Location:
International Food Policy Research Institute
2033 K Street, NW, Washington, DC
Fourth Floor Conference Facility
Thursday, November 7, 2002
3:30 p.m. to 5:00 p.m.
R.S.V.P.

Abstract
Restructuring agricultural markets requires more than the removal of policy constraints. Economists and government officials must also know how to manage the transition from business as usual to a new policy regime. Working at the governance level and analyzing and monitoring welfare outcomes at the market level are critical. A direct link between policy changes and welfare gains should be established. A system to measure welfare outcomes should answer the following questions: What was the welfare outcome under the old policy regime? How much welfare gain, if any, is derived from the new policy regime?

Structural reform of agricultural commodity markets is difficult for several reasons. First, the old policy regime has its own incentive system and its particular business relationships. Those who have benefited from the status quo will resist the introduction of a new policy regime, which will obliterate existing business relationships and practices and incentives. The introduction of a new policy regime without new "rules of the game" (i.e. new business relationships, practices and incentives) will lead to market disruption and scarcity. Second, at the market level, private operators may not know how to work with banks and customers in competitive markets and re-structuring costs can be high. Third, governments often lack consensus, political will, know-how, and skills to carry out re-structuring.

Market re-structuring is an iterative, incremental process that should be closely managed over an extended period of time. There are several phases: introducing the new policy regime at governance level; translating new policy regime into new "rules of the game"; introducing new rules of the game into the market; monitoring private transactions; measuring welfare outcomes at the market level; reviewing welfare outcomes; getting stakeholders to identify with the new policy regime; initiating the next phase of the process. The new polices need to be fine-tuned after each phase based on measurable welfare outcomes and a broad-base review.

Information on the new policy regime should be disseminated widely and explained repeatedly. Governments should manage the re-structuring process in a transparent and inclusive manner, with participation of all operators, winners and losers. New business relationships need to be strengthened. Government officials and private-sector operators need training to equip them for these tasks.

Please RSVP to 202-862-8107 or Email: S.Hill-Lee@cgiar.org.