How Can Agriculture Adjust? Globalization and Farm Policy Reform
On June 13, GMF hosted David Blandford, Professor of Agricultural Economics at Pennsylvania State University, to discuss globalization and farm policy reform in developed countries. The event was moderated by GMF transatlantic fellow Dan Morgan.
Dr. Blandford began by arguing that adjustment pressures are a reality for agriculture due to many factors, including short-term economic pressures and changes in market conditions; long-term pressures such as technological change; and changes in the domestic and international policy environment, i.e. the 2007 Farm Bill in the United States, the 2008 CAP "Health Check" in the EU, and an impending WTO agreement. He acknowledged that although farmers and farm families are in fact very adaptable to change, agriculture still requires special considerations. These changes include varying production methods, activities and enterprises, changing the scale of their production, and changing their on-farm and off-farm sources of income. Particular needs of agriculture highlighted by Dr. Blandford in his presentation included:
- Lower factor mobility due to lack of skills and education;
- Small household firms that continue to operate even when loosing money as to avoid loosing their land;
- The "stickiness" of economic change-transitions in the farm operation only usually occur with intergenerational transfers of the farm.
This challenges policymakers to provide efficient policies that promote adjustment instead of simply bowing to the demands of strong farm lobbies, as has often happened in the past. Unlike the European Union, which has been implementing broader reform policies for agriculture since the 1950s, adjustment policies in the U.S. thus far have been too limited in scope to be effective. For example, the Trade Adjustment Assistance Reform Act of 2002 in the United States provides income support for farmers and fails to incorporate the research and development expenditures necessary to facilitate long-term competitiveness. In response to these shortcomings, Dr. Blandford suggested four components that he believes represent crucial aspects for constructing effective adjustment policies:
- Compensation for reductions in asset values;
- Measures to facilitate labor adjustment for those who wish to exit the farm, and improved skills for those who wish to remain;
- Targeted assistance for persistent poverty for the approximately 130,000 farmers who are both income- and asset-poor;
- Additional compensation for research and development, infrastructure, and regional development in farming communities.
Dr. Blandford addressed the international implications of adjustments in agriculture policies. Shifting spending to the Green Box from the Amber and Blue Boxes-as would be the case with genuine adjustment policies-would help the U.S. prepare for potential future WTO commitments on domestic support arising from international trade agreements.
To view Dr. Blandford's policy paper, please click on the link below (PDF):
Policies for Agricultural Adjustment in Developed Countries under Trade Policy Reform