Sjur Spildo Prestegard

Head of Department/Head of Research

(+47) 911 63 143
sjur.prestegard@nibio.no

Place
Oslo

Visiting address
Storgata 2-4-6, 0155 Oslo

Abstract

The paper analyses and discusses possible impacts on Norwegian agriculture of an EU membership based on the regionalized agricultural sector model CAPRI. Norwegian agriculture is characterized by a small-scale farming structure and high levels of support. Previous analyses have shown that Norwegian agriculture is expected to undergo dramatic changes because of EU membership in terms of farm income, production and structural change. Our study indicates that a substantial share of the agricultural production can be maintained at the national level. Milk and crop production may remain largely unaffected, while meat production decreases in the range of 10–20% compared to a reference run without membership. However, a reduction in total farm income by about 40% indicates that structural adjustments will follow EU accession. The results are discussed in view of the pattern of adjustments observed in Finland and Austria after EU accession in 1995. The need for the dairy industry to take advantage of the improved market access is stressed. Attention is also called to some strengths and limitations of the CAPRI model to analyse large-scale policy changes and to identify model improvements as an area of future research.

Abstract

This article focuses on how to achieve non-trade concerns (NTC) and multifunctional goals that countries may have with minimal trade-distortion. The term 'multifunctional agriculture' focuses on the issue that agriculture, in addition to the production of food and fibre, also may provide national food security, environmental benefits and viable rural areas. The article claims that multifunctionality hardly can justify the use of market support while it may justify budget support. It is argued that just as a tax is widely accepted as the optimum policy for a negative externality, so should the use of a production-related subsidy or payment be accepted as optimum policy for a positive externality or public good that is produced jointly with or complementary to agricultural production. The article concludes with suggestions for WTO agricultural trade rules to prevent such policies from becoming a form of protectionism.

Abstract

The level of support to Norwegian agriculture is partly justified with reference to agriculture’s multifunctionality. The concept of multifunctionality involves the provision of so-called “public goods» by agriculture, in addition to the production of food and fibre. Examples of these public goods include cultural landscape, biodiversity, ecological functions, cultural heritage, the viability of rural areas, and food security. The overall aim of the research project “Operationalization of multifunctionality using the CAPRI modeling system» is to study the effects of policy instruments on agriculture’s multifunctionality by defining quantitative indicators for selected elements of agriculture’s multifunctionality that can be implemented in the agricultural sector model CAPRI. This working paper takes a first step towards the appropriate regionalization when multifunctionality is concerned. The current regionalization of the CAPRI model is at the county level. This approach fails when multifunctionality is concerned, because many issues of multifunctionaliy (e.g., cultural landscape aspects) are independent of administrative borders at that level. As the aim of the overall project is to study the effects of policy instruments on agriculture’s multifunctionality, it is important to design regions within the CAPRI model that to a greater extent exhibit similar characteristics with respect to aspects of agriculture’s multifunctionality. Accordingly, it is reasonable to assume that policy changes will have quite similar effects on the multifunctionality indicators within each of these CAPRI regions. This task has been addressed by performing a cluster analysis by which Norwegian municipalities have been grouped with respect to their performance on variables that are expected to describe different aspects of the multifunctionality of agriculture. This information will then later on be used to regionalize the CAPRI model accordingly. […]

Abstract

Norway, Switzerland, the European Union, Korea, Japan and some other countries place substantial emphasis on the so-called non-trade concerns in the ongoing WTO negotiations on further agricultural trade liberalisation. In addition to the production of food and fibre, agriculture also may provide national food security, environmental benefits, and viable rural areas. The term «multifunctional agriculture» has been increasingly applied to describe these additional functions. This working paper focuses on how to achieve the multifunctional goals that nations may have with minimal tradedistortion. In this study, the economic concepts of externalities and public goods are used to analyse non-trade concerns and multifunctional agriculture. It is argued that just as a tax is widely accepted as the optimum policy for a negative externality, so should the use of a production-tied subsidy or payment be accepted as optimum policy for a positive externality or public good that is produced jointly with or complementary to agricultural production. The study concludes with suggestions for international trade rules to prevent such policies from becoming a form of protectionism.

Abstract

One of the questions debated in the ongoing WTO agricultural negotiations is whether ‘trade-distorting’ subsidies, or subsidies outside the ‘green box’, are needed in order to pursue non-trade concerns. The term ‘multifunctional agriculture’ is increasingly applied to describe non-trade concerns. This article focuses on how to achieve the multifunctional goals that nations may have with minimal trade-distortion. In the first part of the article, this is done by a literature review and a theoretical analysis. The findings are then converted into an analysis of possible policy formulations in a Norwegian context using a partial equilibrium model. The article argues that multifunctionality hardly can justify the use of market support, while it may justify production-related budget support if the positive externalities or public goods are produced jointly with or complementary to agricultural production. The article concludes with suggestions for WTO trade rules to prevent such policies from becoming a form of protectionism.

Abstract

In this note it is first shown that public intervention in agriculture may be desirable in the case of market failure. Then the focus is on objectives concerning income distribution, price and income stability. The note then focuses on the proposition that some of the conflicting views on agricultural policy between economists, politicians and countries, arise from a difference in the fundamental view on agricultural policy. Is agricultural policy basically seen as an income policy or social policy, or as an intervention to correct market failures in agriculture? I suggest that this difference in viewing agricultural policy, also influence views on which policy instruments to use. Economists (and politicians) who look upon agricultural policy as mainly an income policy or social policy, often speak in favour of decoupling support, i.e. that support not should be linked to production. This argument has a strong basis in economic theory. However, if the objectives of agricultural policy are regarded as mainly policy interventions to correct market failures, decoupling of support can not be seen as effective. If the objective is to maintain a public good such as the agricultural landscape, the support must be given to landscape maintenance (and this requires some agricultural activity). This implies that «a greening of policies» which intends to decouple support totally from agricultural production, will not be an effective policy. But «a greening of policy» by reducing tariffs and price support in favour of for example different forms of acreage support or support per head of animals, will be more efficient and less trade distorting. It is argued that this has to be taken into account in the forthcoming negotiations within the WTO on further agricultural liberalisation. To give purely income support, is the same as stating that the main reason for keeping an agriculture in that country, is to give farmers an income. In this note it is argued that it should be seen the other way round. To give farmers a decent income and standard of living can not be regarded as an agricultural objective in itself, it must be seen as a necessary condition for maintaining a national agriculture and thereby obtain other objectives (i.e. correcting market failures). If a society has as its main agricultural objective to secure the income of farmers compared to other groups in society, it can be argued that this could be done better through the regular tax and social system than as an integrated part of agricultural policy.