EU Commissioner Fischler Stresses Rural Development

John de Boer (University of Tokyo & GLOCOM Platform)

As a follow up to last week's Europe Report (EU Report #17), which sought to provide a background to the debate concerning the sustainability of EU and Japanese agricultural policies in advance of the "5th Quint Agricultural Ministerial Meeting" held in Nara between July 25-27, this week's report will bring to light what actually transpired in that meeting and the implications that it had on Japan-EU relations in the area of agriculture.

Japan and the EU have for long been criticized for the excessive support measures that they give to their farmers. Critics of these policies claim that government subsidies are trade and price distorting and consequently contradict the agreements made by both Japan and the EU during the Uruguay Round of negotiations and according to WTO rules. In response, the EU and Japan have argued that agriculture is unlike any other sector in that it produces "multifunctional" benefits for society. The perspective is that agriculture is not only an important economic activity that produces fiber and food but is also one that creates tangible and intangible values that are vital for the survival any society. More precisely, the mutlifuctional activities produced by agriculture include land conservation, the fostering of water resources, environmental protection, strengthening the socio-economic viability and the development of rural areas, and preserving landscapes and traditional cultures. The point stressed by the EU and Japan is that if subsidies were withdrawn all of these multifunctional attributes would disappear with their farmers. As a result, complete market liberalization in the agricultural sector is not in their national interest.

Since introducing this concept, the key question for both sides has been "how can government supports be made non-trade distorting?" In his speech to the Central Union of Japanese Agricultural Cooperatives (JA-Zenchu) on July 25 and in the Quint meeting, Commissioner Franz Fischler reinforced the need for Japan and the EU to continue in their quest to answer this question when he stated the following:

"We both agree that agriculture provides services for our society that the free market alone would not take care of. This is why we formed, together with a growing number of other WTO members, the group of "friends of multifunctionality". The members of this group share the belief that policy measures to deal with non trade concerns must be possible even when trade is liberalized… There are still WTO members who claim that agriculture is a sector like any other (the Cairns Group and in particular Canada and Australia). They see no reason therefore to foresee special policies for agriculture, just as they see no reason to foresee special policies for the manufacturers of soap. So together, we must ensure that the rules that will come out of the new round will permit us to pursue our legitimate policies to support farmers, while avoiding, to the greatest extent possible, trade distortion".

As the EU's answer to the question posed above, Commissioner Fischler unveiled a new orientation that directed government farm subsidies towards rural development. Under this new initiative the EU would cut its market support measures and instead subsidize farmers who are farming in an environmentally friendly way. He stated, "we support organic farming, mountain farming, we give incentives to farmers who want to invest in better quality, and we also support investments in infrastructure and the creation of new jobs on the countryside". The outcome of this new policy according to Commissioner Fischler will be to "re-link farmers with the expectations of society, help farmers to react to market demand, favor the environment and help our international partners, because it does not distort trade". Another obvious objective would be to maintain the tremendous diversity in food culture that exists in the EU. Considering that France alone produces over 500 different kinds of cheese, Belgium 600 types of beer and Italy and Spain a huge variety of hams and olive oils this is an extremely arduous task.

The outcome of this strategy according to the Commission is that it would "reinforce rural development, strengthen farmers in a sustainable way, reward them for exactly those services which are dear to society and which the market would not provide for".

The general consensus is that the EU is heading in the right direction with this policy. Although, market support measures still exist in the EU it is true that they are decreasing in terms of percentage on an annual basis. Considering that Japan and the EU share many common objectives in relation to agriculture, it is hoped that Japanese government officials and policy makers will capitalize on the positive aspects of the EU's rural development initiative. Small-scale Japanese farms have been disappearing at an alarming rate over the past 30 years and with them a landscape, a tradition and values. Nevertheless, it is essential that the agricultural market in Japan be liberalized in order to provide consumers with better and more affordable products and so as to give developing countries the opportunity to export to Japan on a sustainable level. The challenge is far from over as a formula for non-trade distorting supports has yet to be developed. However, towards this end it is hoped that the EU and Japan will continue to collaborate closely.