Home Page  Farming Promoting a Multifunctional Agriculture
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Promoting a Multifunctional Agriculture |
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Written by Dr Alan Matthews
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Wednesday, 01 December 2004 |
Farming currently faces significant changes in its policy environment. For decades,
Irish agriculture has benefited from the generous support arrangements provided
by the EU’s Common Agricultural Policy (CAP). The CAP has prevented competition
on the EU market from lower-cost overseas suppliers by means of high import levies
and duties; it has purchased surplus production into intervention stores to keep
market prices high, and it has disposed of these surpluses with the aid of export
subsidies on the markets of Russia, the Middle East, Africa and Latin America.
But Europe’s agricultural policy is now finally being reformed, a victim
partly of its own success. These reforms started in the 1990s when support prices
were lowered for commodities such as cereals, beef and more recently dairy products.
Farmers were compensated for the drop in income through direct payments. Then
in June 2003, the EU agreed to decouple these direct payments from production
with effect from 2005, although with some derogations and exemptions for some
member states. Decoupling means that income support through what will be called
the Single Farm Payment is provided to farmers irrespective of their level and
type of production. Production incentives in future will be aligned with market
prices. If production is not profitable at these prices, production will not take
place.
However, the market prices which farmers receive are still far above world market
prices for many commodities, including beef, dairy products and sugar. EU market
prices continue to be supported by means of import barriers and export subsidies.
But the EU’s ability to continue to use these trade policy instruments,
with their negative effects on other trading countries, is increasingly disciplined
by trade rules agreed under the World Trade Organisation (WTO).
In return for greater access to the markets of other countries for its exports
of manufactures and services, the EU agreed to reduce its agricultural tariffs
and export subsidies over the 1995-2000 period as part of the WTO Uruguay Round
negotiations. WTO members are currently engaged in a further round of negotiations,
the Doha Round, which, if successful, will further liberalise agricultural trade.
For some commodities, this could require further reductions in EU support prices
beyond those currently agreed under the successive rounds of CAP reform.
Farming will adjust to competing in a more market-oriented environment, but many
people are concerned about the likely impact on the environmental values produced
by farming – the habitats, bio-diversity and pleasant and varied landscapes
associated with current farming practice. It is argued that, at the same time
as performing its traditional role as a food producer, agriculture produces environmental
values as well as contributing to rural development and the maintenance of cultural
heritage. Many people now talk of the ‘multifunctional’ role of agriculture
to emphasise the way in which food production is linked to multiple outputs from
farming.
There is indeed evidence that the general public appreciate and are willing to
pay for particular features of the rural landscape and the rural environment.
Researchers at a recent Teagasc conference reported survey evidence that people
were willing to pay up to ?640 per hectare for more diverse and attractive landscapes
than for monotonic or untidy landscapes. Increasingly, public policy has moved
to remunerate farmers for the production of what economists refer to as ‘public
goods’.
This is done in two ways. First, farmers in receipt of the new decoupled payment
must agree to keep their land in good agricultural and environmental condition
as well as comply with the minimum statutory requirements for environmental protection,
the identification and registration of animals, animal welfare and public, animal
and plant health. This includes the EU water quality directive designed to protect
water against pollution caused by nitrates. The decoupled payments can be reduced
or removed completely if this requirement is breached. In EU jargon, this is referred
to as ‘cross-compliance’.
In addition, farmers can be paid for going beyond the minimum statutory requirements
by enrolling their land in the Rural Environment Protection Scheme (REPS). Under
the current agri-environment scheme REPS 3, farmers who join agree to comply with
eleven basic management measures for their farm which now includes specific biodiversity
options for the first time. Higher payments are made to farmers for eligible commonage
land, Natural Heritage Areas, Special Areas of Conservation and Special Protection
Areas. Additional payments can be made for participating in Supplementary Measures
such as organic farming, maintaining rare breeds or traditional orchards, or securing
corncrake habitats.
These payments are an attractive source of supplementary income particularly for
less-intensive farmers and up to 46,000 farmers are now enrolled in REPS 3. ?420
million was paid up to June 2004 to the 38,000 farmers participating in REPS 2
which runs from 2000 to 2006. The scheme is funded 75% by the EU and 25% by the
Irish Exchequer. Given that the environmental and landscape benefits are largely
local rather than EU-wide, the time may come when the rationale for continued
EU funding is questioned. As of now, EU funding seems secure for the foreseeable
future.
However, the willingness of the public to continue to pay for landscape and natural
heritage will depend on their ability to enjoy these benefits. The issue of public
access to farm land has proved contentious. It is important that the rights and
duties of both landowners and the public are clarified and questions of liability
and insurance addressed in a non-confrontational fashion to permit access in an
appropriate way.
These changes in the policy environment imply that farmers will face very different
incentives in the future. There will be less incentive for the production of surplus
or high-cost foodstuffs, but greater incentives for the production of public goods.
The traditional role of the farmer as food producer will be augmented by the increasing
role of farmers in landscape management and the conservation and management of
natural heritage. These changes must be supported by education and research, and
will contribute to a more sustainable pattern of agriculture and land use in the
years ahead.
Alan Matthews is Jean Monnet Professor of European
Agricultural Policy at Trinity College Dublin. He can be contacted at
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