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| | Promoting Agricultural Exception |
The CAP Health Check presented by Mariann Fischer Boel, European Commissioner for Agriculture and Rural Development, has generated many comments from experts, politicians and economists regarding the scheduled CAP reform for the years following 2013. While all generally agree to acknowledge agriculture’s specific characteristics, they provide few concrete solutions. Most often, they focus on budgetary and European-centered objectives, without any strategic consideration to a global economy, particularly in terms of food security.
Consequently, the informative remarks on the CAP1 Health Check presented by Hervé Gaymard, former French Minister for Agriculture, Food, Fisheries and Rural Affairs and current Member of the French National Assembly, are noteworthy since they stress certain aspects of the CAP’s future reform. As the Agriculture Ministers will meet in Annecy on September 22 and 23, when the reform’s main directions could be settled on, we felt useful to publish an excerpt from the Gaymard report (pages 96 to 98).
“One of the main beliefs of the European Commission and certain member nations is “to let the market operate.” Mrs. Mariann Fischer Boel states in her blog that “European farmers must compete on the global market. They must be free to adapt their production to market needs and meet the challenge of a growing demand.” This analysis, which prevails for example in the Commission’s work on the future elimination of milk quotas2, is based on the application of an economic base model––the FAPRI3 model––which does not include any specific criterion to agriculture and which considers a priori that demand is flexible in relation to price. However, this model lacks certain elementary variables, such as specific agricultural risks for instance. Thus, in order to advocate the elimination of certain regulation methods such as milk quotas, this model makes the assumption that prices will remain high and only includes risks related to climate changes.
This opposing view seems to overlook the fact that agricultural markets cannot be compared to other markets, since adjustment between supply and demand is not automatic. Thus, by advocating the liberalization of agriculture and assuming that a free market will maintain a steady equilibrium between supply and demand, one feigns to ignore that volatility is an intrinsic factor of agriculture.
Let’s take a close look at agricultural supply. Its noteworthy nature lies in a production process that spreads over time. This is especially important in certain activities such as cattle breeding or wine production as several years can elapse between a decision to invest and the first investment returns. This is also valid in types of farming subject to climate risks: one knows what one sows but one does not know what one harvests. Agricultural supply is thus inflexible and can present the risk of a poor adaptation to demand at a given time. In this respect, the CAP’s financial incentives that are “decoupled” from production correspond to an impartial factor in production choices since, in any case, the incentives will remain identical. As far as demand is concerned, it remains more or less stable according to products and the option to make substitutions (vegetables/starchy foods, fresh fruit/dairy products).
Specialists believe that there are three specific agricultural risks that can bring about price volatility:
> the irreversible nature of farmers’ decisions, a situation that is particularly widespread in breeding or durable farming (vineyards or orchards), where decisions to stop production are generally final decisions. This state of affairs, by the way, differs from recent remarks by Mrs. Mariann Fischer Boel, European Commissioner for Agriculture and Rural Development, when she recommends that “farmers change products when they cannot sell them.” 4 ;
> the climate and disease risks. For example, drought conditions experienced by some large producers, such as Australia, have brought to an end in late 2007 to years of declining wine prices5 caused by increased competition from new players.
> the results of speculation and “financialization” of agriculture.
While this specific agricultural flaw should be recognized and justify the implementation of stabilizing mechanisms, we are now faced, under WTO’s pressure, with a declining use of the existing European regulatory measures. This very relapse contributes to foster price instability, which currently leads to dramatic consequences in poorest nations or those relying on one or two agricultural exports. Indeed, we are not speaking about any consumer goods but food products that are crucial to the survival of the human race. That is the reason why agriculture must be protected and must be the subject of a true “exception”. Furthermore, food is not the only strategic stake involved in agriculture, which now implicates the production of certain public goods––such as preservation of the environment and rural areas or energy production.
We must now have at our disposal an international analysis tool specifically tailored to agriculture since CAP’s reforms have been based on unjustifiable preconceived opinions and on the fact that agriculture is administered at the international level without any consideration for its impact on the future of humanity in addition to mere trade concerns.»
Since the 2005 development of our model, we at momagri have been carrying out Hervé Gaymard’s objectives. The momagri model is the first model of general quantifiable equilibrium (EGC) that takes into account, at the international level, not only the endogenous and exogenous risks that affect agricultural markets, but the influence of other essential variables––poverty, the environment or innovation––as well. The model’s first results this past March have already outlined the intrinsic character of global agricultural price volatility and anticipated by several months the current decline of agricultural commodities prices.
This model is an essential tool, not only for the European Union in the framework of its CAP reform but at the international level as well, considering the failure of the Doha Round. The time is now right. This is the goal of momagri’s strategic plan that can be summed up in ten proposals for an international agricultural and food production policy. 6
Momagri’s Editorial Board
| 1 http://www.assemblee-nationale.fr/13/pdf/europe/rap-info/i0956.pdf
2 Faced with soaring demand for dairy products from European and third-world countries, the stake is to adapt to be competitive.
3 Food and Agricultural Policy Research Institute.
4 Le Monde, December 9/10, 2007
5 Please see Thierry Mariani report on common organization of wine production markets.
6 Please see the July 2, 2008 editorial by Jacques Carles « momagri’s Ten Proposals for an International Agricultural and Food Production Policy. » | |
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Advocating for
agricultural market
regulation and global
food governance | |
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