University of Applied Life Sciences and Natural Ressources, Vienna, Austria

Meeting Future Needs - A Comparison of Agricultural Policy Objectives and their Realization in European Union and the United States

Dieter Haas

Table of Contents

Abstract / Kurzfassung ... 2

1 Introduction ... 6

2 Background and overview ... 8

2.1 The origins of Farm Policies ... 8
2.2 Historical review ... 13
2.2.1 American Policy from 1933 to 1996 ... 14
2.2.2 The 1996 Federal Agriculture Improvement & Reform Act (FAIR): ... 19
2.2.3 The 2002 Farm Security and Rural Investment Act (FSRIA): ... 28
2.2.4 Common Agricultural Policy from 1958 to 1992 ... 34
2.2.5 The 1992 MacSharry Reform ... 38
2.2.6 Agenda 2000 ... 39
2.2.7 The June 2003 CAP Reform ... 42
2.2.8 Consequences of the emergence of the sustainable development concept ... 47

3 Current models and objectives ... 49

3.1 The European Model of Agriculture (EMA) ... 50
Social objectives ... 52
Economic objectives ... 55
Ecologic objectives ... 64
Institutional / administrative objectives ... 69
3.2 US Commission on 21st Century Production Agriculture ... 73
Social objectives ... 73
Economic objectives ... 74
Ecologic objectives ... 78
Institutional / administrative objectives ... 79
3.3 United Nations Conference on Environment and Development: Agenda 21 ... 80
Social objectives ... 81
Economic objectives ... 83
Ecologic objectives ... 86
Institutional / administrative objectives ... 87
3.4 Excursus: US Conference of Catholic Bishops (USCCB) ... 92

4 Conclusions on common trends and challenges ... 97

4.1 Common Trends ... 97
4.2 ‘Question Marks’ ... 99

5 Recommendations / desirable changes ... 105

1. Improved labeling rules ... 105
2. Clear distinction of payments for compliance with regulations and additional services ... 106
3. Modernization aid ... 107
4. Reformed modalities for direct payments ... 107
5. Reform of the national accounting system ... 108
6. Special taxation provisions for agriculture ... 108
7. Auction systems for voluntary agri-environmental and conservation programs ... 109
8. Effective aid limitation ... 109
9. Enhanced measures to curb price instability ... 110
10. Precaution principle for food safety ... 111
11. Long term land resource planning ... 111
12. Subsidiarity ... 112
13. Improved transparency ... 112
14. Support for farming families where necessary ... 112
15. Education programs for farmers and the public ... 113
16. Minimal standards for comparability of products ... 113
17. No income guarantees ... 114
18. Promotion of local supply chains ... 114
19. Appropriate application of general trading principles in agricultural trade ... 115
20. Reformed R&D strategy ... 115
21. International action plans with commitments taking account of projected demographic changes ... 116
22. Reconsideration of GMO bans ... 116
23. Establish input accounting systems ... 117
24. Conservation programs for farming practices ... 117
25. Promote ecological pricing ... 118
26. Promotion campaigns for sustainability and efficiency ... 118
27. Promotion of succession practices that ensure the viability of farm holdings ... 118

6 Statistical Annex ... 120

7 References & Literature ... 124

1 Introduction

Seventy years after the establishment of farm policy in the United States and after almost 50 years of Common Agricultural Policy in Europe the necessity for policy reform is stronger than ever before. Despite fundamental differences in background and methods in the past, the pattern for policy reform tends to be increasingly similar. Partly due to agreements already signed as well as decreasing socio-economic differences and corresponding domestic constraints, recent policies enacted in the US and EU show fewer dissimilarities or are even pointing in analogous directions.

At the same time, however, the inconsistencies in terms of input-output-balance and energy rationing around the world are becoming more and more pressing. Exhaustible raw materials will sooner or later enforce a less input-intensive form of agriculture and inevitably create shortage and distribution problems. The alarming degradation of agricultural land already poses serious threats to the conservation of sufficient fertile soils, and projected long-term population growth in excess of the productivity increase in agriculture is likely to exacerbate the problem. Irreversible losses of biodiversity and the disappearance of natural habitats will eventually deprive humanity of the necessary resources to counteract these evolutions. Although this view represents a worst-case-scenario, to avoid a dramatic outcome it might be necessary to concentrate the efforts to find ways and means for retaining agricultural systems which preserve as much productivity as possible, try to balance markets in the short run by timely limited non-food uses and respect at the same time the requirements of sustainability.

With this study I intend to analyze to what extent European and American Policy is driven by comparable overall concepts and whether there is evidence that the two major trading blocks are moving towards more similarities and a more sustainable form of agriculture.
So far, a similar comparing study can not be found in literature, although it can provide relevant guidelines for appraisement and reform of agricultural policies. The condensed form of the analysis eases a holistic approach and might also help the interested reader saving time while getting an idea of the major goals and instruments of farm policies. Too often, the nearly unmanageable complexity of regulations leads to incomplete and unbalanced perspectives and subsequently to inadequate solutions necessitating continuous amendments, creating a system of patchworks.
Primarily based on secondary literature, scientific papers and internet websites, the findings where supported by interviews with experts and a ‘fact finding mission’ at the Ohio State University, where I was predominantly working with Em. Prof. Luther Tweeten.
Once collected the necessary background information, the publications of major think tanks and advisory groups were screened for basic policy objectives. Criteria for a comparison were elaborated and after an analysis of corresponding measures already in force, a conclusion on identifiable common trends and remaining ‘question marks’ was made. The analysis was thereby structured applying an evaluation grid, based on four major policy areas, namely standing for economic, social, ecologic and institutional objectives. Eventually, in the light of future challenges, proposals for reform were developed.
The outcome is a potpourri of recommendations addressing a choice of the most important problems in the field of agricultural policy. Although none of the proposals will lead to the perfect solution, they altogether stand for considerable melioration and a forward-looking approach.

Agricultural policy is at the crossroads today. Perhaps this paper can help decision makers finding the right solutions for a policy “that meets the needs of the present without compromising the ability of future generations” (World Commission on Environment and Development, 1987).

2 Background and overview

The following chapters are intended to provide an overview on the emergence of farm policies and the underlying key questions. Mainly by means of literature analysis, circumstances are analyzed and country-specific differences will be pointed out. A historical review will show the evolution of farm policies in Europe and the United States and major reform steps that were set in the past will be outlined.

2.1 The origins of Farm Policies

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