Creating the right policies – we depend on you!

Zurich, 30.08.2011 - Federal Councillor Johann Schneider-Ammann | Head of the Federal Department of Economic Affairs (FDEA) | EAAE Congress

Mrs President,
Mr President,
Director-General,
Ladies and Gentlemen

To tell you the truth: I would have expected agricultural economists to meet in the countryside. But no, you have chosen the biggest Swiss city as the venue for the congress of your distinguished association. Is this because you want to highlight the potential of urban farming for the future? Or simply, because Zurich is beautiful and strong in science? Whatever the reason: A very warm welcome to all of you on behalf of the Swiss government!

Ladies and Gentleman,

Global agricultural markets have now been in turmoil for a number of years. Scarcities have become all too apparent: in food production as well as in the underlying resource base. It is therefore not surprising that food supply and food security are again taking center stage in world politics. The debate is lively and the question at its heart is: How can we ensure that the food sector can sustainably feed the world?

The answers of course prove to be difficult, as the challenges are so numerous.

To name but a few:

  • The world population grows and dietary needs change - putting farmers and the whole food chain under pressure to produce more and waste less.
  • The competition for the use of natural resources is on the increase - which makes it necessary to use them more efficiently while maintaining or - where necessary - improving their quality.
  • Consumers in middle and high income countries have increasingly complex needs regarding food, making it a challenge to interpret the sometimes contradictory signals they send out, let alone to reconcile them with what taxpayers want.
  • Let me also mention constraints on the political side. Unfortunately, it seems to be difficult in times of great economic uncertainties to hammer out progressive multilateral agreements.

Such agreements we urgently need, be it in the field of trade or the environment.

It is clear that we need guidance, including yours. You have the skills, the tools and above all the passion to lay the foundation for devising the right policies, be it at the national, European or world level.

As Minister for Agriculture, I depend on the following input from your profession:

First of all we need rigorous economic analysis. Sound analysis is the essential prerequisite for good policies.

  • We need to know how the functioning of agricultural markets changes under changing framework conditions. Is the increased volatility on commodity markets we have witnessed recently here to stay? What are the strategies of farmers, the food industry and retailers to cope with such stronger fluctuations? How does the rapid structural change we witness at all levels of the food chain affect price formation and transmission?
  • How does the more risky business environment resulting from tight markets, resource degradation and climate change affect production and investment decisions and in the long run overall production capacity?
  • Ongoing economic analysis is also important in the field of public goods and externalities: What are agriculture's external costs? What is the economic value of public goods agriculture provides to society and where is it maybe even possible to create markets for such goods?

A second set of questions agricultural economists need to address relates to the policies themselves. Here we are confronted with the following questions:

  • Do new challenges mean that new tools are needed?
  • Or is it enough to adapt the tools we already know?
  • And do the new challenges make it possible to abolish some of the old tools because they are no longer adequate?

I think this field of work should not be left to policy makers alone. The scientific community is very well positioned:

  • Not only to provide detailed analysis of pros and cons of policy proposals on the table
  • But to make its own proposals as well
  • And on a more general level: To help us sound out what is the role for the state and the international community and what should be best left to the private sector.

Good agricultural policies have to fulfill many criteria,

  • They have to help agriculture provide the goods and services consumers and society demand
  • They have to fulfill the requirements of sustainable development
  • They have to provide value-for-money
  • They have to be as less trade-distorting as possible.

And so on... which means that coming up with good proposals based on sound cost-benefit analysis is not an easy task. It nevertheless is very important.

A word of consolation: Putting scientific advice into practice - which is my job - isn't easy, either. Finding political majorities in a country, where each and every citizen has an opinion on farm policy can also be a challenge at times!

A third area where agricultural economists have to make an important contribution is in evaluation, which comes last in the policy cycle. This field is clearly gaining importance, as the state is being held more and more accountable for its actions.

Let me give you some insight into our latest policy project. Swiss agriculture provides about 60% of the food consumed domestically. Its roles, however, are numerous and go beyond food production. We attach a lot of importance to the concepts of multifunctionality and sustainability. The respective terms are included in the Swiss Constitution in the article relating to agriculture. With our policy project called " Agricultural policy 2014-2017" we want to bring our policy even closer in line with these two concepts. At the core of the proposal is an amendment to our system of direct payments, based on an evaluation of the current system.

What we want to achieve is to even better target the different public goods that agriculture provides to society with our direct payments. We want to do this by introducing separate green-box compatible payments for each of the main categories: agriculture's contribution to food security, sound natural resources and diverse landscapes.

By this we expect to increase both the effectiveness and the efficiency of our policy. We also hope to be able to better communicate to society the services that agriculture provides by clearly labeling the various types of direct payments.

Last but not least we hope that what we learn in our "Swiss laboratory" can also be a source of inspiration for other countries. At the moment we are processing the results of a public consultation on the proposals. We have had more than 600 comments from all the stakeholders including the general public. I expect to be able to submit an optimized proposal to the government early next year and I am confident that the new legal texts can come into force on January 1st, 2014.

In each stage of the process so far we have relied on the inputs of the research community. Needless to say that agricultural economists have been one of the most important groups of contributors. As you may know, our government is made up of only seven ministers. This means that each one is responsible for a rather large portfolio of roles.

I myself am not "only" responsible for agriculture, but also for the "rest" of the economy and professional training and soon for research as well! This has its advantages and I must admit that this also has its disadvantages. Most of all, it facilitates mutual learning. What I learn in the field of agricultural policy I try carry over to other fields of economic policy as well and vice versa - of course keeping in mind the characteristics of the agricultural sector. There is a very practical conclusion from this for agricultural economists: It might very well happen that your findings are applied to other fields than agricultural policy as well! This of course means that your responsibilities are even greater than what you maybe sometimes think! The greater picture regarding the Swiss economy is as follows.

Most of our wealth is generated by the industrial and services sectors which are very much export-oriented. Every other Swiss franc is earned abroad.

Due to the largely overvalued Swiss franc against the Euro and the Dollar this poses great challenges for certain export-oriented sectors of the Swiss economy like manufacturing and tourism.

As regards the role of agriculture in the economy at large, there are still people who disregard its importance. I don't agree with them. Agriculture's role goes way beyond its contribution to the GDP:

  • First of all there are the vital services agriculture provides that I have mentioned before: biodiversity, healthy soils, clean water and diverse landscapes. Together they contribute to a high quality of life which nowadays is an essential and strategic element for creating a good business environment.
  • And let us not forget the link with the food industry.

The food industry depends on high quality inputs from agriculture to produce - for example - the wide range of cheeses this country is so well known for. They are not link, but they are common challenges as well. A constant challenge, both in agriculture as well as in the other sectors of the economy, is to increase competitiveness.

This is one of the areas where the respective policies can learn from each other.

In one area, agriculture can even serve as a model for the rest of the economy:

Agriculture is a sector which in its very own and direct interest has always had to respect the limits set by nature. In devising strategies to green our economies, there is much to be learned from agriculture. Any policy paper on "green economy" or "green growth" must therefore include agriculture and build on the experience in the field of agricultural policy. Ultimately, there is a common goal for both agricultural policy and economic policy as a whole: to create the right balanced and dynamic framework conditions which allow for a sustainable creation of jobs and wealth while respecting nature's limits and the needs of coming generations.

Let me add an important point: One vital factor to the success of a small and open economy like Switzerland is to have a consistent and reliable set of rules for world trade. We therefore value the existence of the WTO very much. The WTO is not only important for us: We believe that it is a cornerstone of global governance from which all member states benefit. I am convinced that also more open agricultural markets will be to everybody's advantage as well.Reducing trade barriers and distorting support policies can help mitigate the many problems we experience today in getting food to where it is most needed.

Thus we support wholeheartedly the important work which is underway to further develop the framework for trade provided by the WTO, although I am of course well aware of the still existing stumbling blocks. We call on all of the involved parties to contribute to a speedy conclusion of the Doha round - after so many years of hard negotiations. To sum up, my message is, in a nutshell: There are formidable challenges ahead for both agriculture and the food chain, which are vital parts of the economy. We depend on your expertise for getting our analysis right, for creating the right policies and improving them based on good evaluation work.

One ongoing and very important task for you is to also continue to develop instruments that contribute to a fruitful integration of agriculture within a market-oriented economy and stimulate entrepreneurship all along the food chain. "Change and Uncertainty - Challenges for Agriculture, Food and Natural Resources". By choosing this topic for your Congress, you demonstrate that you have opted for the broad approach that is needed today for developing good answers to pressing challenges.

I am convinced that you will not only focus on the risks linked to these challenges, but also identify the new opportunities generated by the sustainable development of the food chain.

I wish you a very successful Congress.


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