AN ABBREVIATED UK/EU AGRICULTURAL POLICY HISTORY

From the Middle Ages, Britain had a succession of Corn laws designed to ensure an abundant supply of food at fair and steady prices. At the beginning of the last century, this policy became protective, restricting imports and raising domestic agricultural prices. The Great (electoral) Reform Act of 1832 widened the political franchise sufficiently to give the resulting political pressure an effective voice and the Corn Laws were repealed in 1846, thus establishing, as far as agriculture was concerned, the British 'tradition' of free trade.

By the 1850s, enclosure of common land was practically complete, and the characteristic English Countryside dates from this period. Rapid technical change saw the introduction of the Norfolk four course rotation, including turnips, clovers and intensive livestock, and a series of technical innovations including the seed drill and the use of artificial fertilisers, which grew almost fivefold between 1845 and WWI. Constable's romantic views of the Suffolk countryside, so ably illustrated in pictures such as The Hay Wain (1821) and The Cornfield (1826), were a product of the time. They are not reproducible in the present countryside, other than as museum pieces, at the turn of the twentieth century regardless of the signals and incentives provided to the farming sector. Yet, when they were painted, agriculture was enjoying dramatic changes. Despite the dire predictions of the farm lobby and a short period of depressed farm prices immediately following the repeal of the Corn Laws, the period from 1850 to 1875 saw a golden age for British farming as 'high farming' took off, based on a rapid growth of the application of scientific principles and the adoption of new technologies to the traditional farming industry. This only came to an end as the development and expansion of agriculture in the new World and the colonies began to replace domestic food supplies, amply assisted by the expansion and improvement of shipping and railways, culminating in the development of refrigerated ships towards the end of the 19th. century.

The consequences of the Great Agricultural Depression of the last quarter of the 19th. century no doubt coloured popular and therefore political beliefs and value judgements about the need to support domestic agriculture well into the twentieth century. But British agricultural policy, in contrast to most in continental Europe, preserved the notion of free trade, apart from wartime controls.

At the end of the WWII, the 1947 Agriculture Act laid the foundation for post war farm policy in the UK, establishing Guaranteed Prices for most farm products and Deficiency Payments which made up the difference between the guaranteed price and the market price, paid by the exchequer, thus preserving the access to domestic markets for foreign supplies at world prices and maintaining food prices to consumers at world levels. The guaranteed prices were set annually by close negotiation between the government (MAFF) and the National Farmers Union.

During the 1950s and 60s the primary concern was with food security and improved self-sufficiency, and latterly with balance of payments arguments. Domestic agriculture was strongly promoted as a result. By 1957 the budgetary cost of the policy forced some limits on guaranteed price increases, and by 1964 minimum import prices (transferring some of the support cost to consumers and users, and restrictions on total quantities which would be supported (Standard Quantities) had been introduced to further limit the extent to taxpayer cost. This period also saw major technical revolutions in agriculture, doubtless fostered by the relative security of agriculture under a benign policy regime. The mechanical revolution was already under way before and during WWII, rapidly replacing labour and horses (as the major motive power source) with machines, leading to substantial economies of scale in the farm business and associated growth in farm sizes. The chemical revolution, including the dramatic improvement in plant varieties and animal breeds and strains able to respond to an increasingly controlled environment, gathered pace after the war and progressed throughout the 60s and 70s, further reducing labour and machinery requirements and associated with increasing specialisation of farming systems. Much of this revolution was fostered by direct government support of research institutes, while the private sector was quick to respond to a securely supported industry's demands for new and more commercially efficient techniques, supplies and equipment.

The shift of the burden of support was completed in 1973 through the UK's entry to EC and CAP. In effect, accession to the Common Agricultural Policy and its primary system of farm support through the imposition of import levies (and export refunds or subsidies) to defend internal prices well above world prices, signaled the return of the corn laws to the UK, and the end of agricultural free trade and "cheap food". Not only that, but accession to the CAP also brought the expectation of substantially higher support prices to British agriculture than it had become used to under the 47 Act. Coinciding with Britain's entry to the EC came the commodity price boom of the early and mid 70s. The consequent farm product price increases in the UK were largely a result of this world price escalation rather than the accession to the CAP, which was in any event being phased in over five years. However, the congruence of the two events led to confusion within the farming sector as to the real cause of price improvement and encouraged farmers to believe that the price improvement was policy driven rather than a market consequence. As a result of these mistaken expectations, the industry over-invested in capital plant and equipment and over-intensified its agricultural systems.

Since the publication of the two agricultural White Papers in the 1970s , the apparently complacent view that agricultural expansion (and, by implication, increased intensification) was in the national interest has come increasingly into question, though the developing concern about the appropriate role of the major rural land-using industry has not yet produced a revised national policy in the form of a new White Paper (the recent Rural White Paper - under the Major administration - does not deal with agricultural policy explicitly). The question of the appropriate size of the agricultural industry in terms of food and fibre output and in terms of resource use is now a legitimate and urgent one. In 1975 the case was made that "continuing expansion of food production in Britain will be in the national interest" By 1979, this view had been revised to " the Government's settled conclusion that the continued expansion of agricultural net product over the medium term is in the national interest", but "not so strongly as to justify seeking the maximum output increase, regardless of the cost to the consumer or to the economy at large, or of its impact on the environment."

The European UnionÕs CAP, illustrated through the cereals regime, was characterised by historically high internal prices, relative to prevailing world prices, defended through intervention buying, import levies and export subsidies. This policy had by 1973 already generated signs of over-production and unsatisfactory cost within the original six member states, and the Mansholt Plan (essentially to ÔdownsizeÕ the EC farm sector) was in the potential policy choice set, as were the UKÕs deficiency payment and minimum import price systems. Indeed, for some commodities, aspects of these instruments were already being used.

The broad quantifiable background (the socio-economic terrain) within which the policy organism has evolved since then is outlined in table 1. The policy has not prevented either the continued decline in agriculture relative to the rest of the economy (1 above, showing agricultural gross value added (GVA) as a proportion of EU GDP) or the decline in farm labour (2). Nor has it been able to close the gap between incomes earned in farming and those earned elsewhere in the economy, (3, measured here simply as the ratio of rows 1 and 2 - as the average GVA per head in agriculture as a proportion of average GDP per head in the whole economy). Against a rising level of unemployment (4, and associated social and economic re-structuring problems), the policy resulted in a rising total cost (taxpayer plus consumer costs , (5), and a large rise in taxpayer costs (6), and a growing proportion of farm GVA being accounted for by these support costs (7), and a growth of the cost as a fraction of total GDP ( 8), though many of the latter ÔtrendsÕ appear to have stabilised somewhat during the last few years.

During the mid 70s, the world commodity price boom substantially reduced the protection rates of the policy (PSEs turned negative for cereals in the Community during 1973 - 1975). Coupled with the expansion of the Community to include the UK, then a substantial importer, the threats of surpluses and increased budgetary cost receded while the popular concerns over the ability of the world to feed itself and associated conviction that world prices would stay firm at least, reduced the pressures which had encouraged the development of the Mansholt Plan. The policy organism evolved to take advantage of the higher world prices and lack of pressure on over-supply, and pursued the evolutionary line towards higher protection rates (the line of least resistance). By the end of the 70s, it became apparent that the Ôfood supplyÕ and benign environment allowing such an organism to thrive were at an end. The Ôice ageÕ of growing surpluses and escalating budgetary costs produced a range of viable mutations in the organism to cope with the colder climate.

The UKÕs entry to the CAP in 1973, amidst the well-established perception that accession would raise farm prices, coincided with the rapid escalation of world prices and thus of market prices in the UK (not fully within the CAP until 1979). The rise in farm profitability was (it can be argued) misinterpreted to be a consequence of the CAP rather than world market prices, and hence regarded as more secure. Coupled with rapid inflation and negative real interest rates, the ÒfittestÓ response of the farm sector was to increase borrowings and invest heavily in capital equipment and productive capacity, in contrast to the typical response to profit improvements seen as less secure - an increase in land prices and little else The Ôice ageÕ in the farm policy environment coincided with tight money markets and strongly positive real interest rates, leaving the farm sector substantially over-borrowed and over-equipped, thus, in the evolutionary perspective, ill-adapted. It took much of the last decade for the farming sector to correct for this evolutionary blind-alley.

By the early 1980s, the policy organism can be seen as searching for adaptations to cope with the new environment. ÒPrudent priceÓ strategies, co-responsibility levies, and maximum guaranteed thresholds appeared, but none were sufficiently well-adapted to the new environment to prosper in the longer term. Nevertheless, the policy set was not sufficiently inconsistent with the political landscape of the member states to demand a thorough overhaul (Harvey, 1982). By 1984, the environment surrounding the dairy sector in particular was especially severe, particularly in the budgetary/surplus dimension. Action on the price axis having proved insufficiently well-adapted, the organism developed supply control in the form of production quotas, albeit against considerable opposition, especially from the UK. Given the latterÕs pheno and genotype, such resistance was to be expected. However, within the closed European Community and for the well-suited dairy sector, this adaptation proved very well fitted to the new climate, though the co-evolution of the dairy sector and the policy implementation structure to cope with the new policy organism took some time to occur.

However, by 1986, the incipient problems of surpluses and escalating budgetary spending had emerged in the cereals sector, where the adaptation of supply control was both less well suited to the structure of the sector than for dairy, and also potentially more far reaching given the place of cereals in the farm sector organismÕs Òfood chainÓ. Furthermore, the prevailing environment now included a growing ecological dimension to the political climate, though highly variable in manifestation depending on the variety of terrains within the Community, and included socio-economic considerations about rural communities as well as concerns over the natural ecosystem . This ecological climate influenced the budgetary terrain, eroding the primitive concern over the size of the budget to reveal a (possibly more fundamental and impermeable) concern over Ôvalue for moneyÕ. The increasing persistence of the ecological climate had also exposed considerable internal difficulties for the policy organism which seemed likely to promote internal (though variagated) reforms in time.

Against this background, it is not surprising that the policy organism sought relief in international negotiation, ÔseeingÕ an opportunity to change the nature of the terrain (world prices) and thus ease the threats of the micro (domestic) environment. In other words, the argument is that the EC was willing to sign up to the Punta del Este declaration partly (and perhaps primarily) as a means of resolving internal farm policy difficulties rather than as a response to either external pressure or a conception of the wider benefits of a new multilateral trade agreement. Once entered, however, the macro-climate of international negotiation became a major part of the organismÕs environment. An immediate (though perhaps not well appreciated) consequence of this environmental change was the addition of (or at least added weight to) a new set of policy options - especially those of the US: set-aside and acreage-restricted deficiency payments.

The organismÕs behaviour during the early phases of the GATT negotiations clearly supports the proposition that it was seeking to change the environment to suit itself rather than willing to adapt itself to a new environment. How long and to what extent it might have been able to continue this trajectory is now unclear, because in 1989 the organismÕs immediate environment suffered the cataclysmic shock of the collapse of the Berlin wall. This ÔearthquakeÕ fundamentally altered both the terrain and the political climate surrounding the CAP. Immediate absorption of East Germany into the organism was a near inevitable consequence, and added to the strong climatic pressure to prepare for the absorption of siblings elsewhere in Central and Eastern Europe.

Conservation and rural recreation sites had already been recognised as important "public goods" which had to be provided, if at all, through public policy and expenditure. Immediately after WWII (1949) the National Parks Commission was established, to become the Countryside Commission, with the authority to designate National Parks and Areas of Outstanding Natural Beauty (AONBs) for the "preservation and enhancement of natural beauty throughout the countryside". This Act also provided for the establishment of nature reserves by Local Authorities or by the Nature Conservancy (to become the Nature Conservancy Council). These two bodies were also to become responsible for the Environmentally Sensitive Areas, and also, through Local Authorities, for access agreements and orders. However, the logic and structure of these policies clearly identifies particular geographical areas within which certain farming practices are to be discouraged or prevented, while leaving the rest of the countryside as the farming factory floor unencumbered by regulation or incentive other than for ever greater production. This does not seem to accord with most views of a "green agriculture".

By 1981, concern over the loss of natural habitats had resulted in the Wildlife and Countryside Act, which among other things provided the legislative basis for management agreements with the Nature Conservancy Council (a grant in aid agency under the Department of the Environment) about the land use practices to be followed to conserve the environment. This Act allows for compensation payments to be made to farmers for the loss of farm profits resulting from the adoption of such practices. Owners and land users are required to seek permission to carry out "damaging operations" from the NCC. However, lack of funds and reliance on voluntary cooperation are still seen as major drawbacks to this legislation.

By 1986 an amendment to the Agriculture Act allowed for the implementation of the EC structures regulation on environmentally sensitive areas (ESAs) and the funding of management agreements associated with these areas. The amendment also included explicit reference to the MAFF's responsibility for the "conservation and enhancement of the natural beauty and amenity of the countryside". Nevertheless, the history of policy development is that agricultural and environmental concerns have been dealt with in parallel rather than in series. Integration of the two is currently a way off, rather than being a way ahead.


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