A comparative analysis of global agricultural policies: lessons for the future CAP

Published on
February 7, 2019

Wageningen Economic Research and IFLS Frankfurt have conducted a study for the European Parliament. This study provides a comparative analysis of global agricultural policies aimed at drawing lessons for the future of the Common Agricultural Policy (CAP). Against the background of the main trends in agricultural support as well as recent changes and new initiatives in global agricultural policies, an in depth analysis is made of selected instruments in five countries (Australia, Canada, Japan, Switzerland, US). Recommendations are made on how current instruments and the policy mix can be improved to better address challenges for agriculture and rural development in the European Union.

Global agricultural policy evolution

Although the characteristics of the agricultural sector vary widely between countries, the main challenges are broadly the same: lagging farm incomes, increasing resource constraints (land, water) and environmental concerns (including climate), and a rapidly increasing future food demand. In order to meet these challenges, economic viability and resource use-efficiency of the sector require continuing attention.

On the whole, the level of policy support in global agriculture has not changed very much from 1995-1997 to 2015-2017. The share of the potentially most distorting forms of support has declined, but these policies continue to represent almost two-thirds of the producer support across all countries.

Also major changes have been made to the content of agricultural policies with regard to environmental aspects, especially by regulations and requirements for land management, climate change action is expected to receive increasing priority in the future.

Country studies

While no major changes in the level of support were observed on the global scale, the European Union and the five selected countries in this study have all reduced their support to agriculture since the mid-1990s. Australia has the lowest level of support, whereas Japan and Switzerland have the highest level. There is a general trend towards payments that are less coupled with production decisions. The main objectives and instruments are the following:

• Australia: Strong market orientation with minimal support to farms. The majority of support is funding of rural research and development (R&D), support for farm financing and drought relief.

Canada: Main objective is the protection of agricultural incomes from the vagaries of markets and nature. Main mechanisms of policy support are supply and business risk management.

• Japan: Target of self-sufficiency in rice as a staple food through market price and investments support. For risk management, an insurance scheme is available for a wide range of products.

Switzerland: Reliable provision of foodstuffs while conserving natural resources and landscapes. The current agricultural policy mainly relies on direct payments and market price support.

• US: Main objective remains the support for farm income and stabilization of farm commodity markets. Insurance type products are the main form of support.

Comparative analysis

Core economic objectives of the assessed agricultural policies are to ensure a viable farm income and to maintain a competitive farming sector. However, the policy instrument mixes vary with countries focusing on risk management and insurance support, while others use a combination of supply management and direct payments. Environmental goals are pursued by all the countries considered, with the current focus more on sustainable use of natural resources and less on adaptation to climate change.

Whilst innovation and support services are an integral part of the European policy mix, these aspects seem to play a less-pronounced a role in the countries under consideration. Instead, some countries are increasingly using policies to ensure food supply and address consumer concerns.

New and promising approaches for possible CAP instruments and measures were identified from the country policies considered, particularly in the areas of ’risk management’ and ’environment and climate’. Interesting risk retention instruments and risk transfer instruments have been assessed in the five countries. In contrast, environmental and climate instruments are already available to a large extent in the context of the CAP, and adaptations to their implementation would be required primarily.

Policy proposals and recommendations

The EU has in several respects obtained an advanced position in agricultural policy with pursuing a comprehensive set of policy goals and the availability of a rich set of instruments. The EU could still learn from other countries, particularly to achieve farm income resilience through risk management tools and to achieve climate and other environmental objectives.

Risk management instruments:

• Risk retention measures (Farm Management Deposit Scheme (AUS), AgriInvest (CA)) represent savings deposits that are interesting to be further considered for adoption in the CAP, as both in the current and the proposed CAP precautionary savings measures are missing.

• Implementation approaches of risk management tools from Australia and the US show possibilities to increase farmer adoption rates beyond current EU levels.

Environment and climate instruments:

• Long-term support and contracts for environmental and nature conservation measures could be beneficial to the EU to achieve its biodiversity, environmental and climate objectives.

• Thematically broadly applicable and innovative project-related approaches to enhance the performance of area-based instruments via advisory services and knowledge transfer provide an option to strengthen result-delivery.

• Selection of programme or measure beneficiaries via auctioning systems could contribute to cost-effective delivery of results.

Rural development instruments:

• An implementation based on the Japanese multifunctionality payments would provide financial assistance to local groups consisting of farmers and other rural actors for the costs concomitant with preserving agricultural and commonly managed resources.

Support instruments in regions with natural constraints:

• The Japanese instrument providing support to farmers in hilly and mountainous areas provides unique opportunities to combine a local tailoring of conditionalities (baseline adjusted to local needs via a communal approach to habitat and landscape management) with income support.

Innovation and knowledge:

• The assessed research and innovation instruments have the potential to provide applicable solutions to specific issues. Integrating networking and dissemination of information activities in supported (research) projects could increase the effectiveness providing solutions and uptake in practice.