agriculture in the european economic community

152 Journal of Agricultural Economics.

AGRICULTURE IN THE EUROPEAN ECONOMIC COMMUNITY

By D. K. BRITTON

On 25th March 1957 a Treaty was signed in Rome by Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands, establishing among themselves a European Economic Community. The aim was “to promote throughout the Community a harmonious development ’of economic activities, a continuous and balanced expansion, an increased stability, a n accelerated raising of the standard of living and closer relations between its Member States”.

Both before and since its establishment we have become accustomed to hearing the European Economic Community referred to as the Common Market. For most purposes, it is true, these names can be used interchangeably; but there is a distinction between the two ideas they denote. The establishment of the Common Market is, in fact, only one of the means expressly mentioned in the Treaty for achieving the aim of the Community; another means is also envisaged, that of “progressively approximating the economic policies of Member States”. The Treaty is characterized by these two features. The contracting parties did not decide simply to eliminate all the barriers to the free movement of goods, persons and capital between members of the Com- munity and then to allow the market forces to operate without any kind of intervention. The Common Market will not be a free market according to the full laissez-faire model, where every reward of every factor is allowed to “find its own level”-if indeed conditions could ever become both stable enough and fluid enough for that to happen. Instead, the Member States, individually and collectively, will bring to bear upon the operations of the market their deliberate acts of policy, which will be designed to influence economic conditions for the common good. They have established a European Economic Community because they know that the creation of a Common Market would not in itself be enough to secure “a harmonious development of economic activities” or “a continuous and balanced expansion” if the separate political entities were to reserve the right to pursue unrelated and perhaps conflicting policies within that Common Market.

Many provisions can be found in the Treaty to furnish evidence of the recognition by the contracting parties that the powerful economic forces of the market must be, to some extent, kept under control or counteracted, and that competition must not be allowed to remain “distorted” because of the legacy of institutional imperfections or other handicaps. For example, Article 39 in that part of the Treaty which deals with agriculture, provides that due account shall be taken of “the need t o make the appropriate adjustments gradually”. Again, (Article 42) financial aid may be granted “for the protection of enterprises handicapped by structural or natural conditions”. The European Social Fund, established to improve employment opportunities, will cover

Journal of Agricultural Eco?wcomics. 153 50 per cent. of expenses incurred for the purpose of helping workers “whose employment is temporarily reduced or wholly or partly suspended as a result of the conversion of their enterprise to other productions” (Article 125). The European Investment Bank, having the task of contributing to the balance and smooth development of the Common Market, shall grant loans and guarantees on a non-profit-making basis for projects for developing less developed regions and for modernizing or converting enterprises (Article 130). It is clear that the economically weak are not to be abandoned in an all-out pursuit of economic eficiency.

These remarks, however, are not intended in any way to detract from the central decision embodied in the Treaty, which is that, to achieve their common purpose, the Member States will eliminate customs duties, quantitative restrictions and all other barriers to trade among themselves. Furthermore, they will establish a common customs tariff and a common commercial policy towards countries outside the Community. Among themselves they will permit the free movement of persons, services and capital, and will prevent the operation of agreements between enterprises which would be likely to restrict trade or distort free competition. They will inaugurate a common agricultural policy and a common transport policy, and will consult together in order to co-ordinate their economic policies (or policies “relating to economic trends”) and to ensure equilibrium in their balances of payments. They will take steps to remove differences in national laws and administrative provisions so far as is necessary for the functioning of the Common Market. They will establish the European Social Fund and the European Investment Bank already mentioned. Finally, they will bring into association with the Community those non-European countries and territories which have special relations with Belgium, France, Italy and the Netherlands, in particular by applying to those countries and territories the same trading arrangements which they apply among themselves, and by contributing to the investments required for their progressive development. In return, the overseas countries and territories will extend to all Member States the same trading arrangements as they operate in respect of the State with which they have special relations.

The Common Market is to be progressively established over a “transitional period’ of twelve years, with the possibility of extension to fifteen years, i.e. to 1st January 1973. Gradualness is one of the most important features of the design; the obligations which Member States have to observe become more stringent as the transitional period proceeds, and, except where the Treaty expressly provides otherwise, a t the expiry of that period all the rules laid down must enter into force and all the measures required for the establishment of the Common Market must be completed.

Agriculture is the subject of a special section in the Treaty, ten Articles being devoted to it exclusively. This is in recognition of the fact that the rules of competition established for the Common Market-such as the prohibition of price-fixing arrangements, of control of production and marketing and of state aid to certain products in a way which might distort competition-cannot be applied to the agricultural sector without some modifications, especially in the transitional period. At the same time, Article 38 makes it clear that the rules of the Common Market do apply to agricultural products in all respects except those for which there are special provisions to the contrary. To remove any doubts as to what is meant by agricultural products, a detailed list is provided in a separate Annex to the Treaty.

The first special provision for agriculture is that, as I have already mentioned, there is to be a common agricultural policy. The objectives of this policy are set down, and I shall have occasion to refer to some of them later.

154 Journal of Agricultural Economics. In working out the policy the Member States are to take account of “the particular character of agricultural activities, arising from the social structure of agriculture and from structural and natural disparities between the various agricultural regions”.

Part of this policy must be to provide for a common organisation of markets. The form which this will take may vary between products, but it must be either a European marketing organisation, a compulsory co-ordination of the various national marketing organisations, or the establishment of common rules concerning competition. Price controls, subsidies, stock-piling arrangements and common machinery for stabilising imports or exports are specifically permitted within the framework of these forms of organisation. Common action for the development of consumption of certain products and the CO- ordination of efforts in the fields of training, research and advisory work are also envisaged.

The Treaty provides for the early convening of a conference of Member States “with a view to comparing their agricultural policies by drawing up, in particular, a statement of their resources and needs”. At the time of writing, this conference is expected to take place at Stresa early in July of this year.

Article 44 deals with the establishment of minimum price systems and the procedure for the fixing of such prices. During the transitional period Member States may, in certain conditions, apply to certain products a system of minimum prices below which imports may be either (i) temporarily suspended or reduced, or (ii) made conditional on their price being above the minimum price fixed for the product concerned.

The exclusion of low-priced imports during the transitional period is permitted “to the extent that the progressive abolition of customs duties and quantitative restrictions. . . may result in prices likely to jeopardise the achievement of the objectives set out in Article 39”-in particular, no doubt, that of assuring “a fair standard of living for the agricultural population”, but also those of increasing productivity and stabilising markets. The intention is that farmers should be able to regard competition from other Member States as a challenge sufficiently strong to spur them on to higher efficiency, but not so sudden and severe in its impact as to discourage and eventually overwhelm them.

The minimum price system, when applied, must apply equally to all Member States on the same terms. Moreover, it must operate in such a way that “it shall not impede the expansion of the volume of trade” in the product or products concerned beyond the average volume traded between Member States during 1955-57. Here the intention is that the temporary protection afforded to farmers in the importing country should not be such as to take away “traditional” markets from exporting countries within the Community. In other words, the system should be operated to check the flood but not to reduce the flow.

The Commission (which is the board of management of the Community and consists of nine members “chosen for their general competence and indisputable independence”) will have to propose to the Council (consisting of one member of each of the six Governments) objective criteria for the fixing of minimum prices. The Treaty lays down that these criteria, which have to be determined by the end of 1960, “shall, in particular, take account of average national costs of production in the Member State applying the minimum price”. They must also take account of “the situation of the various enterprises in relation to such costs” and of “the need for promoting both the progressive

Jour?zal of Agricultural Economics. 155 improvement of agricultural operations and the adjustments and specializations necessary within the Common Market”.

If any minimum price systems are still in force at the end of the transitional period, the Council will have to decide upon “the system to be applied within the framework of the common agricultural policy”, which by that time must be fully established, embracing free exchange within the Community, a common external tariff and a common organization of markets in one or other of the three prescribed forms, to be determined in relation to each product.

If a literal interpretation is to be put upon the words used these provisions may have some interesting implications. In the first place, they openly recognize, or hopefully suppose, that agricultural economists in the countries concerned can, or will soon be able to, calculate the national average cost of production of a particular product. Such a claim will, I know, be strongly contested by many people, and indeed the difficulties are formidable. I need hardly mention the familiar problems of allocating overhead costs to particular products in mixed farming enterprises and of imputing money values to family labour and to other resources which are not paid for in cash. Nor shall I enlarge upon such questions as the selection of the sample of farms whose costs are to provide the national average, or the relative importance of factor prices on the one hand and of efficiency in the use of physical resources on the other, in the determination of cost of production.’

But I believe I can say that we shall all look fonvard with great interest to seeing how the Commission proposes to make these objective calculations, and how the results-if they are made’available-compare with various other kinds of data.’

The requirement that account must be taken of “the situation of the various enterprises in relation to such costs” is also interesting. The meaning here is not very clear, but presumably it refers to the spread of individual farmer’s costs of production around the national average. Probably the purpose is to obtain some indication of the impact of a decision to allow the domestic market prices to fall to a certain level, but no lower, to be able to judge, for instance, what proportion of farmers would be likely to be really hard pressed by such a decision, and to what alternative products they could devote their resources. The wording.may also have been chosen bearing in mind the fact that in some kinds of mixed farming the level of the cost of production of a certain product may be a relatively unimportant matter in the economy of the farm as a whole, while for the specialist it is all-important.

The stipulation that minimum prices must be fixed with an eye to “the need for promoting the progressive improvement of agricultural operations and the adjustments and specializations necessary within the Common Market” suggests that they will not necessarily be at a level such as would be calculated to recompense completely the costs of the average producer. If there is, for example, a tendency for too many producers to be supplying the product in question, it might be considered sound policy to assure and maintain a satisfactory rate of profit only to those whose costs are appreciably below the

1 These and other problems were discussed in “Some Observations on the International Comparison of the Costs of Production of Milk”, a paper prepared by the F.A.O./E.C.E. Joint Secretariat, Geneva, for a Conference of European Milk Producers held in Luxembourg in April 1957 under the auspices of the International Federation of Agricultural Producers and the Conf6d6ration Europienne de l’hgriculture.

* It may be remarked that, even if the average cost of production within a country can be satisfactorily estimated, direct comparison with the price of the imported product is not always possible owing to quality differences and, for some products, differences in seasonal availability.

156 Journal of Agricultural Economics. national average, and induce the others either to increase their efficiency or to leave this product to the specialists.

The possibility that, at the end of the transitional period, some producers would not have been successf~~Uy weaned from recourse to a limited degree of protection through a minimum price system, gives rise to speculation as to the steps the Council would take to prevent hardship resulting from the full play of the Common Market after that time. One possibility would be the provision of grants from a common fund to facilitate the more rapid adaptation of the relatively high-cost producers to the needs of the market.

Article 45 deals with the possibility for Member States to conclude long- term contracts or agreements between themselves in the period until some form of common marketing organization has been established. As the general opinion seems to be that in practice these provisions are not likely to be of more than temporary sipficance, I do not propose to deal with them now. Instead, I should like to pass on to some observations about the issues involved in arriving at a common agricultural policy.

The method which the Member States will have to follow in order to establish and give effect to their policy is fundamentally familiar to them. I t is the method of reconciliation of conflicting or divergent individual policies through mutual consultation. The three Benelux countries have already gained a great deal of experience of this technique in the day-to-day work of giving effect to their own treaty, and all six countries of the Community have worked together for ten years in O.E.E.C., examining and criticizing one another’s policies.

Nevertheless, to pass from the mutual discussion, or “confrontation” as it is now called, of six separate policies to the creation and implementation of a single common policy is a big step, and new techniques will be needed. It is evident, too, that much reliance will have to be placed upon statistical estimates of past, current and future availabilities, requirements, prices and costs. These data will have to be constantly reviewed and revised, and they will have to command the widest possible agreement as a basis for detailed negotiation.

I should like to take a closer look at the nature of some of the statistical material which is likely to be assembled, and at some of the problems involved.

Article 39 of the Treaty states that one of the objectives of the common agricultural policy shall be “to increase agricultural productivity by developing technical progress and by ensuring the rational development of agricultural production and the optimum utilization of the factors of production, particularly labour”. Now, to ensure the rational development of agricultural production seems to me to presuppose an appraisal of the total volume of production which is likely to be needed and some analysis of the relative importance of the difference products in that total. A policy for wholehearted expansion of production would no doubt be most effective in raising productivity, but if i t resulted in market surpluses, would it be a “rational development”? We have t o bear in mind the second objective of the common agricultural policy, which is to ensure, by the raising of productivity, “a fair standard of living for the agricultural population, particularly by the increasing of individual earnings of persons engaged in agriculture”. It seems likely that a more rational policy from the point of view of raising farm incomes would be to aim at a modest and controlled expansion of production at the same time as a substantial and progressive reduction in the agricultural labour force. But here, a third objective must not be overlooked, that of ensuring reasonable prices for supplies to consumers. Any action to restrain or discourage production would not be justified if it led to unduly high market prices. The rate of expansion of production must be geared to consumers’ needs.

Journal of Agricdtural Ecollomics . 157 What statistical estimates are needed, then, to enable a rational production

policy to be worked out, or at least to serve as a broad framework within the limits of which the policy should operate? Statisticians and economists have already begun to tackle this problem, and certain main features emerge in the methods they are using. One approach which is frequently adopted is along the following lines:-

First, an estimate is needed of the rate of expansion of the economy as a whole, as measured by gross national product. This estimate is based upon certain assumptions about population growth, size of the working population, extent of economic activity (employment) of the working population, hours of work and productivity per man-hour. The assumptions about productivity trends normally take into account expectations regarding the volume of non- residential capital investment which the community will make, and the potentialities of the capital equipment already in existence.

Secondly, the share of consumers’ expenditure in gross national product is estimated, and, more particularly, the share of expenditure on food. This is based mainly on assumptions about the elasticity of demand for various foodstuffs with respect to changes in income, and these in turn are derived from such econometric studies as are already available.

Thirdly, expenditure on food Bas to be translated into terms of quantities of farm products “at the farm gate” or a t the port of entry, making allowance for any expected change in the part attributable to processing, marketing and other services in the retail cost of food.

A similar procedure can be gone through for non-food products, such as tobacco, cotton, wool and rubber.

All this leads up to an estimate of the required quantities of farm products. The question would then arise, what part of this quantity would be expected to be imported from outside the Community, and what part would be produced by “the Six”? If this could be answered, one would finally arrive at a figure indicating the required expansion of agricultural production within the Community.

Of course, the magnitude of the errors involved in estimations of this kind is probably very large. Nevertheless, the exercise may well prove valuable, particularly if it points to conclusions which, however tentatively put forward, are incompatible with other assumptions or estimates which may have hitherto found acceptance.

By way of illustration, we may refer to a study prepared by the Secretary of G.A.T.T. (General Agreement on Tariffs and Trade).l Looking ahead to the period 1973-75, this study started with the assumption that in the 20 years leading up to that time, the G.N.P. (gross national product) of the six Common Market countries combined would increase by 90 per cent. Consumption of foodstuffs in “the Six” was estimated to increase in the same period by 50 per cent. A small part of this total food consumption (about three and a half per cent. consisting of tropical products such as coffee, tea and cocoa) would come from abroad, but the rest would all be met by production within the Com- munity, i.e. net imports of non-tropical foods, which in 193-55 represented 71. per cent. of the Community’s total food consumption, would be eliminated. The implication of this for food production within the Community was that

1 “The Possible Impact of the European Economic Community, in particular the Common Market, upon World Trade”. Trade Intelligence Paper No. 6. G.A.T.T., December 1957, Geneva.


a n increase of rather more than 60 per cent. would take place in 20 years (i.e. at an average annual compound rate of about 2.5 per cent.).’

A second example of this method of approach is provided by the O.E.E.C. study, “Europe in 1960”.* The first stage of this study leads to the conclusion that G.N.P. in the O.E.E.C. countries together may increase by 17.4 per cent. in the five-year period 1956-60. (Components: increase in total labour supply 2.8 per cent.; increase in productivity, 14.2 per cent.). Next, estimates are made of the probable use of resources for investment and government expenditure, and this leads to the result that total private consumption will increase by 18 per cent. in the five years (or by 3.4 per cent. per annum). Consumption of durable goods (cars, furniture, etc.) will increase by more than this, the predicted rise being 31.5 per cent. for this group, while food consumption- or, more correctly, expenditure on food-will increase by only 12.8 per cent. (or 2.4 per cent. per annum), because of its relatively low elasticity of demand with respect to total consumption expenditure.

An important secondary result of the calculation is that the largest increases in food demand will be concentrated on the products which are suited t o European production, notably meat and dairy products. It is therefore supposed that net imports of these items will not increase in proportion to the increase in their demand; supplies will come increasingly from European farm

After allowing for an increase in expenditure on the processing of foods and on better grading, packing, etc., the study concludes that total demand for European farm output “at the farm gate” may increz)se by 10 per cent. or 11 per cent. between 1955 and 1960 (or rather less than 2 per cent. per year, compound).

The results of yet another “projection” study are contained in the “Economic Survey of Europe in 1957” (Chapter V), prepared by the Research and Planning Division of the Economic Commission for Europe. The authors emphasize that “it is not the intention in any sense to forecast future developments, but merely, on the basis of assumed rates of growth in the economy of Western Europe, to illustrate the probable implications of those tendencies”.

In this study two alternative assumptions are made about the growth of G.N.P. in Western Europe: I, that by 1975 it will have increased by 60 per cent. above the 1955 level; and 11, that it will have doubled in the same period. In Model I , the total employed population is assumed to rise by 10 per cent., but to fall by 15 per cent. in the agricultural sector, in this 20-year period; productivity is assumed to rise at about the same rate in agriculture as in industry. In Model 11, there is a rise of 20 per cent. in the total employed population (reduction of unemployment in Italy, and greater employment of women generally), and a fall of 27 per cent. in the agricultural labour force; productivity is assumed to rise more rapidly in agriculture than in industry following the substantial transfer of labour out of agriculture. The result is that in Model I, the gross product of agriculture (i.e. “value added“) shows an expansion of 30 per cent. in 20 years (1 -1 per cent. per annum), while in Model I1 the rise is 35 per cent. (1.2 per cent. per annum). At the same time, imports of

The G.A.T.T. study goes on to elaborate certain alternative assumptions about G.N.P. and about the change in net imports of foodstuffs other than coffee, tea and cocoa ; this leads to a whole series of possibilities for agricultural production which cannot be examined here.

Vol. I1 of the 8th Report of the O.E.E.C., entitled “Europe To-day and in 1960”, Paris, April, 1957.

output.

Journal of Agricultural Economics. 159 foodstuffs into Western Europe would increase by 10 per cent. under Model I, and by 30 per cent. under Model 11.

These various projections were not all designed with the same purpose .or the same period in view, but they serve to illustrate the global approach to production planning in agriculture, starting from a consideration of the economy as a whole, and then looking at agriculture's place in the total picture. The main point I want to make is that having arrived by this route a t a rough indication of agricultural production requirements, one can then look again at production possibilities or expectations and see whether there is any risk of serious incompatibility between the two trends.

I believe that the members of the Community will have to make some very careful investigations along these lines. If the projections of total income and of total food consumption which have already been made are anywhere near the mark, then the possibility cannot be ignored that, if total agricultural production were to attain a rate of expansion of about 3 per cent. per annum, this would before long yield supplies which would be more than sufficient to satisfy the food requirements of the Community in all except irreplaceable tropical products. Sooner or later (depending, no doubt, on the products making up the additional output) it would be necessary to seek new markets .or outlets outside the Community, not excluding the possibility of gifts to help less developed countries, or else to find new ways of stimulating consumption within the Community. Failing these solutions, the only alternative would be t o take steps to slow down production.

To determine the desirable rate of growth of agricultural production, in total and product by product, is one thing: to secure the achievement of that rate is quite another. A certain momentum of progress is generated, resulting from the combined effect of all the forces and agencies which are a t work to .stimulate farmers to greater output. The spreading of the best farming practices down from the few highly efficient to the many moderately efficient farmers, through advisory services and through direct exchange of experience; the extended use of fertilizers; improvements in seeds and in breeding of livestock; more timely methods of cultivation and harvesting with the help of better machinery; more scientific feeding and housing of animals; all these and many other influences are constantly at work to raise yields per acre and per head of livestock.

It is not easy to measure just how strong has been the upward trend in yields in the past few years, owing to the fluctuations caused by abnormal weather conditions. Results may be quite significantly different according to what groups of years are compared. But, taking the five years 1953-57 in comparison with the preceding five, 1948-52, it is found that in the countries of the Common Market the average wheat yield per acre rose by 17.7 per cent., which is equivalent to a compound annual rate of 3.2 per cent. The correspond- ing rate for barley is 4.1 per cent., for potatoes 2.0 per cent. and for sugar beet 1.7 per cent.

Up to now, increases in output of livestock products per animal unit have generally been more difficult to achieve than increases in crop production per acre. Nevertheless, milk yields per cow in the six countries together appear t o have been rising at an annual rate of about 2.2 per cent. on the average.'

1 Data for Western Germany show that output per animal unit. calculated by the method of grain-equivalents, increased as follows between 1935-38 and 1953-54-1956-57 (average): cattle, 15 per cent.; pigs, 21 per cent.; poultry, 23 per cent. The last few years have shown more rapid rates of increase. For instance, comparing 1956-57 with 1951-52, the increases are: cattle, 10 per cent.; pigs, 20 per cent.: poultry, 1 1 per cent. (Source: Statistisches Jahrbuch uber Emahrung, Landwirtschaft und Fonten. 1957.)


Are these rates indicative of what is to come? Shall we see a flattening out of the yield curves as farmers approach a physical limit which nature imposes, and diminishing returns to use of fertilizers and other inputs begin to make themselves felt? Or are we, on the contrary, on the threshold of a decade or two of even more impressive developments than we have experienced in the post-war years? Opinions differ, and no doubt the answers will be different for different countries; but my own feeling is that the balance of forces is towards a raising of yields at average rates at least as rapid as we have recently known. With the marked intensification of advisory work on European farms, the increased financial assistance for capital investment, the extension of the activities of farmers’ clubs, farm radio and television programmes, the efforts to bring the results of research work more quickly to the stage of practical application and the general trend towards measurement, calculation and comparison in all matters connected with farming, the “best” yields of the past will, I believe, become the average yields of the future. What is more, my impression is that this kind of development will continue without being very sensitive to changes which may occur in governments’ policies. Over the years, scientists and experts of various kinds have set in motion a process which seems unlikely to be stopped just yet, especially in a Community which expressly aims at “increasing agricultural productivity by developing technical progress”.

Supposing yields do tend in future to run ahead at a faster rate than consumers’ demand for food products (in quantitative terms) and farmers do not adjust their pattern of production so as to hold back total output, what will be the situation? Presumably there would be a downward pressure on farm prices. This would be welcome from the consumers’ point of view, but it would represent an immediate threat to total income from farming. Whether its impact would be as serious for the individual earnings of persons engaged in agriculture (the increase of which, according to the Treaty, has to be ensured by the common agricultural policy) would depend on how rapidly the transfer of labour out of agriculture was taking place.

Higher productivity alone may not be sufficient to solve the problem of low farm incomes. It will have to be higher productivity below a certain ceiling of total production, not yet attained but within prospect of attainment. This will almost certainly mean higher productivity with a reduced acreage under certain crops and perhaps reduced numbers of certain kinds of livestock. It will also mean higher productivity with fewer farms, fewer full-time farmers (but perhaps a larger number of farmers working part-time in other occupations-this trend is already to be observed in Europe, as in America), fewer members of farmers’ families helping their fathers or husbands and fewer regular hired workers.1

I would therefore expect to see the common agricultural policy give a very prominent place to measures to facilitate the rapid and smooth transfer of surplus agricultural manpower to other occupations and to prevent over- recruitment for agriculture amongst school-leavers. Measures to locate certain kinds of industries in the relatively “depressed” rural areas might also receive much attention.

Finally, I would venture some remarks about the role of agricultural statistics and farm accounting data in the formation and implementation of the common agricultural policy. The emphasis placed in the Treaty on increasing the level of farm incomes seems likely to lead to an intensification of the

The provision embodied in Article 119 of the Treaty that each Member State shall ensure equal remuneration for equal work as between men and women workers is likely to hasten this development.

Journal of Agricultural Economics. 161

work needed to determine reasonably accurately what that level is in the various countries, regions and types of farming. In recent years the procedure of. making an annual review, for presentation to Parliament, of the economic situation of agriculture-a procedure now firmly established in the United Kingdom-has been adopted in several European countries. A comprehensive review of this character strains the statistical resources of these countries to the utmost. But having taken over responsibility for assuring a satisfactory level of farm incomes, governments, and now the Community too, must have the means of measurement. Inevitably attempts will be made to compare income levels between different countries, as well as between farmers and persons employed in other occupations, for without this it would seem impossible to decide what is “a fair standard of living for the agricultural population”, which the Treaty seeks to ensure. We may therefore expect to see an increased demand for global calculations and also for representative farm accounting data collected by independent bodies, More accurate knowledge will be needed of the size and composition of the agricultural population and of its sources of supplementary income. Prices and costs will, of course, receive a great deal of attention, and close investigation is likely to be made of the reasons why costs of production are apparently higher in some places than in others. Many policy decisions would seem likely to depend to a considerable degree on the outcome and acceptability of such investigations, if the aim of achieving “the optimum utilization of the factors of production” is really to be pursued in a systematic way.

Is the Treaty going to mean much or little to the typical family farm of Western Europe? There will be no going back from the broad security and welfare measures already written into the national legislation of the individual Member States, which aim at assuring to agriculture fair treatment in relation to other sectors of the economy. But these measures are not unconditional guarantees extending automatically to every existing holding regardless of its economy of management, or to every occupier and his heirs in perpetuity. In the brutal words of the old business slogan, some farmers will have to get on and others-many others--will have to get out. The European Economic Community can hardly offer farmers more than its member governments have already offered in this respect, but it should be able to help them to carry out their good intentions.

DISCUSSION ON MR. BRITTON’S PAPER. President :

I am quite certain of one thing, that if European communities and World communities don’t get much closer together in economic, as well as political and social fields we are not going to make much progress.

Having been to these Western Europeon countries quite recently, I wonder how Dr. Britton feels about a country like Italy. There the conditions are so very, very exceptional from the point of view of production and also from the technical, marketing and economic point of view. There, you have a country which is extremely poor, where there is a grave pressure of population and where farming as farming is a very different proposition from what it is in most other countries. I feel that Mr. Britton is a little bit of an optimist i f he expects the advisory services to be able to do anything, even in seven or eight years, to get the average yields up to the level of the best. I may be wrong, I hope I am wrong, but I think there will be technical dificulties both from a farming point of view and from the point of view of size of holding, that will take a longer time to resolve.

E . M. H. Lloyd : I would like to congratulate Mr. Britton on his paper, I think it is admirably done

as you would expect from anyone going from Oxford to Geneva. But I am a bit dis- appointed because he is always so discreet and cautious, with the result that sometimes I feel that he is not altogether realistic. One would have liked to have had from Mr.

I want to thank Mr. Britton very much for his excellent paper.

162 Joltrnal of Agricdtural Economics. Britton an assessment of the political forces, which he sees from his vantage point in Geneva, determining what is litely to happen. There are conflicting forces at work inside the Six. Pressure groups in the exporting countries all want to have access to the protected markets of their neighbours. In the case of wheat i t is the high-cost producers in France who want their neighbours to take their surplus at a high price. But in the case of butter i t is the low-cost producers in the Netherlands who want greater freedom to sell in France at a low price. There may have t o be sacrifices on the part of the French dairy industry, if the Netherlands and Germany are to be persuaded to take wheat at the price at which the French want to sell.

I think many of us probably share the doubts expressed by Mr. Britton but don’t take quite so seriously as he appears t o do some of the clich6s which find their way into these diplomatic documents. I have sometimes been present at discussions where representatives of farm organisations come to these international meetings under the p i s e of government delegates, and I once heard a,ielegate from Austria excitedly exclaim We farmers must be masters in our own house I There is a lot of that spirit in the Rome Treaty about agricultural policy.

Incidentally, I noticed that in the authorised English version of the Rome Treaty there is a phrase which refers t o co-ordination of efforts in the field of advisory work and this is translated I ’ co-ordination of efforts in the popularisation of the rural economy.” The French expression is vulgarisation ugronomique, which is the French equivalent of advisory services or extension work.

D . T . Healey : I was pleased indeed to hear this paper by Mr. Britton. I have done quite a lot of

work on this subject myself and I must confess that I think he is far more optimistic about the results of the Treaty than 1 am. Having read the Treaty uite often as he must have done, he must surely have found that there are a great manyloopholes. It seems to me that no amount of consultation is going to get over all these problems.

Having read an account of Benelux by Professor Meade in which he says that the agricultural problems were the most intense and had still not been satisfactorily settled, I remain unconvinced that the agricultural problems of the common market are going to be settled in 12-15 years. It seems that for every constructive proposal that is made about freer European trade in agriculture, there is an equal and opposite proposal to restrict trade. This comes or: quite often in Mr. Britton’s paper. ‘ I We are going to stabilise imports and exports and yet at the same time they want more free trade in agricultural commodities.

One is that the overseas territories of the Member States are going to be allowed to protect their diffeTent industries. That is an important oint as far as they are concerned. Also several of the countries, Germany in particular, L v e secured waivers in order to import agricultural commodities from thelr traditional suppliers rather than buy from the high cost producers of the dependent overseas territories of Belgium and France.

I was interested too in his remarks about future projections of national income and demand. I have recently done some work on this for the United Kingdom so as to antici- pate what might be the supplies coming from the O.E.E.C. countries and Common Market to Great Britain if we did not expand our own production. It is interesting to note that if we did not increase British production we might be importing a further L140,000,000 worth of food in five years’ time, about ~35,000,000 worth of that coming from the O.E.E.C. countries, of which the Common Market would supply ~13,000,000. I therefore welcome the fact that the Common Market countries are using the techniques which Mr. Britton mentioned to estimate future demand between themselves for various commodities and I am sure that it is a useful work for E.C.E. and for G.A.T.T. to participate in at present.

Dr. G . P. Wibberley : There is possibly a danger that this discussion will deal too much with the mechanics

of the negotiations going on at the moment and neglect the important thinking behind this idea of a European Common Market. It has come about because people within those six countries, with the Dutch in particular having a very, very strong influence, realising that they have a lot to gain by widening the market generally for their products and securing the advantages coming from specialisation and localisation of production and from the escalator effects of rising standards of living: We must also appreciate, and give credit for the fact, that amongst the people on the Continent who experienced two World Wars, in a more severe way than we did, are those in important positions and of mature age and judgement who are saying “If we can integrate our national economies there is hope that something worse than the 1939/44 War will not be visited on our children.” We must not lose sight of the idealism that is behind this movement. It may well he

Somebody has said : The Six are at sixes and sevens.”

Farm leaders are not going to take them very seriously.

There are one or two other points which Mr. Britton did not mention.

Journal of Agricultural Economics. 163

that in these six countries concerned some more cynical diplomats are thinking " If we start this movement for closer economic intergration in Europe, Britain will have to do something about it." I am very glad that for once we are being forced to tag along behind European thought and action, and forced to think quickly and hard about what this country is going to do in relation to something which has already gone a long way without us being concerned in it.

May I also be allowed to comment on the comparative position of Britain's agriculture in relation to these European developments. It does seem to me that in this question of comparative advantage British agriculture shows up quite well, certainly well enough for us to take a very much more open-minded and benevolent approach to these European discussions and to consent to bring our own agriculture into negotiations. British agriculture compares favourably with most European countries in relation to farm size and layout and in labour productivity and labour cost if the various hidden benefits of one sort and the other which social security adds on t o wage5 in various European countries are taken into account. There are many elements in the British farming system which compare very well with many parts of Europe and as Britain is already quite a long way up the ladder of economic progress we should not be over worried about potential increases in trade competition.

Surely, from the discussions we have had here on British agriculture support policies, and from press comment, if there is one thing that British agriculture needs a t the present time i t is surely a bigger market for many of its products. If there is a hope of a bigger market developing from rising standards of living amongst a hundred and eighty million people in Western Europe rather than our mere fifty million, then this is something that we should welcome and constantly remember so that in the mundane and detailed negotiations towards the reality of European integration cynicism shall not be allowed to take, the reins.

T. Kernpinski : May I say how much I enjoyed this paper, I was not surprised by its excellence

having met Mr. Britton a year ago a t Geneva in connection with my work and having learned how much he knows about the subject and how clearly he is able to put his knowledge across. Mr. Britton was one of the first people who set me on what I hope are the right lines in my present research work. This is partly concerned with what he mentions near the end of his paper, when he says that " close investigation is likely to be made of the reasons why costs of production are apparently higher in some places than in others." There is a warning note earlier in the paper-which reminds me very much of the warnings he gave me at the t i m e - o n '' the relative importance of factor prices on the one hand and of efficiency in the use of physical resources on the other, in the determination of cost of production." There is much to be said for trying to steer clear of the factor prices because of the doubt whether the exchange rates between the countries one is trying to compare accurately reflect the purchasing power of the different currencies.

One still comes across enormous difficulties even with physical resources. For example what is an acre of grassland ?

Now for one or two other points, Mr. Britton says that the calculations made in the preparation of the common agricultural policy must take into account certain assumptions about the elasticity of demand for various foodstuffs with respect to changes in income, and this rather links up with the idea that expanding food production might lead to surpluses. I have a suspicion that they are related to the expected rise in the aggregate national income, and I wonder to what extent the distribution of the increase in income among the population is taken into account. The sort of thing I have in mind is this : we know of the various schemes in this country for increasing the retirement pensions : wouldn't this be likely to put a new spending power into the hands of those people who a t the moment are outside the market for certain " luxury I wonder whether this kind of adjustment in the distribution of income might be under- estimated when assessing the income elasticity of demand for food. Is it not possible that, e.g., butter and meat consumption may rise more than is expected from these calculations, if certain new classes of consumers are able to afford these products ?

Finally, Mr. Britton mentions that there may be a slackening of yield curves because of the physical limit which nature imposes, and in this connection, I would like to mention the problem of grassland. Those concerned with grassland in this country know that in many parts of Britain this limit is very f a r from being reached and I suspect this would also be true of Italy and not only in respect of grassland.

It is certainly not the same in North Wales as in Belgium.

I wonder how these elasticities are calculated.

goods, and whose demand for meat and some other foods is very low ?


R. Lamb: What I am interested in is what will happen to our level of prices in

this country if we have to accept competition from farmers in the rest of Europe. Of course we would get the quid pro quo of the market in Europe for our own products ; and it seems to me that as far as meat, fat lamb and beef goes we would gain on balance. I feel that the price received by the British farmer for meat would be higher than i t is at the moment ; because we are cheap producers of fat lamb and beef and we would gain from the market on the Continent. The same thing goes for barley. We are already e rters of barley to the Continent. There is a very good market for it there. My mal t ingz ley , if it is low grade, nearly always goes to France ; and there is a market for feeding barley ia Denmark as long as it is competitive with the price of maize from the Western Hemisphere.

Of course we have the benefit of a 10% duty on wheat at the moment, but I don’t think there are a lot of exports of wheat on the Continent which are produced cheaper than ours. I am sure we are cheaper producers of wheat than they are on the Continent and my view is that as far as barley and wheat goes, the price received by the British farmer would benefit from a free market in Europe.

I think that economists would agree with me that i f there was a free trade in Europe we would have to accept lower prices for eggs and pigmeat and probably for milk, not because of the competition from imports of liquid milk, but because the imports of butter would force down the price of manufacturing milk. We do benefit by the duty of 10% on butter a t the moment and that would go. That of course would be a serious matter for all farmers, but especially for small farmers because those are the commodities on which small farmers rely.

We have had two papers of extreme fascination and interest to listen to but they have all been concerned with means of bolstering up the standard of living of the small farmer, even when he is relatively inefticient, by suggesting ways in which he can produce more milk, more eggs, and more pigmeat. Our policies are going to be to increase production on small farms,-I think there is no doubt about it,-so that the small farmer can get a higher standard of living.

It seems to me that th is intensses the problem of our small farmers in a free market. My view is that if we are to have the European Free Market we should have amalgamations of farms in this country, so that the small farmer will get more acres and have a chance to go in for grain and meat. Those are the products in which the future of British farming lies.

The &st two papers we have had stressed the importance of increasing production on small farms, and I don’t see how that can be the right way to approach our problems if we are going to have European Free Trade in agriculture. The two things seem to me to be quite incompatible.

I am a farmer.

But when you get to milk, eggs and pigmeat that is another story.

.4nzc~um Evans : The too small farmer has to get out of farming. And on the question of milk I am very

doubtful whether the Dairy industry as a whole need be frightened because i t is the too small farmers with their high costs who are in danger. The difference between the too small farmers costs and the’ average of all farms, (that is the third of the farmers who pro : duce only ten per cent. of the milk) is eight pence per gallon. This is very nearly a penny on a glass of milk, and is quite impossible to defend.

Dr. Thomsen : I think it is only fair to state that the subject of Mr. Britton’s paper is a very difficult

one-agriculture in the Common Market. It is anybody’s guess what is going to happen, because it is not laid down clearly in the Treaty how it is going to be operated. A good deal may depend on what is agreed a t the Stresa Conference. But from what I hear even that conference is not going to throw very much light on i t and there is likely to be another conference later.

As an alien it is very heartening to know that people over here understand that something of importance is going to happen on the Continent. And I think i t would be wrong of you to under-estinate what it means. True, agricultural changes are unlikely to be as important as changes in industry. The importance of these latter developments is under- lined by the United Kingdom Government’s very quick reaction once i t was rea lkd that the European Economic Community was coming into being.

So far as agriculture is concerned I do not think there is likely to be very much difference between agriculture in the European Economic Community and agriculture in the Free Trade Area, although for some peculiar reason i t was thought necessary to start out

Journal of Agricultural Economics. 165 by saying that the Free Trade Area would not apply to agriculture. Finally, I would draw your attention to the opinion of a German-Professor Niehoff-n the likely effects of the Common Market on agriculture in Europe. His view is that the direct effects on the European community of the Common Market in agriculture are not likely to be very heavy, things are likely to continue very much as they are. However, he did think that there was likely to be an important indirect effect. The Common Market will have important effects on industry which will take population away from agriculture to a much larger extent than in the past. In that way you are likely to get most change in agriculture.

Miss F. R. Waiker : Mr. Britton anticipates grounds for concern should agricultural production grow at a

rate of three per cent. or higher. Presumably if mobility were such that total production did not grow at much more than one per cent. he would not feel concerned with a problem of surplus. This rate of three per cent. is the critical rate by virtue of the assumption about the rate of growth of total demand. In attempting to interpret economic appraisals which rest upon specific assumptions, those of us who are nof familiar with the processing of the statistical material cannot help wondering how the assumptions are chosen. In this instance i t is the income elasticity of demand. This parameter is estimated from various types of basic information:-International per capita date, national time series, and from family budget data. Alternative function forms may be fitted to these sets of data :-linear, log-linear, or various asymptotic forms. The value obtained for the income elasticity will depend upon the type of data used and upon the function form selected. It is small wonder that the range of values obtained for similar types of economy is a source of confusion. We need to remember, moreover, that many estimates obtained are not, in fact, elasticities of physical consumption but expenditure elasticities.

With reference to the demand assumption implicit in Mr. Britton’s three per cent. critical rate, I would like to ask him if he could comment on three points : (a) How was the estimate of income elasticity of demand arrived at ? (b) How does he feel about applying estimates of income elasticity obtained from family budget data, which refer to points in time, to future situations, which emerge in a time dimension ? and (c) In the case of expenditure elasticities, to what extent might a n estimated increase in food expenditure be expected to reach the farm gate in increased purchases of actual farm produce I

M . B. Jaw& I should like to say a few words on matters of fact concerning the small farm. Mr.

Evans said that the small farmer’s milk costs are 8d. per gallon higher than the larger farmer. The Milk Marketing Board in assessing them make a charge for the labour of the farmer and his wife. If th is charge is deducted the costs other than family labour on a small farm are lower than those on the larger farms. Only the very e5cient large farm can really compete with a small farm in terms of real costs of milk production.

The other thing which I feel compelled to put right is the contention-and it is a widely held one-that the small farmer depends to a very large extent not only on milk but on poultry and pigs as well. It is true that some small farmers produce quite a lot of pork and eggs, but i t is only the most efficient and most go ahead among them who produce i t with real profit to themselves. I am positive that if the price for eggs and bacon were to drop quite considerably, all that would happen to the efficient small farmer on, say 40 acres would be that instead of making 61,000 or Ll,200 or L1.400 he would only make LSOO, L900 or 61.000. That wouldn’t break my heart and I don’t think it would ruin him either.

As far as the inefficient small pig or poultry producer is concerned. and about 50 per cent. of small farmers may be in this category, they would not be hurt at all, they would just be squeezed out of producing pigs and eggs. It would not make much difference to their profits either way. It may be better for them to be rid of enterprises which lose, them money even at present prices.

But the costs he mentioned are not the real costs.

I am afraid that is a misconception.

W . E . Cave: I did not want to enter into this discussion but I think the small farmer is talked

about so much these days that I think there should be a precise definition of him so that we can talk about the same thing.

With all due respect to the last speaker I submit that a farmer with a sufficiently large turnover to enable him to make a profit of L1,400 or 61,500 per annum is not a small farmer although his acreage may be small. The small farmer should be defined by the size of his enterprise not by the acres he occupies. But what all this has to do with the European Common Market is beyond my comprehension.

166 Jourml of Agricultural Ecorcomics. E M. H. Lloyd :

I agree with Dr. Wibhrley that we mustn't be too sceptical about the Rome Treaty. There is in fact a tremendous movement of opinion behind it, and it has been astonishing how this has swept over Europe and is even having repercussions in this country. It is eilcouraging because it points in the direction both of European co-operation and of econo- inic commonsense. In this modern world of H-bombs and satellites and rapid technical progress people are beginning to be a bit disillusioned about the old-fashioned set-up behind national frontiers-and they are looking for something different, partly going back to the ideals of the 19th Century and partly looking forward to something new. The ideals of the 19th Century are represented by the phrase '' free trade," but in the case of agricultural products competitson and free trade are not enough and may need to be supplemented by international commodity agreements. This is an idea that b e late Lord Keynes flirted with. That seems to me to hold out more promise than purely national measures for stabilizing prices, particularly when they result as they tend to do sooner or later in producing a surplus for which there is no room on the domestic market and which has to be dumped abroad.

Mr. Britton has drawn attention to the two codicting policies on the one hand of stimulating production and increasing the efficiency of small f h r s , and on the other of producing what i t is desirable in the national interest to produce, which implies some limit to the expansion that may be desirable. The present system under which each country produces a surplus which it tries to export to its neighbours and which its neighbours do their best to avoid taking at any price, can't go on indefinitely. If we are going to have anything like a rational economy the governments have got to concert their agricultural support policies and that is the really im ortant idea behind the Rome Treaty. I don't think it wil l lead to anything very new in &e immediate future. I believe, as Dr. Thomsen has rightly said, that the Economic Community with their elaborate Treaty won't in fact be able to accomplish very much more than they would have done if they had stuck to the O.E.E.C. technique of consultation and proceeding bit by bit in a commohnse way. That is the way in which solutions are most likely to be found, but it needs some political drive from the top to make things run smoothly.

I am not pessimistic about the prospect of a slow move forward in the right direction which has been so well pioneered by O.E.E.C. in whose activities our President has recently played an important part.

Miss E . H. Whetham : As members of the Agricultural Economics Society I think we should all be in favour

of the European Common Market, which is likely to mean full employment for agricultural economists. The other point I should like to make deals with the rate of growth of supply for agricultural products. It looks as though the technically advanced countries have an almost natural rate of growth in agricultural supplies in the order of 2 to 3 per cent. per annum. That rate of growth seems likely to continue even without much investment in new buildings or new land or any other agricultural improvements, simply by the application of what people already know and what is already good practice among the better farmers.

An increase in the general level of supply of that order can now be fairly confidently forecast in such countries as Western Germany, Belgium and Holland and possibly France and even this country as well. But will the increase in the national wealth arising from the industrial side be adequate to absorb that increase in the agricultural side ? And will i t be sufficient t o absorb it at prices which will be regarded ad I ' fair " by the agricultural industry I If not, are we wise even in this country, and perhaps elsewhere, in having special grants and special schemes for making capital easier for farmers ? Is that really the way to increase the national wealth ? Ought we not perhaps to go a little t o the other extreme and make capital and credit perhaps a little more difficult on the agricultural side, and concentrate it on the industrial side where we expect the eatest increase to occur in the real income per head. I should be very grateful indeed to !& Mr. Britton's views on that point which arises partly from the various forecasts put forward by the Common Market and O.E.E.C.

D. K. Brilton : It is quite clear that I have to begin with an apology-an apology for disappointmg

Mr. Lloyd and anyone else who found that I had not followed the subject in the way they had hoped. If my errors have been on the side of discretion and optimism I am not going to apologise, but I am sony if I seem to-have put the accent oh the wrong aspect of the subject. I did not write a paper entitled '' The Small Farmer in the U.K. and the European Economic Community," but obviously you have candidates to offer such a paper I

It wi l l be interesting to see what happens during the next six months.

Journal of Agricultrual Economics. I 67

The President asked me about Italy. Obviously Italy is interested in the European Economic Community provisions especially from the point of view of free movement of persons, because if that is to be a reality there would no doubt be a quite considerable outflow of persons from Italy to the other five countries. From the point of view of Italy’s agriculture, I suppose we could expect some of the wheat grown in the more unfavourable conditions there to dis- appear, and perhaps some substitution of livestock products on the same site and also even more specialisation on fruit and vegetable products.

Before I go on to mention the other contributors to the discussion, perhaps I might be allowed to make one more general comment. I have in this paper analysed the Treaty as if i t were a blueprint for operations. I know, of course, that that is an extremely hopeful interpretation to put upon it , but I did not see any other that I could take. I was preparing the paper at the time of the French crisis and obviously there was a considerable risk that the whole Treaty might collapse and that the Free Trade Area discussions might be put off indefinitely. B u t that seemed to me a blind alley to follow if I was to attempt a realistic summing-up of the chances that the Community will operate, as these chances seem to change from week to week. So I went back to the text of the Treaty and looked at i t as an architect’s plan, and tried to imagine what it might be like to live in the house when it is built.

I agree, of course, with Mr. Lloyd, that an analysis commodity by commodity throws up very different results. The French attitude to the wheat problem, I think, must be viewed in the light of the expectations that France cannot quickly reduce its wheat acreage. I think the latest French plan has recognised that wheat must give way to livestock products, and the minimum prices which have been announced up to 1961 .in France do definitely swing in that direction. It seems too early yet to say whether the wheat acreage will decline in the way that has been expressly hoped for in the Frenoh policy.

I would agree with what Mr. Healey said that there does seem to be a loophole envisaged for almost every incursion of free trade if it really began to hurt, but I still think that gradualness is the essence of the Treaty. If there were a serious attempt to p u t the Treaty into operation I think the loopholes would, one by one, be closed, though whether they would all be closed in 15 years is another matter.

I thank Dr. Wibberley very much for enlarging on my paper when he mentioned the likely effects on the Netherlands and on other counties, and also Britain’s position. On this question of comparative advantages I think there is one point which nobody has mentioned. It is that you cannot ensure that you will maintain your comparative advantage simply by making progress over the years. Others may be making progress at a n even faster rate. I am sure that those of you who are doing advisory work on farms don’t always feel happy when you advise a farmer to expand his production as rapidly as possible if you know that other farmers than he are in a better position to expand more profitably, and if a t the same time you know that any general over-expansion will lead to lower prices for all.

Mr. Kempinski touched on the difficulties of comparing prices between countries, and I certainly would not minimise those. Even on this vexed question of the correct exchange rates to use when converting to dollars-or any other common unit-a whole book could be written.

As regards the question of distribution of income changes in the population and its likely effect on consumption, obviously one must agree that the more one can refine the income assumptions the better the final result will be, and the same goes for the question that Miss Walker put to me. I wouldn’t like to say which demand elasticities are better, those which are obtained from time-series analysis or those which are obtained from family budget surveys at one period of time ; I would say that judging by recent meetings of European experts the emphasis is going to be more and more on family budget analysis and not on time-series analysis of national aggregates. I think the econometric experts who have gone into this, and in fact make i t their main work, are pressing all the time for more family budget surveys to show what consumption is a t different levels of income, different family composition, different employment activities and so on, and they are putting less reliance on time-series analysis.

I quite agree with what Mr. Lamb had to say about Britain’s comparative advantage in some products being very different from what it is for others and I would agree with him that, given free trade, the small farmer problem would become even more acute than it is and it will become more acute on the continent of Europe as well.

Dr. Thomsen remarked that no one could really tell what the Treaty is going to mean and of course I endorse that ; equally he was right in saying i t will have importance for the U.K. Agriculture no doubt is the exception in the Treaty, the main importance of which, we must admit, is for industry. Agriculture is brought in for the sake of completeness, but then, as Mr. Healey suggested, is almost let out by another door. But some day

Xow to turn to some of the points raised in the discussion.

It’s an obvious point really, one that comes in Alice in Wonderland.

168 Journal of Agricultural Economics. someone might like to analyse the reasons for this special treatment of agriculture. I remember not many years ago there was quite a,Fontroversy !p this Society about whether it was valid to talk about agriculture being a needing special analysis by economists. Later this wen: very much out of fashion and anyone who used the phase " Agriculture is a way of life was pushed on one side. But I must say it seems t o me that basically that is the reason why agriculture needs special treaf,ment in the Treaty. Agri- culture is of such a nature that when a farmer is " squeezed economically, he does not move out, at least not as readily as an industrialist seems to when he is squeezed. I don't want to enlarge on that now, but I believe that that is the basic reason why agriculture has the exceptional treatment.

I would like to go back to something Mr. Kirk said in answering the discussion yester- day. He said that agricultural policies are not determined mainly with a view to maximising naiional income. They are determined also with a view to maximising farm mcome or at least to attaining a certain level of farm income, even at the expense of the rest of the community, because in a greater or less degree the politicians believe that farmers have not yet had a fair deal in relation to the rest.

It seems to me, Miss Whetham, that the answer to your question depends upon that kind of consideration. If we are to believe that farmers have not yet had a f a i r share in the national income, then I suppose it would be right to allow more investment in agriculture even if the marginal rate of return on the investment to the nation is less there than i t might be elsewhere. Also, we should remember that if some farmers had to give up through lack of capital there would be a transitional period during which resources would be wasted. You have to set that against the simple test of marginal efficiency of capital in the two uses.

I would just like to say once again, Mr. Resident, how much I appreciated being asked to give a paper, and to thank you very much for the discussion.

way of life

agriculture in the european economic community

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