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6 September 1993
Doc. 6906
1403-1/9/93-1-E
OPINION
on the activities of OECD in 1992 in the field of agriculture1
(Rapporteur: Mr DE CAROLIS,
Italy, Liberal, Democratic and Reformers Group)
I. Introduction
The GATT trade negotiations have highlighted the main conflicts in agriculture in the world today. Industrialised countries are endeavouring to restrict their food production and make it more market-oriented. The developing countries and the new democracies in central and eastern Europe view agri-foodstuffs as one of the sectors of key importance to economic development but do not have ready access to markets in the industrialised world. Some of them are having to cope not only with food shortages due to internal conflicts but also with the inefficiency of their systems for producing and marketing farm produce and their lack of distribution and storage capacity.
Intensive production methods have caused water, soil and air pollution problems worldwide. Desertification and erosion are fast increasing in many parts of the world.
Rural areas are losing population because of falling agricultural income and other factors which place the farming and rural community at a disadvantage.
The Committee for Agriculture of the OECD at ministerial level met on 26 and 27 March 1992 for an analysis of the state of agricultural reform, future policy directions for agriculture: an integrated approach, and developments in non-OECD regions: implications for OECD agriculture.
II. Agricultural trade
The volume of world agricultural trade increased by 6% in 1992. The increase was larger than in 1991 (5,3%) and higher than in any other economic sector. However the price of agricultural products fell by 5% on average (the average decrease in other sectors was 3%).
Agricultural trade's share of world trade has been falling for twenty years and in 1990 accounted for only 9,4% of total trade. OECD member countries secured some 70% of world trade (agricultural and overall). Their main exports are grain and meat, and import products include oleaginous and animal-feed products, fruit and vegetables and tropical produce such as coffee, tea and cocoa. In 1991 the total value of exports came to $120 000 million and that of import products to slightly more.
III. Towards liberalisation of agricultural trade
The recent reform of the European Community's Common Agricultural Policy (CAP), adopted on 21 May 1992, is mainly designed to reduce production of grains, oilseeds and beef by cutting the subsidies on these commodities and encouraging set-aside and extensive production. The resulting loss of revenue will be compensated by direct aid to producers. The Community has thus acted in line with the recommendations of the OECD aiming at letting market signals be allowed to exert more influence on agricultural production.
The agreement between Canada, the United States and Mexico to set up a free-trade area (NAFTA) and the agreement to establish a European Economic Area (EEA) are significant steps towards liberalisation of trade, including agricultural trade.
Other OECD members have likewise been cutting subsidies to agriculture. There have also been moves to make support measures more transparent.
On 20 November 1992 the Commission of the European Communities and the United States struck a historic compromise on the agricultural clauses of the GATT Uruguay Round and on soya and other oilseeds. The agreement (which France does not accept) is a great step towards a successful outcome of the GATT negotiations and towards wider opening up of markets to agricultural trade.
IV. New priorities for the south, east and west
Conclusion of the Uruguay Round will enable Third World countries to increase their agricultural exports and thus to boost their economies. Many of them see the vital prerequisite as being a shift in their agricultural, trade and development policy to stimulation of sustainable agricultural development and encouragement of production for export. Higher priority needs giving to meeting domestic requirements through local production.
The new democracies in central and eastern Europe likewise need derestriction of the market, for they face a number of challenges: converting their economies (including the agricultural sector) to market economies, making successful transitions to democracy, maintaining a satisfactory level of food security during the transition period, and turning the agricultural sector into one of the engines of economic development. This will let them maintain employment in rural areas from 20% to 60% of the population). The successful transformation of the agricultural sector which also depends on an opening up of western markets, will considerably modify the present agricultural situation in the sense that current importers of food products could reduce their importations and even become important exporters in a few years' time.
OECD industrialised countries themselves have a considerable interest in exporting some of their agricultural products and importing others, as pointed out at the start of this section. However, all countries are keen to maintain an adequate degree of food security by maintaining farm production appropriate to their needs. This is one of the reasons why some countries have set national production quotas for produce such as milk, rice or eggs etc. The quotas generally permit surplus production but could also exceptionally be set at a level lower than local consumption and consequently make it necessary to import (for example Canada).
In order to achieve worldwide food security and stimulate economic development through trade, it is essential to provide all countries concerned with analyses of market and agricultural trade trends and of agricultural and fishing policy developments. OECD must continue producing its "agricultural policies, markets and trade: monitoring and outlook" analyses. Models such as RUNS (Rural/Urban/North/South Model) are valuable tools for analyses of this kind.
V. The environment in danger — rural depopulation
In recent years two issues on which public and government concern was focused have been the rural community and the environment. Environmental requirements and those of keeping rural areas alive and well need including in OECD's economic and policy analyses. Trade in agricultural products must not be allowed to endanger the environment or kill off the rural community (creating unemployment and hardship in country and town alike). Your Rapporteur has taken note with satisfaction of the communiqué of the meeting of the Committee for Agriculture of the OECD at ministerial level in 1992 in which the Ministers "recognised that it was necessary to examine in a coherent manner the relationships among structural adjustment in the agricultural sector, environmental issues, and rural development, and any measures used to address them."
As the Uruguay Round cannot properly tackle environment problems, there is an urgent need to set up negotiations within specialist United Nations agencies and GATT.
VI. Pluri-activity and the farmer
In recent years both farmers and sectors upstream and downstream of farming have suffered reductions of income or economic activity in nearly all the OECD countries. Agricultural income in the European Community was down 3,5% on average in 1992 (despite increases of 16,5% in Ireland, 2,5% in Germany and 2,2% in the United Kingdom), and this in turn has reduced farmers' numbers and led to greater intensification of production methods. Farmers and their families were once the custodians of the natural environment and the rural landscape and were one of the crucial ingredients of a thriving rural community.
It is vital that they continue to be the protectors and creators of the rural environment, for 83% of Europe is rural and in the second half of the twentieth century the countryside has become a prime recreational amenity for the citydweller. Rural tourism is set to develop increasingly and farmers will have a key role in this. Conservation of the natural environment and the landscape is a further service they can render society. I am pleased to see that OECD's work at last encompasses the concept of pluri-activity in farming. Policy analyses in this area need to continue and be taken further, more particularly in the light of the GATT Uruguay Round negotiations. The Council of the OECD which met on 2 and 3 June 1992 at ministerial level, confirmed that "governments are determined to pursue their efforts to promote the agreed agricultural reform, within a comprehensive policy framework that addresses structural adjustment in the entire agro-food sector, as well as rural development and environmental questions, and that it consistent with the multi-functional character of agricultural. Ministers stress the role that the OECD must continue to play in support of this approach, both through improved qualitative and quantitative analysis and monitoring, and through constructive policy dialogue."
VII. Non-food agricultural products and animal feedstuffs: the future
Agricultural production of renewable (non-food) raw materials has been advanced as a key tool for:
—de veloping new sources of income for farmers;—
—re ducing agricultural food surpluses;—
—re ducing CO2, SO2, NOx and other pollutant emissions mainly due to use of fossil fuels;—
—pr omoting the use of renewable energy;—
—su pplying raw materials to industry.Th
The constituents of the plants mainly involved are sugar, starch, oils, fats, lignocellulose and various fibres (such as cotton and flax). The chemical, pharmaceutical, textiles, paper, timber and other industries already make considerable use of such products. In addition, all biomass can be used to produce fuels for the energy sector.
An extremely important sector which warrants special study is that of use of agricultural products for animal feed. There have been significant developments in the formulation of new products with considerable agricultural potential. In the United States in 1992, for instance, 60 000 tonnes of lysine were used as a maize supplement to replace soya in pig and poultry feed, 97 kilos of maize plus 3 kilos of lysine being equivalent to 100 kilos of soya. With the admixture of lysine (an essential amino acid), maize replaced approximately two million tonnes of soya. A similar product could be devised using wheat if the price of wheat as against the price of soya warranted it.
OECD could provide member governments with valuable information by comprehensive analysis of the prerequisites for stepping up non-food agricultural production, including in particular economic, technical and environmental aspects. Given the large quantities of grain and other agricultural and fisheries products used in animal feedstuffs, periodical studies in this sector would be useful in the context of liberalisation of agricultural trade.
VIII. Fisheries and fishermen
Fishing and aquaculture, like farming, have been transformed since the second world war. In Resolution 972 (1991), on the future of ocean fisheries, the Assembly called on governments of member states, the European Community, OECD and other intergovernmental organisations concerned to work as a matter of grave urgency for the introduction of sustainable multiple-species management policies for the exploitation of marine ecosystems and their living resources in general. It also requested that this include re-establishing a balance between fishing efforts and fishing yields, proper enforcement of agreed conservation measures, putting a stop if necessary to non-selective harvesting methods (gill nets) on a case-by-case basis and the introduction and development of more selective harvesting equipment and practices (seasonal restrictions, specially protected areas for young fish, etc.).
OECD's work in this field is extremely valuable. In particular OECD could help member countries and other fishing nations to devise policies for effective, sustainable management of living ocean resources.
IX. Co-operation with countries not members of OECD
As already pointed out in Mr Hellström's splendid report on OECD activities in 1992 (Doc. 6900), the new democracies in central and eastern Europe have received a great deal of help from OECD and its member states in making the transition towards market economies. The agricultural and food sector is crucial to making this transition successful. In Recommendation 1167 (1991), on the crucial role of food supply in helping to consolidate democracy in central and eastern Europe, the Assembly pointed out the need to strengthen the work of organisations such as OECD of assisting central and eastern Europe. In Recommendation 1174 (1992), on pan-European co-operation in the field of agriculture, the Assembly requested increased assistance to the new democracies of central and eastern Europe for privatising, re-organising and modernising their agricultural sector within the framework of a general policy for rural development and that they be helped to draw up policy for the purpose.
On 14 December 1992 the Committee on Agriculture had an exchange of views with OECD, in which parliamentarians from Albania, Belarus, Estonia, Latvia and Ukraine took part, on co-operation with European economies in transition. The committee and its guests took the opportunity to stress the importance of that work in helping the countries concerned to reform their agricultural policy and in agreeing priorities for carrying through those reforms. In the present context there is a need to strengthen the co-operation programme in the agro-food sector, regarding rural development and the environment, activities which are co-ordinated by the new Centre for Cooperation with European Economies in Transition (CCEET).
Endeavours to help developing countries with their agricultural sector and their rural development must continue. The developing and central and eastern Europe need more access to OECD members' markets for their agricultural products.
X. Text for possible inclusion in the draft resolution to be adopted by the enlarged Parliamentary Assembly
In the Assembly's view the planning and implementation of agricultural and fishing policy reform need to be integrated with other policy areas such as rural development, protection of the environment and energy development.
The Assembly is seriously concerned about the crisis in agriculture, fishing and the rural community in OECD member countries, the new democracies of central and eastern Europe and a large number of developing countries.
It accordingly requests governments of OECD member countries and, where appropriate, OECD itself:
i. to take into account, in concluding the trade negotiations in the GATT Uruguay Round, the importance of maintaining a viable agricultural sector (including fishing and forestry) within a healthy and thriving rural economy;
ii. to continue refining the important work on agricultural policies, markets and trade - monitoring and outlook, particularly in the light of new international trade arrangements such as GATT, the North American Free Trade Agreement, and the European Economic Area, etc. This work should include the monitoring of structural adjustment and its multiple liaisons with rural development and environmental questions as well as the monitoring of agricultural producers' and fishermen's situation. The development prospects in the non-food and animal-feed agricultural sector should also be studied;
iii. to continue and step up their endeavours to assist European economies in transition with the reform of agricultural and rural development policy, inviting them to take part in some OECD activities and opening up agricultural markets to them;
iv. to maintain a policy of actively assisting agricultural and rural development in the developing countries and help them find new markets for their agricultural products.
Reporting committee: Committee on Economic Affairs and Development (Doc. 6900).
Committee for opinion: Committee on Agriculture (and competent committees).
Reference to committee: Doc. 6897 and Reference No. 1893 of 3 September 1993.
Opinion approved by the committee on 28 June 1993.