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The Dutch agricultural model in crisis
All over the world the Dutch agricultural model is considered a success story to be emulated by others. And not without reason. Over the last 50 years the Dutch agro-food system has been transformed into a world player, combatting with France for being the second biggest exporter of agricultural commodities in the world (after the USA). Some agro-food and retail industries, most of them cooperatives, are among the largest in the world. A remarkable achievement considering that The Netherlands is only a small country of 33,000 km2 (1.5 times the size of the Emilia-Romagna region), with 16 million inhabitants (four times that of E-R), 2 million hectares of farm land and currently less than 80,000 farms.
This success was based on three pillars. As one of the founding members of the European Community, The Netherlands has from the start been able to profit from the CAP and the unified internal market and has done so fanatically. The (in)famous Mansholt plan of the early 60’s was the starting signal for a deep transformation of Dutch agriculture and of its countryside. Secondly, in conjunction with the CAP support, the Dutch government created what has been coined the Golden Triangle: agricultural education - agricultural research - agricultural extension. Funded fully by national public funds this extensive knowledge system operated in unison with each other and with farmers and their unions to promote and implement an agricultural model, based on a unidimensional vision of modernisation and increase of production per hectare or per capita and of productivity per unit of labour.
Lastly, and equally important, the Dutch government established an enormous land restructuration programme to improve land and farm structure and to facilitate the use of new technologies and machines. It even went as far as to create new farmland out of lakes and seas.
The three pillars combined, based on a vision shared by governments, scientists, researchers, teachers, extension workers, farmers unions and farmers alike, resulted in an unprecedented increase in production and productivity levels: between 1960 and 1990 average production per hectare of wheat, potoatoes etc. tripled and the average milk production per cow more than doubled from 4,000 to over 8,000 liter per head. Simultaneously, the number of farms dropped from over 300,000 in 1960 to less than 80,000 in 2009 (-74%) and continues to decrease at a steady rate of 2-3% per year. It is predicted that in 2020 there will be only 40,000 farms left, with production capicity remaining at the same level.
The modernisation process of course also created a series of victims. The restructuration of farmland and intensification of production caused great losses of valuable landscapes and bio diversity. The large bio industry for pig and poultry, that emerged at the end of the 60’s, has put great pressure on the quality of soils, ground water and air. Only when the negative effects of this type of production became visible and the European Union at the same was suffocating from enormous surplusses of milk, butter and meat, the Dutch government started to act by imposing some restrictive measures. The subsequent 1992 McSharry reform was also the starting point of the gradual dismantling of the Golden Triangle: farmers had to start paying for advice themselves and scientific research became more distant from agricultural practice. To compensate for the loss of landscapes and bio diversity the national government started a long term programme to convert 200,000 hectares, 10% of all agricultural land, into nature.
Tighter national spatial planning and environmental policies, a growing struggle for rural land between farmers, nature conservationist, leisure seekers and housing developers, a growing public scrutiny vis à vis the negative effects of intensive farming and the opening up of world markets as a result of the WTO agreements on agriculture, has put the agricultural sector in the defensive.
On the positive side it should be mentioned that, following the CAP reforms and the changing public attitude, a growing number of farms has engaged themselves in what is called multifunctional agriculture. In the nineties a new phenomenon could be witnessed in the development of local farmers’ cooperatives whose aims are to integrate management of landscape and bio diversity on their farms with agricultural production. These local coops also seek to make collective long term contracts with regional and national governements and are now preparing themselves to play a role in the public goods debate that currently seems to be the way the discussion on the First Pillar of the CAP is heading. An approach that has met with support from the Dutch government. Other farmers have started new economic activities on their farm, be it in ago-tourism, local products and processing, renewable energy production or, more recently, in health care and wellness farming, in this way trying to develop other sources of income, both throuh public and private markets.
Why Dutch agricultural continues to need a common policy
Nevertheless, large parts of Dutch agriculture will remain highly dependent on a common policy. Cost of production in the Dutch context is relatively high because of high land prices (land pressure), high labour cost and one of the fiercest tax regimes in the world.
Typically an average dairy farmer of 70 milking cows or arable farmer of 80 hectares will receive between € 14,000 and € 32,000 of direct payments annually (€ 400 per hectare), constituting between 40 and sometime up to 80% of their net income. An abrupt dismantling of the SFP would therefore cause severe havoc among those farmers.
Furthermore the heavy dependency on export makes the sector more vulnerable to the volatility of international markets and speculation. Currently some 70 per cent of all agricultural commodity production is being exported, mainly to countries in the European Union, but also to a substantial part to countries outside the EU. The internal market therefore remains key for the future of the Dutch agri-food complex as well as bi-lateral and multi-lateral trade agreements.
An enlarged and enlarging Union offers new possibilities to find new markets. At the same time, the enlarged internal market could also create stiffer competition from the new MSs. If and when they succeed in modernising their agricultural sector they will probably be able to outcompete Dutch farmers in cost of production. This explains why the Dutch position, as the largest net payer to the European Union, is stressing the need for a level playing field concerning food safety regulations, environmental criteria and labour conditions.
What kind of common policy: the Dutch position
Due to the recent national elections and subsequent formation of a new government, the Dutch Ministry of Agriculture to date has not put forward a final position on the new CAP. In its preliminary outlines it has proposed a new transition, that is, in simple terms, based on three points of departure:
- Improve competiviness by increasing research and innovation;
- Improve sustainability by replacing the SFP system by a system of rewards for the delivery of clearly defined public goods (animal welfare, bio diversity, landscape management, renewable energies, etc.) that go beyond the current cross-compliance criteria. To achieve pre-set delivery output some public goods lend themselves for a collective, territorial approach, notably the management of landscapes and bio diversity and could be executed by the local farmers cooperatives, mentioned above, in conjunction with other land owners in the form of collective, territorial contracts;
- Non agricultural activities aimed at improving the general socio-economic vitality of rural areas, but that are not related to agricultural activities (axis 3 and 4 of the Rural Development Programma), should no longer be part of the CAP but instead be integrated in the Cohesion policies and only apply for the poorer regions (average income 75% or less than European average).
Such a transition in the eyes of the Ministry is necessary in order to maintain or rather regain public legitimity for public support of the agricultural sector. In this vision the distinction between the First and Second Pillar will disappear and the possibility of national co-financing of this new payment system is kept open. The Ministry furthermore stresses the need for the creation of emergency measures in cases of market or crop failures, to counter the adverse effects of climate change or other ‘natural’ disasters.
Interestingly, the Minstry recently launched a fourth focal point, which is sustainable food consumption. Alarmed by on the one hand the rise of diet related problems (obesity, diabetes, etc,) and the subsequent rise in public health care cost and on the other hand the level of food wastages along the food chain, the Ministry in collaboration with other Ministries (health, environment, but also education) now actively encourages initiatives that aim at improving sustainable and healthier food consumption patterns among citizens.
In conclusion: evaluation of the Dutch position
The last point, aiming at changing consumer behavior, is touching on a subject that is close to the mind of the Groupe de Bruges as well: agriculture and food production should be more aligned with the needs and wishes of society, but vice versa society has also a key role to play in critically reviewing its own needs and wishes and aligning those with notions on sustainability, health, animal welfare and fairer prices for farmers. It is for the first time that the Ministry of Agriculture so explicitly concerns itself with the shopping bag and the consumption behavior of citizens.
Although The Netherlands are an exeptional case in Europe and as a small country have limited policital power, this addition to what could be called a Common Agricultural and Food Policy is one worth discussing at the European level, not only with the Agricultural Commissioner, but also his collegues from other DG’s.
As far as the abolishment of the SFP system is concerned, this will probably not meet with great resistance in The Netherlands; the national farmers union has already more or less accepted that direct payments coupled to the delivery of public goods will in the long run replace the current SFP system and pleads for a ‘soft landing’ as well as appropriate market stabilization measures and an increase of WTO’s Green Box. Other stakeholders also have reacted positively, but warn that much is still unclear on how precisely public goods, the development of clear cut delivery criteria and subsequent payment system as well as an effective and efficient monitoring system should be defined and whether or not and to what extent public goods require national co-financing. An important issue for a succesful implementation of a new system, but in general there seems to be clear support for the vision of the Ministry on direct support.
If this will also be the case on the Ministries approach to rural development is yet unclear. However, the sums currently dedicated to axis 3 and 4 of the Second Pillar are relatively small - € 28 million compared to € 840 million for direct payments and axis 1 and 2 - that it can be expected that The Netherlands, one of the wealthier members of the Union will forgo on European financing of rural development as a trade off for support of other parts of their plans.
What the final Dutch position will be, however, will to a large extent depend on the - expectedly difficult - formation of a new governement. Increased nationalistic and sometimes anti-European tendencies, as can be witnessed in more European countries, and the need for a stricter budgettary regime to remedy the effects of the financial and economic crisis could result in less support in The Netherlands, as the biggest net payer per capita to the Union, for maintaining, let alone increasing the European budget in general and for agriculture in particular.