Agricultural sustainability in the age of neoliberal economics: The case of the EU Common Agricultural Policy

European Union agricultural policy and sustainable

development

The Common Agricultural Policy (CAP), conceived in 1958 and

enacted in 1962, is intimately bound up with the origins of

the European Common Market. Originally devised to regulate

and protect agricultural production of member states

(particularly France), the CAP has survived sustained

international criticism and the challenges of an expanded

European Union (EU), which is now composed of twenty-seven

nations. Especially since the Agreement on Agriculture came

into effect in 1995 following the Uruguay Round of

international trade negotiations between 1986 and 1994, the

CAP has been under pressure for failing to work towards

agricultural trade liberalization. Under the auspices of the

World Trade Organization (WTO) a complex system for auditing

agricultural subsidies has been established. Key categories

include an “amber box” (clearly trade-distorting

subsidization), “blue box” (trade-distorting subsidization

exempted as such by virtue of the ‘Peace Clause’ agreed the

EU and the US in the Uruguay Round), and “green box”

(minimally trade-distorting subsidization). This

categorization has, however, failed to diffuse tensions

around global agricultural trade, with the EU being

suspected of using putative environmental and social

sustainability reasons for what are in reality protectionist

measures. This has led to a widespread perception that the

green and blue boxes are easily manipulated to allow

European agriculture an unfair advantage in global trading.

However, a more fundamental question relates to the

potential environmental and social impacts of full-scale

trade liberalization in agricultural trade. This raises the

prospect that EU agricultural subsidies could be defended as

legitimate means for facilitating sustainable development.

Agriculture as a sustainability issue

According to Harris (2006), environmental economics is

distinguished from the traditional economic model (also

known as neoclassical economics) in its effort to “place

economic activity in the context of the biological and physical

systems that support life, including all human activities”

(Harris 2006, p. 5). In the view of Gowdy (2000), the

essential limitation of neoclassical economics is its almost

exclusive focus on efficiency, with regard to both

production and distribution (Gowdy 2000, p. 27). This narrow

efficiency perspective is overcome with the introduction of

key notions in environmental economics: the centrality of

solar energy, the environment’s carrying capacity, resource

depletion, and the environment’s sink function in relation

to waste products (Harris 2006, pp. 6-8). Articulating such

concepts allows economics in the narrower sense to be seen

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with the much more comprehensive system of life of the

planet, thereby allowing for reasoned critique of short-term

efficiency imperatives. As Harris puts it: “In this

perspective, an economic evaluation expressed in prices can

only imperfectly capture the complexity of ecological

processes, and indeed will sometimes result in serious

conflict with ecosystem requirements” (Harris 2006, p. 9).

Seen through the lens of economic efficiency successful

agriculture must, like any other economic sector, strive to

extract maximum profit by minimizing the cost of inputs. In

the most advanced economies the industrialization of

agriculture developed rapidly in the course of the twentieth

century. As Thompson (2010) points out with respect to this

process in the United States, between 1920 and 1960 there

was a broad progressive consensus “that agriculture should

be viewed as just another sector of the industrial economy”

(Thompson 2010, p. 48). Surprisingly, however, given that

today only three percent of the population in the United

States works in the agricultural sector (Graffy 2012, p.

512), farming has continued to enjoy special protection

measures on the part of the federal government, measures

which also shelter it from the rigors of environmental

regulation. In the words of Graffy (2012): “Agriculture [in

the United States] maintained its sense of exceptionalism in

the environmental policy domain, however, remaining largely

exempt from environmental laws that affected most other

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industrial sectors until quite recently” (Graffy 2012, p.

512). While the US 2014 Farm Bill earmarks $56b for

conservation out of a total expenditure of $973 through 2023

(Plummer 2014; online), the European Union directed around

12 billion Euros of CAP money toward environmental

protection (‘Pillar 2’) in 2011. Over the last decade Pillar

2 payments have increased as a total of CAP expenditure from

around 12% to 23% (Matthews 2013; online). This is in large

part due to the WTO agreements according to which Pillar 1

(direct subsidization) payments are to be eventually wound

down.

At first glance, this tendency to direct state

expenditure towards environmental land management would

appear to be a clear victory for the ecological economics

paradigm. Indeed, the WTO itself proclaims environmental

protection as one of its six fundamental principles (WTO

2014; online). However, widespread skepticism with regard to

the ‘agricultural multifunctionality’ rationale for state

spending persists, particularly on the part of the Cairns

Group of nations (which includes Canada, Austrialia, and the

major producers of South America) that has been calling for

a complete cessation of all agricultural subsidization for

the best part of three decades. The multifunctional idea has

been central to the EU’s strategy of shifting funding from

Pillar 1 to Pillar 2 payments. It is important to note on

this issue that the power of sustainable development as an

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ethical paradigm for policy making is at stake. As Potter and

Burney (2002) explain: “The differences between advocates

and critics of multifunctionality are thus normative as well

as technical, reflecting as they do very different views

about the desirability of structural changes in agriculture

and hence the role of government in maintaining a

countryside largely occupied by farmers” (Potter and Burney

2002, p. 36).

The EU development of the agricultural multifunctionality

concept came to prominence in the years leading up to the

1999 meeting of the WTO in Seattle. Around this time the

environmental benefits of continued subsidization in

particular were emphasized. Considered more broadly there

are three proposed core benefits in play: conservation of

farmland biodiversity; protection of agriculturally marginal

production and associated social and cultural systems; and

protection of enduring managed landscapes that have

developed in harmony with natural systems. In the Agenda

2000 CAP reform 55% of all EU farmland designated ‘Less

Favored Areas’ (principally low intensity hill and mountain

farming) was eligible for ‘environmental resource payments’

(Potter and Burney 2002, 39). France, in particular, adopts

an explicitly agrarian stance when justifying such payments

as needed for the continued protection of traditional

patterns of rural settlement (Potter and Burney 2002, p.

40). The United Kingdom, by contrast, prefers to justify CAP

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spending for its national agricultural sector on the basis

of robust ‘decoupling,’ that is, distinguishing

environmental management as an end it itself rather than as

a means to protect traditional patterns of agriculturally

based social settlement (Potter and Burney 2002, p, 40).

Environmental consequences of agricultural land abandonment

One of the key issues in the debate over EU agricultural

subsidies relates to the prospective consequences of

widespread abandonment of farmland as a result of complete

liberalization of European agriculture. As noted, there are

profound differences with the EU itself, with France

continuing to support Pillar 1 payments to protect marginal

agriculture on environmental and social/cultural grounds and

the United Kingdom calling for the complete abolition of

such payments. In a recent empirical study Renwick et al

(2012) analyzed potential scenarios to ascertain the

potential environmental impact of agricultural land

abandonment across Europe. The scenarios centered on WTO

proposals on agricultural trade liberalization in light of

the 2011 European Commission policy position on agriculture.

While an adequate appreciation of the modeling methodologies

used in this study is beyond the competence of the present

author, the conclusions of the study are worth considering.

Broadly, the paper concludes that the effects of land

abandonment will be mixed. With respect to upland animal

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agriculture the authors note: “The predicted cessation of

farming in many high nature value areas is likely to lead to

a loss in farmland biodiversity” (Renwick et al. 2012, p.

453). On the other hand the authors hold that “there appear

to be potential economic (efficiency) and environmental

gains (lower overall greenhouse gas emissions, reduced

nutrient surpluses) to be had from wider reforms of

agricultural and trade policy” (Renwick et al. 2012, p.

453). With both the gains and losses of abandonment in mind,

the authors conclude that it is “balance between maintaining

production in areas where it is deemed environmentally

important, but still enabling agriculture to become more

efficient, that is the key policy challenge” (Renwick et al.

2012, p. 455).

A notable absence in this study – funded by the UK

Department of Environment Food and Rural Affairs – is the

social/cultural dimension of sustainable development. As

noted, this is a key desideratum for the French response to

CAP reform. French agricultural policy appears to be guided

by a truly agrarian vision, which according to Thompson

hinges on the human virtues of land stewardship and farmer

self-reliance (Thompson 2010, p. 67). Most importantly,

agrarianism identifies farming activities as key drivers of

social solidarity: “The fact that land cannot be relocated

leads farmers to recognize the mutual self-interest in

solidarity” (Thompson 2010, p. 83). Factoring in the

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agrarian perspective on farming raises the question whether

the goals of efficiency through liberalization and social

sustainability through agrarianism can be mutually

reinforcing. If they cannot policy-making in this arena must

continue to be a compromise and, to that extent, a

recalcitrant sphere of production in the eyes of free market

advocates.

Agriculture as a common good

In a recent paper Wan-ki Moon (2011) tackles the question of

the compatibility of sustainable agriculture and free trade

directly. Initially citing innovative concepts of ecological

economics such as underpricing natural capital, the

pollution haven hypothesis, and irreversibility, Moon

acknowledges that “agriculture is at the forefront in

managing a wide range of natural resources” and, as such,

must foster “the flow of ecosystem services, coping with

global warming, and promoting sustainable agricultural

production and food security for future generations” (Moon

2011, p. 14). Moon’s argumentative position in light of this

is that “agriculture is incompatible with free trade because

of its innate role in managing ecological/natural resources

at both national and global levels” (Moon 2011, p. 14). In

particular, the WTO is implicated in its mission to

liberalize agricultural trade across the globe. In effect,

Moon is arguing that agricultural environmental services

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cannot be ‘decoupled’ from agricultural production, as the

former is inherent (‘innate’) in the latter. At the same

time, Moon concedes that developed nations are responsible

for “the uneven playing field that was created by the way

agriculture has been treated (protected/taxed) differently

across countries in the past” (Moon 2011, p. 14).

Moon insists that both domestic and international

agricultural policy should be driven by the moral imperative

of ‘food security’: “[E]very country now and in the future

is entitled to food security and such food security is

indispensible for economic globalization to progress in an

ethical and equitable manner” (Moon 2011, p. 14). This

principle is placed above the free trade imperative of

maximized production for the world market. Emphasizing

equity essentially places global agricultural production

under the obligation to maximize fair distribution. This echoes

the terms of the 2012 declaration of the United Nations

Conference on Sustainable Development (Rio+20): “We reaffirm

our commitments regarding the right of everyone to have

access to safe, sufficient and nutritious food, consistent

with the right to adequate food and the fundamental right of

everyone to be free from hunger” (Rio 2012). The final, most

overtly political statement, is found in paragraph 118 of

this document: “We reaffirm that a universal, rules-based,

open, non-discriminatory and equitable multilateral trading

system will promote agricultural and rural development in

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developing countries and contribute to world food security”

(Rio 2012).

Moon’s analysis shows the degree to which the reality is

removed from this vision of agricultural equity offered by

the United Nations. In stark terms it is noted: “The

monetary magnitude of farm protection in OECD countries

amounted to $253 billion in 2009, greater than five times

the amount of foreign aid given to developing countries from

the industrialized world” (Moon 2011, p. 15). Moon cites

four underlying rationales for agricultural protectionism:

food sovereignty, protection from boom-bust cycles,

multifunctionality, and sheltering farming interest groups.

Moon sees the first three motivations as legitimate, the

fourth as illegitimate. Further analysis of the

environmental dimension of agricultural multifunctionality

leads Moon to a strong conclusion:

Agriculture is too special to be treated like

manufacturing sectors in multilateral trade talks: it

produces a broad range of multifunctional outputs

domestically; it is profoundly associated with global

public goods including sustainability, food security for

LDCs [Least Developed Countries], and mitigation and

adaptation to climate change; and countries need varying

degrees of collective actions to address widely divergent

needs from agriculture. (Moon 2011, p. 21)

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Indeed, Moon goes on to identify agricultural trade

liberalization as a ‘wicked problem’ in light of the

vicissitudes of WTO negotiations in this arena over the last

two decades. In particular, it is clear that developed

nations (particularly the EU and the US) are reluctant to

relinquish the global trade advantages they enjoy.

Reflecting on the repeal of the British Corn Laws in the mid

nineteenth century, Moon notes that “our world has never had

free trade in agriculture and agricultural trade policies

have always been subordinated to nation-states’ agricultural

interests” (Moon 2011, p. 22). The answer in our own times,

according to Moon, is to challenge the legitimacy of the WTO

in this arena and, given the empirical impossibility of

agricultural self-sufficiency for nation states today, “to

explore alternative systems of global governance that are

solely dedicated to dealing with agricultural matters” (Moon

2011, p. 22).

Impacts on the global South

The discussion of EU agricultural policy offered above makes

clear that there are two key drivers at play. On the one

hand, there is the original impetus to maintain historically

existing patterns of agriculture across European nation

states, the claims of French farmers being a preeminent

interest group in this regard. On the other hand, the

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pressures of liberalized global trade, under the auspices of

the General Agreement on Tariffs and Trade (GATT) since 1947

and the WTO since 1994. Under pressure from the latter, the

expanding European Union has sought to repurpose the CAP as

an environmental land management framework. In the

international arena, the EU’s subsidization of agriculture

has been most trenchantly criticized by the Cairns group,

which accuses the Europeans of reneging on successive

promises made to create a level playing field in global

agricultural production. Building on the opposition of the

Cairns group, the G-20 developing nations bloc (which

includes China, India, most of South America, South Africa,

and Mexico) formed in 2003 at the fifth Ministerial meeting

of the WTO, held in Cancún, Mexico. The platform was one

that essentially indicts advanced nations or blocs

(essentially the US and the EU) of the hypocrisy of pushing

for poorer countries to allow access to their domestic

markets while maintaining protectionism for their own

economies.

Reflecting on the impact of the G-20 developing nations’

stance on agricultural trade, Clapp (2006) notes: “The main

concern of developing countries was the incorporation of

special measures to enable them to protect rural livelihoods

and food security” (Clapp 2006, p. 566). Such measures

included a “Special Safeguard Mechanism (SSM) to help

protect their economies from import surges” (Clapp 2006, p.

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566). Rather than amending the Blue Box to curb trade-

distorting subsidization, the G-20 developing nations called

for its abolition, in addition to more stringent spending

caps on the Green Box. With the economic and political heft

of such nations as China, India, and Brazil behind it, this

represented an international alliance (comprising two-thirds

of the global population) that the EU and US could not

simply bypass. In the years that followed the 2003 WTO

meeting pressure mounted on the EU to specify a date for the

elimination of agricultural subsidization. While the US and

G-20 developing nations were pushing for a date of 2010,

after a tense and protracted standoff the EU finally agreed

to a latter date of 2013 at the 2005 WTO Ministerial meeting

in Hong Kong. Despite the headlines of a major breakthrough,

this was largely a symbolic achievement given that “the 2003

reform of [the EU’s] Common Agricultural Policy would see

the end of most export subsidies by that date in any case”

(Clapp 2006, p. 574). In fact, the victory was less symbolic

and rather pyrrhic, due to fact that realignments of the box

system meant that the EU and the US were able to “increase

their trade-distorting domestic support by $35 and $7.9

billion, respectively, by the end of the implementation

period” (Clapp 2006, p. 574).

The pattern of trade negotiations in recent decades is

thus clear: agriculture remains a highly protected sector of

economic activity in the EU (and the US). While the Doha

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‘Development’ Round of WTO negotiations (from 2001) was

predicted to bring a net gain of $500 billion to the global

South, the actual figure was a much more modest $16 billion

(Clapp 2006, p. 575). Given the adverse affect on the

agriculture of developing nations, it is worthwhile noting a

further paragraph of the Rio+20 declaration: “We recognize

that a significant portion of the world’s poor live in rural

areas, and that rural communities play an important role in

the economic development of many countries. We emphasize the

need to revitalize the agricultural and rural development

sectors, notably in developing countries, in an

economically, socially, and environmentally sustainable

manner” (Rio 2012). In light of tis claim, it is easy to see

how accusing the EU that it is protecting its own rural

development at the expense of that of developing nations

finds resonance. The question remains whether EU

agricultural policy is flawed in absolutely or relative

terms. That is, could EU support for its own agriculture

actually became a framework to be emulated across the world,

once the glaring inequities of the current situation are

dealt with. If so, this would represent a permanent

divergence from the strong liberalization case that has been

made by most economic analyses of agriculture since the

advent of GATT in the mid twentieth century.

Agriculture as a common good

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The moral claims of ‘food security’ (especially when brought

together with ‘food sovereignty’) arise from a simple fact:

agricultural is an arena of activity that caters to the most

basis needs of the human population. It is not a question of

discretionary commodity consumption but literally a matter

of life and death. Acknowledging this simple fact is the

most direct way to single out agriculture, in the way Moon

(2011) does, as a special case where the standard arguments

for trade liberalization do not apply. At the same time, as

the opening sections of this paper make clear, being

sensitive to the sustainability dimensions of agriculture

means that, at a minimum, economic profit-making can only be

one of a number of desirable outcomes. Environmental

economics reorients our appreciation of production towards

the solar cycle on which all organic life on earth is based.

Proponents of organic agriculture would also point to the

centrality of soil health for viable long-term systems of

food production.

While the tendency of the EU to repurpose its support for

agriculture is seen by many non-European nations as a

subterfuge to maintain unfair domestic subsidization, the

potential of trade liberalization to provide incentives for

more robust patterns of sustainable development is

questionable. After all, the major trade issues relate

primarily to large-scale commodity crops (maize, soy,

cotton, etc.), whereas the EU rationale for continued CAP

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payments increasingly pertains to marginal agricultural

practices, such as low-intensity animal husbandry in upland

areas across northern Europe and perennial crops such olive

plantations in relatively arid regions of southern Europe.

In addition, there is the European appeal to the role of CAP

in preserving the vitality of rural communities, which can

be justified under the heading of social sustainability.

While the proportionate numbers of the population living in

rural areas in Europe is small, there are credible

sustainability rationales for maintaining rural communities

at higher levels than would be the case if agricultural

trade liberalization were to be pursued to the neglect of

all other claims.

Thus, while the case if liberalization is not without

merit, subsidization that supports the multiple

sustainability functions of agriculture is, on a broader

view, justified. If, in a spirit of unbridled free trade,

the livelihoods of many (or even most) current European

farmers were undermined, then governmental institutions

would almost certainly have to assume the more onerous task

of deploying specialized land managers to maintain ecosystem

services at optimal levels. Just as environmental economics

seeks to factor in what were traditionally regarded as

‘externalities,’ the farm (particularly at smaller scales)

can be seen as a human institution well suited to manage

productive agricultural land in an environmentally

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responsible manner. The point is made succinctly by Thompson

(2010): “Neoclassical economics achieves explanatory power

precisely because its simplifying assumptions focus on

production and exchange characteristics that apply to all

forms of economic activity […] Still, the economic approach

must be augmented if we are to understand social goals that

derive from the kind of activity that agriculture itself is”

(Thompson 2010, p. 186).

Moon’s (2011) challenge to forge alternatives to the WTO

to achieve an effective international policy convergence

steered by the moral claim of food security is attractive

but unlikely given the present political reality. If, as he

and Thompson (2010) insist, sustainable agriculture is

incompatible with straightforward economic efficiency

thinking, it is unrealistic to expect nation states to

simply give up trade advantages they currently enjoy. In

fact, unlike with core global environmental issues such as

the production of greenhouse gases, it is harder to argue

that one nation’s agricultural activities have a direct

negative impact on other nations. While issues such a soil-

based carbon sequestration challenge this, it is still the

case that the negative environmental effects of agriculture

are regarded as concentrated within the geographical

confines of each nation state. Given this, threats to global

food security can only be indirectly attributed to agricultural

practices insofar as they have negative effects on

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determinants of climate that are truly international in

scale. As the impacts of climate change become better

understood, it is reasonable to assume that more robust

international governance of agricultural practices will

arise that seeks to balance environmental benefits against

the hitherto dominant concern for sheer production levels

and profitability.

As the Rio+20 declaration announces, this should be

construed as a responsibility to help developing nations to

achieve greater levels of agricultural resilience. But this,

in turn, can become controversial if it takes the form of

advanced economies exporting agricultural technology (such

as GMOs) to developing nations. Whatever the means employed,

however, there appears to be growing awareness that the

precariousness of food systems in the developing world

(especially sub-Saharan Africa) is likely to have grave

implications for global social and political peace and

stability. While the warm glow of international agrarian

solidarity is no doubt attractive in theory, the threat of

international instability is more likely to give self-

interest reasons for the advanced economies to protect

developing nations from the impact of full-blown

agricultural liberalization.

Considered in this light, at least some of the

motivations for EU agricultural subsidization can be

defended on sustainability grounds. At the heart of the CAP

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lies the recognition that there is something different about

agricultural production, something that ties farming

intimately to social vitality and environmental health.

While this insight has certainly been subject to self-

interested manipulation on the part of EU member states and

the bloc as a whole relative to other agricultural

producers, abandoning the CAP entirely, as the trade

liberalizers insist, might produce a leaner sector but would

almost certainly have negative impacts on social and

environmental sustainability. Thus, while it might seem

ironic in the eyes of many commentators, EU agricultural

policy, with its core recognition of the multiple functions

of farming, has the potential to become a model for future

international negotiations. Of course, the prerequisite for

doing this in any plausible manner would be removing the

current asymmetries thanks to which the EU is able to export

subsidized food to the rest of the world at an unfair

advantage. Thus corrected, international agreements on

agriculture would allow nations to direct revenue towards

domestic agriculture provided there was a compelling and

verifiable sustainability case. Given such an altered global

conjuncture, however, a more radical realignment would be

hard to avoid. Namely, agriculture would be steered away

from the imperatives of global commodity production and back

towards more localized or perhaps regionally planned

farming. A further beneficial corollary of such a change

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would be significantly lessened non-renewable energy

expended on the distribution of food. While this would not

bring us to the robust localism celebrated by agrarian

traditionalists, it would go some way to refocusing

agricultural policy on meeting the nutritional needs of

local and national populations across the world.

Works Cited

Clapp, Jennifer. 2006. “WTO Agriculture Negotiations:

implications for the global South.” Third World Quarterly. 27:

563-577.

“The Future We Want: Rio plus 20”

http://www.uncsd2012.org/content/documents/727The

%20Future%20We%20Want%2019%20June%201230pm.pdf

Gowdy, John M. 2000. Terms and Concepts in Ecological

Economics. Wildlife Society Bulletin 28(1): 26-33.

Graffy, Elizabeth. 2012. “Agrarian Ideals, Sustainability

Ethics, and US Policy.” Journal of Agricultural Environmental Ethics

25: 503-528.

Harris, Jonathan. 2006. Environmental and Natural Resource

Economics: A Contemporary Approach, Second Edition.

Matthews, Alan. 2013. “Implications of CAP Reform.”

Http://capreform.eu/implications-of-the-european-council-

mff-agreement-for-the-agricultural-environment. Accessed

14 March 2014.

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Plummer, Brad. 2014. “The $956 billion farm bill, in one

graph.”

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/2

8/the-950-billion-farm-bill-in-one-chart/. Accessed 14

March 2014.

Potter, Clive, and Jonathan Burney. 2002. “Agricultural

multifunctionality in the WTO.” Journal of Rural Studies 18: 35-

47.

Renwick, Alan, et al. 2013. “Policy Reform and Agricultural

Land Abandonment in the EU.” Land Use Policy 30: 446-457.

Thompson, Paul. 2010. The Agrarian Vision. University of

Kentucky Press.

WTO 2014;

http://www.wto.org/english/thewto_e/whatis_e/what_stand_f

or_e.htm. Accessed 12 March 2014.

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