, becoming positive, the profit fi?;"1 being captured as a budgetary revenue by the country H, andthe total marginal profitability n'1i bein8 equal to zero. Thus, the use of Ç ata negative level allows the government of country I/ to tax the profit of the foreign firms 2 via their imports of good 1.

From the assumption of a Iaeontief technology and from the market equilibrium equations it follows that Si=Sj-X, and Dr=Xr+Dr. For a given level of intervention, the resolution of the system formed by these two equations and equations

(2), (3), ( 5) and ( 6) determines the equilibrium level of D2, X2, X,, Sj, ,Si and Q.

First stage of the game: determination of the level of the instruments In the first stage of the game, the government chooses the level of the instruments 0 , Tl and $ in order to maximise the national welfare (equal to the sum of the surplus levels of the producers of good l, the m firms producing good 2 and the final consumers, less the cost of intervention), under the constraint of a minimum revenue flt for the producers of good 1. The lagrangean associated with this program is:

(7) L =W + ).(f7' -rI';, with W =Tlt*ÉtI" +Y" -&, i=1 where 2 is the multiplier of the redistributive constraint.

The solution for optimal intervention is found by totally differentiating this lagrangean.

A convenient form for this total derivative is obtained using the two following relations. First, equation (5) implicitly defines Si = Sj(X, ,X1), where .Sjr, is negative and Sj", is positive under the assumption of strategic substitutability between the purchases of good I and between the sales of good 2 for the different firms (see annex).

Second, equation ( 6) implicitly defines p4= pet(Dt,X1,X2), where the partial derivatives pen, and pezx, are negative under the assumption of strategic substitutability, if g*g".Xr>0 and if the marginal cost is non decreasing (cj'>0), and where p€ro, = -g".Xr l m , wbich sign depends of the concavity /convexity of the inverse offer function of good I in country H (see annex). Using these both expressions, after reaffangement, yields:

Assuming an interior solution is obtained, the optimal intervention is found by equating to zero the partial derivatives of the lagrangean with respectto D, X, and X,. This directly gives the optimal levels of the instruments 0, q and (. The interpretation is made easier by re-writing the result in terms of optimal price differences. From equation ( 1), (pq -pd) intervenes in the both expressions of 0 and r7 , and thus there exists an infinity of solutions in terms of price differences. This characteristic follows from the assumption of laeontief technology of production of good 2 with respect to good 1. From equations ( 1) and ( 4), the optimal equilibrium can be obtained with the following price differences: af = t+ * )D, g' +X, p er, + )rS, g' + L V "' 1dD, (8) +t41 + *D, g' *x, p e, o + AS, g' + 4 d*' x, + msi *,îr!. + x r. p q *,\dx, +ft + mSi*,tI!. + X, pq y, * AS 6'fdX, (9) ps, -pdt=.spr +,tcr = )Srg+L*Drg'+Xrpero, (10) ps, -p€t = spt+ set = ASr/*m$rfIï + Xrper*, (ll) psi, -pdz = spz *rr, = 1tY" '--L Dr.d' ttmtmL (12) pser-pî= spz+ sez-*ll d*'xr+ms)*,.û31 * xr.pew"

The results can be interpreted using the targeting principle. In our case four kinds of distortions are present: the revenue redistribution towards primary producers ; the distortions resulting from the market power exerted by the domestic firms 2 on their internal markets, upstream and downstream ; the terms of trade distortion resulting from the excessive competition of the domestic firms 2 on their export market ; and the "strategic" distortions resulting from the non-competitive behaviour of the foreign firms 2, upstream and downstream. According to the targeting principle, if only price instruments are at disposal, the least-distorting way to redistribute income towards producers of good I is a producer subsidy, spt = AEg'> 0 .

The "strategic distortions" are of two kinds. First, in the presence of equilibrium oligopsony rents partly captured by the importing foreign firms 2 on the market of the good I in country fI, country H can improve its terms of trade on this marketii. Second, in the presence of an oligopolistic rent on the foreign sales market of good 2, the home government can help the domestic firms 2 increasing their net export profit. Each of these distortions require a simultaneous intervention on the exports of both the primary and the processed goods.

Thus, the instrument on exports of the intermediate good, se,, is used simultaneously to improve the terms of trade on this market (Xflerx, < 0) ; and to diminish the imports of good 1 by the foreign firms 2, in order to reduce their total production, and thus increase the marginal revenue of exports by the domestic firms 2 çmS)",n|< 0). The intervention thus corresponds to an export tax on good 1, se, < 0.

Assuming that the production subsidy sp, equals zero, the instrument on exports of the final good, ser, is the sum of three terms: a negative term of improvement of the terms of trade on the market of good l, Xrper*, <0, aimed at increasing the sales price on the foreign market 2, and thereby increase the import price of intermediate good ; a positive term of correction of the strategic distortion on the downstream foreign market, nS)rn'i, > 0, aimed at increasing the marginal export revenue of the domestic firms 2; anegative terms of trade correction on market 2, (m-I)d.'X2lm<0, intended to prevent the domestic firms from excessive competition in the foreign market. The instrument used may be an export tax or a subsidy depending on the relative values of these effects.

Still assuming that the production subsidy qp, is equal to zero, the correction of the oligopoly distortion on the internal market requires a consumption subsidy, sc, --pr4'> 0. The instrument at the intermediate consumption of good 1, rc,, is used simultaneously to correct the oligopsony distortion (Drg'lm> 0) and to improve the terms of trade on the market of good I (Xrpero,, which sign depends on the concavity/convexity of the internal offer curve of good I in H ). The sum of these two effects is necessarily positive if the offer function of sector I in H is concave. It may be negative in case of strong convexity of this offer function.

Table I sums up the instruments used at the equilibrium of optimal intervention, in the case where the production subsidy sp, equals zero.

t2

Conclusion

The results obtained here may be compared with the case of perfect competition in a similar context of vertically related markets. In this latter case, the optimal price policy consists in a production subsidy on the primary good aimed at redistributing revenue towards its producers, and export taxes on both goods aimed at improving the terms of trade in the large country case. Our paper shows the policy implications following from the integration of an oligopolistic-oligopsonistic behaviour of the processing firms in this framework. We find that the production subsidy on the primary good is still the best way to redistribute income towards its producers. Besides, intervention is still required on the exports of both goods, but it is now motivated by the strategic nature of the interaction between firms. And welfare maximisation also requires intervention on the internal home markets, mainly because of the non-competitive behaviour of the domestic firms. Thus this paper identifies new rationales for intervention arising in a context of vertically related markets, when taking into account imperfect competition. However the signs of the instruments obtained here are specific to the nature of the interaction between firms retained (Cournot competition with marginal substitutability between purchases and between sales of the different processing firms, segmented markets). Further research should extend the analysis to other assumptions on the structure of competition (e.g. Bertrand behaviour of firms, integrated markets).

It would also be interesting to add supplementary instruments to the government's toolbox. In particular the production subsidy on the intermediate good used here to redistribute income towards the primary producers is likely to increase the profit of the domestic processing firms as well, to the detriment of the domestic final consumers, and this may run counter to the redistribution objectives of the government. It would thus be interesting to compare the welfare implications of different implementations of the revenue constraint towards the primary producers, e.g. by way of production subsidies as in our case, of direct payments or of guaranteed prices.

More fundamentally, under the framework retained here, the processing firm of the importing country is able to exert market power upstream and downstream. This assumption may not be adequate in the countries importing agricultural goods from the UE. It would be more interesting to build a three-country model, where two countries showing imperfect competition in the processing sector would export towards a third country with markets in perfect competition.

Annex

Totally differentiating equation ( 5), after rearïangement, yields Sj = Sj(X, ,X1), The second order conditions for the profit maximisation imply that ll34r. < 0 . From the terminology of Bulow et al. (1985), the assumption of strategic substitutability between the purchases of good I means that the marginal profitability of purchases of the intermediate good by each firm2 decreases with the purchases of the other firms 2.

This leads to the inequalities: Ilf,ir-, < 0, n]i-rir ( 0 , n?lo, < 0. Assuming that this strategic substitutability between the purchases of good I stands independently of the conditions on the final demand, and in particular for a perfectly elastic final demand, yields: g +g".Xi > 0 and g*+g*".,S,'* > 0. In the same way, the assumption of strategic substitutability between the sales of good 2leads to the inequalities: nlr,l", < 0 and il'lÏ",<O, which yield d.+d."Sl. <0. Using the expressions of the second order derivatives, one shows that the numerator of Sjr, equals -g*'-m.(g-+g-".,Sf-;, that Il'/ir;,. =d*'+d*".5j. and ttrat tlf;ir-=zd*+d*".S/. -cf-'. These three expressions are negative under the previous restrictions and as long as the marginal cost is non decreasing. Assuming also g*g".Xr>O yields the signs given in the text for the partial derivatives af Si and pe,

  From the assumption of laeontief technology we have S) = Di and S/. -Dl. . The definition of export offers and import demands and the equilibrium conditions of the world markets of goods 1 and 2lead to the identities: S, =4 +X, ; Di =Si +X, ; Xr+Dr=Sz i (where A=ZA' , A= Dr,S2,X2,D2, -, Di, s;, xr ).

  with û2. =d.(si +x, + xr)sl. -g-(s, )sl. -B(xr+Dr)xi -cl-,,SJ.) and ( = spr * set= p\pel where Cl-(.Sl\ is the cost of the factors of production except good l.

  ", = n]iÀr +(m.s/-s1r t4 Totally differentiating equation (6), after rearrangement, yields per = per(Dt,Xt,Xz) , and sj*, -(il3[l -r4f.l ) + (nx. -1)É:i;.'. -n3ûr' ) n3Ël + (m" -tin3ltr. with pero,--!^g".X1, perx, =-\rr*r".x,) + sjr, fr'"i*r. +1m. -Dfi'li,-, m and per*, = fl'i,*, + Sj", f iT,r + (m. -t)n!,,rr,.tn

Table I :

 I summing up of the instruments used


Adolphe Rue

Boblerre

Mariëlle, Vermersch, Dominiquer Matthee

Are the precautionary principle and the international trade of genetically modified organisms reconcilable?

Keywords:

HAL is

These two issues often seem to be in contrast with one another in the sense that the implementation of the precautionary principle on a national level can provoke international trade barriers. So where exactly lies the origin of the conflict, and how can we reconcile the precautionary principle with the international trade in order to work towards a sustainable development?

The precautionary principle The precautionary principle allows and even obliges governments to adopt measures, in absence of scientific certainty, if there exists a reasonable fear for irreversible or serious damage. We can divide the precautionary principle in three components: (1) the presence of scientific uncertainty, (2) a risk of irreversible or serious damage, and (3)an obligation for the governments to take precautionary measures.

The first and the second component contain a certain freedom of interpretation, which might mean that the application of the same scientific information will result in different precautionary measures according to the country's culture and environment. When does scientific uncertainty become a certainty, what should be the estimated dimension of a serious or irreversible damage, and at what level should a possibility of serious or irreversible damage be defined as a risk; all questions to which we need to respond in order to conclude that the government has an obligation to take measures. To get a better idea about the necessity of the precautionary principle, we will compare it with the preventive principle.

The principle of prevention aims to prevent damages rather than having to cope with its consequences. lt is based on the scientific proof that a violation of the preventive measures will result in the occurrence or increase of environmental damages. Scientific identification of the risks involved is therefore a condition.

So why not wait with regulating until scientific proof has been established? Within the precautionary principle lies a presumption that the establishment of scientific proof might come too late to prevent damages, either because damages have already occurred, or because the delay is too short to implement effective preventive measures. So the precautionary principle can be seen as an enlargement of the preventive principle in the sense that it broadens its scope in time and goes beyond the human capacities of a given moment.

But we should be aware that the applicability of the precautionary principle concerns a period of scientific uncertainty, to be considered as uncomfortable and temporarily. The precautionary principle identifies problems endangering sustainable development, which are still surrounded by doubt, and calls for scientific proof seeking a solution. lt aims to replace uncertainty to ensure safety until other measures or solutions can be implemented.

However, different interpretations of the precautionary principle and its applicability to genetically modified organisms have led to a different opinion on: (1) whether genetically modified products should be distinguished from classical products2 and whether genetic manipulation should be considered as a new technology containing new risks and therefore demanding an implementation of precautionary measures, and (2) the form and contents of the precautionary measures necessary.

These different interpretations can easily create restrictions on the free circulation of genetically modified products. How do the WTO rules respond to this problem?

The WTO rules The WTO rules aim to establish liberalisation of international trade and avoid arbitrary trade discrimination.

The protection of human health and environment may be used as justification for trade restrictions, but shall not lead to the establishment of arbitrary trade discrimination. ln other words, they should be applied to both foreign and domestic "like products" in a similar way and may not contain disguised restrictions to protect domestic production.

Two crucial points apply to the genetically modified organisms. The first point is the Panel's interpretation of the concept "like product"; will genetically modified products and classical products be considered as "like products", or is there within the character of the product a reason to treat them differently? Secondly, if they are considered as like products, is there a justification for regulating the genetically modified product based on the precautionary principle?

When trying to respond to the question whether the Panel will consider genetically modified products and classical products as like products, we should divide the question into two sub-questions: (1) how does the genetically modified product in its final version differ from a classical product, ( 2) is modern biotechnology considered as a new technology or a continuation of the classical biotechnology?

While examining the presence of the notion "like products" in previous cases3, the Panel has primarily looked at the final product. lf the Panel decides to continue this approach while analysing the genetically Classical products: products which have not been subject to genetic manipulation.

For example the Report on Spain -Tariff Treatment of Unroasted Coffee. modified organisms, the substantial equivalencea will certainly been taken into account. Consequenfly, when genetically modified organisms cannot be detected in the final product, similarity between the genetically modified products and the classical products will be concluded.

But if the Panel decides to consider the whole production process, it will be essential whether modern biotechnology is to be considered as a new technology. How will the products resulting from genetic manipulation be classified? Will they be classified in one category consisting of products containing or having contained genetically modified organisms, or into different categories according to the product type (potato, corn, etc.)? Will a genetically modified potato be considered as a genetically modified product or as a potato?

The second point will only be applicable if genetically modified products and classical products will be considered as "like products"; is there a disposition adopted in the WTO rules which allows the application of precautionary measures? ln most cases, the justification for the implementation of environmental restrictions must be founded on scientific proof, so prevention of damages is possible but not by the implementation of precautionary measures. However, the Sanitary and Phytosanitary Agreement indicates that if scientific proof is insufficient, the Party may provisionary adopt measures, which need to be analysed after a reasonable delay in order to conform them with scientific information later establisheds.

And although the Sanitary and Phytosanitary Agreement recommends the Parties to harmonise their sanitary measures by basing them on international norms established, they have the liberty to determine their own level of protection.

The harmonisation of national measures 6

We have observed that differences in the adoption of precautionary measures could result in the first place from a certain freedom of interpretation of the precautionary principle, due to its complexity and imprecision, and secondly from the definition of the precautionary measure necessary, determined by the risk assessment and risk management procedure. ln order to reconcile the precautionary principle with the international trade of genetically modified organisms, we need to establish an international framework harmonising national measures and redefine certain notions and definitions influencing the determination of these measures, But which elements shall be coordinated on an international level and which should fall under the scope of the national sovereignty of the state?

When harmonising national measures, we should start with promoting the exchange of scientific information and stimulate scientific cooperation. Knowing that the necessity of the precautionary principle will depend on the scientific knowledge of a certain moment, international cooperation might help to develop scientific evidence.

The interpretation of the precautionary principle will partially depend on the interpretation of the scientific information available and the perception of related concepts, such as "risK' and "irreversible or serious damage". Establishing guidelines on how to use the scientific information and defining related concepts a The concept of "substantial equivalence" has been developed by the FAO/OMS and the OECD and divides the genetically modif,red products in to three groups: (1) products, which in their fînal version don't differ substantially from classical products, (2) products, which substantial equivalence can be concluded, except for the introduced genes, (3) substantial equivalence cannot be concluded. 5 Article 5.7. of the Sanitary and Phytosanitary Agreement.

6 Experience has shown that there is a need for a harmonisation of national measures preventing biotechnological damages and projects have been undertaken to create an international legal framework (the "Biosafety" Protocol) and strengthen the European regulation (the revision ofthe European directive 901220). might help harmonisation, while states keep their liberty to adapt these guidelines according to their national circumstances. This freedom of interpretation allocated to the states should be respected in order to guaranty an effective risk assessment and management procedure. Culture and environment differ according to the country and could have a diverse influence on the risks involved, But how far should we go? Should we take into consideration only scientific elements, or should we also bear in mind the social-economical interests of the genetically modified organism in question balancing these interests with the risks involved. And what about the public opinion? At first instance, the precautionary principle is a policy, which should provide the society with measures aiming to protect human health and the environment and thus the scope of the precautionary principle seems to exclude social-economical considerations and the opinion of the public. Although social-considerations and the public opinion can be adopted into the precautionary measures, once their necessity has been justified, they should not be the fundamentaljustification for the adoption of precautionary measures or their abolishment. But if taken into account, the national social-economical considerations shouldn't be analysed isolated, but should be added to the international stakes in question and regional and international commitments made by the country should not be forgotten.

A last point asking for consensus concerns the burden of proof. The precautionary principle implies a shift of the burden of proof, and asks the promotor of a certain activity to prove that the activity is not dangerous. The WTO rules however demand the state imposing the trade restriction to justify its necessity. So the question is whether it is the state imposing a precautionary measure needing to justify its necessity or the promotor of a certain activity, proving its safety.

Conclusion

The harmonisation of national measures is obstructed by the fact that countries have a different background and therefore a different need for precautionary measures. While harmonising, we should not aim to abolish all diversity of precautionary measures, but have as objective to avoid abuse, which might lead to restrict the promotion of international trade liberalisation. The necessity of precautionary measures and their contents needs therefore to be analysed, bearing in mind the culture and environment of the country. But the applicability of the precautionary principle should be seen as temporarily. A scientific society based on a strong scientific development demands a flexibility in the form, contents and length of period of a precautionary measure, susceptible to be changed according to the scientific evidence established. lf we want to reconcile the protection of the environment with the trade liberalisation, we need to take this characteristic into account.

INRA, Unité d'Economie etSociologie Rurales,65, rue de SaintBrieuc, 35042.Rennes, France D. Vermersch is alsowith the Université Catholique de Louvain-la-Neuve, Belgium.DOCtllilEIITATO}l ÉIOt'lOiilIERURALE REt,ll{ES I ililt llill lllll lllll lllll lllll lllt lllt )K004I07)r(