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Commonalities and conflicts: the Common Agricultural Policy in the Australia/EU relationship.



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Commonalities and Conflicts:

The Common Agricultural Policy in the

Australia/EU Relationship

Dr Linda Courtenay Botterill, Mr John Gage

National Europe Centre, The Australian National University

Refereed paper presented to the

Australasian Political Studies Association Conference

University of Tasmania, Hobart

29 September - 1 October 2003

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

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The Common Agricultural Policy (CAP) has been an ongoing aggravation in the

otherwise healthy and positive relationship between Australia and the European

Union. Discussion of the EU in Australia is often focused disproportionately on the

impact of the CAP on Australia, a perception heightened by the central role played

by agricultural trade issues in the Uruguay Round of multilateral trade negotiations

in the 1980s and early 1990s. Agriculture also seems set to be pivotal in the current

Doha Development Round.

In the 1950s and 1960s domestic agricultural policy in Australia was not dissimilar to

that of the new Common Agricultural Policy. Both relied on high levels of

government intervention to secure stable and “fair” farm incomes. However, the

economic development experience of the two was quite different with Australia

remaining highly dependent on exports of agricultural products for national wealth

while Europe was developing a post-industrial economy based on elaborately

transformed manufactures and the developing service industries. Where the health

of Australia’s economy depended on the efficiency of its agricultural sector, Europe’s

economy was generating non-agricultural wealth which meant it could afford to

support less efficient agricultural producers and protect them from international

competition through import barriers. These policies became increasingly expensive

and a series of attempts were made to reign in the cost of the CAP and ameliorate

some of its unintended consequences, among which was Europe’s transformation

from a net importer of agricultural products to an important exporter. Until the

1980s the European policy settings were largely immune from international criticism

due to a quirk of GATT history which saw agriculture exempted from international

trading disciplines. This changed in the Uruguay Round of multilateral trade

negotiations when agriculture took centre stage.

In Australia, the pressure to reform domestic support programs came much earlier.

The entry of the UK into the European Economic Community (EEC) marked the end

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of access arrangements for Australian exports which had provided a safety valve for

the regulated agricultural sector. As the 1960s progressed, it was also becoming

apparent that the complex mix of domestic agricultural support policies was

unsustainable. A major paradigm shift occurred in rural policy circles in the early

1970s which saw the rise of neoliberal economic policy ideas. This new economic

policy approach enabled Australia and its Cairns Group allies to capitalise on the

opportunities of the Uruguay Round and place the spotlight on the trade distorting

impact of the CAP. Australia’s agricultural policy in the 1980s and 1990s was market

oriented and focused on deregulation and market access.

In spite of the very different economic circumstances driving agricultural policy in

Australia and the EU, the two face some common challenges. Where agricultural

policy in the EU and Australia had diverged between the 1970s and 1990s, it is

apparent that in a number of important areas it is once again converging in the early

years of the new century. In both cases internal factors are bringing pressure to bear

on policy makers to amend their policy approaches—in the case of the EU,

enlargement has focussed policy makers on the cost of the CAP and in the case of

Australia, socio-political change is putting pressure on policy makers to look beyond

the economic model and incorporate broader values into agricultural policy.

Historical and economic context

Agricultural policy began to become a problem in the Australia-EU relationship in

the 1960s when a major shift occurred in Australian economic attitudes. From

Federation to the post-World War II decades Australian economic experience was

characterised by the growth of protectionism and regulation. Agricultural policy

was marked by a similar growth of intervention in production and marketing.

Agricultural exports were seen as the key to the prosperity of this system through

their role in relieving external balance constraints on growth and development in

Australia. The production and export of agricultural commodities was thought to be

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crucial to national wellbeing. Interventionist policies in agriculture could fit into

‘protection all round’ ideas since export market access was secured by preferential

arrangements with the United Kingdom.

The relationship deteriorated for two key reasons. First, Australia’s dependence on

agricultural exports for its prosperity ensured that, in the absence of managed

international commodity markets, free trade was in its best interests. As a small

economy it has not been able to achieve international competitiveness and intervene

to support farm incomes. It has therefore had to bear the pain of structural

adjustment domestically in order to achieve the greater goal of freer international

trade in agriculture. By contrast, the EU has a long tradition of erecting barriers to

trade in order to maintain farm incomes and a strong enough non-farm economy to

afford to support agriculture. The second factor in the souring of the relationship has

been that Australia’s economic imperative for seeking freer trade has coincided with

a major ideological change in policy direction undertaken in Australia since the

1970s. This has resulted in a move from protection all round to a free market

approach. The CAP has also undergone some important reforms in recent years

however EU policy-makers have strongly resisted the free market agenda pursued

by their Australian counterparts. As we will discuss, this process in Australia has

been made easier as the losers from the adjustment process have not had an effective

voice in the policy process whereas in the EU supporters of non-economic values

have been very effective policy players.

This paper will argue that the different policy settings, as well as reflecting different

economic circumstances highlight the different values given priority within the

policy process. The paper is somewhat skewed towards a discussion of Australian

policy settings, however, this does not seem unreasonable given that Australia is in a

sense the “aggressor” in the dispute, seeking change to the EU’s policy settings while

the EU is on the defensive.

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Divergence

Economic imperatives and policy change

Until the early 1970s, the agricultural policy approaches of the EU and Australia

were not particularly different. The objectives set out in Article 39 of the Treaty of

Rome and those articulated by Australian Prime Minister Chifley in his

government’s 1946 Rural Policy Statement are strikingly similar—both including the

potentially contradictory objectives of good incomes for farmers and fair prices for

consumers, with an emphasis on the former. However, even at this time Chifley

recognised that “The agricultural prosperity of Australia depends upon the widening

of world trade”1. European agricultural policies were not the objects of particular

criticism by Australia—in fact in the early 1950s, Australian Ministers were holding

the United Kingdom up as “the best example of government assistance to

agriculture” due to the “huge sums … paid in direct subsidy to producers”2. At this

time, the profile of agricultural policy in Australia differed little from that of other

developed countries, consisting of “a bewildering array of policy instruments which

directly or indirectly affect[ed] farm policies, including two-price schemes, import

controls, output subsidies, restrictions on substitutes, and so on”3.

During the 1960s, agricultural economists began to point out the limitations of this

policy approach and price slumps and drought in the mid-60s highlighted the

structural adjustment problems facing Australian farmers. Within this general trend,

policy makers were forced to seek reform in the production and marketing of

agricultural commodities as the attempt to negotiate increased access to the United

Kingdom market were unsuccessful in the 1950s and the UK developed interests in

European integration. International commodity agreements in the 1960s failed to

provide assured market access on negotiated terms. Cost-price effects squeezed

rural incomes and simple technical improvements in response were no longer

sufficient to relieve the pressure on farm incomes.

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British entry to the EEC in 1973 was not just an issue for Australian producers

through their loss of preferential access to the biggest agricultural export market in

the world and the immediate adjustments in structure and income that the loss of

that market brought about in Australian agriculture. It was also seen as a strike

against Australia overall given the place of exports in the determination of national

wellbeing. Although the exploitation of minerals and the growth of new markets in

Asia and the centrally planned economies eased the internal consequences of this

external problem the loss of the UK market was a major cost to Australia. The

operation of the CAP in cutting off access to European markets and the subsequent

generation of surpluses above domestic requirements to be dumped on world

markets by the Europeans further exacerbated Australia EEC relationships by

curtailing Australian export opportunities and through that national development

and growth overall.

The benefits of economic reform for Australia in terms of rural adjustment and

through the entry of services and elaborately transformed manufactures into

Australian export activity has reduced the impact of these adverse outcomes.

Significant costs for the sector and the national economy still exist however and

while the reforms of the CAP in the last decade are acknowledged by policy makers

the critical attitudes engendered by these costs still remain. The consequences of

Australian agricultural trade experience with Europe since the 1960s are found in the

residual bitterness evident among rural producers and the community at large.

It is conventional to date the origins of major change in Australian agricultural policy

to the general economic reforms of the 1980s. If earlier discontinuities are sought

they might be found in some of the institutional changes of the 1970s; the

establishment of the Industries Assistance Commission in 1974 for instance or the

National Farmers’ Federation in 1979. It may well be that the establishment of the

IAC represents the conclusion of a truly seminal debate as well as the beginning of

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major changes in the processes and outcomes of economic policy making in

Australia. Changes of the rate and magnitude like those of the recent past in

Australian agricultural policy suggest that larger forces were involved in generating

that change than just those found within agriculture and its associated interests.

Those changes were made to an established policy regime of protection and

regulation in agriculture. That regime fitted naturally into an Australian socio-economic systemic of general protection and regulation that had been the outcome of

the economic elements of the Federation debate and the developing interventionist

trends that characterised Australian experience up to the 1960s. The challenge to that

system came in 1960 with the lifting of the quantitative restrictions on imports

maintained in response to the balance of payments crisis of the 1950s. The return to

the tariff as the instrument of protection for manufacturing industry initiated the first

major debate on industry protection in Australia since the 1920s.

The agricultural policy environment changed in 1972 with the election of the

Whitlam Labor Government. The key decision was the inclusion of agriculture in the

ambit of the new Industries Assistance Commission which meant that farmers

seeking government support for their industries were required to make a national

interest case for that support, rather then simply relying on persuading the Minister

to provide assistance as a result of industry special pleading. Although a more

friendly government took power in 1975 with a tendency to revert “to the economic

dogmas, such as protection all round, of its predecessors”4, “once the National

Farmers Federation had accepted the philosophy of deregulation, agriculture became

a soft target for a Federal Labor Government keen to demonstrate progress in

microeconomic reform”5.

Some particular influences contributed to the direction of rural policy reform. The

need to analyse the cost effects of agricultural policies on structures of production

meant the application of economic expertise to the issues. The cultural conditioning

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of the Australian agricultural economists was strongly influenced by their American

peers and those influences were “dominantly neoclassical”6. As a result “the

profession has been faithfully and uncritically neoclassical”7. Given this there would

be little capacity in the profession to acknowledge values other than the “rational” or

to recommend policy other than the efficient use of resources in line with market

forces. This approach has been accompanied by an increasing intolerance on the part

of agricultural policy makers for the policies of others that have not adopted a similar

approach and a reduced capacity to incorporate non-economic values into policy

development. This limited view of agricultural policy as being all about economic

efficiency has resulted in policy failure when policies attempting to influence

farmers’ behaviour have failed to take account of the values driving that behaviour8.

Due to this series of political and institutional developments in the 1970s, agricultural

economists have been, perhaps uniquely in the developed world, very influential in

the development of agricultural policy9. Where their counterparts in Europe seem to

lack the political acumen required to get their policy prescriptions adopted10,

Australia’s agricultural economists have been effective policy entrepreneurs

promoting their ideas when the time was ripe and then overseeing the establishment

of this approach as standard operating procedure within the agricultural policy

community11.

It is worth noting that Australia remains in the minority among developed countries

in its approach to agricultural policy. Rather than being the normative approach to

agricultural policy, the Australian approach stands out in an environment in which

the objectives of the CAP “resemble the typical aims of agricultural policy in

developed countries the world over”12 as “all countries tend to concentrate a high

proportion of their [farm] income support measures on the organisation of markets

rather than on structural and social measures”13.

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Values in the policy process

In the 1980s, the issue of domestic agricultural support policies and their impact on

international trade received increasing attention. This culminated in the prominence

given to agriculture in the Uruguay Round of multilateral trade negotiations and a

focus on the types of policies which were considered to be particularly distortionary

and therefore of concern to the international trading system. This closer scrutiny of

domestic agricultural policies has drawn attention to the multiple goals that

governments set out to achieve through agricultural policy settings. As a small

economy, Australia cannot afford to match the support policies of the EU and the US,

making the decision to pursue trade liberalisation clearly one based in national

self-interest. However, the free trade push has coincided with the ideological trends

in much of the developed world in the 1970s and 1980s giving the position a

theoretical and policy coherence.

David Easton argued in 1953 that “politics is the authoritative allocation of values”14

and as such the differences in the policy approaches of the EU and Australia can be

considered in terms of the different values that are important within the two polities.

One of the key challenges facing governments in liberal democracies is to achieve a

balance between the different and sometimes competing values held by different

sectors of the community. Ideas, which have a normative force in policy, such as

efficiency, equity and individual liberty, have been described by Doern and Phidd as

“dominant ideas”15. They argue, “The constant need to rank, balance or otherwise

deal with the relations and contradictions among dominant ideas is a central aspect

of public policy”16. In the Australian context, the role of government in balancing

competing values in rural policy was described by Henry Schapper in 1970:

At the one and the same time in Australia, there is need for efficient farming and

there is concern for inadequate income farmers. But there is no political or economic

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mechanism which automatically ensures harmony between efficiency and welfare.

This can be resolved only by government policy.17

Within the current Australian policy setting, economic values such as efficiency are

clearly dominant and this bias has its origins both in the role of farmers as price

takers on the international market and in the strong ideological orientation of

Australian governments towards deregulation and open markets. However, in the

European Union the balance between economic and “non-economic” values has not

been struck so clearly in favour of the former. Using the policy map developed by

Botterill18, it is clear that European and Australian policies are anchored in different

quadrants, with EU policy philosophically inclined to intervene more on behalf of

non-economic values such as food safety, animal welfare and rural development

objectives.

Figure 1 illustrates the different priority given to competing values within the policy

process and the different willingness by policy makers to intervene in agriculture to

achieve a range of objectives. It is suggested that the EU’s policy position is

Less intervention

Less intervention

Australia

Economic values

Non-economic values

Figure 1: Comparing policy anchors in agricultural policy

European Union

Agrarian Model Farm Business Model

Free Market Model Welfare Model

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anchored in the “agrarian” quadrant reflecting policy assumptions about the

importance of agriculture per se and the appropriateness of government intervention

to protect the sector and the people involved in it—as well as other important

non-economic values. Australia’s location in the “free market” quadrant reflects the

strong free market orientation of agricultural policy. The placement of the policy

anchor is not intended to describe specific policies but to denote the location of the

prevailing policy environment which provides a constraint on the range of possible

policy options available to decision makers. Identifying the policy anchor in this

form illustrates the fundamental differences in approach taken in the two polities in

striking the balance between competing values and underscores the difficulties in

achieving agreement on the appropriate use of agricultural policy to achieve

non-economic objectives.

The policy anchor is only stable in the short term and over time, governments change

the balance of values reflected in their policy settings. As described above, a

fundamental shift in Australia’s agricultural policy approach occurred during the

second half of the twentieth century19 from the agrarian quadrant to its current

position. Although there has been a general trend in European policy development

in “an economically liberal direction”20, the European Union has not moved at the

same speed in its policy reform, and a gap between the two has opened up. This gap

is at the heart of the “conflict” between Australian and the EU over agricultural

policy.

The policy community

In his analysis of change in the Australian wheat industry, Whitwell asks “What are

the forces promoting change?” and “What are the forces resisting?”21. In the area of

broad agricultural policy in Europe and Australia a large part of the answer lies in

the nature of the policy community. Australian policy-makers have benefited from

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near-unanimity within the policy community about the prevailing economic

paradigm. By contrast,

The [EU] Agriculture Commissioner, the key actor in the Commission process, must

maintain the confidence of a number of often conflicting constituencies, which

include the other commissioners, the Agriculture Council, the farm lobby and DG-VI.22

This means that the process of partisan mutual adjustment23 in Australia does not

result in the degree of compromise or watering down of reform proposals that is

evident in the EU24. While COPA has been important in the policy process as a brake

on reform in the EU25, the National Farmers’ Federation has been an important

facilitator of change in the Australian context.

At first glance, the NFF and COPA would appear to have much in common. Both

organisations are federal structures which face the challenge of balancing the

interests of different constituent organisations, a variety of often-conflicting

commodity interests and considerable variety in terms of the size and structure of the

farm enterprises which they seek to represent26. Again at first glance both bodies

were formed in response to institutional change. The profiles of the leadership of

COPA and NFF are very similar. They represent the “elite of elites”27, large scale

farmers mainly in the grains and livestock industries. In Australia so-called

broadacre agricultural interests, grains, beef and wool have dominated the debate

within the NFF and it is the interests of these export-oriented industries that have

driven the policy approach based on free trade. By contrast the elites within COPA

have benefited from policies which deliver high levels of support. As Averyt

explains, the larger farmers

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profit from a farm policy that relies mainly on high prices to ensure a decent farm

income. In order to ensure a decent income for the marginal farmer, the price must

be high enough for the extremely efficient farmer to reap a handsome profit.28

A public choice analysis of the role of farm organisations suggests that their survival

is dependent on the existence of this government intervention. As Moyer and Josling

point out, the existence of the CAP provides an important basis for the legitimacy of

farm lobby groups and “strengthened the corporatist relationship between national

agricultural ministries and farmers”29. This analysis may have some value in the EU

setting in explaining the resistance of farm groups to reform but it does not explain

the enthusiasm of the Australian farm lobby for deregulation and reduced

intervention in the agricultural sector. The latter’s position is based on the need of

the export-oriented sector to obtain a decent income from the world market rather

than from the domestic market.

The formation of the peak farm body in Australia, the National Farmers’ Federation,

in 1979 marked a watershed in the agricultural lobby in Australia. Prior to 1979,

farmer representation had been fragmented and relatively unprofessional30 with

divisions within and between industries and between the advocates of free trade and

those who supported government intervention. The creation of the Industries

Assistance Commission mentioned above meant that the farm lobby groups needed

to argue their case with a degree of economic literacy and based on national interest

arguments. This put considerable pressure on the resources of the organisations and

was a key impetus in the formation of the NFF. It is worth noting, by contrast,

Grant’s observation that “the decision-making atmosphere of the CAP does not

encourage special interests to exert much quality control over their arguments”31.

From the outset, the NFF was a vocal proponent of micro-economic reform and free

trade. In 1981 it released a policy paper Farm Focus: the 1980s, which stated clearly

that the NFF would be pursuing a free market philosophy:

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NFF does not believe that any industry—rural, mining, manufacturing, or tertiary—

whether highly protected or not—should be permanently shielded from the forces of

economic change. The overall interests of the economy demand that all industries

must participate in the inevitable adjustment process.32

The NFF has pursued this approach consistently and was an active proponent of the

free trade approach taken by the Australian government during the Uruguay Round.

By contrast, “COPA has constantly defended the family farm, a price policy that

reflects production costs as well as the need to orient production, protection of [EU]

markets, and structural and regional policies that increase productivity”33.

Unlike the situation in the EU in which the larger farmers stand to lose from the

reduction in domestic support policy, in Australia structural adjustment policies

have tended to hit hardest those groups that are not well represented in the National

Farmers’ Federation. This has allowed the NFF to pursue a coherent policy of free

trade internationally and reduced domestic support, essentially trading off the loss of

domestic support for less powerful industries for the gains to be made from free

trade by those industries in control of the NFF.

Areas of common interest

The problems of agriculture in developed economies

Blandford has pointed to the convergence between the agricultural policy issues that

the US and the EU need to address34. Similarly, the European Union and Australia

face a number of common challenges. As developed economies, both have seen a

decline in the importance of agriculture as a contributor to gross domestic product

and this has been accompanied by declining farm terms of trade. The inelasticity of

demand for food means that consumers in developed economies spend an

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increasingly smaller proportion of their income on food. As economies develop,

there is a tendency for young people to leave rural areas seeking educational and

economic opportunities in urban areas and the resulting rural-urban drift has seen an

ageing of the farm population in both Australia and the EU.

The “farm problem” in high income, growth oriented economies derives from the

nature of the market. In these economies the demand for farm products does not rise

proportional to real income growth since basic requirements of food and fibre are

met at fairly low levels of income. This means that the prices of agricultural

commodities rise less than the general level of prices. The prices of productive

inputs of goods and services rise more in step with the general price level resulting in

a cost-price squeeze for farmers; what gets squeezed is farm income relative to all

other incomes. Supply side problems mean that difficulties in aligning supply to

demand result in unstable prices and incomes. The outcome of these market forces is

relatively declining and unstable farm incomes. Agricultural policy can address

these issues by intervening to affect prices for inputs or outputs, or both, in the

farmer’s favour but this may well mean a policy that sustains the problem by only

dealing with effects and not causes. The alternative is to seek policies more in line

with market realities and allow those market forces to restructure the sector by

pushing producers to increase efficiencies in process or alter patterns of production

or both. There may be some large adjustment, equity and welfare problems in this

last policy response.

In many societies the relative decline in farm incomes is considered to be undesirable

and a rationale for government intervention. This concern is partly based on equity

concerns—ie that farmers should share in the increased national wealth arising from

economic progress—and partly on romantic sentiments about the inherent value of

farming as an activity.

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Agrarianism

In spite of the differences in policy approach between the EU and Australia, there are

common strongly held sentiments among the general public about the importance of

farming as an undertaking and the role of the family farm as the preferred form of

agricultural enterprise. Given the strong free-trade stance taken by Australia in the

Uruguay Round and beyond, it is perhaps surprising for the international observer

to note that in the popular imagination, farming in Australia is not a productivist,

industrial activity but rather evokes images best described as agrarian. The

struggling family farmer and rural life have been the subject of a number of popular

television series and, before that, long running radio dramas. In spite of being one of

the most urbanised countries in the world, when Australia presents itself on the

international stage it often evokes the rural, for example with Olympic athletes

attired in Drizabones and Akubras in foreign Olympic games and the strong rural

flavour of the opening ceremony when it was staged in Sydney. As Lockie notes

“rural imagery figures prominently in constructions of Australian national identity”35

and sympathy for farmers is reflected in public generosity to the Farm Hand drought

appeals held in 1994 and in 2002.

Images of agriculture as an essential and morally uplifting undertaking date back to

the early Greek philosophers through Thomas Jefferson and J S Mill to the present

day and are widespread

throughout the developed world. Grant writes of a European view of farming as “a

natural wholesome activity embodying sturdy traditional values that were an

important counter-balance to the artificiality of city life”36. Aitkin characterises the

Australian version, “countrymindedness”, in similar terms, referring to the belief

that “farming and grazing, and rural pursuits generally, are virtuous, ennobling and

co-operative; they bring out the best in people” while “city life is competitive and

nasty, as well as parasitical”37. Flinn and Johnson in their seminal 1974 article

capture similar sentiments among farmers and their supporters in the United States38.

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Moyer and Josling report that the European public has a genuine affinity for the

countryside and a strong sympathy for the farmer39, although this is often based on

an uninformed romanticism about rural life40. In the early years of European-style

agriculture in Australia, farm enterprises were essentially capitalist, large-scale

holdings by wealthy squatters41. In the 1860s, a series of land reforms was

undertaken to limit the power of the squatters and open the land up for closer

settlement and the establishment of “an industrious yeomanry”42. Government

policy deliberately set out to implement this ideal through the creation of family

farming in Australia. Williams describes this approach to rural settlement policy as

“a vehicle for influencing the type of society that the colonies wanted, or at least

thought they wanted; it was an early example of a type of social engineering”43. The

importance of the rural to the national image was further enhanced during the First

World War as volunteers came disproportionately from rural Australia. The

rewarding of returned soldiers with farm land meant that the rural became further

entangled with the “Anzac legend” and ensured that the family farm became an

important part of the Australian identity. These, often marginal, soldier settlement

blocks also sowed the seeds of many of the adjustment problems which face

Australian agriculture later in the twentieth century.

In summary, the sentiments outlined above suggest that agriculture is a special form

of economic activity because

1) Adverse terms of trade for agriculture in high income societies mean that

farm incomes do not keep up with general economic growth

2) farming is subject to climatic uncertainty and occasionally other natural

calamities beyond the control of the farmer

3) farmers are generally price takers and, particularly those dependent on

export markets, are subject to fluctuating prices

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4) farming is an essential activity and it is only “fair” that farmers share in

national wealth, and

5) the family home is often inseparable from the family business and

therefore social considerations cannot be completely removed from agricultural

policy.44

Skogstad has described the ideas that underpin much agricultural policy as

“agricultural exceptionalism” which she argues draws on two key arguments: that

farmers have special interests and needs due to the nature of farming and that

agriculture serves an important national interest role, ie food security45. Self and

Storing similarly identify two standards which are applied to farmers’ claims for

support: “that of utility (e.g. their contribution to the national economy) and that of

equity (e.g. their right to a fair share in the wealth of the community)”46. The

combination of agrarian sentiments and appeals to the national interest can be a

potent argument in favour of government intervention in agriculture.

The Family Farm

The family farm is central to the agrarian ideal and as such its survival is an

important policy issue in many developed countries, including the EU members and

Australia. Duchêne et al argue that, in the early years of the CAP, “The family farm

was seen in many countries as an anchor of social stability in a continent which had

just been shaken to the foundations and then subjected to rapid change”47.

Governments have supported this attachment to the family farm48. In Australia, Lees

notes that “Throughout most of the 208 years of European settlement of Australia,

government policy has been directed towards establishing and maintaining family

farms”49. This statement exaggerates somewhat the length of time that the family

farm has received government support but it is certainly true of the twentieth

century, although in recent years more rhetorically than in terms of actual policy

settings50.

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There is no single, accepted definition of the family farm. Lee proposes a list of

characteristics which he places in three categories related to the operation of the farm

(including ownership form and size of farm), attachment the family has to the farm

(eg length of residence, tendency to pass the farm on to the next generation) and

socio-cultural attributes relating to the farmer’s values (eg attachment to farming as a

“way of life”)51. It is the third of these categories that Lees considers “most under

threat” as “the economic climate in which farms function becomes more difficult,

there will be an increasing tendency for farmers to adopt a more business-like

approach to running their farms”. He goes on to suggest that “Farmers who think

along these lines are likely to place a lower value on the lifestyle factors traditionally

associated with family farms” 52. This interpretation highlights the link between the

family farm and agrarianism—the greatest threat to the family farm is to the values

that underpin it.

It is clear that these sentiments extend beyond farmers and influence the opinions of

the broader community. Public sympathy for the family farm is then exploited by

farming organisations and politicians. Duchêne et al argue that in the EU “the big

farmer has been able to merge his public identity in part with the poor peasant”53.

They go on to suggest that “In combination, the new productive farmers and old less

productive peasantry constituted a formidable and historically entrenched lobby54.

This strategy works as long as support is based on units of output rather than

income. Lawrence makes a similar point about Australia’s National Farmers’

Federation (NFF) which also sees the need to blur its interests with those of small

farmers:

What the NFF appears to have managed to do is to have fused the sectional pro-capitalist interests of the more wealthy employer farmers with those of the smaller

family farmers, those for whom price volatility is of paramount concern but whose

larger numbers are required to lend weight to the leadership’s aims.55

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Former Executive Director of the NFF, Rick Farley has described the NFF’s ability to

keep within its ranks both the free-trade exporters and the producers who are more

domestically focused as the organisation’s “greatest achievement”56.

The agrarianism underpinning the family farm limits the mechanisms that are

employed by governments to deliver income support. There is a strong perception

that it is inappropriate to provide “welfare” support as this undermines the values

that the policy is seeking to preserve. Duchêne et al argue that

One of the favourite arguments against income aids in France and Italy is that they

demean the farmer’s dignity and that it is an insult to treat a producer as a pensioner.

On the other hand, to pay high prices unrelated to the market is a just reward for the

honest toil, a right the farmer has earned by the sweat of his brow57.

Similar language has been used in Australia to explain the poor take up of support

for farmers that has been delivered by welfare agencies rather than through the

agriculture portfolio. This sentiment is reflected in decisions to name assistance

schemes in terms of farm activity such as “Drought Relief Payment” rather than

including a reference to income support.

Similarly, off-farm income earned by family members is regarded as supplementary

to the “real” activity of farming. Nevertheless, in the face of declining farm terms of

trade, issues of off-farm income and pluri-activity are becoming increasingly

important. Blandford reports that for the late 1980s and early 1990s, on average

45 per cent of farm incomes in the EU9 were derived from off-farm activities. In

future the focus may need to be on farm “household income” rather than “farm

income”58. This may require both a culture shift on the part of farmers and in the

image of the family farm and provides a challenge for policy makers.

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 21

New and emerging issues

Deeply held agrarian values about the inherent worth of agriculture have in recent

years been supplemented by a new set of non-economic concerns associated with the

production of food and fibre. Often characterised as “post materialist” values, issues

such as the environmental impact of agricultural activity, the welfare of farm animals

and food safety have become increasingly important to policy makers. In Australia

from the mid-1980s, there has been growing concern about the impact of

European-style agriculture on the Australian environment and this has been reflected

in programs such as the highly acclaimed Landcare program. Policies towards food

safety and animal welfare have often been on the agenda for the Commonwealth-State Ministerial Council59.

The incorporation of non-economic values into agricultural policy has been

particularly controversial with respect to the concept of “multifunctionality”. In

essence the European Commission argues

that agriculture has diverse roles: to produce not only agricultural goods at low cost

but also safe and high quality food; to protect the environment and preserve rural

landscape; and to contribute to the socio-economic development of rural areas.60

The important point to note about the incorporation of these issues in agricultural

policy is that they are largely driven by the urban consumer. As Blandford has noted

The balance of power in the food system has shifted towards food retailers and the

food service industry. As consumer demands become more exacting these players

will determine how the system as a whole will respond.61

In advanced liberal democracies, consumer views will also be reflected in the policies

adopted by elected decision makers.

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

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The question for policy makers then becomes what are the best mechanisms for

delivering these important values? The functional efficiency of the European policy

response to its concept of multifunctionality may be open to question. For instance,

it may be that high quality and safe food products, or more accurately what

consumers perceive to be high quality and safe food product are best achieved by

market mechanisms that allow consumer preferences to be expressed. The

Australian experience in recent years provides evidence to support this approach, for

example in the dramatic shifts in the range and quality of the products of the wine

and dairy industries.

Not all of the post materialist values outlined above lend themselves to a market

solution. Environmental degradation and the devastation of the landscape

associated with agricultural activity are examples of market failure and therefore

legitimate areas for interventionist public policy to correct those failures and the

negative externalities. These problems often require collective responses which also

suggest the need for government involvement, for example in the case of Australia’s

highly acclaimed Landcare program. However, overall support of farm incomes

through the subsidisation of production as a means for achieving multifunctionality

may exacerbate rather than reduce the problems by stimulating production rather

than directly addressing the policy objectives. Some large issues of accountability

and transparency in redressing environmental concerns also arise through the

generalised nature of multifunctional policy. Benefits might be gained in these areas

through market-based schemes like the UK’s LEAF (Linking Environment and

Farming) program.

In general economic experience in the West over the period since the 1970s suggests

that the new and emerging issues that characterise these developed societies, with

the exception of some environmental concerns, are best resolved through the

operation of market mechanisms that allow the exercise of consumer preferences. It

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 23

may appear paradoxical but satisfying non-economic values may best be achieved

through economic means.

Convergence?

This paper has argued that the position of agriculture in the Australia-EU

relationship has gone through phases. Initially, the domestic policies implemented

through the CAP were very similar in objective and form to those in place in

Australia. The two policies began to diverge in the early 1970s with the adoption in

Australia, out of economic necessity, of neoliberal approaches to trade and domestic

support policy. In the 1980s and 1990s this saw the dismantling of regulation in the

agricultural sector and further exposure of the Australian economy to the world

market, for example, through the floating of the Australian dollar. During the

Uruguay Round of multilateral negotiations, the distance between the EU and

Australia on agricultural policy arguably reached its greatest.

Policy making is about the balancing of values which compete for policy attention.

For agricultural policy makers one of the challenges of the last half-century or so has

been balancing the non-economic values associated with farming with the desire to

make farming more efficient. In recent years, Australia and the EU have struck a

quite different balance between economic objectives and non-economic concerns,

both for sound national interest reasons. As a rich post industrial economy, the EU

has chosen, through democratic processes, to pay for the preservation of values its

citizens see as important. These include traditional agrarian concerns related to

family farming combined with post-materialist values such as environmental

protection and animal welfare. This choice of support for farming is perhaps

analogous to the choices many advanced societies make about providing public

support for the performing arts. In Australia, for example, the concept of a “fair go”

has seen strong electoral support for the preservation of universal access to the health

system through Medicare in the face of a strong ideological push towards market

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 24

solutions in other areas of the economy. However, in the area of agriculture,

democratic forces in support of agrarian and other non-economic values have not

been strong enough to mount resistance to deregulation, although a number of

sectors such as the pork industry and sections of the dairy industry have paid a high

price for adjustment.

Under pressure from the international trading community, but perhaps more

importantly in response to budget realities and the challenges of impending

enlargement, EU policy makers began to reform the CAP from the early 1990s

increasing the linkages between agricultural production and the operation of the

market.

In recent years, Australia has also seen amelioration of its policy position in response

to internal pressures. Since the mid-1990s the voice of opposition to unfettered

market forces has seen electoral challenges to the National Party and recent changes

to drought policy have been towards a greater welfare focus with less emphasis on

structural adjustment62. Green has written that “The economists of the NFF may

have abandoned … romantic [agrarian] notions, but the majority of the electorate on

whom the National Party relied had yet to abandon the quest for the rural idyll”63.

The perceived lack of representation of these views as the National Party has become

increasingly identified with the Liberals’ policy prescriptions has seen voters

question whether the party can represent the interests of rural and regional voters64.

Recent elections have seen the rise (and fall) of One Nation and increased support for

rural Independents.

As the EU moves to make its agricultural sector more responsive to market forces

and Australia sees a rise in concerns for the environmental impact of agricultural

activity and increasing consumer concern with issues such as animal welfare and

food safety, we may be seeing the turning point in the Australia-EU relationship on

agriculture. A recent Workshop in Canberra on Future policy prospects for agriculture

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 25

in Australia and Europe identified numerous areas of common interest between the

European Union and Australia in the area of agricultural policy including rural and

regional development issues, the viability of the family farm in a period of great

change and the policy implications of achieving sustainable agriculture. Both the EU

and Australia face the challenges of structural adjustment in agriculture, the aging of

the farm community, the changing nature of the family farm as off-farm income and

pluri-activity become more common and the need to respond to the requirements of

consumers, including concerns about the sustainability of agricultural production,

food safety and animal welfare issues65. We argue that while fundamental economic

differences will remain, internal economic, social and environmental pressures,

expressed through the democratic process will ensure that both policies become

more responsive and we will see a convergence, albeit slow, between the two.

Increased cooperation in developing responses to common challenges, and against

the background of many common values, could see the CAP become less of an issue

in the Australia-EU relationship in coming years.

1 Chifley (1946) A Rural Policy for Post-War Australia A Statement of Current Policy in Relation to

Australia's Primary Industries p 20 2 National Archives of Australia (1952) A518 B2/1/2 Part 2: Proceedings and Decisions of the

Australian Agriculture Council: 36th Meeting, Canberra 21-22 April 1952 p 30 3 Throsby (1972) "Background to Agricultural Policy" in Throsby Agricultural Policy: Selected readings p

13 4 Godden (2001) "Elegy, ode or panegyric? Practising agricultural economics in Australia, 1975-1999",

Australian Journal of Agricultural and Resource Economics, 45 (1) 5 Ibid. 6 Ibid. 7 Ibid. 8 Botterill (2001) "Rural Policy Assumptions and Policy Failure: the Case of the Re-establishment

Grant", Australian Journal of Public Administration, 60 (4) 9 Botterill (2003) From Black Jack McEwen to the Cairns Group: Reform in Australian agricultural policy

National Europe Centre Paper No 86 10 Grant (1997) The Common Agricultural Policy p 148 11 Botterill From Black Jack McEwen to the Cairns Group: Reform in Australian agricultural policy 12 Fennell (1987) The Common Agricultural Policy of the European Community p 10 13 Ibid. p 95 14 Easton (1953) The Political System: An Inquiry into the State of Political Science p 129 15 Doern and Phidd (1983) Canadian Public Policy: Ideas, Structure, Process p 54 16 Ibid. p 51 17 Schapper (1970) "Elements of a national policy for Australian agriculture", farm policy, 9 (4)

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 26

18 Botterill (2003) Balancing Values in the Agricultural Policy Process National Europe Centre Paper 19 Ibid. 20 Wallace (2000) "The Policy Process: A Moving Pendulum" in Wallace and Wallace Policy-Making in

the European Union p 60 21 Whitwell (1993) "Regulation and deregulation of the Australian wheat industry: the 'great debates'

in historical perspective", Australian Economic History Review, XXXIII (March) 22 Moyer and Josling (1990) Agricultural Policy Reform: Politics and Process in the EC and the USA p 52 23 Lindblom (1965) The intelligence of democracy: decision making through mutual adjustment 24 Moyer and Josling Agricultural Policy Reform: Politics and Process in the EC and the USA p 219 25 Grant The Common Agricultural Policy p 171 26 Fennell The Common Agricultural Policy of the European Community p 56 Petit, de Benedictis, Britton,

de Groot, Henrichsmeyer and Lechi (1987) Agricultural Policy Formation in the European Community: the Birth of Milk Quotas and CAP Reform p 123 27 Averyt (1977) Agropolitics in the European Community: Interest Groups and the Common Agricultural

Policy p 75 28 Ibid. p 91 29 Moyer and Josling Agricultural Policy Reform: Politics and Process in the EC and the USA p 45 30 Marshall (1985) "Rural interest groups" in Costar and Woodward Country to National: Australian rural

politics and beyond; Richmond (1980) "The Major Rural Producer Groups in New South Wales" in Scott Interest Groups and Public Policy 31 Grant The Common Agricultural Policy p 144 32 National Farmers' Federation (1981) Farm Focus: The 80's p 48 33 Averyt Agropolitics in the European Community: Interest Groups and the Common Agricultural Policy p 93 34 Blandford (2001) "Oceans Apart? European and U.S. Agricultural Policies are Converging",

Eurochoices, Premier Edition (Spring 2001) 35 Lockie (2000) "Crisis and conflict: Shifting discourses of rural and regional Australia" in Pritchard

and McManus Land of discontent: The dynamics of change in rural and regional Australia p 17 36 Grant The Common Agricultural Policy p 223 37 Aitkin (1985) ""Countrymindedness"- the spread of an idea", Australian Cultural History, (4) 38 Flinn and Johnson (1974) "Agrarianism Among Wisconsin Farmers", Rural Sociology, 39 (2) 39 Moyer and Josling Agricultural Policy Reform: Politics and Process in the EC and the USA p 50 40 Ibid. p 47 41 Craig and Phillips (1983) "Agrarian Ideology in Australia and the United States", Rural Sociology, 48

(3) 42 McMichael (1984) Settlers and the agrarian question: Capitalism in Colonial Australia p 220 43 Williams (1975) "More and Smaller is Better: Australian Rural Settlement 1788-1914" in Powell and

Williams Australian Space Australian Time: Geographical Perspectives p 61 44 Botterill Balancing Values in the Agricultural Policy Process 45 Skogstad (1998) "Ideas, Paradigms and Institutions: Agricultural Exceptionalism in the European

Union and the United States", Governance, 11 (4) 46 Self and Storing (1962) The State and the Farmer p 218 47 Duchêne, Szczepanik and Legg (1985) New Limits on European Agriculture: Politics and the Common

Agricultural Policy p 23 48 Fennell The Common Agricultural Policy of the European Community p 4 49 Lees (1997) "The Future of the Family Farm" in Lees, A Legacy under threat? Family Farming in

Australia p 252 50 Lawrence (1987) Capitalism and the countryside: the rural crisis in Australia p 149 51 Lees "The Future of the Family Farm" p 249 52 Ibid. p 251 53 Duchêne, Szczepanik and Legg New Limits on European Agriculture: Politics and the Common

Agricultural Policy p 171 54 Ibid. p 193

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 27

55 Lawrence Capitalism and the countryside: the rural crisis in Australia p 79 56 Farley (2000) Interview with Linda Botterill 29 February 2000 57 Duchêne, Szczepanik and Legg New Limits on European Agriculture: Politics and the Common

Agricultural Policy p 178 58 Napier (2003) The Future of the Family Farm Workshop on Future Policy Prospects for Agriculture in

Australia and the EU National Europe Centre, Canberra, 2003;Winters (1990) "The so-called "non-economic" objectives of agricultural support", OECD Economic Studies, 13 59 ARMCANZ (1993) Record and Resolutions: First Meeting, Alice Springs 29 July 1993;ARMCANZ (1996)

Record and Resolutions: Eighth Meeting, Cairns, 27 September 1996;ARMCANZ (2000) Record and Resolutions: Eighteenth Meeting Brisbane 18 August 2000;ARMCANZ (2001) Record and Resolutions: Nineteenth Meeting Wellington 9 March 2001 60 Mahé (2001) "Can the European Model be Negotiable in the WTO?" Eurochoices, Premier Edition

(Spring 2001) 61 Blandford "Oceans Apart? European and U.S. Agricultural Policies are Converging", 62 Botterill (2003) "Uncertain Climate: The Recent History of Drought Policy in Australia", Australian

Journal of Politics and History, 49 (1) 63 Green (2001) "Bush politics: The rise and fall of the Country/National Party" in Lockie and Bourke

Rurality Bites: The social and environmental transformation of rural Australia p 68 64 Ibid. 65 Kenyon, Botterill and Papadakis (2003) NEC Agriculture Workshop Concluding Session National

Europe Centre Paper No. 99

Linda Courtenay Botterill, John Gage: The Common Agricultural Policy

Page 28

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