A new vision for agriculture
momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.

Thierry Pouch
Personal account

Europe weeps, America smiles

Thierry Pouch,

Head of Economic Studies of the Permanent Assembly of Chambers of Agriculture (APCA)

As we have repeatedly emphasized1, the ongoing reform of the Common Agricultural Policy (CAP) is in many ways similar to the current discussions taking place in the United States for the adoption of a new Farm Bill planned for this year: similar in context and as to the challenges, but also with regards the alternative proposals emerging from the discussions. In this context, we recommend reading the editorial by Thierry Pouch, published in the Economic Letter of the Permanent Assembly of Chambers of Agriculture (APCA) in March 20122. It provides a very interesting parallel between the two ongoing reforms. While proposals made for the Farm Bill reform clearly indicate a willingness to preserve the productivity of American agriculture and its world position, European farmers are witnessing the gradual erosion of the tools for market regulation. Given the high stakes in terms of food security, employment and geo-strategic harmony, it is essential to reverse this dynamic.

Momagri Editorial board

As one by one, member countries of the euro zone enter recession, a recession that could spread to other economies within the European Union, the U.S. economy seems to be picking up. This fact confirms the difference in views on economic policy, even if now, the euro zone is more in line with the current crisis because of Mario Draghi’s activism, at opposite poles to his predecessor’s rigidity. As with growth, agriculture forms another domain, which highlights the rift between the Americans and the Europeans, because in both cases the issue at stake is the reform of agricultural policy. So then, has Europe got a future?

The economic growth forecasts delivered last January by the IMF confirm that growth in the euro zone will be negative (-0.5%), while the U.S. economy has regained a positive growth rate (1.6% against 1.8% in 2011). The adoption of austerity measures in the euro zone stifles recovery and obstructs opportunities.

In contrast, accommodating American economic policy supports demand and at the same time, benefits from the vigorous growth of emerging countries. As a consequence the unemployment rate in the U.S. has seen a significant decline. This is the opposite to the euro zone, where unemployment has crossed the symbolic threshold of 10% of the workforce.

U.S. agriculture has clearly had a share in this economic recovery. In 2011, farmers indeed saw a marked increase in their income, reaching beyond 100 billion dollars for the first time since 1990 (average income of around $66 billion). Another leading indicator for U.S. agriculture, the trade balance. Recording an annual increase of nearly 45%, the U.S. surplus in agricultural and food products is in itself a very significant increase compared to 2010, 43 billion dollars against 29.7 in 2010.

It is in this context the preliminary discussions for the new Farm Bill intended to cover the period 2012-2018 fit in, unless both parties, the Senate and the House of Representatives are unable to agree on the 2012 Farm Bill, in which case the law will be pronounced in 2013, after another year of operating under the 2008-2012 Farm Bill.

At the same time, the E.U. will be striving to reach consensus on CAP reform for the period 2014-2020, with the issues of subsidy greening or convergence forming major stumbling blocks. U.S. farmers have played a more aggressive card.

Firstly, vis-à-vis direct subsidies (about $5 billion per year), which they admitted removing with regards the evolution of agricultural prices on the markets, indicating that in compensation they expected the continuation of food aid (75% of federal agricultural spending in 2011).

Secondly, because farmers and the Farm Bureau have developed a document that could serve as a reference during the discussions in Congress, and in which it is proposed to amplify public and private insurance-tools for farms. There is also suggestion that marketing loans accompanied by a recovery plan for supported prices are to be preserved.

Finally, U.S. farmers have made a claim that should be echoed on this side of the Atlantic, namely a review of environmental regulations in order not to hamper agricultural productivity.

What a contrast between on the one side an American agriculture concerned about its production and its position in world markets, and on the other, European farmers, who despite the results in 2011, are witnessing the gradual disappearance of market regulation tools to greening. Admittedly the United States plan to reduce agricultural spending, but without sacrificing the geo-strategic dimension of agriculture. When will Europe take the leap?

1 Please see momagri’s article “European Union and United States: A different agricultural policy is possible”, http://momagri.fr/UK/a-look-at-the-news/European-Union-and-United-States-A-different-agricultural-policy-is-possible_1074.html
2 http://www.chambres-agriculture.fr/grands-contextes/cles-de-lagriculture/economie/actualites/toutes-les-publications-economiques/article/lettre-economique-n316-ma/
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Paris, 26 June 2019