Table Of ContentDevelopments in Agricultural Economics, 7
AGRICULTURAL ECONOMICS AND POLICY:
INTERNATIONAL CHALLENGES FOR THE NINETIES
OTHER TITLES IN THIS SERIES
1. Planning and Decision in Agribusiness: Principles and Experiences
edited by C.-H. Hanf and G.W. Schiefer 1983 viii + 374 pp.
2. Simulation and Systems Analysis in Agriculture
byC. Csäki 1985 262 pp.
3. Subjective Equilibrium Theory of The Farm Household
byC. Nakajima 1986 xii + 302 pp.
4. Agricultural Policy Formation in the European Community : The Birth of Milk Quotas and CAP
Reform
byM. Petit, M. De Benedictis, D. Britton, M. De Groot, W . Henrichsmeyer and F. Lechi 1987
χ + 166 pp.
5. Multiple Criteria Analysis for Agricultural Decisions
byC. Romero and T. Rehman 1989 xiv + 258 pp.
6. Multicriterion Optimization and its Application in Agriculture
byJ. Pitel 1991
Developments in Agricultural Economics, 7
AGRICULTURAL ECONOMICS
AND POLICY:
INTERNATIONAL CHALLENGES
FOR THE NINETIES
ESSAYS IN HONOUR OF PROF. JAN DE VEER
Edited by
KEES BURGER, MARTIJN DE GROOT,
JAAP POST AND VINUS ZACHARIASSE
Agricultural Economics Institute, P.O. Box 29703, 2502 LS The Hague, The Netherlands
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V
Contents
Preface
Aart de Zeeuw and Gerrit Meester
Jan de Veer 1
Ulrich Koester
Economy-wide costs of farm support policies in the
major industrial countries 5
Alexander Sarris
Agricultural trade liberalisation and instability in
world cereal markets 18
Jean-Marc Boussard
Sectoral policies and the microlevel decision making 30
Michel Petit
Agricultural economics and the art of policy making 40
Stefan Tangermann
Agriculture in international trade negotiations 50
David Colman
Reforming the CAP: reducing trade distortion 62
Louis Mahe and Terry Roe
EC-US agricultural trade relations: do political
compromises exist? 70
Kenneth Thomson
European agriculture, economic integration and "1992" 85
John Marsh
Agriculture and structural policy 95
Wilhelm Scheper
Agriculture and vertical integration 119
UlfRenborg
Agricultural economists - displaced and superfluous? 130
Victor Nazarenko
Economic reform in the USSR agro-industrial complex 137
vi
Csaba Csäki
Agriculture and agricultural policy in Eastern Europe 145
Wilhelm Henrichsmeyer
Structural adjustments in East European agriculture:
the case of East Germany 161
Günther Weinschenck
Environmental economics and harmony with nature 166
Hartwig de Haen and Martin Scheele
Environment: Threat to agriculture? 174
Arie Oskam
Productivity measurement, incorporating environmental
effects of agricultural production 186
Jerrie de Hoogh
Agricultural technology: for better or for worse? 205
vii
Preface
"It is rather unattractive to retire right now", said Jan de Veer with a view to the host
of interesting events affecting European agriculture. With GATT negotiations under
stress in reaching even some conclusions, with Eastern Europe changing day by day
while establishing its agricultural policy, and with the ever louder call for en
vironmental regulations, he must be very anxious to see what the consequences of all
these events will be for agricultural economics and policy.
On his retirement, this liber amicorum is offered to him. The authors and amici were
requested to focus their attention to those developments that are bound to dominate
the discussion on agricultural economics and policy in the years to come.
Put together, the contributions give a vivid picture of the dynamic times that lie
ahead for both Eastern and Western European agriculture, and of the profound
changes that will be forced upon agricultural policy.
The need for a (further) policy reform is made clear by Ulrich Koester, who shows
the sizeable direct and indirect costs of the present policies. The recent changes in
policy towards less overall price support, but more provisions like set-aside and
quota, are a further move away from a policy that would be optimal from a welfare
point of view. There is a variety of reasons, however, why optimal policy is not iden
tical to a complete free-market regime. As Alexander Sarris shows, there may be in
creases in production instability resulting from trade liberalisation, although world
market prices will probably be stabilised. And Jean-Marc Boussard makes the same
point by saying that considerable uncertainties are introduced by the market. Deter
mining the extent to which the State should interfere requires a combination of both
micro and macro economic considerations as applying only one discipline may lead
to wrong answers. Using this type of analysis, combined with social welfare func
tions, may enable the economist to come up with normative answers as to what poli
cies should be.
This extension of the economists' apparatus towards inclusion of the new political
economy, enables abetter understanding of why governments behave as they do,
Michel Petit asserts, and he draws examples from recent major policy decisions. The
economist's role is to make clear what the costs are for the various actors in the politi
cal decision making and in this way contribute to democratic procedures.
Stefan Tangermann highlights the procedures followed in this and earlier GATT
rounds of negotiation. Although many GATT regulations appear not to have been
adhered to, some chances for agreements in the past may have been missed, due to
lack of information as to what the consequences would be. His expectation is that
some agreement will now be reached on reduced aggregate levels of support. David
Colman holds the same view, and expects that the focus of the policy will shift from
price support to other forms of support, not in the least because of new environmen
tal regulations. Louis Make and Terry Roe show the potential outcomes of the EC-USA
negotiations. Using political goal functions with weights assigned to producer and
consumer groups and tax payers, they show that free trade is attractive neither to the
EC, nor to the USA. A reduction of protection combined with decoupled income
viii
transfers may be the outcome of US-EC negotiations, but political gains to either
party are small.
Kenneth Thomson documents this change in emphasis of the EC policy towards
more regional and national policy. The CAP has done little towards economic inte
gration, unlike the other moves of EC policy, which have fostered integration of up
stream and downstream industries.
John Marsh, focussing on EC's structural policy, takes this point one step further
and stresses the trend toward rural development policy, in which market and struc
tural policy no longer can be distinguished separately. Ecological considerations will
enhance the need for an integrated policy of the rural areas. The integration of the
food chain will call for more quality-oriented policy and research, and this aspect is
also taken up by Wilhelm Scheper, who sees a clear trend toward "demand-induced
vertical integration". As to the farm structure, he believes that the CAP and the pre
sent institutions, including the separation between agricultural and economic Minis
tries, are no longer adequate in view of the increasing non-agricultural activities
taken up by the rural population. Ulf Renborg, in a visionary contribution, sketches a
future in which many part-time and hobby farmers and small scale non-agricultural
entrepreneurs will occupy the rural areas. Research should shift from farm manage
ment and production policy towards business management and rural policy.
The situation in Eastern Europe is quite the opposite. Changes are so recent that
Victor Nazarenko and Csaba Csdki can document the enormous size of the problems,
rather than the solutions. Whereas Western Europe is heading toward small, but
sophisticated and integrated farm sectors, Eastern Europe is in the process of disinte
grating its farm sectors into separate units, connected by market interdependencies.
Interestingly though, as much as his Western colleagues, Nazarenko emphasises the
need for attractive rural areas, in order to prevent further erosion of social provisions
in the country side. Much hope is on the EC, which, in the words of John Marsh, will
have to make space for further imports from the East. The former GDR is now within
EC borders. Wilhelm Henrichsmeyer sketches the problems of adjustment towards new
price structures. He expects that the eventual farm size in East Germany will be far
above the average EC size and that family farming will not prevail to the extent that
is seen in the rest of the EC.
A strong force toward regional policy is provided by the environmental concerns.
Günther Weinschenck calls for a reconsideration of policy aims, that should include the
long term view and sustainability not as a constraint but as a separate and virtuous
goal. Hartwig de Haen and Martin Scheele regard the formulation of desirable en
vironmental outputs as providing a challenge rather than a threat to agriculture. In
their view, policy initiatives in this direction should be considered as desirable per se
and should not be mixed with agricultural income policy. They expect substantial
contributions to come from technical innovations, that can turn environmental con
straints into sources of future income for farmers.
In the past, technical changes have led to productivity increase in the Netherlands,
amounting to some 2.5 per cent for total factor productivity and 4.5 per cent per year
for net factor productivity, as Arie OsL·m shows. In an effort to incorporate the exter-
ix
nal environmental effects of agriculture into this measure, these benefits of technical
change may decrease by up to 13 per cent. In the same spirit, Jerrie de Hoogh, in the
final contribution to this book, expresses doubts as to whether policy and prices can
be such that socially desirable technical innovations will come about.
Summarising, international challenges for the nineties will come from a redirection
of the EC policy, stimulated by GATT negotiations, the opening towards Eastern
Europe and environmental considerations, from a production oriented policy
towards rural policy, aiming at protecting vulnerable regions, maintaining a rural
population, curtailing production in the West and fostering it in the East, and aiming
at the provision of environmentally desirable output. The challenge to the profession
will be to provide the interdisciplinary, policy-oriented and creative analysis and ad
vice needed. In the opening article, Jan de Veer's life time contribution is charac
terised as such by Aart de Zeeuw and Gerrit Meester.
It is rather unattractive to see him retire right now.
October 1990
The editors
