22 September 1989 - 24 September 1989

Agriculture in the Developed World: Should Industrial Societies Aim to Ensure the Farmer a Livelihood, and if so, How? Subsidies, Surpluses, Famine and the Environment. Implications for the Third World

Chair: Dr Sylvia Ostry

A joint conference with Canadian Ditchley in Ontario, Canada held at the Millcroft Inn, Alton, Ontario

For this meeting, the first Ditchley conference staged in Canada, we were the guests of Canadian Ditchley to whom we are most grateful for their warm and generous hospitality.

The problem we addressed was defined as intervention by governments, on the one hand in the developed countries in favour of the producer, the farmers, and in developing countries, on the other, in favour of the consumer, with consequent distortion of trade and a transfer of resources from the consumer to the producer. That in turn led to reduced economic activity, soured relations between trading partners, with an overspill into other areas, and had damaging environmental consequences. Intervention was traditionally justified on various grounds: security of supply, the uncertainties of farming (weather etc), the small-scale business of individual farmers, competition between governments, a perception that governments ought to share out prosperity and preserve rural communities and the view that neglected land might be environmentally undesirable. What intervention was in fact justified by such arguments, and to what level?

It was argued that the general view to-day was that the major agricultural producers ought to move from subsidies which distorted, to “de-coupling” payments which did not, or at least did not do so directly. In seeking to achieve that through international negotiation, in the Uruguay Round of the GATT, governments had come to accept that domestic policies would have to be changed; but the nature and speed of change raised political and social as well as economic problems. The point was made that even under the much criticised Common Agricultural Policy, the number of European farmers in the Community had been more than halved, from a total of 21m thirty years ago without social upheaval. That change brought out another point, that rural communities were in many cases no longer primarily agricultural. One feature of the conference was the increasing understanding of the various complicated linkages within this whole field of discussion.

Some optimism was expressed that the current international negotiations would be successful, because of domestic pressures for reform and the recognition of the link between domestic policies and international agricultural trade and because politicians now had a better understanding of the mechanisms. Others were sceptical and queried the definition of success. Some pessimists predicted that we should probably end up with supply controls and quantity restrictions (and markets closed to other producing countries, including those in the developing world whose prospects of growth depended on access). Some, indeed, suggested that the European Community, no longer under budgetary pressure, was more interested in damage-limitation than in reform. (It was unfortunate that despite our efforts, no representative from the Commission was able to be present.)

Domestically, security of supply, the original justification for supporting agriculture, had been achieved, at least for those with money to buy. The problem to-day was more one of surpluses, over and above the level of prudent and economically justified reserves, the difficulty of disposing of them at commercial prices and the consequent effect on the economies of the recipients of subsidised supplies. Economic pressures therefore to reduce production combined with environmental concerns to argue in favour of less intensive methods of farming - extensification was the technical word - and in favour also of quality (or perceived quality) rather than quantity - e.g. concern for animal welfare, the landscape, pollution etc. The latter constituted the externalities of farming (i.e. the unintended by-products which society perceived as stemming from farming activity), some positive and some negative, for which farmers were neither compensated nor held to account under present arrangements. It was in these areas that the possibilities of “de-coupling” lay: while there was no strong argument against the general principle applied to other business activities that the polluter should pay, there was a case for paying the farmer a price for the (at present) “unpriced cosmopolitan benefits” as one participant called the beneficial by-products. A start had been made in this direction in Britain, for example, where voluntary agreements with farmers in areas designated as environmentally sensitive were providing, it was claimed, non-distorting support for environmentally beneficial agriculture, and in the Federal Republic. Policing of such arrangements, it was argued, was likely to be bureaucratic and costly, though others believed that they could be made self-policing - farmers were not villains: they too were conscious of the environment. Moreover in many cases research had shown that improved methods not only reduced pollution, but were justified economically - though where they were not so justified, incentives might be needed. Another point was made that we should be looking not merely for the modification of old practices but the introduction of new ones - reference was made to the report, Alternative Agriculture, issued under the auspices of the US National Academy of Science. Given, too, that farming is a very localised activity, with a great variety of soils and conditions, both internationally and nationally, measures of this kind could not be universal, but had to be tailored to circumstances.

Movement in these directions had to be on a multi-lateral basis: governments acting unilaterally would be seen to be undermining the competitive advantage of their own farmers and legislatures, notably the US Congress, would be unwilling to ratify arrangements which appeared inequitable. A truly free market, with no government support for agriculture, was likely to lead to higher world prices, because unsubsidised production would be lower, with adverse implications for importing developing countries. It might also be expected to put pressure on small and marginal farmers in the developed world.

This led to a discussion of the risk that measures designed to cope with environmental or amenity concerns, or held out as so doing, could be misused to create non-tariff barriers. There was a need, perhaps, for some international mechanism to monitor the justifications advanced for such measures and to ensure that if there were no scientific justification on health or other agreed grounds, the country imposing the disputed measure should pay a price for it (The EC’s ban on hormone-assisted beef was instanced.) The difficulties, however, were obvious.

In the context of the environment, there was some discussion of the problems of developing countries. It was not reasonable to expect them to adopt measures protective of the environment at the expense of their economic growth, without compensation, though it might well be possible to demonstrate that proper management of the tropical forests, for example, was more profitable than its conversion to other uses. There might be a need for some new international body - probably an impractical idea, - or the strengthening of an existing one to plan and coordinate action in this field (the UN Environmental Programme, the FAO, the IMF or the World Bank were all mentioned with varying degrees of doubt about their ability to cope). It was particularly important that research should be directed towards the needs of developing countries, which were not always the same as those of the developed and where public-funding might be needed since the commercial return might be small or problematic. Indeed a strong general case was made by several participants for not relying solely on a commercially-driven research effort, given current concerns for the environment etc.

Finally, while some anxiety was expressed that in an ideal free market, the level of reserve stocks might prove inadequate to cope with emergencies, the conclusion was that existing programmes tended to over-provide, that the quantities needed were in relative terms small and that the anxiety was groundless.

There were many points of detail which I have not covered in this summary and no doubt some views which I have misrepresented or failed to reflect. We did not reach any firm conclusions but the discussions served, I believe, to illuminate a number of the difficulties and to suggest ways forward. We were fortunate in having a good representation of those engaged in the multilateral negotiations and in the field of practical agriculture, who may be in a position to follow up some of the ideas thrown up.

This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.

Conference Chairman: Dr Sylvia Ostry
Senior Research Fellow, University of Toronto; Ambassador, Multilateral Trade Negotiations and Personal Representative of the Prime Minister, Economic Summit, Department of External Affairs


Sir Richard Body MP

Member of Parliament (Conservative), Holland with Boston; Member, Joint Select Committee on Consolidation of Law ; Chairman, Commons Select Committee on Agriculture; Chairman, Open Seas Forum; Vice President, Small Farmers’ Association
Mr Richard Fell
Counsellor (Economic & Commercial), British High Commission, Ottawa
Sir John Graham Bt GCMG
Director of the Ditchley Foundation
Mr David Hadley
Head, European Secretariat, Cabinet Office
Mr L P Hamilton CB
Secretary, Department of Agriculture & Fisheries for Scotland; Member, Agricultural and Food Research Council
Mr Simon Harris
Director for Corporate Affairs, British Sugar pic
Mr K A Ingersent
Emeritus Fellow; currently writing book on agricultural policy in the EC and the US A (with Professor Rayner of Nottingham University)
Professor John Marsh
Head, Agricultural Economics and Management Department, University of Reading; Independent Member, Food and Drink Manufacturing Sector Group and UK representative, the Other Less Favoured Areas Programme Committee of the EEC
Mr David Naish
Deputy President, National Farmers’ Union
Mr Adrian Phillips
Director General, Countryside Commission; Deputy Chairman, Commission on National Parks and Protected Areas, IUCN

Mr Michael Gifford

Senior Co-ordinator and Negotiator, Multilateral Trade Negotiations, Department of External Affairs, Canada
Mr Carl Grenier
Director General, Trade Policy, Department of International Affairs, Quebec
Mr Morley G Handford
Senior Vice-President, Esso Chemical Canada, and Worldwide Fertilizer Vice- President, Exxon Chemical Company
Mr Ronald S Ritchie
President, the Canadian Ditchley Foundation
Mr Robert E Séguin
Director of Economics & Policy Co-ordination Branch, Ontario Ministry of Agriculture and Food, Province of Ontario
Professor T K Warley
Professor of Agricultural Economics, University of Guelph, Ontario

Mr John Banks
Mr Leighton McCarthy
HE Mr Michael A Wadsworth QC            

Professor Wilhelm Henrichsmeyer

Professor of Economics and Agricultural Policy and Director, Institute of Agricultural Policy and Vice President, Bonn University; Chairman, Research Association for Agricultural Policy and Rural Sociology, Bonn; Chairman, Scientific Advisory Board, Ministry of Agriculture; Consultant to the EC Commission on Agricultural Policy analysis

Professor Gianpaolo Cesaretti

Professor of Agricultural Economics and Politics, University of Naples; Secretary-Treasurer and member of Council, Italian Society of Agricultural Economics

Professor Masayoshi Honma     

Associate Professor of Economics, Otaru University of Commerce, Japan and Visiting Research Fellow, International Food Policy Research Institute, USA

Mr Norman Berg

Senior Adviser to the American Farmland Trust (AFT); Washington representative, Soil and Water Conservation Society (SWCS); member, governing board, Anne Arundel Soil Conservation District, Maryland; Treasurer, Natural Resources Council of America (NRCA)
Professor Ronnie Coffman
Professor and Chairman, Department of Plant Breeding & Biometry, Cornell University
Mr George Dunlop
Formerly Assistant Secretary, Natural Resources & Environment, US Department of Agriculture (1986-89)
Mr Robert M Goodman
Executive Vice President, Research & Development, Calgene Inc; Associate Editor, Virology; Adjunct Professor, University of California, Berkeley; Member, International Working Group on Legume Viruses, the International Society for Plant Pathology, the International Committee for the Taxonomy of Viruses; Member, the National Academy of Science/National Research Council Board on Agriculture
Mr Robert D Havener
President, Winrock International Institute for Agricultural Development
Professor Edward Lotterman
Professor of Agricultural Economy, Center for International Food and Agricultural Policy, University of Minnesota
Mr Charles W Muller
Administrative Director, the American Ditchley Foundation; President, Murden & Company (international public affairs consultants)
Mr Charles H Riemenschneider
Director, Majority Staff Committee on Agriculture, Nutrition & Forestry, Senate Office, Washington
Dr Wallace E Tyner
Professor and Head of Department, Department of Agricultural Economics, Purdue University