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| A Discussion Paper for the Attention of Delegates to the Intersessional Meeting of the Commission for Sustainable Development (CSD 8) |
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Governments have reached a critical stage in the development of agricultural policy. New negotiations to further liberalise agricultural trade will have a significant global impact on the future of agriculture. It is therefore important that all countries consider both the domestic and external impacts of their respective agricultural policies as well as the likely impact of further trade liberalisation. The CSD dialogues on Sustainable Agriculture can play a central role in this process.
A question of particular importance is whether agriculture can be considered mainly in terms of commercial production and trade, or whether a wider range of concerns need to be taken into account and if so, how? Polarised debates about ‘free trade’ versus ‘protectionism’ are already surfacing, in particular, with regard to the stated non-trade concerns of some agricultural producers such as the European Union (EU).
Central to this debate is the use of the term ‘multifunctionality’ – an attempt to encapsulate, in one word, the concept that agriculture has diverse roles. Although it is widely acknowledged that agriculture has many functions, the use of the word multifunctionality has become a subject of contention. Part of this disagreement stems from a lack of clarity on what multifunctionality means in practice. This paper describes what multifunctionality is, why it is important, and proposes a set of principles intended to stimulate discussion on how multifunctionality could be used to reform trade policy so that it fosters sustainable agriculture and rural development (SARD).
What is Multifunctionality?
As well as producing secure supplies of food and fibre, agriculture also impacts upon quality of life, in particular through the vitality of rural areas (rural employment, society and cultural heritage); recreation and tourism; biological diversity; soil and water systems; landscape; food quality and safety; and the welfare of animals. The term multifunctionality attempts to encapsulate these diverse factors. It is also complimentary and linked to sustainable agriculture and rural development (SARD).
The relative importance of the various functions differs between localities, regions, countries or even groups of countries. However, the basic fact that agriculture serves multiple functions is recognised by both the OECD and the FAO.
Despite such acknowledgements, the term multifunctionality has proved controversial. Its use by particular governments and organisations has generated suspicion that multifunctionality is merely an excuse for defending current agricultural policies and vested interests. As one journalist has stated;
(Raghav Narsalay, The Times of India, 29 November 1999)
Why is Multifunctionality Important?
Some believe that agriculture should be treated like any other industrial product in the trade system. They argue that agriculture should be exposed to the disciplines of the free market and they view multifunctionality as an attempt to justify ‘special treatment’ for agriculture in trade policy. However, in the real world, markets do not function perfectly. The many public goods that agriculture provides, and adverse impacts that intensive agricultural practices can have, are not taken into account. For this reason, it is important that agriculture is not treated just like any other industrial product within the trade system.
Agricultural policies and related international trade arrangements influence not only the ‘commodity’ aspects of agriculture (i.e. the production of food, feed and fibre), but also the many other functions it provides to society. To ensure that trade policy will facilitate secure supplies of food that are produced in a sustainable way, this reality needs to be fully taken into account during WTO negotiations on Agriculture. These negotiations should aim to facilitate SARD.
The ‘built-in agenda’ of the WTO requires agriculture negotiations to begin in 2000. The failure to agree a broader agenda in Seattle means that negotiations will now proceed on the basis of Article 20 of the Agreement on Agriculture (AoA) which recalls that;
Principles of Multifunctionality
Although much recent debate has focused upon whether to use the word ‘multifunctionality’, the real point at issue is what this term actually means for policy. It is therefore important to describe how the concept should be used to formulate policy that promotes SARD. What follows is a list of key principles that elaborate on what multifunctionality could mean in a policy context.
1) Recognition that agriculture is different all over the world
Multifunctional agriculture is essentially a world-wide concern and is by no means limited to the EU, Norway or Japan. Large differences in the degree and nature of multifunctionality exist between regions and between farm types within regions. For example, the availability of agricultural land and its proximity to local communities differs substantially between the EU and the US. This has produced different approaches to agricultural, environment and related policies.
Because multifunctionality requires policies tailored to the specific circumstances of different countries and regions. Governments must therefore have the appropriate degree of policy flexibility - in accordance with their level of development - to pursue SARD. A ‘one-size-fits-all’ model of agriculture is inappropriate and cannot reflect the environmental, social and cultural diversity that exists around the world. A one-dimensional approach to liberalisation of agricultural trade could therefore be detrimental to the pursuit of SARD.
2) The use of ‘least trade distorting’ or ‘minimally trade distorting’ measures
It is not possible to fully achieve SARD solely through ‘non-trade distorting’ means. There are few policy measures that have absolutely no impact on production and trade. However, in order to minimise the impact of domestic agriculture on third countries, the pursuit of SARD should preferably be based on policies that are ‘least’ or ‘minimally’ trade distorting.
Developing and least developed countries should be afforded greater scope to use trade distorting measures (such as tariffs) because they are less able than developed countries to afford subsidies. This accords with the concept of ‘special and differential treatment’ for developing countries that has been accepted by the WTO’s membership.
3) Food security
A key function of agriculture is to ensure secure and stable supplies of food. Yet, food insecurity is still a major problem, particularly in the developing world. A range of trade policy measures - which could vary depending on levels of development - should therefore be available for use by governments to pursue food security objectives.
Also important is effective provision of food aid, as defined by the ‘Marrakech Decision’ agreed as part of the last round of trade negotiations. Governments need to ensure that Net Food Importing Developing Countries are effectively compensated for changes in markets and food supplies, resulting from trade agreements, that adversely affect their food security.
4) Sustainable agriculture
Financial support to farmers should not be supplied simply to compensate for liberalisation or price reduction. In principle, it should be de-coupled from production and ‘re-coupled’ towards achieving sustainable agriculture objectives and to improve agricultural practices. Some exceptions from ‘de-coupling’ should be allowed in cases where the maintenance of certain environments cannot be completely de-linked from the use of certain production systems.
The so-called Green Box' of the AoA offers an effective means to provide these forms of support, although it should be expanded to cover other agricultural functions (e.g. animal welfare). Support payments to farmers must be justified by sound calculations, e.g. income foregone, costs incurred.
It is important to evaluate the actual, as well as the intended effects of agricultural policies, in particular, to assess their impact upon SARD and other relevant concerns. Such impact assessments should be an integrated component of national and international policy and should also inform decision-makers considering new policy initiatives.
Environmentally damaging and other harmful subsidies should be phased out.
Environmental and animal husbandry standards should not be lowered.
Alongside government support for multifunctionality, consumer demand for nature conservation and animal welfare, for example, may require new agricultural products and services. Labelling is an important tool in distinguishing such products and services in the marketplace.
5) Agricultural and rural development (North and South)
Domestic support to farmers should be linked to the rural development benefits that agriculture can provide and payments justified by sound calculations.
Export support mechanisms can have a detrimental impact on agriculture and rural communities in third countries. Such export subsidies or export credit arrangements should be abolished and the funds redirected to support multifunctionality and SARD. Industrialised countries have a particular responsibility to address the consequences of their various forms of export support.
The concentration of market power among a small number of producers can be detrimental, especially for small-scale farmers and rural communities. It can also lead to forms of export ‘dumping’ on international markets. The vertical, horizontal and global integration of agriculture, together with issues such as patenting, potentially conflicts with multifunctionality. National, bilateral and international strategies are needed to address the concentration of power in the agricultural sector.
6. Cultural Values
Societies have different attitudes to intensification and new technologies, animal welfare, and with regard to traditional forms of farming, e.g. maintaining small-scale mixed farming, specific types of produce, knowledge and skills etc. Multifunctionality respects and supports such diversity.
Conclusions
26th February, 2000