Compare and Evaluate Reform in One Policy Sector in Two Countries

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Table of Contents

Introduction
The US Agricultural Policy
EU Agricultural Policy
Comparison of the Policy Environment
Policy Comparisons
Conclusions
References

Introduction

The comparison of policies between nations is important as it contributes to the development of stronger policies. The European Union and the United States constitute one of the largest trading blocs in the world, generating over a quarter of the world’s revenue.

The EU and the US are also significant trading partners, as well as competitors on various fields. One of the fields in which the competition between the two has led to the development of polices is the agricultural sector, which is considered an import part of the economy in both of the countries.

The respective governments have always supported their respective agricultural industries in a number of ways. The policies developed have contributed to both success and failures of the systems. They are worth a comparison to investigate their strengths and weaknesses.

Between the year 2000 and 2010, a number of developments have taken place in the agricultural sectors of the EU and the US, with the most significant ones being the development of new policy to facilitate the industry (Lars 2010, p. 79).

The world’s population is growing at an alarming rate. Some of the growths observed are in the US and the EU (Lars 2010, p. 79). The need for agricultural goods has therefore been increasing over the past few years to cope with this growth in population. In the process of attempting to meet the agricultural demands of the century in these two regions, a number of policies have been chosen to facilitate this.

The two nations also contain some of the largest populations, with the demand for agricultural produce being high as evidenced in the past few years. The development of policies has therefore been guided by these factors in addition to competition and government interests.

Based on the argument of the Organisation for Economic Cooperation and Development (OECD), “the EU and the United States together account for more than 60% of all government support to agriculture among the major developed economies” (Lars 2010, p. 79).

Some of the reforms that are taking effect in the EU include the proposed reform to the Common Agricultural Policy (CAP) while the US congress on the opposite side of the Atlantic has passed several agricultural bills over the last three years (Castles 1998). Despite these latest developments, the policies in the two places took a major change in the last decade.

The purpose of this essay is to compare the change in policy over a period of ten years in the EU and the US in a common sector, in this case the agricultural sector. The essay compares the agricultural policies in both the EU and the US between the year 2000 and 2010, recognised as the most recent period of reform in the agricultural policy for the two nations.

Some of the major changes in policy have targeted the bio fuel production in the agricultural industry and the protection of the industries in the respective countries from the competition from other external markets (Lars 2010, p. 79).

The essay will be divided into several parts, all facilitating the outcome of comparison of the agricultural policies. To begin with, the first section will discuss the existing agricultural policies in the EU and the US before the period under discussion.

The second section will be an analysis of the changes in both of these palaces between the year 2000 and 2010, which will form the basis of comparison. The next session will then constitute a comparison of the changes in the agricultural policies. A conclusion will follow these sections of the essay.

The US Agricultural Policy

The agricultural policy in the United States has had several reforms over the past decade. Several laws govern food assistance, farm support, agricultural trade, rural development, and marketing (CRS Report RS22131 2004).

On several occasions, these laws have been modified through other freestanding legislation, or as part of other laws as Lars states. In the period between the year 2000 and 2010, several of these laws were passed to regulate the agricultural industry since their effects are still being felt (2010, p. 79).

One of the major laws enacted is the omnibus Farm Bill that covered a wide section of the agricultural industry including “rural development, forestry, livestock, horticulture, livestock, commodity crops, nutrition, conservation, agricultural trade, and food aid” (CRS Report RS22131 2004).

Other programs included in the bill include among others “agricultural research, forestry, rural development, energy, and farm credit” (Dewbre, Thompson, & Dewbre 2007, p. 1161).

In the same period between 2000 and 2010, the policies implemented in the US were aimed at farm support. The subjects brought about by the legislation aimed to “provide both direct and indirect support to consumers and producers of agricultural products within the US and the whole of the agricultural sector at large” (Lars 2010, p. 79). Selected commodities were also enlisted for support.

These were to be supported to ensure competitiveness at the international markets. Subsidies for agricultural produce were also effected for various commodities, with the farmers being allowed to contest this based on several factors (Dewbre, Thompson, & Dewbre 2007, p. 1161).

To limit the influence of the external competitors in the industry, some of the commodities were also supported under various systems. The dairy and sugar sector are some of the areas that commanded a large share of the legislation in the light of the strong competition that was present at the time from external markets such as the EU and South America (Swinbank & Josling 2012).

Quotas were instituted to protect some commodities and prevent flooding of the market with cheap produce that was imported, with dairy and sugar being supported through minimum pricing systems (Swinbank & Josling 2012).

Under the Farm Bill of 2008, farmers would also have some of the crops insured from calamities and natural disasters, with payments being made for disaster assistance at the time of disasters (CRS Report RL34696 2004). The average cost of the policy implementation of the bill would be 8.3 billion dollars every year, with the programs instituted under it being the main sources of the budget.

To understand the policy changes during this period in the US, it is important to understand that there were defining periods in the agricultural policy in the nation. The 1985 farm bill is such an example. Through it, congress had introduced programs that were aimed at encouraging farmers to use farming practices that were friendly to the ecosystem and the environment at large.

In the United States, the Farm Bill constitutes the major policy changes in the agricultural sector since the year 1985. The 2002 farm bill is also one of the farm bills with significant effect on the agricultural markets and industry in the US.

The bill was highly criticised for its effect of increasing the subsidies on certain agricultural produce and bringing with it detrimental effects on the industry as a whole (Lars 2010, p. 79). Most of the critics were from external markets with their view that the bill undermined the vision of achieving liberalised agricultural trade globally (Atici 2005, p. 284).

According to Atici, “the bill raised expenditure compared to the 1996 legislation, with this not being compatible to the 1998-2001 outlays” (2005, p. 284). The bill also maintained planting flexibility, increased support to planting of new crops (Swinbank & Josling 2012). The bill was thought to go against the policies of the US on international trade and contravened the perception of other nations that the US was a liberalised market.

EU Agricultural Policy

The EU with its member countries has since 1962 had a Common Agricultural Policy in place, which governed the agricultural policies instituted in the bloc as well as other related programs (Anatole 2012, p. 125).

The original reason for the institution of CAP in the year 1962 was to ensure that there was an increase in agricultural productivity at a time that the continent was undergoing a revolution in agriculture (Anatole 2012, p. 125).

The policy was also a major win for farmers, as it was considered one to ensure that they got fair living standards, with the markets being stable enough to enable them make a reasonable profit (Atici 2005, p. 284). Aside from the above reasons, the existence of this common policy also meant that there was the availability of food and this was at reasonable prices that their population could afford.

The historical aspects of the CAP allow us to see the changes that were effected on it and especially in the period between 2000 and 2010. The fall of market prices for various farm commodities that followed the adoption of CAP were a trial period for the policy, which worked as the governments purchased the produce at higher rates to cushion the farmers from the adverse effects (Josling & Swinbank 2011).

The policy also meant the start of variable tariffs on the agricultural imports that were meant to cushion the producers of the produce. As Anatole states, “Export subsidies were used eliminate the surpluses of agricultural products that resulted from the high internal prices of the intervention buying system” (2012, p. 125).

Some of the unexpected effects of the institution of CAP include the high prices that were experienced by consumers and the subsequent rise in the government spending in the field of agriculture (Mewvissen, Van Asseldonk & Huirnde 2008).

To mitigate the effects of the policy, the governments had to decide on a number of policies, with the period under discussion being important to achieve this. In the periods between 1970 and 1980, the agricultural policy accounted for more than 70% of the EU budget (Mewvissen, Van Asseldonk & Huirnde 2008).

The changes in policy observed in the period between 2000 and 2010 were because of the realisation that the CAP would be disastrous to the economies of the EU if left unaltered. In the state, it was implemented. Notable reforms before this period include the MacSharry Reforms of 1992 and the Agenda 2000 that was legislated in the year 1999.

The reforms aimed at, “reducing EU commodity support prices toward market levels and required that some farmland be taken out of production” (Swinbank & Josling 2012). In the year 2002, the EU had to make more changes to CAP. The stance taken in this year was to reduce the growth in commodity spending on the policy (Mewvissen, Van Asseldonk & Huirnde 2008).

Some of the pillars of CAP that were in the original legislation were also to be enacted in the period between 2000 and 2010. The first pillar of direct aid and market support received backing during this period with the institution of the Single arm Payment (SFP) introduced in the year 2003 (Mewvissen, Van Asseldonk & Huirnde 2008).

Monke and Johnson argue, “SFP replaced payments made under various commodity-specific common market organisations (CMOs) and largely decoupled support from current prices or production” (2010).

The year 2007 saw the development of “modulation”, which was the reduction of direct payments to farmers of 5000 pounds or less, reduce by 5% with the money reduced in the first pillar going to the second pillar in the CAP (Monke & Johnson 2010).

Since the introduction of MacSharry reforms of the year 1992, the previously pendulous agricultural market of the EU was tamed. The internal market prices of agricultural commodities began to take a more sustainable course with close relation to the prevailing world agricultural market conditions (Banse, Van Meijl, Tabeau & Woltjer 2008, p. 124).

Some of the prices that were notably higher and out of line with those in the international markets include sugar and daily product prices, which were also tamed by the same reform (Monke, & Johnson 2010).

Comparison of the Policy Environment

The existence of a common agricultural policy for the EU has meant that the institution of agricultural policy is made in the background here. With the envisioned reforms to the CAP in the EU, the future of policy implementation lies with the structures put in place to oversee the same (Monke, & Johnson 2010).

Some of the proposals made during the period under investigation include the publication of proposals for the summer of the year after the period (that is 2011), which were meant to adopt some alterations to the Common Agricultural Policy (Young, & Hansen 2011, p. 12).

The developments during the period also point to the change in the financing of agriculture by the European governments. These would allow further changes to CAP and allow the European parliament to have more control over the industry as suggested by Monke and Johnson (2010).

The US on the other hand has enacted several farm bills that are a result of the experiences during the period between the year 2000 and 2010 through Congress. The engagement of shareholders in the industry has been necessary before the tabling of any of the Farm Bills. This has had significant influence on the success of the measures put in place.

The timing of an appropriate Farm Bill is made before the farmers can prepare for the next planting and marketing periods because the bill has an immediate effect on the industry and the market, both local and international (Mewvissen, Van Asseldonk & Huirnde 2008).

The policies made throughout the period under discussion are recognised as having brought about significant changes in the global agricultural markets due to the importance of the agricultural industry of the EU and the US to the global trade (Atici 2005, p. 284).

These two countries are considered the agricultural giants of the world, feeding more than a quarter of the world’s population and hence the significance of their agricultural industry and the policies they make in it.

As Monke and Johnson argue, “farm policies in the EU and the US are fixtures in their respective political landscapes” (2010).

In the European Union, the agricultural policy is centred on CAP thus influencing the economic environment of over “7.3 million farms that are commercial and over 5 million smallholding farms, most of which are in the newer members of the EU such as Bulgaria and Romania” (Orden, Blandford & Josling 2010).

The number of people employed in the agricultural sector in the EU is also high, with most people placing it at over 16 million thus making up roughly 6% of the labour force(Baylis et al. 2005, p.270).

The average farm size in the EU according to Sodarois 22 hectares, with about 304 billion Euros being the total value of production for these farms (2008, p. 23).

In the United States in the other hand, the number of area under farmland that is governed by the policies is just over 2.2 million hectares, with the average size of these farms being larger than those in the EU at over 418 acres each and the total output being 2887 billion dollars (Sodaro 2008, p. 23).

The transfers that are made in the EU as a function of CAP account for 24% compared to just 10% of the transfers made in the US under the existing policy (Sodaro 2008, p. 23).

On the opposite sides of the Atlantic, the policies that exist are because of strong lobbying and support by the people and organisations that benefit directly from them and those who oversee their implementation to protect their respective sectors. For some years, CAP had been the only policy in the UE operating in the field of agriculture, and limiting the activities here.

However, the period before 2000 saw the implementation of policies in line with the objectives of CAP. Most of the policies put in place during the period under discussion were aimed at protecting the internal agricultural market in Europe from the cheaper commodities that were being produced elsewhere (Sodaro 2008, p. 23).

However, with the imminent overproduction that the policy brought, many of the states producing the same commodities were at loggerheads with the same including the US (Monke, & Johnson 2010).

The agricultural policy in existence in the EU in the form of CAP also made the distribution of resources within the Union hard, with the agricultural sector taking up a large section of the budgetary allocation (Bullock & Salhofer 1998, p. 198).

Most of the changes in this policy instituted between the year 2000 and 2011 were therefore aimed at curtailing the development of a crisis through the policy and reducing the spending on agriculture (Bureau & Louis-Pascal 2009). In the US, on the other hand, the policies instituted in the same period were to increase funding to the industry and cause an overall increase in production while at the same time protecting consumers and farmers.

The current version of CAP in the EU has undergone a series of changes. It is different from that instituted at the integration of the European states. Agricultural policies in the US have remained the same over the same period that the CAP has undergone changes, which have meant that the resilience is more than the EU one.

It may indicate the extent of consultations that were undertaken in the making of policies in the US (Potter & Ervin 1999, p. 62). The original creation of the policies here was, however, to serve a more temporary function compared to the EU, and hence the contrast in the duration of the changes.

The major focus of policy changes in the US is in the dairy and crop production, with the US having to produce policies to control the prices of these commodities. The major policy changes have been the introduction of price controls over the period, with protection of livestock markets being served through tariffs (Sodaro 2008, p. 23).

The period also saw a shift in policy development from the government to the respective members of the industry. This according to Scrieciu means, “Policies to restrict production have largely been abandoned and the government no longer intervenes extensively in agricultural markets” (2007, p. 407).

The issue of direct payments in the industry was introduced in the US during this period. This move was a major shift in policy (International Food & Agricultural Trade Policy Council 2011).

Despite the changes in policy in the US, the central elements of these farm policies still remained the same as those present in the 1930s (Sodaro 2008, p. 23). This marks a similarity with the CAP in the EU, which has been relatively constant in the EU.

In the recent era, the policies in both the EU and the US have largely been concerned with the bio fuel industry, leading to the development of ambitious projects that are focused on the same (Scrieciu 2007, p. 407).

The bio fuel policy in the US has been the focus of attention in the latest of the periods, with the government and the transport industry investing material and time to the same (Hans van, & Frank van 2016, p. 315). The policy has been blamed for the increase in food prices, since the use of corn in the production of bio fuel means less of it available for consumption.

The rise of the bio fuel policy in the EU has followed the same in the US. The implications include the levelling of the same complaints against the policy. In the period under discussion, consumers began to take interest in the production and sale of farm produce. This meant that their concerns had to be met by the farming activities in both the EU and the US (Schultz 1964).

There emerged a growth in the demand for organic foods, with the same being currently experienced the world over (Hans van, & Frank van 2016, p. 315). The same era was characterised by an increase in the agitation for higher animal welfare standards (Hans van, & Frank van 2016, p. 315), with the developers of farm policy being more interested in the consumer welfare as opposed to both the consumer and producer.

The same period saw similar growth in the making of policies aimed at conserving the environment, in both the EU and the US. The policies that were instituted in the period dwelt with the issue of air pollution, water pollution and land use among other conservative measures in line with the international concern of global warming (Lars 2010, p. 79).

With the scientists predicting a rise in temperature in the next decade and a record rise being recorded in the period of discussion, the EU and the US embarked on measures to salvage their agricultural industries and enhance crop production.

The proportion of greenhouse gases emitted by agricultural activities in the EU and the US exceeds those of many nations including the ones in Africa. There was a growing concern that this was a significant contributor to global warming.

Being signatories to several treaties that focus on the prevention of environmental degradation and global warming, the EU was in the forefront in the making of policies aimed at preventing global warming. Some of the policies and change in policy in the agricultural sector observed after the year 2000 was, therefore, a component of this change for the better (Hans van, & Frank van 2016, p. 315).

The prevailing international conditions are important factors in the development of policies in the EU and the US. The same conditions held for the period between 2000 and 2010. Political environment was another major influence of policy making in the two places in the agricultural sector, with the commodity pricing being the main area of control or these policies (Lars 2010, p. 79).

The same period also saw the emergence of other countries such as Brazil and the African states that increased competition for the farm commodities produced in these nations. Slowing in the agricultural growth was also a major problem for these industries (Regional Growth and Policies in the European Union).

Major changes on the international front have also influenced the formulation of policies in the EU and the US, with this being evident between 2000 and 2010. In the year 2010, there was a surge in the prices of commodities on the international markets.

This concern over food security in the areas under description also took place in the year 2007-08, which was also characterised by a spike in the agricultural prices on the global front (Lars 2010, p. 79).

Policy Comparisons

In the period between the year 2000 and 2010, there were many policies and reforms in the EU and the US, with marked similarities and differences. These will be discussed in this section. Adequate comparisons will hence be made.

According to Lars, the year 2003 saw the introduction of Single Farm Payment Scheme in the EU, “that consolidated payments made previously on the basis of commodity output where individual commodity common marketing organisations were revised over the subsequent three years and eventually consolidated under a single piece of legislation” (2010, p. 80).

A reform that was also significant in the same period and was instituted at the same year in the EU as a Farm bill in the US is that Health Check reform of 2008 (Haas 2007). As Haas states, “The Health Check reform in 2008 further decoupled support from production, as well as ending set-aside requirements, and placing additional limits on market intervention” (2007).

He continues to state that the reform, “entailed the removal of most intervention prices (rice, barley, maize and in effect beef and sugar beet) and set the date of April 2015 for the phased elimination of milk quotas” (Haas 2007).

These reforms were a significant advance in the future that the agricultural industry enjoys. They have defined the industry over the last couple of decades. A series of farm bills in the US sought to reduce the incentives for increased production in agricultural commodities (Rose 2005).

Haas states that “the 2002 Act saw the introduction of countercyclical payments in which support for eligible farmers varies inversely with variations in commodity prices over a given price range, though it is not linked to the current volume of production” (2007).

This was then followed by a similar Farm Act (2008), “saw the introduction of an optional revenue stabilisation program (ACRE) that was intended to offset the impact of variations in both prices and production of major program crops at the farm level” (Marius 2005, p. 93).

Some of the similarities in the farm policies in the EU and the US include the price control nature that they are targeted. For a long period, the policies in the EU and the US have been targeted towards control of the “costs of acquiring surplus products to support prices although the issue has now largely been resolved” (Garrido, Bielza & Sumpsi 2003, p. 420).

The resolution to the surplus products in the EU has largely been through the reduction of prices of commodities and livestock to near the internationally prevailing prices (Garrido et al. 2009).

This was instrumental in the reduction of subsidies that existed. Thus, a reduction in the total cost that was being incurred through the subsidies. These have been left only in the dairy industry especially in periods of low pricing.

In the United States, the reduction of subsidies also took shape, with the original buying of agricultural produce to support the prevailing market prices being abandoned altogether (Hardaker 2000). Export subsidies are rarely applied in the current economic status, with the same only remaining in the dairy industry (Garrido et al. 2009).

Both the EU and the US remained open to any new policies that would allow the industry to support the farmers and maintain an acceptable level of income generated through farming. The similarity between the two is that the policies that were implemented and were in the process of being implemented were more linked to the prevailing political outfits in the federations (Hellerstein 2010, p. 29).

Another similarity in the policy environment between the EU and the US includes the acceptability of farm policies during the period mentioned above. A major constraint to changes in the farm policy for the two countries was the acceptability that the stakeholders accorded the policies “within the limitation of available funds” (Garrido et al. 2009).

Throughout the period between 2000 and 2010, there was marked increase in the number of stakeholders in the agricultural industry in both the EU and the US. This brought about the challenge of acceptability based on the sheer number of shareholders to be convinced (Hellerstein 2010, p. 29). In relation to the shareholder increase, there was also marked demand for accountability for the policy makers in both places. This case has remained even in the present day.

A major difference between the EU and the US in terms of accountability in policymaking is the level of authorities involved. “In the EU, as a result of its mix of supranational and intergovernmental institutions, the issues of acceptability and accountability take on a different form” (Mapping European Integration 2008).

The distribution of resources in the 27-member bloc in terms of the agricultural sector has been contentious. This means that the implementation of the policies has to be done on a consultative basis. This case is different from the system in the US, which is more centralised.

Conclusions

Based on the expositions made in the paper, it suffices to declare the subject of policy making crucial. Various sectors of the economy implement various policies, with all of them aiming towards ensuring the best in that particular sector.

However, it is also crucial for various countries to have information concerning the policies that other countries put in place concerning the various available sectors, for instance the agricultural sector, since all countries have it in place. They have to make sure that the policies that each of the concerned countries put in place do not deter the outcomes expected of the sector and hence the need for a thorough comparison of such policies.

For instance, a comparison of the policies instated in the United States and the EU reveal similarities and differences in the agricultural sector. Some of the policies that are discussed include the Common Agricultural Policy that exists in the European Union and the changes that were instituted in the period between 2000 and 2010.

The defining moments for these policies were in the year 2000, 2008 and 2010, with several policy changes being made then. The US also saw several changes in policy at the same time, with that of 2002 and 2008 being significant.

The policies in the US were instituted in the form of a Farm Bill through congress, which had similar functions to those in the EU. The challenges that faced the implementation of policies in both areas during the period were also similar.

The agricultural policy changes in the EU and the US between the year 2000 and 2010 reflect the policy change that may be instituted in any nation on any part of the economy. The changes observed were meant to protect the farmers, consumers and the government from the spending that they were undertaking in the respective sectors (Hellerstein 2010, p. 33).

In the future policies, a target will enable shareholders to contribute full and to their benefit. In areas like agriculture, as seen above, a change in policy in one part of the world has effects on different parts of it (Ewa 2012, p. 119). A harmonisation of policies will therefore be a wise method of standardising prices of commodities and encouraging competition.

In the institution of policies in these nations, consultative decisions were reached first. This means that the policy cold hold for all the stakeholders concerned. Any policy therefore that is to be implemented should be after consultation to ensure that the shareholders in the industry to be affected are not aggrieved.

Governments also have a role to play in target to encourage contribution from other sectors of the economy, with the changes in the policy being informed by different sectors. This strategy will enhance the creation of strong policies to be adhered to by all the shareholders.

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