The Agricultural Policy in European Union and the United State of America Proposal

Brief Outline of the topic of the proposed research

The European Union is one of the largest economies in the world and a considerable trade partner for the United States of America.

The two blocs are also agricultural trading partners and leading competitors where food market is involved. According to Haas (2007), “The European Union (EU) and Unites States’ (US) governments provide support to their respective agricultural sectors” (p.43).

This strategy is one of the relevant factors in the success experienced in this sector.

Several policies exist in both regions of the world. It is crucial to compare them to establish the effect that they have had on the respective countries. With the population of the world said to be over seven billion and increasing every day (Anatole 2012, p. 17), agriculture is increasing in significance.

Countries around the world have adapted policies aimed at increasing their agricultural output and shifting balance of trade to their advantage (International Food & Agricultural Trade Policy Council 2011). This is the case in the US and the EU, as they try to meet the agricultural demands of the 21st century.

Therefore, how do the agricultural policies in the US and the EU compare? What effect do they have on agricultural output?

Currently, the economies are experiencing budgetary issues, which continue to inform the agricultural policies being developed. Based on all these factors, it is vital to conduct a study comparing the agricultural policies in these countries.

In this regard, the dissertation is proposed with the title ‘The Agricultural Policy in European Union and the United State of America.’

Aims and objectives of the research

The first objective will be to identify the existing agricultural policies in France, Germany, and Spain. The next objective will be to investigate the agricultural policies in the United States of America.

To achieve the main aim of the study, the third objective will be to analyse the common agricultural policy in the European Union and its effects on the member countries with the use of Germany, Spain and France. To achieve these objectives and aims, several questions will need to be answered in relation to the study aims.

  1. What are the existing agricultural policies in Spain, France, and Germany?
  2. What are the existing and proposed agricultural policies in the USA? The question of the details of the common agricultural policy in the EU will also be answered.
  3. How do the agricultural policies compare for these countries.

Importance of the proposed research

With the integration of members and enlargement of the European Union, the existing agricultural policies in the member countries will be overtaken by the common agricultural policy. Few investigations have been done detailing the effects as well as comparing it with the policies in the USA.

As indicated above, the EU and the US are principal partners and competitors in the field of agriculture with each of the economies receiving a significant contribution from the sector. A significant government support in the countries goes to the agricultural industry.

According to the Organisation for Economic Cooperation and Development (OECD), “the European Union and the United States together account for more than 60% of all government support to agriculture among the main developed economies” (Young & Hansen 2011, p. 26).

Some of the latest developments in the policy reforms in the EU include the proposed reforms in the Common Agricultural Policy (CAP) with the US congress said to have passed significant agricultural bills in the year 2012 including the Farm Bill (Bureau & Louis-Pascal 2009, p. 5: Monke & Johnson 2010, p. 12).

A common feature for both of these economies is the bio fuel policies, which are inseparable from the agricultural objectives of the member counties and states (Young & Hansen 2011, p. 26).

An attempt will therefore be made in this dissertation to compare the agricultural policies for the bloc with that of the United States to see if the two are similar.

With the increase in population and geographical size that the European Union is likely to have from the member countries, the bloc could use the experience of the United States to set up relevant policies to support her growth.

Summary and outline of proposed research topic

Agricultural policies are statements by governments and authorities that are aimed at ensuring welfare, sustainability, and distribution in the agricultural sector (Young & Hansen 2011, p. 26).

Agriculture in the European Union specifically in Germany continues to be regulated by the existing agricultural policies, and public support is its mainstay.

The European Union has adopted the CAP that is aimed at establishing a market-oriented and sustainable agricultural sector (Mewvissen, Van Asseldonk & Huirnde 2008, p. 53).

As an example of a member state in the European Union, Hardaker reveals that Germany’s agricultural policy is geared towards consumer protection and ‘greening’ of the policies (an example is BMVEL 2001)(2000, p. 42).

The CAP in the European Union was proposed in 1960with the founding members of the European Community such as Germany and France having emerged from severe food shortages and hence requiring food security (‘Study of European Union Common Agricultural Policy2008, p. 2).

The agricultural policy in France has been based on the aim of boosting her economic development in the past.

The adoption of the CAP in the EU could mean a standardisation of the existing agricultural policies in the member countries. The strategy could have both positive and negative impacts on this sector. According to (Garridoet al 2009), after Spain joined the EU in 1986, it is therefore party to the CAP in the bloc (p. 94).

The United States has a well-established agricultural policy. Several amendments to the law on food and agricultural production have been made.

The agricultural policy here has undergone the transition through four stages of traditional developing, maturing, and modern stage with Schultz noting that traditional society was marked by poverty and primitive technology (1964).

The current agricultural policy in the US is market-oriented with several factors such as laws and international treaties affecting the output (Young & Hansen 2011, p. 26).

One of the findings from the dissertation as revealed by (Hellerstein 2010) is that the agricultural policies in the US and EU are similar and that the two countries are outstanding competitors and partners in the global agricultural trade (p. 78).

Proposed chapter outline of dissertation thesis

The dissertation will begin with the literature review where the appropriate information will be discussed based on the existing studies. This approach will establish the suggested theories in the literature reviewed. Analysis of the information will then follow to make the first chapter.

After the analysis, the methodology for the dissertation will then be discussed with details of the exclusion and inclusion criteria. The second chapter will then be written based on the data collection and results presented to the supervisor for proof reading.

The results will be those obtained from the pilot study and the actual study. After the dissertation is complete, the data and collusions will be presented in the form of a document. The final draft will then be presented after proofreading and correction.

Literature review

The policies in the US and the EU are similar on many aspects. Literature describes the historical changes in them. The Common Agricultural Policy governs the EU. As shown by the case studies of some of the member countries, some challenges have been witnessed on its implementation.

Both policies are focused on environmental conservation now with the protection of the farmers being a key similarity. A number of studies and discussions on existing and proposed agricultural policies in the US have also been done and so has the relationship between the policies in the two places.

These will then be discussed in an attempt to answer the questions raised by the dissertation.

Methods review

In Germany, the primary objective of the 1955 law on agriculture (LWG) is the provision of sufficient food to the population (Wohlleben 2006, p. 243).

This has then lost with the development of a new objective to protect the consumers of agricultural produce, which has mainly developed following the Bovine Spongioforme Encephalopathie (BSE) crisis (Wohlleben 2006, p. 243).

A new shift in policy has also been observed as revealed by Wohlleben with the country opting to “green” its agricultural policies, and an example is the BMVEL 2001(2006, p. 243).

The effects of the CAP are observed with agriculture increasingly becoming market-oriented and sustainable (‘Regional Growth and Policies in the European Union 2007, p. 20).

Agricultural policy in Germany has some contribution from many areas. Due to federalism, Wohlleben (2006) asserts that the responsibility is at the federal, local, and EU level, with responsibility being split between the levels (p. 24).

In response to the BSE crisis, some of the policy changes at the federal level include the formation of Ministry of Consumer Protection and Agriculture (BMVEL) (Garrido, Bielza & Sumpsi 2003, p. 73).

The distribution of responsibility by the policy ensures that food production, distribution, and consumption are integrated with quality assurance (Garrido, Bielza & Sumpsi 2003, p. 73).

Ewa’s study on German agricultural policy did a literature review highlighting some of the existing agricultural laws in the country and their effect on the agricultural sector (2012, p. 23).

An analysis of the laws and literature done on the agricultural reforms was then done with recommendation being made. He concluded that the agricultural policy in Germany is a federal government responsibility that could be considered a specific case of the general social policy (Policy Schemes and Trade in Dairy Products 2011, p. 29).

The CAP that German is signatory to has been found to be mainly protectionist with an increase in agricultural output resulting to dumping in the third world countries (Lars n.d.).

The policy has also been a subject of debate in the country. Germany being a ‘net payer’ to the EU has consistently pushed for limitation of expenditure and reform in the policy as revealed by Scrieciu (2007, p. 16).

France is among the founders of the European Union and a chief proponent of the CAP in the bloc. In the development of an agricultural policy in Poland that would be concurrent with the CAP in the EU, French agricultural policy was investigated and recommendations based on the study (Policy Schemes and Trade in Dairy Products 2011, p. 29).

The study analysed some of the past policies in France beginning with the 1960s where CAP was proposed (Garrido, Bielza & Sumpsi 2003, p. 73).

The treaty of Rome is a significant article in the study with article 39 detailing some of the objectives of the policy as being to increase productivity, increase standards of living, stabilise markets ensure food security, and provide adequate consumer prices (Young & Hansen 2011, p. 26).

According to Garrido, Bielza, and Sumpsi (2003), the Mansholt Plan in the same period that the CAP was being set up was proposed to move small-scale farmers from the land to ensure that farming was done on a larger scale (p. 73).

Currently, the country is a beneficiary of CAP with a significant amount of money in the country from the EU being in the form of subsidies (Young & Hansen 2011, p. 26).

The country has therefore, resisted any of the policy changes and reforms over the past with steps being taken to minimise the effects of the new policies on the farmers and consumers initially benefitting from the EU’s CAP (Garrido, Bielza & Sumpsi 2003, p. 73).

The policy here is common to that in Germany with the conservative nature being observed, as it is common to the member countries using the CAP. The study was based on the review of the laws and policy statements in France over the years. This strategy was an effective way of comparing the EU agricultural policy with that of France.

Spain is the last member of the EU that the dissertation uses to make a comparison. The agricultural policy here was not harmonised with that of the other EU member until the country joined the union in 1986.

One of the documents used for the study on Spain’s agricultural policy is that by Young and Hansen, which investigated the effect of the CAP and the Spanish economy (2011, p. 26).

The paper reviewed the policies in the country and adaptation in the Central and Eastern European Countries and problems in the adaptation of CAP (Garrido, Bielza & Sumpsi 2003, p. 73).

The methodology used was gathering of data from secondary sources and mainly the government and organisational papers detailing the performance of the agricultural sector in Spain (Marius 2005, p. 78). The data and literature obtained from the study was then analysed and used to make conclusions.

In the paper, the main findings were categorised into CAP history in Spain and elsewhere in the EU, results of the negotiations with the Central and Eastern European Countries, with the last part dealing with the similarities with the other EU countries (Banse, Van Meijl, Tabeau & Woltjer 2008, p. 20).

The study recommended that, due to the financial implications of expansion of the EU and the adaptation of CAP, the EU has been experiencing pressure from Spain (Marius 2005, p. 78). The methods used for the study are relevant and accurate with generalisability to the EU being easily made.

A study conducted by the Congressional Research Service aimed to compare the EU and the US program support for farm commodities and conservation in 2010 (Marius 2005, p. 47). The methodology used in the study was similar to the studies highlighted above.

It utilised data from professional organisations and global bodies. The report detailed the results and data published by the Organisation for Economic Cooperation and Development (OECD) by using it to make the comparisons (Marius 2005, p. 78).

According to Garrido, Bielza, and Sumpsi (2003), OECD’s annual Producer Support Estimate (PSE) was of particular use in the study with data from the estimates being used to make valid conclusions (p. 73).

For comparison, “estimates of the Aggregate Measurement of Support (AMS) for agricultural programs, as compiled by individual World Trade Organisation (WTO) member countries and notified to the WTO as part of their membership obligations” was used (Young & Hansen 2011, p. 23).

The other source of statistics for the study was the annual budget expenditures for agricultural programs as given by the particular countries (Young & Hansen 2011, p. 23).

From the data, program support across the countries indicated that, since the mid-80s, “the total farm support in the United States and EU has declined as a share of total gross farm receipts” (Young & Hansen 2011, p. 24).

The decrease is mainly in commodity programs support, with an observed increase in support for non-commodity programs (Young & Hansen 2011, p. 25). Examples of programs where support in the two countries was recorded to increase included programs for rural development and the conservation of farmland (Orden, Blandford & Josling 2010, p. 97).

Despite the observed changes, Dewbre, Thompson, and Dewbre (2007) point out that the non-commodity programs still maintain a smaller percentage of the farm recipients (p. 27).

The US was observed to have a slightly higher percentage of farm receipts in the above programs as compared to the EU with non-commodity shares of input being 0.7% lower than that of the EU (Young & Hansen 2011, p. 26).

In the United States, several laws govern the agricultural sector. A multiyear farm bill in the US provides a means of comprehensively addressing agricultural issues with several modifications being made frequently to the existing laws (Young & Hansen 2011, p. 23).

One of the omnibus farm bills is the P.L. 110-246, the Food, conservation, and Energy Act of 2008 (Young & Hansen 2011, p. 26).

According to CRS Report RS22131 (2008) and CRS Report RL34696 (2008), the bill “covers a range of areas, including commodity crops, horticulture and livestock, conservation, nutrition, trade and food aid, agricultural research, farm credit, rural development, energy, forestry, and other programs”.

Farm sustenance in the US “…consists of programs providing direct and indirect support to the producers and consumers in the sector with only selected commodities being supported” (Young & Hansen 2011, p. 26).

According to Potter and Ervin, “Grains, cotton, oilseeds, dairy, and peanuts are eligible for both fixed “decoupled” payments and “counter-cyclical assistance” payments: the total producer subsidy is based on past production” (1999, p. 31).

Further support is provided by Young and Hansen to the producers of these commodities and those not included in the list via crop loans and subsidies related to loans (2011, p. 28).

Several minimum pricing systems support the dairy and sugar industries with quotas being subjected on some commodities to limit the destruction of the local markets from imports therefore protecting the local farmers (Swinbank & Josling 2012).

Crop insurance is also common in the country with farmers receiving payments in the case of disasters (Swinbank & Josling 2012).

The 1985 farm bill passed by the United States congress was the first of a series of bills passed to ensure that farmers adopt farming practices that are environmentally friendly (Josling & Swinbank 2011, p. 28).

According to Swinbank and Josling, “Conservation programs administered by USDA can be broadly grouped into land retirement and easement programs and so-called “working lands” programs” (2012, p. 28).

They go ahead to state that the land retirement and easement programs stop crop production from certain lands with the aim of converting it to the original vegetation such as forests and wetlands (Swinbank & Josling 2012).

This revelation is contrary to working lands programs that are aimed at encouraging environmental conservation on agricultural land that is currently used for production (Potter & Ervin 1999, p. 32). As discussed above, CAP governs the policies in the EU member states (Potter & Ervin 1999, p. 35).

The primary use of the policy was observed in the buying of farm commodities from the member states when the prices fell below the expected thus cushioning the farmers from any losses (Potter & Ervin 1999, p. 35).

As with the US, the EU also levied a tax on imports to prevent cheaper imports from undermining the output from the member countries because of the high prices established after the interventions (Potter & Ervin 1999, p. 35). Several problems were experienced with CAP.

As Potter and Ervin state, “During the 1970s and 1980s, the CAP accounted for as much as 70% of the total EU budget. The CAP was also criticised by EU trading partners for distorting world markets and interfering with global agricultural trade” (1999, p. 35).

A change in the CAP that has been experienced since 1992is the gradual move to a more market-oriented support for the agricultural sectors in the member countries (Potter & Ervin 1999, p. 35). In line with these changes, the policy has changed to comply with the requirements of the World Trade Organisation (Potter & Ervin 1999, p. 35).

The CAP has also mutated to fit other requirements of the member states and international standards, which include the need to improve the rural living standards to protect the animal rights (Young & Hansen 2011, p. 29).

One of the similarity with the US policy is observed in “1992 (the MacSharry Reforms) and 1999 (Agenda 2000) reduced EU commodity support prices towards market levels that required that some farmland be taken out of production” (Potter & Ervin 1999, p. 35).

As indicated above, the focus of program support in the US is on only a few commodities, which have been given. The EU has an agricultural policy that provides support to a larger scope of commodities and livestock products. The existing farm structures and organisations in both countries and member states are different.

According to Potter and Ervin, “the United States has roughly twice the farmland base of the European Union with fewer but significantly larger farms than the EU” (1999, p. 35). Comparatively, the size of land available for farming in the EU is smaller, but with a relatively larger number of farms (Hans van & Frank van n.d).

The researches discussed above are relevant to the dissertation and the suggested research since they will help in the making of comparisons between the agricultural policies in the EU and US. The limitation of the methodology is that most of the researches were based on secondary sources of information.

The results are therefore subject to errors. The evidence supports the existence of substantial differences between the agricultural policies in the United States of America and the European Union.

The two blocs have embarked on Bio fuel policies thus pushing the agricultural sector to experience critical reforms based on the observed changes (Hans van & Frank van n.d).

Research findings

In the literature review, significant differences emerge between the EU and US agricultural policies. There are also a number of similarities in the two areas. These observations create the need for analysis of the policies.

In the European Union, the key component of the agricultural policies in the countries that have been discussed is the Combined Agricultural Policy.

According to Potter and Ervin, the policy forms the backbone of the decisions made in relation to agriculture in the EU with members having to fulfil the requirements of the policy (1999, p. 35).

The body that regulates the agricultural industry in the EU is described as being a constituent of the organisation. The aims are to protect the local farmers and consumers (Wohlleben 2006, p. 243).

In the US, the policy is mainly in the form of bills and laws passed by congress concerning the promotion of agricultural sustenance and protecting the farmers (Atici 2005, p. 10). A characteristic of the policy is the provision of quotas for some of the imports as a way of limiting the dilution of the market with cheaper agricultural goods.

The farmers here receive subsidies for selected produce. Insurance companies and the government protect them from losses by insuring the crops (Potter & Ervin 1999, p. 35).

Due to the frequent loss of produce to disasters, a measure that the government has taken is the provision reimbursements for farmers affected by such calamities. The CAP in the EU is expected to be reformed in the next years.

The US congress has also made significant changes to the agricultural policy as Potter and Ervin (1999, p. 35) report.

The European Union is also discussed to have a larger number of its population being involved in farming as compared to the US, which has larger sizes of farms and a larger area of land available for farming (Potter & Ervin 1999, p. 36).

The policies in both countries are reported to be moving towards ‘greening’ the agricultural production process with the emphasis being made on environmental conservation efforts. According to Potter and Ervin, this means that more land is being abandoned strategically to allow the growth of natural vegetation (1999, p. 39).

For Germany and France who are the founding members of the European Union, the CAP is a characteristic that has shaped farming with Spain joining them over the years.

The agricultural policy in the US has developed over the years with reforms in the sector contributing to the observable agricultural developments in this country. The policies in the US and the EU are similar in a number of ways as discussed in the literature review.

A considerable similarity is the aim and objectives, which are to protect their farmers and consumers as well as ensuring continued agricultural output. Some of the other observations in the policies in the countries are the purpose for which they were initially set up.

The most recent of the reforms as Young and Hansen state are those detailed in the Mid-term Review of 2003 (2011, p. 26).

These are also highlighted in Garrido, Bielza, and Sumpsi’s literature where they explain that they were meant to complete decoupling for cereals besides reducing support for rice with milk and sugar being spared later (2003, p. 73).

These reforms were recently followed by the Agenda 2000 reforms in the year 2003 (Garrido, Bielza & Sumpsi 2003, p. 73). The reforms were meant to reduce the prices of beef in the local markets with the introduction of environmental conditions (Garrido, Bielza & Sumpsi 2003, p. 73).

In the US, series of reforms in the policies are suggested with transformation from traditional to modern policies taking place stepwise. The traditional policies are conservative and hampered by the low levels of technological innovation in this age.

The modern policies in the US are informed by the desire to cushion the population of the high consumer prices of commodities to protect the farmers from the cheap imports that are available (Haas 2007, p. 17).

Under the laws and bills passed by the United States congress, a number of consumer products are subsidised with others having the quota system of management (Haas 2007, p. 17).

The strategy according to Haas protects the local agricultural economy to ensure that agricultural traders are not exploited (2007, p. 17).

For the European Union, the policy is broader. It covers more commodities than the United States. Farmers have the advantage of receiving price subsidies and financial support from the government with France being a prime beneficiary of the policy (Haas 2007, p. 17).

Germany and France were some of the nations in the EU that Moyer and Josling noted to have multifunctional agriculture with Austria and Italy joining them.

Though many countries were not noted to practice globalised agriculture in Moyer and Josling’s book, Mewvissen, Van Asseldonk, and Huirnde state that this paradigm is emerging in many of her member countries (2008, p. 53).

The World Trade Organisation has contributed significantly in the way CAP is shaped in the European Union, and this is based on experiences where CAP contributed to trade imbalance between it and the trading partners (Bullock & Salhofer 1998, p. 23).

According to Bullock and Salhofer, the comparison between the policies in agriculture for the two blocs are incomplete without considering the protection accorded to the industry (1998, p. 23). They state that the EU’s agriculture is more protected and that the gap is narrowing each day (Bullock & Salhofer 1998, p. 23).

Some of the agricultural sectors in the US are reported to be progressing to being uncompetitive with sectors in the EU becoming more competitive (Haas 2007, p. 17). In most of the literature reviewed, the dairy industry and sugar industries in the countries are reported to be out of line with the rest of the sectors.

Review of concepts and theories

From the above literature review, several theories and concepts are suggested, and others supported. One of the concepts that emerge is consumer protection characteristics of the CAP for the European Union (Baylis, K. et al. 2005).

The researches support the theory that the CAP was designed to protect the EU member states and that this strategy has served to the advantage and disadvantage of some of the members (Haas 2007, p. 17).

In the example above, France is described to be a beneficiary of the CPA. In the past, it has resisted the proposed changes by various members. The benefit is in the form of subsidies, and the government here has moved to protect the citizens after some of the changes were put in place.

Moyer and Josling discussed four theories that include dependent agriculture, competitive agriculture, multifunctional agriculture, and globalised agriculture where a large international chain is formed by the industry.

In their book ‘Agricultural Policy Reform’, Moyer and Josling highlight some of the theories in the US and EU in the field of agriculture (2002).

They stated a paradigm shift from a state-assisted mode of agriculture to one that is market-liberal, with the agricultural sector in the US shifting from a small industry to a competitive one over the decades.

In their book, the two authors continued to explore their proposed paradigm shifts in agriculture for the two countries by comparing them to conflicting paradigms brought about by globalisation of agriculture (Moyer & Josling 2002).

According to Moyer and Josling (2002), the theories that the authors discussed include dependent agriculture where the industry needed government’s support and competitive agriculture where the industry started competing for resources.

These were later on followed by the multifunctional agriculture theory with the industry being able to provide public goods and the present globalised agriculture where a large international chain is formed by the industry.

In the US, the competitive paradigm shift/theory is most evident in the non-program crops with dependent agriculture persisting in the dairy and sugar industry. The theory is supported by Potter and Ervin who state that the sugar industry relies mostly on government policy to protect farmers in a bid to maximise output (1999, p.34).

In the EU, the foremost theories mentioned include the ‘MasSharry Reforms’ that took place in 1992 (Wohlleben 2006, p. 243).

According to Wohlleben, these reforms introduced direct payments while at the same time cutting the prices of grains in the bloc to come close to those in the world market levels (2006, p. 243).

Moyer and Josling conclude that, in the EU, dependent agriculture remains present though with reducing dominance (2002, p. 35). They also noted the emergence of competitive agriculture among the main agricultural states in the EU though the states used for comparison were not among them (2002, p. 27).

Research design and methods

The proposed research paper will be based on secondary analysis on the ground of case study research. A case study research will be the most appropriate format to establish the relationship between the agricultural policies in the European Union and the United States.

The type of research will also provide a lot of information since most of the concepts to be discussed are mainly in the outstanding universal publications. Haas (2007, p. 17) states that the use of a case study in research is effective especially in fields such as international relations and real life events are to be studied.

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