This study is aimed to suggest how to improve performance and efficiency of government subsidy programs for agricultural sector. More specifically, it is designed to address followings: First, general definition of agricultural support and the classified catalogue of WTO domestic support are reviewed. Second, the current status of agricultural support is examined and a direction of its reform is proposed. Third, an appropriate size of agricultural support is considered. Finally, it suggests ways to revamp direct payments, individual subsidy programs, and the management system of implementing agricultural support, which are major issues in the agricultrual support reform.

Agricultural subsidies have brought about a set of positive effects on competitiveness, SOC, R&D, and restructuring in the sector, even though too many subsidy programs, each having different goal and target and inefficiency of their implementation have been pinpointed as shortcomings.

However, agricultural subsidies have also produced some adverse effects on the sector. First, they have spurred dependence on government aids and weaken farmers' ability to stand on their own. Second, problems associated with direct payment are pointed out, including its concentration on rice and paddy field, overproduction of rice, a lack of incentive for upland field corps which are in short of production. Third, the projects as FTA countermeasures have so high portion of support, 74.4% that much concern is being voiced about deepening dependence on government and excess demand for the pojects. Fourth, there exist inefficient factors in the management system of budget and fund. Finally, government-oriented fiscal funds would stand in the way of private investment in agriculture.

This study focuses on the reforms of direct payments, individual subsidy programs, and their implementing system. The principle of the reforms is based on the consensus from the 'Committee of Advanced Agriculture and Fishery(2009.07)'. Each subsidy program is reconsidered to determine whether it should be abolished, be integrated with other program, be changed to loan program, or be adjusted with lower share of support, and so on.

In this stage, the reform of agricultural direct payments would be conducted focusing on the modification of rice direct payment. In order to mitigate overproduction of rice, the variable payment needs to be coupled with production costs. The newly discussed public-service direct payment is not widely shared opinions yet and would be difficult in securing enough fund for implementation. However, in the near future when further opening of domestic agriculture starts to lower profitability of upland crops, a com- prehensive reform of agricultural direct payments will be required.

Researchers: Seong-jae Park, Joon-kee Park, Ju-ho Song,
Gwang-seok Chae, Han-pil Moon
Research period: 2010. 12. - 2011. 1.
E-mail address: seongjae@krei.re.kr