Ag system differences an interesting study

How the other side of the world does agriculture


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Comparing the EU's subsidy-based farming system to Australia's market-based model is an interesting exercise.

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We often hear about how different agriculture is in other parts of the world. There are a lot of opinions advocating for both the merits and the pitfalls of a regulated/subsidised system versus the market-based model we are so used to in Australia. After spending six weeks travelling across England, Wales and Ireland here are some general observations and reflections. 

Under the EU’s Common Agricultural Policy (CAP), farmers in the United Kingdom and Ireland receive agricultural subsidies and have access to agricultural programs. The CAP covers farming, environmental measures and rural development, and controls EU agricultural markets. Incredibly, it is the EU’s single largest common policy accounting for about 40 per cent of the entire EU budget.

While EU subsidies won’t be news to many Australian farmers, the extent that UK farmers rely on them to make a profit surprised me. UK countries have different arrangements, but for some farmers, payments received through the CAP account for 70pc of their income. There is no doubt that the subsidies heavily influence farm decisions, but it has not made their farmers lazy or ambivalent about what they produce. Rather, the existence of local food, fibre and foliage production remains at a high quality and holds a high degree of social licence and value.

The CAP is complex public policy, and the operating environment for UK farmers is very different to Australia – imagine more than 175,000 businesses farming land the size of Victoria – but the conscious decision by European governments to preserve small scale producers that would not be viable in a free market has merit. Some key benefits observed include healthy regional communities, effective management of rural land, and agricultural produce that is valued locally and in cities.

By contrast, our governments have reformed market interventions to the point where the level of agricultural support is the second lowest in the OECD area. While these reforms have undoubtedly made decision-making in Australian agriculture more responsive to market forces, we cannot claim the same broader social and community outcomes that have resulted from the European system.

I am not for one minute advocating for a change in how Australia conducts its farming to a subsidy-based model. Our focus must remain on producing efficiently and sustainably by running viable and profitable businesses in the market-based system we operate within. We do and must continue to compete on the world market with our high quality and sustainable practices, accepting that it is unlikely to ever be on a level playing field.

A non-subsidy learning I would like to see adopted here is the undisputed right of way tractors and farm machinery have on roads and through towns and villages, apparently without the need for any special permits.

Now that the UK has voted to leave the EU, it will be interesting to see if/how the operating environment for UK farmers changes. Between 2007 and 2013, the CAP invested more than €29.2 billion (about A$43.5 billion) in the UK’s farming sector and rural areas. From 2014–2020, the UK was set to receive around €28 billion (about A$41.7 billion) in CAP funding. The vagaries of agriculture mean that farmers are constantly faced with many uncertainties. For UK farmers, their subsidy future and pending trade negotiations will only add to this.

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