Transcripts

"Agriculture: Small is Sustainable, Big is Subsidised"
by Jill Winfield

The Agreement on Agriculture (AoA) and the Common Agricultural Policy (CAP), despite their opposing ideologies of open market and protection respectively, have both led to the promotion of agribusiness and corporate monoculture farms at the expense of smaller biodiverse farms.

The European CAP, drawn up at the Treaty of Rome in 1957, had admirable aims: to prevent food shortage and excessive prices without resorting to overproduction, which leads to lower prices and therefore reduced farmer income.

To achieve this, the CAP set food prices, the intervention price being above the free market equilibrium. The resulting surpluses were bought up by the Intervention Board, which is funded by the European Agricultural Guarantee and Guidance Fund. The surplus is then stored or 'dumped' (sold on the world market or given as food aid, often for another commodity, such as in the Food for Oil programme in Iraq). CAP also introduced quotas (e.g. milk in 1984), which restrict the levels of domestic production and imports. The imports are then brought in line with the intervention price, or with the quota produce through customs duties, tariffs or import levies.

Despite the worthy aims of the CAP, backed by over half of the EU budget, in practice, the results are less than admirable; the number of farms has decreased, along with farmers' incomes. Since the CAP's inception, the number of farmers has fallen from 22 million to 7 million within the founding 6 countries of the CAP. In the US, which operates similar policies of protection, consumer prices have increased 3% in real terms, whilst farmers' incomes have decreased by 35%.

These distortions arise because CAP subsidies are linked with production quantity and food type. The preference for large quantities favours large farms, and encourages overproduction. The policy of subsidising certain foods more than others has meant that the richer agricultural regions within the EU receive the lion's share of subsidies. Import levies on products entering Europe mean that countries elsewhere in the world cannot compete in the European agricultural market. Nor can they compete with subsidised EU exports, which are dumped on the world market in large quantities. Many farmers in developing countries give up agriculture and migrate to overcrowded cities; the result is a drop in agricultural output, which can lead to famine in times of poor harvests.

Export subsidies are also given for the costs of processing, marketing and transporting agricultural goods. Farmers receive none of this; the beneficiaries are the agribusinesses like Monsanto and Cargill. Corporate agribusiness now owns the whole food system, and sells farmers the means of production (tractors, fertilisers) at inflated prices, because there is no real competition. The multinationals also act as retailers, processors and distributors; here again, their size allows them to dictate the prices at which farmers can sell produce. In many cases, agribusiness owns the large farms as well; Lord Hamilton, the government's 'rural recovery co-ordinator' is the head of Northern Foods, which owns a 600-acre farm. Similar subsidies have been described by Peter Rosset of Food First as 'basically a transfer of money from the taxpayers to large corporate farmers'.

The protectionist policies of the CAP are slowly being eroded by the implementation of the Uruguay Round of GATT negotiations (1986-1994). Agriculture has been the most difficult sector to bring under the GATT treaty, largely because industrialised countries have been reluctant to give up their protectionist agricultural policies. In the 1950s, the US Congress obtained a legal 'waiver' from GATT obligations, which set the precedent for other countries to withdraw GATT compliance without this legal cover.

Attempts to bring agriculture under the treaty, largely motivated by American companies that felt restricted by cheap EU exports, failed during the 1960s and 1970s. However, extreme pressure from the Cairns group of 18 agricultural exporting countries ensured that agriculture was the central topic during the Uruguay Round. Despite difficult negotiations between the EU and US delegates (the latter being led by Clayton Yeutter, a former Cargill employee), an Agreement on Agriculture (AoA) was developed which brought agriculture under the GATT rules. This Round also relinquished the US waiver. This contract seemed quite modest to some of the signatories, who wanted to completely phase out subsidies within a decade.

The AoA aims, first, to increase market access by phasing out non-tariff barriers, including quotas. The effects are to be converted to tariffs, which is known as 'tarification', one of the AoA's central concepts. Second, the AoA reduces domestic support for agriculture. Vandana Shiva states that in India, this has meant that the only subsidies granted are for the chemical fertilisers produced by agribusiness. Third, the AoA calls for reduced export subsidies. Areas exempt from reduction in developing countries include processing and transportation, which are likewise dominated by agribusiness.

Nevertheless, the US has expanded export credit guarantees; the US secretary of agriculture, Dan Glickman, cites this as 'the main reason why we have not lost more exports to Asia'. IMF loans to developing countries have also propped up US agribusiness; Mr Glickman says that without IMF actions, American agricultural exports 'would have been at great risk'. Vandana Shiva concludes: 'WTO rules are for preserving and enhancing corporate subsidies and withdrawing support to farmers and rural communities whether they refer to domestic support, market access or export competition.'

The effects of the AoA on the CAP are mainly visible in the reduced intervention prices prescribed by the 1992 MacSharry reforms. In 1997, as the EU considered proposals for expansion into Eastern Europe (including Poland, whose 2 million farmers would increase the demands on the CAP budget), the unelected European Commission published 'Agenda 2000', which called for further price cuts alongside an increase in income support, with ceilings on support to agribusiness to reduce surpluses. However, Agenda 2000 also dictates the end of milk quotas by 2006, a move that will increase surpluses. This decision has not been popular with European agricultural ministers.

Mainstream economic opinion holds that large-scale intensive farming of single crops (monoculture) produces a higher yield. This is true but misleading, since the total output per hectare on small farms is several times greater, because of more efficient use of the land. Mixed-culture farms also require less fertiliser, to the dismay of the agrochemical industry. Large-scale, intensive farming of livestock keeps animals packed together in close quarters; this leads to stringent regulations, which are also enforced unnecessarily on small farmers for whom they are prohibitively costly. Furthermore, transporting foodstuffs across the globe is grossly inefficient, and incurs a huge ecological debt.

The current pricing in supermarkets beggars belief, by implying that processed, long shelf-life foods produced far away are cheaper than local fresh food. The inefficiencies of agribusiness are masked only by the direct and indirect subsidies borne by the taxpayer.

Jill Winfield