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An agricultural policy for the future?

(PS. This article is machine-translated from Norwegian)

The development of agriculture in many western countries is today characterized by the proponents of freer trade and their demands to reduce agricultural subsidies. To the extent that the support is to be maintained, the requirement from these political and economic environments is that it be disconnected from production. In the World Trade Organization (WTO) negotiations, such decoupled support is called green. Is such support suitable for securing the production of food and public goods in a country like Norway? The EU is the area that is now trying to decouple aid to the greatest extent. They have recently reformed their agricultural policy, and the support will be awarded regardless of how much or how little the farm produces in the future. The objectives are to increase international competitiveness through greater market management and to limit the agricultural budget.

When agricultural subsidies are decoupled from production, this means that EU subsidies to agriculture must be paid out through production-neutral schemes. Ie. that EU support should be given either based on the farm's area according to a regional model where different regions have varying support rates per goal, or as support based on the farm's historical production. It is also possible to choose a combination of these. If you want to avoid too much redistribution, choose a historical model where all support will be given after previous production. If you put as much as possible on the area, it means a redistribution from use with little to those with a lot of area.

When EU support is no longer given in relation to production, it means that the farm must satisfy certain minimum requirements to receive support. There are requirements related to animal welfare, the environment, the preservation of the land, etc. Production beyond the minimum requirements must be covered by the raw material price alone. It is agreed that the reform will increase bureaucracy and costs in the agricultural administration. This happens i.a. through increased need for control related to follow-up of the minimum requirements. Professor Vatn at UMB (formerly NLH) has calculated that the administration costs of, for example, Special measures in the agricultural cultural landscape (STILK) are about 46 per cent, while investment grants for environmental measures are 20 per cent. On the other hand, the administrative costs of price subsidies for milk are 0,2 per cent and area and cultural landscape subsidies 0,9 per cent. This is not an argument against having specific measures, but we see that the money is used far more efficiently if it is given as general production support.

It is thus significantly cheaper to get common goods such as cultural landscape, settlement, biological diversity, etc. linked to food production, rather than having one policy for the production of food and one for the production of public goods. This is natural, because these benefits are connected – if you produce food, you also get a cultural landscape, but not necessarily the other way around. Releasing food and common goods is also about the farmer's motivation. Studies, such as those carried out by Professor Vatn, confirm that the farmer strongly wants to produce the cultural landscape together with the food, but that the production of food is the most important thing. If food production is toned down, the farmer's motivation as a landscape nurse is weakened.

A question in the wake of the EU's decoupling is whether there will be political support for a system that does not stimulate production? We fear that over time a situation may develop where you see decoupled – green – support as unnecessary, because the production you have is driven on the basis of market prices, nevertheless. In comparison, the United States has recently abandoned a policy aimed at increasing the decoupling of agricultural production. The reason was that the profitability of the farmers became too poor, which led to political pressure to bring back a more production-oriented agricultural policy.

One of the goals of current agricultural support is to even out production costs within and between countries. When the support is decoupled from production, the equalizing effect will disappear completely. Decoupling will therefore probably have consequences through redistribution of production between regions in the same country, and this also lays the foundation for changed competition between countries. In Norway, this means that the districts with the highest production costs come out even worse in the competition than is the case today, and more of the production will be moved to the areas around Oslo, Trondheim and Hafrsfjorden, as well as Lake Mjøsa. Telemark agriculture will be one of the losers in such a system.

Full decoupling of agricultural support provides more bureaucracy, more expensive cultural landscapes, more market management, favoring the areas with the cheapest production and lower motivation among the farmer. As a supplement to other schemes, it makes sense in an overall picture to have some decoupling. We already have that in Norway today, but a complete decoupling can have a number of unintended consequences.

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