the dilemmas of globalisation

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The d i lem m as o f g lobal i sa t ion

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Group e d e Bruges

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First published by Bureau Kirja in Europe in 2008

Copyright © Groupe de Bruges in cooperation with Kirjaboek.nl,

May 2008

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Cover design by kind permission of Food Valley Foundation,

Wageningen



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The rapid developments, pressing dilemma’s and urgent questionsconcerning globalisation and liberalisation in relationship to the

future of (Europe’s) agriculture and countryside formed the

background for a small series of meetings the Groupe de Bruges

organised in the year 2006. Following an internal meeting by the

Groupe’s members, a public debate on the theme was held in

Amsterdam in May, at which the former Dutch minister of

Agriculture, Prof.Dr.Ir. Cees Veerman, acted as one of the key note

speakers. As a follow up, an expert meeting was held in the autumn

of the same year in Paris. This manifest was written based on the

outcomes of these meetings and on further desk research. We hereby

wish to thank all who, in one way or another and sometimes without

even knowing, have contributed to its present form. A special thank

to the Ministries of Agriculture of France and the Netherlands for

their financial support.

We are furthermore grateful to Justina Pena-Pan and Rachel

Wilkinson for ensuring the correct use of the English spelling andgrammar and offering valuable suggestions to improve the quality of

the text.

And last but not least a huge bouquet of flowers for Bart Soldaat, the

secretary of the Groupe de Bruges for his research, his capability to

integrate our discussions into a next concept and his quality to write

with a ‘European Pencil’ this final document.

I hope this book will play a role in the political and public debate

about the next step in the construction of Europe and the future of the

Common Agricultural Policy, based on social justice and ecological

sustainability.

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An economic journalist on assignment to describe agriculture and the

problems it encounters on different continents, discovers that overthe course of only a few weeks he has had the privilege to go throughthe whole history of agriculture and human food provision from itsorigins to its present day: from hunting and fishing to harvesting,animal husbandry, irrigation, urbanisation, farmers revolts, famines;he sees large scale industrialised farm holdings but also tinysubsistence farms that provide the survival of hundreds of millions of families today.

Visiting rural areas in the West he finds both modern family farmsand large agricultural enterprises and he, unsurprisingly, comparesboth on their economic, social and environmental merits. Thentravelling to Africa he discovers that famine is still very much a ruralmisery. Crossing the Atlantic he learns that by colonizing hundredsof thousands of hectares of the Amazon forest Brazil is not onlydisrupting the world’s ecological equilibrium, but is also destroying

the global cotton market. Moving on he finds that while the rich

Texan cotton growers are well protected by their government, theirpoor colleagues in Mali are unable to continue their production.

Invited later on to visit China, staying in a large coastal city, he

learns that each year twenty five million rural migrants move to the

urban agglomerations, who no longer know what to do with these

people as the industry is meanwhile adapting modern technologies.

He notes that deserts are expanding and that the rising of the oceans

and the growth of urbanisation are threatening the most fertile plains

in the world; that water is often lacking in a growing number of areas, while at the same time irrigation is one of the key factors in

ensuring global food supply. He also acknowledges the immense

need in modern agriculture for fuels, but also that the exhaustion of

fossil fuel resources is threatening food production as a result of the

rise in energy costs and the development of bio fuels.

Finally ending up in Geneva where ‘agricultural’ experts from

almost two hundred nations are gathered in the World Trade

Organisation, he ascertains that they are unable to reach an



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agreement. The composition of contradictory ‘groups’ that make up

the WTO results in poorer countries ending up drawing the short

straw based on some illusory advantages. He discovers that each

expert-diplomat is more concerned with the immediate interests of

his own country than with establishing a balanced global foodsupply, the protection of nature or the future of farmers that have no

land and no work. Filled with amazement over the policies of

Brussels and Washington he searches through his notes to find that

public support for agriculture in these regions sometimes mounts up

to eighty per cent of the net revenue of the producers, even though it

has recently already been lowered by twenty per cent on average. He

also finds that for example in France the off-farm value of

agricultural production is just 25 per cent of the value of the endproducts sold in the shops. The so called agricultural policies have

been advantageous mostly for consumers and even more so for the

processing and retail sectors. He concludes that the evolution of the

world that he has been investigating is less guided by governments,

even when they are working together, but predominantly by a group

of some twenty to fifty multinational enterprises that dominate the

market and the debate on free trade.

He writes in conclusion: “our future is threatened by the

demographic expansion because the world is without doubt unable to

feed the world; it is threatened by misery and disarray, by the

migration of rural communities which the urban economy can absorb

no longer, by the necessity to transform agriculture into producers of

carburant, by the attacks of all sorts on nature.

Is there then any place in the world where one thinks about all these

problems simultaneously? The institutional system and the economy

itself, are they not inapt to satisfy the needs of the world? Are they

able to think globally?

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A necessary re-valuation of agriculture 8The changing role of agriculture:from food to health care 10The big issues relating to agriculture 12Globalisation and liberalisation: cause or cure? 14From big issues to big dilemmas 15The structure of this manifest 16The why’s and how’s of this manifest 18

*OREDOLVLQJZRUOGOLEHUDOLVLQJPDUNHWVIntroduction: an exemplary case 20

Myths and theories on globalisation and liberalisation 23

/LEHUDOLVDWLRQIURP*$77WR:72A short history of liberalisation 46

The changing geo-political landscape 53

Farmers’ perspective on liberalisation 58Are we barking up the wrong tree? 61

On the importance of global trade 66

Where do we stand? 68

7KHGLOHPPDVRIJOREDOLVDWLRQIntroduction 70

Dilemma 1, Sustainability and reduction of poverty 73

Dilemma 2, Can we feed 9 billion people sustainablyin 2050? 92

Intermezzo: can we feed the world on organics? 112

Dilemma 3, the fight for food, feed and fuel 119

Dilemma 4, Food or landscape; nurture of nature? 134

Future outlook 140



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µ)RUWUHVV(XURSH¶One vision, one market: Europe as a success story? 146Intermezzo: who wants to be a farmer these days? 162The CAP and the dilemmas of globalisation 167The future of the CAP: opportunities and threats 180

$UHYDOXDWLRQRIDJULFXOWXUHOur Common Future revisited 188The dilemmas of globalisation and liberalisation:Synthesis 191A new approach for the WTO 197The CAP and beyond: towards a new vision and

new policies 203The future of agriculture: towards a re-valuation 224Ten questions for future debate 229



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Never in the history of mankind have there been so many farmersthan there are today in absolute terms: some 2.5 billion people,almost 40% of the world population, are directly involved in anddependent on farming.The year 2007 also marks another significant moment. For the firsttime in history there are more people living in urban areas than in the

countryside. This is not only a marker for the ongoing exodus fromthe countryside to the cities (25 million people a year in Chinaalone), but it will also influence the attitude society has towardsagriculture and countryside. With the majority of people living in anurban environment, the interests, wants and perspectives of urbanitestowards agriculture and countryside will become even moredominant.

There is a lot of pressure on agriculture. It is not only supposed toproduce sufficient and healthy food for 6.5 billion human beings, butit is also required to provide nourishment for the 9 billion people thatare expected to populate this planet by the year 2050. In addition,agriculture will be expected to play a significant role in providingrenewable energy sources, to compensate for declining fossil fuelresources, in order to help decrease carbon emissions and/or to helpus be less dependent on questionable or unstable oil producingcountries.

Furthermore, this must all be achieved in a sustainable way, in orderto safeguard resources for future generations. Agricultural productionstill has a huge impact on our resources: it uses 70-75% of theavailable fresh water globally, 30% of all ice free land and 20% of available energy.

If this weren’t challenging enough, agriculture worldwide is

supposed to become more competitive, producing with decreasing

public funding, producing under free market conditions. Why?



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Because that is part of the ‘zeitgeist’, the still predominant neo-

liberal vision that free markets will lead to more prosperity; a vision

in which agriculture is ‘just’ another economic sector.

And as for European farmers, the European Union AgriculturalCouncil at a meeting in 1997 stated that “(European) agriculture as

an economic sector must be versatile, sustainable, and competitive

and spread throughout Europe (including less favoured and

mountainous regions). It must be capable of maintaining the

countryside, conserving nature and making a key contribution to the

vitality of rural life, and must be able to respond to consumer

concerns and demands regarding food quality and safety,

environmental protection and the safeguarding of animal welfare”.

Is there any sector that has to fulfil so many, sometimes

contradictory tasks simultaneously? How, for example can

agriculture be competitive in less favoured areas? How can it be

competitive and at the same time maintain the countryside? What

kind of supermen and superwomen are farmers expected to be?

If all of this is asked from European and global farmers, thanobviously we honour and encourage them, support them and cherish

them, making sure that all conditions are in place to allow them fulfil

this enormous variety of roles and functions. Or are we?

And will there, in the future, be enough farmers left in Europe to

fulfil the wishes of our society? The European Commission predicts

that of the current 14 million farmers, by 2014 there will be some 6

million left of a total population of over 450 million people

comprising the EU-27.

While in some parts of the world up to 70% of the population can be

considered a farmer, on average, only a small and decreasing

percentage of the European population is still directly involved in

agriculture, albeit with notable variations from one country to

another.

Over the last decades European agriculture has already fulfilled the

huge task of ensuring food security. Food is available in abundance

in an enormous variety at reasonable, if not cheap prices to



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consumers. The proportion of our income that we spend on food hasdecreased to less than 10% in some countries. Under these conditionsit is easy to forget the vital importance of agriculture. And indeed, itseems that we have forgotten.

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On the geological time scale, farming is a very recent phenomenon.Only some 10,000 years ago people in the turbulent Middle East

region gradually evolved from hunter-gatherers into farmers. Evenart has existed longer than agriculture. Until then society as a wholewas involved in taking care of fulfilling basic needs. Agriculture notonly made it possible to support larger populations, but also createdthe basis for specialisation. With the advancement of agriculturaltechniques, water management being one of the first, more and morepeople could devote larger portions of their time to other activities.

With the growth of the non-farming population and the subsequentincrease in living standards, partly as a result of improvedagricultural production, the role and function of agriculture haschanged significantly over recent decades. Or rather, people’s

perspective has changed on what agriculture should be and what it

should do.

The changing role of agriculture is reflected in the increasing number

of functions it fulfils, or is supposed to fulfil, for today’s society.

Some functions are old, some are new and some used to be a mere

‘side-effect’ of agricultural production but are now viewed from adifferent perspective.

Food production is, of course, still the main function of agriculture

worldwide. It is the conversion of sunlight and organic matter into

materials that can be used for human consumption in the form of

carbohydrates, proteins, fats, vitamins and minerals. Some organic

matter has to be transformed by other animals first in the form of

eggs, milk, meat etc., before it is suitable for human consumption.



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Agricultural output can also be used to produce fuels. This of courseis not a new phenomenon. Oils derived from plants, animals fats,plant material and even manure have for centuries been used as fuel

before we entered the carbon fuel era. In recent years this functionhas been given a new meaning when we talk about bio mass and biofuels.Another use for agricultural production is that for fibres, such aswool, flax and more notably cotton production, one of the mostdebated issues in and outside the WTO. As mineral oil, the othermain raw material used to make fibres becomes scarcer and moreexpensive; the industry is now also focussing on other organic

materials, such as maize and soy. These are used as raw materials tomanufacture clothes and bio-degradable packaging material.

Finally1, a both old and new function of agricultural production is forpharmaceuticals. From its origin, plants have been used inagriculture either as medicine or for cosmetics. According to legend,Cleopatra used to bathe herself daily in the milk of a thousand mules.Today, the agro-industry, in cooperation with pharmaceutical

businesses, is developing, on a daily basis it seems, a rapidlyincreasing variety of new products that all promise us a healthy lifethat will allow us to grow older and older without the downside of losing our good and youthful looks.

And these are ‘merely’ the direct functions of agricultural production

itself, understood as the art of transforming sunlight, soil and organic

matter into products for human use.

Today we debate the multifunctionality of agriculture and mutatis

mutandis that of the countryside as a whole. With that we imply that

agriculture has other roles to fulfil besides the ones mentioned above.

Some of these roles entail amongst other things, water storage and

water management, care for man made landscapes, maintenance of

natural and cultural heritage and of bio diversity. Yet, they are still to

1There is of course also the production of narcotics, a global industry of

incalculable proportion. For some countries, like Afghanistan, the production

of raw materials for narcotic production is their main source of exportrevenues



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provide a contribution to the social fabric and economic vitality of rural areas and to the well being of citizens in general through thecreation and maintenance of agreeable living spaces, tourism andrecreation, and recently, even on-farm health care facilities.

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So, if agriculture from its origin to its recent past has undergone thistransformation, is this then not a good sign, indicating theadvancement of mankind? On the one hand freeing most of us towork the soil and to tend to our animals to provide for our dailybread and milk and on the other hand providing us with a multitudeof products and services that increase our well being and that fit inwith today’s needs and the wishes of society?

It becomes more and more apparent, however, that ‘the agricultural

question’ is nowhere near completion. Worse still, some of the main

issues for the future of mankind are directly or indirectly connected

to agriculture.

Food security has not been achieved in all parts of the world, hungerstill stubbornly persists, especially in those areas of the world that

also show higher than average population growth and/or are dealing

with a politically unstable situation.

More people live in severe poverty than ever before, despite

desperate attempts by the UN and an endless stream of NGO’s and

the promise from the WTO that trade liberalisation would provide

the cure. Poverty is more of a problem in rural areas than in the citiesand in three quarters of the cases, it affects people whose subsistence

is directly dependent on agriculture. Income disparity over the last

few decades has increased, not diminished. This is not only true

when we compare North to South, but also West to East and even

within affluent societies, countries and regions.

Processes concerning the diminishing availability of fresh water, loss

of fertile soils and the changing climate might endanger the earth’scapacity to ensure sufficient food production in the future.



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Agriculture is not only the number one consumer of fresh water, butis also still one of its major contaminators.Al Gore’s documentary ‘An inconvenient truth’ has placed the

environment at the top of all political agenda’s, where it had quietly

disappeared from in the nineties, putting agriculture in the spotlightboth as part of the cause and as part of the solution. Everyone is

looking now to agriculture to store CO2

and to produce the raw

materials for bio fuels, while at the same time agriculture is a major

energy consumer and emitter of greenhouse gasses, notably methane

through livestock.

In some parts of the world the rapid exodus out of agriculture and

impoverished rural areas into cities, is creating enormous problemsconcerning housing, facilities, infrastructure, sewage, air pollution,

unemployment and crime, while in other parts, rural areas are under

pressure from urban sprawl and urbanites that seek the relative calm

of the countryside.

Agriculture over the centuries has shaped, created and maintained

landscapes that we value; a substantial part of the earth’s bio-

diversity is directly dependent on agricultural practices. At the sametime it is undeniable that agriculture is destroying landscapes and

nature, sometimes at a staggering and frightening pace.

In globalising and liberalising food markets, food safety, production,

hygiene and health issues, like H5N1, E-coli and salmonella, are on

the front pages and in the news of global networks almost on a

weekly basis. Food production and food consumption appear to be

among the prime causes of death worldwide. Today far more people

die from the lack of sufficient food than through acts of terrorism.

While in some parts it is the lack of food, in other parts it’s because

we eat ourselves to death. The percentage of people, especially

children, who suffer from obesity and a series of other diseases

connected to unhealthy diets, has risen alarmingly over the last

decades.



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So, how do globalisation and liberalisation fit into this picture?

If we define globalisation as a process of connecting and integratingthe different economies, cultures and countries of this world into aglobal house, then liberalisation could be regarded as the keyunlocking the doors to connect the various rooms.However, neither globalisation nor liberalisation is a newphenomenon. There have been global economies before, the last oneending in the era of the so called mercantilism period of the 16th and17th century, in which the trade of slave labour was one of the mainand most profitable economic activities. Europe has known a more orless unified market for centuries; the prices for wheat and rye wereset in only a few European capitals, like London and Amsterdam forexample. This is, until the nation states finally became strong enoughto sustain governance. Only when the notion of the nation state hadbeen globalised, did we come to realize that the downside of this isthat borders are not only there for protection, but also constitutebarriers to trade and exchange.

The American economist, Jeremy Rifkin, once stated: “Few peoplerealize how limited the present wave of globalisation is. More than

three-quarters of the world’s population has got nothing to do with it.

Sixty percent of people have never made a phone call in their lives.

Thirty percent has no electricity.”2

As much as this is true, globalisation and liberalisation today do

affect every human being on this planet, from the CEO of Cargill to

the starving family in the remote rural areas of Sudan receiving food

from the UN Food Aid Programme.Even some maybe yet-to-be discovered tribe in the Amazon will,

without knowing and without participating in the process, be affected

by decisions made in the WTO on liberalising markets for

agricultural commodities. Small scale cotton growers from

Bangladesh, though illiterate and without any connection to the

outside world other than through their middlemen, are directly

2Interview with Rifkin, Zout, april 2006, pp. 60-67



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affected by the global cotton market and the hefty disputes betweenthe US and other cotton growing regions3.

If we look at the big problems and challenges facing the world of

today and tomorrow, globalisation has undisputedly somerelationship or another with all of them. Poverty and hunger cannotbe viewed in disconnection with the inner workings of the globaleconomy and political structures in which certain economic interestsdominate others; local and global environmental problems are anintegral part of the way we view trade and technology and are seenas drivers for economic progress. An outbreak of H5N1 on a remotechicken farm in Vietnam will make alarm bells go off all over the

world, because the way we produce, process, trade and consumefood, is part of a globalised food system. Eating too manyhamburgers could not only cause health problems for a Westernchild, but also environmental problems and loss of rain forest in theAmazon.

The question is whether or not globalisation is the cause of all theseproblems or its cure, and whether or not it should therefore be

encouraged through liberalisation of markets?

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Are globalisation and liberalisation good or bad for agriculture, for asustainable land management, for society? This book would be a lotthinner if these questions could be answered in an unambiguous

manner.Some of the big issues of today all seem to be in one way or anotherconnected to globalisation and liberalisation on the one hand and toagriculture on the other.

3John Micklethwait and Adrain Wooldridge in their “A future perfect, the

challenge and promise of globalisation” (New York, 2000) give the exampleof Bangladesh farmers who collectively invested in an Internet connectionwith which they had direct access to information on actual prices on the

world market, strengthening their bargaining position vis à vis theirmiddleman



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Again, the Groupe de Bruges, at this point, does not want to be justone more party offering yet one more opinion. Rather, we would liketo focus on the way globalisation and liberalisation affects theseissues and influences agriculture, rural areas, nature, environment

and societies, to analyze and if and when necessary criticize some of the assumptions underlying the debate. And to discuss and analyzesome of the major dilemmas that could be identified and should beaddressed in the future debate. We strongly feel that this exercise isnecessary and could provide the negotiators and stakeholders withinsights on how the liberalisation debate should proceed and how theglobalisation process should be managed.These dilemmas will force us towards a renewed reflection upon the

organization of markets, the mechanisms of trade and protection, andthe place of agriculture and farmers in the world of today andtomorrow. A world in which problems of the past will remainproblems for the future, a future in which new challenges are alreadycasting their shadows, at a point in history where the WTO is incrisis and the leaders of the world seem to lack both the vision andthe courage to confront them.

7KHVWUXFWXUHRIWKLVPDQLIHVW To simplify the complexity of the matter we have made the choice tofocus on four dilemmas, which the Groupe de Bruges feels are at theheart of the problems and challenges and which have a directrelationship with agriculture.These dilemmas will be explained one by one and discussed in

chapter three. Before that we will dedicate one chapter to addressingthe basic assumptions underlying the globalisation and liberalisationdebate, showing that some of these assumptions need reviewing orworse are based purely on myth. Only when we have the basics right,can we begin to address the dilemmas and the possible solutions. Indoing so, we will also, as briefly as possible, shed light on theliberalisation process to date, with primary focus on agriculturalcommodities.



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When we have more or less painted the whole picture, will we thendare to make an evaluation of the good, the bad and the ugly sides of globalisation and liberalisation.

It will then be time to return from our around the world trip andreturn to what has been, and will remain, at the heart of the focus andactivities of the Groupe de Bruges: the European Union and morespecifically the Common Agricultural Policy.Is the European Union the prime example of a multilateral projectthat has succeeded in not only bridging and respecting historic,ideological, political, social and cultural differences, but also inachieving a unified, truly liberalized market that has brought

prosperity to all its members? How is the globalisation andliberalisation process, in which the Union has engaged itself,affecting European farmers, agriculture and rural areas in all itsdiversity? And how has the Union, the world largest importer andexporter of agricultural commodities, fared in the liberalisationprocess? What is its position vis à vis the big issues and the major

dilemmas? How has it responded? What should be her future role

and responsibility and what does this imply for the next Common

Policy on Agriculture, Food and Rural Development?So, even if we will travel to all corners of the world, which is

inherent in discussing globalisation and liberalisation, by the end of

this manifest we want to return to our ‘core business’ and reflect on

what this all means, or should imply for the next generation of the

Common Agricultural Policy. With the last so called Fischler reform

still being in the process of implementation, the next reform is

already being prepared with an outlook on the post 2013

programming period. Although the Groupe de Bruges traditionally

focuses more on options and strategies for the long term, we do not

want to miss the opportunity to make some points concerning the

current debate, albeit from a global and long term perspective.

When this is all said and done, we will have the audacity to propose

some recommendations both for the WTO and the European Union.

This will be done from the perspective that we desperately need a re-

valuation of both agriculture and of farmers if we want to find a

successful way to confront the big issues and dilemmas.



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liberalisation must be organized around one priority: to find acommon path towards a sustainable social, economic and ecologicaldevelopment that reduces inequality between countries, betweenterritories, and between individuals at the same time respecting and if

necessary protecting their differences.As much as we would like, this book is not meant to offer solutions,not even a position for or against. What we strive for, by laying barethe basics of globalisation and liberalisation and by pinpointing someof the fundamental dilemmas connected to these processes, is that thereader will, at the very least, be left with an uncomfortable feeling, agnawing sense of what is at stake and what tough choices will haveto be made, choices that will affect every living soul on this planet.

But most of all we hope to bring about a renewed appreciation forthe vital role of agriculture and of farmers.

Secondly, because of its very nature as an independent think tank theGroupe de Bruges can allow itself more degrees of freedom in thedebate. The Groupe’s members can be described as independent,

well informed concerned European citizens. The Groupe as a whole

and its members individually do not represent certain interests or

points of view of certain stakeholders. Nor is it a group of scientists,giving ‘only’ an objective analysis, based on scientific study. The

mixed composition of the Groupe de Bruges guarantees that the

debate can be viewed and discussed from different points of view

and at various levels. In this way the Groupe can feel free, based on

information from all angles and perspectives, to express its heart felt

concerns in a truly independent way.

On a more practical note: by its mixed nature, including scientists,

decision makers, farmers, representatives from NGO’s et al., from 23

different European countries, sources of information can be brought

together that otherwise would not or not as easily have been brought

together. Even in this Internet era, American authors tend to use

predominantly Anglo-American sources; French authors for the most

part base their findings on other French information and so on. This

is not simply a matter of language, but also a cultural phenomenon:

people, even journalists, politicians and scientists feel more at home

with their ‘own kind’ despite the globalisation of information.



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The Groupe de Bruges however, by its very nature and composition,is able to break through these language barriers, thus providing abetter opportunity to use different sources and come to a morebalanced and hopefully less biased approach.

What truly unites the members of the Groupe de Bruges is that theyconsider themselves all to be true Europeans. This positive attitudetowards Europe and the European Union does not mean a less criticalapproach. On the contrary. Failure of the European project is not anoption, too much has been gained and too much will be lost if theEuropean Union should disintegrate. As the Union is becominglarger, in itself a sign of success, disintegration is more likely. From

the beginning in 1957, agriculture has been at the core of Europe’spolicy, based on a common objective of providing food security for

its population as one of the tools for social and economic cohesion.

To quote Cees Veerman, the former Dutch minister for Agriculture,

Nature and Food Quality, agriculture should also in the future remain

a binding factor, although under different circumstances that require

different policies. Once again agriculture is or has to be priority, in

Europe and worldwide. The world is looking towards Europe to set

an example. This manifest should be considered as a critical, butultimately a positive review of Europe’s role in dealing with these

big issues.



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,QWURGXFWLRQDQH[HPSODU\FDVH Take the two neighbouring peasant villages, Hitherto and Yonder. Inboth villages the peasants only grow potatoes and wheat. Their dietsconsist of equal parts of wheat and potatoes. In Hitherto the soil isdry and poor. The soil can harvest either 200 tonnes of potatoes or200 tonnes of wheat. The peasants, because of their diet, grow 50%potatoes and 50% wheat. The soil in Yonder, however, is fertile and

can produce either 600 tonnes of potatoes of 400 tonnes of wheat.This means that the peasants plant wheat on 60% of their land and40% of potatoes, resulting in 240 tonnes of potatoes and 240 tonnesof wheat. Together both villages produce 340 tonnes of potatoes and340 tonnes of wheat. Would trading be beneficial in this situation?One would say not, because Yonder produces so much more in bothpotatoes and wheat, so why should they trade? However: thepeasants of Hitherto have a FRPSDUDWLYH advantage: in Hitherto itcost only one tonne of potatoes to grow one tonne of wheat, while inYonder it costs 1.5 tonnes of potatoes to grow one tonne of wheat.To fully exploit this advantage, the peasants in Hitherto startproducing only wheat; 200 tonnes. In Yonder they can reduce wheatproduction to 40%, producing 160 tonnes of wheat. On the other60% they grow potatoes, producing 360 tonnes of potatoes. Thevillages now trade, 90 tonnes of Hitherto wheat against 110 tonnes of Yonder potatoes, ensuring that both villages can maintain their dietof 50% potatoes and 50% wheat. The end result of the trade is that

both villages are better off: Hitherto now has 110 tonnes of wheatand 110 tonnes of potatoes (+10 tonnes of each product) and Yonderhas 250 tonnes of wheat and 250 tonnes of potatoes (+10 tonnes of each product).Everybody profits, so it seems. However, not all villagers on bothsides are convinced. In Yonder the left wing political party claimsthat the poor farmers in Hitherto are being exploited, since they onlyget 1.2 tonnes of potatoes for each tonne of wheat, while in Yonder

farmers get 1.5 tonnes of potatoes for their wheat, despite the fact



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the spread of Western capitalism, technology, social and moralvalues, and more recently the Internet4.Within the WTO framework globalisation has become even morenarrowly and almost exclusively defined in economic terms, only

relating to the global trade of commodities and services.

Liberalisation could be defined as the removal of artificial, manmade, barriers to the flow of goods, services, people, capital andknowledge across borders. The word in itself has an ideologicalconnotation: as if trade has been held in captivity and has to be setfree.

It is clear from the beginning when discussing globalisation andliberalisation, processes which have become so important toagriculture and farmers all over the globe, both ‘objective’ economic

parameters and political and ideological views play a part. It is our

impression that in the debate, these get mixed up, or worse that

seemingly objective economic theories and scientific data are used to

legitimize a political or ideological position or vice versa that a

narrow and a priori vision on liberalisation sets the parameters for

scientific research and public debate. It seems that more than one ortwo of the underlying assumptions regarding globalisation and

liberalisation are incorrect and/or of a mythical nature, thus clouding

the debate or starting the debate on the wrong foot.

So, before going into the debate itself and discussing the dilemmas of

globalisation and liberalisation in relationship to agriculture, we

would like to address some of the basic, underlying assumptions, to

liberalise as it were the liberalisation debate.

4 Currently one out of six people on this planet is connected to the Internet



25

0\WKVDQGWKHRULHVRQJOREDOLVDWLRQDQG

OLEHUDOLVDWLRQ

7KHUHLVQRLQYLVLEOHKDQG There are two basic assumptions that are used to legitimizeglobalisation and liberalisation: the market is the best and mostefficient way to bring offer and demand together, and that free tradein liberalised markets will bring more economic growth and welfare.According to economic theory this is regarded as the neo-liberal orneo-classical approach. In this approach economy is usually definedas the sum of all human activities connected to the production,distribution, exchange, and consumption of goods and services. It isthe art of matching limited resources with, in principle, unlimiteddemand. On the supply side the objective is to get the right goodsand services to the right people at the right time in the right way atthe right price. And to do so at the lowest cost possible, i.e. in themost efficient way. Demand is perceived as the sum of all consumersseeking to maximize the utility of their own resources to obtain

goods and services. Technology is then the development of mechanisms to improve the efficiency of both production (includingprocessing and transport) and consumption.

The primary function of the market is to bring demand and supplytogether at a certain price, a price just high enough for a supplier tobe prepared to sell and just low enough for a buyer to be prepared topurchase. (Neo)Liberal economic theory states that if there is

complete transparency in price, supply and demand, on both thedemand and the supply side for all parties involved in the transaction,then supply and demand will always be brought together and theright price will always be the end result of any transaction. Marketsare efficient when the price of a good or service attracts exactly asmuch demand as the market can currently supply. The chief functionof a market, then, is to adjust prices to accommodate fluctuations insupply and demand in order to achieve allocative efficiency. This is

the essence of Adam Smith’s ‘invisible hand’. But even Adam Smithwas quick to note that information is always imperfect and markets



26

are always incomplete. In practice there always exist disparities ininformation and market unbalances; these disparities and imbalancesare the very reason that traders and merchants can make money.Information is not available to everybody in the same way at the

same time.For example, although literacy rates have been steadily risingthroughout the world, still some 15% does not have the basic skills toread or write, with illiteracy rates still extremely high in South Asia,the Arab world and in Sub-Saharan Africa of up to 90%. Illiteracy isalso more concentrated in rural than in urban areas and rates are, notsurprisingly, higher among the poor than among the wealthy.

When we look at information sources that are relevant to suppliersand buyers in today’s economic system, 30% of the world has no

electricity and therefore has no access to information media such as

television or the Internet. One out of six people have access to the

Internet, but most of them lack the fast broadband connection that

nowadays is the best means of acquiring relevant information fast.

These facts alone show that there are huge information disparities

among suppliers and among buyers. For suppliers, such as farmers,this means that they more often than not have to rely on oral sources,

which could be the local market where they sell their products

directly to consumers or through their middleman, who come to buy

their produce. But even the farmer-entrepreneur with a university

degree on his 10,000 hectares farm in the USA with broadband

access to all global markets, does not have all the information he

needs to make the most profitable decision on when to sell and to

where and to whom.

So, buyers and sellers have to work with Best Information Available,

which is imperfect by definition. The huge disparities in information

give the best informed parties an important and often decisive

advantage on the market. In other words: there is no invisible hand.

And as far as agriculture is concerned, buyers are always in the

driver’s seat because they know that most agricultural produce can

only be stored for a limited period of time.



27

2QWKHQRWLRQRIPDUNHWV

In the liberalisation debate it appears that what markets are and howthey work is often overlooked. If mentioned at all, usually a rather

simplistic, Smithsonian, notion of the market is implicit to thedebate. Every first year economy student, however, will be taughtthat there are different types of markets, each with their own specificcharacteristics.In general in economic theory four different types of markets arecommonly distinguished, each with their own characteristics,depending on the number of suppliers, the number of buyers and thenature of the goods and services traded: the market of perfect

competition, monopoly, monopolistic competition and oligopoly.

The first form of perfect competition is characterised by a greatnumber of suppliers and buyers who individually cannot influencethe price; the commodities traded are of a homogenous, which meansinterchangeable, nature. For a large number of agriculturalcommodities, this is the case.In a market of perfect competition, individual suppliers can only

respond by adjusting supply to the given price. Normally anindividual supplier at a certain price will try to supply as muchproducts as possible. Since all suppliers will try to do so,overproduction will occur, leading to an adjustment of the price.Characteristically, farmers will not always lower their supply whenfaced with declining prices, as economic theory suggests. One reasonis that for most agricultural products it is impossible to reduceproduction from one day to the next. Another reason is that they willtry to compensate lower prices and margins by producing more notless.

Farmers have understood for a long time the workings of the marketof perfect competition, by organising supplier power in the form of cooperatives over a hundred years ago. This has proven to be a verysuccessful strategy as they form a countervailing power towardstraders and processors. Over the last decades, however, we have seena process emerging of both globalisation and concentration of

traders, processors and, more recently, also in the retail industry.



28

This has given large parts of the market for agricultural commoditiesa more oligopolistic nature, in which a few parties dominate themarket. The basic characteristic of an oligopoly is that, when forexample, a retail company raises its prices, others will not follow and

the demand for this company will react in an extremely elasticfashion. On the other hand, if one of the retail companies decides tolower its prices to consumers, its competitors will followimmediately. Demand will in this situation react inelastically.Usually this phenomenon leads to a freeze in prices, but can alsoresult in the notorious price wars we have witnessed in someEuropean countries over the last few years and in which foodproducts more often than not were the main products suffering from

these price wars. To be able to raise prices or to avoid such warprices, the handful of parties dominating the market often formcartels in which they agree not to fight each other and to raise theirprices simultaneously. Cartels are not an item dealt with within theWTO framework, but are illegal in most countries. However, theadvantages of forming cartels often outweigh the risks of beingcaught and punished, and therefore are still a common practice.

A third market type is called monopolistic competition. Here, as inthe market for perfect competition, there are numerous suppliers andbuyers, but the type of products are of a heterogeneous nature. Bycreating differences in the characteristics of products and throughproduct branding, niche markets are created where there is someroom to influence the price. We have seen over the last few yearsthat cooperatives and private processors and manufacturers of foodproducts have engaged themselves in attempts to diversify theirproduct ranges to create new niche markets, for example by addingingredients to dairy products and cereals like calcium and vitamins togive their product an added value to consumers over homogeneousproducts. Also, attempts by individual farmers or new and smallcollectives to organise direct marketing strategies can be viewed asattempts to diversify their products and services and find nichemarkets. The bulk of agricultural produce, however, is still of arelative homogeneous nature.



29

A true monopolistic market is not normally one that we would find inagriculture, since all agricultural production is characterized bynumerous suppliers. We have witnessed, however, that a sort of monopolistic market can occur with only one buyer, namely the

state, who determines the price. This has been the case in the formercommunist regimes, but also in the heydays of the CAP, when theEuropean Union would guarantee a certain price and would buy allproduce that the market could not absorb itself. These types of stateintervention are now in the process of being abandoned also as aresult of the liberalisation paradigm. However, more recently we seegovernments act as monopolistic buyers when we discuss themultifunctionality of agriculture and the production of public goods.

It seems strange, with this typology being common knowledge andwith the different types of markets having such different impacts onthe behaviour of suppliers and buyers, that within the liberalisationdebate these differences are not taken into account. There seems tobe some kind of general assumption that if markets were liberalisedthey would function as markets of perfect competition. By this falseassumption there is no attention whatsoever within the WTO

negotiations for the oligopolistic tendencies that today are occurringin the globalised agricultural commodity markets. But even if therecould be markets where perfect competition exists, problems can beexpected for agricultural production, since farmers do not and cannotrespond to market fluctuations as economic theory tells them theyshould.2QWKHQRWLRQRIFRVWRISURGXFWLRQDQGWKHP\WKRIFRPSDUDWLYHDGYDQWDJHVOne of the most important assumptions underlying the free marketthinking is the notion of comparative advantages. Products should beproduced in areas where the relative cost of production is lowest. Inthis way all products are produced in the most efficient way.Uninhibited trade between regions and countries will ensuremaximum profits for everybody by utilizing these comparative

advantages.



30

It was of course David Ricardo who developed this theory in theearly 19th century5. In his famous example of the trade of linen andwine between England and Portugal he demonstrated the principle of what became known as the Law of Comparative Costs.

Even before Ricardo published his theory Alexander Hamilton, thefirst minister of Finances of the USA, acknowledged the fact that thisprinciple implies that developed countries with a high level of labourproductivity and favourable geographical conditions will alwayshave an advantage over less developed countries. To support theeconomy in a country that had become independent from Englandonly a few years before, he introduced import tariffs in 1791 toprotect domestic industry from cheap English imports.

Also little known, or at least little mentioned in the free trade debate,is the fact that in Ricardo’s example the exchange between England

and Portugal was not based on free trade, but on a bilateral

agreement to ensure that the more expensive British linen had better

access to the Portuguese market than the French linen. Adam Smith

in his famous book The Wealth of Nations commented that the

British consumers as a result of this agreement were obliged to drink

wine that was of an inferior quality and more expensive than the

French one. It was not economics but politics that ruled.

In the example given at the beginning of this chapter, differences in

soil conditions were the only factor explaining the comparative

advantage. In reality, a myriad of variables determine whether or not

certain products can be best produced in certain parts of the world,

ranging from climate and geological conditions, to the level of

education, tax regimes, labour conditions, sanitary standards (or the

lack of them), political stability, interest rates, and so forth and so on.

Comparative advantages can thus also be altered and created, for

example by introducing a more favourable tax regime by the national

government, by investing in irrigation systems and education or by

externalising production costs at the expense of the environment,

labour conditions or future generations.

5David Ricardo - On the principles of political economy and taxation (1817)



31

Comparative advantages can also change through time throughchanges in demand: products can go out of fashion, diet preferenceschange, increases or decreases in standard of living lead to changesin ways people spend their money.

It seems, however, that the theory of comparative advantages wouldstill, to a large extent, apply to the agricultural sector, in whichclimate, soils and other geographical conditions play a greater role inproduction. It is still impossible to grow bananas or coffee in Europe,for example. As we all know agriculture, from its early beginningand increasingly so over the last century aided by research andtechnology, has always sought to influence these conditions, which

now makes it possible to grow tomatoes in greenhouses in Hollandon artificial soils that are cheaper to produce than Italian tomatoes.

In short, the notion of comparative advantages has to be carefullyapplied and viewed, as Joseph Stiglitz points out, from a dynamicpoint of view. It also shows that by influencing productionconditions to obtain a comparative advantage, we very quickly entera grey zone of indirect producer support and market distortion.

&RXOGWKHUHEHVXFKWKLQJDVDOHYHOSOD\LQJILHOG"

A lot of people would be a lot less opposed to liberalisation, theysay, if we would have a level playing field at a global level. If minimum production standards and criteria would be the same forevery producer of a certain product, then competition would be fair.Products from other countries would be granted market access if theycomply with the environmental regulations, labour standards andproduct quality criteria that importing countries apply to theirdomestic products.The question is: what criteria, who decides on them and what is fairto ask of producers?From the European point of view these criteria are based on ourstandards, dealing with items such as sustainable production, foodquality and food safety, sanitary criteria and labour conditions.



32

We are of the opinion that criteria here are of the highest standardsand in principal these standards should be made applicable toimported products as well. Since the Union is the world largestimporter of agricultural products, this has quite an impact on

international trade. In fact, this has also been one of the main issuesin the enlargement debate. On a global level there’s the FAO’s

Codex Alimentarius responsible for establishing international

sanitary standards. The members discussing and deciding on these

standards mostly come from developed countries and have little

consideration for the inability of southern countries to comply with

these standards.

The WTO’s Dispute Settlement Body does not take internationalsocial or environmental law into consideration. Only very recently

has the WTO begun to look at standards already operating like

EurepGap, a system for food products that was developed by the

retail industry and which is rapidly becoming the international

standard. So, there is a general tendency to make the playing field

more level. Even if these standards are established by the developed

countries, who would be against this, if it would ensure better

working conditions for farm labourers and farmers around the world,would entail measures to protect the environment and improve the

quality of products?

In general this would be true, but we have to remember that most

standards, especially regarding the environment, are not based on

some universal idea of sustainability, but rather on the problems we

encountered at home. Rather than imposing our standards on other

countries, we should strive for international minimum standards.

Secondly, in order to be able to comply to these standards, as the

new Member States are fully aware of, a vast infrastructure is needed

in technical aid, scientific research and control bodies, which

developing countries do not have and lack the funds to invest in

them. If we really want a level playing field, we should at least

provide these countries with the money, the knowledge and the tools

to implement them and give them the same amount of time to adjust

to different and higher standards, just as we are giving our farmers

substantial time to adjust.



33

Thirdly, an appeal to a level playing field may not be used bydeveloped nations as a new mechanism for protection of domesticproduction.Also, the bodies that are engaged in the development of international

standards and criteria should be restructured so as to allowdeveloping countries a real voice in discussing and establishingcriteria.Lastly, we in the developed world are under the assumption that wehave the highest standards. This could prove to be a mistakenconception if we were to internalize all cost of production.

7KHPLVWRIPDUNHWGLVWRUWLRQ Liberalisation is the process aimed at reducing market distortions inthe form of domestic support, export support and limiting marketaccess. When there is so much debate inside and outside the WTOabout market distortion, than clearly we all know exactly what ismeant by this, what kind of measures cause the distortion and towhat extent?

So, let’s look into this a bit closer, starting with domestic support.Normally domestic support in the agricultural sector is seen in terms

of payments in some form or other to producers, individually or

collectively, to compensate for the difference in cost of production

and market prices so producers can earn an income and sufficient

food supply can be guaranteed.

But there are a whole series of indirect and sometimes hidden

mechanisms to support domestic production, for example through

schooling programmes, extension services, subsidised research,

infrastructure for transport and ICT, etc. The OECD tries to quantify

these types of support in a so called General Services Support

Estimate. It is remarkable that while direct producer support,

calculated in Producer Support Estimate (PSE) has gone down from

37 to 29% (minus 21 per cent) over the last 15 years in OECD

countries, the GSSE has increased from 13 to 18% (+38%). So,

governments in the developed part of the world find other ways of

supporting the agricultural sector and making them more

competitive.



34

Yet, there is another, major mechanism of domestic support that isalways ‘forgotten’ or overlooked and that is taxation. Even within

the European Union there is no level playing field for agricultural

(and other) products with for example VAT rates varying from 3% in

Luxemburg to 25% in Denmark. Other taxes concerning the cost of labour also differ widely, which has huge impacts on the

competitiveness of labour intensive sectors such as horticulture.

If we are still a far cry from a unified tax system in the European

Union, one can imagine the sheer impossibility of creating one at a

global level.

In general the incidence and the impact of subsidies also remain

seriously under-researched. Many governments maintain extensivesubsidy programmes at the national and sub-national levels, and

invoke a multiplicity of objectives to justify the programmes.

Because subsidies can be trade distorting, WTO Member

governments must notify the organization of any such support. Yet

few governments fully meet their notification obligations under the

WTO, contributing to a serious lack of information and transparency

on the use and effect of subsidies. The absence of systematic

information is aggravated by the lack of common definitions of subsidy practices. A recent WTO report begins with a review of

attempts to define subsidies. It goes on to consider what economic

theory tells us about the effects of subsidies, providing a guide for

assessing the desirability of different kinds of subsidy programmes.

The authors examine the reasons governments give for using

subsidies, and assess the incidence of subsidies in various industries

and sectors. Finally, the report undertakes an analysis of the WTO

rules on subsidies. The report states some salient findings.

Governments, for example, extend subsidies to build infrastructure,

help struggling industries or foster new ones, promote research and

develop new knowledge, protect the environment, redistribute

income and help poor consumers. Economic theory tells us that some

but not all of these objectives are most effectively addressed by

subsidies or in other words, by public investments. Theory also tells

us that subsidies can distort trade by giving an artificial competitive

advantage to exporters or import-competing industries, and this can

be a source of tension among trading partners.



35

The report concludes furthermore that concern among tradingpartners about subsidies rises in direct proportion to the extent towhich subsidy practices have direct trade effects within a narrowsegment of economic activity. If the effects of subsidies are

perceived as severe enough in the marketplace, they may trigger areaction nullifying any advantage from the subsidy.The Report estimates that in 2004 21 developed countries spentalmost $250 billion on subsidies, while all countries spent over $300billion. The arithmetic average ratio of subsidies to GDP is lower indeveloping than developed countries, but large variations of the ratiocan be found in both country groups. For a sample, of 31 developingcountries the average ratio of subsidies to GDP was 0.6 per cent,

while the comparable figure for a sample of 22 developed countrieswas 1.4 per cent. Agricultural subsidies in OECD countries, bothdomestic and export subsidies, show a downward trend. Theavailable evidence suggests industrial subsidies are most pervasive inmining, coal, steel, forestry, fishing, shipbuilding and automotiveindustries. Comparable data on the incidence of subsidies in servicessectors do not exist. Incomplete evidence suggests support measuresare concentrated in the transport, tourism, banking,

telecommunications and audiovisual sectors. Information is not solidenough to conclude that there is any systematic downward trend insubsidies to industry and services. In some cases, however, evidenceexists of a tendency to redirect subsidies towards “horizontal”

objectives. This will generally make subsidies less distorting.

In conclusion: when we talk about market distortion, we should be

very precise on what exactly we mean and what definition we apply.

The GATT/WTO rules on subsidies have evolved considerably over

the years, becoming more precise and detailed. Competing views

exist however as to whether the rules are tight enough to limit trade

distorting subsidies, or accommodating enough to allow

governments to pursue their legitimate objectives, including

development.



36

2QQHHGVDQGZDQWV

One of the other underlying paradigms in the quest for liberalisationis that it will bring production more in agreement with the demands

and expectations of society. In other words, that the market is inprincipal a better mechanism to bring supply in line with demand andto react on changes in demand than government intervention can.Also in our previous book, $JULFXOWXUHDWD WXUQLQJSRLQW , we havestressed the fact that agriculture should become more aligned withthe demands and expectations of society. But this constitutes at leasttwo problems: people manifest themselves in different roles, as taxpaying citizens and as consumers. And as is well known, demands of

citizens are not equal to demands of consumers. This discrepancy isone of the dilemmas of liberalisation we will discuss more at lengthin the next chapter. Here we want to focus first on the question whatexactly these demands and expectations are.

In marketing theory usually a distinction is made between ‘needs’

and ‘wants’. Around this notion Maslow developed his pyramid of

needs and wants6. At the basis of the pyramid he puts a number of

basic needs which are: air, water, food, shelter, safety andprocreation. These basic needs have to be fulfilled before people can

strive for other needs and wants, both material and immaterial.

The first point to be made here would be that sustainability is

creating or maintaining the necessary conditions so that the human

species can not only fulfil the basic needs of this generation, but also

those of the next generation. So, one could say that sustainability in

this sense also equals survival of the species.

The second point is that in the affluent Western world we have come

to give ‘wants’ a higher priority than ‘needs’. Even worse, we have

transformed basic needs into wants: water has become a fashion

product to be sold in fancy bottles and so has food as well. Eating

haricots verts imported in winter time from Ethiopia for example, not

because there are no other vegetables on sale, but because we want to

6

Maslow’s Hierarchy of Needs is a theory in psychology that AbrahamMaslow proposed in his 1943 paper $7KHRU\RI+XPDQ0RWLYDWLRQ



37

impress our friends at Christmas dinner. And vice versa: we havecome to regard wants as needs. We spend on average a larger part of our income on our cars than we spend on our food. Our basic needsseem all to be fulfilled and are taken more or less for granted. Only

when truck drivers go on strike for a week and stocks run low in thesupermarkets7, because we live in a globalised, just-in-time drivenlogistical supply system, do we become aware of the importance of water and food and only then do we seem prepared to change ourhabits and our perspective on the value of these things, if only for theduration of the strike.

Looking back 10,000 years ago, when agriculture was first

‘discovered’ in Mesopotamia, the ‘needs’ of society were theprimary driving force behind land use and agriculture: securing a

constant availability of clean water and the production of basic food

stuffs. In these modern times, with the increase in living standards,

consumption patterns and life styles are becoming as equally

globalised as production systems and now the ‘wants’ of society

worldwide are becoming the primary driving forces of land use,

development of technology and, so it seems, of policy as well.

What is the function of the market in this story? When you follow

the line of reasoning described above there is at least one basic and

fundamental flaw with the concept of market. The market as it is

seen today is essentially an expression of the wants of consumers and

not of the needs of society. The market seems very badly equipped to

express and fulfil the basic needs of society and mankind (including

social justice) as a whole. The market tends to fulfil only the needs

and wants of those who have enough buying power. The more

affluent a society becomes, the more the market will prioritize the

fulfilment of wants of these category of consumers above needs of

other, less fortunate categories of people; with existing differences

from one society to another, the market tends to prefer to fulfil the

wants of the affluent, before attending to the needs of the poor.

7As happened some years ago in England and more recently in Italy



38

The current Doha round of WTO negotiation is called thedevelopment round. Around the world we are having differentopinions and political positions to what exactly is development andhow this should be achieved and promoted. From our perspective,

development should be defined in terms of the ability of mankind tofulfil its basic needs as an absolute minimum for this and futuregenerations. In other words: development and sustainability are bydefinition closely interlinked. It could therefore be maintained thatthe next round of WTO negotiations could in fact just as well becalled the sustainability round of negotiations. And as in ourdefinition sustainability equals survival we could also call it thesurvival round of negotiations.

Looking at markets, consumers demand, development andsustainability from this perspective, the future international politicaland societal agenda in general and that of liberalisation in particularwould then have to be to put the fulfilment of needs above thefulfilment of wants; to change the needs that have become wantsback into needs again and vice versa and to create the necessaryconditions for the next generations to be able to survive.

This is why we need, on all levels from local to global, governmentsand governance: to express and regulate the needs of society, to helpcreate the necessary conditions to fulfil basic needs and to make surethat our today’s wants do not endanger the fulfilment of basic needs

of future generations.

)UHHWUDGHDQGJRYHUQDQFH

Very few would argue these days that liberalisation will make

governments and governance obsolete. Only some die-hard free trade

advocates, such as Milton Friedman, still believe that Adam Smith’s

invisible hand of free markets is capable of allocating goods and

services more effectively and efficiently than the state, even under

less than perfect market conditions.



39

As a result of this thinking, which dominated the eighties of theprevious century, we have witnessed the privatization of wastemanagement, hospitals and jails, sectors, which until recently,belonged to the exclusive domain of state intervention.

But in general we feel that the publicly constituted authoritiesrepresent an indispensable institution for economic co-operation andcontrol. Their primary role is to define and ensure observation of alegal framework within which the market may function as efficientlyas possible. Another role is to intervene to remedy market failure totake into account the ethical, social and ecological dimensions whichsociety holds dear. They must also ensure the establishment and

proper functioning of redistributive mechanisms, at both theindividual and territorial levels, to preserve essential balances and toguarantee cohesion. And finally they can act to promote theparticipation in the market of those who wish to engage in it, and toensure that access, under democratically established rules andconditions, is open to all.

All of this is well recognized at the national level. But one of the

effects of globalisation is to reduce the room for manoeuvre of nationstates. Many small and medium-sized states have almost been sweptaway by the scale of financial fluctuations and economic change thatfollowed a period of liberalisation of financial and commoditymarkets. Even among the planet’s major powers, authorities struggle

to adapt to the worldwide mobility of capital, companies,

developments in technology and to the speed of change. Public

policy, long confined to the national level and unequal to the task,

seems to be breaking down.

Breaking down in terms of strategies and instruments perhaps, but

certainly not in terms of legitimacy. Some people would have us

believe that public policy intervention only obstructs the smooth

operation of the market. But numerous experiences demonstrate that

this has not been the case. In Korea, in Singapore or in Taiwan - the

countries of Southeast Asia known as the ‘tiger’ economies

interventionist nation states have arisen to stimulate and support a

hitherto unprecedented process of industrial expansion. By

organizing market forces, redistributing the fruits of growth and



40

protecting certain of their cultural values, they have demonstrated tointernational institutions and other nation states that it is possible togovern the market. Isn’t the European Union itself prime example of

how also on a supranational level, agreements can be reached and

rules of the game can be established and managed to develop aunified market without disrespecting historical, cultural and social

differences?

So, the question is not whether or not we should have state

intervention, but what type, at what level and to what extent. This,

again, raises the question in how far the WTO and other international

bodies are structured in a way to guarantee good, transparent and

balanced governance to counterbalance the loss of power of nationstates vis à vis globalisation and liberalisation. At this moment the

WTO is the only international legal body that could consider itself in

the position to claim legitimacy to develop governance of

international trade. Unfortunately, the WTO system does not

incorporate or encourage world’s best practice; principles of good

public governance, such as openness, transparency and

accountability. The WTO will have to embody these sound principles

if it is to be successful, otherwise the organisation will be capturedby a myriad of interest groups and the system will become

unworkable. The WTO system must be based on a coherent set of

consistent, democratic principles so trade policies can be evaluated

against these principles, allowing good policy to evolve.

$JULFXOWXUHDVDQH[FHSWLRQZK\VKRXOGIDUPHUVEHSURWHFWHGDJDLQVWWKHIUHHPDUNHW"

Countries restrict trade and support agriculture for many reasons.

Self-sufficiency and food security are some common reasons. Many

more reasons can be found, like saving jobs and consumer

protection. But trade restrictions and producer support always

involve taxing consumers and transferring this to producers.

Protection and support in these terms make producers better off at

the expense of consumers. So why do consumers go along with this?

Basically because the large costs and transfers involved are spread



41

thinly over a large group of consumers so it does not pay them toorganise a lobby for change. Producers, however, are concentrated,receive large benefits and so it pays to organise and politically arguefor protection.

Agriculture is one of the economic sectors to receive large amountsof the support and protection through tax payers, in large parts of thedeveloped world at least. What is the basic reasoning andlegitimization behind this, while at the same time there are also richeconomies that hardly support their agriculture and both the countryand the sector seem to fare well with this policy?

Australia and New Zealand are well known examples of countrieswhere producer support is among the lowest of all the OECDmembers. Their liberal philosophy has made Australian and NewZealand agriculture among the most competitive in the world.Advocates of this policy, like the Centre for InternationalEconomics, have sought arguments to falsify the intention of restricting trade and supporting producers. The next table showssome of their arguments.

The key message of the Centre for International Economics is that“there are deep-seated views and arguments that have superficial

appeal amongst the public for maintaining protectionist policies for

agriculture among regions and countries such as the European Union,

Japan and the United States. None of these other arguments justify

protection. Food security, way of life and ‘preserving countryside’

objectives, if they have legitimacy, can be achieved by less wasteful

policies than are used today. First best policy is free trade combined

with policies that directly address ‘multifunctional’ concerns.”



42

0\WKVDQGUHDOLWLHVRIDJULFXOWXUDOSURWHFWLRQ

6XSSRUWLVQHHGHGWR

5HVSRQVH

Provide forself-sufficiency

Biggest subsidiser of all – the EU – is more than100 % self-sufficient. The EU is, e.g., the world’s

second largest exporter of sugar.

Keep people in

rural areas

At one point Europe lost one farmer for every

minute over 20 years.

The average age of farmers in subsidised

countries is not different to that in countries with

low protection of farms.

Preserve thecountryside Fragile land has been returned to native vegetationwhen subsidies removed. Better to subsidise

hedgerows and maintenance of ’small green

fields’ rather than milk production. First best

policy is a direct subsidy to preserve countryside

combined with free trade.

Preserve jobs Assistance for one job is a tax on another – for

every job saved there is a job lost.

Provide

adequate farm

income

Hasn’t worked. Many farmers in the most

protected markets still struggle. About 70% of EU

subsidies go to the 30% of biggest farmers.

Preserve the

environment

But it has been found that 80% of subsidies are

perverse – they harm both the economy and the

environment.

Ensure food

safety

Hygiene standards are higher in New Zealand,

which receives no farm support, than in protected

markets.

Some of the worst food safety scares haveoccurred in the most protected markets.

So, can agriculture be treated as an economic sector like any other, is

growing wheat in essence the same thing as, say, making cars, like

the neo-liberals want us to believe?

Of course it isn’t. First of all, because food, although taken for

granted in the affluent Western world, is something we simply



43

cannot survive without. People can do without cars if push comes toshove, or at least we could postpone the sale of a new car for quitesome time, but we just have to eat, preferably every day. On a globallevel we therefore cannot run the risk of running low on supplies. In

fact, for food security reasons, some overproduction is inherent andnatural to food production.

Also, different economic laws seem to apply to agriculture. Any firstyear economic student can explain to you that the prices of goods canbe either elastic or inelastic. All economists will agree that especiallyfood products are of an inelastic nature. This means that loweringprices will not encourage people to eat more and raising prices will

not lead to a decline in demand. Individual raw materials and foodstuffs are, of course, also subject to so called substitute elasticity.This reflects how demand of a certain product reacts when the priceof a substitute products changes. People can, for instance, decide,when the price of beef goes up, to switch to poultry as an alternativesource of protein. On a global scale, and this is how, in a liberalisedworld, we have to look at agriculture, and in short term the totalquantity of proteins and calories consumed will however be little

affected by price movements. Unless, of course, total global demandincreases as a result of changes in standards of living and throughgrowth of world population.The Law of Engel, a German statistician living in the 19th century,states that if a person’s income increases the relative proportion of

the income that is spent on necessary goods, like food, decreases. In

other words, the income elasticity is different for food than it is for

luxury items. This explains why on the whole and on long term in the

Western world agricultural products have become 70% cheaper in

real terms over the last 50 years and why the share of income we

spend on food has dropped from 40-50% to on average 10-15%.

The price inelasticity of agricultural commodities is one part of the

explanation why, under liberalised conditions, prices for agricultural

commodities tend to become very volatile and why, in contrast to

industrial production, there often is no direct relationship between

the cost of production and consumer prices for agricultural

commodities.



44

The other reason for volatility in prices is through fluctuations insupply. The main part of agricultural production involves workingwith living matter and is dependent on climatic and soil conditions.

This entails specific risks, largely unknown to other sectors.Especially for farmers producing vegetable products, it takes at leasta growing season and sometimes years for them to know what theamount of produce will be. Good or bad weather, diseases, war,water shortages or water surpluses all can have an effect on theharvest.Since agriculture is, despite technological advances, still largelydependent on factors and conditions that can only partly be

controlled, like soils, climate, pests and diseases, harvests of agricultural products can vary according to these conditions, leadingto fluctuations in supply and therefore to higher or lower prices.Even the anticipation of a good or bad harvest can pro-actively leadto lower or higher prices. Normally these fluctuations would beoffset and eventually cushioned by changes in demand. Since peoplehave, however, little room to change the overall demand for food,they will not respond to changes in food prices the way they would

respond to changes in prices for luxury items such as cars or TV’s.

What also makes agriculture stand out as a different sector is the fact

that a farmer is simply not like any other entrepreneur, as much as

we want him to be one in a liberalised and globalised world. Returns

on investments are traditionally low in agriculture. Most farmers,

acting as ‘homo economicus’, that is constantly looking for the best

return on investments in labour, land and capital, would have to

immediately sell their farms and put their money in another business

or in a savings account. They would be far better off living off the

rent, then struggling 70 hours a week for what in most countries is on

average not even the legal minimum wage. But farmers are a

different breed, reacting differently to changing market (and policy)

conditions. Their aim in the short term is to make a living and in the

long term to keep the farm. This ‘deviant’ logic also allows them to

sell their produce under the real cost of production (labour cost

included) for a certain period of time. As long as they have sufficient

cash money to pay for direct cost, they will tighten their belts, work



45

some more hours, try to save expenses and increase production untilthe market improves.

Finally, more than any other sector, agriculture is inherently

multifunctional. A lot of the landscapes flora and fauna, that we associety value are products of, and closely interlinked withagricultural production. To conserve these landscapes and this bio-diversity we would either have to bring these landscapes and biodiversity into public hands and manage them in an agricultural waywithout bringing the produce to the market, or if we want the farmersto keep on farming and at the same time have them ‘producing’ these

landscapes and bio diversity, direct public intervention in agricultural

production itself is inevitable. Otherwise farmers will just follow thelogic of the market and produce those products that serve their

economic interest only.



46

/LEHUDOLVDWLRQIURP*$77WR:72

$VKRUWKLVWRU\RIOLEHUDOLVDWLRQ

In 1947, two years after World War II ended, in a new era of hope,reconstruction, decolonisation and a strong desire for cooperation toprevent such a war from ever happening again, the GATT memberstates9 agreed for the first time on a decrease of tariffs against eachother: “recognizing that their relations in the field of trade and

economic endeavour should be conducted with a view to raising

standards of living, ensuring full employment and a large andsteadily growing volume of real income and effective demand,

developing the full use of the resources of the world and expanding

the production and exchange of goods, being desirous of contributing

to these objectives by entering into reciprocal and mutually

advantageous arrangements directed to the substantial reduction of

tariffs and other barriers to trade and to the elimination of

discriminatory treatment in international commerce”.

The initial objective was to create a third institution to handle the

trade side of international economic cooperation, joining the two

“Bretton Woods” institutions, the World Bank and the International

Monetary Fund. Over 50 countries participated in negotiations to

create an International Trade Organization (ITO) as a specialized

agency of the United Nations. The draft ITO Charter was ambitious.

It extended beyond world trade disciplines, to include rules on

employment, commodity agreements, restrictive business practices,

international investment, and services. The aim was to create the ITOat a UN Conference on Trade and Employment in Havana, Cuba in

8For a concise overview of the history of GATT and WTO see also:

http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm 9

These were: Commonwealth of Australia, Belgium, Brazil, Burma, Canada,Shri Lanka, Chile, China (!), Cuba, Czechoslovak Republic, France, India,Lebanon, Luxemburg, The Netherlands, New Zealand, Norway, Pakistan,

Southern Rhodesia, Syria, South Africa, United Kingdom, United states ofAmerica



47

1947. A charter was agreed upon in March 1948, but the ITO nevercame to be, because ratification was eventually blocked in 1950 byUS Congress. This left the GATT as the only multilateral (andunofficial) instrument governing international trade from 1948

onwards until the WTO was established in 1995.

This first round of trade negotiations resulted in a package of traderules and 45,000 tariff concessions affecting $10 billion worth of trade, about one fifth of the world’s total at that time. The group had

expanded to 23 countries by the time the deal was signed on 30

October 1947. The tariff concessions came into effect by 30 June

1948 through a “Protocol of Provisional Application”. And so the

new General Agreement on Tariffs and Trade was born, with 23founding members (officially “contracting parties”). Most of the

GATT member states agreed with the softening of tariffs against

developing countries.

A series of trade rounds followed, leading eventually to the Uruguay

round that started in 1986 after four years of extensive pre-

negotiations. By that time gradual progress was made on reducing

tariffs, but the process had become slower and more difficult. It wasfelt that a new attempt was necessary to get liberalisation back on

track. At the start of the Uruguay round 123 countries participated.

Despite good intentions and lengthy preparations, negotiations were

thrown back and forth between complete failure and potential

success. It took eight years before finally a new agreement could be

signed at Marrakech.

In hindsight it can be concluded that the Uruguay round reflectedmore the interests of the developed world than those of the

developing world and producers’ interests were better met than those

of consumers.

This was about to change, or at least this was one of the driving

forces behind the creation of the World Trade Organisation: to come

to a formal organisation, where negotiations could be held in a more

democratic fashion and in which the focus would be on a more

balanced approach, better respecting the special position of

developing countries.



48

A formal organisation was also needed to create better means andmechanisms to penalize member countries that didn’t correctly apply

the agreed rules. For this the Dispute Appellate Body was formed

within the WTO. The WTO’s creation on 1 January 1995 marked the

biggest reform of international trade since after the Second WorldWar. It also brought into reality — in an updated form — the failed

attempt in 1948 to create an International Trade Organization,

however not as a special agency of the UN. The original GATT and

its 1994 update are still the legal backbone of the WTO.

From its start WTO focussed on coming to a final agreement on the

principal components of liberalising markets through a reduction of

tariffs, maximizing market access and removal of trade distortingdomestic support. At the same time it expanded its scope, including

more countries and more issues concerning services and notably

property rights in the form of the TRIPS agreement.

Gradually, as the WTO progressed, public resistance against further

liberalisation was also building up. Most attention was on activist

groups, the so-called anti-globalists, who were almost successful in

disrupting the WTO conference in Seattle in 2001. But there was alsoa growing under stream of NGO’s and intellectuals that warned of

the detrimental and counter-productive effects of further

liberalisation based on a narrow neo-liberal vision on economy and

progress. It was felt that WTO-negotiations were not in the interest

of the weaker actors of the game, like developing countries, low

income labourers and farmers. More recently, there is also more

concern for the effects of globalisation and liberalisation on the

environment, also spurring NGO’s in this field to take a strongerstand against the WTO. Meanwhile, within the WTO itself things

weren’t going too smoothly either. As we all know, WTO

negotiations came to a complete stop in July 2006 with agriculture as

one of the major breaking points.

Former European Commissioner for Agriculture and architect of the

first CAP, the late Sicco Mansholt, once said that he had always tried

to keep agriculture out of the GATT. To him, agriculture was a

sector that needed to be treated differently from any other sector and



49

that it should not be made subject to free trade negotiations.Countries and multilateral unions like the European Union shouldnever give up the means to have their own policies concerning foodsecurity and market regulation.

This vision, shared by others, kept agriculture outside the GATTnegotiations until as late as 1995, when at the Uruguay Round theAgreement on Agriculture (URAA, 1995) was agreed upon. Thewind had changed and was now blowing from the neo-liberal side,putting pressure on countries to treat agriculture as an economicsector that had to be subjected to the same rules as other sectors. Onthe other hand, resistance had also been building up against theprotective agricultural policies of the EU and the USA that

dominated world trade, and the devastating effects of these policiesto the economies of developing countries as well as to nature andenvironment.The AoA defined three categories of support: PDUNHWDFFHVVH[SRUWUHIXQGV and GRPHVWLF VXSSRUW . In the first two categories theagreement targeted at the restriction of open use of means that inhibittrade, in the third category at a decrease of trade distortion caused bydomestic support. The biggest result of the GATT agreement was

that the tariff system became the base for agricultural trade amongWTO members.

The November 2001 declaration of the Fourth MinisterialConference in Doha, Qatar, provided the WTO’s mandate for a new

round of negotiations. The negotiations included those on agriculture

and services, which began in early 2000. After a turbulent period and

two failed Ministerial Conferences (Seattle, 2001 and Cancun, 2003),

on 1 August 2004, the 147 members of the WTO finally reached a

provisional agreement.

The agreement rested on four main points:

• a reduction in agricultural aid that encourages distortions in

trade; for example, a substantial reduction in national aids and

grants;

• the suppression of export practices that bring about distortions in

trade. The EU's demand for equal treatment for all practices of

this type was satisfied;



50

• opening up of agriculture markets. This implies a generalreduction in customs duties, with exceptions for farmingproducts considered sensitive for each Member State;

• special, differentiated treatment for developing countries. TheEU also called for tariff- and quota-free access for goods fromleast developed countries. This point was accepted, but to beapplied only by countries that are in a position to do so.

Following the agreement, talks leading to the 2005 Hong Kongconference on tariff decrease urged sharply, in favour of theabandonment of tariffs showing big differences but also to softentariff peaks and tariff escalation (the so called “Swiss Formula”). A

smaller tariff decrease would be introduced for special products. Ingeneral the target on the long run was to fully abandon export

refunds, including the more rigorous regulation of all support

schemes which influence export competitiveness (export credits,

credit guarantees, food aid, State Trading Enterprises).

For the sake of the fulfilment of the WTO commitments a large

number of member states were forced to restrict their domestic

support. The growing use of price and income support wasincreasing the distortion of world market prices. In this sense the

2003 CAP reform was intended to bring about a move towards a less

market distorting and more free market oriented production.

On August 1, 2004, the 147 WTO member states came to a

compromise which enabled the Doha Round to continue: The “rich”

countries would cease export refunds for their agricultural products

while the “poorer” would remove their industrial tariffs. WTO has

been completing a draft framework in favour of successfully ending

the agricultural negotiations. This draft contained proposals

concerning domestic support, through reduction of support by 20%

or more in countries with higher levels of support and acceptance of

Green Box measures that were regarded to be non trade distorting,

such as direct payments, in contrast to Amber Box measures that

were considered to be trade distorting.



51

Concerning export subsidies the draft proposal included a gradualbut in the end total elimination of all export subsidies by 2013,including export credits and State Trading Enterprises. A specialprovision and clearer definition of food aid was also agreed upon

(‘safe box’).

As far as market access was concerned the aim was to increase

efforts to reduce higher tariffs to a greater extent, following the

principles of the Swiss Formula. If the Doha round would have been

completed, this would have meant a cut back in tariffs for EU

agricultural products from on average 23% to 12%, with a drop in

higher tariffs for those processed products in the escalation system.

With regards to market access, the draft text also states: “developed-country Members shall, and developing-country Members declaring

themselves in a position to do so, should provide duty-free and

quota-free market access on a lasting basis, for at least 97 per cent of

products originating from the 32 least-developed country members

(LDC’s) of WTO”. This was an important achievement for

developing countries who organised themselves into a group of 110

countries to push this through, giving more credibility to the Doha

Round as a ‘Development Round’.

At the Sixth Ministerial Conference in Hong Kong a timetable was

set to come to a full and comprehensive agreement by April 30, 2006

and comprehensive draft commitment based on these modalities to

be submitted by the members July 31, 2006. This was a very tight

deadline. It was generally assumed that the implementation period of

the new WTO agreement would start in 2008.

Specifically for cotton developed countries agreed to eliminate all

forms of export subsidies on cotton by the end of 2006 and to

provide duty-free, quota-free access for cotton exports from the least-

developed countries (LDC’s) from the beginning of the

implementation period (2008).

There was a third demand from the West-African cotton producing

countries, namely that trade-distorting domestic subsidies for cotton

in developed countries (notably the USA) should be reduced by more

than that for other products, with these cuts being made more



52

rapidly. However, this is included in the Declaration in brackets as aproposal and not a decision at that stage.

The 30 April deadline for “modalities” was missed. A first draft of

the modalities paper was circulated on 22 June 2006. “A formalmeeting on 1 July 2006 on the Trade Negotiations Committee, which

comprises the entire WTO membership, brought to an end about

three days of discussions among a representative group of ministers.

More progress was made in trying to narrow the gaps on formulas for

reducing tariffs and subsidies, various flexibilities, and other

disciplines that would be in the ‘modalities’10”.At the last stretch, however, the final gaps, especially on the

agricultural package, could not be bridged and further negotiationswere postponed until further notice. Since then, WTO director,

Pascal Lamy, has been trying to build up a new momentum to get

negotiations back on track, but at the time of writing this book, no

real breakthrough has been achieved.

Just before the negotiations were suspended, Director-General Pascal

Lamy, on July 10, 2006, welcomed the Negotiating Group on Rules’

formal approval of a new WTO transparency mechanism for allRegional Trade Agreements (RTA). It is estimated that more than

half of world trade is now conducted under RTAs. Some 197 such

agreements in force have been notified to the GATT/WTO.

Differences between members on how to interpret the criteria for

assessing the consistency of RTAs with WTO rules have created a

lengthening backlog of uncompleted reports in the Committee. In

fact, consensus on WTO consistency has been reached in only one

case so far: the customs union between the Czech Republic and the

Slovak Republic after the break up of “Czechoslovakia”. Fear is

rising that with the WTO negotiations hanging in mid air, this will

lead to a new wave in RTA’s further clouding multilateral

negotiations.

10WTO News – DDA June/July 2006 Modalities: Summary from July 1.



53

7KHFKDQJLQJJHRSROLWLFDOODQGVFDSH One can only conclude from this that it is no longer possible, as wasthe case with the Uruguay Round, for a handful of developedcountries to set the outlines of a deal among themselves and thenimpose that on the rest of the membership.Although the European Union and the US are still among the keyplayers in the liberalisation game, new actors have come to the stagesince the WTO was founded in 199 5. This was mainly the result of the emergence of a handful of new, fast growing large scaleeconomies like India, China, Brazil and South Africa. Thesecountries not only have shown high and constant growth rates over

the last decade, but have also restructured their agriculture, industryand even service sector into very competitive and export orientatedeconomies. Some of them were already WTO members and somehave recently joined. Due to their export orientated economies theyplay a very active role in the negotiations and dispute settlements.

At the same time, since the current Doha round is focussed (or is atleast supposed to be focussed) on development, developing countries

have taken the opportunity to make themselves better heard throughforming new alliances.

The changing geo-political landscape is also reflected in the variouspositions countries take in WTO negotiations. The first groupconsists of countries that have a strong agro-export potential andwould like to see maximum opening of world markets. Theyembrace the G20, a group of emerging countries such as Brazil,

China, South-Africa and the Cairns group. A second group is madeof countries that would like to preserve their policy space in tradeand protect their agriculture. They include the G33, the LDC’s and

the African countries, while countries that would like to accede to

new markets while maintaining protective and support measures for

their agriculture, namely the USA and the EU, form the third

category.



54

New agro-super power Brazil is one of the WTO’s most active

participants and its actions are geared towards building consensus

and preserving the integrity of the mandate agreed to in Doha, while

at the same time emphasizing and promoting the shared interests of

developing countries. As meanwhile the third largest exporter of agricultural products worldwide, Brazil has played a leading role in

the agriculture negotiations, as the sector remains subject to wide

trade distortions and protectionism that hinder Brazilian trade.

The country supports the strengthening of Special and Differential

Treatment (S&DT) for developing countries and considers it to be an

essential part of an agreement on agriculture in particular to cover

food security and vital concerns of rural populations. Brazil is also anactive user of the WTO dispute settlement mechanism. This

mechanism has become an essential instrument for Brazil to address

worldwide market distortions, which affect its exports and is one

important reason for Brazil to further strengthen the WTO. The

country has recently (2005) reached a victory in a dispute over

American cotton subsidies, which were higher than the agreement

allowed and thus harmed Brazilian exporters. In 2003, Brazil

together with Australia and Thailand, filed a complaint at the WTOagainst the European Union’s subsidised sugar production. Brazil is

the largest sugar producer in the world accounting for 16.6 percent of

world production in 2002. The subsidised production of sugar by the

EU depresses the world market price, which has severe consequences

for Brazil. The WTO Panel ruled in favour of the complainants,

concluding that the EU contravened its WTO commitments by

subsidising its excessive sugar re-exports. The EU was subsequently

forced in 2005 to reform its sugar regime, something that had not

been included in the 2003 ‘Fischler’ reform.

Brazil is also the leading exporter of soybeans, coffee, orange juice,

sugar, beef and chicken and might soon continue using the dispute

settlement mechanism, this time against US’ subsidies for soybeans.



55

A very important forum for Brazil is the G-20, a group which wasestablished in August 2003 in the final phase of the preparations of the 5th WTO Cancun Ministerial Conference11.Led by Brazil, China, India and South Africa, the G-20 has rapidly

become a powerful voice and a distinctive and new element in thescenario of trade negotiations. Its objective was, and still is, to reachan outcome in the agricultural negotiations which would reflect thelevel of ambition of the Doha mandate and the interests of developing countries. The G-20 addresses export subsidies, trade-distorting domestic support and market access for developingcountries’ products. It takes its legitimacy out of the importance in

the agricultural production and trade, as it represents almost 60

percent of the world population, 70 percent of world’s ruralpopulation and 26 percent of world’s agricultural exports.

Furthermore, the G-20 has the capacity to translate a vast range of

developing countries’ interests into concrete and consistent

proposals. It has developed skills in coordinating its members and

interacting with other groupings in the WTO12. However, due to the

great differences of the leading states Brazil, China, India and South

Africa, common positions are not easily reached. India, for example,

is more defensive than Brazil concerning “Agriculture” and “MarketAccess” because it wants to protect is own internal market and is not

yet ready to make major concessions in these regards. While South

Africa has similar offensive positions like Brazil, China differs from

those two. China is not as in favour of liberalisation to the same

extent as Brazil and South Africa; as a recently acceded member

country of the WTO it wants to avoid further obligations and is thus

less involved in the G-20 discussions.

11 Today the G-20 is integrated by 19 members: 5 from Africa (Egypt,Nigeria, South Africa, Tanzania and Zimbabwe), 6 from Asia (China, India,Indonesia, Pakistan, Philippines and Thailand) and 8 from Latin America(Argentina, Bolivia, Brazil, Chile, Cuba, Mexico, Paraguay and Venezuela).Colombia, Costa Rica Ecuador, El Salvador, Guatemala and Peru had left the group because of incompatible negotiations with the USA in the frame of

the FTAA-negotiations. 12See http://www.g-20.mre.gov.br



56

Brazil has a large, modern and competitive agricultural sector, but atthe same time there are widespread areas of poverty and millions of small farmers living at a subsistence level. Therefore, Brazil hasproposed a free-trade agreement among the G-20 developing

countries and will continue to press for concessions by rich countriesat global trade negotiations13.

Given the importance of the US as an agricultural producer andoverall number one exporter of agricultural products, any substantialchanges to domestic support arrangements in the next Farm Bill, (USFarm Security and Rural Investment Act) to be implemented for the2008 crop year, will impact on world agricultural markets.

In the USDA proposal14

there is a heavy focus on bio fuels as aninstrument to achieve the goal of a 20% reduction in gasoline use by2018. Already under the current Farm Bill, demand, especially formaize has surged as a result of extensive and rapid investments inbio-ethanol production facilities, doubling the price from $ 2 to $ 4 abushel in two years time.Furthermore, the new proposal includes a conversion of the currentprice-based countercyclical program to a revenue-based program for

disaster relief and an income support safety net. The idea behind thisreform is that in this way farmers’ support will classify WTO’sGreen Box measures or at least Blue Box. The plan also sets thesubsidy payment limit for individuals at a total of $360,000.To receive commodity payments, producers must also meet a limiton Adjusted Gross Income (AGI), which includes wages and otherincome minus farm expenses and depreciation. This plan reduces theAGI limit of $2.5 million to a new limit of $200,000. If a producerhas an annual adjusted gross income of $200,000 or more, thatindividual would no longer be eligible for commodity payments.

13The Group – despite its prophesized early end of some industrialized

countries – still exists: it held two Ministerial Meetings and meets frequentlyat the level of Heads of Delegation in Geneva. Within the G-20 a group offive countries, Argentina, Brazil, China, India and South Africa, meets attechnical level to discuss the WTO-agriculture negotiations.14

April 2007, see also

http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1UH?contentidonly=true&contentid=2007/01/0019.xml



57

In theory this would mean that more support would go to relativelysmaller farms.USDA is also aiming for a somewhat stronger focus on agri-environmental measures, aid for new farmers, conservation

programmes, rural development and water management; moremoney for food based health programmes, notably fruit andvegetable promotion aimed at children.

The Bush administration’s farm bill approach would spend $10billion less on the commodity title over the life of the bill. But itwould deliver $14 billion more in funding other areas, including $5billion for rural development, $2 billion for renewable fuels and $7

billion for conservation programmes.It seems at first glance that the general tendency of the new FarmBill is to make a move towards Europe and other major players in theWTO arena. Partly this is due to the fact that the US has recently lostsome Dispute Settlements (cotton) and runs the risk of losing more(rice, soy, maize), that could heavily affect domestic agriculture. It ispartly a result of the internal political changes that have recentlytaken place and the upcoming presidential election15.

Until now the proposed reforms have been rather well received bymost of the domestic actors as an attempt to reduce total directspending on agricultural support, to come to a more balancedapproach in payments and to give greater emphasis on the ‘greening’

of agricultural policy. Some have, however, pointed out that it does

not go to the core of the agricultural question, namely the position of

farmers in the US (and worldwide) in the food supply chains.

15The Farm Bill still has to be approved by the US House of Representatives

and Senate and finally by President Bush himself. So far the House in July2007 and Senate in December 2007 have proposed some importantchanges to the Government’s proposal, which are more in agreement withthe current Farm Bill.See also:

http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1UH?navid=FARM_BILL_FORUMS



58

Where does this leave Europe? On the current WTO talks the EU isrequesting acknowledgement of and support for the multifunctionalcharacter of agricultural production in Europe. The objective of theEU is that there will be a balance between trade considerations

(market access, export competition and domestic support) andprograms belonging to QRQWUDGH FRQFHUQV (environmentalprotection, food safety, rural development). In return for this the EUagrees with the drastic decrease of domestic support and exportrefunds16.The EU’s objectives and interests in these negotiations are first of allthat the non-trade aspects of agriculture should be addressed:agriculture has a multi-functional role to the extent that, apart from

food production, it is involved in preserving the countryside,environmental protection, food safety and quality, animal welfareetc.; a balance is thus needed between trade-related and non-tradeissues of agriculture. Furthermore, the need for special anddifferentiated treatment for developing countries remains, taking intoaccount in particular the great importance of food and agriculture inthese countries. Finally, the EU seeks to further improve access tomarket opportunities: the EU, being a major food exporter, wants to

obtain improvements in opportunities for its exporters and to reduceunjustified customs barriers. In this way, the EU seeks to share in theexpected expansion of world trade in agricultural products.

)DUPHUV¶SHUVSHFWLYHRQOLEHUDOLVDWLRQIn what way then, do farmers view the liberalisation process and

their position in the global agricultural production system?Without going into too much detail here, the position of two of thelargest and most active farmers’ organisation should be explained,

that of the International Federation of Agricultural Producers (IFAP)

and its counterpart the Via Campesina, with the Coordination

Paysanne Européenne (CPE) as its European member.

16 AKI, 2004



59

In a letter dated 12 July 2004 sent to the Ambassador Tim Groser,Chair of the WTO Committee on Agriculture Special Sessions, theIFAP stressed that it would be judging the adequacy of the WTOagricultural modalities paper on whether it met six critical objectives

for farmers. These objectives are:1. An improvement in world agricultural trade that brings real

benefits to all farmers.2. Significant progress and balanced commitments over all three

pillars (being export subsidies, market access and domesticsupport).

3. Sufficient flexibility in the modalities framework allowingcountries to use the most appropriate instruments according to

their specific national circumstances to meet agreed, measurableand equitable outcomes

4. Space for farmers to receive domestic support, so long as thatsupport has no, or at most minimal distorting effects onproduction and trade.

5. Improvements in market access for all farmers, in particularthose in developing countries and Least-Developed Countries.

6. Due prominence and recognition of the broad role that

agriculture plays in many countries, ensuring not only foodproduction but also many other functions, including thesustainability of rural areas and environmental protection.

“IFAP believes that farmers need a rules-based system for

international trade. However, for IFAP trade liberalisation should not

be regarded as an end in itself. Rather it should serve to ensure that

economic growth and greater integration of the world economy

fulfils it potential to enhance the livelihoods of farm families

throughout the world, contributes to the eradication of poverty, and

promotes an economically, socially and environmentally sustainable

path for agricultural development.

For IFAP, it is critical to empower producers in the market place so

they are able to receive a fair return for their work.”17

17 IFAP Trade and Development Letter, November-December 2005 – SpecialIssue on Hong Kong Ministerial, Farmer leaders’ involvement within the

WTO negotiations on agriculture



60

In a Press release from August 3, 2004, the more radical CPE statedthat “at the WTO, Fischler and Lamy betrayed the European farmers

and those from the southern countries to the only advantage of the

transnationals”. CPE maintains that the text agreed at the WTO onJuly 31 2004 by the 147 member countries constitutes a hard stroke

for all the farmers in Europe as well as in the “Southern” countries. It

allows the Northern countries to keep their decoupled domestic

support system untouched, which results in farmers’ revenues being

made mainly of public payments and not of their production sale.

This system is unfair to the many European farmers who do not

benefit from any domestic support (fruits and vegetables producers

for example) and to the farmers in the Southern countries whoseproducts have to compete with unduly cheap food imports.

Moreover, this agreement is a new path on the way to the

dismantling of tariff protection, the only fair commercial protection

and an effective way to support the agriculture prices and thus the

farmers’ revenues.

The CPE and peasant organizations from all over the world asked for

the CAP, as well as the American Farm Bill, to be changed, so thatfood sovereignty can apply on a world level: “The EU and WTO

persist in the way of deregulation, although it has already proved to

be disastrous for farmers worldwide. Clearly, they are more

interested in maintaining a system that unduly increases the

multinational agri-business corporation’s profits than in reducing

unemployment in Europe and hunger in the southern countries.”

At the first meeting with Mrs Mariann Fischer-Boel on 21 December

2004, CPE stated that “the EU lets the European agricultural

production be moved in countries with low wages and lower

environmental and social standards, and uses agriculture as change in

the WTO negotiations so that European companies or services enter

freely into the markets of third countries. The European

Commission, which negotiates for the EU in Geneva, would have to,

in the interest of the citizens and the European farmers recognize the

glaring agricultural [scheming] of 1994 and to redirect its position.”



61

According to the CPE a generalized lowering of tariffs would ruinthe production capacity of a large majority of Southern and Northernfarmers facing imports at low prices. It would hinder the possibilityof moving the CAP in the right direction: “to produce in the cheapest

way in the world, with a few euros for a days work, that is not‘competition’, but slavery”.Although the tones of the two farmers’ organisation differ, in essencethey are telling the same story: liberalisation of agriculturalcommodity markets as seen and acted upon within the WTOframework should aim to protect the interests of farmers worldwide;full liberalisation would be disastrous for farmers both in the South

and in the North. It will also damage the multifunctional roleagriculture is supposed to play.

$UHZHEDUNLQJXSWKHZURQJWUHH"

When it comes to liberalisation all the attention seems to be oncommodity and service trade and the WTO. In reality the

liberalisation of capital markets, and the role that the World Bank and the IMF have played in this, has probably had a larger impactthan GATT and WTO. In fact, the globalisation of financial markets,by far exceeds that of commodity markets. While world exports haveincreased twenty fold since 1950, capital investments have beenincreasing four times quicker than foreign trade over the sameperiod. Over the last 15 years alone foreign capital investmentsincreased from $ 60 billion to $ 394 billion.

Heavily indebted countries especially have sought the aid of WorldBank and/or IMF to obtain the necessary financial means foreconomic development.Both institutes were a result of the famous Bretton Woodsconference of 1944 where the allied forces made agreements onfinancing the rebuilding of Europe after the war. While the WorldBank 18 was intended to help finance the rebuilding, the International

18In full: The International Bank for Reconstruction and Development



62

Monetary Fund’s main task was to ensure global economic and

financial stability. For this it had and still has access to considerable

funds, which are obtained from tax payers from all over the world.

Over the years both World Bank and especially IMF have broadened

their field of activity, engaging themselves in assisting developingcountries that decolonized in the fifties, sixties and seventies. In

doing so, they have also started to deviate markedly from their

original course and have turned into champions of the free market

ideology. This new attitude has led to policies, the so called

Structural Adjustment Programmes (SAP), in which funds are

provided under the condition that countries apply strict measures

such as cutting budget deficits, raising taxes and interest rates that

rather than encourage the economy, lead to its contraction.Some, like Joseph Stiglitz, feel that the strict, almost religious way in

which World Bank and IMF imposed their recipes on developing

countries has brought mostly damage if not put these countries into

financial and economic crises. The SAPs in most cases led to

reductions of import tariffs that are below the ones negotiated so far

within the WTO arena.

More recently a shift in the way foreign capital investments areallocated is noticeable. At first they were mainly spent in agricultural

products and raw material resources. Nowadays investments are

mostly allocated to industrial activities in the developing countries

and we can witness a new global division of labour in industry, but

also in services taking shape. Countries remaining outside the

process of globalisation, run the risk of lagging behind, respectively

they are being forced to the periphery of the world economy.

The Commission for Africa states that Africa has lost two-thirds of

its global market share as a result of the application of World Bank

and IMF conditions. UNCTAD has also admitted that the Least

Developed Countries (LDCs) have not benefited from the last decade

of liberalisation; they simply do not possess the necessary

institutions and means to win a global trade war.

Another consequence of the World Bank and IMF programmes is

that farmers in developing countries are pressed to start producing

cash crops for export at the expense of their own food requirements,



63

often resorting to non-sustainable cropping practices. Vietnam, forexample, entered the coffee market a decade ago, and is now thefourth largest coffee producer, contributing to an overproduction anda long crisis in coffee prices; in Sri Lanka commercial and industrial

shrimp cultivation was developed under the auspices of the WorldBank at the expense of mangrove forests, not only destroying animportant eco system, but making the country also more vulnerablefor the effects of tsunami’s as witnessed in December 2004.

It is felt, and not by the least of men, that these institutions have lost

their pivotal role in financial development and are instead no more

than the cheer leaders of economic optimism and neo-liberalism,

causing damage and havoc wherever they operate, with the WTO‘der dritte im Bunde’, the Third Party in this neo liberal choir.

&RQFHQWUDWLQJVXSSO\FKDLQV

If there is anything other than the Internet characterizing

globalisation; if there is one process influencing global developments

over the last few decades then it must be the internationalisation of big companies in general and the concentration processes in the food

supply chains in particular.

The hundred largest multinational corporations now control about 20

per cent of global foreign assets; 51 of the one hundred biggest world

economies are now corporations. According to the World Bank the

top hundred multinational companies control 71% of world trade

compared to 25% in 1989.

Some of the main players on the global market place are

representatives of various chains of the globalised food supply

system. Three quarters of the world cereal market is in the hands of

two American companies, Cargill and ADM. Bunge (Belgium) and

Dreyfuss dominate the oilseed and soy market, Cargill, Dreyfuss and

Tate&Lylle share the sugar market while only four companies

control 40% of the coffee market.



64

Western multinational companies like these control 80% of international agriculture trade. It is therefore no surprise thatcompanies such as these profit most from liberalisation of agricultural trade.

While the concentration process in the trading and processingbusiness has been going on for some decades, more recently theretail industry has also begun to internationalise. Until recently retailcompanies like Wal Mart (USA), Tesco’s (UK), Carrefour (France),

Aldi (Germany) and Ahold (Holland) were only active on the

domestic market. Some 10 years ago however these companies have

been increasingly focussing on acquiring companies or setting up

businesses abroad.It is expected that in the future only ten retail companies will

dominate the international food supply market, turning the global

food market into even more of an oligopoly. These powerful chains

in the food supply chains also make their influence felt in the WTO

arena, especially when it comes to market access and food standard

issues.

This double process of internationalisation and concentration in thefood supply chain can lead to a race to the bottom. Governments,

eager to attract investments by multinational corporations, either to

be able to lower the price of food for their urban population and/or to

create both international market access and employment, can be

tempted to change their laws and regulations concerning labour

conditions and environment to accommodate the wishes and

demands of these corporations. The other, and more positive side of

this development is that in some cases multinational corporations,

who are mostly based in the Northern hemisphere, ‘export’ their own

standards to a certain degree to countries in the South. Studies

suggest that, on the whole, wages and environmental standards are

higher in these corporations compared to local companies. But in

practice global enterprises tend to withdraw from activities, when

they are affected by short term market fluctuations. Wherever

possible they try to pass these risks on to sub-entrepreneurs which

for their part are using compensatory strategies, which usually

negatively affect the conditions of labour, sometimes with



65

devastating consequences. The production factor “labour” has been

in transition for decades now towards a "migrating world factory".

This process was previously confined to the Mediterranean area and

Latin and Central America. Since the fall of the Berlin Wall in 1990

this labour migration has also expanded into Eastern Europe as awhole and the far distant areas of the world, and especially to China.

Economic conditions everywhere consist of uncertain and

unprotected jobs, seasonal or part time labour, loaned labour,

extreme overtime, withholding of wages at least for the subsistence

level, health damage or health endangerment, prohibition of labour

syndicates, disregard of collective treaties and discrimination on

origin, sex, age, religion and culture because of political affiliation or

religious opinions.

The control of commodity chains in agribusiness by clusters of

powerful downstream industries has profound impacts on agriculture,

especially in weakening the link between farm prices and food

prices. High levels of concentration in downstream processing and

retailing industries mean lower levels of value-added going to local

communities; 78-85% of value added in the agri-food chain in the

US and UK, for example, is not done by farms.All farmers who are connected to buyer-driven commodity chains

are facing globalisation’s new rules. These rules explain why farmers

are losing, even when trade policy is supposed to work in their

favour. We are witnessing a divergence between and within

agriculturally dependent rural economies, North and South. The

simultaneous integration and exclusion of communities with respect

to agri-food systems mirrors the emergence of the dual economy

across the farming world. A global division of labour separates a

core from the majority of a flexible work force, small holders, family

farmers and farm workers.

The growth and concentration in agribusiness is therefore not

restricted to any one country. As Levins (2002) put it: “This has

significant implications for farmers throughout our hemisphere.

Farmers on the one hand must deal with multinational firms to sell

their products and buy many of their inputs. But farmers continue to

identify themselves as being from one country or another, and to see



66

their principal competition as coming from other countries. Therivalry between farmers in the United States and those in SouthAmerica over soybean exports is an example of a process that willeventually destroy both. Farmers, in my view, should see themselves

primarily as farmers when they are conducting business matters, andfind other ways in which to honour their countries of origin”. He is

therefore proposing a global farmer’s network (other than IFAP or

Via Campesina) in order to strengthen the bargaining power of the

agricultural producers throughout the world: “when we consider the

alternative, of an agriculture serving nothing more than being

efficient and being cheap, we must all agree that the value of such an

agricultural system to rural areas will be minimal.”

2QWKHLPSRUWDQFHRIJOREDOWUDGHWith all the focus on WTO negotiations it seems that world trade is

the singular most important way to achieve economic growth and

prosperity. We live in a globalising world and barriers to trade would

inhibit countries and people to supply or buy the right goods and

services to or from wherever they choose at the best price possible. Itis true that since the GATT agreement world trade is booming. The

reality, however, is that only a small proportion of all production is

traded on international markets. As far as agricultural commodities

are concerned for most products, like cereals, meat and dairy, only

10 to 20% of the total production is internationally traded. In other

words: the bulk of production is traded on the domestic market

(where the European Union is considered as one unified market).

It has to be stated right away that these are average figures. For someproducts the international market is of vital importance as well as for

some countries, being their main source of obtaining foreign

currency. When talking about WTO and liberalisation, these

differences between various products have to be taken into

consideration.

Nonetheless, world trade in agricultural commodities is not the rule,

but rather the exception. Studies also show that further liberalisation

will only lead to a limited increase in world trade for agricultural

products.



67

As for Europe, the EU-27 in 2005 exported some ¼ELOOLRQZRUWK

of agricultural products, which is some 10% of the total productionvalue, and imports show more or less the same figure. Over the last20 years there has been a steady increase of both imports and exports

for the EU-15, with on average a small trade deficit of a few billioneuros.

So if world trade in most cases is of relative limited importance, thansurely the growth that happened in world trade is a direct result of the GATT and WTO agreements to liberalise markets? That will bevery hard to determine. As we have shown, liberalisation of financialmarkets and the policies imposed by World Bank and IMF have

caused a shift in investments to more export orientated countriesand/or have forced mostly developing countries to reduce tariffs andtake on a more international market orientated approach especiallyconcerning shifting from subsistence production to growing cashcrops for export.

We must also not forget that it is not liberalisation but the protectionpolicy of the CAP and the US themselves that have largely

contributed to a growth in trade and exports. The European Unionand the US are still among the world largest exporters. These exportshave for decades been heavily supported through export subsidies.Therefore, at least a substantial part in the growth of global trade inagriculture, which has occurred since World War II, can be attributedto other liberalisation policies or even anti-liberalisation policies.Only more recently globalisation, GATT, WTO and the subsequentreforms of the CAP, have made their mark on the position of European food products on the international market with shares inworld trade steadily dropping for products that received exportsupport, such as meat, milk, cereals and sugar. There is anaccelerating tendency of production capacity, particularly for bulk products, shifting towards a number of emerging developingcountries, notably China and South-East Asia, Brazil and probablySouth Africa as well.



68

Despite GATT and WTO, the developed countries, most of themunited in the OECD, maintain very high levels of producer support.It is true that as a result of previous WTO agreements and domesticreforms Producer Support Estimate (PSE) in OECD countries fell

from 37% of farm receipts in 1988 to 29% in 2005. Still, even todaytotal OECD spending on agriculture is more than $ 300 billion peryear. This is almost six times the total aid from OECD countries toall developing countries, which amounts to some $ 50-60 billion peryear.PSE’s vary enormously between OECD countries, ranging from 5%

of gross farm receipts in Australia to 20% in the US, 35% in the EU

and up to 70% in Switzerland

Although still well below levels in the USA and Europe, upcomingeconomies like China, India, Brazil and South-Africa have increased

government support for agriculture over the last years to make them

more competitive on the world market. In most cases the support is

aimed at compensating price differences between domestic cost of

production and world market prices. These facts also mark, to a

certain extent, the change at the geo-political level that has

characterized globalisation and liberalisation recently.

:KHUHGRZHVWDQG"

After the failure of the negotiations on 2006, WTO-director, Pascal

Lamy, with the zeal of a true missionary, has been anxiously trying

to mend the broken pieces to eventually come to a successful

conclusion of the Doha round, beating the same drum over and over

again: “It is our EHOLHI that a strong WTO reflects the widespreaddesire to operate in a fairer and more open multilateral trading

system which provides a stable anchor to our economies as they

become more intertwined. It is the EHOLHI that international trade can

play a major role in growth and poverty alleviation and all our

peoples can benefit from the increased opportunities and welfare

gains that the multilateral trading system generates” (italics by

Groupe de Bruges).



69

A retreat, entitled "Realizing the Doha Development Agenda as if theFuture Mattered," was organized to analyze the failure of thenegotiations and was convened by three non-profit foundations withglobal missions: the William and Flora Hewlett Foundation, the

German Marshall Fund of the United States, and the SalzburgSeminar. Significant expertise and program support was provided bythe International Centre for Trade and Sustainable Development(ICTSD) and entailed key stakeholders from government, business,and civil society from developed, developing, and least developedcountries.

The findings of the retreat should give the WTO enough food for

thought to seriously rethink the way the negotiations are organized,the most fundamental point of critique brought forward by theparticipants being a lack of vision. Retreat participants urged leadersto create a new vision for trade agreements that moves beyondnarrow mercantilism to focus on the benefits for consumers as wellas producers. Leaders also need to explain to their constituents therole that trade and multilateral institutions can play in improvingsecurity and promoting peace. Participants also urged leaders to be

more forthright about the challenges that come with trade reforms.Leaders must acknowledge that there are losers from trade reforms,and must address the dislocations caused by trade agreements.Participants of the Retreat also shared a strong scepticism andmistrust among developing countries about the Uruguay RoundAgreement and concerns that the "Doha Round smells like theUruguay Round" because it could deliver cuts in the level of tariffsand subsidies allowed under WTO rules, but not actual reductions inapplied tariffs and current levels of subsidies. Participants agreed thatthe Doha Round must result in real improvements in market accessand real reductions in trade distorting subsidies.

Participants also regretted the WTO’s narrow vision of development.

Even though this is the Doha Development Agenda, retreat

participants were concerned that "development" has been equated

with Special and Differential Treatment, Preferences, and Aid for

Trade.



70

While all of these are important, developing countries are primarilyseeking the right to compete under a fair, rules-based trading system.Developing countries want developed countries to remove marketbarriers and distortions in agriculture and those industrial products

that have been left out of the trade negotiations for decades.Developing countries cannot expect a "Round for Free," but neithercan developed countries expect to continue to exempt agriculture andother highly-protected products from real WTO disciplines. The factthat this is a "development" round should be seen as an asset togetting a good agreement, not a liability”.

Despite desperate attempts by Pascal Lamy, the WTO negotiations

are still in a dead lock, despite some signals that a restart of negotiations is imminent

19. There are no signs, however, that the

WTO has incorporated lessons learned, such as instigated by the

retreat participants mentioned above.

Two questions arise: should we continue with the WTO as the right

platform for trade negotiations and should we keep on pushing the

same neo-liberal buttons? Or should the pause be welcomed as an

opportunity to rethink and restructure the way multilateral tradenegotiations are managed?

We will come to a final conclusion later on in this book, but it seems

that for the WTO as an institution, liberalisation has become a goal

in itself and therefore has lost its right to be the legitimate arena to

debate liberalisation in relation to development. There are some

serious doubts, and not by the least informed, that the WTO and the

way it is functioning now, can deliver what it promises. And even if

WTO would succeed in achieving its goals, the effects might not be

what it promises.

An a priori conclusion would be that we need a new approach and

maybe also a new institution or at least a thorough restructuring of

the WTO into a WTO Mark II. We should use the stalling of the

negotiations to fundamentally re-think liberalisation and WTO’s role

in it.

19December 2007



71

We have to go back to the core of its initial objectives and criticallyreview whether or not the way it is going now will lead to achievingthese goals. Also, these objectives, in short: trade liberalisation as amechanism for worldwide economic progress and reduction of

poverty, should be integrated fully with other objectives to come to atruly sustainable development approach, an approach in which profitis balanced against planet and people and in which, as far asagriculture is concerned, the position of farmers and consumers inthe whole food supply chain should be an integral part of the debate.Up until now, there is little evidence of such debates taking placewithin the WTO.

Are we too harsh in this view? We could agree that, yes, the WTO isnow talking with ILO on including labour conditions, is discussingsustainability issues with UNEP and NGO’s. But the question

remains, whether this is part of a truly new approach, based on a new

vision on sustainable development. Cynics will perceive these

attempts to involve these institutions to be mere tactical manoeuvres

to give new legitimacy to the WTO institution, just adding a bit of

new flavours to make the liberalisation cake more edible and

digestible without changing the basic recipe. Nonetheless, WTO hashad to learn the hard way that it cannot achieve its goal of further

trade liberalisation if it does not take other interests more into

account, not solely as a proverbial case of window dressing, but truly

accept them as full and legitimate partners in the process.

One other problem is that the whole negotiation process is about the

whole package, a package that will be the final stage of

liberalisation. We must acknowledge that for negotiation tactics

alone this approach has proven to be no longer valid. It would be

better to focus instead on the things we can all agree on and that have

unquestionable benefits for people, planet and profit.

Before reaching a more final verdict on liberalisation and the WTO

as its main champion, we would like to look at, in more detail, a

number of important dilemmas that are connected with the processes

of globalisation and liberalisation.



72

7KHGLOHPPDVRIJOREDOLVDWLRQ

,QWURGXFWLRQ

The world of today seems to be in crisis. Old news, of coursepersists, of local and regional conflicts, of diseases, famine andnatural disasters, some of which proved to be not of natural causesbut induced by human behaviour. The debate on global warmingoccupied the front pages of the media over the last year accompaniedby signs of a new and imminent financial crisis that could parachute

the global economy into a recession. There’s the new reality of emerging economies, new giants like India, China and Brazil that are

on their way to play an important part in a new economic and

political order, but at the same time have to cope with increasing

social and environmental problems. Nonetheless, the geo-political

and geo-economic arena is changing rapidly, enhanced by the

deflating dollar, indicating that the U.S. is loosing its foothold as the

world’s biggest economy. And last but not least, agriculture, or more

precisely, agricultural commodities have evoked a new interest

among politicians, economists and stock brokers alike: some of the

basic food stuffs have witnessed a sharp rise in market prices as the

combined result of climate conditions, expanding demand and policy

changes. These are all signs that more than ever we live in a

globalised world, where actions in one location can very easily turn

into a global catastrophe. At a time that WTO negotiations are still in

a deadlock, the world has to prepare itself for a time in which old

problems persist and new problems come to the fore. In the next

decades we will have to deal with some serious problems that willtest the planet’s resources and man’s resourcefulness to their very

limits.

In this chapter we will deal with four of the main challenges, poverty

and sustainable economic development, feeding a growing world

population sustainably, the new competition for food and fuel and

finally, agricultural commodity production and bio diversity, issues

which we feel together form the core of the problems of today and

tomorrow.



73

Diverse as they may seem, their common denominator is that all of them have to do with globalisation and liberalisation on the one handand with agriculture on the other. And all of them will be crucial forthe world we and the next generations will have to live in.

'LOHPPD

6XVWDLQDELOLW\DQGUHGXFWLRQRISRYHUW\ “International trade can play a major role in the promotion of

economic development and the alleviation of poverty. We recognize

the need for all our peoples to benefit from the increased

opportunities and welfare gains that the multilateral trading system

generates. The majority of WTO members are developing countries.

We seek to place their needs and interests at the heart of the Work

Programme adopted in this Declaration. Recalling the Preamble to

the Marrakech Agreement, we shall continue to make positive efforts

designed to ensure that developing countries, and especially the

least-developed among them, secure a share in the growth of world

trade commensurate with the needs of their economic

development”20.

Development is central to the Doha Round of WTO negotiations,

development in the sense of reduction of poverty through

liberalisation of trade. The underlying assumption obviously being

that through improved market access for poor countries, decreased

domestic and export support by rich countries, developing countries

will be able to become more competitive on world markets and

expand their exports which will contribute to their economicdevelopment and welfare. In other words: liberalisation is regarded

as an important tool to fight poverty and improve standards of living.

Poverty reduction is also one of the main UN Millennium goals. By

2015 the number of people stricken by poverty should be reduced by

half compared to the year 2000.

20

Article 2 of the Hong Kong Ministerial Declaration, adopted on 14November 2001



74

The UN also sees free trade as one of the instruments to reach thisgoal, though under certain conditions: “develop further an opentrading system that is rule-based, predictable and non-discriminatory.Include a commitment to good governance, development and poverty

reduction. Address the least developed countries’ special needs. Thisincludes tariff- and quota-free access for their exports”In this sense the objectives of the WTO and the UN seem tocoincide.

Let us make clear here that the ambition of this paragraph is not tohelp solve the poverty problem, but to evaluate whether theunderlying assumption is correct: does liberalisation of trade indeed

lead to reduction of poverty? Are the interests of the poor and of theleast developed countries at the heart of the WTO negotiations?And supposing that liberalisation does help to alleviate poverty, canthis be obtained in an ecologically sustainable way? At a time inwhich we have come to realize that not only economically andfinancially, but also ecologically do we live in a globalised world,this is truly the most imposing and difficult dilemma to tackle.

3RYHUW\LQWKH ¡

FHQWXU\ The official UN definition of poverty is when a person has less than$2 to spend per day. Currently 2.6 billion people, 40% of worldpopulation, live below $ 2 a day. Joseph Stiglitz points out that inEurope the subsidy per cow is on average $ 2.40 a day. Rathercynically he concludes that it is better to be a cow in Europe than apoor man in the Third World.In 2005 the average world income was $ 8,000 per capita, rangingfrom $ 650 as the average income per capita for the whole of Africato over $ 30,000 for the USA and Europe. But, since these areaverage figures, large disparities exist not only between nations, butalso within both the poor and the wealthy countries of the world.In the USA, 37 million people, more than 10% of the population, livein severe poverty. In the EU-27 average annual incomes vary from ¼9,000 in Bulgaria to ¼LQ/X[HPEXUJ



75

These figures, however, disguise large differences on sub-nationallevel: the London area has an average income that is three times ashigh as the EU average, in Europe’s poorest region, the North East of

Rumania; the average income is only 24% of the EU average. The

European Foundation for the Improvement of Living and WorkingConditions indicates that in Bulgaria 31 per cent of the workforce

earns less than ¼DGD\

Poverty is therefore more than merely looking at economic growth

rates or average GNP’s per capita per country or even per region.

Even in those countries showing steady and sometimes high

economic growth rates, such as China, India and Brazil, there is a

growing discrepancy between a relatively small class of sometimesextremely rich, while the majority of the population remains poor.

Finally, poverty is very much a rural problem. Of all people in the

world that have to live off a dollar a day, three quarters live in rural

areas and most of them are farmers. Even in the developed countries

more often than not farmers belong to the low income classes. These

simple facts immediately explain the extreme importance that

discussing poverty in relation to liberalisation has for agriculture.

So, we have to treat the problem from at least two perspectives: poor

versus rich countries and poor versus rich people. This distinction is

important since in the WTO arena the debate is only about the

position of poor countries, while the UN Millennium poverty

reduction objective is primarily addressing poor people.

Poverty, however, is more than the lack of financial funds in absolute

or in relative terms; poverty rather is the structural lack of being able

to fulfil one’s basic needs on a daily basis. Being poor is about not

having access to sufficient food in caloric and nutritional value, to

sufficient water of good sanitary condition, to decent housing, to

basic health care, to education and it is about being part of a safe

social community and a fair judicial system. Poverty, in strictly

monetary terms, would be far less of a problem if people were

secured free or cheap access to at least the basic necessities such as

water, health care and education.



76

In this sense poverty is not ‘just’ about people earning enoughmoney to buy the necessary goods, but it is also about the failure orinability of markets and public bodies to install and maintain theinfrastructure to provide for some of these basis needs.

/LEHUDOLVDWLRQDVDFXUHIRUSRYHUW\" Despite 50 years of liberalisation debate, there is surprisingly littleempirical evidence on the impacts of freer trade. Most economicstudies are of an analytical and theoretical nature, based on neo-liberal assumptions, which, as we have shown in the previous

chapter, have dubious validity when confronted with the real world.What also is often overlooked is the fact that, in order to be able toreap the potential benefits from trade liberalisation, countries have togo through a difficult, laborious and costly transition process, whichmakes them vulnerable. The Central and Eastern European countrieshave, on their way to entering the unified European market, ampleexperience in this respect: you have to go through hell to get toheaven.

After finally concluding the Uruguay Round there was an overalloptimism about the benefits of the trade agreements, also for thedeveloping countries. Although negotiations had been dominated bythe interests of the developed countries, some special arrangementshad been included to address the needs of the poorer countries. BothWorld Bank, OECD and the GATT secretariat estimated largeincome gains of over $ 200 billion a year, most of which were tobenefit developing countries. In reality, however, developedcountries gained most, together with a handful of large export-oriented developing countries. The rest gained little or indeed wereworse off than before the GATT agreement. Especially the LeastDeveloped Countries are estimated to have suffered $ 600 million innet losses per year.One World Bank report (!) showed that the poorest region in theworld, Sub-Saharan Africa, saw average incomes, already the lowestper capita in the world, decline by more than 2% as a result of the

GATT agreement.



77

It could be argued that the reason for this was a failure to implementthe agreement correctly. Key to the Uruguay agreement was theconversion of non-tariff barriers into tariffs, which was supposed to

provide a simpler framework for negotiations. However, countries,especially in the developed part of the world, took the opportunity toset high initial tariffs so that even after the implementation of theagreed tariff reductions, the new tariff rates were higher than theones that prevailed before the agreement.Part of the Uruguay Round was the Agreement on Agriculture; forthe first time trade in agricultural commodities was included into theliberalisation process. Agriculture is crucial to developing countries.

It represents on average 40 per cent of their GDP, 35 per cent of theirexports and 70 per cent of their employment. So, any agreement onagriculture would be of extreme importance to these countries.Unfortunately, also in this area little progress was made by thedeveloped countries to improve trade conditions for poorer countries.The OECD notes that in the years after the Uruguay Agreement onthe domestic support front farm subsidy levels only dropped 3 percent points, from 51 per cent to 48 per cent, of all farm production in

OECD countries.

Also, the system of tariff escalation was not addressed. Even in 2002the tariffs on imported fully processed foods in Canada, Japan andthe EU were still 42, 65 and 24 per cent respectively, while for theleast processed food products tariffs were 3, 35 and 15 per cent. Thiskeeps most developing countries in the position of supplier of rawmaterials, while the added value is achieved in the importingcountries, thus hindering the potential of developing countries todevelop their own processing industry.

From the poor results of the Uruguay Round it can therefore not beconcluded that trade liberalisation itself is not contributing to combatpoverty. Rather, it shows the power relations within the WTO, inwhich the developed countries were able to work out an agreementthat would suit their interests. Because the global political arena hassince then changed dramatically, a new round of negotiations was

inevitable, a round that started in Doha in 2001.



78

First the US, followed by the EU, typically anticipated the expectedoutcome of these new negotiations by pro-actively reinforcing theirbargaining position. The US adopted a new Farm Security and Rural

Investment Act or Farm Bill as it is popularly known in 2002, inwhich the amount of support almost doubled in respect to theprevious programme, from $ 103 to $ 190 billion. It, among others,provided for so called Counter Cyclical Measures to compensatefarmers and exporters for changes in world prices, allowing productsto be exported well under cost of production.The EU on its part, responded through the 2003 Fischler Reform,steering the price and market support subsidy system towards direct

payments decoupled from production, thus trying to shift supportmeasures from the so called Blue Box to the Green Box subsidieswhich are deemed to be less trade distorting, while leaving, at least inthe short term, the total level of support almost unchanged.

Truth be said, the EU also introduced the Everything But Arms(EBA) initiative, by which duty and quota free access was grantedfor all products coming from LDC’s except arms. The Commission

intended to ‘significantly enhance export opportunities and thereforepotential income and growth for LDC’s’. This initiative, however,

seems to be a case of window dressing to earn some credits in the

negotiation process. Most products concerned, more than 99 per cent,

were already part of other preference schemes, representing 0.2% of

the total export value. Rather, those countries that were part of these

existing preference schemes feared to loose this position in the

negotiation process. Several studies show that the impact of the EBA

initiative is only marginal.

The same goes for the assumed benefits of liberalisation in general.

Despite WTO’s optimistic projections of the benefits of further

liberalisation, especially for the developing countries, recent

projections and research by the World Bank, the UN and a variety of

independent think tanks and scientists consistently confirm that the

poorest countries would be the biggest losers if the current Doha

framework were agreed to. Or, to put it into more precise words: the

poor in the developing countries would loose.



79

Not only would they not gain as much as the developed counties, butthey would actually be worse off compared to today’s situation,making liberalisation a counter-productive tool in fighting poverty. Itseems that those in favour of liberalisation have consistently used the

argument that through removing barriers to trade economic growthcan be spurred, which automatically will alleviate poverty. It is likedangling a carrot in front of a battered mule to persuade it to take yetanother step in the direction the driver wants, without the mule everbeing able to taste the carrot.

The World Bank in its recent Global Economic Prospects predicts anannual economic growth rate of 3.1 per cent per capita in the next 25

years, a full per cent more than was achieved on average over the last25 years. Without debating at this point whether or not there is validground for such optimism, it says absolutely nothing whether thisgrowth will reduce poverty. History so far does not give us anyreason to be optimistic in that respect. The gap in incomes continuesto grow. Per capita GNP in the 20 per cent poorest countries versusthe 20 richest countries in 1962 was $ 212 versus $ 11,417; in 2002 itwas $ 267 versus $ 32,339. So, in 40 years time the poor have stayed

just as poor, while the rich got much richer.

:K\OLEHUDOLVDWLRQLVQRWWKHFXUHIRUSRYHUW\ According to WTO logic, if developed countries are prepared toreduce domestic support, increase market access by lowering tariffsand decrease or even abolish export support, developing countriesare expected to do the same. They are given a few extra years toimplement measures at a slower pace, but the basic principles remainthe same.

What is overlooked here, is that a large number of the less developedcountries have already been forced to reduce tariffs, open up marketsand develop a competitive, internationally orientated agriculture bythe strict World Bank and IMF rules, while Europe and the USAwere and still are heavily subsidizing their economic sectors,

agriculture among others.



80

It seems quite unjust to ask from developing countries to reducealready low levels of support and protection, when the developedworld, mainly Europe and the USA, are so reluctant and slow toreduce theirs.

Another reason why it is quite unfair to ask developing countries tofollow the same path as the developed world is the fact that tariffsare not only a means to protect domestic producers, but also avaluable source of income. The ability of a government to make thenecessary investments in education, public health and transport andinformation infrastructure is, a part from political considerations,based on its potential to obtain money from taxation. Raising

revenues by raising taxes is not an option for most developingcountries. Tariffs, however, allows them an important source of income that can be used to pay debts or be invested in the domesticeconomy and infrastructure. Is has been suggested in theliberalisation negotiations that these countries should reduce theirborder taxes in favour of indirect commodity taxation such as ValueAdded Taxes (VAT). Since, however, in most of these countries theinformal economic sector is often widespread, and therefore out of

reach of taxation, this seems, at least in the short term, not a validapproach. The end result of tariff reductions is a decrease in revenuesfor government investments.

On the micro-economic level increased volatility of prices resultingfrom further liberalisation21, will make most producers in developingcountries more inclined to reduce risks and to reduce investments.This could have a negative effect on progress in productivity andproduction growth. Above all, the basic assumption underlyingliberalisation is that increased market access will make producers indeveloping countries better off since they will have the opportunity

21 There are a number of economic studies that offer a theoretical backing ofthe hypothesis that prices will become more volatile as liberalisationprogresses, especially for agricultural commodities as a result of theirinherent price inelasticity. See for example: Boussard, J.-M., F. Gérard et M.-G. Piketty, 2005. /LEpUDOLVHUO¶DJULFXOWXUHPRQGLDOH"7KpRULHVPRGqOHVHW

UpDOLWpV



81

to become more competitive in international markets. But how cansmall scale, poor, mostly illiterate, unorganised and predominantlysubsistence farmers be expected to enter these markets if not byputting themselves at the mercy of merchants and companies that

buy their produce and are experts in international trade? If any of thesmall farmers’ production is sold abroad, it is for the most part

exported by firms in which the farmers have no stake, so they do not

necessarily benefit from the expanded markets.

Just as it is too simplistic to assume that liberalisation as such will

offer a cure for poverty, it would likewise be far too simplistic to

only blame liberalisation for not contributing to the alleviation of

poverty in the world. Unstable, corrupt and oppressive regimes,religious and ethnic conflicts are as much a part of the problem in

some areas of the world. Nonetheless, the FAO’s message in its ‘The

State of Agricultural Commodity Markets 2006’ is absolutely clear:

“further liberalisation of world trade will not benefit the poorest

countries. Application of a reduction of tariff rates will confront

domestic production, notably agricultural commodities, with

increased competition from abroad”. The FAO goes as far as to

recommend that a new WTO agreement should not be made if theMillennium goal is not achieved.

Trade policies, as promoted by the WTO, do most and for all seem to

be profitable for those countries and those actors on the international

markets already in the best position to profit, while it does not, or at

least not in the same way, benefit poor countries and less advantaged

actors. What liberalisation in essence does is that it creates winners

and losers, the winners being those that are in the position to make

use of liberalised markets to expand their markets and reduce

production cost, while the losers being the ones that do not have the

resources or circumstances to seize the opportunities. In most case

the so called Mathew 25 effect22

will occur in which those that

already had access to resources will profit from liberalisation,

because they can put their resources to better, more efficient and

22The book Matthew in the New Testament states in chapter 25: who that

has will be given, who that doesn’t have will be taken away from him what hehas left.



82

more profitable use, while those who were already lacking resourceswill remain unprotected from the fierce global economic winds.Increased market access will benefit companies to obtain a betterreturn on investment from Research and Development. Innovation

through R&D is one of the most important drivers for obtaining abetter market position. It leads on the one hand to a more efficientuse of inputs, more efficient processing and more efficient logisticalsystems, thereby reducing cost of production, and to a wider range of products to meet changing global demand. In other words: it putsstrong companies in an even better position to compete.

In developed countries often governmental subsidy programmes and

research facilities are put into place to assist domestic companies intheir efforts to innovate and find new market outlets. The EuropeanUnion, for example, has been supporting industry in this way fordecades through its Framework Programmes for Research andInnovation entailing over ¼ ELOOLRQ IRU WKH -2013 period.Developing countries, typically, have very limited means to give thiskind of support to their own economic sectors, leaving them a prioriin a worse competitive position.

In developed countries the losers of the globalisation game can becompensated, at least partially, through extensive social welfareprogrammes funded by government taxes; developing countries lack such a safety net, leaving the poor even worse off than beforeliberalisation.

True, developing countries have obtained a special position withinthe WTO Doha Round, at first glance reinforcing the approachalready imminent in the Uruguay GATT Agreement, via the socalled Special and Differential Treatment23, allowing countries toimpose quantative restrictions on a temporary basis (10 yearsmaximum) for an agricultural product that is the predominant staplein the traditional diet of a developing country member. But this SDTis little used or has proven to be ineffective: there is often pressurefrom donors and private importers not to impose this measure.

23

The WTO does not have a definition to distinguish between developingand developed countries



83

More often than not, even with SDT put into place, importedproducts are still cheaper than domestic supply.Nonetheless, the SDT is an implicit recognition of the fact that neo-liberal assumptions to not apply to developing countries. No wonder

that the SDT has been much criticised by laissez-faire enthusiasts. Tokeep a positive approach, what SDT at least does is to keep thedeveloping countries within the global economic arena, notexcluding them from taking part in the negotiations, by giving themat least some instruments to protect their agriculture, their industryand service sector and to give developed countries the possibility togrant special status to exporting developing countries.

More fundamentally, the main flaw of the WTO approach, and thatof the IMF and World Bank, is its one-solution-fits-all ideology, anideology based on neo-liberal assumptions which simply are notvalid in the real world. By imposing this ideology onto the rest of theworld, it is denying countries and people to choose their own path of economic development. This has already proven to be not onlywrong but also dangerous. Countries such as Nicaragua, Bolivia andVenezuela, that have felt the whip of the Structural Adjustment

Programmes, have meanwhile turned the other way. Economicdevelopment is not only about trying to make the cake bigger, butalso to divide in a better way, so everybody will get his share. Freetrade simply does not equal fair trade.

This does not imply that trade liberalisation could not serve as aninstrument to improve economic conditions. What should, however,be included into the equation is the large disparities in the socio-economic structures of the players in the field.In order to be able to reap the potential benefits of freer worldmarkets, the pacing and sequencing of the liberalisation process iscrucial, as Joseph Stiglitz has pointed out on numerous occasions.This means that we need a tailor made approach for each and everyone of the developing countries



84

Stiglitz also points out that what is lacking most in the WTOnegotiation process is a set of commonly agreed upon principles:“progress in the Development Round needs to be accompanied by a

debate about principles, how these principles apply to trade, and how

they should be implemented in the current round of negotiations”.

Stiglitz and Charlton (2005) have therefore proposed to introduce a

new principle into the negotiations, namely all countries should

provide free market access in all goods coming from all countries

with a GDP per capita and a total GDP smaller than themselves.

An approach that is simple, fair and relatively easy to monitor. This

approach would not require an artificial distinction between

developing and developed countries, promotes South-South tradingand would also introduce a certain amount of dynamism: countries

that prosper economically would show an increase in total GDP and

GDP per capita, which changes their preferential status; countries,

that for one reason or another fair less well economically would be

immediately supported by granting them a more beneficial

preferential status. Another criterion could be added, in which

income disparities within a given country are also taken into account.

Liberalisation should furthermore only be promoted if there is

concrete proof that poorer countries and the poorer classes within

countries profit from it.

Another principle would be that the negotiation process should

become more transparent and organised in a more democratic

fashion, giving developing countries a truly equal bargaining

position, not only theoretically, but also by providing them with the

means to develop the expertise needed to make better use of their

democratic rights.

Finally, it should be made easier for poorer countries to use the WTO

instruments of combating trade distortion. For LDC’s the use of

these instruments as well as the use of experts to guide them through

the complex processes should be free of charge. We have witnessed

over the last few years how Brazil has successfully used the Dispute

Settlement Body to combat unfair domestic and export support

systems of the USA and the EU.



85

Most countries, however, lack the funds and/or expertise to gothrough the complicated and expensive proceedings of the disputesystem.

In conclusion: the least one can say, is that the claimed contributionof liberalisation to combating poverty should be mistrusted or at leastbe treated with due scepticism. Government intervention, bothnationally and internationally, embedded in democratic institutions,remains necessary to guide and where necessary impede the processof liberalisation, making sure that the poorer countries and the poorerclasses of people have the opportunity to really profit from it. In fact,it seems that above all macroeconomic stability and a stable political

system based on fair democratic principles offer a better startingpoint for growth than openness to trade24. Does the European project,that started after World War II not provide a prime example of thistheory?

2QHSODQHWVKRUW

Economic development is basically and quite simplistically seen asgrowth of the economy, expressed in GDP and GDP per capita.Economic growth will increase standards of living and welfare; itincreases the incomes of governments through taxes, allowing themto invest this money into improving the conditions for economicenterprise and providing for public goods, such as education andsocial security.It is undeniable that economic development in conjunction with astable, democratic political system will alleviate poverty, with moreclasses of people having access to more and better resources. So, letus assume for a minute that liberalisation is orchestrated in such amanner that freer trade is an incentive for economic development25.

24 See for example Jeffrey Sachs and Andrew Warner, ‘Economic Reform and the

Process of Global Integration’,£ ¤ ¦ ¦ ¨ © ¤ ¦ # % ¦ ¦ ' © % ( %2 1 © 34 © 1 5 6

, pages 1-118(1995)

25 There is little empirical evidence however that liberalisation encourages nations tobecome more democratic and politically stable.



86

Let us also suppose that the predictions of the World Bank for globaleconomic growth rates are not opportunistic, but that they willindeed be even higher over the next quarter of a century than theywere in the last 25 years. Signs over recent years seem to point in

that direction; economic growth rates in the new emergingeconomies such as China and India have been close to ten per centeach year for over the last decade; in the developed world growthrates on the whole are reasonably steady at one to three per cent onaverage; the New Member States, after the sometimes devastatingfree-for-all period that followed the collapse of the communisticregimes, are now able to reap some of the benefits of being part of the European Union. Even some former ‘hopeless’ countries like

Angola and Mozambique, having left their violent past behind, arenow on the path to economic progress.

There is, however, a strong negative correlation between economic

growth in this sense and ecological sustainability. As people have

more money to spend, their ecological footprint26 increases as the

next figures show.

Although there are some methodological objections to be madeagainst the ecological footprint method, there can be no doubt about

general tendencies that manifest themselves by applying it.

26Ecological footprint analysis measures human demand on nature. It compares

human consumption of natural resources with planet Earth’s ecological capacity toregenerate them. It is an estimate of the amount of biologically productive land andsea area needed to regenerate (if possible) the resources a human populationconsumes and to absorb and render harmless the corresponding waste, givenprevailing technology and current understanding. Using this assessment, it is possible

to estimate how many planet Earths it would take to support humanity if everybodylived a given lifestyle (source: Wikipedia).



87



88

The first figure also makes clear that demand is already exceedingthe earth’s capacity to provide for this demand. In other words,

economic growth is currently already unsustainable, despite

technological improvements.

From the second figure it can be concluded, rather cynically, that the

poorest people are the most sustainable ecologically, since they use

the least resources per capita. The whole population of the Asian

Pacific region, including India and China, some 3.5 billion people,

have the same ecological footprint as the 780 million people of

North-America and the EU-25. The world’s global footprint is

currently some 15 billion hectares. If China and India were to reach

the same level of economic development as the EU-25, the globalfootprint would increase by 40%, and by 80% if they would achieve

the level of the United States.

In the next two paragraphs we will deal in more depth with the

intricate relationship between globalisation, liberalisation and

ecological sustainability when discussing the food crises and

carbon/fuel crises. For now, we can conclude that the expected

growth of the population, the pace and manner of expansion inespecially China and India, the economies of the largest countries in

the world, and the subsequent changes in dietary and overall

consumption patterns, will result in a shortfall of at least one planet

by 2050 in terms of resources needed to fulfil all needs and wishes of

the future world population.

As global demand for resources is exceeding the earth’s capacity to

provide for these resources, now and more so in the future, we have

to realize that we have entered a zero-sum game in which any

increase in standards of living anywhere is at the expense of

standards of living somewhere else, a situation that implies nothing

less than a geo political time bomb of an unprecedented scale.

So, this puts us in an extremely awkward position, since we only

have one earth. Can we, in the affluent Western world, deny

developing countries the welfare we have, knowing that this will put

an irresponsible pressure on the environment and on resources?



89

On the other hand, we are painfully aware that increasing standardsof living together with the expected growth of world population, willlead to an unsustainable exploitation of limited resources.

Will we be able to develop new technologies that will allow us to useresources more efficiently and in a renewable way? And in time?Will liberalisation be an instrument in assuring a better and moresustainable use of resources or will it lead to further destruction inthe race towards short term profits and competitive advantages? If not, can we then deny the right of other, less fortunate countries andpeople, to strive for similar levels of prosperity in the light of thescarcity of resources? Are we then, the 20 per cent of the rich that

consume 80 per cent of the resources, prepared to reduce ourstandards of living? Can we avoid conflicts over access to and use of scarcer resources in regions where violence is already imminent?Can we stop others to come to us, legally or illegally, peacefully orviolently, to claim their slice of the cake?

In our view this is the main dilemma: not only if we are willing andable to alleviate poverty, but whether or not at the same time we are

able to make economic development more sustainable and beprepared, if necessary, to share the cake with others and, if necessary, be satisfied with a smaller slice ourselves?

$ZD\RXW" A lot of thinking power has been spent and of lot of CO2 emittingconferences have been held over the last two decades to come to aglobal approach to reconcile economic growth with sustainabledevelopment.In 1987 the World Commission on Environment and Developmentpublished Our Common Future, a report that stressed the importanceof sustainable economic development.In 1992 the United Nations Conference on Environment andDevelopment (UNCED) or Earth Summit was held resulting in theAgenda 21, the Rio Declaration on Environment and Development,

the Statement of Forest Principles, the United Nations Framework



90

Convention on Climate Change and the United Nations Conventionon Biological Diversity.The UN Summit in Johannesburg on Sustainable Development inSeptember 2002 established an action plan to ensure sustainable

global development.

Before that, even the WTO seemed to become aware of the tensionbetween liberalisation and sustainability: “We strongly reaffirm our

commitment to the objective of sustainable development, as stated in

the Preamble to the Marrakech Agreement. We are convinced that

the aims of upholding and safeguarding an open and non-

discriminatory multilateral trading system, and acting for the

protection of the environment and the promotion of sustainabledevelopment can and must be mutually supportive. We recognize

that under WTO rules no country should be prevented from taking

measures for the protection of human, animal or plant life or health,

or of the environment at the levels it considers appropriate, VXEMHFWWRWKHUHTXLUHPHQWWKDWWKH\DUHQRWDSSOLHGLQDPDQQHUZKLFKZRXOGFRQVWLWXWH D PHDQV RI DUELWUDU\ RU XQMXVWLILDEOH GLVFULPLQDWLRQEHWZHHQFRXQWULHVZKHUHWKHVDPHFRQGLWLRQVSUHYDLORUDGLVJXLVHG

UHVWULFWLRQRQLQWHUQDWLRQDOWUDGHDQGDUHRWKHUZLVHLQDFFRUGDQFHZLWKWKHSURYLVLRQVRIWKH:72$JUHHPHQWV”27.

This allowed nations to put certain supporting measures in the so

called Green Box. The green box is defined in Annex 2 of the

Agriculture Agreement. In order to qualify, green box subsidies must

not distort trade, or at most cause minimal distortion (paragraph 1).

They have to be government-funded (not by charging consumers

higher prices) and must not involve price support.

They tend to be programmes that are not targeted at particular

products, and include direct income supports for farmers that are not

related to (are “decoupled” from) current production levels or prices.

They also include environmental protection and regional

development programmes.

27

Article 6 of the Hong Kong Ministerial Declaration, adopted in 14November 2001



91

“Green box” subsidies are therefore allowed without limits, provided

they comply with the policy-specific criteria set out in Annex 2.

In the current negotiations, some countries argue that some of the

subsidies listed in Annex 2 might not meet the criteria of the annex’s

first paragraph, because of the large amounts paid, or because of thenature of these subsidies, the trade distortion they cause might be

more than minimal. Among the subsidies under discussion here are:

direct payments to producers (paragraph 5), including decoupled

income support (paragraph 6), and government financial support for

income insurance and income safety-net programmes (paragraph 7),

and other paragraphs. Some other countries take the opposite view,

that the current criteria are adequate, and might even need to be

made more flexible to take better account of what are called non-trade concerns such as environmental protection and animal welfare.

At first glance this leaves room for WTO’s members to install

measures to protect the environment and natural resources. The

pitfall, however, is in the last part of the citation, which we marked

in italics. This literally states that when push comes to shove free

trade considerations will always prevail. The debate over the Green

Box and the rulings of the Dispute Settlement Body make clear that,despite common agreements, trade considerations do prevail. Green

Box measures seem to have been, on the one hand, provoked by

pressure from outside in order to maintain enough political and

societal backing for the liberalisation process as such and on the

other hand, an instrument to allow those members that heavily

support their agriculture (Europe, USA) to find other, acceptable

ways to keep the negotiations on track.

Also, Green Box measures only apply to agricultural production and

have no jurisdiction on the industry, transport and services sectors.

Finally, the WTO framework does not offer any incentives for

nations to make trade more sustainable, it merely states which

measures are allowed and which are deemed trade distorting.

Sustainability is therefore by no means part of an integrated approach

by the WTO; an approach based on a shared vision on sustainable

economic development; a vision that would allow pursuing trade

negotiations from a different perspective; a perspective based on a

new hierarchy between people, planet and profit.



92

As we have argued before, in the long term, economic, social andecological sustainability are one and the same thing. Acknowledgingthis principle and putting it into practice are, however, two separate

things. In general it is supposing a certain level of solidarity andshort term altruism that currently does not exist. But if not forhumanitarian reasons, than at least for selfish reasons should we putthis sustainability principle into reality. Globalisation makes peoplethat are deprived of even the most basic needs, realize what theydon’t have. As the global fight for resources will inevitably increase

fiercely over the next decades, in the end the poor will not stand idly

by as 20 per cent of the rich consume 80 per cent of the earth’s

resources, destroying the planet in the process in its continuous striveto fulfil, basically, endless wants.

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How do we ensure a global system that will allow a balanced access

to resources, an ecologically sustainable use of these resources and afair distribution of food around the globe?

To approach these fundamental questions we need to first of all

consider some of the main individual aspects of the problem. We will

have to confront the current situation in global food production and

demand and the use of resources against expected developments. We

will in particular in the context of this book, have to look into the

ways in which globalisation and liberalisation connect to food

production and distribution: are they part of the cure or part of theproblem?

)HHGLQJWKHZRUOGWRGD\DQGWRPRUURZ

The world’s farmers now provide 24% more food per person on

average than in 1961 although population has nearly doubled over

the same period. The available calories per capita have risen globallyfrom 2549 calories per day to almost 2800 calories; an increase of



93

over 10% per capita. An average person, depending on gender, ageand occupation needs some 2500 calories per day. So, in theory,there is, for the moment, sufficient food in calorific value to goaround for everybody.

Nonetheless, hunger stubbornly persists in the world today. Tocombat famine and under nourishment is top of the UN MillenniumGoals. By 2015 the proportion of people suffering from hungershould be reduced by half compared to the year 2000. The UNestimates that today some two billion people suffer from undernourishment; 824 million people suffer from chronic hunger, 13% of the world population. Every second a human being dies of

malnutrition and related causes, 30 million deaths per year. In its2006 report the UN warns that progress is slow and that in someparts of the world numbers are rising again.Even in upcoming economic super powers such as Brazil and India10-23% of the population is still undernourished and also in therichest economy of the world, the United States, under nourishmentis far from uncommon28.

Paradoxically, overweight and obesity

29

are rapidly increasing. Some300 million people are obese worldwide, 5% of the world’s

population, and the number is rising at a staggering rate: for example

in the UK from 14% to 21% in just 10 years time30

. This trend will

have severe implications for health costs. Overweight is by no means

a phenomenon found exclusively in affluent countries, but on the

increase in developing countries as well. Overweight in rich

countries is more prevalent in the poorer classes31

, as a result of

limited access to healthy food and a lack of exercise.

28The Harvard School of Public Health has calculated that in the U.S.A. 35

million people, 10% of the total population, are undernourished, costing thenation some $ 90 billion because of loss of economic production andadditional health care cost.29

People are considered to be obese when they have a Body Mass Index of30 or more30

The WHO states that without appropriate measures in 2025 over half ofthe world population will be overweight31

See: Lang, T. and M. Heasman, Food Wars; the global battle for mouths,minds and markets (2004)



94

In developing countries it is more common in the higher social strata,where corpulence is a sign of one’s socio-economic status.

So, as one part of the world is suffering and dying from a lack of

sufficient food and another part is suffering and dying from too muchfood and unhealthy diets, the problem appears to be ‘solely’ of a

distributive nature. Apparently for some reason or another global and

local food markets are not working correctly to solve this distribution

problem. We will turn to this highly complex matter later on and

instead would first of all like to focus on the future: if agriculture has

succeeded so far in theory providing enough food to feed a growing

world population, does this mean it will be able to do so in the next

forty or fifty years as well? Is it possible in a strict technical sense toincrease food production to accommodate the nutritional needs of 9

billion people and to do so in a way that does not endanger the

production capacity for future generations? If so, this would allow

the UN, the WTO and the international political world to concentrate

on solving ‘only’ the distribution problem.

Based on both population growths, rising standards of living and

changing dietary patterns, the FAO estimates a growth in globalagricultural demand of 60% (85% in developing countries) between

2005 and 2030. This is without taking into account a growth in

demand of agricultural production for bio fuels and other uses.

In the 2002 study “World Agriculture. Towards 2015/2030” the FAO

predicts that annual agricultural production growth will decline from

2.2% in the last 30 years to 1.5% over the next 30 years. This will

not be enough to meet a 60% growth in demand. The expected

growth rate is based on certain assumptions, which rely mostly on

advances in technology.

Yield growth in the EU-15, however, has slowed down considerably

over the last decade. This seems to indicate that production is at the

technological frontier even in the most competitive regions.



95

In order to meet the growing demand for food, intensification of production seems the only way forward32. This would include anintensified use of chemical fertilizers and pest controls, the use of higher yielding varieties and increased use of water resources for

irrigation to enable multiple cropping.

There are a number of other telltale signs that show that the necessityto intensify production will be accompanied with a whole series of problems of which some have been manifesting for some time andothers have been lingering in the shadows, but will come to thesurface shortly. These developments might bring us, after 10,000years of agricultural development, right to the point where we

started: the basic question of how to produce sufficient food forpresent and future generations. Without pretending to be prophets, itis very likely that this matter will be on the very top of everybody’s

agenda in the decades to come. It’s not unthinkable that future

conflicts will mainly be fought over access to and use of scarce, but

necessary resources, such as fertile land and clean water, to produce

food and other basic commodities.

*URZWK RI SRSXODWLRQ GHYHORSPHQWV LQ GHPRJUDSKLF SDWWHUQV DQGXUEDQLVDWLRQ

Let us first of all examine in more detail, developments in demand,

starting with world population growth.

It is estimated that in the year 1 A.D. the world population was some

200 million people. The first billion was reached in 1804. In 2005 the

figure was almost 6.5 billion.

32Some maintain that global warming will lead to a substantial increase in

new areas that can be used for agriculture in the future, especially in thepermafrost areas in the Northern Hemisphere, which would more thancompensate the loss of land through droughts and rising sea levels. This,however, would only become a real possibility not before the end of thecentury. Others point to developments in bio technology, making it possible

to produce so called functional foods made from genetically altered aminoacids to be used either for food or bio fuels.



96

The UN expects the world population to grow by 40% between 2005and 2050 at an average growth rate of 0.9% per year. Most othersources seem to confirm this trend.Population growth rates are not the same in various parts of the

world. In the rich countries they are approaching 0% and in somecases negative growth rates have been recorded, especially in someCentral and Eastern European countries. Growth rates are highest inAsia and Africa, over 2% per year on average, as table 1 shows.

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:RUOG source: UN Department of Economic and Social Affairs/Population Division

Average world population growth will not be as dramatic as it wasover the last 50 years (2.8% annually), though the growth will beconcentrated almost exclusively in developing countries, that willshow an increase of more than 1% per annum, leading of course to a

subsequent increase in demand for food and putting more stress onavailable resources, especially in those parts of the world alreadyconfronted with lack of resources and struggling with poverty andhunger.

Another significant and ongoing trend that will have majorimplications is that of urbanisation. More and more people are livingin urban areas. Or better said more and more people leave rural areas

33The EU-27 currently has a population of 484 million



97

in sometimes desperate attempts to escape from poverty andunemployment34. In the year 2007 we will have reached themilestone that for the first time in history worldwide more peoplewill be living in urban areas than in rural areas. The UN expects that

this trend will continue and most markedly in developing countries.

)LJXUHXUEDQLVDWLRQ

Source: UN Population Division

Europe has already witnessed a process of rapid urbanisation overthe last century, so here the process will continue at a slower pacewith still big differences between East and West as table 3 indicates.Holland is among the countries with the highest urbanisation rates inthe world and where urbanisation started very early; by the 17th century over half of the Dutch population lived in urban areas.

34

In China, 25 million people per year move from the rural areas to thecities. In some of the peri-urban areas in Europe, however, there seems to

be a reversed trend, where notably high income urbanites move back to therelative tranquillity and spaciousness of the countryside



98

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&KDQJLQJGLHWDU\SDWWHUQV One of the effects of urbanisation is a change in dietary patterns.People living in urban environments have different diets than peopleliving in rural areas.They have on average higher standards of living. Generally as peoplehave more money to spend, they substitute cereals for higher valueprotein foods such as milk, dairy and meat.

Urbanites in general also show more openness towards new trends,more orientation towards other cultures and the accompanyingculinary traditions together with increased emphasis on fast food andready meals that are better suited for urban lifestyles.This will on the whole lead to a rise in demand for meat and dairyproducts, while starchy staples, such as cereals, will show a relativedrop in diets.

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Urbanization and higher standards of living are the two main driversfor dietary changes. All studies seem to agree at least, on one thing,and that is a substantial increase in meat consumption worldwide.Meat consumption almost doubled over the last 25 years and nothingseems to indicate that this trend will slow down.



101

In areas as diverse as southern Africa, the Middle East, Mongoliaand Central Asia, the livelihood of herder populations-and culturesthat revolve around animal husbandry is threatened by the escalating

demands on the world’s rangelands.Lastly, meat production is also one of the main contributors to globalwarming: methane production from animal husbandry is currentlyresponsible for 13-18% of emissions of green house gases, exceedingthe effects of, for example, air transport.

So, should we propose a worldwide ban on animal production andconsumption and all become vegetarians?

Animal husbandry is as much part of agriculture as producing fruits,vegetables and cereals.As French historian Marc Bloch so eloquently put it: agrarian historyconsists of three things: dung, dung and dung. Despite the abundantuse of chemical fertilizers, manure is still one of the main ingredientsto maintain soil fertility. Some habitats lend themselves almostexclusively to animal husbandry; some tribes living in these habitats,depend on the products of animals for their livelihood, for the milk,

the meat, the skin, the eggs and even the blood. Manure is used forfertilizing, but also as a fuel and in the construction of houses.Animal husbandry is also vital to maintain habitats for certainspecies of flora and fauna and to maintain certain types of landscapes.It is true that animals are inefficient at converting feed calories toanimal product calories. However, calculations of efficiency shouldalso take into account the utility of the initial product. Non-ruminantscan and often do, consume plant and animal processing by-productsthat humans will not consume. This recycles calories that otherwisewould be wasted, which is excellent efficiency. Ruminants,considered inefficient by many, are probably the most efficient sincetheir digestive systems can utilize cellulose and fibrous materials, themost abundant raw food material on earth. They can even utilizenon-protein nitrogen, all of which are less well digested orindigestible by mono-gastrics, and they are able to convert them intowell balanced food for people.



102

Also, a major percentage of the world’s land cannot be cultivated dueto steepness of the terrain or climatic conditions. The only way it canbe harvested is with animals and, again, this is to maximumefficiency for the human population. It is true that animals in some

countries are fed grain that could be consumed by humans. However,this will stop when grain becomes more expensive than alternativeby-products which today’s animal husbandry experts know how touse. So, far from being inefficient, animals can be very efficient byconverting undesirable material to well balanced protein and energyfor human consumption.

:DWHUDULVLQJSUREOHP Growing meat production also puts more stress on another necessary,but scarce resource: fresh water. Agriculture is worldwide the biggestconsumer of this resource: 70% of all available fresh water is utilizedfor agricultural production. Without any doubt, water will be thenumber one limiting factor in the near future for (increases in)agricultural production.

Already a third of the world’s population now lives in water-stressedcountries. By 2025, this is expected to rise to two-thirds. In a recentstudy by the IWMI35 this has been confirmed. Four main factors willcontribute to this worrying trend: the increase in the use of fertilizersand irrigation to intensify production for a growing population, theincrease in meat consumption, increase of water use in general as aresult of increasing living standards and climate change.

The agricultural area under irrigation grew by more than 70% overthe past thirty years.For irrigation alone 14% more water will be needed in 2030,especially in areas already suffering from pressure on scarceresources and from political unrest (Near East, North Africa, South

35Water for food, water for life. Insights from the Comprehensive

Assessment of Water management in Agriculture (2006), the results

of five years of research by some 700 scientists, coordinated by theInternational Water Management Institute



103

Asia). The expected global increase in meat consumption will alsoput more strain on water resource. It takes 15 cubic metres of waterto produce a kilogram of grain-fed beef, while it only requires 0.4 to3 cubic metres to produce a kilogram of cereals.

)LJXUHZDWHUFRQVXPSWLRQSHUFDSLWDLQ

Global water consumption increased six fold between 1900 and 1995- more than double the rate of population growth - and goes ongrowing as farming, industry and domestic demand all will increasefurther.

As groundwater is increasingly being exploited for irrigation,industrial and domestic use, water tables in parts of China, India,West Asia, the former Soviet Union and the western United States

are dropping - in India by as much as 3m a year.



104

The latest report by the IPCC36 assesses that as a result of climatechange the drop in ground water tables will accelerate in some partsof the world, glaciers will melt worldwide leading to further watershortages, higher temperatures especially in the Northern hemisphere

will cause more droughts and subsequent water scarcity.

Over 700 scientists, experts on water management, recentlypublished the result of a study examining the demand for water in205037, in which they calculate that water consumption couldincrease by as much as 70% to meet a growing demand. Watershortages will be felt most in the Middle-East, North Africa, Mexico,China and in South and Central Asia.

A part from the availability of sufficient quantities of fresh water, forlarge parts of the world it is also the quality of the water thatconstitutes all sorts of problems. More than five million people diefrom waterborne diseases each year, ten times the number of peoplekilled in wars around the globe. But even in countries with thehighest sanitary conditions, problems with the quality of water haveemerged, partly due to the intensification of agricultural production

through the wastage from the over use of manure, chemicalfertilizers and pesticides.The 1992 Nitrate Directive and the more recent Water Directive areclear indicators that also in Europe water quality problems havearisen and are to be urgently addressed.

The UN-backed World Commission on Water estimated already in2000 that an additional $100 billion a year would be needed to tacklewater scarcity worldwide. This dwarfs the $20 billion which will beneeded annually by 2007 to tackle HIV and Aids, and, according tothe Commission, it is so much, it could only be raised from theprivate sector.

36Intergovernmental Panel on Climate Change – Climate Change 2007, 4

th

Assessment Report37Water for food, water for life



105

It’s a gloomy picture, with a rapidly growing demand for fresh water

on the one hand and diminishing water resources on the other. Since

we simply cannot survive without a steady supply of good quality

fresh water, it seems inevitable that the management of our water

resources will shortly revolutionize our ways of thinking and willdramatically change the way we produce food. In the past we sought

to maximize production per unit: soon we will be seeking to

minimize the use of water per unit of production and to reduce, to a

minimum, the impact of production on the environment to further

prevent the change in climate, in addition to fresh water becoming

wasted or polluted. The rationale will be turned on its head, and

farming practices will no longer be the same.

7KHJURXQGEHQHDWKRXUIHHW

Next to water, fertile soil is still the main resource for agricultural

production. Most farmers in the world will agree that one of the

prime long term goals in agriculture is to maintain, and where

possible, improve soil fertility as a basic condition and resource for

sustained production. However, here too, the growth of population,changes in dietary patterns and the industrialisation of agriculture

have made their mark.

The International Food Policy Research Institute (IFPRI) some years

ago calculated, based on the most advanced satellite and ICT

techniques that no less than 40% of world’s agriculture land is

seriously degraded, ranging from 11 percent in Asia, 20% in Africa

and up to 75% of crop land in Central America. But also in Europe

soil fertility has been dropping as agriculture has come to rely more

and more on external inputs; chemical fertilizers will feed the plants,

but not the soil, causing a gradual depletion of soil fertility. The

Chinese Ministry for Land and Natural Resources announced

recently that over 10% over Chinese agricultural land has been

polluted by artificial fertilizers, heavy metals and hazardous waste to

such an extent that food coming from these soils constitutes a threat

to public health and should not be used for either animal or human

consumption.



106

Soil degradation can also come from various other sources, varyingfrom erosion to salination caused by irrigation for example. In otherwords: soil degradation is caused by poor management, byexternalising cost of production, mainly induced to try to maximize

short term revenues instead of optimizing long term production.

Previously, pressure on land and agricultural production was relievedby bringing formerly marginal lands into production. From 1966until 1996 the total area of land for agriculture rose from 4.55 billionhectares to 4.93 billion in 1996 (+8%).It’s increasingly difficult to find productive new land to expand the

agricultural base. The limits of geographic expansion seem to have

been reached and in some areas the surface for agriculturalproduction is declining as a result of soil degradation. Intensification

of production on the remaining land will become an even more

growing necessity.

In view of these facts, it seems paradoxically at least, if not

somewhat perverse, that over the last 30 years some 40 million

hectares haven been taken out of production in the US, Europe and

Oceania through set-aside policies to counter over production. Even

in its latest reform the European Commission has made a 10% setaside mandatory again38

.

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When we look at the food problem in relation to globalisation and

liberalisation the first question to look into would be: what have

globalisation and liberalisation to do with the fact that there are still

850 million people starving, even if food production today

theoretically is sufficient to feed all mankind?

How we could wish that there was only one factor responsible for

preventing a fair distribution of food. The reality is that there are a

number of reasons. International political instability is one, of course.

Poor internal policy is another: the relatively thriving Zimbabwean

38

Although it has recently suspended the set-aside measure toaccommodate bio fuel production.



107

agriculture has been brought to ruins by the foolish and destructiveMugabe regime. Protectionism is a third reason: after 50 years of European policy we have come to acknowledge that our exportsubsidy programmes (for a long time an euphemism for dumping

practices), as well as that of the USA, have had detrimental effectson local food production in developing countries. So, in this sense,could liberalisation of markets be part of the cure to come to a fairerdistribution of food?

There are some serious doubts that it will. Liberalisation is primarilya mechanism to open doors to further globalisation of capital, labourand commodities. In this process the forces of the market will reign.

And it is a basic law of economics that in free markets, supply willgo there, where it will find demand that is capable and willing to buyat a given price. The market is primarily driven not by demand perse, but by buying power which determines what products will beprocessed from which raw agricultural materials and to where and towhom it will be shipped for consumption and use. If it is moreprofitable to convert grains and water into beef, then that is what themarket does; if it is more profitable to turn maize into bio-ethanol so

we can continue to drive in our cars to our holiday destination (andfeeling that we are contributing to solving the climate problem whiledoing so), then that is what the market provides for.

As stated before, the key is that the process of globalisation in thefood supply system has led to a concentration process in processingand retail industry, radically changing power relations in the globalmarket place. These industries are not there to take care of an evenand fair distribution of food, but to achieve a return on investmentsand to make a profit by buying in raw materials as cheaply aspossible as the Law of Comparative Cost dictates, within but alsosometimes by neglecting existing local legal frameworks, and sellingwhere the people with enough buying power are. To have no buyingpower simply means that your demand for food will not be met, or atleast not adequately met, by supply. In this sense the market has nomorality and is therefore not an adequate mechanism to resolve thedistribution problem.



108

And if globalisation is not providing for a fair distribution now, itwill be hard to imagine that it will do so in 2050. As populationgrowth, changing dietary patterns and the growing competitionbetween food, feed and fuel will most likely exceed production

capacity and at least will lead to increased competition for scarcerresources, prices of raw materials are bound to increase. At firstglance this may seem to be good news for producers, but whilst atthe same time the concentration process in the global food supplyeconomy will continue over the next decades, the link betweenproducers and consumers worldwide will be in the hands of only afew multinational companies that will control global markets formost raw materials and processed products.

We must not fool ourselves into thinking that liberalisation as it isnow perceived within the WTO arena will help to solve the problem;it will not provide the necessary checks and balances needed to slowdown globalisation, change its course or remedy its ‘collateral’

damage.

A second basic question in this context is whether globalisation and

liberalisation will offer part of the cure or aggravate the problems

concerning the use of necessary resources to provide for sufficientfood for future generations?

If we limit the use of the word sustainable to the kind of use of

resources that will provide the present day population with sufficient

food without endangering the capacity for future generations to

produce enough food, how then must we judge the effects of

globalisation and liberalisation?

The main mechanism for globalisation is not so much liberalisation

of markets, but developments in technology and in tax regimes.

Especially developments in transport technology have made shipping

70 per cent cheaper over the last 20 years, road transport 20 per cent

and costs of transport by air has fallen 50 percent. Kerosene, the fuel

for planes, is free of taxes. Shipping and air transport are left out of

the Kyoto protocol. Some maintain that the contribution of air

transport and shipping on CO2

emission and other pollutants is

relatively small, some 3%.



110

The logic of the market, the strategies of the agri-business, fuelled bythe short term interests of share holders, increased competitionamong farmers, growth of world population, changing consumerdemand and the further globalisation of the whole food system, will

enhance the global competition for the use of resources, where theweaker actors will draw the short straw; it also has an inherent risk of inducing time and again a race to the bottom in which agri-businessis constantly looking for buying agricultural raw materials andproduce at the lowest cost possible at today’s prices; to shift, if

economically necessary, to other places in the world when

comparative advantage ratios change, either by stricter domestic

regulations or by governments loosening conditions wanting to

artificially create a comparative advantage to attract foreigninvestment.

In such a fierce global competition it is tempting to reduce cost of

production by externalising certain costs either to the environment, to

land labourers, to tax payers or to future generations. The market

thus encourages the wastage of natural resources which are not or at

least not fully factored into the trading calculus: water, air, soil,

fauna and flora and bio diversity would be more highly respected and

valued if their destruction incurred an immediate cost to those whodegrade them, which is not invariably the case. As things stand at the

moment, the market is incapable of taking into account long term

respect for the environment, the rhythm of biological processes, and

the capacities of ecosystems for purification and recuperation. The

ecological footprint of a European intensive livestock industry, for

example, built on imported feed grains grown on fragile regions rich

in biodiversity such as the Brazilian Pantanal wetland area, must

become part of our analysis of a sustainable development.

In this respect it is meanwhile undeniable that globalisation has had

devastating effects on various eco systems. Over 400 million

hectares, 8 times the size of France, of natural forest has been lost

worldwide over the past 30 years, 40% of which were rain forests in

the Latin American region. Clearing of rain forests was mainly due

to make the land suitable for agriculture, especially beef farming and

more recently for soy and palm oil production for international

markets.



111

The expansion and intensification of agriculture, notably cottonproduction, that started in communist times, but has accelerated afterthe collapse of the Soviet regime, made Lake Aral in Central Asiashrink from 68,000 km2 to 17,000 km2 in 2004, leaving a salt desert

unsuitable for agricultural production.The unbridled globalisation has been felt maybe most in the fisheriessector. More than 60% of Asia’s mangroves have been converted to

aquaculture farms, partly as a result of policies imposed by the true

champions of liberalisation, the IMF and the World Bank.

The grip the retail industry has developed on global food markets

also has led to a remarkable paradox concerning bio diversity:

supermarkets these days typically have on offer a range of productsformerly unknown to consumers coming from all over the world in

order, as they say, to meet the changing demand of consumers. This

diversity has, however, been accompanied by a likewise loss of agro-

biodiversity. Nowadays, here in Europe we can buy kiwis from New

Zealand, rice from Thailand and avocado’s from Costa Rica. But of

the 6,000 plus varieties of European apples, only three or four

varieties are available in supermarkets today. In the U.K. 70% of all

eating apples sold in supermarkets are from two varieties only. Othervarieties simply are not competitive enough or do not fit with the

logistical requirements of the retail industry.

At the same time, and all the more worrying, it has become apparent

that international trade becomes less and less the domain of

democratic governments. Multinational companies have the power to

‘bribe’ or pressure democratic governments into accepting the rules

of the game of the industry, rules that are not the result of democratic

processes, but unilaterally imposed by companies and accepted by

governments in the name of employment and economic growth.

The WTO as an undemocratic body itself has more than once

demonstrated utter contempt for the wishes and positions of

democratically elected governments. As Noreena Hertz remarks:

“time and time again the WTO has intervened to prevent

governments from using boycotts or punitive tariffs against

companies that they have found to be acting in ethically unacceptable

or environmentally unsound ways. In fact, in all environmental cases



112

it has so far considered, the WTO has ruled in favour of corporateinterests40

”. A very strong case in point being the ruling of the

WTO’s Dispute Settlement Body in 1997 in favour of the United

States, Monsanto, the US Dairy Export Council and the US National

Cattlemen’s Association and against the European Union that theEuropean ban on hormones created a barrier to imports. The ban was

the result of 366 to 0 votes by the European Parliament. A similar

case was won by the United States some years later concerning the

trade of food products containing genetically modified ingredients.

,QWHUPH]]RFDQZHIHHGWKHZRUOGRQRUJDQLFV" It has been suggested by some that only a radical change to organic

agriculture would make agricultural production sustainable enough

to ensure food production in the long term. Others have dismissed

this idea right away by stating that such a radical change would

prove to be catastrophic for the provision of sufficient food for a

growing world population.

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Noreena Hertz – The silent takeover; global capitalism and the death ofdemocracy (2001)



113

The debate, however, seems to based more on ideological notions if not prejudices and less on facts and research.So, for the sake of argument, it is worth considering a model based

on organic production: will it lead to a more sustainable use of resources and will it be able to provide for enough food for agrowing world population?

A number of conclusions can be drawn from table 3 right away:organic agriculture is marginal compared to other systems of production that is: FHUWLILHGorganic agriculture. In large parts of theworld agriculture is organic GHIDFWR through the lack of funds to buy

artificial fertilizers and pesticides. Another conclusion is that Europeis doing a lot better than the USA which scores far below the worldaverage, even though production area has quadrupled there over thelast decade. Both, however, are nowhere near organic championAustralia, a country also renowned for its low Producer SupportEstimate. So, despite a large consumer potential, relative highenvironmental awareness and favourable policy measures, Europecannot claim to be a role model when it comes to organic agriculture.

Does organic agriculture ensure a more sustainable use of resources?It doesn’t require artificial fertilizers or pesticides, thus reducing the

risks of contaminating water; it is on the whole, less intensive, more

energy efficient and provides less of a threat to overgrazing and loss

of soil fertility. On the other hand: it provides no restrictions to the

use of water or to transport: organic kiwis imported to Europe from

New Zealand or organic wine from Chile cost the same amount of

energy for transport, causing the same amount of emissions as

conventional ones.

Let us assume nonetheless that organic agriculture on average is

more ecologically sustainable than conventional agriculture and that

we would live in a world where 100% of agriculture is organic.

Could the world then be fed sufficiently?

Some research results are striking and contrary to what might be

expected.



114

The University of Michigan developed two models, one based onactual organic yields and one based on optimum conditions. In thefirst model the yields were 2,641 calories per person per day, onlyslightly under the world’s current production of 2,786 calories, but

higher than the average caloric requirement for an adult person of 2,500 calories per day.

In the second model the yield was 4,381 calories per person per day,

almost twice as much as we currently need, which would leave

enough room to provide for sufficient food in 205041

.

Yes, on average there is a yield gap with conventional agriculture,

but it seems that the gap with conventional agriculture exists only in

the wealthy nations where farming is more of a high input highoutput nature, whose sustainability in the long run is questionable.

The Research Institute for Organic Agriculture in Switzerland

showed that organic farms were 20 per cent less productive than

conventional plots over a 21-year period.

Studies by the World Bank’s Food Policy Research Institute (IFPRI)

based on concrete evidence, show that a shift to organic agriculture

in developing countries leads to a ULVH in production and even moreso in exactly those poor, dry and remote areas where hunger is most

severe, at the same time reducing the grips of the agri-business on

farmers.

If this is true, why are we not promoting organic agriculture more,

especially for developing countries? One technical problem is that

organic agriculture requires a completely different set of knowledge,

knowledge that requires schooling and the appropriate research

institutions and extension services that have to be put in place. Even

then, increases in yields normally take some years to become visible.

Soil fertility has to be rebuilt, an essential benefit of organic

agriculture by the way, and perennial plants take time to become

fruitful.

41See also: N. Röling’s paper ‘Organic agriculture and world food security’

(2006)



115

Even in the best cases, organic agriculture has fewer instruments tointervene if crops are being plagued by climate, pests and diseases.Some have therefore pleaded for a third option, that is basicallyorganic, but with the possibility of using conventional methods as an

insurance policy, in case of emergency.

A more political reason for not promoting organic agriculture is thatmultinational companies that provide the inputs for conventionalagriculture have a very strong market position.They are often indirectly supported by the international financialinstitutions such as IMF and World Bank, but also by the wealthycountries that provide development aid as well as the governments of

recipient countries. For the industry and the donor countries,commercial interests are at stake as companies providing the inputsare based in the donor countries, providing jobs and taxes. Thesecompanies, more often than not, also buy the raw materials and cropsfrom the farmers to be exported. Recipient countries put more faithin conventional agriculture or just want to be part of the modernworld.

Organic agriculture could be promoted in the liberalisationnegotiations, by giving organic products originating from developingcountries a preferential status. However, for organics to make a realbreakthrough to consumers, it would have to be widely available inthe supermarkets in large quantities. In this way economies of scalewould make organic products more competitive. The problemhowever is that supermarkets now have a relatively high margin onorganic products. If they would go into organics on a grand scale atlower consumer prices, they could obtain the same turnover in thesale of organic products, but at lower margins and costing muchmore space in the stores at the expense of other products. It’s

therefore unlikely that a real break through of organics will be

realised through the supermarket channel in the near future.

But more fundamentally, the hunger problem will not be solved

solely by shifting to organics. Currently hunger is not a problem of

food shortage, but of inadequate income and distribution problems.

These problems will not be solved by going organic.



117

A sustainable use of resources, however, should be very much atrade concern and, given the way the globalised food production andtrading system is endangering current and future resources, even beat the heart of negotiations.

So, we need (international) policy and we need internationalgovernance to remedy where the market fails and prevent the marketfrom externalising the cost of production, processing anddistribution. What we concluded in our previous book, Agriculture ata turning point, is still valid today: “It is not possible to rely upon the

market alone to shape the organization of the global economy. The

market does not tend to spontaneously create equilibria. It is a

powerful motor which cannot do without controls; controls in whichethical, social and ecological values must not be regarded as of

secondary importance”.

So, first of all we need a major shift in attention, away from the one

dimensional debate on free trade and on the track of VXVWDLQDEOHGHYHORSPHQW sustainable food production and sustainable trade as

the top priorities for agriculture and indeed mankind for the next

decades.

Free trade and lifting barriers to free trade should be considered in

this light and should be encouraged if and only if it can be

demonstrated that this will help to achieve a more efficient, more

sustainable use of resources and a better and fairer distribution of

food.

In hindsight it is truly a pity that the world did not succeed in 1950 in

setting up the International Trade Organisation as an institution

within the UN. There were good reasons then and there are even

better reasons now to embed further liberalisation negotiations within

the wider institutional framework of the UN. WTO objectives in this

way can and should be made part of the Millennium Goals

preventing free trade from remaining a goal in itself, but instead

becoming a means to a fairer, more prosperous and more sustainable

world. With the power of individual governments diminishing vis à

vis the globalised agri-business, an integrated approach towards

liberalisation under the umbrella of more democratic bodies such as



119

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7KHILJKWIRUIRRGIHHGDQGIXHO

6WDUW\RXUHQJLQHVSOHDVH A few years ago we wouldn’t have imagined that we would be

discussing the developments in global car sales in a book on

agriculture. Yet, nowadays agriculture has as much to do with the

automobile industry as it is related to, say, health care. On the one

hand, cars emit CO2, thus contributing to global warming that will

affect the earth’s potential for agricultural production and on the

other hand, cars will use more and more bio-fuels, which will

influence agricultural commodity markets in the years to come.

The expected global economic development will, inevitable, lead to a

global increase in the sales of cars, evidence of which is already

showing. When the automobile was invented, some 120 years ago,

people in Europe travelled on average less than 100 km per year;

today the average is 20,000 km, flying not included. The car together

with the technology and infrastructure needed to make buying and

driving a car both possible and affordable contributed to thisincrease. Car sales and car use and economic prosperity are closely

interlinked: higher standards of living lead to increased car sales and

more car use and vice versa: more car use contributes to economic

growth.

According to the World Watch Institute, in 2006 a record breaking

67 million new cars were sold worldwide, of which 7 million cars in

China, 40% of the number sold in the US. Although total carnumbers in China are still relatively modest, the fact that sales have

increased fivefold over the last decade is a telltale sign of what will

happen in the next decade42

.

42At the moment a car producing industry is rapidly evolving in both China

and India. The aim is to produce large quantities of small low cost cars forboth the domestic and the international market.



120

What will this growth mean in terms of use of oil and CO2 emissionsand the subsequent climate change or, if China chooses to take up itsshare in the fight against global warming, what will this mean for thebio fuels market?

7KHHQHUJ\FULVLVIRRGRUIXHO To use an already corny phrase: the climate is ‘hot’. Even people

without any knowledge of chemistry nowadays know what CO2

stands for, or at least think they do. It seems that we are entering the

carbon age and a carbon economy. Actually, CO2

stands for carbon

dioxide and we entered the modern carbon age a few centuries ago.Petroleum, in some form or other, is not a substance new to the

world. More than four thousand years ago, according to Herodotus,

asphalt was employed in the construction of the walls and towers of

Babylon. The modern use of oil started in mid 19th

century.

What is meant of course is that the effects of the abundant use of

carbon based fuels in the form of, among others, CO2

emissions are

starting to become apparent.

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122

the financial crises in South-East Asia and Latin America, theongoing political unrest in the Middle East and last but not least thecautious changes in Chinese politics and the subsequent rapidchanges in its economy.

Nonetheless, CO2 was on the agenda43, albeit only half heartedly,leading eventually to the Kyoto agreement and protocol in 1997,which as is common knowledge, was not signed by the world’s

biggest emitter, the USA, nor by China, which will be the biggest

emitter in absolute quantities in the near future.

Behind the scenes an extensive research programme was started to

study the causes and effects of carbon emissions and to try to come,

at least at a scientific level, to some sort of general understanding.After more than 15 years of extensive research and hefty debates, a

consensus has evolved among scientists, united in the IPCC, that the

climate is changing and that the behaviour of man is one of the main

contributors to this change primarily by way of carbon emissions as a

result of our oil based economies. The almost simultaneous release

of former vice president Al Gore’s documentary ‘An Inconvenient

Truth’ further fuelled the debate on global warming and put it on top

of everybody’s agenda.

Scientists differ, however, on what the effects of global warming

exactly will be, at what pace they will occur and where they will be

felt the most. It is generally believed that temperatures this century

will rise between 1.8 and 6 degrees, causing glaciers to melt, the

levels in seas and especially rivers to rise and leading to changes in

rainfall patterns and quantities. As far as Europe is concerned, recent

research shows that it is likely that the south will become warmer

and drier and that the north will be warmer and wetter, making

agriculture more favourable in the northern parts of Europe, such as

Scandinavia and the Baltic countries and less so in Southern Europe.

Even China, as a developing country not part of the Kyoto protocol,

recently warned that it expects that the temperature in this vast and

fast growing country will haven risen 3.3 degrees in 2050, causing

43Already in 1986 the European Parliament accepted a resolution on this

matter. In 1992 the UN Climate Agreement was signed in Rio de Janeiro,eventually leading to the Kyoto Protocol



123

more turbulent weather patterns and a greater shortage of water. Butthe most dramatic effects will most probably be felt in the poorestregion of the world, Sub Saharan Africa.

7KHORRPLQJHQHUJ\FULVLV One of the extraordinary elements in the whole debate is thecoincidence of a neighing climate crisis and an impending energycrisis. We are starting to run out of mineral oil and this time for real.The ongoing economic growth in the Western world and the morerecent expansion of the Chinese, Indian and Brazilian economies

have spiralled energy consumption to new heights. Over the last 15years global oil consumption has surged 21%, with the upcomingeconomies all in the top five: Brazil +74%, India +99% and at thenumber one position China with a staggering increase of 165%,which is more than the average growth of China’s GDP over the

same period. China alone is responsible for 28% of the global growth

in oil consumption in the last fifteen years.

Over the next decades total energy demand will continue to increaseover 70% between 2003 and 2030, which is accelerating compared to

the last three decades; demand for fossil fuels will increase 60% over

the same period.

Based on data provided by the oil companies, the International

Energy Agency expects that the so called Hubbard Peak 44

will

manifest itself around the year 2030, but if the amount of new

reserves keeps dropping at the same rate it is doing now, some claim

the peak could be reached as early as 2010.

Economists fear this will seriously affect our oil based global

economy, in which energy intensive production methods and long

distance transport are the key components.

44

Hubbard Peak is the point at which consumption of oil exceeds the findingof new oil fields



127

of combating climate change, these governments see in thesedevelopments, an opportunity to increase their domestic support forthe agricultural sector and industry, to reinforce their position onglobal markets and at the same time to become less dependent on oil

producing nations.

However, long before any possible beneficial effects of a transitionto bio fuels on climate change will become noticeable; the effectswill be felt in other respects.The World Watch Institute among others, maintain that the increasein demand for bio fuels will benefit the poor farmers in the world.This seems highly debatable. It seems wry to say that poor farmers,

mostly subsistence farmers, would be advised to dedicate theirprecious land to the production of inputs for our transport andautomobile sectors.Secondly, entering the fuel market with agricultural raw materialsmeans that the prices for these products will be tied to the price of oiland the US dollar. As recent years have shown, both oil prices andthe value of the US dollar are very volatile and depend on, to a largeextent, geo-political stability or instability.

Although prices for bio fuels will show on the whole an upwardtrend, this volatility can be devastating for those that lack thenecessary reserves to deal with sudden drops in prices.Thirdly, this higher volatility will be accompanied by a generalupward trend in market prices for agricultural commodities, makingfood more expensive. For the rich classes in the world, that alreadydedicate only a small portion of their income to food, this will hardlycause any problems. For the poor, however, and we remind you herethat the main part of the monetary poor in the world live in ruralareas, higher food prices would be the last drop. Shifting productionfrom food production to potentially more lucrative, but also morevolatile bio fuel production would increase dependency on foodimports.

In fact, the booming bio-ethanol market is already causing problems.Because of the NAFTA agreement between Canada, the USA andMexico, Mexican maize growers could not keep up the competition

with their heavily subsidized American colleagues, making Mexico



131

the pressure on; the high prices and the relative cheap land are tooinviting for companies to be able to resist the temptation for too long.

The impact of intensive sugarcane cultivation on soil organic carbon,

particularly as the result of changes in land use, has also not receiveddue attention. A study published in 1999 found a decrease in soilorganic carbon of 24 percent over 20 years when forest is turned intopasture land in Brazil. The remaining 47 tonnes of carbon per hectareof pastureland was further reduced by 22 percent over the next 20years when a sugarcane plantation was established on thepastureland.A WWF report to the International Energy Agency in 2005

suggested that Brazil’s bio ethanol programme reduced transportemissions by 9 MTonnes per year, but 80 percent of the country’s

greenhouse gas emissions came from deforestation. A study found

that a hectare of land in Brazil grows enough sugarcane to make

enough ethanol to save 13 tonnes of CO2

a year. But if natural forests

were allowed to regenerate on the same hectare of land, the trees

would absorb 20 tonnes of CO2

every year. So, the cure is not only

worse than the problem, it is aggravating it.

Another disturbing side-effect of bio-fuels production, as the World

Water Week, the international forum on water, has recently pointed

out, is a sharp increase in the use of water. The Stockholm

International Water Institute has calculated that the expected increase

in the production of rapeseed and sugar cane could double the

current agricultural water use. As we have seen in the second

paragraph of this chapter, fresh water availability will become more

under stress than it already is as a result of a growing global

population, global warming, increased living standards and meat

consumption. Adding bio fuels as a fifth factor is likely to tip the

already vulnerable balance even more towards a global water crisis.

Bringing marginal or set aside land into production will also lead to

higher inputs of other resources, such as fertilizers and probably

pesticides.



134

the energy use of the farms; by adopting systems of production andfarming techniques which raise the organic matter rate of the soil, inorder to increase the quantities of carbon confined in the soil; byfavouring the development of solar electricity on the roofs of the

agricultural buildings.The European Landowners Organisation has suggested integrating asystem of carbon accounting into farm management as a tool tomonitor and adjust energy input and emission output.

This more careful and subtle approach seems to be more realisticthan rushing headlong into an uncertain adventure of full scale biofuel production based on products such as maize and soy, that in

today’s globalised world will prove to be counterproductive,threatening to make the bio fuel industry, that is currently being put

into place, obsolete on very short notice.

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)RRGRUODQGVFDSHQXUWXUHRUQDWXUH"

0DQDQGQDWXUH

Man has become a growing factor in shaping the landscape. As

hunter-gatherers we were part of nature and part of landscape,

adapting to natural conditions. As farmers we have begun shaping

the landscape in the service of our needs and wants; needs and wants

that changed interactively with the new possibilities that agriculture

created. The development of techniques, our ability to create

organisational systems to accommodate the development, diffusionand application of these techniques and, more recently, developments

in science, have led us to believe that we can and should control the

forces of nature and shape the landscape in our interests. When

nature reacts, following its own laws or responding to the

interventions of man, we get scared. Some of us because we think

it’s the wrath of God, others because we realize that we are not in

full control yet.



135

So, man shaping his surroundings and his natural conditions isnothing new. The scale and extent of man’s interventions, however,

have increased dramatically in the industrial and post-industrial era.

As man is more and more a species living in an urban environment,we have become gradually detached from nature. We have come to

see nature as something we can visit in the weekend and in our

holidays; a separate area where trained specialists manage nature on

our behalf for which they receive public funding and private

subscription fees; areas protected by fences and with all the

appropriate information signs, designated exploration routes and

education centres; a far cry from the wilderness of Thoreau’s

Walden.

The development of global food supply chains has disconnected us

from the way food is produced, a process that is still for the most part

closely linked to natural conditions and cycles. If we buy chicken

breast in the supermarket, clean, conveniently pre-cut and pre-spiced

and nicely packaged and correctly labelled, we no longer associate

this with a live chicken, let alone with the fact that a chicken is

originally a type of bird living on the fringe between open terrain andforest.

Not only have our actions influenced nature and landscape, but more

importantly our perception of and attitude towards them has changed.

Nature and landscape have become entities to be utilized, now or in

the future, in the service of man’s needs and wants, be it for the

production of food and resources or as a consumption space for

recreational purposes.

But it is not all bad. Man’s intervention also has created new

landscapes, which are nowadays highly appreciated. Who would

want to reforest the magnificent Scottish Highlands again? Man

made land in 17th century Holland is now on Unesco’s World

Heritage list. A variety of ecosystems and flora and fauna, in

particular in mountainous areas, have become dependent on

agricultural production. Removing agriculture out of the equation

would be disastrous for certain types of vegetation and wildlife.



138

Long distance transport has become so cheap that the cost of transport constitutes only a fraction of the total cost of production.Distance to markets is hardly a factor for allocation anymore. Thismakes former marginal areas interesting for economic exploitation,

while other areas become less competitive. Globalisation and cheaptransport have thus caused major shifts in land use worldwide. Insome parts agriculture has perished, causing the collapse of landscape and bio diversity that was closely connected to agriculturalproducts; in other parts, nature, landscape and bio diversity havebeen sacrificed to create new production areas.

Globalisation of production also leads to a re-allocation of minerals

and nutrients. As 20 per cent of the world population is responsiblefor 80 per cent of consumption, hauling agricultural commoditiesfrom all corners of the world implies that nutrients will getconcentrated in centres of consumption, causing degradation of soilsin some parts of the globe and wastage problems in others.

We have also shown, or tried to do so, that this globalised foodsupply system is demand driven; demand that is mainly constituted

by the wishes and wants of Western society. Despite the growingpublic interest for sustainable production and nature conservation,the mainstream trend still results in increased pressure on globalresources. In her book “Not on the label. What really goes into the

food on your plate” journalist Felicity Lawrence gives some rather

shocking examples of how the globalised food system is affecting

eco-systems both in Europe and in the Developing World.

Vulnerable mangrove forests, important habitats for coastal wildlife

and equally crucial for protecting the coast from the influences of the

sea, are being sacrificed on an unprecedented scale to accommodate

the production of prawns destined for the European market; large

parts of rainforests have been cut down to allow for the production of

coffee in Vietnam. In other parts of Asia vast areas of rain forests

have been sacrificed to make room for large scale palm oil

production. In Brazil the Amazon and the Cerrado area are under

constant threat from being cut down for soy and sugar cane

production by large farmers and multinational corporations.



139

Together with the nutrients, packaged in the form of agriculturalcommodities, come unwanted flora and fauna. This biologicalinvasion, spurred by climate change, has become a rapidly worryingtrend. Not only do they cause infectious diseases among cows, sheep,

pigs, chickens and crops, they are also responsible for loss of biodiversity in the recipient country as these species lack their naturalenemies.

Another worrying trend is that bio-diversity of agriculturalproduction itself has decreased enormously. It is estimated that since1900 some 75% of all genetic diversity of agricultural crops andanimals has been lost. The reason for this, of course, is that most of

the breeds and varieties were not competitive enough and werereplaced by new developed breeds and varieties, enabled through thedevelopment of new techniques which has spurred a globalisation of the reproduction of both plant and animal genetic material.Not only have we lost a serious amount of breeds and varieties, butalso within the remaining ones, the genetic base is getting smallerand smaller, as only the best producing species of a breed and of avariety, are used for reproduction. Genetic defects or inadequacies

will then affect dairy herds or crops world wide. New techniquesbased on the latest bio-technological insights lead to completely newcrop varieties, developed in laboratories and subsequently‘introduced’ all over the world, causing not only a diminishing gene

pool, but also forcing producers to modify production conditions to

accommodate the new varieties.

The FAO has more than once put out serious warnings that

agricultural bio-diversity has decreased to a dangerously low point.

Furthermore, scenario studies show that dairy production will fare

remarkably well economically, in a free trade situation, as a result in

a general rise in standards of living. This would be good news for

those areas and landscapes that require grazing in order to be

maintained. Liberalisation will, however, reinforce the already

existing trend to larger and more specialised dairy farms. The

question is in how far large scale, specialised dairy farming will

affect the landscape and whether or not it will leave enough room for

multifunctionality; is it possible to combine efficient production,



141

to 2006. Brazil, the second largest producer of bio fuel plans todouble its production over the next decade. Production increase willcome mainly from expansion of the already vast areas of sugar caneand soy.

For Europe it is estimated that between 4 and 13 per cent of the totalagricultural land in the EU would be needed to produce the amountof bio fuels needed to reach the level of liquid fossil fuel replacementrequired for the transport sector in the Directive 2003/30/EC, that is5.75 per cent of all transport fuels in 2010. The OECD has calculatedthat between 30% and 70% of current crop area would be needed forthe EU (15) to replace 10% of their transport fuel consumption bybio fuels, the new objective the Commission has set for 2020.

Specialists expect that as soon as 2009, 10% of all European cerealswill be used for bio-ethanol production. This would equal over 6million hectares. The Commission reckons that the surface neededfor bio-fuel production will go from 3.1 million hectare to over 17million hectares or some 15% of the total agricultural area to achievethe goal of 10% share in energy consumption for the transport sector.The Commission calls this a modest share, with similarly modestconsequences for prices of cereals, colza and sunflower oil. But 15%

is quite substantial on already stressed land markets. Land prices willundoubtedly rise, making land an even more interesting commodityfor speculators. Private equity brokers have already engagedthemselves in buying both American farms and former large scalecommunist farms in Central and Eastern Europe. Whilst receivinggenerous payments from either the U.S. Government or the EuropeanUnion they patiently wait for land prices to rise.

The new demand for land has also led some farmers’ leaders to

express the need to refrain from spending more public money in

buying and managing nature areas48

and to focus, instead, more on

securing farmland to ensure future food, feed and fuel sufficiency.

48As for example in the EU through the Nature 2000 programme



142

7KHZD\IRUZDUG Landscapes change, nature changes constantly. Natural conditions

alone have had and will keep on having major impacts on the shape,look and feel of our surroundings: continental drift49, changes inclimate caused by the slight changes of the earth’s spin, to name a

few. And with it nature changes; species adapt, evolve, diversify and

become extinct, with or without the intervention of man. It is

therefore an illusion to define sustainable land management and the

preservation of nature and bio diversity as maintaining the status

quo.

A basic question in this respect is whether or not landscape is a

primary need or a secondary want. In other words: when push comes

to shove and we need all possible resources to ensure food

production and certain standards of living, can we afford ourselves

the loss of bio diversity and landscapes?

Rather than to approach this from a philosophical or ethical

perspective, let us not be hypocritical here. Most of us would not or

cannot sacrifice a week of our holidays or a month’s salary to savenature and landscape. There are people, and fortunately their

numbers are growing, that become aware that the degradation of bio

diversity and landscapes is connected to the way we live and

consume; that nature and landscape have intrinsic values and that we

also have a personal responsibility in safeguarding these values. But

for most of us it suffices to pay an annual subscription fee to the

World Wildlife Fund or similar NGO, to suggest to companies that

they should take their Corporate Social Responsibility (CSR)

seriously and most of all to point out to our governments to take

appropriate action in taking care of these public goods.

49It is expected for example that in time Africa will collide with Europe,

dissolving the Mediterranean Sea and creating a new mountain range ashigh as the Himalayas.



143

But, while NGO’s are doing what they can on the waves of public

interest, while some companies claim they really do take

environmental considerations into their business decisions50

instead

of mere window dressing or turning CSR into a marketing tool and

while governments worldwide are torn between the need to rise ormaintain standards of living and the need to preserve our

environment, we also have to address the issues personally, both as

citizens and as consumers. Again, instead of being hypocritical let us

be selfish, an attitude that is more natural to modern man: we have to

realize that our way of life and standards of living are highly

depended on nature, on bio diversity and on landscapes and the way

we treat them. What is nature but the soil we live from, the air we

breathe and the water we drink; forests that provide oxygen andrenewable resources that regulate climate and harbour species of

flora and fauna that could provide us future medicines. We have tried

to tame and control nature and to detach ourselves from it only to

discover, as the current climate crisis evidently shows that we are

still very much part of it. Nature, bio diversity and the landscapes

that are connected to them, are not a luxury to be commoditized at

our will, but vital conditions for our lives and standards of living.

It is equally clear that we need more and better integrated public

intervention. If we truly want to find a compromise between private

markets and these essentially public goods, we will have to at least

make sure that the WTO as an institution is integrated in the United

Nations, for better or for worse the only international political

platform where the interests of the market can be weighed against the

interests of the environment. In this new institutional context the

internationally agreed aims for preserving our environment,

protecting landscapes and bio diversity can and should be integrated

in the WTO agenda.

50See for example www.saiplatform.org or www.sustainablefoodlab.org



144

This implies introducing a process of international harmonisation of policies aimed at protecting environment, landscapes and biodiversity, integration of these policies and accompanying criteria intotrade, internalisation of all cost of production together with an

internationally agreed labelling system through which both importingnations and consumers can assess in how far these criteria are met;the abolition of public support measures that have a clear negativeimpact on the environment and no limits whatsoever to programmesaimed at preserving nature and landscape. If this should lead to newforms of open or disguised protectionism, so be it.



147

A process of economic convergence seems to be the result of successful European policy and the unification of markets: there aremore possibilities to reach new and profitable markets and there isstiffer and fairer internal competition, resulting in higher efficiency

of production and productivity. Free transfer of goods, capital andpeople leads to more investments and exchange of knowledgeresulting in innovations. The transfer of public funds throughcohesion policy and the structural funds from the more prosperousmembers to the developing members has given the latter theopportunity to invest in their infrastructure, education and economicsectors in order to become more competitive and raise standards of living.

One of the other main factors behind this success was the CommonAgriculture Policy, developed in 1962. It was one of the crucialfactors for the viability of the young European Community. Asformer Dutch minister Cees Veerman states in his recent essay:“European spirit and European cooperation, and the values anchored

therein, are based on and have been shaped by socio-economic

arrangements: the customs union which has blossomed into a

common internal market and the Common Agriculture Policy whichis a vital part of it. Without the CAP the Union would not have

become what it is today”.

Agriculture sat high on the agenda of European policymakers,

especially at the time when the Treaty of Rome was being

negotiated. The memory of post-war food shortages was still vivid

and thus agriculture constituted a key element from the outset of the

European Community.

The Treaty of Rome defined the general objectives of a common

agricultural policy. The principles of the Common Agricultural

Policy (CAP) were set out at the Stresa Conference in July 1958. In

1960, the CAP mechanisms were adopted by the six founding

Member States and two years later the CAP came into force.



148

The goals, as set out in Article 39 of the Treaty, underlying the firstCAP, have, in legal terms, remained unchanged until today: toincrease agricultural productivity by promoting technical progressand by ensuring the rational development of agricultural production

and the optimum utilisation of the factors of production, in particularlabour; to ensure a fair standard of living for the agriculturalcommunity by increasing the individual earnings of persons engagedin agriculture; to stabilise markets; to assure the availability of supplies and to ensure that supplies reach consumers at reasonableprices.

Three main principles, defined in 1962, characterise the common

agricultural market. The first of these is the principle of a unifiedmarket: this denoted the free movement of agricultural productswithin the area of the Member States. For the organisation of theunified market, common means and mechanisms should be usedthroughout the EU.The second principle is that of community preference. This impliesthat EU agricultural products were given preference and a priceadvantage over imported products and also the protection of the

internal market from products imported from third countries at lowprices and from considerable fluctuations in the world market.Lastly, there was to be financial solidarity: all expenses and spendingwhich result from the application of the CAP are borne by theCommunity budget.

To make these principles operational three mechanisms were put inplace, the first of which was to apply import tariffs to specifiedgoods imported into the EU. These were set at a level to raise theworld market price up to the EU target price. The target price waschosen as the maximum desirable price for those goods within theEU. Quotas were also used as a means of restricting the amount of food being imported into the EU. Also, an internal intervention pricewas set. If the internal market price falls below the intervention levelthen the EU will buy up goods to raise the price to the interventionlevel. The intervention price is set lower than the target price. Theinternal market price can only vary in the range between the

intervention price and target price.



149

Finally, subsidies were used to pay to farmers growing particularcrops. This was intended to encourage farmers to choose to growthose crops attracting subsidies and maintain home-grown supplies.Subsidies were generally paid on the area of land growing a

particular crop, rather than on the total amount of crop produced.

So, the success of the European Union and of the CAP was reachedby creating on the one hand a common market, but on the other tobuild a fortress, a strong defense line against external competition. Itis crucial to underline this, since in the liberalisation debate theUnion’s internal market and its success are frequently pictured as a

textbook example of the benefits of liberalisation of markets. We

have to realize, however, that the succes of this internal liberalisationwas only made possible through massive external protectionism. The

European Model can therefore not be extrapolated to a global level,

or only if all of a sudden we would encounter extraterrestial

economic competition.

7KHKLVWRU\RIWKH&$3DVDKLVWRU\RIUHIRUPV

Almost right from the start the CAP has been severely debated and

attempts for reform were made. The first serious attempt at a reform

came just six years after its implementation. In 1968, the

Commission published a "Memorandum on the reform of the CAP",

commonly known as the Mansholt Plan, named after Sicco Mansholt

who was Vice-President of the Commission and responsible for the

CAP at that time. The plan sought to reduce the number of people

employed in agriculture and to promote the formation of larger andmore efficient units of agricultural production53. The reform was

heavily debated and eventually limited in its scope. It was in fact

contested so heavily that subsequent Commissioners could not find

the courage for new reforms until 1983.

In that year the Commission made a proposal for a fundamental

reform, which was formally expressed two years later with the

53

At the end of his life Mansholt, influenced by the Club of Rome report ‘Thelimits to growth; a global challenge’, published in 1972, regretted his reform.



153

In the general agreed framework on the total EU’s budget, a

mechanism for financial discipline was also introduced to ensure that

the farm budget fixed until 2013 is not overshot. Given that since

2004 the Union has welcomed 12 predominantly agricultural and

rural new members54, this obligation has severe consequences for theallocation of available money.

One of the aims behind the decoupling of the payments was to be

able to convince the WTO that a major share of support to

agriculture would be moved from trade distorting classification under

WTO-rules (Amber Box) towards minimal or non-trade distorting

category (Green Box).

In this sense the Commission pro-actively anticipated the outcomesof the new Doha round of negotiations in which reduction of trade

distorting support would be key.

As a consequence of the reform and the strict budgetary rules the

value of subsidies paid to individual European farmers will fall by

25-30% in real terms until 2013, which is the combined effect of

degressivity, compulsory modulation and the national reserve.

In its hay day the CAP accounted for some 70% of the total EUbudget. In 2013 this share will have fallen to 39%, second pillar

budget included. The cost of the CAP will amount to no more than

0.5 percent of the EU’s GNP.

(YDOXDWLRQRIWKHUHIRUPVWUHQJWKVDQGZHDNQHVVHV@ @

How should this latest CAP reform be looked at: as a decisive and

final rupture with the old market and price support policy, as a clever

strategy in the WTO-negotiations, as an incentive for farmers to

respond better to the changing needs and demands of the market and

54Although there exist large differences between de various new members.

For more general information see also the excellent websitehttp://www.rlg.nl/cap/index.html.55

This paragraph is to a large extent based on the paper by Groupe de

Bruges’ members Franco Sotte and Emilio Chiodo ‘/RRNLQJWRZDUGVDQHZUXUDOGHYHORSPHQWSROLF\D6:27DQDO\VLVRIWKH)LVFKOHUUHIRUP¶



154

at the same time complying better with society’s wishes for more

sustainable and animal friendly ways of production or is it simply a

way to control the expanding EU-budget, in which agriculture still

has the biggest slice of the cake. Or is it just old policy disguised in a

new form?

The Fischler reform, definitively approved in September, 2003,

undoubtedly constitutes a turning point in the complex redefinition

of the role of the CAP in the strategies of the EU. Obviously it has

been a difficult compromise, a synthesis between various interests

and opinions and at the same time the Commission was juggling to

keep a strong bargaining position in the WTO-arena, which at that

point in time was in the preparatory stages to come to a finalagreement on free trade.

The reform can thus be considered as an arrival point. But at the

same time it should be considered as a departure point for a new

stage in the proceedings. A long term solution for agriculture and the

rural areas is yet to be found. It still lacks an integrated long term

vision and a sustainable socio-economic and territorial strategy for

an enlarged Europe.

This new vision and new strategy will have to be developed within

the context of an enlarged Europe in which 12 new actors have

entered the stage since 2004 and 2007 respectively and possibly

more to follow before the end of the current programming period56.

These new actors will play their role from now on, by introducing

new objectives and modifying past strategies. They will also make

their mark on the allocation of the budget for both the First and the

Second Pillar, as they currently receive a relatively small share of the

total CAP budget.

The debate on the agricultural and rural development policy reform

will therefore continue and should continue; a debate in which

agriculture for a variety of reasons should still actively play its role

for the future of Europe; a future which, at present, refers to the year

56

Although there seems to be little political support for allowing newmembers on short term



155

2013 as the long term reference, but which, in the framework of thetheme of this book, must look beyond 2013. An evaluation of thestrengths and weaknesses, opportunities and threats of the latestreform should therefore be undertaken from this perspective,

considering not only the changing internal political playing field, butin particular from within the context of the dilemmas of globalisationand liberalisation we pictured in the previous chapter.

The first positive thing one could remark on is that there was areform at all. Around the CAP a very powerful wall of conservatismhas been set up for a long time. It has been built and strengthened byall the vested interests served by the CAP: the farmers’ interests,

certainly, but also the interests of many other actors: the food chainoperators, the land owners, the public bureaucrats and those of the

various associations and lobbies. Almost all the previous efforts to

reform the CAP, even less radically, systematically ran out against

this “wall”. The Fischler reform took special care of the political

feasibility. In this way, the solution was designed in such a way as to

be as acceptable as possible to all actors involved. Indeed, the

solution that was found gives a particular protection to certain social

categories which otherwise would have been penalized. Thisapproach resulted in a weakening of the resistance to any change of

the main beneficiaries of the CAP. For the old beneficiaries of the

CAP, in fact, the adopted solution implied limited losses of income,

even in the hypothesis, when faced with the new CAP and the

consequent new market conditions, they refused to adapt by choosing

to maintain their previous production systems.

Acceptance of the reform is to a large extent attributable to the fact

that support was guaranteed until 2013. This guarantee will certainly

be useful for the farmers. After the reform, they can take their

entrepreneurial decisions within the framework of a relatively higher

level of guarantee of the public support they will receive. This

increases the level of confidence and their propensity to risk. This is

a fundamental issue that should be carefully considered. Before the

reform uncertainty about the future was in fact high.



158

In fact, this could be considered as a partial and indirect re-nationalisation of the First Pillar, making the European playing fieldless level. Of course, these differences can be judged as a positiveconsequence of the application of the subsidiarity principle, offering

room to adapt the CAP to national and regional specificrequirements. But MSs, as well as their regions can use the degreesof freedom instrumentally aiming at creating artificial marketadvantages for their farmers. In this way, they could distort thecompetition between farmers of different MSs. A similar marketdistortion can be seen if the MSs adopt divergent decisions fromeach other on the practical adoption of the cross complianceprinciple. The risk is a decrease in the commitment towards multi-

functionality and some could take advantage of it by favouringenvironmentaldumping, in a visible or hidden way.

From a global perspective decoupled support seems to reduce directmarket distortions. The Fischler reform in principle should facilitatea solution in the WTO negotiations. Decoupling and compulsorycross-compliance can make it easier to move the support from theblue box to the green one, from production and trade support to non-

trade concerns. This re-legitimization of the CAP can bring someindirect advantages to Europe in the negotiations. Nonetheless, theEU position within the WTO will remain weak. The total support forEuropean agriculture, calculated by the OECD interms of ProducerSupport Estimate’s, has only slightly decreased after the reform.Given its volume, it can still be considered as a strong distortion ininternational competition. This protection has been moved from anyspecific agricultural product, but if we consider the agriculturalsector as a whole, the protection has remained more or less at thesame level as before. This will further condition the EU contractualstrength on all the other negotiation tables and in its politicalrelations with the rest of the world.

As the reform does little to resolve market distortion, both internallyand externally, surely we can conclude that it has put agriculture onthe track of becoming more sustainable with the introduction of compulsory cross-compliance; that the greening of the CAP has in

effect become an integral part of policy?



161

If it only leads to marginal improvement of lifting trade distortion, if the greening of the CAP is still quite pale and the new RuralDevelopment Programme hardly lives up to its expectations, thenwhat then does the reform actually do?

The crux of the reform is that it has created a new privilege of statusfor the farmers with the reform: that of "past-beneficiary". Thereceived support thus becomes a recognized, necessary and sufficiententitlement for continuing to receive support from the EU in theyears to come. Rather than an incentive for making agriculturalproduction more innovative, more competitive and more sustainable,the SFP should be considered to be a rent. By rewarding the status

conditions the CAP actually prevents rewarding the most deservingbehaviour of farmers, who take part in the realization of innovativeprojects and programs, corresponding more appropriately to thetaxpayer’s expectations.

The decoupled support calculated on the basis of the direct payments

received in the years 2000-2002, constitutes in fact a consolidation

and an acceptance, even for the future, of the past distribution of

CAP funds. The distribution of CAP support has in fact only slightlychanged since the eighties. It has been modified neither by the

MacSharry reform nor by Agenda 2000. The major beneficiaries of

the CAP are still the same as they were twenty years ago and more.

This contradicts one of the main objectives for a more efficient and

effective CAP: to correct the very bad and unfair distribution of its

support. Until 2013 80 % of the support will still go to the same 20

% beneficiaries. They are in general the largest farms, part of which

are in the hands of private investors, producing the most protected

crops or animal products obtained with standardized, capital-

intensive techniques, which offer fewer job opportunities. They are

generally less compatible with the objectives of environmental

protection, less diversified, and less market oriented. They are also

less likely to engage in Pillar II schemes. It is certainly not to this

kind of agriculture that the EU refers by evoking, as it did in Agenda

2000, a (XURSHDQPRGHO RIDJULFXOWXUH" based on diversification,

multi-functionality, integration, and sustainability.



162

It is exactly the kind of farmers that are in the position to compete onliberalised international markets without public support that receivethe bulk of the direct payments.

Maintaining this status quo also means that an opportunity to bringthe CAP more in agreement with the cohesion policy objectives hasbeen missed. While the EU reaffirms that the central objective of itspolicy is to shorten the socio-economic gap between its lessdeveloped regions and the European average, the benefits of the CAPcontinue to be concentrated in the richest regions, namely the plains,the territories with better infrastructural endowments and amenities,and those bordering on the largest metropolitan areas and those that

are to a substantial extent devoted to the specialized production of commodities of standard quality. On the other hand, fewer resourcesare given to the mountain and hill areas, to the areas characterized byhigher diversification, to areas which are suitable for typical and highquality value products and to the Eastern European andMediterranean regions. After the reform, the CAP still maintains itsmost negative character: that of a policy oriented mostly to otherareas than those with the more complex territorial problems, the

lowest levels of income, the highest rates of unemployment andunderemployment, and the highest degree of marginality. The CAPthus still acts in a geographically, economically and socially oppositedirection than that of European convergence and cohesion, which isthe priority objective for the other structural policies. By its stillheavy weight on the EU budget such a connotation risks depriving itfurther of justification and sense.Another consequence is that the first pillar has a non coherentdistribution of funds with that of the second pillar, putting theefficiency and effectiveness of both pillars at risk.

,QWHUPH]]RZKRZDQWVWREHDIDUPHUWKHVHGD\V" Society needs farmers, it needs people that see farming not only as a

job, but still as a way of life, that are prepared to work long hours tobe, in the end, underpaid and undervalued. Society needs thesepeople to guarantee the continuation of food supply, the production



163

of healthy, quality food products and other essential products asfibres and energy. And to make sure that the countryside is keptviable and landscapes are maintained. So rather than posing thearrogant question whether or not we still need farmers, the question

should rather be: will we still have farmers left to fulfil these tasks?Who wants to be a farmer these days?

Very few, it seems. The number of farmers in Europe has shown asteady decrease of on average 2 to 3% a year for decades. Theremaining farms on average get larger. Contrary to what might beexpected, the number of small farms remains high and it’s the

middle-size farms that suffer the biggest decline. This trend leads to

a bi-modal structure, of (very) large farms and (very) small holdingsand can be seen all over Europe, but maybe more pronounced in

some of the new Member States. It also indicates that a substantial

proportion of farmers rely heavily on non-farm and off farm sources

of income. In fact, in the EU-25 of the 10 million people working in

agriculture in 2003 only 46% worked full time. Commissioner

Fischer Boel’s remark that in the future the majority of farmers need

to look for additional sources of income outside agriculture is already

current practice. The European Commission expects furthermore thatof the 15 million farmers in the EU-27 by 2015 almost half of them

will have given up farming. So, apart from the need to develop

alternative employment for some seven million people in the coming

years and the subsequent marginalisation of already disadvantaged

rural areas, the question is why so few farmers continue their

profession and why so few young people are inclined to take up

farming?

Farming has a bad image, due to the lack of economic perspective,

the hard labour, the investments needed to become and stay

competitive, the uncertainties concerning policy changes and more

liberalised market conditions, the increasing expectations of society

and simply because alternative labour, with better payment, better



164

hours and working conditions, is relatively easy to be found in aEuropean Union where there is a free flow of labour57.The net result is that the current population involved in agriculturalemployment is aging more rapidly than in other sectors and that the

percentages of farms that can expect to have a successor taking overthe farm in the next 10 years is dangerously low.

One of the problems why agriculture has such a bad image is the factthat heavy investments, the hard labour, the risks of climate anddisease that can endanger production, the uncertainties of the market,the negative public feed back, the increasing requirementsconcerning the protection of environment and animal welfare just

don’t pay off. Farmers are probably in absolute terms, but surelymeasured in hours worked the worst paid workers in the Union,

doing what is the still one of the most hazardous jobs.

Those supported by the CAP have experienced a further drop in

income over the last years as a result of the cutback in price and

income support. At the moment, as a result of increasing global

demand, brought about primarily by the economic growth in China

and India and the bio-fuels hype, farmers’ incomes see some

improvements, that partially make up for the losses over recent yearsand expected loss of subsidies over the next.

Officially the European Commission expects farmers’ income to

increase on average by 3% in the next seven years, with higher

increases in the new Member States and in some sectors and constant

or falling incomes in others. Few employees in the industry and

services sectors would be satisfied by a 3% rise in seven years; in

real terms this will be another loss of income as inflation will most

certainly be more than 0.5 annually. The reason why farmers’

incomes do not increase more, given the expected continuing rise in

demand, is threefold. First of all, those under the SPS will suffer a

25-30% reduction of their payments in real terms.

57It is estimated for example that of the 20 million Romanians, 4 million

currently work in one of the other MSs. This exodus has already forced theRomanian economy to hire labour from China to do low skilled jobs. Thestagnant population growth in some of the MSs and the accompanying

ageing of the population will accelerate this migratory process; a process, bythe way, that is part of a global development.



165

Secondly, over the next few years farmers will have to invest oncemore in order to be able to comply with EU-regulations, such as theNitrate Directive, the Water Directive and the Soil Directive,increasing the cost of production. Cost of production will be further

augmented by expected rises in the cost of energy inputs andlivestock producers will witness a further increase in the cost of feedstuffs.Finally and more fundamentally, the way added value and higherprices are spread out over the supply chain leaves farmers in general,in the back row, always the last to reap the benefits of improvingmarkets. On average of every euro spent by consumers on food, only20% end up in the pockets of the farmers, compared to 50% a few

decades ago. The other 80% is for the downstream industries andretail sector. Any increase in demand will first of all be of benefit forthese downstream industries. When European farmers step up toclaim their slice, retailers promptly seek to find other supplierselsewhere, facilitated by a globalised food system and liberalisingmarket conditions. Recent developments in demand have already ledretailers to loosen their EurepGAP criteria so as to have more roomfor manoeuvre on world markets.

So far we have spoken only in general terms on farmers’ incomes.

There are of course huge differences in income between farmers per

sector and per country. Although some of these differences can be

attributed to geographical conditions, the scale of operation and

management performance, it is also a well known fact that the

unequal distribution of income among farmers is reinforced by the

CAP itself, despite its goal to ensure a fair standard of living for the

agricultural community, in particular by increasing the individual

earnings of persons engaged in agriculture. The largest farmers who

are generally also the most profitable receive most of the benefits of

the CAP: the largest 25% of farms produce 72% of the output and

receive 68% of support.



166

In fact, most of the peasant farms in new MSs are considered toosmall to be eligible for CAP support58.

The latest reform also creates a new form of distorted competition

among farmers. With the SPS the coupled support has beentransferred from the product to the eligible land. The effect is thatland prices and land rents remain high. The decoupled support,linked to the eligible land, represents in agriculture thus an additionalbarrier to entry. To start a new farm, the young entrepreneur must notonly pay for the access to the land, whose value is dependent on itsproductive capacities and expected income it can generate linked tomarket expectations, but also for the enormous burden of benefits

and supports that are bound to the status of the farmer through theSingle Payment System. Or otherwise he is forced to compete withno support with the old farmers, who are receiving the single farmpayment.

Rather ironically, on the other hand there are now Pillar II funds andmeasures to help and encourage young farmers in taking overexisting farms or installing new farms. As Pillar II funds form only a

small proportion of the total CAP spending and as measures aimed atyoung farmers have to be co-financed by national and/or regionalgovernments, it remains a matter of national or regional prioritywhether or not this measure will be implemented and to what extent.Some regions, however, have acknowledged this growing problemby topping up the available European EAFRD funds by more than100%. Obviously some have understood that we still need farmers;farmers that can make a fair living out of agriculture without being apriori forced to supplement their income from activities outsideagriculture.

58It is true that in the Health Check Green Paper issued by the Commission

on November 20 2007 it is proposed to apply upper limits for support, that isthe higher the support the larger the reduction, but simultaneously to install aminimum payment per holding “in such a way that would not affect realfarmers”(!), which will exclude another large portion of small scale andsubsistence farmers. This will hit hard especially in some of the new MSssuch as Romania where the countryside still relies heavily on this type of

agriculture. On the other hand, large scale farms can easily by pass theceilings and cuts by on paper subdividing their holdings.



168

With the growing success of the CAP in the sixties and seventies of the last century also criticism increased as to the externalities of thispolicy. One of the main points of critique was the fact that Europe’s

export and access policy was hugely distorting world markets and

destroying local food production systems in developing countries;small and poor farmers in these countries had to compete with

heavily subsidized imported European agricultural commodities

while on the other hand they had little opportunity to export their

commodities to the Union. On top of this we installed a tariff

escalation system, hindering developing countries to set up their own

processing industry, forcing them to become mere suppliers of raw

materials. As this policy, complemented by a comparable policy of

the U.S. government, continued for decades it also facilitated a homegrown processing, trading and retail industry to develop and expand

internationally. It was in fact the major Western companies that,

directly helped by the CAP and U.S. agricultural policy, succeeded

in getting a tight grip on the global food supply chain in this crucial

period. The reforms of the CAP in the nineties were not so much

instigated to remedy this process as they had become necessary for

internal, mostly budgetary, reasons. It is only with the Fischler

reform that we see some serious attempts to lower the Union’sdistortion of world markets. It has now in principle been agreed to

come to an abolition of export subsidies, though the actual

implementation and finalization has been made dependent on the

outcomes of the current WTO round of negotiations60.

In the meantime the damage has already been done: multinational

companies, through a process of expansion and concentration have

meanwhile achieved such a dominant position in the global food

supply, that elements of the reform that are directly aimed at

reducing market distortion will, again, mainly benefit these

companies that now find themselves in an excellent position to

compete under liberalised conditions.

60

In fact, the Commission has at the end of 2007 re-introduced exportsubsidies for pig meat.



173

Food security was the first priority of the first CAP; an objective thatwithin two decades was not only reached, but superseded in such away that we had to install measures to first of all develop publiclyfinanced measures to more or less dump excess production on world

markets and subsequently to confront and control over production,through production quotas, compulsory set aside and lowering of price support.It is meanwhile a cliché to say that the objective of food security was

not reached in a sustainable way. The fact that it is a cliché does not

make it less true, even today. The high input high output nature of

modern day agriculture, especially in those regions, sectors and

farms that were and are most supported by the CAP, has led to a

series of negative externalities that have not been taken into theimmediate cost of production, but whose bill we are now only

beginning to pay for in the form of its contribution to climate change,

shortages of water, contamination of soils and ground water,

depletion of soil fertility and loss of landscapes and bio diversity; all

matters that will lead to huge and increasing costs for today’s and

future tax payers and consumers to restore and manage. It would

therefore be foolish to take our model of ensuring food security as an

example for the world as a whole.

The problems are exacerbated by the fact that meanwhile we have

become part of a globalised and liberalising economy in which the

Western model of standards of living has become the norm to strive

for; as soon as welfare increases, people change from diets based on

cereals and vegetables to diets based on dairy and meat, both of

which contribute further to an inefficient use of resources and an

increment in wastages and contamination. We therefore do not need

more of the old neo-liberal, technology driven strategy; we need

another, a modern-ecological approach; an approach that takes the

use of resources as a starting point combined with reinforcing

existing measures to prevent and combat wastages and contamination

and, again, to include consumers as being co-responsible; a truly

integrated approach that entails the whole chain from upstream

industries to production, processing, transporting, selling and

consumption.



174

The European Commission should for example question itself why itstill is subsidizing milk and meat production; while it has, up untilnow failed to even agree on a European campaign to promote theconsumption of fruit and vegetables at schools. Organic agriculture,

evidently the most sustainable system of food production, stillremains marginal in terms of production surface and market share.On top of that, and in collaboration with other relevant DG’s and

MSs the Union should not only engage itself in consumer protection,

but also make the role and responsibility of consumers concerning

the relationship between food consumption and sustainability an

integrated part of a new CAP. Likewise the Corporate Social

Responsibility of the multinational companies that control food

supply chains should be addressed.

Following this approach through to the international arena of the

WTO the EU should once and for all free itself from the vested

interests that merely look to keep the level of support as unchanged

as possible, support that is not only to the detriment of the world’s

poor but is also damaging our resources and environment; the Union

should instead agree on no further liberalisation until ecological

principles have become an integrated part of any agreement. Wehave reached a point in history that partial interests no longer should

dominate the debate and determine its outcomes. If we want to take

care of profit, people and planet should come first.

7KHILJKWIRUODQGDQGUHVRXUFHV

In the previous chapter we have predicted that over the next decades

we will witness a new and intensified global battle for land and

resources as population, standards of living and the need for

alternative, bio-mass based energy sources will simultaneously and

interactively augment. Climate change will parallel to that affect both

the total surface of productive land as the production capacity of

soils; urbanisation and the subsequent increase in the needs and

wishes of the urban population for living space, infrastructure and

recreational areas will continue to nibble away agricultural land.



175

In Europe there has been a steady annual decrease 0.3% of theagricultural acreage since 1950. This seems little, but calculated overhalf a century this constitutes a loss of more than 15% and there areno signs that this process has halted, rather the contrary.

The 9 billion people that will inhabit this planet in 2050 will onaverage eat more meat, leading to an increased usage of water,already a scarce resource for 40% of the worlds population, andacreage to grow feed stuffs; similarly the accelerated increase indemand for bio-fuels will further enhance the use of water and otherinputs, such as fertilizers and pesticides to accommodate globaldemand. We also predicted that these developments will potentially

constitute the underlying causes for (geo-) political and ethnicconflicts. We have demonstrated that the process of globalisation,despite what neo-liberal theory states, is not maximizing theefficiency of inputs and resources, but rather it has aggravatedproblems as it prioritizes the wants of the wealthy minority over theneeds of the poor majority. Liberalisation, when it is not embeddedin a strong and clear vision on how to balance people, planet andprofit, will merely serve as an accelerator of this process.

Can the CAP in this context then be considered a tool in thesustainable management of land and resources? From the currentCAP few incentives can be detected for a more prudent use of neither; water is only a matter of policy as far as the quality of ground and surface waters are concerned. Necessary of course, butthese policies should be complemented by redirecting the SPStowards increased input efficiency. The same goes for landmanagement; cross compliance offers only a bare minimum, meatproduction is still one of the most subsidized sectors and the budgetfor Pillar II is far too insufficient to really tackle the problems of lossof land and soil fertility. Other policies do, but cohesion with theCAP is still to a large extent lacking. Some policies even aggravatethe problems, such as the recent action plans to increase theproportion of bio-fuels in our energy consumption. It is clear that atthe moment the alleged benefits of using good quality agriculturalland for bio-fuel production are offset by larger downturns both in

the short and long-term.



179

These public investments will not only safeguard us from the loss of landscapes, cultural heritage and bio diversity, but will also rendereconomic benefits62. In other words: it is wise economic policy toinvest in these public commodities. It will create attractive spaces for

recreational use, it will keep the air cleaner and people healthier,which will lead to new and extra forms of income and will contributepositively to combating the ever rising cost for health care.

Secondly direct payments for public goods should in part bedecoupled from individual farmers and be spent on an aggregatelevel, locally or if necessary regionally, not only because funds areand will remain scarce, but also because some measures will only

have an effect on certain public goods when implemented on supra-individual or territorial level. Research on the effects of existingagro-environmental measures shows that to improve the quality of ground water or to manage certain habitats only a territorial approachwill be effective. This also means that these payments should beconnected to the land rather than to the farmer himself in order toascertain a certain continuity in management. Another reason forpromoting policy implementation at an aggregate level is that it

offers a better stepping stone to involve citizens living in and aroundthe area: farmers and other land managers operating collectively andcooperatively to maintain landscape and bio diversity are a far betterpartner to engage the general public than individual farmers.

62

A recent Dutch study has calculated the societal economic spin offof such landscape investments in terms of increased returns fromtourism and reduced health care costs. The cost in terms of publicinvestments and payments to farmers are more than compensated

by additional income from tourism and reduction in for examplehealth care cost.



180

7KHIXWXUHRIWKH&$3RSSRUWXQLWLHVDQGWKUHDWV

So far, we haven’t treated the CAP and its successive reforms kindly.

We have criticized its negative effects on world markets, on the

environment, nature and landscape, on resource management and on

the position and image of farmers; we have confronted it with some

of the big dilemmas that are at the heart of the debate on

globalisation and liberalisation and that are likewise at the heart of

the future of agriculture and the rural world. We feel, however, that

such a critical approach is necessary to challenge decision makers

and stakeholders to rethink the assumptions on which their policies

and positions are based, to tickle their grey matter to come up with a

new and inspiring vision based on shared goals and commonobjectives, to evaluate not only what is feasible or politically

convenient, but what is necessary in the light of the problems Europe

and the world community are facing; problems that in one way or an

other are linked to agriculture and to our perception on the role of

agriculture.

Before we can add our conclusive part to the debate on the future of

the CAP, in order to come to some hopefully usefulrecommendations, we want to conclude our analysis by presenting

some of the opportunities and threats that have to be reckoned with if

we want to come to a fruitful continuation of the debate and a

successful outcome.

It would be safe to say that the biggest threat to the future of the CAP

is a political debate that would only consider budgetary arguments.

While it is true that the CAP, even after its latest reform, is runningthe risk of rapidly losing its justification, it would be foolish, in the

light of the problems and challenges that lay a head, to narrow the

debate down to a further reduction of the budget, both in relative and

absolute terms.

63This paragraph is also to a large extent based on the paper by Groupe de

Bruges’ members Franco Sotte and Emilio Chiodo ‘/RRNLQJWRZDUGVDQHZ

UXUDOGHYHORSPHQWSROLF\$6:27DQDO\VLVRIWKH)LVFKOHUUHIRUP¶



181

Even when prices for agricultural commodities momentarily show anupward trend, we have to come away from the pitfall to concludethat the bulk of the CAP can be put to other uses. To call the CAPobsolete and outdated is one thing, to abolish it altogether would be

extremely dangerous; we would lose a powerful instrument inmanoeuvring and redirecting agriculture and rural development toaccommodate new goals and objectives, just as the CAP in its initialstages served as a lever to steer and direct agriculture to meet theobjectives of those times.

Indeed, the CAP budget highly risks erosion; budget shrinkage isalready at work: its ratio on the European GDP amounted to 0,61 %

in 1993, and fell to 0,43 % in 2003 and it will fall, on the basis of thedecisions already adopted, to 0,33 % in 2013. Nothing proves thatthe last ratio will actually be defended until 2013. As time passes, thedecoupled support, based on the direct payments received in theyears 2000-2002, will be less and less politically justifiable. Thedissatisfaction will rise, in particular if these payments are notstrictly associated with tighter cross compliance criteria and thesupply of public goods or services (based on specific contractual

obligations), corresponding to the willingness of the taxpayer to pay.It can be expected that the situation will become untenable as 2013draws closer. If a real perspective based on a new vision foragriculture and rural development is not found in the meantime, thecriticism that decoupled payments means "paying farmers for doingnothing" would become that strong as to undermine the wholeconstruction of the CAP.

It is not difficult to imagine that if the future battles for the CAPreform had to take place once again separately from the otherEuropean policies, with the same participants and the same ways,one could expect its progressive dismantling, based first of all on asubstantial reduction of funds. As a consequence one can expect alsoa marginalization of the role of rural areas in regional and localdevelopment, as well as a marginalization of the farmers in theEuropean economic development. In these conditions, it is evidentthat the most radical solutions, such as those expressed by the Sapir

Report, would be reasonably welcomed by many.



182

Such an approach was presented by the Lithuanian Commissionerresponsible for Financial Programming and Budget Mrs Dalia*U\EDXVNDLW ZKR LQ IDFW GHILQHG WKH &$3 DV "old-fashioned anddémodée". It is not difficult to imagine what she was referring to

later when she added that the EU budget responds to “some prioritieswhich have been old for decades” and that it should be revised “by

increasing its flexibility”.

On the other hand, the major positive effects produced by the reform

are of a political order. The political value of the Fischler reform has

been recognized by the new Commissioner for Agriculture Mrs.

Marianne Fisher Boel. Declaring her agreement with the Fischler

strategy and confirming her commitment to continue on the roadtraced by his reform, she advocates Europe’s need for a rural strategycorresponding to an agricultural and rural development policy aimed

at supporting diversification, innovation, structural renewal and

technological improvement. The Fischler reform successfully broke

the wall of previous opposition to any consistent change. This new

political setting, strengthened by the fact that meanwhile we now

have 12 new members, most of which still have a strong agricultural

and rural basis, offers an opportunity to give the CAP new meaningand justification.

Nonetheless, the cornerstone of the recent reform, the Single Farm

Payment System will need some fundamental revising; it is the time

bomb under any future CAP. A system that allocates, in the name of

income support, the majority of the funds to a minority of farms that

should be expected to be in a position to compete on international

markets without subsidies anyway, is untenable. Direct payments

should be re-coupled, but this time to support farmers to re-orientate

production towards truly sustainable production systems, to more

efficient use of resources, to further ‘green’ the CAP on the one hand

and the provision of non-agricultural, public goods and services on

the other. The upcoming Health Check offers a good opportunity to

encourage this debate as the reform is already urging farmers to

reconsider their business organization.



183

In particular, given the technology and considering the marketconditions, they have to decide if and how it is convenient to changethe attributes of quality both of the production process and of theproducts or services (both public and private) produced. In the past,

the coupled support mainly stimulated the production of standardquality products, as no additional payments or incentives wereavailable for supporting the quality of the process as well as that of the product. Now that the coupled incentive of the past is beingdismantled, farmers could decide also on the qualitative attributes onthe base of the rewards they could obtain on liberalized markets; tofind in sustainability, diversification and quality their newcomparative advantage. The vicinity of large markets with

substantial buying power in which large classes of consumers showan interest in these characteristics, could offer a spring board for thistransition, under the condition however that the Commission remainsprepared to protect these added value products of origin both towardsEuropean consumers as well as in the WTO arena.

In losing the coupled support and restructuring the decoupledsupport, the most standardized products will have to find their value

on the international market, where they have to face international andinternal competition. For these products it is especially important todecrease the average production cost. Several European regions andfarms will be able under these conditions to continue to becompetitive, but in many other cases it will be necessary to changestrategy and to re-orientate land use either towards non-agriculturalfunctions (forestation, residential use, recreational services) or lessextensive high quality products. If this were really going to happen,the Fischler reform could favour the spread of the European model of agriculture evoked by Agenda 2000 in a concrete way, based onquality enhancement, diversification and multi-functionality.

If, in the future, the importance attributed to environmental issues bythe citizens increases, a growing support to further actions for"greening" the CAP is expected. From this perspective, the eco-conditioning of the Fischler reform would represent only a first steptowards new and more explicit contractual solutions to pay for

multifunctional services supplied by farmers.



185

Which brings us once again to the liberalisation debate. The WTOnegotiations were stalled in July 2006 and at the time of writing thisbook, were not yet officially resumed. This time out offers anexcellent opportunity to rethink the objectives of trade liberalisation,

to evaluate these objectives vis à vis the Millennium Goals and theneed for sustainable economic development and to revise Europe’s

position accordingly. It also gives us the opportunity to redefine the

notion of market distortion when we discuss agriculture. Food,

sustainably produced and contributing to public health, is a need so

obviously essential for our survival, that food security and access to

good quality, healthy and affordable food can almost be considered

to be a public good. Stabilizing markets through public intervention

so as to give farmers some certainty on their income and on the otherhand make sure that food is available for all consumers, will

therefore always remain necessary and justifiable.

The fact the European population will hardly grow or even decrease

over the next decades makes maintaining food security for our part

of the world relatively easy, technically. For this reason alone we

could take bigger steps in ensuring a more efficient use of resources

in production and combating its negative side effects. On short termthis could lead to a reduction in production quantities, but would

better ensure production capacity long term. It will also lead to a

competitive disadvantage in the global market when it comes to cost

of production, but if Europe wants to lead the way in sustainable

development, as it says it wants to, this consequence should be

defended in the international arena and towards the general public,

by emphasizing quality65 over low cost and by maintaining a long

term perspective.

Finally, what can be concluded at this point in time is that the CAP is

becoming less common. MSs have the right to choose their own form

of implementing the decoupled payment system, they can develop

their own criteria for cross-compliance; they have their national

envelopes, they are responsible for writing and implementing their

65

For example when it comes to defending the position of the products withlabels of origin in the WTO arena



187

While a 10 per cent reduction on a payment of ¼ZLOOKDUGO\

be felt by the farmer in question, the loss of an annual total paymentof ¼ FDQ IRU RWKHU IDUPHUV PHDQ WKH GLIIHUHQFH EHWZHHQ

continuing the farm or seeking labour opportunities elsewhere.

Keeping an exclusively technical approach to evaluating the lastreform, to us is an opportunity missed. If anything of a ‘vision’ seeps

through the proposals than it is one that is still based on neo-liberal

assumptions of the free market, assumptions that we have shown to

be questionable at least.

Given the timeframe to come to any agreement on any reform until

2013, the debate on such a new vision post-2013 should start right

now, a debate that should question the original objectives of theCAP, question the still dominant free trade ideology in the light of

the problems and challenges of tomorrow to come to a new,

common, comprehensive and integrated European vision on

agriculture, on farmers and farm employment, food, health,

sustainability, bio diversity, land management, rural development

and the city-countryside (inter)relationship; in fact to come to a new

Treaty of Rome.



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Farmers, crushed by the tight squeeze of these companies,technological developments and government policies have eitherintensified production or sought better life conditions in the cities.The globalisation of technology and of the food supply chain in

conjunction with the expansion of the world population and changingconsumption patterns have put an unprecedented pressure onresources and the environment, causing soils to become depleted,water to be polluted, nature and landscapes to be destroyed and theclimate to change. These effects in their turn are now affecting thevery conditions for our survival and are threatening our commonfuture.

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We realize that we have been critical concerning the processes of globalisation and liberalisation. That does not imply that we areopposed to either. We live in a globalised world and we cannot turnback the clock nor do we want to. The interlinking of economies and

cultures can act as a powerful driver for economic development andwelfare if governed wisely; it makes economies and peopleinterdependent which can act as a safeguard for peace and stability; itoffers the opportunity to exchange knowledge, experiences and makepeople conscience of the richness of different cultures, values andbeliefs. And it is a far better model than its counter part, a world inwhich each country or region is driven by protectionism, self interestand mutual distrust and suspicion. We are neither against

liberalisation as such, for the same reasons and more: when governedrightly and justly, trade liberalisation can lead to a more efficient useof resources, to a wider and faster dissemination of the use of technology and knowledge and give poorer nations and people theopportunity to reap the benefits of access to larger and moreprofitable markets.



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We have shown, however, that this is not the case. Globalisation andliberalisation are not driven by ideals, but are essentially aboutmaking money, in which free trade serves as leverage for economicgrowth defined in very narrow monetary terms. What globalisation

and liberalisation do in fact is disconnect production andconsumption, to literally de-localize the whole economic system.People, goods and resources have become commodities to be pushedand shoved over the globe at will. Capital has become as fluid asmercury and as light as helium, the financial world an almost virtualreality. Labour is not about people and skills, but has become acommodity to be bought at the cheapest price possible, causingmillions of Rumanian unskilled workers to find miserable job

opportunities in Spain and forcing the Rumanian government andbusinesses to hire Chinese labourers instead to fill in the gaps in thedomestic industries. This almost translucent state of the globaleconomy is destructive as it has lost all relationship with place andtime and therefore with communities.

Our critique is in principal, aimed at those that advocate the benefitsof globalisation and liberalisation while disregarding its risks, pitfalls

and negative side effects; those that maintain that liberalisation is thecure for all ills, based on shaky neo-liberal economic notions andquestionable theories. We have tried to expose these notions asmyths or false assumptions, and to introduce, in essence, simple andbasic economic notions that are lacking in the debate. There is forexample hardly any mention of the different price and substituteelasticities of various categories of commodities; especiallyagricultural commodities which react quite differently to changes insupply and demand than other goods or services. There is also nomention of the various types of markets that exist, each with theirown characteristics. In this respect agricultural commodities havemoved from local and regional markets with full competition to aglobal oligarchic market where a handful of agri-businesses and twohandfuls of retail companies meanwhile dominate global supply anddemand. The debate lacks clear definitions of what subsidies andtrade distortion are; it fails to make clear what the benefits of furthertrade liberalisation could be and to whom.



193

We have demonstrated that there is no such thing as the invisiblehand that reigns or could reign over markets and that the notion of comparative cost should be approached in an extremely cautiousmanner. We have also made clear that the notion of a level playing

field, whether one should have one or not, is not being addressedproperly as it is usually narrowed down to production criteria, ratherthan to include other and usually more important aspects such as taxregimes, infrastructure investments and research programmes.

The debate is especially lacking a basic distinction between goodsthat serve to satisfy basic needs and commodities that serve endlesswants, a topic to which we will return at the end of this chapter.

From this critical position we have tried to put the discussion in thecontext of some of the main problems that face the world, problemswhose solution is critical for the survival of mankind. We haveexamined these problems in the light of the process of globalisationand the debate on liberalisation and especially with respect to theposition of agriculture. Rather than taking an a priori point of view,we have tried to pose these problems as dilemmas, because in this

complex world there is more than one way to assess them, especiallywhen we confront short term urgencies with necessities for the longterm.

We have started with the UN’s number one priority, the eradication

of poverty, also following article 25 of the Universal Declaration of

Human Rights stating that “everyone has the right to a standard of

living adequate for the health and well-being of himself and of his

family, including food, clothing, housing and medical care andnecessary social services, and the right to security in the event of

unemployment, sickness, disability, widowhood, old age or other

lack of livelihood in circumstances beyond his control”, the dilemma

not being the eradication of poverty as such, but to overcome poverty

in a sustainable way. A dilemma that is crucial for farmers as they

still constitute one third of the world population and 75 per cent of

the world poor. We have pointed out that if every human being on

this planet would have the same standard of living and consumption

pattern as we have in the Western world, we would be at least one



194

planet short. With 9 billion people inhabiting the Earth we wouldsoon be at least two planets short. The Western world has no moralgrounds to deny less fortunate countries our welfare. The Westernworld has the severe responsibility to reduce its ecological footprint,

either by increasing the efficiency of our use of resourcesdramatically and/or by accepting a more modest life style.

We have made clear that globalisation and liberalisation do little toreduce poverty, evidence available shows that it rather makes mostof the poor even worse off and making the gap between the havesand have nots wider. Those that could reap the benefits of globalisation, fuelled by developments in transport and information

technology, are quickly adopting life styles that resemble thoseprevalent in the Western world, putting more pressure on vulnerableand non-renewable resources.

As our second dilemma we have confronted the expanding worldpopulation with the question of sustainable production: can we feed 9billion people sustainably in 2050? First of all we must acknowledgethe fact that since the dawn of agriculture we have failed to solve the

hunger problem. Despite enormous advances in production, morepeople starve of lack of sufficient food than ever before although intheory there is enough supply in caloric terms to feed every personsufficiently. Although this is undoubtedly, to a certain extent, due tofailing governments and existing conflicts, we have demonstratedthat it is also the globalised market that does not meet demand as it isprimarily looking for demand that has buying power. The basicneeds and endless wants are fulfilled by those that have the money todo so; if global demand for meat increases then the market is there toinstantaneously fulfil this rising demand, despite the fact that meatproduction is to the detriment of both the poor and the environment.If there is a new demand emerging for bio-fuels the market rapidlydelivers. True, there is also a growing demand for organic products,but we fear that if this trend is not sufficiently backed up bygovernment policies, it may be just that, a trend that will fade away if it is no longer in fashion.



196

On the contrary, this first generation of bio fuels does little ornothing to reduce carbon emissions and it is worsening some of theexisting problems.Already we feel the effects of the seemingly unstoppable growth in

demand for food, feed, building materials and bio-energy as a resultof a growing population, upcoming economies, rising welfarestandards and the subsequent increments in the use of energy. Stocksin cereals have reached their lowest point in years, furthercontributing to existing tensions. Food prices have risen by 10-50%over the last year alone. This is of course bad news for consumers, asthey are forced to pay more for their food stuffs. The increase in foodprices is especially affecting the poor in both the Western world and

developing countries. For a rich household an increase of 10% of food prices means they will spend 11% of their budget on foodinstead of 10%; for a poor family however the same increase impliesthat they will have to spend 55% of their income on food instead of 50.Prices in food and other raw materials have risen so rapidly andsteeply that they are even attracting the interest of stock brokers,speculators and other private investors. In the current financial crisis

all of a sudden these ‘golden oldies’ constitute a solid investmentopportunity. This new speculation runs the risk of making food

prices even more volatile.

Finally we have posed the dilemma of food against bio diversity and

landscape: in the light of world poverty, world hunger, the growing

world population, the climate crisis and the urgent need to make both

production and consumption more sustainable can we ourselves

afford to spend precious public money and even more precious land

to protect landscapes and flora and fauna that do not seem to provide

a direct benefit for man?

Globalisation and the subsequent development of global food supply

chains have disconnected us from the way food is produced; the

ongoing process of urbanisation has disconnected us from nature.

Nature and landscape have become entities to be used or abused in

the service of man’s needs and wants, be it for the production of food

and resources, as a consumption space for recreational purposes or as



197

a way to dispose of our waste materials to keep cost of productionand consumption as low as possible. We have demonstrated thatglobalisation and the free market have fuelled and reinforced thisdestruction, facilitated by governments that have conveniently

forgotten to integrate these costs in their economic models so as to beable to boost about their economic growth and welfare to keep theirvoters happy. As the global economy is constantly on the look outfor new market opportunities and reducing the cost of production a‘race to the bottom’ is always imminent. The emerging of the bio-

fuels market and the subsequent increased pressure on rain forests

are recent proof of this. The old Ricardian principle to localize

production where this can be done at the lowest comparative cost has

become perverted in a short term strategy to externalize cost of production. Ricardo’s Law can only claim some validity still when

all costs of production are made part of the equation.

We are now at a point in history when we ourselves are also feeling

the negative consequences of this short term strategy. Nature is

reacting, the climate is changing, bio diversity that could offer us the

genetic material for future food and medicines is diminishing to

critical levels and our precious landscapes are being lost forever.We can no longer fool ourselves into believing that we can do

without nature or can control it at our will. In the interest of our own

survival we will have to find a new ‘entente’ with nature and the

resources it holds. This is especially true for agriculture, not only as

it is the biggest consumer of resources, such as land, water and

energy, but also since agriculture can fulfil a vital role in

reconnecting food production with a sustainable management of

natural resources.

$QHZDSSURDFKIRUWKH:72In the foreword of WTO’s 2006 Annual Report Director-General

Lamy is claiming that despite the stalling a year before, progress has

been made, especially concerning sustainability as being an integral

part of the trade negotiations and regarding helping the poorer

countries.



198

Whether this is true or just a tactical manoeuvre to win moresupporters, has meanwhile become irrelevant. The fact thatstatements like these, made time and time again, are received withscepticism and distrust is a clear sign that WTO is quickly losing its

legitimacy as the multilateral forum do discuss international tradeissues.At the moment of writing this book, the financial world is, again, inturmoil. A further proof of how economies have become interlinkedon a global scale in a way that resembles a house of cards, makingthe debate about the market and public intervention prominent in allsectors, including in agriculture. Food policies are based upon the

premise that food represents a strategic commodity whose vitalnature justifies special treatment. The market considers food to be atradable good just like all other goods. Some believe that everyonewill benefit from this, while others believe that the most vulnerablewill suffer from the commoditization of food. History has shownboth the limits of self-centred strategies as well as the perverseeffects of the market.Therefore we need to come up with a new approach to globalisation

and liberalisation, neither a retreat into protectionism, nor anunconditional opening up. As markets have acquired a globaldimension, so the actions of public authorities and collectiveinstitutions must be exercised at this level.It is therefore all the more unfortunate that the WTO as the multi-lateral institution to regulate and promote world trade is in crisis. TheDoha negotiations have been stalled for almost two years now.Despite desperate attempts by WTO-director Pascal Lamy, it isunlikely that we will witness a successful restart in the foreseeablefuture. This is evidence of the shift in the geo-political balances inwhich Europe and the U.S. no longer dominate the scene. This shiftis, of course, a good thing. It was about time that other power blocks,especially from the South, would enter the arena, claiming their rightto express and defend their interests as well. Another equallyfundamental reason for the dead lock in which the negotiations findthemselves is that liberalisation itself is becoming increasingly

questioned by mainstream institutions and governments.



199

Although Lamy, flexible as ever, is still pointing towardsliberalisation as the cure for all ills, it has become evident that it isnot. The problems of today and tomorrow cannot and will not besolved by ‘simply’ removing barriers to trade. In an already

globalised global economy more liberalised trade between unequalpartners, with the environment also being one of the partners on the

weak side of the spectrum, will not create economic prosperity for

all, will not solve our environmental problems and will not

contribute to greater social justice. It rather creates more instability,

as the recent crisis in the financial markets has shown, and reinforces

parties that already are in the best position.

To put it bluntly: if it cannot be demonstrated that WTO negotiationswill lead to a better economic position for poor countries and

especially poor people, we should be against it; if there is no

evidence that WTO negotiations will result in a more sustainable use

of resources we should be against it; if further liberalisation of trade

leads to even more emissions of green house gases, we should be

against it; if WTO negotiations do not improve the position of

labourers according to ILO standards we should be against it; if

WTO negotiations do not help farmers to acquire a better position,especially small scale subsistence farmers, we should be against it; if

WTO negotiations do not result in a better and more democratic

position of developing countries, we should be against it.

As the WTO fails to deliver its promises we have to come up with a

new approach that is based on a new vision and shared principles.

We have to acknowledge that for too long globalisation and

liberalisation have been a one dimensional exercise. A globalisation

that is not three dimensional, respecting not only profit but also

people and the planet, is a danger to our very survival. A new

approach is needed that also addresses two of the main problems.

First of all we have to do away with the impression that WTO-

agreements are highest in the hierarchy of international agreements.

Secondly, and in conjunction with the previous point the fact that the

WTO as an institution in essence operates in isolation from other

multi-lateral bodies and agreements should be remedied.



200

This stand alone position of a WTO under scrutiny makes itdefensive and even more narrow-minded than it already is.

Globalisation is not just about economic development; it is also

about sharing knowledge for the advancement of mankind and aboutaccepting and respecting values. Liberalisation is not a goal in itself.It should be viewed and assessed in the light of the problems theworld is facing. The WTO as an international institution shouldtherefore be integrated into the other bodies dealing with worldproblems, especially be joined with the different institutions withinUnited Nations organisation. This could be a first and major step in afull make-over process to bring the debate back on the track and to

come up with a strategy that will ensure that international trade cancontribute for both economic welfare, the emancipation of the poorand the protection of the environment. The leaders of the worldshould start a process in which the established international bodies of WTO, UN, World Bank and IMF, all of which are more or less incrisis, join forces and find a common denominator or otherwiseaccept the imminent arrival of a very turbulent period.

The necessity of a global regulatory framework for (agricultural)trade is unquestionable. There is however a pressing need to groundit on what the Eco-Social Forum has called a paradigm shift, whichentails a world-wide acknowledgment of the fact that an “eco-social”

frame of a liberalized market economy is something fundamental for

the entire globe and for the ruling political and economic world

order. If the mental step towards this will succeed, then, and only

then, will it become possible.

The essence of this new paradigm is therefore to find the proper

balance between enforcing the competitiveness of economies, social

and economic fairness, ecological responsibility, employment and

good labour conditions, respecting and protecting cultural diversity

and the legitimate desire of every nation to secure its food supply.

One of the main principles that should be the starting point for this

joint approach is to not give priority to further liberalisation as such,

but to start with the UN Millennium Goals and to ask at each goal

what the current impact of trade liberalisation is and subsequently



201

whether or not trade liberalisation can contribute to achieving thegoal at hand, in what way and under what conditions.In this context it is obvious that priority should be given to anapproach in which the right to install any food security measures is

accepted, as well as the right to regulate markets in a way thatenables food supply and price stability, to ensure a decent standard of income for farmers, to respect the need to protect, maintain andmanage natural resources in a sustainable way, to promote theeconomic and social vitality and viability of rural areas and to adoptstandards to ensure that consumers will be guaranteed sufficient,healthy food.In this context developing countries should also be allowed to form

multi-lateral economic unions similar to that of the European Union74

Also the principal of what we call ‘trade subsidiarity’ should be

introduced, meaning that the WTO should concern itself only with

international trade and not mingle with local and regional production

and trading. The WTO’s role in regulating international trade should

be limited to establish and enforce general rules for fair trade and

competition and to prevent and combat abuses, such as export

dumping, to set minimum standards for protection of theenvironment and animal rights and to help producers and nations

meet and control these standards, allowing them a certain transition

period.

This will also entail a revision of the definition of dumping, which

should be defined not as selling on the world market at a price below

domestic price but instead as selling at a price below production cost,

including social and environmental costs. It will also mean ensuring

that the social and environmental value of products is respected

through UN controlled international standards defined on the basis of

ILO conventions and environmental conventions.

A system of labelling could help ensure that these standards are

respected and that consumers are encouraged to sustain their buying

behaviour.

74A number of these new regional arrangements have in fact already been

put in place, such as the Southern African Development Community (SADC),an agreement between 15 countries in the Southern Africa region.



202

As a consequence, all external costs are internalised into the cost of production, processing and transport. In other words, not integratingthese costs should be deemed trade distorting.

*UHHQLQJWKH:72

In 1994 Yale Professor Daniel Esty published his book “Greening

the GATT” that opened the debate on trade liberalisation and

environment. Since then, as we have shown previously, little was

done within the GATT and WTO to truly incorporate environmental

standards in trade liberalisation. Only recently has the WTO

acknowledged that concern for profit through trade should beaccompanied by concern for our planet as well. One could comment

cynically, and we have done so in this book, about the truthfulness of

this seemingly new approach; it can easily be judged as an attempt to

gain more votes to facilitate the negotiating process in the direction

that is still desired by the WTO. Nonetheless, the fact that WTO is

now discussing environmental issues in relationship to trade

liberalisation is in itself a clear sign that times have changed. Let us

therefore take this momentum to really try to integrate somefundamental ecological issues into the negotiations, to green the

WTO where the greening of the GATT has obviously failed.

The WTO has to make up some considerable ground if it wants to be

taken seriously in this respect. The famous 1991 tuna-dolphin ruling

by the GATT and the equally renowned 1998 WTO ruling against

the USA's prohibition of shrimp imports from countries not

mandating technology to protect sea turtles, served only to reinforce

the view of many environmental groups that, '… the WTO is creating

the path for the rapid destruction of our global resources and the

plundering of local economies…’

Far too often the WTO has been used or misused by countries as a

platform to avoid their obligations under other multilateral

agreements. The trade rules and compliance mechanisms through the

Dispute Settlement Body of the WTO have time and time again

proven to be stronger and more effective than its counter parts

regarding the protection of the environment.



203

When there is a conflict between trade rules and environmentalregulations, the latter usually bite the dust.One mechanism to green the WTO, a part from the aforementionedinstitutional integration of the WTO into the UN, is to integrate

minimum enviromental standards as part of the productspecifications and as a legitimate argument to put trade barriers inplace for products that do not comply with those standards. Althoughmarket access for products from the LDC’s should be maintained

under the Everything But Arms (EBA) initiative, these standards

should also be applied to this category of products (EBA+),

providing that that the Trade-Related Technical Assistance for

LDC’s, one of the few truly successful instruments of the WTO, is

expanded to also include technical assistance to be able to comply tothese environmental standards.

Also, there should be no barrier based on free trade arguments to

support agriculture or other land users to provide for public goods.

Yes, in some cases these types of support can be trade distorting, but

when the principal goal of this type of support is evidently to protect

the environment, bio diversity or landscapes and to improve the

quality of air, soil and water, they should all be accepted as Green

Box measures without any limits what so ever.Finally, accepting a wider group of stakeholders into the WTO

negotiations, green NGO’s and concerned citizen’s organisations for

example, would also help to bring environmental issues up to par

with economic priorities.

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Agriculture is no longer just a matter for farmers and specialized

bodies. It represents a major issue for society at large, for it occupies

half of our territory, manages an essential part of our water and soil

resources, provides indirect employment for a considerable number

of people, feeds all of our consumers and is a key element in our

relationship with other regions of the world.



204

All Europeans can legitimately feel concerned with the future of agriculture and of agricultural policy. And they should be, as users of rural areas, as taxpayers, as consumers and as citizens.

As these are all more or less internal matters, the global geo-politicalcontext is also rapidly changing, putting the Union as the world’s

largest exporter and importer of agricultural commodities in the

forefront of the debate on globalisation and liberalisation. The

pressure to further open markets and to reduce support measures

coincides with the growing need to make agricultural production

more sustainable and at the same time safeguarding precious natural

resources and contributing to reducing carbon emissions to combat

climate change.

Both developments, internal and external, force us to rethink the

CAP, starting with its very foundations.

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In 1957 the fundaments of the CAP were laid down in the Treaty of Rome. Fifty years later one could look at the CAP as a house. At first

it was a good and roomy house, giving shelter and warmth. But after

a certain period of time, like it is with houses, maintenance was

necessary, especially when the running costs are increasing too

much, the system of waste disposal is out of date and the neighbours

start complaining too loudly. From the eighties onwards a series of

renovations and re-decorations of the CAP-house have taken place.

In the nineties a small annex was constructed called the Second

Pillar, made out of the materials of the original house. Currently, the

Commission is executing a Health Check of the most recent phase of

maintenance. The result of this exercise will form a prelude for the

next phase which is the CAP post 2013. The question that should be

put on the table is: should we renovate and redecorate the old house

once more or should we start thinking of a completely new house,

fundaments included.



205

We need first of all to understand that the world in which we live isno longer the world which gave birth to the Common AgriculturalPolicy in the 1960s, nor even the world which saw the most recentCAP reforms. It is clear, as the old vision no longer applies to the

new reality, that we need a new policy based on a new vision andshared principles. In short: a new Treaty of Rome. An enlargedEuropean Union in a globalizing and liberalizing world, a world inwhich major dilemma’s have to be urgently addressed will constitute

major challenges for the political leaders of the Union.

To any neutral bystander it is self evident that the current CAP

should be reformed. It is still too much a remnant of a policy of the

past, with some clear perverse and harmful effects. We need toreform the CAP to adjust it to the changing European political

landscape, to the changing global geo-political landscape and to be

able to confront the problems of tomorrow. Without a fundamental

reform the CAP will lose its public mandate and will undoubtedly

fall prey to the Ministers of Finance, who will concur with the

Commissioner’s Goubraskaite’s vision that the CAP has become

obsolete. And it isn’t obsolete; we need a Common Policy for

agriculture just as much as we needed it at the beginning of theUnion. This new CAP will be vital for the stage the European Project

is in and for its future.

There are a large number of solid reasons that instead of a new make

over, we need a completely new approach. First of all, the European

Union has dramatically changed since its beginnings. We not only

now have 27 members instead of the 6 members that agreed upon the

first CAP, but along with the enlargement also came a rich diversity

in countries, regions, cultures, history and agriculture. One of the

major issues resides in the cohesion and balance of the territories.

There are already marked differences between South and North, East

and West, but with market unification which may create inequalities

between regions, the risk of fragmentation is great.



206

The recent enlargement with 12 new Member States has also morethan tripled the number of farmers, from 5 million to over 15 million.At the same time the already rich diversity of production systems,types of farms and farmers, landscapes, stages of development has

increased enormously. A phenomenon that we thought to be almostextinct within the ‘old’ Union, subsistence agriculture, is now again a

substantial reality. In Romania more than half of the farm households

do not sell any production; in Bulgaria the number is as high as 77

per cent. These very small scale farms are not or are only marginally

connected to the market, but still play a vital role in rural areas. What

do we do with them? Should they be supported to transform

themselves into genuine agricultural entrepreneurs or be pushed out

of agriculture?As these farms are usually not eligible for 1

stpillar CAP support

75, an

exodus from these rural areas can be expected, signs of which are

already showing, with millions of Romanians and Bulgarians already

being employed in agriculture and other low paying temporary jobs

in the old Member States.

On the other hand a new type of large scale farms has emerged in

which the former communist farms have been bought up mostly by

private investors. Under the reformed CAP and the rules applying forthe new Member States, they will receive the largest part of the first

pillar payments under no other condition than to keep the land

available for agricultural production. There is little incentive for

these farms to modernize agriculture, to invest in agro-environmental

schemes or in programmes to conserve, restore and manage nature,

landscapes and bio diversity or to invest in employment and to

contribute to the local economy.

Secondly, we must not overlook the differences in rural areas, thinly

populated in most parts, but densely populated when neighboring

urban areas. Both types are important, but require specific support

policies. To manage this diversity and to avoid repetition of the

errors made in the past, we need to reflect here and now upon an

75On page 5 of the Green Paper on the Health Check the Commission

proposes not only to introduce maximum levels of direct payment, but also

minimum and/or to set the minimum area requirements at a higher level insuch a way that would not affect real farmers (sic)



207

appropriate policy for the territories capable of ensuring the link between agricultural policy and a cohesive territorial policy, withoutwhich Europe cannot be envisaged76.

Also, the internal problems within the Union concerning animalwelfare, food quality and food safety issues on the one hand, and thenegative effects of agricultural production on the environment,landscape and bio diversity in an enlarged Union puts serious stresson existing policy and financial instruments.

Last but by no means least; we need to consider the public legitimacyof the CAP. Public spending on agriculture has come under constant

and increased scrutiny by consumers and citizens as the negativeimpacts of both the CAP and globalisation on the poorer nations of the world and on the environment have become apparent. There isalso a growing consumer concern towards the way food productionaffects public health; diet related health problems will constitute amajor part of public health spending.

In Leipzig in May 2007 a Ministerial Council meeting was held of all

ministers responsible for spatial planning. At the meeting theTerritorial State and Perspectives of the European Union werediscussed. This is an indication that spatial issues are graduallybecoming an item on the EU agenda. The term territorial cohesionwas key to the debate, meaning that apart from economic and socialcohesion, the European Union is gradually also assuming it to be hertask to connect these with a vision on spatial planning as well.Regarding Europe’s countryside ESPON, the European Spatial

Planning Observatory Network concluded that the CAP has had three

major spatial consequences. A larger surface has been used for

agricultural production than would have been the case in liberalised

markets. Secondly, the CAP has advocated for farms to become

larger.

76The Peri Urban Regions Network Europe (PURPLE), a network of some

13 peri urban regions, has recently been created to specifically address theproblems and challenges of these areas and has been putting forward

proposals to the Commission to integrate this specific approach into the CAPand Rural Development Policy. See: www.purple-eu.org



208

Lastly, products have been grown that would not have been producedor produced to a lesser extent without European subsidies, such assugar beets. More remarkably ESPON concluded that the CAP wasnot coherent with Europe’s own cohesion policy: “correlation

analysis shows that total CAP Pillar 1 support does not supportterritorial cohesion with higher levels of CAP expenditure per

hectare of agriculture being strongly associated with more

prosperous regions”77

. So, even in this respect the CAP is being

questioned and there are little signs that the new reform proposals

will do very much to remedy this.

Even after the Health Check proposals will be implemented, a major

part of 1st

Pillar support will go to a small minority of large scalefarms; some farmers have a historic right to direct payments, while

others do not and cannot benefit at all. This unequal treatment, which

is a reflection of power relations, is compounded by serious

imbalances at the territorial level in the distribution of support, which

calls into question the cohesion of the CAP with other policies

concerning for example regional development and that of town and

country planning.

To handle this critique, consumers and citizens should be regarded asan integral part of agricultural policy; not only to criticize it, but also

to be held co-responsible for it.

6RPHWKLQJROGVRPHWKLQJQHZJRDOVIRUWKHIXWXUH

The goals of the first CAP, as set out in Article 39 of the Treaty,

have remained unchanged until today in legal terms: to increase

agricultural productivity by promoting technical progress and by

ensuring the rational development of agricultural production and the

optimum utilisation of the factors of production, in particular labour;

to ensure a fair standard of living for the agricultural community by

increasing the individual earnings of persons engaged in agriculture;

to stabilise markets; to assure the availability of supplies and to

ensure that supplies reach consumers at reasonable prices.

77ESPON, 2004



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This was of course a strictly sectorial policy aimed at providing foodsecurity and promoting economic development in a post war Europe.As Italian minister for Agriculture, Paolo de Castro, recentlyremarked the CAP is no longer a sectorial policy as it involves many

different fields of our life and should be a policy for all citizens fortheir food security and also for the areas where they live and work.This is true of course. Nonetheless, goals of the first CAP still havevalidity today although in a completely new context and with awhole set of new stakeholders to consider. Increasing foodproductivity and assuring food security will have to be once again onthe agenda, as production expansion is necessary and productionconditions are threatened by climate change and depletion of natural

resources such as water and soil fertility. To secure sufficient foodsupply will have to remain at the heart of a new CAP from a longterm perspective, but, in the context of today’s political situation and

tomorrow’s challenges, including sustainable production on the one

hand and healthy diets on the other.

Also the old goal of ensuring a fair standard of living for the

agricultural community has not become obsolete. Although recent

increases in food prices and subsequent overall increases in farmincomes can delude one into concluding that this matter has been

solved, this is not the case. Most farmers’ incomes are still well

below what can be considered a fair compensation for their labour

and investments. The trend in the CAP, reinforced in the current

Health Check proposals, to reduce support and increase

competitiveness through further liberalisation will put farmers’

income even more at the mercy of the market and especially at the

mercy of the agri-business and retail industry, while at the same time

they will see the cost of production increasing as a result of tighter

criteria for environmental protection, animal welfare and food safety

as well as higher cost for inputs as energy, fertilizer and feed. Also,

the rise in consumer prices do not always reflect an equal rise in off-

farm prices as a large and growing portion of the added value ends

up in other parts of the food supply chain, a debate that recently has

also attracted the attention from the European Parliament requesting

the Commission to assess the role of the supermarkets as ‘gate

keepers’ to 500 million consumers.



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A more fundamental question for European policy however iswhether or not the incomes of farmers should remain part of anagricultural policy or rather that it should be integrated into theEuropean cohesion policies for the relatively poorer member states

and be left to national policies in the wealthier member states.

The old goal of stabilisation of markets meanwhile seems a thing of the past in the era of liberalisation. Current market conditionsreinforce this perception. As we have shown before, this is adangerous attitude. Food is not something to be left to speculators. If we abandon all safety nets to manage supply and subsequently theprice of our basic food stuffs, we run the serious risk of encountering

very volatile market conditions, which will not only be harmful toEuropean farmers that cannot adjust production on a day to day basisand who are simultaneously confined by the fact that they have toproduce under more rigorous sustainability criteria that decrease theirroom to reduce cost of production. It will also be harmful forconsumers who will discover that a less costly CAP will come at aprice in the form of more volatile supply and consumer prices andmore uncertainty concerning the quality of the products. The

Commission will have to explain to its citizens that as a consequenceof the current trend in the CAP to liberalize food production and foodtrade it goes against the old goal to ensure that sufficient suppliesreach consumers at reasonable prices, since the CAP will no longercontain the instruments to do so.

As most of the old goals still hold their legitimacy, new goals havealready entered the arena.Since the nineties, promoting Rural Development has been added tothe objectives of the CAP. In its origins it was aimed at supportingmarginal rural areas, but over the years its scope has expanded toinclude, in principle, all rural areas. This has led to situations,comical to some, perverse to others, in which under the heading of the CAP member states that have the highest GNP per capita in theworld have received European funding for creating bicycle tracks,maintaining libraries in villages and supporting local footballassociations. Though we do not deny these communities their right to

facilities and we fully support the bottom-up approach that has been



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made key in the Rural Development policy, one can wonder whetherthey should be part of European policy and be funded at all and morespecifically whether or not this should be part of an agriculturalpolicy.

More recently two other types of objectives have come to the fore,one that does relate directly to food production and one that has to dowith the management of resources. The first type of objectivesconcerns matters like ensuring food safety, combating theproliferation of animal diseases, one other expression of the risks of aglobal food system, securing and improving food quality, especiallyin relationship with the debate on industrial quality criteria versus the

protection of local and traditional products of origin and improvingpublic health through the promotion of healthy food and healthydiets.In the other category of objectives we find items that relate toimproving the conditions of natural resources such as air, water andsoils and developing policies for protecting bio diversity andlandscapes and of course combating climate change and its expectedeffects, all of which affect agriculture and/or rural areas to a greater

or lesser extent.

Lastly, as the Union now represents its members in global tradenegotiations, Europe has taken it upon itself to play a role inweighing the interests of its farmers and citizens against those of other nations and people, especially in relationship with the needs of the poor, but also with regards to environmental problems thatrequire a global approach. In the light of the dilemmas we haveposed, Europe will have to again reflect on its long term objectivesand redefine its strategy with regards to this role as well.

It is in this extremely complex setting that we have to consider newapproaches and lay the foundations for new policies. To find newways, to develop new policies is not an easy task in a context inwhich not only the problems and objectives but also governanceitself has become so much more complicated. We feel however thatthe European Commission is not lacking in courage. Over recent

years it has put forward far reaching proposals.



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It is rather still national interests that prevail and that dilute thesebold proposals. So, in addressing the Commission we are in factaddressing its members to show more of the old spirit thatcharacterised the political leaders that originally proposed and set up

the European project. What is most lacking, and this is somethingthat we FDQ blame the Commission for, is a new and coherentEuropean vision, which can bridge national conflicts of interest,inspire and unite today’s and tomorrow’s generation of political

leaders and can act, again, as a role model for the world. A vision in

which not ‘jobs and growth’ as such are the predominant objectives,

but one in which the notion of sustainable development will be the

first and the last item, the starting point and the final measure for

success for each policy and therefore also for a new and stillcommon policy for agriculture, resources and countryside.

)URPQHZJRDOVWRQHZSROLFLHV

We all know that eventually we will have to let go of the CAP and

develop an exit-strategy for it. Everybody knows this, but few have

the courage to say it out loud. Despite the good grades theCommission seems to get for the new reform proposals from the

general public, based on the results of the Euro Barometer, and on

the whole positive reactions of both the Council and the European

Parliament, the CAP even in its revised and re-revised form will not

be able to stand the test of time; it is still too much of an instrument

of the past and not a tool to help face the challenges of tomorrow.

Let us suppose now for a minute that we did not have a CAP, that we

did not have a legacy of fifty years of Common Agricultural Policy,

what alternative policies could we think of to reach our new common

objectives?

Looking at the matter at hand from some distance and the challenges

a New European Policy has to address now and in the future, we

have to conclude that we should distinguish a number of different

approaches. On the one hand we need a common policy that focuses

not on sustainable agricultural production as such but on a

sustainable food system, a comprehensive approach to all aspects



213

that have to do with the way that we produce, process, transport,trade and consume food.On the other hand a common policy that specifically addresses themultifunctional role of rural areas in which, next to other actors,

agriculture is one of the providers of public and private goods andservices, an integrated territorial approach in which the managementof natural resources, of bio diversity and landscapes can be balancedagainst food production and against other functions such asrecreation, infrastructure, housing and the viability of localcommunities.

$(XURSHDQSROLF\IRUVXVWDLQDEOHIRRGVXSSO\DQGFRQVXPSWLRQ Food, not agriculture, should be at the heart of a future policy thatshould take the place of the CAP. This allows us to take the wholefood supply chain into consideration, from the inputs used inagriculture to grow raw materials and the position of farmers in thesupply chain until the prepared food on the plate of the consumer andthe way food affects consumers regarding their behaviour and

health

78

.Although food production, processing, transporting, trading andconsumption can be left to the market to a large extent, governmentintervention on a European level is necessary.This intervention should concern itself with maintaining some of theinstruments to secure food supply and to stabilize markets. Weshould therefore be very cautious in abolishing instruments like set-aside, production quota and stock management altogether, rather theCommission should choose to have them at hand as anti-cyclicalmeasures in times of need. If food is regarded, as we do, to be almosta public good, than this should not be a debate among Ministers of Finance, but of the Commission and the Council as a whole. Oneinstrument that should be abolished permanently, however, is exportsupport subsidies and other export support related measures, as they

78If we take a truly ‘cradle-to-cradle’ approach also the recycling of

packaging materials and waste management should be considered. Forreasons of simplicity we leave this out for the moment.



214

are truly distorting trade at the expense of poor producers indeveloping countries79.Also from this comprehensive perspective the position andfunctioning of the agri-business and the retail industry should come

more under scrutiny of public policy. The proposal by the EuropeanParliament to start research to assess the position of the agri-businessand the retail industry in the food chain and the way added value isdistributed over the various stakeholders could be a valuable firststep. We have shown that in an oligarchic market system, such as thefood supply system, price agreements between the big companiesthat control the chain are probable, just as price wars are. Neitheroutcome is in the interest of producers or that of consumers.

Next to this a system should be developed to truly ensure sustainableproduction methods throughout the supply chain and for all sectors.Farmers in the first place should be encouraged and rewarded to thedegree in which they succeed in improving the efficiency of the useof inputs, such as energy, fertilizer and feed, in improving soilfertility and in reducing output that is harmful to the environment,such as carbon, methane, pesticides and minerals. As we have

demonstrated in the previous chapter, the current cross compliancesystem is unsuitable to achieve sustainable production for a numberof reasons: it sets merely a minimum level, based on currentlegislation, it only applies to those farmers receiving direct paymentsand more fundamentally it is not a positive system, in the sense thatit actually encourages and rewards farmers that produce moresustainably.A strong incentive that would encourage the reduction of inputs forexample would be to green the tax system, to allow member states tomodify the VAT regime so as to burden unsustainable inputs byimposing a higher VAT rate and to favour sustainably producedcommodities through a lower VAT rate.

79It is from this perspective incomprehensible that the Commission has

installed export subsidies for pig meat. A part from distorting world markets itis also encouraging a production system that is truly unsustainable



215

A truly integrated approach should also include animal welfare andwould counter the downsides of the current cross compliancemeasures which are linked to the direct payment system. Becauseone thing is clear, the direct payment system is simply untenable in

the long run also in a flat rate scenario; even after the Health Check itwill favour farmers that receive payments over those that do not, itwill still favour meat producers over vegetable growers and it is notencouraging producers that are not entitled to direct payment toproduce in a more sustainable way. Any support system should inour view be based on an approach in which farmers that succeed inimproving the sustainability of their production beyond minimumlegal requirements should be rewarded, to go from Good Agricultural

Practice to Better Agricultural Practice to Best Agricultural Practice.The same should apply to other parts of the chain: the food industryshould be likewise encouraged to reduce its inputs, like energy fortransport80 and processing, and its waste outputs such as carbonemissions and waste of packaging material and food81.

Encouragement can be established by installing investment andresearch programmes and by greening the tax system, making non

renewable inputs and non efficient input, waste and emissionmanagement more expensive, while rewarding farmers andcompanies that succeed in above average efficiency. It will makesome products more expensive, notably meat. As we have shown inthe previous chapter, a more cautious approach to meat productionand consumption is necessary anyway, given its on averageexcessive use of inputs and the global increase in demand. Such anapproach, in which all costs of production, processing, transport andtrade are integrated in the market price, could also be used as acommunication instrument towards the consumer, to help themdistinguish between more and less sustainable production systemsand products.

80Almost one third of all transport is food related

81

It is estimated that in Europe some 30% of food is wasted at some stagein the food supply chain



216

Another important aspect of this new food policy is the quality of food products. At the end of the Second World War, the mainobjective was to produce enough food. Today, concerns about thetype of food produced, its taste, food safety, and less industrialized

ways of producing food are winning over more and more consumers.It is true that farmers are making great efforts to meet these concerns,but the Common Agricultural Policy is mainly prioritizing foodsafety issues. Important as they are, we also have to keep in mindthat far more people suffer from bad food, than from unsafe food.Food quality should be addressed more prominently and morecomprehensively in the new policy than it is in the current one. Nextto maintaining and improving high sanitary standards, much more

emphasis should be put on different types of quality. One of Europe’s main assets is its cultural diversity. This is also reflected in

its diversity in local and traditional products of origin and culinary

traditions. This heritage and the local production systems that are

connected to it should be cherished, protected and promoted.

Although consumer concern expressed through organizations such as

Slow Food are important in raising public awareness, this needs to be

backed up by European policy. This could imply that a different set

of quality and sanitation standards is needed in order to maintainquality products that are anchored in tradition. The fact that these

largely localized systems can also contribute in reducing food miles

and carbon emissions should act as an additional incentive for policy

makers to come to an approach that goes beyond the current system

of merely labeling.

Lastly, this new policy should also concern the relationship between

food and health. Obesity and other diet related diseases are

increasing at an alarming rate, especially among children. To bring

food and diet related health issues into this new food policy will have

major implications. It will involve more and new stakeholders,

nutritionists, doctors, school teachers, health inspectors, behavioral

scientists, cooks, therapists and especially the consumers themselves

in the development and monitoring of this policy. It will require new

forms of cooperation between different policy departments at all

levels.



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This issue has to be urgently addressed if we do not want to end upwith a generation that will have a life expectancy shorter than oursand with major parts of public money having to be devoted to healthcare. A part of the money now allocated to the CAP will have to be

used to set up food education programs, publicity programs topromote healthy food and to make healthy food more accessible forthe poorer classes of people. Following the recommendations byfood systems professor Tim Lang82, also tax instruments should beconsidered that encourage healthy life styles and that discourageconsumption patterns which contribute to obesity and other foodrelated health problems. The Commission should allow healthcriteria to be included in food procurement procedures and it could

also formulate a common policy regarding advertising of unhealthyfood aimed at children, as has already been done by some of themember states83.

We are aware that to say goodbye to the CAP in its old form and toembrace a sustainable food supply and consumption policy wouldmean a breach, a drastic rupture with the past and the present. We dohave a CAP, so we cannot keep on pretending that it does not exist.

A careful transition strategy will have to be put into place to enableproducers to adapt and modernize in this direction; time is alsoneeded to involve the other stakeholders in both the development andexecution of such a policy.

$(XURSHDQSROLF\IRUDVXVWDLQDEOHPDQDJHPHQWRIWKHFRXQWU\VLGHDQGUXUDOUHVRXUFHV

When the CAP was first developed and put into effect, this was nomatter for debate. The post war European population had to be fed atthe lowest cost possible. How this might affect nature, landscape andbio diversity was no part of policy considerations with devastatingconsequences that have become apparent over the last twenty years

82See for example the book Food Wars by Tim Lang and Michael

Heasmand83Sweden for example.



218

or so. To be fair towards the European Commission, this process hadalready started in pre war times. Industrialisation of agriculture hadbegun at the end of the 19th century, already causing damage to soils,water, landscape and bio-diversity, but the CAP in the first decades

of its existence has accelerated this process. Only since the earlynineties policies have been adopted to try to remedy the negativeconsequences. The Nitrate Directive, the Water Directive, Natura2000 and the recently adopted Soil Directive, after years of debateand even longer periods of implementation, are evidence of attemptsto address these consequences at European level. But the damage hasalready been done. All over Europe landscapes have beendramatically altered to accommodate new and more efficient

methods of farming, hundred thousands of kilometres of hedge rowshave been cut down, ancient meadow lands have been converted formaize cultivation, millions of hectares of peat soils have been usedfor fuel, causing the loss of landscapes and eco systems that haveevolved over hundreds and thousands of years and the flora andfauna that lived there. The number of birds that depend onagricultural fields has dwindled considerably, sometimes to the pointof extinction.

For too long we have considered the countryside to have only onefunction: either as a production area for agriculture and forestry or asa marginal area unsuitable for production and therefore no concernfor a common policy. As the negative impacts of the development of agriculture became apparent in conjunction with a changingperception of society on environment, nature, landscapes and leisure,we have begun to see the countryside as a multifunctional space.Nowadays, some even maintain that Europe should not assume therole of the world’s leading economic power. Instead it should try to

bring its common history and diversity into fruition. Its huge cultural

heritage, its cultural diversity and its vast variety of unique

landscapes are Europe’s Unique Selling Points. These elements

constitute Europe’s identity both for Europeans as well as to the rest

of the world. Europe’s countryside in this respect is an enormous

resource that can be used for sustainable forms of economic



219

development84, both to new residents from the cities, tourists andother leisure seekers and to contribute to the health and well being of its population.Even if for most, this vision is too far fetched, the least we can say is

that the countryside harbours a multitude of resources; on the onehand a number of essential natural resources and on the other handresources that could be used to provide a large and growing numberof goods and services for society.

If the Commission and in most cases also the Member Statesthemselves have already involved themselves in developing policiesto protect and manage these resources and functions, then why do we

need a European policy for the sustainable management of thecountryside and rural resources?One of the main problems in our view is the lack of coherence in andbetween the various measures. Not only between the different DG’s,

but also between the different levels of governance. With the

decentralisation of policies and the principle of subsidiarity promoted

by the European Union, lower echelons of government, especially

the regions and municipalities become more important as relays in

the development and implementation of public policies. Thesegovernment bodies usually have a more territorial perspective on

agriculture and countryside. The existing diversity in rural areas also

requires a tailor made approach in which the interests of all

stakeholders are weighed and considered.

As they are the layers of governance that are eventually responsible

for the implementation of European and national regulations, they

struggle to find a balance between the different and sometimes

contradicting goals of these policies and the different and often

contradicting interests of the respective stakeholders. The outcome of

these battles more often than not is below expectations or sometimes

even counter productive; depending on local power relations, one

function or interest often prevails at the expense of others.

84A Dutch study has calculated that such an approach, in which investments

in bio diversity and landscape can render billions in additional turnover andsave on health costs as well.



220

We also have to consider in this context that in many Europeancountries the countryside is no longer a land of exodus; it is beingrepopulated by new arrivals, stimulating new services andemployment, but also creating tensions between the different

functions and tensions between urban and rural interests. For theseareas a strict rural policy is no longer sufficient; the future of thecountryside is so closely tied to urban developments, that in theseperi-urban regions we need an integrated rural-urban approach. Oneof the problems associated with peri-urban areas is urban sprawl.Besides having in most cases a negative effect on nature andlandscape, it also implies higher per capita energy consumption. Buteven if people stay in the cities, more land is needed. People live

longer and the average households continue to get smaller, leading toa greater need for residential areas. Between 1990 and 2000 over800,000 hectares were urbanised in Europe. It is estimated that by2020 80% of the population will live in urban areas, covering 15% of the territory.

The already existing disconnection of the urban population with theirrural and agricultural roots could have devastating effects on the

public mandate to support agriculture and the rural world. Thismeans that we have to re-connect citizens with agriculture and ruralcommunities; make them realize, understand and accept that theirwellbeing depends on sustainable agriculture producing safe andhealthy food and maintaining a viable, attractive countryside85.Although in the context of the subsidiarity principles this is primarilya matter for local and national governments, the Union has a role topromote this for example, by integrating rural and regionaldevelopment policies in which there is more room for programmesand projects aimed at integrating the urban and the rural world86.

85In France for example, after the problems in the Paris banlieus two years

ago, a project was started to bring distressed citizens from the suburbs tothe farms. This experience opened a new world for both these citizens as theparticipating farmers86

The LEADER axis in the new Rural Development Policy has proven to be

a good tool to promote citizen participation, but under the programme, it isnot allowed to invest part of the available budget in the cities



221

What is needed is an integrated approach towards what could becalled the management of rural resources, both natural and societal.Such an approach would offer the development of tailor made localstrategies to assess valuable resources to be maintained and/or

developed, to develop public and private goods and services utilizebut not harm these resources and, finally, a system to ‘market’ and

reward the management of resources and the provision of goods and

services connected to these resources. Integration should take place

between the different measures and regulations and between the

different layers of governance.

It is important that in these new institutional arrangements sufficient

room remains for flexibility and for a certain dynamism; the question

regarding what resources should be managed can change fromcountry to country, from region to region and also over time; recently

the production of bio-mass has been added to the list of functions and

meanwhile we are discussing methods to use land for the

sequestration of carbon and in the near future we will be debating the

development of contingency areas to counter the effects of climate

change.

From this perspective we should also let go of the notion of LessFavoured Areas. Yes, conditions for efficient agriculture are less

favourable in large parts of the Union, but these areas harbour other

resources and potential amenities that render them More Favourable

Areas in other respects. If we as a society value these functions in

those areas more than the agricultural production function, but at the

same time want agriculture to play a major part in fulfilling these

other functions, we should no longer compensate farmers for worse

production conditions, but instead reward them with tax payers’

money for providing these public goods. The basis for payment to

these farmers would no longer be income compensation, but

payments that ensure us, as society that farmers and other land users

as well, will be prepared to provide these public goods. It is obvious

that the management of public goods requires a long term

perspective. The payment system should reflect this time horizon in

the form of long term agreements.



222

This brings us to the next point we want to bring into the debate. Thecurrent system is based on compensating and rewarding farmers onan individual basis. As most resources, such as bio diversity,landscape, carbon sequestration and water management, are not

confined to the boundaries of a single farm, a territorial approachshould also be reflected in the system of agreements and payments.We feel, and studies and practical experiences in various countriesback up this position, that an aggregate system in which anagreement is made collectively with a group of farmers in a givenarea will give far better results and a better guarantee for long termmanagement. In such an approach, other land users could also andshould be included. An aggregate system would also allow a more

integrated approach and room for experimentation to create moresynergy between the different functions87 and should also give moreroom to public-private investment partnerships. 5XUDO'HYHORSPHQWDVDQLQWHJUDOSDUWRIUHJLRQDOGHYHORSPHQW

When looking at the Rural Development Regulation 2007-2013, one

can only conclude that it has given way to a mish mash of goals,themes and measures. There is one axis intended to support andpromote competitiveness in agriculture; one for the implementationof agri-environmental schemes and one on improving the quality of life in rural areas. The integration of the Leader-programme, thoughvaluable as this methodology has proven to be in shaping andexecuting a bottom up strategy for rural development, adds an extradimension to this myriad that together is supposed to constitute theframework for Rural Development for the next programming period.Following the principle of subsidiarity it is up to the Member Statesand the regions to develop Rural Development Plans which form thebasis for European and national funding. We have demonstrated thatapart from this programme, rural areas will have to also integrateother programmes such as 1st Pillar payments and Structural Funds

87For example: to put experiments in place to grow bio mass on polluted

land to produce not only bio fuels, but also to purify the land; to combine

protection of bio diversity with water management and forms of low intensityrecreational use, etc.



223

and other measures ranging from the Nitrate, Natura 2000, Water andSoils Directives, together with national and regional spatial planningpolicies.

In the previous two paragraphs we have made a case to integratepolicies for agriculture and rural areas in a different way; acomprehensive policy for food supply and consumption on the onehand and an integrated policy concerning the multifunctionality of the countryside on the other.The third and last tier concerning rural areas is an approach to qualityof life issues that will support the Union’s overall Cohesion Policy.

As stated before it seems strange to invest CAP money in the quality

of life of rural areas. Also, the fact that as part of the RuralDevelopment Programme European money is invested in regions

which have income levels above and unemployment rates well below

the European average seems more the result of political wheeling and

dealing than of careful policy planning. More problematic is the fact

that in doing so, it operates separately from other European cohesion

programmes and structural funds. They have in essence the same

objectives which are to give an incentive to the socio-economic

development of regions that suffer from income levels lower, andunemployment rates higher than the European average.

In our perception, rural development with regard to the quality of life

should be integrated into existing cohesion policies. This would

result in decoupling the financing of the Second Pillar from the First

Pillar and would also imply that the richer members receive less

European funding for this policy. The integration of this aspect of

Rural Development into the wider Regional Development approach

would also allow areas that are under urban pressure to integrate

urban and rural development. These peri-urban fringes, too often and

too long regarded by spatial planners as future urban development

areas, fulfill a vital role in maintaining open spaces around cities and

at the same time in providing a multitude of goods and services, both

public and private, for urban consumers, citizens and policy makers.



224

The European Project is founded on the premise that a unifiedEurope and a single market will bring us lasting peace andprosperity. The notion of cohesion, in which richer members, via theUnion, invest money in poorer members, is key to its success. The

new approaches proposed by us could also act to counter the debateon the alleged dangers of a re-nationalization of European policy:policies will still have a common, in the sense of European,dimension, but not in the old top down sense of the word, but as partof a truly integrated approach to agriculture, food and countryside.

7KHIXWXUHRIDJULFXOWXUHWRZDUGVDUHYDOXDWLRQ Just as the Rapa Nui, we only have one world of which we have tolive, a small blue and green coloured marble in an endless universe.Despite attempts to discover new, inhabitable planets, it is safe toassume that for the next centuries we will have to continue to live off this one planet. The Rapa Nui example should make us painstakinglyaware that no matter how high and mighty we may feel about ourtechnological, scientific and cultural achievements, the earth is

vulnerable and therefore we are vulnerable. The same achievementshave clouded the fact that we still depend on basic resources for oursurvival and well being, basic resources that have come underserious strain. While our arrogance has led us to believe that basicneeds have been fulfilled and that we can dedicate our time, energyand brains to higher goals, we are in the process of making the samemistake as the Rapa Nui.

To say that we only have one planet is a cliché, but that does notmake it less true. The debate on climate change has once again made

us aware of this fact. Globalisation and liberalisation do too:

countries, their economies, cultures and ecosystems become

interlinked in such a way that today the survival of Orang-utans in

the tropical forests of Borneo is directly dependent on the demand

for soap bars made from palm oil and the price for soap bars is

directly dependent on the price for crude oil. Ergo: the number of

species of Orang-utans depends on the price of oil.



225

If there is anything we want to make clear with this book then it isthe plain and simple fact that when looking at some of the majorissues for the world of tomorrow, we need a re-valuation of the roleof agriculture and therefore of farmers. Without agriculture we

would all still be hunters and gathers, without modern agriculture 98out of every 100 people would still be compelled to work the soil fortheir daily bread while nowadays in most European countries only asmall minority is directly involved in farming, creating time andspace for other activities for the majority of the population; it haspaved the way for the Industrial Revolution and it has been animportant prerequisite for the success of the post war EuropeanProject.

Farming and farmers have always been vital for our survival; theyform the very corner stones of our existence and economicdevelopment; it has shaped large parts of the world we live in. Aviable and sustainable agriculture, an agriculture that not onlyprovides sufficient, good quality food without endangering futureresources, but that can also provide a whole series of other publicand private goods and services and contribute to the viability of ruralareas all over the world, will be as equally important today and

tomorrow as it has been in the last 10,000 years.

In the liberalisation debate within the WTO, but also in the CAPreform debate, we now approach farmers as entrepreneurs and assuch urge them to become more market-orientated. Entrepreneurs inthe sense of business men that seek to optimize return on investmentsin land, labour, capital and knowledge? If so, than we should not besurprised to find that some of them actually do act as entrepreneurs,either by selling their farms to invest their money in more profitableenterprises or by making business decisions that do not comply withthe multifunctional role we want to attach to agriculture. We cannotsay to a farmer: go, and act as an entrepreneur henceforth and at thesame time expect him to maintain public goods for virtually nocompensation. But, luckily for us, most farmers in essence are notentrepreneurs, even when they compete on international markets,which only a relatively small proportion actually do.



226

They are not entrepreneurs but tenants of the soil and providers of our food, an item so essential for our survival, that it can almost beconsidered a public good itself.In doing so, they have to work with nature, with landscape and with

the seasons, which makes farming one of the few professions left thatis not yet disconnected of time and place.

It is remarkable that the OECD88 in 1998 adopted a set of policyprinciples for agriculture in which trade, let alone free trade, is noteven mentioned. These principles include: strengthen world foodsecurity; enhance the contribution of the agro-food sector to theviability of the rural economy; take actions to ensure the protection

of the environment and sustainable management of natural resourcesin agriculture and preserve and strengthen the multifunctional role of agriculture.Much has been said about this multi-functional role, also in thisbook, both as a strategy to manage and preserve resources andprovide a wide range of goods and services as well as a way tostrengthen the socio-economic position of farmers. As much as wesupport this view, we must never forget, that the ‘core-business’ of

farming is and should remain the sustainable production of food. Theworld simply needs to be fed on a daily basis. Given the expected

growth of the world’s population and the fact that the growth rate of

the population will probably be higher than the growth rate of food

production, we cannot afford to remove food security and food

sovereignty from the world’s agenda or from Europe’s for that

matter. We are not in the position to say: “we have solved the food

security problem, we can now leave it to the forces of the free

market” and re-allocate tax payer’s money solely to agriculture’s role

in fulfilling other functions.

88Currently OECD member are: Belgium, Canada, Denmark, Germany,

France, Greece, Ireland, Italy, Luxemburg, The Netherlands, Norway,Austria, Portugal, Spain, Turkey, United Kingdom, United states, Iceland,Sweden, Switzerland, Australia, Finland, Hungary, Japan, Mexico, New

Zealand, Poland, Slovakia, Czech Republic, South Korea



227

Nonetheless, the fact remains that agriculture is the only economicsector to provide both marketable goods and public goods. In thatsense a lot is asked of agriculture and of farmers. It is therefore anoutright scandal that agriculture has become marginalised in the

public debate and is now threatened to become marginalised inpolicy as well. This is to a large extent due to globalisation that hasdisconnected production from consumption and producers fromconsumers, to liberalisation as it regards agriculture a sector like anyother and to policy itself as it has led to an image of farmers as livingof off tax payers’ money and at the same time polluting our soils,

water and air, mistreating their animals and destroying our

landscapes.

We have proposed therefore to redirect the debate on globalisation

and liberalisation and to come to a new common policy for

sustainable food production and consumption on the one hand and a

policy for a sustainable management of the countryside and natural

resources on the other. This could give way to building a more

positive image of agriculture, of its roles, its benefits and its crucial

importance. In this way more young people will be drawn to stay or

become farmer, a matter to be urgently addressed, if we want to keepenough farmers. If not, any debate on whether or not we want to

keep family farming as the corner stone of agricultural production

and agricultural policy will have become obsolete. The young are

already turning their backs on agriculture in the old Member States

and a new exodus is to be expected in the nations that recently joined

the Union. Farming is regarded as a profession that consists of hard

labour, long hours and little pay, suffering from increased

administrative burdens, volatile policies, increased pressure from the

agri-business and retailers and the scrutiny of the general public.

Together they have undermined the essence of what makes being a

farmer appealing: working in an independent way in and with nature

to produce basic good quality goods and services that are valuated by

consumers and citizens alike, backed by a policy that really supports

and promotes them.



228

We feel that over recent years the ‘zeitgeist’ is changing for the

better, that we have reached a point where the grains for a new

appreciation of agriculture and for farmers are sown. But it is still a

long way before being a farmer will be regarded as an attractive and

rewarding way to make a decent living. $JDLQRQQHHGVDQGZDQWRIVRFLHW\

Lastly we have to turn to ourselves, as citizens and consumers. At the

beginning of this book we used a distinction (that is common in text

books about marketing) between needs and wants. We have shown

that in the course of history, moving from an agricultural society toan industrial and subsequently post-industrial society we have

become to take the fulfilment of basic needs for granted and have

instead begun to perceive wants as needs and needs as wants. We

have argued that a first, major step, on the path to sustainable

development would be to put needs again above wants and to correct

the misconception that wants should have a higher status than needs.

We have also shown that the market is very good in fulfilling the

wants of society, but fails when it comes to satisfying basic needs,and that is the reason why government intervention is and will

remain necessary.

Especially the Western world has a global moral obligation to reduce

its ecological footprint and to help other regions of the world to

prevent them to make the same mistakes. Instead of running around

in desperate attempts to find quick fixes to be able to maintain our

present welfare, lifestyles and consumption patterns, to satisfy our

endless wants and support new members to adopt the same standards

of living we should consider a new approach.

We have to realize that the ongoing pursuit for material welfare is

unsustainable in the long run and it also does not equal our pursuit of

happiness. There is a correlation between material welfare and

happiness, but one that is also subject to the Law of Diminishing

Returns.



229

We have to be aware that Europeans have become ambiguous intheir expectations towards agriculture. Of course we want farmers toproduce in a sustainable way, produce healthy and safe food andfulfil its multifunctional role in the countryside. On the other hand,

we have become used to certain lifestyles in which food is the lastitem on the shopping list. Only when we want to impress our friendsor want to show that we are concerned citizens, are we prepared toput food higher on our personal agenda. But the core problem is thatthere is still a huge gap between what we expect from agriculture andwhat we are prepared to pay for it.

In discussing sustainability in general and specifically with regards

to agriculture we have to not only debate sustainable production andsustainable resource management but also sustainable lifestyles.Citizens can exercise their democratic rights to evoke policychanges; as consumers they can use the power of the shopping bag todirect supply towards a more sustainable offer of goods. Politiciansand policy makers should show the courage to put consumptionpatterns and lifestyles on the political agenda, an agenda on whichthe old notion of economic development and growth still prevails.

7HQTXHVWLRQVIRUIXWXUHGHEDWH1. How will the changing needs and wants of society reflect on the

functions of agriculture; how will this affect land use andlandscape?

2. How will a more market oriented approach of agricultural

production and the need to produce more efficiently to stay in theglobal competition affect land use in Europe?3. More efficient production will mean a further decrease of

farmers and farms in Europe. How will this affect the social andeconomic vitality of regions? How should the expected exodusof farmers, especially in the new member states, be managed?



230

4. If we agree that farmers are crucial for maintaining landscapesand for the vitality of the countryside and if this means to strivefor maintaining the farmer’s role in managing substantial parts of

the countryside, how can enough critical mass be maintained to

safeguard the management of the countryside?5. What should be done to ensure alternative ways of land use and

land management that are sustainable, both ecologically

(environment, landscape, biodiversity), economically, socially

and culturally?

6. What political room for manoeuvre is there to increase the

effectiveness of existing instruments; what political means are

there on the various levels of administration to develop new

instruments to support farmers to adopt new uses for the landand/or to make use of the opportunities developments in markets

and policies have to offer? More specifically how can the CAP

and EU RD policy be redefined not only for but with the new EU

members to prevent a devastating rural exodus?

7. What new ideas and examples are there in Europe in the form of

best practices or could be developed to involve private parties

(property investors, banks, and agribusiness) into the

management of land, both by farmers or other stakeholders, andin the funding of new and sustainable ways of land use?

8. How should and how can world trade, especially in agricultural

commodities, be governed to ensure that they will contribute to

sustainable development?

9. How can the needs and wants of society be connected to the

debate on sustainable development, sustainable agriculture and

the multifunctional role of the countryside?

10. How can civic society become more involved into this debate

and into assuming co-responsibility?



231



232

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89 W ld W t h I tit t *O E O W WL K I

the dilemmas of globalisation

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