Agriculture, Trade, and Environment:

Achieving Complementary Policies

May 1995

OTA-ENV-617

GPO stock #052-003-01412-2
Recommended Citation: U.S. Congress, Office of Technology Assessment, Agriculture,

Trade, and Environment: Achieving Complementary Policies, OTA-ENV-617

(Washington, DC: U.S. Government Printing Office, May 1995).
iii

oreword

imes have changed. No where is that more evident than in U.S. agriculture.

Increasing global integration, expanding world agricultural markets, and

broadening environmental priorities both at home and abroad are defining

new policy challenges for the United States. Passage of the North American Free Trade Agreement and the Uruguay Round Agreements of GATT

have spurred debate about the effects that liberalizing trade might have on the environment, and these debates continue. As the 104th Congress prepares to deliberate

reauthorization of the Food, Agriculture, Conservation, and Trade Act (FACTA),

more commonly referred to as the 1995 Farm Bill, the relationships among agriculture, trade, and the environment are prominent subjects.

Anticipating further debates on free trade, on FACTA, the Clean Water Act, and

other policy issues related to agriculture, trade, and the environment, Congress requested this assessment to provide guidance on policies and technologies needed

for U.S. agriculture to be competitive in world markets and to ensure that environmental goals are met. Committees requesting the assessment were the Senate Committee on Agriculture, Nutrition, and Forestry; the House Committee on Agriculture; and the House Committee on Foreign Affairs.

This report provides information that can help align agricultural legislation with

emerging needs and trends. Current policies do not ameliorate conflicts between

agricultural production and environmental quality, between trade and the environment, and between agriculture and competitive trade. Opportunities for greater

complementarity among these areas are possibly being missed.

Technology is integral to achieving complementarity. So often, agricultural

technology has been developed for the sole purpose of increasing production with

little attention to the market, environmental, or budgetary trade-offs. Unintended

consequences have often been the result. Today, with the vast array of powerful

scientific tools available, such as biotechnology and advanced computer technologies, it may be possible to develop technologies that incorporate multiple objectives, such as increasing production while enhancing environmental quality. Innovations in science and technology paired with future-oriented policies to guide

agriculture, trade, and the environment could position the United States as a leader

in world markets and in domestic environmental protection.

OTA greatly appreciates the contributions of the Advisory Panel, authors of

commissioned papers, workshop participants, and the many additional people who

reviewed material for the report or gave valuable guidance. Their timely and indepth assistance allowed us to do the extensive study our requesters envisioned. As

with all OTA studies, the content of this report is the sole responsibility of OTA.

ROGER C. HERDMAN

Director
iv

dvisory Panel

Alexander F. McCalla

Panel Chair

Director, Agriculture & Natural

Resources Department

The World Bank

Washington, DC

Sandra Batie

Elton R. Smith Professor of Food

& Agricultural Policy

Michigan State University

William L. Bryant

Chairman

W.L. Bryant Co.

Seattle, WA

Anne Chadwick

Trade Policy Advisor

California Department of Food &

Agriculture

The Chadwick Co.

Sacramento, CA

John M. Duxbury

Director, Agricultural Ecosystems

Program

Cornell University

Ithaca, NY

Peter Emerson

Senior Economist

Environmental Defense Fund

Austin, TX

Dan Esty

Director

Yale Center for Environmental

Law & Policy

New Haven, CT

David Frederickson

President

Minnesota Farmers Union

St. Paul, MN

Stephen R. Gliessman

Director, Department of

Agroecology Program

University of California

Santa Cruz, CA

Ralph W.F. Hardy

President

Boyce Thompson Institute

Ithaca, NY

Robbin Johnson

Corporate Vice President

Cargill, Inc.

Minneapolis, MN

Jack Laurie

President

Michigan Farm Bureau

Lansing, MI

Kitty Reichelderfer Smith

Director of Policy Studies

Henry A. Wallace Institute for

Alternative Agriculture

Greenbelt, MD

Ann Veneman

Counsel

Patton, Boggs, & Blow

Washington, DC

Justin R. Ward

Senior Resource Specialist

Natural Resources Defense

Council

Washington, DC

Cecil A. Watson

Farmer

Cavalier, ND

Pete Wenstrand

President

National Corn Growers Assoc.

Essex, IA

Note: OTA appreciates and is grateful for the valuable assistance and thoughtful critiques provided by the advisory panel members. The panel does not, however, necessarily approve, disapprove, or endorse this report. OTA assumes full responsibility for the

report and the accuracy of its contents.
v

roject Staff

Clyde Behney

Assistant Director

Walter E. Parham1

Progam Director

Food & Renewable Resources

Robert Niblock2

Program Director

Environment Program

MICHAEL J. PHILLIPS

Project Director

David E. Ervin

Senior Analyst

Leo V. Mayer

Senior Analyst

Sherry L. Showell

Analyst

Elisabeth A. Graffy

Analyst

Vivian N. Keller

Analyst/editor

ADMINISTRATIVE STAFF

N. Ellis Lewis1

Office Administrator

Kathleen Beil2

Office Administrator

Nellie M. Hammond

Administrative Secretary

Kimberly Holmlund2

Administrative Secretary

Sharon Knarvik2

Secretary

Carolyn M. Swann1

PC Specialist

________________

1Through February 1994

2From March 1994
1 Summary and Overview 1

Global Integration Now Impacts the United States 2

Agricultural Programs No Longer Reflect Market

Realities 3

Environmental Programs Do Not Emphasize New

Priorities 7

Expanded Trade Can Complement Environmental

Protection 10

Agricultural Research Needs a New Direction 12

The View from Abroad 14

A New Context for Policy 15

2 The U.S. Agricultural System and Global

Markets 17

The Agricultural Production System 18

Technology and Management Practices 24

Domestic Marketing Trends 33

Global Marketing Trends 37

The U.S. Dilemma 42

Research and Development 42

Chapter 2 References 43

3 Global Markets and International Trade

Agreements 47

Global Markets and U.S. Participation 46

International Trade Policy and U.S. Agriculture 51

Evolution of Export Promotion Programs 53

Impact of Export Promotion Programs 55

International Trade Agreements 56

Terms of the New Trade Agreements 66

Implications of GATT and NAFTA 62

Trade Agreements and Domestic Programs 66

Chapter 3 References 66

4 Agriculture’s Broadening Environmental

Priorities 69

Agriculture and Environmental Quality 71

Federal Conservation and Environmental

Programs 89

Chapter 4 References 104

contents

vii
Chapter 4 Appendices

4-1 National Primary Drinking Water Standards 111

4-2 Listing of Federal Conservation and Environmental

Programs Related to Agriculture 113

4-3 USDA Conservation Expenditures, by Activity and

Program, Fiscal Years 1983-1995 115

5 Expanding Agricultural Trade and the

Environment: Complementary or

Conflicting? 119

Effects of Environmental Programs on Trade

Competitiveness 122

Trade and Environmental Effects of Product

Standards 125

Domestic Environmental Effects of Agricultural Trade

Liberalization and Expansion 130

Trade Measures To Achieve International

Environmental Objectives 137

Appendix I: Potential Environmental Effects of

Commodity Program Reform and Trade

Liberalization 144

Appendix II: Processes and Production Methods 149

Chapter 5 References 150

6 International Comparison of Agriculture,

Trade, and Environmental Policies 157

Trends in Agricultural Support and Trade Policies 161

Environmental Provisions in Agricultural Policy 174

Chapter 6 References 191

7 Opportunities for Redesigning Policies for

Agriculture, Trade, and the Environment 197

Policy Options for Agriculture and Trade 198

Policy Options for Agriculture and the

Environment 210

Policy Options for Agricultural Trade and the

Environment 221

Epilogue 227

Chapter 7 References 227

WORK GROUP, REVIEWERS, AND

ACKNOWLEDGMENTS 229

INDEX 233

viii
Summary

and

Overview

n the past few decades, the U.S. agricultural sector has become integrally and irrevocably linked to international markets and environmental interests. Once the dominant supplier, U.S. agricultural producers now must compete with

numerous other international traders to fill the demands of global

agricultural markets. At the same time, the effects of agricultural

activity on the U.S. environment, and of environmental programs

on agricultural production and trade, have become subjects of national importance. Within this new, multifaceted framework, international markets increasingly dictate domestic production and

marketing decisions, and new priorities for environmental programs emerge. Also emerging, however, are questions about the

efficacy and appropriateness of current government farm and

conservation programs, many of which were instituted to cope

with the exigencies of another time. In 1995, and into the next

century, the key challenge for U.S. agricultural, trade, and environmental interests is to ensure that the nation’s policies and programs are oriented toward the future, not shackled to the past.

This report assesses the current status of, and the diverse connections among agriculture, trade, and the environment. It delivers four major messages based on the overarching goal of promoting complementarity among them:

1. Global forces increasingly dictate the economic framework

within which the U.S. agricultural sector operates, as well as

the legislative framework for U.S. agricultural policy. As a result, current agricultural programs are more of a problem than a

solution. Dismantling them would help the U.S. agricultural

sector to respond better to the demands of global markets, and

improve U.S. competitiveness abroad. | 1
2 | Agriculture, Trade, and Environment

2. Current conservation programs focus too narrowly on old problems rather than on newer issues such as water quality, wildlife habitat, soil

quality, and the environmental systems that

join them together. Scientific knowledge of

these newer issues is lacking.

3. Expanding agricultural trade does not pose significant short-run environmental risks, and environmental regulation overall does not impair

the United States’ ability to compete effectively in overseas markets. However, some isolated

environmental damage related to trade and

some cases of trade impairment will occur.

4. Federally funded research programs remain

tied to an old agenda of producing more agricultural output, while research on international

trade and environmental issues is dramatically

underfunded. Opportunities for developing

technologies that help the United States to meet

its agricultural production, trade, and environmental objectives are being missed.

The United States is not alone in facing these

problems. Other countries too are striving to liberalize trade while enhancing environmental

protection and bringing their agricultural production sectors in line with market realities. Achieving some of these global goals may require multilateral action. Nonetheless, there is much that the

United States can do on a unilateral basis to reorient its policies and programs to complement global forces while working toward national goals related to agricultural production, trade, and the

environment. This report offers a range of forward-looking policy options (chapter 7) designed

to benefit the three areas both individually and

collectively.

GLOBAL INTEGRATION NOW IMPACTS

THE UNITED STATES

In recent decades, global events and trends

have had an ever-greater impact on the United

States. On the economic front, the United States

has switched from fixed exchange rates, which

were controlled by the government, to flexible exchange rates, which are controlled by dynamic

and volatile forces around the world. The country

has also moved from a relatively closed economy

to a more open economy, in which trade is a major

force behind the restructuring of the nation’s industries, including agriculture. As part of its more

open policy, the United States has entered into a

number of agreements that liberalize international

trade. The most notable are the North American

Free Trade Agreement (NAFTA) and the Uruguay

Round Agreements (URA) of the General Agreement on Tariffs and Trade (GATT) (now the World

Trade Organization, or WTO). On the environmental front, the United States has joined other

countries in structuring more multilateral accords,

such as the North American Agreement on Environmental Cooperation and the Montreal Protocol

on Substances that Deplete the Ozone Layer, to

protect transboundary resources and the global environment.

Poised to take advantage of more liberalized

trade are multinational companies (MNCs) that

control a substantial portion of the world (and

the U.S.) economy. Their origins, sources for materials, communications, production facilities,

and outlooks are increasingly global. Intrafirm

trade—that is, goods and services exchanged among

parent companies and their foreign subsidiaries—

may account for 40 percent of U.S. imports and 35

percent of exports.

Facilitating the long reach of MNCs is global

communications technology. Fifty plus years ago,

when technologies such as radio and television

first appeared, only a few wealthy countries felt its

impact. Today, these and other global communications technologies allow hundreds of millions

of people around the world to hear and see how

others do things differently. With advanced computer systems, firms as well as individuals have

instant access to global information, and trading

goes on 24 hours a day. At the same time, the increasing exchange of scientific data and discoveries through communications technology has fostered an improved understanding of transboundary

and global environmental systems. The result of

these changes is that countries are much more interdependent. It is more difficult for a country to
Chapter 1 Summary and Overview | 3

impede the flow of information or to prevent or

even slow the transfer of technology. All of these

massive forces of change mean actions taken by

one country have major implications for others.

Although global integration has made the

United States more dependent on other nations, it

has also brought new and rewarding opportunities

for the public and private sectors. U.S. industries

can not only avail themselves of frontier science

and state-of-the-art technology more readily and

at reduced cost; they can also diversify production

and marketing risks with overseas operations. The

U.S. government can share science and data with

other national governments to construct more accurate appraisals of transboundary or regional environmental issues, and private industry can export or import technologies to solve them. To take

full advantage of the benefits of global integration, however, it is crucial for the United States to

move toward new, far-sighted policies based on

emerging conditions in the nation and the world.

Implementing policies that promote mutually

beneficial developments in agriculture, trade, and

the environment is a policy objective consistent

with the new forces.

AGRICULTURAL PROGRAMS NO

LONGER REFLECT MARKET REALITIES

Global integration has had a profound impact on

the U.S. agricultural system. No longer do national borders define the markets available to U.S.

farmers and processors. Rather, the U.S. agricultural sector is using new organizational arrangements and marketing strategies to enter and compete in global markets. Farm inputs, new farm

technologies, farm output, and new food products

are all exchanged in this global agricultural system, of which the U.S. agricultural system is an

important and interdependent part.

MNCs are responsible for most international

business in food and agricultural products, handling farm inputs, food processing, food distribution, and fast-food restaurants. They draw on the

entire world to supply their operations. If a

drought or flood decreases grain supplies in the

United States, for example, MNCs can obtain

grain from Argentina, Brazil, Australia, or another

country. MNCs in food processing are creating

global sourcing networks for ingredients, foodprocessing equipment, and packaging systems.

These developments and others have made for a

global agricultural system that is extremely dynamic. Response time to marketing opportunities

is shorter, resources are more mobile, and the

level of competition is more intense in nearly all

markets.

Unfortunately, current U.S. farm commodity

programs do not provide the U.S. agricultural sector with the flexibility it needs to compete effectively in such a dynamic global agricultural system. These programs may have enhanced farm

prices and farm incomes in earlier years, but now,

they impose limits on land use and depress agricultural growth and competitiveness. The United

States must seriously consider dispensing with

these programs if it wishes to remain competitive

in global agricultural markets.

❚ Increased Market Orientation

As the previous sections explain, agricultural output, marketing decisions, and farmers’ incomes

are increasingly tied to global markets—which

means that the traditional domestic demand and

government program incentives that farmers

looked to for guidance on what to plant, how to

market, and what to export are steadily being replaced by market signals. Farm structure has

changed as well. Six million farms produced the

nation’s food and fiber during World War II, but

now, fewer than one million farms account for

more than 95 percent of all U.S. farm output.

Another million or so part-time farming operations add to agricultural supplies, although the operators of these farms earn more from jobs they

hold off the farm than from farming itself.

Together, higher incomes on commercial farms

and more off-farm income on part-time farms

have brought farm households income parity with

all other U.S. households. Within the farm sector,

however, there is an enormous diversity of income: the largest farms receive incomes several

times the national household average (figure 1-1).
4 Agriculture, Trade, and Environment

200,000 ,

 ❏ Off-farm income

■ Farm income

$7,845

o

$128,662

/

$21.271

$39,699

-$2,618

less than $50,000- $100,000- $250,000- greater than

$50,000 $99,999 $249,999 $499,999 $500,000

Agricultural sales

SOURCE: U.S. Department of Agriculture, Economic Research Service, National Financial Summary, ECIFS-13-1, 1993

Nonetheless, the improved economic status of

farm households overall has helped stabilize the

farming sector, slowing the reduction in farm

numbers and improving the asset position of farming operations.

A variety of technological, economic, and social forces combined in past decades to reshape

the structure of farms and raise farm output. Farm

size expanded as farm machinery grew in size and

capacity. Farm output increased as each year’s

new crop varieties replaced the old. As domestic

surpluses became the norm, commodity prices

were depressed, forcing high-cost operators out of

farming enterprises. Budget costs for disposing of

stocks replaced concern over adequate food supplies. And, as environmental issues gained prominence, the American public placed greater emphasis on food quality, human nutrition, a safer food

supply, protection of the environment, and the development of a sustainable agricultural system.

With new demands from consumers, new marketing arrangements emerged to improve the

coordination of farm output with consumer needs.

Contract production and vertical integration are

used increasingly by agricultural producers, lowering economic risk and improving quality control. These new arrangements account for everlarger portions of total output. Although open

markets with many buyers and sellers still account

for most sales of food and feed grains, for specialty crops and livestock the trend has been toward

markets with relatively few buyers and sellers—

many of whom establish terms of trade through

contracts or vertical integration. Some 49 percent

of fresh vegetable production, for example,

moved through open markets in 1970, compared

with 35 percent in 1990. Turkey production went

from 28 percent of production moving through

open markets in 1970 to 7 percent in 1990. Citrus

production is now entirely handled through contracts and vertical integration. Overall, vertical integration and contractual arrangements, many

involving MNCs, account for an increasing proportion of agricultural marketing.

As marketing arrangements have changed, so

has overseas demand for agricultural products.

Most notably, as the composition of other countries’ agricultural imports has broadened, the
Chapter 1 Summary and Overview 5

01 1 1 I I 1 1 r 1 I 1 I I 1 I I 1 1 1 I 1 I I

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agricultural Handbook

No. 683, revised April 1994 -

- .

global market for value-added agricultural items

has expanded.l Between 1972 and 1993, worldwide trade in value-added products grew at an

annual rate of 8.5 percent, from $27 billion to

$148 billion. By contrast, trade in bulk commodities increased from $24 billion to $60 billion, reflecting an annual growth rate of 4.5 percent. The

share of world agricultural trade attributed to

value-added food products was 71 percent in

1993, compared with 51 percent on 1970. The

combined value of world trade in agricultural bulk

commodities and value-added food products was

$51 billion in 1972 and $208 billion in 1993.

In keeping with the times, the United States has

expanded its exports of value-added agricultural

products, which now make up a majority of U.S.

farm exports. However, value-added agricultural

products dominate world food trade by a ratio of

2.5 to 1, while the ratio for U.S. exports is 1.25 to 1

(figures 1-2 and 1-3). U.S. exports of agricultural

products have not grown as rapidly as world trade,

leading to a loss in U.S. share of global agricultural markets. Part of the problem is the United

States’ continuing emphasis on bulk commodities, a legacy of farm programs that originated in

the 1930s. These programs result in restraints on

land use that limit the responsiveness of production to market forces. The programs also require

multiple subsidies—first for producing bulk commodities, and then for disposing of them in export

markets. Substantial budget savings and greater

efficiency could be attained by gradually phasing

out government-enhanced incentives for producing bulk commodities and allowing market signals to guide farm output toward expanding global

markets.

Another useful change would be to redirect current market research efforts. Approximately 60

percent of all agricultural research expenditures is

directed to increasing animal and crop production;

1 Value-added food products include semi-processed products such as wheat flour, oilseed meal, and vegetable oil, as well as end products

that require little or no additional processing for consumption such as fresh and processed fruits and vegetables, fresh and processed meats, and

bakery products. Bulk commodities are products that have not been processed such as wheat, corn, cotton, and rice.
6 Agriculture, Trade, and Environment

30-

Bulk commodities

25-

 15-

10-

5-

Intermediate

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agricultural Handbook

No 683, revised April 1994 -

less than 5 percent is spent on researching international and domestic markets. As global markets

continue to change, more research on foreign market institutions and trends in agricultural trade,

and their implications for U.S. agriculture, is essential.

❚ New Technologies for New Markets

A range of new technologies complement the market trend toward value-added products. Information technology, for instance, enables firms to

identify new markets and customize products to

satisfy changing markets. The traditional

constraints associated with variability in raw material supplies are slowly being removed, as new

biotechnologies can alter a raw agricultural product to fit specific end uses. A highly publicized example of such a product was recently introduced

by Calgene, a multinational biotechnology/information technology-based seed, food, and specialty chemical company that is developing proprietary plant varieties and plant products. Since

the mid-1980s, Calgene has genetically engineered

new kinds of tomatoes in an effort to significantly

extend shelf life and improve taste. The company

has successfully produced a fresh market tomato

with at least seven to 10 days of extended shelf

life. The consumer benefits are that the genetically

engineered tomatoes may be harvested ripe for

full flavor, shipped without refrigeration, and delivered fresh to domestic and global markets. The

company received the first U.S. patent covering

the use of genetic engineering in tomatoes and

commercially launched the Flavor Savr tomato in

1994.

Calgene also provides a good example of the

new marketing arrangements discussed above.

The company will competitively select growers to

produce and harvest the new tomatoes under specified conditions, will control the distribution of

the tomato, and will merchandise it under its own

label. Thus, Flavor Savr tomatoes will be available to consumers through a vertically integrated

MNC that controls the product from seed to retail

sale.

❚ International Trade Agreements

Among the forces accelerating global integration

of the agricultural sector are international trade

agreements. Although most countries intervene in
Chapter 1 Summary and Overview | 7

their agricultural sectors to achieve certain national objectives, the trend is overwhelmingly toward

less government support. Trade agreements such

as the URA complement this trend not only by requiring reductions in such support, but also by acting as a major impetus for policy to move toward

greater flexibility to meet changing market conditions. The URA reduces tariffs on many of the

agricultural goods traded among WTO members,

which will increase competitive pressures and

place a premium on the marketing skills of agricultural businesses worldwide. NAFTA completely phases out North America’s regime of

agricultural tariffs over the next decade and a half.

Tariffs on about half of the agricultural products

traded between the United States and Mexico

were eliminated on January 1, 1994. Even though

tariffs on “import-sensitive” products, such as

corn and beans for Mexico, and orange juice, peanuts, and sugar for the United States, are being

phased out more slowly, the trend toward open

markets is clear.

The URA and NAFTA will expand markets for

U.S. agricultural products. Conversely, U.S. markets will be opened to countries that may have a

comparative advantage in the production and marketing of certain agricultural items. Because the

United States already imports large amounts of

agricultural products, and its tariffs have been

among the world’s lowest, it is unlikely that imports will jump dramatically. Nevertheless, competition will increase and markets will expand.

Even though they will help to redirect some

U.S. agricultural efforts, international trade agreements alone cannot align U.S. production and exports with global markets. The URA provisions

may focus U.S. attention on exporting more value-added food products, but current programs that

support farm commodity prices and subsidize

commodity exports (most of which show little

promise of large export-value gains) will work at

cross purposes with this trend. Not only are these

programs clearly detrimental in terms of myriad

trade opportunities and revenues lost; they also

conflict with the spirit of international trade agreements, which the United States has, through the

years, strongly supported. The United States is

consequently reaching a point where it must

choose between supporting global free trade and

insulating its agricultural interests from the global

marketplace. The challenge ahead is to allow the

incentive system to encourage more production of

items to meet expanding international markets.

ENVIRONMENTAL PROGRAMS DO NOT

EMPHASIZE NEW PRIORITIES

As it copes with the forces of global integration,

the U.S. agricultural system is also facing new environmental dilemmas. Traditionally focused on

soil and water conservation, the system must now

deal more with water quality, wildlife habitat, and

soil quality problems. The fundamental question

confronting policymakers is how to take advantage of global market opportunities while making

acceptable progress on this broader environmental agenda.

Environmental conditions associated with

agricultural systems vary significantly throughout the United States. For the most part, this variation is simply a reflection of the diverse distribution of environmental resources across the

national landscape. However, different types of

agricultural production operations also create different types of environmental stress. Generally,

the effects of agricultural operations on the U.S.

environment are local or regional in nature. A first

step toward defining possible federal program responses, then, is to appraise the pattern of environmental problems nationwide, so that priority areas

can be identified and effectively targeted.

❚ Agriculture’s Effects on the

Environment: Negative and Positive

Research and monitoring conducted since the

1970s provide broad evidence of both degradation

and improvement in the quality of water, wildlife

resources, and soil conditions affected by agriculture. Overall, water quality suffers most from its

association with agriculture. Agriculture ranks as

the primary contributor to today’s surface water

quality problems, principally through sediment

deposition and agrichemical runoff from dryland

and irrigated systems. Agriculture contributes
8 I Agriculture, Trade, and Environment

Agriculture is the primary source

of pollutants to impaired:

 Rivers and streams

States assessed only portions of rivers, lakes, and coastal estuaries in 1992. ln 32 states, agricultural pollutants were the main source of pollution in

surface waters that were unable to support their intended uses. Im paired estuaries in Oregon, California, Florida, Delaware, and Connecticut were

predominantly effected by agricultural pollutants. Because four states did not report sources of pollution to rivers and lakes (Tennessee, New Jersey,

Idaho, and Georgia), and six states did not report sources of pollution to lakes, ponds and reservoirs (Minnesota, Wisconsin, Tennessee, Pennsylvania, Vermont, and Alaska), this map may underestimate agriculture’s role in those states.

NOTE: Data for Alaska and Hawaii is not available. States shaded whlte did not report agriculture as a source of pollution to impaired surface

waters.

SOURCE: OTA, 1995. Compiled from data in U.S. Environmental Protection Agency, National Water Quality Inventory 1992 Report to Congress, EPA-841-R-94-G01, 1994.

pollution to over one half of the assessed streams,

rivers, lakes, and reservoirs suffering impairments. As shown in figure 1-4, agriculture’s relative importance to surface water impairments is

spread throughout the country. Recent research indicates that more than 70 percent of U.S. cropland

is located in watersheds of “poor water quality,”

where at least one agricultural contaminant exceeds recreational or ecological health guidelines.

Nitrate in groundwater appears to be increasingly

prevalent: 16 percent of the samples taken from

under agricultural lands show nitrate levels that

exceed drinking water standards. Although incomplete, groundwater monitoring of agricultural

pesticides indicate that residues exceed drinking

water standards in some states.

Overall, wildlife habitats (and as a result, wildlife populations) have been diminished or degraded by agricultural cultivation, drainage, and

pollution for the past half-century. Indeed, agricultural production has been the nation’s leading

cause of habitat alteration, including wetlands alteration, and is the most prominent activity endangering species today. It is important to note, however, that selected wildlife species, such as

pheasants and migratory waterfowl, have made
Chapter 1 Summary and Overview | 9

significant recoveries since conservation land setaside programs began in the mid-1980s, indicating that reversals are possible.

Dramatic improvements have been made in

controlling soil erosion. Overall, soil erosion levels have fallen 50 percent since 1945 and one-third

over the past decade. The benefits are not only

lower productivity losses but also future improvements in water quality as reduced pollution from

sediment, nutrients, and pesticides allows rivers,

wetlands, estuaries, and reservoirs to recover. Not

all regional erosion trends are positive, however:

some areas have been subjected to greater stress

from cropping and production practices. And 120

million acres are still eroding at levels considered

excessive for maintaining productivity while also

causing environmental damages. Aspects of soil

quality apart from erosion, such as microbial activity, have not been monitored and cannot be

evaluated at the present time.

❚ Incomplete and Ineffective Program

Coverage

Today, at least 40 federal programs give incentives to farmers and ranchers to adopt conservation and environmental technologies. There are

three basic approaches: 1) voluntary programs,

which provide education, technical assistance,

and/or subsidies for practice cost-sharing and land

rental; 2) compliance measures; and 3) regulation.

An overall evaluation of each approach or for the

total set to assess duplication, conflicts, and coverage has not been conducted. However, existing

evaluations indicate that strategic improvements

are possible to improve long-term environmental

performance while saving public and private costs.

Voluntary educational and technical assistance

programs, often coupled with subsidies, grew out

of the Great Depression “Dust Bowl” soil erosion

problems, and remain the government’s dominant

approach. There is a lack of scientific evidence to

indicate that educational and technical assistance

programs have produced significant environmental improvements, except when combined with

subsidies. Whenever sufficient private economic

incentives exist, farmers will eventually adopt environmentally preferable production technologies

without public educational or technical assistance

programs. The explosion of so-called conservation tillage technology over the past decade and

the growing use of field nutrient testing to cut fertilizer use are two prominent examples. These successes with “complementary technology”—technology that simultaneously benefits agricultural

operations and the environment—arose largely

without public research or education program initiatives. The benefits might be even greater if public policy targets resources to such innovations

and helps spread adoption farther and faster.

Subsidy programs, by themselves or in conjunction with education and technical assistance,

have produced conservation and environmental

gains. However, they generally have not been targeted to address areas suffering the largest damages and have not always encouraged cost-effective practices. For example, enrollments in the

Conservation Reserve Program (CRP), under

which the government “rents” environmentally

vulnerable land from farmers, did not initially include some of the nation’s most fragile lands. Further, the CRP rules did not permit farmers to produce profitable commercial crops on the enrolled

land, even if they could simultaneously meet the

program’s environmental objectives—a feature

that could have lowered the government’s rental

payments and enhanced international competitiveness. Enrollment procedures instituted after

the Food, Agriculture, Conservation, and Trade

Act of 1990 improved CRP targeting, but in general did not allow the enrolled land to be used

commercially. Careful targeting and greater attention to costs will be essential to the success of future subsidy programs, which will likely have

much more limited scope as a result of federal

budget pressures.

Compliance schemes, a landmark development

of the 1985 Food Security Act, link farmers’ agricultural program payments to environmental improvement. The programs cover the use of highly

erodible cropland, pasture or grassland conversion, and wetlands alteration. Perhaps because the

compliance measures were untried, their imple-
10 | Agriculture, Trade, and Environment

mentation was slow and filled with uncertainty.

Regardless of their efficacy to date, the schemes

suffer from two basic shortcomings. First, the size

of the compliance penalties, and so the incentives

to meet given standards, are not necessarily

aligned with environmental priorities. Second,

compliance schemes depend on the continued renewal of adequate agricultural program benefits—an increasingly difficult and costly proposition in the face of budget constraints and global

agricultural economic integration.

The use of voluntary subsidy approaches and

the difficulty of monitoring pollution from agricultural lands—the nonpoint source problem—

has meant that agriculture has been subject to less

environmental regulation than other industries.

However, a growing number of regulations have

surfaced over the past two decades, and their perceived influence on farmers’ management decisions is growing. Pesticide registration, involving

a protracted and costly review process that is behind schedule, may have the broadest effects. The

regulation of pesticides has not meant overall economic loss for the industry, but it has disadvantaged specific sectors and retarded innovation that

could result in environmental improvement. For

example, the registration of new or existing pesticides for “minor use” crops, such as many fruits

and vegetables, has been a problem because the

registration costs do not compare favorably with

the pesticides’ small market potential.

The problems with regulation extend beyond

pesticides. Long delays and conflicting rulings

from multiple agencies have plagued some farmers’ attempts to obtain permits for altering wetlands. Even though the percentage of these

troublesome cases is small, their very existence

may have spread uncertainty to other farmers who

will not be likewise affected. The prospect of future regulations to protect endangered species,

control coastal zone water pollution, or address

other environmental issues adds more uncertainty

for farmers in planning their production operations. Further, the implementation of regulations

is often uneven across states. For example, pointsource water pollution from confined animal operations is regulated under federal water quality

programs delegated to states, and the states have

widely differing approaches. Allowing states to

use different approaches to pollution control may

cause problems, however, when pollutants migrate across state boundaries.

Taken as a whole, the current mix of regulations, voluntary programs, and compliance schemes

neither cover the broader set of environmental priorities nor operate efficiently. As matters stand,

there is no clear set of environmental objectives

and priorities for the agricultural sector, and excessive costs for producers, consumers, and taxpayers, as well as environmental losses, result.

Further, inadequate understanding of agroenvironmental systems, conditions, and health implications can lead to uncoordinated programs and

ineffective signals for the agricultural sector regarding the goals of production, technology development, and environmental protection. Clarification of agriculture’s environmental responsibilities, including public and private roles and improved science would reduce uncertainty and help

target scarce public resources to environmental

priorities.

EXPANDED TRADE CAN COMPLEMENT

ENVIRONMENTAL PROTECTION

As global economic integration proceeds, and as

domestic and international environmental agendas broaden, two subjects of increasing concern

have been how trade might affect the environment, and how environmental regulations might

affect trade. Whether the forces of expanding trade

and environmental protection can work together,

or whether they necessarily conflict, has been a

matter of intense debate. Over the past 20 years,

the scope of the debate has widened from domestic economic and environmental issues under U.S.

jurisdiction to include international commerce

and global environmental questions. The simple

label “trade and environment” consequently covers a large, complicated, and ever-growing web of

topics that are crucially important to legal, economic, and environmental interests alike. Four aspects of the relationship between trade and the environment merit special attention.
Chapter 1 Summary and Overview | 11

First is the effect of environmental regulation

on trade. According to some schools of thought,

costly environmental regulations can force domestic producers to lose export markets or move

overseas. Studies of nonagricultural industries indicate that overseas migration resulting from environmental regulations has not been significant

overall, and that trade has been little affected. Because the U.S. agricultural sector is subject, for the

most part, to voluntary conservation and environmental programs implemented with subsidies, its

compliance costs are low, and so its competitiveness in world markets is relatively unhindered.

Moreover, competitors abroad must comply with

agroenvironmental programs similar to those affecting the U.S. agricultural sector as discussed

below. Ultimately, the effects of a larger environmental agenda on trade will depend on the types of

environmental and other programs implemented

to promote mutually beneficial outcomes.

Some specific sectors with special environmental problems may be exceptions and find that

their competitiveness is hindered as a result of environmental regulation. The most noteworthy

case thus far concerns methyl bromide, a chemical

used in agricultural production and trade, and

slated to be banned in the United States because it

contributes to air pollution. Although the benefits

to U.S. society as a whole of banning methyl bromide are estimated to far exceed the costs, some

agricultural sectors will suffer disproportionately,

losing about $1 billion per year in the short term.

Cases such as methyl bromide should be the focus

of research to investigate the policy opportunities,

domestic and multilateral, to ease adjustment,

create better substitute technologies, and help retain international markets.

Second is the role of product standards. National product standards, such as tolerance levels for

pesticide residues, can serve as legitimate nontariff measures to screen certain imports. The

URA established new health and safety, as well as

“technical barriers to trade,” codes that address

this issue. Among other things, the codes specify

that product standards should be based on science

and restrict trade no more than necessary to

achieve a nation’s desired level of protection. The

specific aim of these new negotiated agreements

was to reduce the likelihood that U.S. agricultural

exports would be subject to unwarranted import

barriers. However, product standards are also crucial to addressing certain environmental ills related to agriculture. For example, keeping harmful

nonindigenous species (HNIS) out of the United

States (now a significant environmental concern)

depends primarily on strictly enforcing measures

covered by the codes, such as quarantines. Because of the lack of precedent under the URA, it is

not clear whether product standards for environmental purposes will come under fire as unjustifiable barriers to trade. If they do, only future rulings by the WTO will determine their status. Other

agricultural-trade-environmental issues extend

from product standards to the growing gray area of

process standards, currently illegal under WTO

rules. Examples include the enforcement of domestic country rules excluding genetically engineered plants and animals and market standards

for organic farm products. Multilateral attention

to these issues could enhance U.S. production and

environmental interests.

Third is the effect of trade liberalization and expansion on the environment. Estimated shifts in

agricultural production that result from the new

trade agreements will likely cause little overall

damage to the U.S. environment. Indeed, environmental conditions may improve in some areas, if

imports displace environmentally damaging domestic production. Certain other areas—such as

border zones, where trading could flourish—may

come under added environmental stress, and foreign species, such as invasive weeds on rangelands, could pose new commercial and environmental risks as they enter through new trade

pathways. Controlling these short-run domestic

environmental quality challenges and longer-term

conflicts hinges principally on how U.S. agroenvironmental programs are run. As explained

above, current programs are not wholly effective:

they do not offer comprehensive and enduring environmental coverage, nor do they encourage

complementary technology research and development. NAFTA and the URA do not require the

United States to reduce current commodity pro-
12 | Agriculture, Trade, and Environment

gram payments affecting production, or to “decouple” (that is, separate) the payments from levels and type of crop production. Had the URA

significantly reformed domestic agricultural commodity programs, some net environmental improvement would likely have occurred. The net

effect of such reform depends on weighing increased erosion pressure against less chemical

use.

Expanding agricultural production through

trade liberalization may pose special risks for

countries that have inadequate environmental programs and would respond to higher world prices

by producing more for export. Pressures on transboundary and global environmental resources of

interest to the United States, such as border water

resources and wildlife habitats, may result in significant costs. With the exception of the environmental side-agreement approved with NAFTA,

neither the URA nor the present patchwork of

multilateral environmental agreements addresses

this kind of situation. Trade agreements will not

cover all environmental problems because of their

necessary orientation to commerce. Some type of

multilateral environmental agreement or organization to coordinate and stimulate solutions to

transboundary and global environmental problems is also required.

Fourth is how trade measures are used to meet

international environmental objectives. NAFTA

and the URA were the first trade agreements to incorporate significant environmental provisions,

but the ultimate efficacy of those provisions depends on future political dynamics. The use of

trade measures in a limited number of international environmental agreements, such as the Montreal Protocol to Control Substances that Deplete

the Ozone Layer, has been shown effective. Current WTO rules do not specifically address the use

of international environmental trade measures,

and therefore clear guidelines are not at hand. Further, critical questions about the conditions justifying unilateral or multilateral actions and extraterritorial objectives remain unanswered. Such

“offensive” environmental trade measures have

not been widely applied to agriculture, although

they may be in the future. Clear rules promulgated

by the WTO would assist environmental and trade

efficiency. Again, a multilateral organization responsible for global environmental management

could work with the WTO to ensure that both

global trade and environment needs receive appropriate consideration. Such an organization

could help promote alternative measures, such as

technical assistance and technology research and

development, to avoid unnecessary trade disruptions.

Efforts to expand agricultural trade and upgrade environmental quality can complement

each other, if “appropriate” environmental management programs that target significant environmental problems and focus on low-cost solutions

are properly run. To achieve this outcome research

needs to be targeted on these problems and solutions. Unfortunately, current programs at domestic and international levels do not ensure that this

will happen. Reconstitution and retargeting of domestic environmental programs and technology

research and development, introduction of new

multilateral institutions, and greater levels of multilateral cooperation are essential.

AGRICULTURAL RESEARCH NEEDS A

NEW DIRECTION

For many years, the nation has benefited from a

long stream of agricultural research breakthroughs that have increased agricultural output

and lowered the real cost of food. However, relatively little research has been directed toward agriculture’s relation to trade or to the environment.

Little if any information on changing trade flows,

new and emerging agricultural markets, and strategies to meet the needs of those markets is available. On the environmental front, comprehensive

information is not available on national trends in

water quality, soil quality, and agriculture’s effect

on wildlife resources. Moreover, the potential for

science to aid in devising complementary technologies remains largely unexplored.

A primary explanation for these differences in

research achievements can be found in the budgetary resources allocated to these topics. In 1993,

the United States devoted $2.9 billion to agricul-
Chapter 1 Summary and Overview 13

tural research through federal and state research

institutions. The allocation of these funds heavily

favored research on crop and livestock production

(figure 1-5), which received almost 60 percent of

all resources. Funding for research on the environment was only 12 percent, and for research on

trade, a mere 4 percent. As a result, many potential

chances to improve environmental conditions and

trade revenues are being missed, and many key developments in world markets are identified belatedly, if at all. The dramatic shift of world trade

away from bulk commodities and toward value-

-added agricultural products, for instance, went unnoticed for nearly a decade.

To take advantage of the trade opportunities

available to it, the U.S. agricultural community

needs information on markets in a wide range of

countries. Food consumption trends in other

countries, as an example, are important to track.

Many of the countries that will be responsible for

shaping the composition of future global trade in

agricultural products are in different stages of development, with different income levels and different responses to changes in incomes, food

prices, and availability of new food products. For

the United States to become proficient at marketing agricultural products to these countries, it

must become more knowledgeable about their

conditions, about food tastes and taboos, and

about cultural habits that shape food consumption. This new direction would present a major

challenge to an agricultural research community

that has focused most of its attention on enhancing

yields of commodities that are declining in relative importance in international markets.

The relatively low priority of agroenvironmental research is reflected in the fact that federal

agencies do not have major initiatives to understand the relationships between agricultural and

environmental systems. Nor do they collect or

maintain databases designed to evaluate comprehensively national water quality, trends in soil

quality (except for erosion), or agriculture’s effects on wildlife resources. Individual agencies

monitor conditions separately, resulting in incompatible databases for building a national picture.

Con

Environment/ Marketing and trade

natural resources 4.4%

Forestry A

Animals

23.80/o

Total funding $2,970,911,000

SOURCE: USDA/CSRS, Inventory of Agricultural Research, 1993

Finally, even with adequate national monitoring

data, the implications of those conditions for environmental health remain poorly understood. For

example, many agrichemicals have not been evaluated fully for their potential effects on the health

of humans or environmental systems. Because

market incentives to enhance environmental quality are incomplete, it is unrealistic to expect sufficient research and development to emanate from

the private sector. Public research to provide adequate science and data on agroenvironmental topics, and for developing complementary production and environmental technologies, is clearly

necessary.

The low level of funding for agroenvironmental research and lack of major program support for

complementary technology, will slow the reorientation of public research priorities from

traditional production emphases to enhancing the

integration of production and environmental

goals. Given the current research system, promising new developments in biotechnology, biological pest controls, and information technologies to

increase the efficiency of inputs will not reach

their full potential. Only anew generation of inte-
14 | Agriculture, Trade, and Environment

grated research and technology developments can

set the stage for an economically and environmentally sustainable agricultural system.

THE VIEW FROM ABROAD

Issues relating to agriculture, trade, and the environment are clearly not unique to the United

States. The question is, how similar or dissimilar

are the specific problems faced by other countries,

and what kinds of policies are they implementing

to address the problems? Are other countries experiencing agroenvironmental problems similar

to those of the United States? How do their responses compare with ours? If the United States

regulates agriculture to preserve its environment,

will it still be competitive in world agricultural

markets? Do other countries offer more support to

their agricultural sectors than the United States

does, or less? Do other countries restrict agricultural trade more, or less?

All of the countries considered in this report

(Argentina, Australia, Brazil, Canada, France,

Germany, Japan, Mexico, the Netherlands, New

Zealand, Taiwan, and the United Kingdom) intervene in their agricultural sectors to achieve certain

national objectives, such as maintaining a secure,

safe, and adequate food supply; increasing agricultural productivity; and enhancing the living

standards of farm families. In recent years, however, budget constraints, international pressure,

and socioeconomic changes have led almost all of

these countries to cut back on government support

for their agricultural sectors. New Zealand went

so far as to eliminate government support altogether in 1984, other than for pest and disease control and some research. Mexico and the European

Union (EU) have advanced efforts to decouple

agricultural support from product prices. As part

of its economic reforms, Argentina has drastically

reduced the implicit tax it levies on its agricultural

sector.

This is not to suggest that barriers to agricultural trade are becoming obsolete. All countries continue to use some combination of border measures—tariffs, quotas, export promotions, health

and safety regulations, licensing schemes, and

other devices—to protect domestic agricultural

producers and enhance their opportunities to increase agricultural exports. Taken together, these

measures can restrict overall world trade. However, through increased participation in regional

trade blocs such as NAFTA, and in the WTO,

many countries are choosing to liberalize, rather

than hinder, agricultural trade.

This move toward freer trade coincides with

growing environmental concerns and a range of

government efforts to address those concerns. By

the mid-to-late 1980s, most governments had

instituted at least some environmental legislation

and regulations, and had taken moderate measures

to help mitigate problems. Generally, in the industrialized countries, the percentage of GDP that is

used for pollution abatement and control by the

public and private sectors averages less than 2 percent.

Although the nature and extent of the problems

may vary, most countries are contending with

similar agroenvironmental concerns. Until recently, though, the agricultural sectors of most countries were generally not subject to environmental

policies and regulations. Initial policies addressing agroenvironmental issues focused mostly on

soil erosion, because it directly affects agricultural

productivity. As the agroenvironmental agenda

has broadened, however, many countries have begun to implement provisions for enhancing water

quality as well as protecting habitats, wetlands,

and countryside amenities in their agricultural policies. Canada, Japan, and the United States have

each reduced their wetlands by more than 70 percent in some regions, but have now introduced policies geared to protecting remaining wetlands

that are deemed significant, or to preventing a net

loss of all wetlands.

Most countries are coping with the environmental effects of agricultural production by discouraging harmful practices or encouraging beneficial ones through a variety of programs. It must

be kept in mind, however, that federal programs

designed to assist agriculture still emphasize production rather than general environmental goals.

To a large extent, existing agricultural policies ei-
Chapter 1 Summary and Overview | 15

ther effectively raise farmers’ prices for output, or

decrease prices for inputs—both of which encourage farmers to adopt intensive farming practices

that may be harmful to the environment. Agroenvironmental policies are then introduced to counteract these effects, but the artificially high prices

for agricultural goods make it difficult for such

policies to work. It is more profitable for farmers

to use land for agricultural purposes than to let it

be used, for example, as wildlife habitat, and agricultural programs enhance this disparity.

This dilemma is being addressed now by governments the world over. Confronted with shrinking budgets, they are finding it more and more difficult to rationalize maintaining such conflicting

policies—and they are increasingly unwilling to

pay not only the financial, but also the environmental, costs of supporting their agricultural sectors as they did in the past. Partly as a result,

agroenvironmental policies are moving away

from strictly voluntary efforts to cross-compliance schemes and regulatory measures. These

policies may increase production costs, but if all

countries are implementing similar policies and

all face increased costs, the ultimate effects on

competitiveness may be minimal.

A NEW CONTEXT FOR POLICY

Global integration, expanding and changing

world agricultural markets, and heightened environmental concerns are defining new policy challenges and opportunities for the United States.

These trends manifest themselves in an agricultural system that must respond more to global markets; an emerging environmental agenda that extends beyond traditional conservation concerns;

and an expanding research agenda that increasingly emphasizes environmental protection, food

safety, marketing and trade, and profitable, yet environmentally sustainable agricultural systems.

While the context has changed, federal policies

and programs affecting the agricultural sector

have not changed. They promote production of

bulk commodities and hinder possible opportunities for U.S. farmers in fast growing value-added

export markets. They divert major resources to

soil conservation while newer issues of significance—water quality, wildlife habitat, and soil

quality—remain relatively neglected. Almost

two-thirds of agricultural research funding is devoted to increasing farm output, even though

more output will mean more federal subsidies to

export surplus crops, and still more federal funds

to “idle” land to control surpluses.

As the United States moves toward the year

2000, and as continuing budget pressures constrain traditional subsidy solutions, government

must explore innovative approaches to these dilemmas. Furthermore, tensions between agricultural policies and trends in both trade and environmental spheres create costly inefficiencies.

Seeking complementary and mutually reinforcing

policies for agriculture, trade, and the environment could not only lessen budget pressures but

also help ensure that the nation’s policies are oriented to the future.

Seeking complementarity would involve:

 synchronizing domestic trends with global

forces,

 targeting program resources on priority areas,

 encouraging development of technologies that

serve multiple objectives, and

 using markets or market-like mechanisms

wherever possible.

Policy options discussed in chapter 7 for agriculture, trade, and the environment illustrate how

policies and institutions can be complementary

rather than in conflict. Central to the process will

be allowing market forces to have more influence

in food production while at the same time compensating for the market’s inability to signal the

value of environmental effects that result from

agricultural production. Modern market forces are

tuned to world-wide trends. Their signals help

guide production patterns toward future markets,

rather than tie them to past patterns of use. Those

same signals can help research institutions determine research priorities that are consistent with

national and international trends. Current commodity and conservation programs tie U.S. agriculture to the past. To provide complementarity
16 | Agriculture, Trade, and Environment

among agricultural production, trade, and the environment many current programs need to be dramatically restructured, if not eliminated; fundamental policy changes need to be considered.

The pace of change must be carefully planned,

however, so that the agricultural system and related environmental stresses are not thrown out of

balance by abrupt suspension of federal programs.

In chapter 7, a number of policy options are

spelled out that would move federal programs toward a better balance with international markets,

budget realities, trade deficits, and environmental

concerns. The time sequence is five years which is

in keeping with the time framework of recent agricultural legislation.

As the United States heads into the next century, such complementarity could have a key influence on the standing of U.S. agriculture in a global

economy. Indeed, seeking complementarity among

these policies will allow the United States to capture the opportunities of global market expansion

while protecting and advancing domestic goals related to environmental quality as well as to the

competitiveness of the agricultural sector. Moreover, seeking complementary and mutually reinforcing policies will likely require fewer government resources in an era of increasing budget

stringency. Equally important, pursuing complementarity can help ensure that the nation’s policies

are oriented to the future, not anchored to the past.
The U.S.

Agricultural System

and

Global Markets

ar-reaching changes in technology, domestic and global

markets, and organizational structure have had a profound

impact on the U.S. agricultural system. Within the new

framework that has evolved, agricultural output, marketing decisions, and farmers’ incomes are tied ever more tightly to

global markets and market prices. The traditional beacons of domestic demand and government farm programs, which farmers

looked to for guidance on what to plant, how to market, and what

to export, are steadily being replaced by market signals—signals

that emanate from many different countries and filter through

markets located in urban areas like New York, Chicago, Memphis, and Kansas City.

The structure of farms has changed as well. Six million farms

produced the nation’s food during World War II, but now, a commercial agricultural sector of less than one million farms accounts

for more than 95 percent of all farm output. Another million or so

part-time farming operations add to agricultural supplies, although the operators of these farms earn more from work they do

off the farm than from farming itself. Together, higher farm incomes on commercial farms and more off-farm income on parttime farms have raised farm household incomes to the national

average of all U.S. households. The improved economic status of

farm households has helped to stabilize the farming sector, slowing the loss of individual farms and helping more farms to stay

solvent.

As technological, economic, and social forces have combined

to increase the average size of farms, farm output has increased.

As output has grown—as domestic surpluses have become the

norm, and budget costs for disposing of stocks a major concern— | 17
18 | Agriculture, Trade, and Environment

public debate over adequate food supplies has

been supplanted by concerns about food quality,

human nutrition, food safety, environmental

protection, and the development of a sustainable

agricultural system. In this new paradigm, farm

tillage methods have changed and the environmentally unfriendly moldboard plow has largely

disappeared; fertilizer and pesticides have been

monitored more closely for their impacts on water

quality as well as crop output; and biotechnology

has been hailed as an evolving technology that can

potentially improve productivity as well as enhance food quality, food safety, and environmental quality.

Faced with new demands from consumers,

farmers have devised new marketing arrangements to better match farm output with consumer

needs. Contract production and vertical integration (in the first instance, producing goods according to strict contractual stipulations; in the second,

putting functions such as production, marketing,

and retailing all under one roof) have become crucial to agricultural production, lowering economic risk and improving quality control. Simultaneously, developments in other countries have

broadened the composition of their agricultural

imports, expanding markets for U.S. value-added

food items (a category that includes processed

grains, fruits, vegetables, and meat). As U.S. exports of bulk commodities (mostly raw grains)

slumped in the early 1980s, exports of value-added foodstuffs continued to grow, offsetting some

of the loss in export earnings. Even though exports of U.S. value-added foods expanded, however, total global trade in these items expanded

faster—which means that the United States, relatively speaking, has been losing ground in global

food markets.

Part of the problem is the United States’ emphasis on bulk commodities, a legacy of current

farm programs that originated in the 1930s. These

programs result in multiple subsidies, first for producing bulk commodities, and then for disposing

of them in export markets. Substantial budget savings and greater efficiency could come from gradually phasing out incentives for producing bulk

commodities, and allowing farmers to respond

more appropriately to expanding global markets.

Another useful change would be to redirect current market research efforts. Approximately 60

percent of all food and agricultural research expenditures is directed to animal and crop production; less than 5 percent is spent on researching international and domestic markets. As global

markets continue to change, more research on

changing trends in food trade, and their implications for U.S. agriculture, is essential.

With farm incomes higher, and with global

markets now boosting demand for U.S. agricultural products (especially value-added food exports), the nation has an opportunity and, some

would argue, the government an obligation to formulate new policies for U.S. agriculture. As a

foundation for developing future legislative options, this chapter examines in detail the state of

the U.S. agricultural system, its evolution over the

past few decades, and its operation in the current

economic and technological climate.

THE AGRICULTURAL PRODUCTION

SYSTEM

U.S. agriculture has undergone tremendous

changes in the course of this century. Gone are the

days of the Great Depression, with its low prices

and incomes. Gone are the days of World War II,

when more farm output was deemed a national

priority. Gone are the post-war decades of agricultural adjustment, when surpluses burdened markets and farm numbers sometimes fell more in a

single year than they now fall in a decade. Today,

agricultural productivity is impressive, resources

are concentrated on larger farms although parttime farming is widely practiced, and farm household incomes have improved considerably. Despite the changes, agriculture remains an industry

of enormous diversity, in terms of geography, production systems and practices, and in terms of income levels and asset values.

❚ Commercial Farms and Agricultural

Output

The structure of the U.S. agricultural sector has

been streamlined substantially over the past few
Chapter 2 The U.S. Agricultural System and Global Markets 19

years, as a consequence of four key factors. First,

technology in the form of mechanization allowed

individual farmers to handle more acres of land,

while new technology in the form of higher yielding seed varieties and pesticides increased output

and lowered real commodity prices. Second, lower real prices cut into the incomes of farmers who

were unable to produce more, leading some of

them to seek jobs off the farm and others to retire.

In both instances, other farmers generally took

over their land. Third, farmers learned to manage

their land better; and fourth, job opportunities off

the farm grew. Slowly, the six million farms that

existed during World War II became two million

farms by 1994.1

The decline in farm numbers reflects the loss of

more small, part-time operations (those selling

less than $20,000 worth of output) than larger

commercial farming operations.2 In 1978, some

1.6 million farms sold less than $20,000 worth of

output. Most were part-time operations. By 1993,

the number of such farms had fallen to 1.1 million,

a loss of 500,000 farms over 15 years (figure 2-1 ).

In this same period, the number of farms selling

more than $20,000 worth of output actually increased, rising from 908,000 farms to 960,000

farms (22).

As the total number of farms declined, the

shares of output accounted for by commercial and

part-time farms changed. Part-time farms (under

$20,000 worth of sales) accounted for 7.5 percent

of all farm output in 1978 and 6.2 percent in 1993

(figure 2-2). Intermediate-size farms-farms selling between $20,000 and $100,000 worth of output—also lost in terms of share of production:

they accounted for 30 percent of farm output in

1978 and 17 percent in 1993. Larger farms-those

1,700-, I

1,360

65.1 % of all U.S. farms

.

Less than

$20,000

26.2%

of all U.S.

farms 27.5%

12.5%

5.6%

$20,000- $100,000- Greater than

$99,999 $249,999 $250,000

Agricultural sales

SOURCE: U.S. Department of Agriculture, Economic Research Service

(EC IFS 13-1), Economic Indicators of the Farm Sector, National Financial Summary 1993

selling more than $100,000 but less than $250,000

worth of output annually—increased their share

of total farm output from 18 percent in 1978 to 21

percent in 1993. Farms selling more than

$250,000 worth of output each year also increased

their share of total farm output. Although they represent only 6 percent of all farms, these enterprises

now account for 57 percent of all farm output, up

from 45 percent in 1978.

The fact that only two million farms, or more

accurately one million commercial farms, can satlThe number of farm varies according to whose estimate is used. The 1992 Census of Agriculture counted 1,925,000 farms, but excluded

farms currently in the Conservation Reserve program (CRP) and farms producing Christmas trees. Horse farms were included. The U.S Department of Agriculture’s (USDA) estimate of farm numbers for 1992 is 2,094,000, a figure that includes CRP farms and Christmas tree farms, but

excludes horse farms. The USDA estimate for 1994 is 2,044,000 farms.

2The definition of what constitutes a commercial farm varies by region and type of farm, as does the definition of what constitutes a part-time

farm. Some farms with large sales probably are managed by operators who also manages off-farm enterprises and considers the farm enterprise

as less than full-time employment. Alternatively, some farms with less than $20,000 of sales may engage the operator full time. For this study,

we have arbitrarily divided farms into part-time (under $20,000 in sales) and commercial (more than $20,000 in sales) farms.
20 Agriculture, Trade, and Environment

Total farm output

❏ 1978: $111.5 Bn

 80 - ■ 1993: $175.1 Bn

 60- Percent of total output

/ \

4’

/ \ 20.7%

Less than $20,000- $100,000- Greater than

$20,000 $99,000 $249,999 250,000

Agricultural sales

SOURCE U S Department of Agriculture, Economic Research Service

(EC IFS 13-1), Economic Indicators of the Farm Sector, Nationai Financial Summary 1993.

isfy the nation’s food and fiber needs is the result

of large increases in land and labor productivity.

Technical advances such as hybrid seeds, irrigation, fertilizer, and pesticides have raised crop

yields and reduced the number of acres needed to

satisfy agricultural markets. Larger machines can

cover more acres and lower the amount of labor required, thus reducing the number of farmers needed. But that is not the whole story. Insect-resistant

storage bins and chemicals to control rodents have

reduced storage losses, and feed conversion rates

for animal production have risen sharply, decreasing the amount of feedstuffs needed to produce

meat. As yields and feed conversion rates went up

and storage losses went down, farmers needed

fewer acres to grow grain. As the sizes of machines increased and their numbers declined, fewer farmers were required to feed and clothe the expanding U.S. population, which grew by some 55

million people between 1970 and 1994. Even

though export markets nearly doubled in volume

over this period, crop production capacity still

outdistanced markets, leaving on average some 55

million acres idle each year between 1984 and

1993.

❚ Economic Status of Farm Households

As the farm sector restructured itself, household

income on both commercial and part-time farms

rose significantly. Incomes rose on commercial

farms as farming activities expanded and lowered

per-unit costs of production on larger sales; and

incomes rose on part-time farms as well, as family

members found more work off the farm. The combination of higher farm incomes on commercial

farms and higher off-farm incomes on part-time

farms raised average incomes of all farm households. In 1993, for example, the U.S. Department

of Agriculture (USDA) reported that average farm

household income, from all sources, totaled

$42,911 (22). For the same year, the Bureau of the

Census reported that the average U.S. household

had an income of $40,885 (29).

The data in figure 2-3 illustrate that farmhousehold incomes vary by farm size—and that the

source of their incomes also varies. Generally, as

farm size increases, farm income increases. For

example, the amount of net farm income rises to

$7,845 for farms selling between $50,000 and

$99,999 worth of products annually, and reaches

more than $128,000 on farms selling more than

$500,000 worth of products annually. The essence

of the farm situation today is that smaller farms

earn most of their income off the farm, and actually lose money on their agricultural activities; larger farms make money from both their agricultural

activities and employment off the farm.3

The low income from farming operations

shown in figure 2-3 for intermediate-size farms

($50,000 to $99,999 worth of sales) leads many

analysts to conclude that farm financial problems

3All farm income statistics cited are net of all expenses, including depreciation.
Chapter 2 The U. S. Agricultural System and Global Markets 21

200,000

150,000

0

-50,000

$7,845

\

$21,271

\

$39,699

\

\

$128,662

\

\

-$2,618

less than $50,000- $100,000- $250,000- greater than

$50,000 $99,999 $249,999 $499,999 $500,000

Agricultural sales

SOURCE: U.S. Department of Agriculture, Economic Research Service (ECIFS 13-1 ), Economic Indicators of the Farm Sector, National Financial Summary, 1993

are concentrated primarily on this size farm. However, when income from sources off the farm is

taken into account, these intermediate-size farms

averaged household incomes of $38,309 in 1993,

slightly under the average income of all U.S.

households of $40,885 (29). As averages, both

figures can hide wide variations in income. The

data suggest, however, that when off-farm income

is included in farm household income calculations, farms households are faring about as well as

nonfarm households.

Variations in farm household income also result from differences in other organizational characteristics of farms. An important difference relates to borrowed capital. Some farms use large

amounts of borrowed capital and have large interest payments. Others operate without borrowed

capital and have low interest costs. Overall, the

farming industry has a very low debt-to-asset ratio, averaging 16 percent in 1993 (15). Large

farms (those with sales exceeding a half million

dollars annually), have debt-to-asset ratios exceeding 25 percent (22); smaller farms have debtto-asset ratios that range as low as 11 percent.

However, as figure 2-3 indicates, the income of

larger farms is much greater and it follows that

debt repayment capacity is also larger.

Another measure of farm diversity is the rate of

return on assets used in the farm business. Although large farms have high debt-to-asset ratios,

those same farms have high rates of return on

owned assets. For example, farms selling more

than a million dollars of output annually have average rates of return of 25 percent according to one

land grant university study (10). As farm size decreases, the rate of return declines to around 10

percent for farms selling between $100,000 and

$250,000 worth of products, and is negative for

farms selling less than $40,000 worth of products

annually.

Government payments to farms also vary greatly, depending on farm size. Figure 2-4 divides

farms into four size groups and shows the average

payments to each group for 1987 and 1993. Direct

payments made to farmers reached a high of $16.7

billion in 1987 and declined to $13.4 billion in

1992. The distribution of payments followed patterns of production with smaller farms receiving a
22 Agriculture, Trade, and Environment

Dollars per farm

60,000

Total government payments 27.6%

❏ 1987: $16.7 billion

50,000

■ 1993: $13.4 billion

Percent of

 30,000 ---–> 36.4% 1 total

payments

20,000-

10,000- 31.1 %

25.O%

4.8%3.4%

0

36.3940

Less than $20,000- $100,000- Greater than

$20,000 $99,999 $249,999 $250,000

Agricultural sales

SOURCE: U S Department of Agriculture, Economic Research Service

(EC IFS 13-1), Economic Indicators of the Farm Sector, Nationai Financial Summary, 1993

smaller share and larger farms receiving a larger

share. Farms with sales under $20,000 annually

received 4.8 percent ($593 per farm) of all direct

payments in 1987 and 3.4 percent ($458 per farm)

in 1993 (figure 2-4). Farms with sales of more

than $250,000 received 28 percent ($52,557 per

farm) in 1987 and 35 percent ($35,579 per farm) in

1993. Payments varied between these figures for

farms with sales of more than $20,000 but less

than $250,000 annually.4

The decline in direct government payments between 1987 and 1993 had little effect on net farm

income. As figure 2-5 illustrates, net farm income

was $39.7 billion in 1987 and $43.4 billion in

1993. The $3.3 billion drop in direct government

payments between 1987 and 1993 was offset by a

$33.2 billion increase in cash receipts and a $29.3

billion increase in cash expenses. The difference,

■ Net farm income

❏ Government payments

1987 1988 1989 1990 1991 1992 1993

SOURCE: U.S. Department of Agriculture, Economic Research Service

(EC IFS 13-1), Economic Indicators of the Farm Sector, National Financial Summary 1993

$3.9 billion, covered the $3.3 billion drop in payments, and contributed $0.6 billion of the $3.7

billion increase in net farm income. About half of

the $33.2 billion increase in cash receipts was due

to a rise in farm exports, which increasedby$14.1

billion between 1987 and 1993. The remainder

was accounted for by increased domestic consumption, including more industrial uses of agricultural products and increased livestock sales.

❚ Size and Diversity

Although individual farms may have undergone

many changes in past years, the size and diversity

of U.S. agriculture as a whole have remained the

same. There are 2.3 billion acres (3,594,000

square miles) of open land outside the nation’s cities—land that stretches from the irrigated valleys

of California to the tile-drained lands of northern

Iowa, from the windswept plains of western Kan4

The European Union reports similar distributions of characteristics among its farms. See chapter 6.
Chapter 2 The U.S. Agricultural System and Global Markets 23

Millions of acres

Total land in Land available Land planted Land harvested

Year Total land area farms for crops to crops for crops

1970

1975

1980

1985

1990

1992

1993

1994

2,264

2,264

2,264

2,265

2,265

2,265

2,265

2,265

1,063

1,059

1,038

1,012

987

980

978

975

384

369

382

403

403

395

391

389

333

367

382

372

341

340

332

340

289

330

342

334

310

308

299

311

SOURCE: U.S. Department of Agriculture, Economic Research Service, Agricultural Resources, Situation and

Outlook Report, AR-30, May 1993 and personal communications.

sas to the rolling pastures of Vermont and Maine.

Across this vast expanse of land, farms accounted

for 43 percent, or 975 million acres, in 1994. Yet

these 975 million acres reflect a drop of over 85

million acres in farmland since 1970 (table 2-l).

The downward trend in land available for farming

was of widespread concern during the 1970s, as

rising world food needs generated fears that science and technology would not provide sufficient

output to offset the loss of cropland. But that concern slowly dissipated in the 1980s as production

levels continued to rise, commodity exports declined, and large acreages of cropland again had to

be idled under government farm programs.

Despite a decline in the amount of land in

farms, land available for crops actually increased

after 1975, rising from 369 million to over 400

million acres in 1985 before declining to 389 million acres in 1994. The increase came about as

farmers plowed up grass and other types of noncropland and planted it with crops. Much of this

expansion occurred in the 1970s, as an export

boom increased economic returns. Some 30 million acres were added to the cropland base during

this period (table 2-1 ). The expansion did not exhaust the supply of available acres. A 1975 study

found that 111 million acres of land could be converted to crop production (27). A second study

completed in 1977 found even more land, 127

million acres (28). However, this figure reflected a

decline from the previous decade: in 1967,

USDA’s Conservation Needs Inventory had reported that 265 million acres could be converted

(8). None of the studies specified what kinds of

market prices would induce farmers to move more

of these acres into crop production.

More important than land in farms, or even

acreage available for crops, is the amount of land

actually harvested. This measure of productive capacity varies more than land used for farms or land

available for crops: it rises in good economic

times (e.g., the 1970s) and falls in bad ones (the

1980s). By 1994, harvested acreage was down 30

million acres from what it had been in 1980. Many

of these acres were drawn out of production by

government-sponsored land retirement programs.

In 1993, annual and long term land retirement programs removed over 56 million acres of cropland

from cropping (table 2-2) while land harvested for

crops was down 43 million from 1980. The

13-million-acre differential between the reduction

in acreage harvested and the amount of acreage

under government programs included land in the

Conservation Reserve Program (CRP)5 that had

5The CRP was authorized by the Food Security Act of 1985. It was intended to remove at least 45 million acres of erosion-prone land from

production, and ensure that these acres would be used to plant grass or trees. More information on the CRP is provided in chapter 4.
24 Agriculture, Trade, and Environment

Millions of acres idled, by commodity

Wheat Feed grains Cotton Rice Other Total

Annual programs

1980 0

1985 71

1990 75

1993 4,6

Conservation reserve program

1980 0

1985 0

1986 0.6

1990 10,3

1993 109

Total acres idled

1980 0

1985 7.1

1990 17.8

1993 15.5

0

18,8

171

13,3

0

0

0.6

10,2

11,0

0

18,1

27.3

24,3

0

3.6

2.0

1.3

0

0

0.1

1,3

1,4

0

3.6

3.3

2.7

0

1,2

1.0

0.6

0

0

0

0

0

0

1,2

1,0

0.6

0

0

0

0

0

0

0.7

12.1

13,2

0

0.7

12,1

13,2

0

307

27,7

19.9

0

0

2.0

33.9

36.5

0

30.7

61.6

56.4

SOURCE: U.S. Department of Agriculture, Economic Research Service, Agricultural Resources, Situation and Outlook Report,

AR-32, October 1993 -

not been previously planted with program crops,

and other acres that are often called slippage (i.e.,

cropland that might not have been planted if acreage reduction programs had not been in place).

Examples include cropland pasture that went into

the CRP, and areas around the edge of fields or

along streams where tillage is difficult and the risk

of machinery accidents is high.

Wheat and feed grains account for most of the

acres removed from crop production by land retirement programs. In 1993, for example, 15.5

million acres of wheat land and 24.3 million acres

of feed grain land were placed under government

acreage reduction programs. An additional 3.3

million came from cotton and rice land. The total

land idled was 56 million acres: 36 million acres

in the CRP and 20 million acres in annual programs for wheat, feed grains, and other crops. The

CRP retired almost equal amounts of wheat and

feed grain acres: 10.9 million acres of wheat and

11.0 million acres of feed grains. Of widespread

interest is what will happen to CRP acres when the

10-year contracts under which land is idled begin

to expire in early 1996.

TECHNOLOGY AND MANAGEMENT

PRACTICES

Acres idled under government programs are one

important source of potential farm output. Another is technology. Technological innovation has

played a significant role in transforming agriculture in the past, and still promises to have major

impacts on the U.S. agricultural system. The transition from horsepower to mechanical power

(1920 to 1950) boosted the productive capacity of

agriculture even as farm labor requirements decreased dramatically. From 1950 to 1980, agricultural productivity rose further as irrigation, tillage

practices, chemical fertilizers, and pesticides

helped farmers to increase yields. Changed in how

these technologies are used, which have been

prevalent in the past decade, are discussed below.

❚ Irrigation Water Use

Like the idled acres under government programs,

irrigated cropland is of interest from an environmental standpoint. Irrigation can lead to so-called

“intensive” farming: with a plentiful water supply,
Chapter 2 The U.S. Agricultural System and Global Markets | 25

a fanner may use more fertilizer and other chemicals to get correspondingly higher levels of output. As fertilizer and pesticide use increases, the

danger of runoff and seepage into underground

waters and aquifers also increases.

Despite such problems, and the expense

associated with its development, irrigation remains a key agricultural technology. In specialty

crop production, irrigation is an insurance policy,

protecting high-value crops against drought. In

some instances, it also improves quality. Marketing specialists from the McDonald’s Corp. recently pointed out that:

Potatoes, particularly the type valued for the

ubiquitous French fry, require more irrigation

water, fertilizer and other chemicals than do

many other crops. These requirements for potato growing have significant effects on production and management requirements (6).

With irrigation, the fast-food industry has the

size and quality of potato that satisfies consumer

demand for French fries. Without irrigation, it

might have to develop other varieties.

The positive characteristics of irrigation led to a

sharp increase in irrigated acres during the boom

years of the 1970s. Compared with 39 million

acres irrigated in 1969, some 50 million acres

were irrigated by 1978 (table 2-3). Much of the

additional output from the increased acreage went

to overseas markets. When exports declined in the

1980s and farm income declined, the number of irrigated acres dropped, settling at 46 million acres

in 1987. Subsequent improvements in agricultural

markets led to another expansion in irrigated land,

to 53 million acres in 1993. At that point, water for

irrigation accounted for 81 percent of all fresh water used in the United States (18).

Along with the rise in the total number of acres

irrigated, total water use for irrigation increased

steadily during the 1970s. After 1980, water use

for irrigation stabilized, reflecting fewer acres irrigated and a decline in per-acre use, from 2.09 ft /

acre in 1970 to 1.80 ft/acre in 1993. New irrigation

techniques helped farm operators find more efficient ways of using irrigation water—a trend that

Irrigation scheduling and uniform distribution are key factors

in improving irrigation management and reducing

agrichemical losses. Shown here is a center pivot irrigation

system that provides water for nearly 270 acres of corn.

bodes well for the growing water demands of cities and instream uses. (See chapter 4.)

■ Tillage Methods

Along with using irrigation water more efficiently, farmers have found new ways to till their cropland. In some instances, the motivation to use new

tillage methods is economic: these practices can

lower production costs for many farmers (2). In

other cases, the incentive is eligibility for farm

program payments. Under the Food Security Act

of 1985, commonly known as the 1985 farm bill,

farmers with land especially prone to erosion were

required to have a conservation plan in place for

their farms by January 1, 1995, or possibly lose
26 I Agriculture, Trade, and Environment

Millions of acres

Region 1869 1978 1987 1900 1993

Atlantic seaboard 1.8 2.9 3.0 3.4 3.4

Corn belt & lake states 0.5 1.4 2.0 2,2 2.7

Northern plains 4.6 8.8 8.7 9.8 10.6

Delta states 1.9 2.7 3.7 4.6 5.4

Southern Ppains 7.4 7.5 4.7 5.5 5.3

Mountain 12.8 14.8 13.3 14.6 14.5

Pacific 10.0 12.0 10.8 11.4 10.8

Total 39.1 50.4 46.4 51.6 52.8

SOURCE:U.S. Department of Agriculture, Economic Research Service, Agricultural Resources, Situation and Outlook Report,

AR-30, May 1993;

program benefits. Through 1992, loss of farm program payments for violations of conservation provisions (often called Sodbuster provisions) had

been relatively small: $6.4 million on 129,000

acres (18). However, as late as 1993, a total of 55

million acres out of the 148 million acres designated by the Soil Conservation Service (SCS) as

“highly erodible” were subject to a conservation

plan that was not fully applied or not yet certified.

Another seven million acres were not under any

conservation plan, either because producers had

not requested such a plan from SCS or had not accepted a proposed conservation plan (18). These

numbers suggest that up to 62 million acres might

have been ineligible for program payments on

Conservation tillage provides many advantages for farmers

and the environment. It is being adopted by more farmers

each year

January 1,1995, when conservation plans were required.

One way for farmers to meet conservation requirements and maintain their eligibility for farm

program payments is by adopting “conservation

tillage” practices. (For an explanation of conservation tillage, see box 2-1.) Corn and soybeans,

two crops that leave land susceptible to wind and

water erosion, illustrate the rapid rate of adoption.

Twenty-one percent of corn acres were farmed using conservation tillage in 1988 and 39 percent in

1992 (table 2-4). Soybean production went from

16 percent using conservation tillage in 1988 to 37

percent in 1992. Wheat has shown a smaller increase. Nineteen percent of the 1988 wheat crop

was produced with minimum tillage, and 25 percent in 1992. One explanation for conservation

tillage’s apparent lack of popularity in the wheat

sector is that wheat growers have long used fallow

systems that maximize moisture retention. The

new tillage systems are similar to those already

used by wheat growers (with the exception of no

till, and production of wheat using the no-till

method has increased). For rice and cotton, the

major change has been the substitution of other

conventional tillage methods for methods that

used the moldboard plow. Use of the moldboard

plow in cotton decreased by half between 1988

and 1992. The moldboard plow had not been

widely used in rice production for sometime, but

even in this sector farmers are using it less. National sales of new moldboard plows consequently dropped from 60,543 in 1974 to only 1,382 in
Chapter 2 The U.S. Agricultural System and Global Markets 27

Conservation tillage is defined as any tillage and planting system that (a) leaves at least 30 percent

of the planted soil surface covered by residue to reduce soil erosion by water, or (b) leaves at least

1,000 pounds of residue per acre during critical periods when soil erosion by wind IS a primary concern. Two key factors influencing the amount of crop residue are the type of crop previously harvested

and the type of tillage operations carried out before and during planting. There are three types of conservation tillage practices:

1.

2.

3.

No Till, The soil is left undisturbed from harvest to planting, except for nutrient injections. Seeds are planted

in a narrow bed or slot created by coulters, row cleaners, disk openers, in-row chisels, or roto-tillers. Cultivation may be used for emergency weed control.

Ridge Till. The soil is left undisturbed from harvest to planting, except for nutrient injection. Seeds are

planted in abed prepared on ridgeswith sweeps, disk openers, coulters, or row cleaners. Residue is left on

the surface between the ridges. Weeds are controlled with herbicides and/or by cultivation. The ridges are

rebuilt during cultivation.

Mulch TiII. The soil is broken before planting with tillage tools such as chisels, field cultivators, disks,

sweeps, or blades. Weeds are controlled with herbicides and/or by cultivation.

Other types of tillage and planting systems that leave less than 30 percent of the soil’s surface covered by residue may meet erosion control goals with or without other supporting conservation practices

(for Instance, strip-cropping, contouring, or terracing).

SOURCE: USDA/ERS, May 1993, p 31

1991, reflecting a dramatic change in less than two Taken together, lower fuel use and decreased labor

decades (14,15).

As the use of conservation tillage has increased, horsepower requirements on farms have

changed. Annual sales of large tractors (those with

more than 99 hp) peaked in 1990 at 22,800 units

and declined 11 percent by 1994 (table 2-5). Sales

of extra-large, four-wheel-drive tractors dropped

sharply. Sales of smaller tractors were more

stable.

Conservation tillage uses less fuel as well as

less horsepower. Gasoline use on farms has declined strikingly, from 2.9 billion gallons in 1981

to 1.6 billion gallons in 1992. Diesel fuel use declined slightly, and the use of liquid petroleum gas

was cut by a full 40 percent (17). Even though

some of the reduction may be attributed to more

efficient and increased amounts of custom services, the clear inference is that conservation tillage has reduced the amount of fuel used on farms.

The effect on labor use has been less dramatic. Total hours of contract and hired labor used on farms

declined about 8 percent between 1981 and 1991.

requirements resulted in lower production costs.

One Ohio study estimated that a shift to no-till

methods reduced production costs by $20 per

acre, compared with the costs of conventional tillage practices. The same study found that substituting a chisel plow for a moldboard plow reduced

production costs by $8 per acre (2).

❚ Fertilizer and Pesticide Use

Applications of fertilizer declined after 1981, as

farm programs drew land out of production and

weaker markets reduced farm incomes. In 1983,

when planted acreage was reduced by nearly 50

million acres in an attempt to lower stockpiles,

fertilizer use dropped nearly 25 percent. Fertilizer

applications increased again in 1984, but not to

previous highs, as crop acreages expanded to offset the effects of a drought in 1983 and government programs. These lower usage levels reflect

a sharp reversal of earlier trends. Total use rose

from 7.5 million nutrient tons in 1960 to

4
28 Agriculture, Trade, and Environment

Crop and tillage system 1988 1989 1990 1991 1992

Corn (million acres) 53.2 57.9

No till (percent) 7 5

Ridge-till * *

Mulch-till 14 17

Conv/wo/mbd plowa

20 59

Conv/w/mbd plowb

20 19

Soybeans (million acre) 48.8 50.9

No till (percent) 4 6

Ridge-till * *

Mulch-till 12 16

Conv/wo/mbd plow 62 58

Conv/w/mbd plow 22 20

Wheat (mill Ion acres) 45,1 54.3

No till (percent) 1 1

Mulch-till 18 21

Conv/wo/mbd plow 66 65

Conv/w/mbd plow 15 13

Rice (million acres) 2.1 2.1

No till (percent) * *

Mulch-till 2

*

Conv/wo/mbd plow 96 97

Conv/w/mbd plow 2 1

Cotton (million acres) 9.7 8.4

No till (percent) * *

Mulch-till * *

Conv/wo/mbd plow 72 84

Conv/w/mbd plow 28 15

aConventional without moldboard plow

bConventional with moldboard plow

58.8

9

*

18

57

17

48.2

7

*

18

57

18

59.1

3

19

67

11

1.8

1

3

96

1

9.7

1

1

84

14

60.4

10

*

2 0

55

15

49,2

10

*

21

55

14

50.7

3

21

66

10

1,9

2

4

94

*

10.9

1

1

76

21

62.9

12

2

2 5

49

12

48,6

14

1

2 2

53

10

56.5

4

21

65

10

2.0

1

4

95

*

1 0 2

*

*

88

12

*Included in no-till for these years

SOURCE: U.S. Department of Agriculture, Economic Research Service, Agricultural Resources, Situation and Outlook Report,

AR-29, February 1993

Year 40-99 hp >99 hp 4-wheel drive Total tractors sold

1986

1987

1988

1989

1990

1991

1992

1993

1994

30,800

30,700

33,100

35,000

38,400

33,900

34,600

35,500

39.100

14,300

15,900

16,100

20,600

22,800

20,100

15,700

19,000

20,400

2,000

1,700

2,700

4,100

5,100

4,100

2,700

3,300

3,700

47,100

48,300

51,900

59,700

66,300

58,100

53$000

57,800

63,200

SOURCE: U.S. Department of Agriculture, Economic Research Service, ARE/ Updates Farm Machinery, No. 1, 1995
Chapter 2 The U.S. Agricultural System and Global Markets 29

Millions nutrient tons

Year Nitrogen Phosphate Potash Total

1960 2.7 2.6 2.2 7.5

1970 7,5 4,6 4.0 17.2

1980 11,4 5,4 6.2 23.1

1985 11,5 4,7 5.6 21.7

1990 11.1 4 3 5.2 20.6

1991 11,3 4 2 5.0 20.5

1992 11,4 4,2 5.0 20.6

1993 na na na 19,8

SOURCE U S Department of Agriculture, Economic Research Service, Fertilizer Use and Trade, March 1993

16.1 million tons in 1970, and continued upward

thereafter, reaching a high of 23.1 million tons in

1980 (table 2-6). By 1993, however, fertilizer applications totaled 19.8 million short tons, down

14.3 percent from 1980.

The dip in fertilizer use to below 20 million

tons in 1993 may have been a temporary phenomenon, reflecting that year heavy rains and flooding. What may be more permanent is the pressure

on growers to reduce all kinds of chemical use in

farming. Concerns over environmental impacts

have subjected all agricultural chemicals to new

and more intense scrutiny. (See chapter 4.)

Coupled with intense cost pressures that force

growers to reduce inputs wherever possible, all

chemical use has stabilized or fallen.

The pattern of pesticide use mirrors that of fertilizer use: rising sharply in the 1970s, peaking in

the early 1980s, and dropping sharply thereafter.

By 1990, total pesticide use was down 13 percent

from the record set in 1982 (table 2-7). Pesticide

use declined in 1993 by an estimated 3 percent

(17). Trends in use of individual pesticides have

varied. Herbicide use expanded rapidly in the

1960s and 1970s, peaked in 1982 and then eased

downward. Insecticide use was relatively steady

from 1964 through 1976 and then dropped off

sharply. Fungicide use was relatively stable

throughout the period. Corn production accounted for the greatest percentage of pesticides

used in U.S. agricultural production (43 percent in

1992), in part because corn is planted on more

acres than any other crop. Soybean production accounted for 12 percent of pesticide use; cotton, for

10 percent; and potatoes, for 7 percent. Wheat,

grain sorghum, and rice accounted for about 3 percent each; peanuts and citrus fruits, for 2.5 percent

each.

Quantities applied to crops (1,000 pounds)

Years Herbicides Insecticides Fungicides Other pesticides Total pesticides

1964 54,884 128,167 21,715 27,983 232,750

1966 87,351 121,717 21,660 24,233 254,961

1971 198,949 137,808 30,906 31,565 399,228

1976 368,422 135,920 29,546 31,072 564,960

1982 464,596 84,793 27,519 35,417 612,325

1990 376,363 56,617 31,632 68,958 533,571

1991 368,269 51,055 33,117 80,900 533,341

1992 387,126 56,837 34,242 85,657 563,863

SOURCE: USDA/ERS, Unpublished Data, May 1994
30 I Agriculture, Trade, and Environment

Genetically engineered tomatoes, approved by the FDA in 1994 (left), and control (right) 3 weeks after harvest.

The decline in pesticide use between 1982 and

1992 may continue. Public and government pressure on agricultural producers to work in greater

harmony with nature—that is, to practice "sustainable agriculture’’-already has induced many

to change their farming practices, as noted above.

With regard to such inputs as fertilizers and pesticides, the overuse that characterized the farming

of decades past was called into question during the

economic downturn of the 1980s. Upon close examination, reduced levels of inputs often were

found to offer lower costs with little or no loss in

yields. In addition, a generation of new and more

effective pesticides has helped lower usage levels

(although not necessarily costs). As future farm

prices and incomes remain uncertain, especially

on smaller and moderate-size farms, input use

will, in all likelihood, be monitored closely to

hold down production costs.

■ A New Generation of Technology

Change certainly has taken place in how current

technologies are used. But change is also taking

place in the types of technologies that will be used

in the future. Today, U.S. agriculture is on the

threshold of a new era: the biotechnology and information technology era. Technologies that have

just been introduced, or are in the final stages of

development, have the potential to increase agricultural productivity, enhance the environment,

and improve food safety and quality. Some of the

major technologies that will be influential in the

future are outlined below.

■ Biotechnology

Biotechnology, broadly defined, includes any

technique that uses living organisms or processes

to make or modify products, improve plants or

animals, or to develop microorganisms for specific uses (12). It relies on two powerful molecular

genetic tools: recombinant deoxyribonucleic acid

(rDNA); and cell fusion technologies. Using these

tools, scientists can isolate, clone, and study the

structure of an individual gene, as well as explore

the gene’s function. Such knowledge allows scientists to exercise unprecedented control over biological systems, leading to significant improvements in agricultural plants and animals.

Some of the new technologies are or will soon

be on the market. For example, in early 1994, the

U.S. Food and Drug Administration (FDA) approved the first genetically engineered tomato,

which has an extremely long shelf life and a better

flavor than many tomatoes currently available to

consumers. The tomato may be harvested ripe for

full flavor, shipped without refrigeration, and delivered fresh to supermarket shelves without the

standard ethylene “gas” treatment.

Genetic engineering allows scientists to breed

plants that have greater resistance to disease, in-
Chapter 2 The U.S. Agricultural System and Global Markets | 31

sects, and weeds, and can withstand environmental stresses such as cold, drought, and frost. It also

allows them to develop value-added products

from agricultural commodities; and to improve

their understanding of plant resistance and of the

interactions among plants, pests, and biological

control agents in the agro-ecosystem.

Insect Control

Traditional breeding programs have produced,

and will continue to produce, insect-resistant or

insect-tolerant varieties of crops. However, the

tools of biotechnology can be used to selectively

engineer plants for this trait. For example, genetic

coding for bacterial Bacillus thuringiensis (Bt)

toxin has been cloned and inserted into plants.6

Transgenic plants producing Bt toxins are expected to be commercially available by the mid to

late 1990s.

Weed Control

Improved understanding of how herbicides work

is helping scientists to design herbicides that destroy some plants (e.g., weeds) but have no effect

on others (e.g., crops). In addition, genetic engineering is being used to develop crops that have

some resistance to herbicides. The frost herbicidetolerant crops are expected to be commercially

available by the mid-1990s.

Disease Control

Biotechnology techniques are being employed to

determine how pathogenic organisms cause disease and to engineer plants that can better resist

disease. Genetically engineered plants that resist

certain viruses are expected to be commercially

available by the mid- 1990s. In animal agriculture,

biotechnology has the potential to improve feed

efficiency, reduce losses from disease, and increase the ability of all livestock to reproduce successfully. Advances focusing on growth promotants, reproductive technologies, and animal

health will play a major role in enhancing the efficiency of animal agriculture and the quality of its

products.

Growth Promotants

Genetic engineering techniques are being used to

produce new products such as a new class of protein hormones called somatotropins. In late 1993,

the FDA approved the first of these compounds,

bovine somatotropin (bST), which increases milk

production in lactating cows. Although the efficacy of the product ultimately relies on the management ability of the producer, average increases in

milk volume of about 12 percent are expected.

Another growth promotant, porcine somatotropin (pST), is expected to be approved for use in the

near future. Pigs that are given pST show increases in average daily weight gains of approximately 10 to 20 percent, improved feed efficiency

of 15 to 35 percent, decreased fat tissue of as much

as 50 to 80 percent, and concurrently increased

protein deposits of as much as 50 percent. The

quality of their meat is not adversely affected.

Tomato plants that show one -stripped by caterpillar and one

not. The plant not stripped contains the Bacillus thuringienis

toxin gene.

6

Bt is a spore-forming bacterium that produces insecticidal proteins. Different strains of Bt produce proteins toxic to different insects.

Through biotechnology insecticidal genes from different Bt strains have been incorporated into other organisms, including plants, which then

produce the corresponding Bt toxin.
32 I Agriculture, Trade, and Environment

Comparison of pork loins that show the effect of pigs treated with porcine somatotropin (pST). The loin-eye area of the loin

treated with pST is 8 square inches; the control is 4.5 square inches.

Animal Reproduction Technologies

The field of animal reproduction is undergoing a

scientific revolution. In the cattle industry, for example, it has become possible to induce genetically superior females to shed large numbers of eggs;

and to fertilize these eggs in vitro with the sperm

of genetically superior males. Each resulting embryo can be sexed (i.e., preselect the sex of the embryo) and split to produce multiple copies of the

original embryo. Each of the new embryos can

then be frozen for later use, or transferred to a reAnimal physiologist prepares embryo for microscopic examination before implanting it into an animal.

cipient cow. The cow carries the embryo to term

and gives birth to a live calf. It maybe possible in

the near future to sex the sperm rather than the embryo, or to create more copies of each embryo than

is currently possible.

Animal Health Technologies

Biotechnology is rapidly acquiring a prominent

place in veterinary medical research. New vaccines include those created by deleting or inactivating the genes in a pathogen that cause disease.

The first gene-deletion viral vaccine to be approved and released for commercial use was the

pseudo-rabies virus vaccine for hogs.

■ Advanced Computer Technologies

Since the Industrial Revolution, agricultural systems have intensified, and agricultural productivity has grown significantly with farm size. Laborsaving devices on farms have increased output per

worker many times over, and advances in understanding and applying biological principles have

boosted agricultural yields significantly. As production has increased, however, managing a farm

has becomes a more challenging and complex job.

Even today, many farmers make decisions with
Chapter 2 The U.S. Agricultural System and Global Markets | 33

less than full information, and many agricultural

systems are poorly managed (12).

Advanced computer technologies can make for

more effective agricultural management. Computer technologies can provide managers with the

ability to determine systematically the best decision, rather than arrive at decisions in an ad hoc

fashion. For example, a farmer deciding whether

to plant a specific crop on a specific field can

weigh the profitability of the crop, as well as overall farm needs (e.g., nutritional requirements for

livestock). The decision will have an impact on

land sustainability, and will determine whether

certain pest-control strategies should or should

not be used. Improved access to information can

also help farmers to monitor their progress more

effectively. Keeping better track of animals’

growth rates, for instance, can allow a farmer to

detect diseases earlier.

The primary application of computer technology by the mid to late 1990s will be so-called expert

systems (i.e., computer programs that actually

solve problems, based on information given to

them). Such systems are currently being developed, and farmers will have a cadre of them to

diagnose diseases and to evaluate production performance. These systems generally will not be integrated with one another: each will consider only

one aspect of a problem. Integrated systems that

solve production problems while considering economic and environmental consequences will not

be available until the latter part of the decade.

Electronic sensors are already playing an important role in agriculture. Sensors are being used

for improving operations in crop production by

machine guidance systems, applying pesticides

and fertilizers more accurately, and improving the

management of irrigation water to conserve theresource and reduce production costs. Current research focuses not only on developing methods of

monitoring crop growth that can be used with

computer models for improving day-to-day crop

management and strategic planning, but also on

developing sensors for assessing crop maturity

and fruit location as a basis for mechanical harvesting. Sensors and satellite technology are curFarmer and consultant examine data from a expert system

that has diagnosed a crop disease on his farm and provided

the specific remedy based on the unique characteristics of

his farm.

rently used to monitor weather and field conditions for crop management. Expert systems help

farmers to interpret these data and suggest appropriate management strategies for irrigation,

fertilizer, or pesticide treatments.

DOMESTIC MARKETING TRENDS

Beyond the farm gate, the process of turning farm

commodities into finished food products also has

changed. Fresh fruits and vegetables that once

were picked in the fields and transported to packing sheds and then to market are now packed in the

field and transported directly to retail markets.

Milk that once was shipped to local processing

plants is now refrigerated and shipped to urban

processing centers. Chickens that once were

grown in small flocks on farms for supplemental

income are now raised in specialized broiler facili-
341 Agriculture, Trade, and Environment

The combination of sensors, global positioning systems and expert systems allow site-specific programs to be developed such

as for crop nutrient management.

ties and processed by the hundreds of thousands

daily. Small comer grocery stores that were once

the mainstays of families throughout America

have slowly lost ground to large supermarkets—

and supermarkets have in turn lost some ground to

specialized stores catering to health food aficionados, the elderly, or other niche markets.

The economic components of the food chain

have also changed. Processing and retailing costs

now account for 78 percent of the nation’s food

bill (and farm value 22 percent). Of that 78 percent, labor costs make up 36 percent; packaging

materials, 8 percent; intercity transportation, 5

percent; fuel and electricity, 4 percent; and corporate profits, 3 percent. Other costs, such as interest, depreciation, and advertising, account for the

remaining 22 percent (20) (figure 2-6). In return

for the added processing and marketing costs they

pay, consumers are able to spend less time preparing food and more time doing other things, including eating out in restaurants. Restaurant meals accounted for 45 percent of all food dollars spent in

1992, a substantial increase from the 25 percent

spent in 1954 (3).

New ways of organizing food production in the

United States are being introduced at a relatively

rapid rate, spurred by high rates of return on capital, declining levels of economic protection from

government farm programs, and other forces.

These trends have the potential to change marketing practices for a wide range of crop and livestock

production. This section focuses on some specific

marketing methods that are already widely used in

agricultural production.
Chapter 2 The U.S. Agricultural System and Global Markets 35

Advertising 4.0%

Total 1983 costs: $217.5 billion

Total 1993 costs: $382.1 billion

36.00/o

22.0%

SOURCE: U.S. Department of Agriculture, Economic Research Service, Food Cost Review, 1993, Agricultural Economic

Report No 696, Washington, DC, August 1994

❚ Contract Production and Vertical

Integration

As consumer demand for high-quality agricultural products has increased, agricultural marketing

has moved more toward coordinating production

methods and final market demand. As a result,

more farmers are working under contract to processors—that is, they produce specialty crops and

some types of livestock according to the terms of

a written agreement. Similarly, vertical integration (which means that a single firm handles the

different functions of production, processing,

marketing, and retailing) is becoming more and

more common in agriculture, accounting for a

larger share of processed vegetables, fresh vegetables, and potatoes (table 2-8). Production for sale

into open markets, where the producer delivers the

product to a middleman who then moves it to the

ultimate consumer, is less the rule.

Vertical production and contract production are

becoming more prevalent in animal agriculture.

Turkey production, like broiler production, involves more contract production and less production for open markets. Production of eggs and

even sheep and lambs is following suit. Largescale, integrated operations for hog production are

replacing traditional corn-hog production. Alan

Barkema of the Federal Reserve Bank in Kansas

City reports that “from 1980 to 1990, the percentage of the nation’s hog production under contract

or vertical integration doubled to about 10 percent.” He notes that other estimates place this

share as high as 16 percent in 1991 (4). Notably

bucking the trend is cattle feeding—a lower percentage of output involved contracts and vertical

integration in 1990 than in 1970.

Field crops continue to be sold mostly through

open markets, although contractual arrangements

are accounting for a larger share of food and feed

crops. No figures are available for oilseeds, but the

trend is likely to be similar to that for other field

crops. Michael Cook, an economist with the University of Missouri, offers four explanations for

this growing phenomenon in grain markets:

First, consumers have become more discriminating buyers not only of grain products, but of

all products including grain and oilseed-based

items. Second, biological, mechanical, and

chemical technology is beginning to permeate

the grain related industries, permitting participants to evaluate risks and consumer needs in

greater depth. Third, the demand for organizational forms that minimize the information
36I Agriculture, Trade, and Environment

Commodity 1970 1990 1970 1990 1970 1990

Field crops

Food grains 2 7 1 1 97 92

Feed grains 1 7 1 1 98 92

Cotton 11 12 1 1 88 87

Specialty crops

Processed vegetables 85 83 10 15 5 2

Fresh vegetables 21 25 30 40 49 35

Potatoes 45 55 25 40 70 95

Citrus 55 65 30 35 15 0

Other fruit 20 40 20 25 40 65

Livestock

Broilers 92 92 7 8 1 0

Turkeys 60 65 12 28 28 7

Hatching eggs 70 70 30 30 0 0

Market eggs 35 43 20 50 45 7

Manufactured milk 25 25 1 1 74 74

Hogs 1 18 1 3 98 79

Fed cattle 18 12 7 4 75 84

Sheep/lambs 7 7 12 33 81 60

SOURCE: Patrick M O’Brien, “lmplications for Public Policy, ” in National Planning Association, Food and Agricultural Markets:

The Quiet Revolution, Lyle P. Shertz and Lynn M Daft (eds.), Washington, DC, 1994, p 301

search and monitoring costs of operating in a

more segmented and higher technology marketplace is increasing. Fourth, an over expansion in

physical assets with few alternative uses created

financial burdens on many participants that required better risk-management tools (5).

Cook concludes that agricultural markets are

moving toward two markets: one a market in

which grain and oilseeds will be traded for traditional purposes, like livestock feed or industrial

uses, and a second in which commodities are purchased for specialized uses such as food processing, pharmaceutical uses, and cosmetic applications. Cook titles the former a “commodities”

market and the latter a “products” market.

❚ Industrial Uses of Farm Commodities

In addition to consumer demand for quality, industrial demand for farm commodities is encouraging shifts to contract farming. To keep production lines running smoothly, industrial firms

require a steady, uniform supply of raw materials.

When agriculture becomes the source of raw materials, its greater variability in quality and quantity must be addressed. Generally, this can be done

through contractual arrangements between growers and industrial firms that ensure uniformity in,

and constant supplies of, a material. Such arrangements are even more likely to be employed if the

industrial crop in question is new and grown on

relatively small acreages, as many industrial crops

are.

Although some analysts forecast a rosy future

for industrial crops, the expansion starts from a

small base, which limits the overall impact on demand. In 1991, an OTA report concluded that

“[l]arge-scale replacement of U.S. fuel use or primary chemical feedstocks would require signifi-
Chapter 2 The U.S. Agricultural System and Global Markets | 37

cant acreage for crop production. However, economics do not favor these developments at the

current time” (11). The president of the American

Farm Bureau Federation touted the virtues of industrial crops three years later—but also was careful to couch his remarks in terms of the future, not

the present:

Alternative uses of major farm commodities

are attracting attention (for example, ink made

from soybeans). Improvements will lead to

greater use, eventually requiring 100 million

bushels of soybeans to meet annual demand.

Corn growers eagerly promote ethanol use because it adds 20 cents to their pockets for every

bushel of corn sold. Ethanol, packing materials,

and other industrial uses of corn could require

850 million bushels a year. Paints, fiberboard

and medicines could also contain farm products.

Many more alternative uses will occur and will

contribute to a farmer’s income (7).

❚ Retail Food Marketing Changes

As the nation’s population gradually ages, as twoincome families have less time to prepare food at

home, and as nutrition and food safety become

ever more important to consumers, retailers are

providing a constant stream of new products, new

forms of packaging, and new market outlets. The

elderly, for example, want food products that meet

special dietary needs. Working parents want foods

that can be prepared quickly but are nutritious, and

health-conscious consumers want foods that are

low in fat and high in energy. The retailers’ response can be seen in more salad bars in full-line

food stores, and more take-out sections in gourmet food stores, to cite only two examples. As

Barkema has observed, “consumers are becoming

more discriminating, requiring the food industry

to design its products more carefully” (4).

In 1991, Senauer, Asp, and Kinsey pointed out

that “[s]ome consumers are willing to pay a premium for products such as free-range chickens,

natural beef raised without antibiotics or hormones, or wild game meat that is raised for sale”

(9). With consumers willing to pay, processors

have established contracts with growers that ensure that supplies of specialty items will be available. In the 1980s, these items translated into big

business. Senauer, Asp, and Kinsey, estimate that

sales of organic products—that is, products grown

without chemical pesticides or synthetic fertilizer

and distributed without artificial preservatives or

dyes—amounted “to over $3 billion annually.”

GLOBAL MARKETING TRENDS

Global markets for agricultural goods are changing as much as domestic markets. On the one

hand, certain developing countries have applied

new agricultural technologies that have improved

their crop yields, increased their degree of selfsufficiency, and decreased their need for imports.7

On the other hand, international trade agreements

have helped to open up international agricultural

markets and increase exports. Following the Tokyo Round of the General Agreement on Tariffs

and Trade (GATT), which ended in 1979, negotiations to expand trade in food products continued,

and were ultimately successful. Another strong

force pushing expanded global food trade has

been the economic prowess of Pacific Rim countries. As they have modernized and expanded their

economies, and as their trade surpluses have

grown, these countries have gradually opened

their markets to imports of semiprocessed and

retail-ready food products.

❚ Value-Added Food Trade

The impact of all these changes can be seen in the

changing composition of global food trade. The

higher yielding crops grown in developing countries lowered imports and reduced trade in bulk

commodities. Higher incomes and lower trade

barriers brought more trade in intermediate and

7Bangladesh exemplified the trend, with high-yielding varieties (HYV) used for 1.6 percent of all wheat planted in 1967-68 and 95.9 percent in 1982-83. In India, 4.2 percent of all wheat planted used HYV in 1966-67 and 76.0 percent in 1983-84. China increased from 10.1 percent

HYV in 1980 to 34.2 percent in 1984, an amazing increase in such a short period (1).
38 Agriculture, Trade, and Environment

100

■ Bulk commodities

80- ▲ Consumer-oriented

X Intermediate

60-

40-

20

0 ! I I 1 1 I

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agricultural Handbook

No 683, revised April 1994

consumer-oriented food products.8 The shift began in the early 1980s, at the same time that U.S.

exports of bulk commodities began to decline. Initially, the prevailing explanation for declining exports of bulk commodities was that higher price

supports in the 1981 farm bill, along with a stronger dollar and a weak global economy, made U.S.

commodities uncompetitive in global markets. As

global trade continued to shift toward more value-

-added trade (i.e., trade in both intermediate and

consumer-oriented products) and less bulk commodity trade, the explanation began to change. B y

1989, the USDA’s Foreign Agricultural Service

(FAS) reported that:

During the 1980s, growth in world trade was

greatest in consumer-oriented products, which

grew by around 3 percent, or $3.7 billion a year,

compared to less than 1 percent a year for both

bulk and intermediate products.

The report noted that:

Increases in demand were most concentrated

in meats, horticultural products, dairy products,

beverages and pre-packaged food preparations

(23).

What was unclear in the early 1980s was that

expanding demand for value-added food items

was changing the overall composition of world

food trade. The share of global food trade accounted for by consumer-oriented food products

rose 12 percentage points between 1980 and 1990,

from 30 to 42 percent, and the share accounted for

by intermediate food products increased 3 percentage points, from 21 to 24 percent. The share

accounted for by bulk commodities fell by 15 percentage points, from 49 percent to 34 percent. (For

more recent trends, see figure 2-7.) A small portion of the increased trade in consumer-oriented

8Bulk commodities are products that have not been processed, such as wheat, corn, rice, soybeans, and unmanufactured tobacco. Intermediate products are semiprocessed products, such as wheat flour, oilseed meal, vegetable oil, hides and skins, animal fats, wool, and refined sugar.

Consumer-oriented products are end products that require little or no additional processing for consumption, such as fresh and processed horticultural products, fresh and processed meats, dairy products, table eggs, and bakery products.
Chapter 2 The U.S. Agricultural System and Global Markets 39

■ Bulk commodities

I

▲ Consumer-oriented

30- x Intermediate

 20-

10-

O *

A

I 1 I 1 ! 1 I I I I 1 1 I I 1 1 I I 1 I

197 0 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U S Agricultural Trade, Agricultural Handbook

No 683, revised April 1994

and processed food products, especially the increase in meat exports, involved the use of bulk

commodities (feed for cattle, for example). But

that increase was not nearly large enough to offset

the loss of U.S. bulk commodity exports. As U.S.

crop production continued to rise during the 1980s

and bulk commodity exports declined (figure

2-8), commodity prices received by farmers fell,

decreasing farm income and expanding acreage

diversion programs.

In an attempt to discourage further stockpile

growth, the United States implemented a Payment-in-Kind (PIK) program in 1983 to reduce

crop acreage, using excess stocks to pay farmers to

lower production. That reduction in crop acreage,

coupled with an extremely severe drought in the

Midwestern grain belt, cut grain output by nearly

40 percent in 1983. The return of favorable weather in 1984 meant that surpluses built up again,

however, and led to the implementation in 1985 of

the Export Enhancement Program (EEP). EEP

was designed to stem the losses incurred in global

markets and used stocks as payments to exporters

for meeting foreign competition. Neither PIK nor

EEP, or even a weaker dollar and large export subsidies, changed the global trend toward more trade

in processed and consumer-oriented food products. By 1993, global trade in these types of products was up $45 billion over 1980. U.S. exports of

these items also increased, rising by $10.0 billion

between 1980 and 1993 (23).

❚ Bulk Commodity Trade

Although value-added food trade has risen sharply since 1985, trade in bulk commodities has, as

noted above, weakened. Global trade in bulk commodities totaled $87.5 billion in 1980 and fell to

$71.6 billion in 1990 (23). While traders and others remained optimistic about long-term prospects, the decline in bulk commodity trade continued, falling to $60.2 billion in 1993. Meanwhile,

trade in processed and consumer-oriented food

products rose from $89.5 billion in 1980 to $133.2

billion in 1990. With economic recovery under

way, global trade in processed and retail food

products reached $148 billion in 1993.

The new trends in global food trade should

have been familiar to the U.S. food industry, be-
40 Agriculture, Trade, and Environment

(million dollars)

Oilseeds Fruits, nuts Vegetables

Grains & and Animals and and Cotton and

Fiscal year products products products products products tobacco

1950 1,268 212 301 123 103 1,214

1955 1,178 410 405 230 143 761

1960 1,802 628 429 270 172 1,287

1965 2,441 1,094 527 323 213 982

1970 2,464 1,676 765 401 500 914

1975 11,230 4,852 1,704 805 1,049 1,938

1980 18,261 9,811 3,757 2,087 2,170 4,382

1985 13,285 6,195 4,075 1,886 2,204 3,555

1990 15,672 6,125 6,610 3,116 4,617 4,079

1992 13,858 7,156 7,756 3,940 5,944 3,763

1993 14,104 7,210 7,781 3,831 6,695 2,969

SOURCE U S Department of Agriculture, Agricultural Statistics, U.S. Government Printing Office, Washington, DC, 1981, p

564-565 and 1993, p 474-475, U S Department of Agriculture, Economic Research Service, Foreign Agricultural Trade of the

United States (FATUS), April 1994

cause they mirrored earlier patterns in U.S. food

expenditures. In the 1950s and 1960s, U.S. families began purchasing more and more ready-to-eat

food products, cutting back on purchases of flour,

potatoes, and other ingredients for homemade

food. Two-income families could, and did, spend

even more on ready-to-eat food items. The same

economic trends led to more food consumption

outside the home, in restaurants and fast-food establishments. These same trends are reflected in

world food trade: trade in processed and consumer-oriented food products has increased, and bulk

commodity shipments have declined. One result

is more jobs in food- processing industries, just as

more food consumption outside the home led to

more jobs in restaurants and fast-food establishments.

Global trade in bulk commodities obviously

will not disappear, any more than domestic use of

bulk commodities disappeared. The issue instead

is one of growth, and adapting to new trends in

global markets. Adapting is difficult for the

United States, for various reasons. Bulk commodities were at the heart of the U.S. agricultural export boom of the 1970s, and the value of grain exports more than quintupled over the decade (table

2-9). Exports of oilseed crops and products also

rose. But as global markets for bulk commodities

shrank in the 1980s, U.S. exports of grain and

oilseeds declined as well. Other items became the

driving force behind export expansion, even as

traditional farm programs continued to encourage

production of bulk commodities. Animal product

exports doubled between 1980 and 1993. Similarly, exports of fruits and nuts nearly doubled, and

exports of vegetables more than tripled.

The impact of the shift away from bulk commodities was dramatic. By 1993, bulk commodities

made up 44 percent of the value of U.S. agricultural exports, compared with 70 percent in 1980; intermediate products such as soybean meal made

up 20 percent, compared with 17 percent in 1980;

and consumer-oriented products accounted for 36

percent, compared with 13 percent a decade earlier (23). In little more than a decade, consumer-oriented products had more than doubled their share

of U.S. agricultural exports, rising from 13 to 36

percent. On a global scale, consumer-oriented

food products had gone from 29 to 46 percent. In

1993, the United States was about where world

markets were in 1983, relative to consumer-oriented exports. To catch up and remain the world

leader in food and agricultural trade, the United

States may need to rethink its farm programs and
Chapter 2 The U.S. Agricultural System and Global Markets | 41

its export expansion programs. Otherwise, it will

likely remain behind the times in global food markets.

❚ Global Marketing Shifts

One geographical area that has been central to the

growth of consumer food exports is the Pacific

Rim. Japan and Taiwan, along with Hong Kong

and Korea, are among the top 10 markets for consumer-oriented food exports—and exports to

these countries are growing rapidly. Red meat exports to Japan increased 83 percent between 1988

and 1993. Poultry exports to Hong Kong more

than tripled. Exports of fresh tree fruits to Taiwan

more than doubled, and exports of these items to

Malaysia increased by 50 percent (26).

As development has proceeded, Asian countries have become more prominent players in the

international trade arena. Asia replaced Europe as

the leading regional market for U.S. farm products

as early as 1979 (23). One-third of all agricultural

exports went to Asia at that time. The Asian share

has continued to increase and reached 37 percent

in 1993. In describing the evolution of this trade, a

1994 USDA report noted that:

Asians have begun to incorporate more Western-style food into their diets. This, in turn, has

led to a surge in demand for Western-style consumer-ready goods in Asia. Increases in demand

have been most marked for beef, horticultural

products, beverages, and pre-packaged foods.

Both U.S. beef and poultry meat exports to Asia

posted record levels in fiscal 1993. Fueled by a

burgeoning demand for a diversity of tastes,

U.S. sales of snack food, dairy products, fresh

vegetables, and tree nuts to Asia also reached

all-time highs (23).

Asian nations are not the only ones increasing

imports of food items. Canadian importers are exploiting new opportunities under the U.S.-Canada

Free Trade Agreement (FTA) and importing large

amounts of food products, a phenomenon that has

made Canada the world’s largest importer of U.S.

food products. Mexico is also increasing food

product imports and ranks third, after secondplace Japan, as an importer of U.S. food products.

Other countries in the top 10 include Hong Kong,

Germany, the United Kingdom, South Korea, Taiwan, France, and the Netherlands.

The expansion of trade in food products has had

a positive effect on the nation’s trade balance.

Some of the processed items shipped, however,

are tradeoffs for bulk commodities. Exports of

corn and red meat to Japan provide a good illustration. Total shipments of red meat to Japan increased steadily and reached $3.1 billion in 1993,

a full 83 percent above the value of red-meat shipments made in 1988 (26). Japanese corn imports

totaled 16 million metric tons in 1993, the same

amount as five years earlier (25). The Japanese

case is not unique. According to the February

1994 issue of the USDA’s FAS grain circular (24):

After expanding at about 5 percent annually

throughout the 1960s and 1970s, the growth rate

for corn utilization outside the U.S. fell dramatically in the 1980s. If China and other major corn

exporting countries are excluded, corn utilization in the remaining countries only increased a

net 6.7 mmt [million metric tons] from marketing year 1980/81 to 1993/94, a rate of about 0.2

percent annually. Over the same period, U.S.

corn utilization expanded 37.7 mmt, a rate of

about 2.3 percent annually.

Slow growth rates were not alone in hurting

bulk commodity exports. Another USDA grain

circular (25) noted that Latin America is importing more wheat and now accounts for 15 percent

of world trade in wheat, but that “U.S. wheat has

become relatively uncompetitive.” In this

instance, both the European Union (EU) and Argentina have successfully replaced the United

States as a supplier of wheat to Latin America.

Although drought or some other unforeseen

event could lead to rapid growth in bulk commodities almost overnight, as the 1970s demonstrated, the availability of supplies from other exporting countries suggests that the likelihood of

permanent increases is low. Planning public

policy around such an expectation does not appear

to be very realistic.

Alternatively, the probability of further growth

in consumer food exports appears higher, and

planning public policy to take advantage of that

growth seems more promising. What is evident on
42 | Agriculture, Trade, and Environment

the basis of past trends is that some change in

policy is needed. The United States had a 23 percent share of global food and agricultural trade

from 1980 to 1984, but only 20 percent in 1992.

Over the same period, the EU took advantage of

the shift toward processed food products and increased its share of world food trade from 14 percent in the years 1980 to 1984, to 19 percent in

1992 (23). Even though the United States has increased its consumer food exports, world markets

have grown even faster. The ultimate outcome:

other countries have absorbed a more-than-proportional share of world food markets, and the

United States has been losing out.

THE U.S. DILEMMA

Part of the U.S. dilemma with regard to agricultural exports has been the aforementioned slow

growth in world markets for bulk commodities, as

well as fierce competition from the EU and other

food-exporting countries. But part of the reason

for the declining market share may be ascribed to

the United States’ overemphasis on bulk commodities. Price supports and deficiency payments for

wheat, rice, cotton, and feed grains prevent the

United States from taking maximum advantage of

opportunities to export intermediate products

such as soybean meal and wheat flour. While

global trade in semiprocessed products increased

by $13.5 billion between 1980 and 1993, U.S. exports of oilseed products dropped, from $9.8 billion to $8.3 billion (13,15). U.S. soybean acreage

also declined, from 68 million acres harvested in

1980 to 57 million acres in 1993 (13,15). Despite

changes in the 1990 farm bill designed to free up

more program acres for soybean production, soy

bean plantings continued to lag. Apparently, support payments for planting other crops are more

important than planting more soybeans, no matter

how many acres are available for doing so.

Like global trade in intermediate agricultural

products, global trade in consumer-oriented food

products also rose dramatically between 1980 and

1993, by $45 billion. U.S. exports of these items

increased, by $10 billion—but mostly in response

to the efforts of private firms. Government promotion programs continued to focus on exporting excess supplies of wheat, feed grains, and other

price-supported bulk commodities. With budgets

already limited, there were few funds left over to

promote exports of processed and retail-ready

food items. Farm legislation may also act as a

constraint. Examples include the legislative prohibition on planting of fruits and vegetable crops

on flex acres and the administrative regulation

against grazing and haying of CRP acres. Both

prevent more production of items that are in growing demand in global markets.

RESEARCH AND DEVELOPMENT

The task of providing information to the public on

trends in international agricultural trade falls to

government agencies and the agricultural research

community. The challenges vary from reporting

events in individual countries that will shape trade

in the coming year to assessing trade agreements

that will influence the patterns of food exports and

imports for coming decades. On the commercial

side, the task includes monitoring trends in food

consumption, along with changes in government

regulations, to anticipate new marketing opportunities. On the economic front, the task includes

following trends in earnings and assessing where

trade patterns are likely to change.

Achievements in these research areas contrasts

sharply with achievements in research on food

production. On the technological side of agriculture, the nation has benefited from a long stream

of scientific breakthroughs that raised agricultural

output and lowered the real cost of food and fiber.

Although such technological breakthroughs were

newsworthy achievements in earlier decades,

most are greeted today with little fanfare. Their

lack of visibility does not, however, mean that

they are unimportant, or that food costs are absorbing a larger share of national income. In as recent a period as 1983 to 1992, the percent of disposable personal income spent on food in the

United States declined on average from 13.0 percent to 10.6 percent—a truly remarkable achievement, considering that food purchases consist
Chapter 2 The U.S. Agricultural System and Global Markets 43

more of processed and ready-to eat items than they

have before (15).

One explanation for the different level of research achievements can be found in the budgetary resources devoted to food production and agricultural trade. In 1993, the nation devoted $3.0

billion to agricultural research through federal and

state research institutions (16). As shown in figure

2-9, the allocation of these funds heavily favored

crop and livestock production. Research on crops

received 34.8 percent of the total funds, while research on animals received 23.8 percent. Both far

outdistanced funding on international and domestic markets, which accounted for 4.8 percent of total research funds. Research expenditures on

people and institutions accounted for even less:

3.0 percent of the total, or $88,353,000 of federal

funds. With the Uruguay Round Agreement

(URA) implemented this year, and the new World

Trade Organization (WTO) in place, opportunities

for expanded trade (and the adjustments to the

agriculture sector they may bring) may justify

more investment in examining changing international markets and their impact on U.S. agriculture.

Food consumption trends in other countries

differ from trends in the United States. As a mature industrial nation with a population structure

to match, U.S. food demand is relatively stable.

Many of the countries that will be responsible for

shaping the composition of future global trade in

food products, however, are at a different stage of

development, with different income levels and

different responses to changes in incomes, food

prices, and availability of new food products. For

the United States to become proficient at marketing food in these countries, it must become more

knowledgeable about their internal conditions,

about food tastes and taboos, and about cultural

habits that shape food consumption. In essence,

the United States must learn more about the differences among countries and shape marketing programs to match other countries’ needs rather than

our own. This will be a major challenge for the research community, as well as the business community, in coming years.

Marketing/trade

Environment/ 4.4% Crops

Forestry

12.7%

Animals

23.80/o

Total funding $2,970,911,000

SOURCE: U.S. Department of Agriculture, Cooperative States Research Service, Inventory of Agricultural Research, Fiscal Year 1993

Washington, DC, 1993.

CHAPTER 2 REFERENCES

1.

2.

3.

4.

Dalyrymple, Dana G., “Development and

Spread of High-Yielding Wheat Varieties in

Developing Countries,” Agency for International Development, Washington, DC, 1986.

Lines, A.E., Reeder, R., and Acker, D., “An

Economic Comparison of Tillage Systems,”

Ohio State University Cooperative Extension

Service, AEX 506, Columbus, OH, 1990.

National Planning Association, “The Transforming of U.S. Food Marketing,” prepared

by A.C. Manchester, in Food and Agricultural Markets: The Quiet Revolution, Lyle P.

Shertz and Lynn M. Daft (eds.) (Washington,

DC, 1994), pp. 7-18.

National Planning Association, “New Roles

and Alliances in the U.S. Food System,” prepared by Alan Barkema, in Food and Agricultural Markets: The Quiet Revolution, Lyle P.

Shertz and Lynn M. Daft (eds.) (Washington,

DC, 1994), pp. 96-118.
44 | Agriculture, Trade, and Environment

5. National Planning Association, “Structural

Changes in the U.S. Grain and Oilseed Industry,” prepared by M.L.Cook in Food and

Agricultural Markets: The Quiet Revolution,

Lyle P. Shertz and Lynn M. Daft (eds.) (Washington, DC, 1994), pp. 118 -125.

6. National Planning Association, “The Quick

Service Restaurant Industry,” prepared by

Z.T. Nagengast and C. Appleton, in Food and

Agricultural Markets: The Quiet Revolution,

Lyle P. Shertz and Lynn M. Daft (eds.) (Washington, DC, 1994), pp. 133-149.

7. National Planning Association, “A Farm Perspective on the Future of the U.S. Food System,” prepared by D. Kleckner in Food and

Agricultural Markets: The Quiet Revolution,

Lyle P. Shertz and Lynn M. Daft (eds.) (Washington, DC, 1994), pp. 209-212.

8. Resources for the Future, The Cropland Crisis, Myth or Reality, Pierre R. Crosson (ed.)

(Baltimore, MD: The John Hopkins University Press, 1982).

9. Senauer, B., Asp, E., and Kinsey, J., Food

Trends and the Changing Consumer (St. Paul,

MN: Eagan Press, 1991).

10. Tweeten, Luther G., “Is it Time To Phase Out

Commodity Programs?” Paper presented at

Farm Policy Conference, Mar. 5, 1993, Columbus, OH, 1993.

11. U.S. Congress, Office of Technology Assessment, Agricultural Commodities as Industrial Raw Materials, OTA-F-476 (Washington, DC: U.S. Government Printing Office,

May 1991).

12. U.S. Congress, Office of Technology Assessment, A New Technological Era for American

Agriculture, OTA-F-474 (Washington, DC:

U.S. Government Printing Office, August

1992).

13. U.S. Department of Agriculture, Agricultural

Statistics (Washington, DC: U.S. Government Printing Office, 1981).

14. U.S. Department of Agriculture, Agricultural

Statistics (Washington, DC: U.S. Government Printing Office, 1989).

15. U.S. Department of Agriculture, Agricultural

Statistics (Washington, DC: U.S. Government Printing Office, 1993).

16. U.S. Department of Agriculture, Cooperative

State Research Service, Current Research Information System, Inventory of Agricultural

Research; 1992, Washington, DC, 1993.

17. U.S. Department of Agriculture, Economic

Research Service, Agricultural Resources,

Situation and Outlook Report, AR-29 (Washington, DC: U.S. Government Printing Office, February 1993).

18. U.S. Department of Agriculture, Economic

Research Service, Agricultural Resources,

Situation and Outlook Report, AR-30 (Washington, DC: U.S. Government Printing Office, May 1993).

19. U.S. Department of Agriculture, Economic

Research Service, Agricultural Resources,

Situation and Outlook Report, AR-32 (Washington, DC: U.S. Government Printing Office, October 1993).

20. U.S. Department of Agriculture, Economic

Research Service, Food Cost Review, 1993,

AER No. 696 (Washington, DC: 1994).

21. U.S. Department of Agriculture, Economic

Research Service, AREI Updates: Farm Machinery, No. 1, 1995.

22. U.S. Department of Agriculture, Economic

Research Service, Economic Indicators of the

Farm Sector; National Financial summary,

1993, ECIFS 13-1, 1995.

23. U.S. Department of Agriculture, Foreign

Agricultural Service, Desk Reference Guide

to U.S. Agricultural Trade, Agricultural

Handbook No 683, 1989, 1990, and 1994.

24. U.S. Department of Agriculture, Foreign

Agricultural Service, Grain: World Markets

and Trade, Circular Series FG 2-94, Washington, DC, February 1994.

25. U.S. Department of Agriculture, Foreign

Agricultural Service, Grain: World Markets

and Trade, Circular Series FG 4-94, Washington, DC, April 1994.
Chapter 2 The U.S. Agricultural System and Global Markets | 45

26. U.S. Department of Agriculture, Foreign

Agriculture Service, Ag Exporter, Washington, DC, July 1994.

27. U.S. Department of Agriculture, Soil Conservation Service, Potential Cropland Study

(Washington, DC: U.S. Government Printing

Office, 1975).

28. U.S. Department of Agriculture, Soil Conservation Service, National Resources Inventory (Washington, DC: U.S. Government

Printing Office, 1977).

29. U.S. Department of Commerce, Economics

and Statistics Administration, Bureau of the

Census, Current Population Reports: Consumer Income, Series P60-188, Washington,

DC, September 1993.
Global Markets

and

International

Trade Agreements

ince the 1970s, U.S. exports of goods and services have

grown rapidly. Agriculture and industry alike have turned

to international markets as a place to sell their excess production, bolster employment, and enhance revenues. Yet

the United States’ fortunes in international food markets have

fluctuated considerably. The booming markets for commodities

(e.g., wheat, corn, and other grains) of the 1970s gave way to declining shipments in the early 1980s; the mild recovery of the late

1980s was succeeded by relative stagnation in the early 1990s.

Over the past two and a half decades, the United States has lost its

commanding share of world commodity trade.

Although exports of value-added food products (e.g., fruits,

vegetables, and meats) continue to grow, the future for commodity exports is uncertain. Future shipments of bulk commodities

depend on a number of factors not directly affected by U.S.

policy: weather at home and abroad, foreign economic prospects,

global population growth, and the introduction and application of

new agricultural technologies in other countries. But future shipments also depend on factors directly related to U.S. policy: the

shape of government programs to come, how those programs

mesh with trends in growing global markets; and the impact of

international trade pacts such as the Uruguay Round Agreements

(URA) and the North American Free Trade Agreement (NAFTA).

This chapter examines the possible effects of these factors on

U.S. prowess in world food markets. Generally, it appears that

government policies appropriate in the 1960s and earlier are far

less appropriate for the 1990s and the 21st century. Agricultural

markets have changed, much as the structure of American agriculture has changed, and new growth opportunities differ from

those of the past. The 1960s emphasis on bulk-commodity ex- | 47
48 | Agriculture, Trade, and Environment

ports, for example, has persisted into the 1990s, at

a time when high-value products, and particularly

consumer-oriented food products (e.g., ready-toeat foods), comprise a growing share of global

trade and of U.S. exports.

Currently, neither domestic export programs

nor international trade agreements have helped

U.S. farmers to synchronize U.S. production and

exports with trends in global markets. The URA

provisions may nudge U.S. farmers toward exporting more high-value products, but domestic

farm and export programs will discourage them

from doing so. Clearly, one of the major challenges ahead is to reshape these programs, and the

incentives they provide, so that U.S. farmers are

growing the kinds of products demanded by international markets. An obvious example of the

need for such reshaping can be found in the

oilseed market. Even though global demand for

soybeans has grown, U.S. farm programs led U.S.

farmers to plant fewer acres with soybeans, and

U.S. exports of the crop stagnated (although this

situation was addressed in the 1990 farm bill).

Similarly, even though fruits and vegetables are in

high demand globally, the use of government flex

acres for fruit and vegetable production is limited.

Future legislation may need to address the use of

flex acres and currently idled acres to encourage

more output of fruits, vegetables, soybeans, and

other items valuable in the global marketplace.

The United States’ approach to international

trade agreements also reflects a multiplicity of

purpose. Even though it is a strong supporter of international trade negotiations and international

trade agreements, the United States continues to

implement policies for supporting commodity

prices and subsidizing commodity exports that

often conflict with the spirit of international trade

agreements. For example, the U.S.-Canada Free

Trade Agreement (FTA) lowered barriers to trade,

including trade in food and agricultural items, between the two countries. U.S. farm programs,

however, restrain wheat production and U.S. export subsidies encourage wheat exports. The result: wheat prices in the United States rise, and the

price of wheat overseas falls. Because U.S. wheat

prices are above world levels, Canada in 1994

shipped more wheat to the United States, which

responded by pressuring Canada to restrict its

wheat exports.

The URA, which went into effect on January 1,

1995, will further reduce trade restrictions. Fewer

restrictions on trade may, as illustrated by the

U.S.-Canada wheat imbroglio, increase the likelihood of agricultural trade conflicts in the future,

given current policies. Thus, the United States

finds itself at a crossroads where the dichotomy

between its support for global free trade and its

policy of insulating agricultural interests from the

global marketplace may be too burdensome to

sustain. The country is confronting a crucial

choice: whether to move toward free agricultural

markets and open world trade, or continue subsidized exports and restrictions on agricultural imports. The decision will, to a substantial degree,

determine the economic standing of U.S. agriculture in the global economy of the 21st century.

GLOBAL MARKETS AND U.S.

PARTICIPATION

World population growth, rapid economic development, and several rounds of international trade

negotiations have expanded global trade in food

and agricultural items. World shipments of food

and agricultural goods totaled $41 billion in 1970,

and increased to $208 billion in 1993 (17).

Twenty-one percent of the agricultural goods

traded came from the United States in 1993, making it the world’s largest agricultural exporter—although it was followed closely by the European

Union (EU). The impact on the U.S. farm economy was substantial, as export markets absorbed

sizable amounts of bulk commodities (e.g., such

as wheat, corn, and other grains) and growing

amounts of value-added foods (e.g., fruits, vegetables, meats, and processed foods). The shipments

raised farm income, lowered farm program costs,

and slowed the decline of rural communities.

The growth of U.S. agricultural exports has not

followed a steady path. Between 1970 and 1981,

the annual value of U.S. agricultural exports

soared from $7 billion to $43.8 billion (figure

3-1). Then, a combination of a stronger dollar, a
Chapter 3 Global Markets and International Trade Agreements 49

Export volume (million tons)

I

Total agricultural exports ($ billions)

 20

Bulk commodity exports ($ billions)

1971 73 75 77 79 81 83 85 87 89 91 93

Fiscal years

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agriculture Handbook No 683, revised January 1993

changing global economy, and new farm legislation drove farm exports down to a low of $26.3

billion in 1986 (17). Bulk commodities suffered

the most, declining from $30.4 billion in 1981 to

$14.2 billion in 1986. New farm legislation, a

weaker dollar, and export subsidies reversed the

trend after 1986, and farm exports reached $43.1

billion in 1993. Bulk commodity shipments also

recovered a portion of their loss, reaching $19.0

billion in 1993.

Three key changes in the global economy precipitated the export decline of the early 1980s.

First, the EU made a concerted and highly subsidized push to gain world market share in agricultural products—a move that depressed world

prices, limited U.S. agricultural exports, and

earned the sobriquet “trade war.” Second, new

technologies raised grain output in many developing countries. This “Green Revolution” obviated

the developing countries’ need for substantial

grain imports. Third, world food trade shifted toward value-added food products. Nonetheless, the

United States remained the world’s largest exporter of agricultural goods—although a significant

part of the growth was due to increased exports of

processed and consumer-ready food products.

Imports of food and agricultural products into

the United States have also grown, rising steadily

over the past several decades. The types of imports change from time to time, more as the result

of domestic political pressures than changes in

foreign supplies. Meat imports, for instance, are

occasionally restricted by “voluntary restraints”

imposed on countries exporting meat to the

United States; wheat imports decline in response

to threats of Section 22 action;] and size, grade or

1 Section 22 was part of the Agricultural Act of 1935. It authorized the President to impose restraints on import of farm commodities whenever imports threatened to interfere with the effectiveness of price support programs for commodities covered by the Agricultural Adjustment

Act of 1933.
50 Agriculture, Trade, and Environment

❏ Competitive imports

■ Non-competitive imports

Total agricultural imports

5

0

1971 73 75 77 79 81 83 85 87 89 91 93

Calendar year

SOURCE U S Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide, 1994

other specifications occasionally restrict fruit and

vegetable imports. Such actions contrast sharply

with an overall U.S. trade policy that favors lower

trade barriers, lower export subsidies, and expanded channels of global commerce.

As a food importer, the United States is a significant world player, ranking as the world’s fifthlargest behind Germany, Japan, Italy, and the

United Kingdom (15). U.S. food imports accounted for about 12 percent of world food trade

in 1993, down from the 14 percent of 1971 but up

from the 9.5 percent of 1981. Some of the growth

in imports comes from items not grown in the

United States, but a much larger part consists of

items that are also grown domestically. Competitive imports (imports of items also grown here) increased from $1.6 billion in 1950 to $18.9 billion

in 1993 (figure 3-2) and now make up 75 percent

of all food imports, compared with a 50-percent

share in 1950. They include a wide range of items

such as meats, vegetables, fruits and nuts, oilseed

products, and sugar and sugar products. Noncompetitive or supplementary food imports (imports

of items not grown in the United States) increased

more modestly, from $1.6 billion in 1950 to $5.5

billion in 1993. Included are items such as bananas, coffee, cocoa, tea, spices, silk, rubber, nursery stock, certain beverages, and processed food

products. Together, competitive and supplementary imports helped raise U.S. food and agricultural imports from $3.2 billion in 1950 to $24.4 billion in 1993 (17).

Some of the growth in imports reflects changing U.S. food tastes, as well as immigration and

internal population growth. Many immigrants

brought deeply ingrained food preferences from

their native countries. Most of the increase, however, has stemmed from price inflation, economic

growth, and the broadening of food tastes that

comes with higher incomes.

A final factor has been lower trade barriers. The

rounds of international trade negotiations completed since the GATT was established in 1947

(box 3-1 ) have lowered U.S. tariffs and other border restrictions. Although agricultural trade barriers--especially nontariff barriers that protect internal support programs for farmers-were

largely left out of the early rounds of trade negoti-
Chapter 3 Global Markets and International Trade Agreements 51

Geneva, Switzerland 1947 . . . . . . . . First round 22 countries participated

Annecy, France 1949 . . . . . . . . Second round 32 countries participated

Torquay, England 1950-51 . . . . . Third round 33 countries participated (Germany joined GATT)

Geneva, Switzerland 1956, . . Fourth round 34 countries participated (Japan joined GATT)

Geneva, Switzerland 1961-62, Dillion Round 37 countries participated

Geneva, Switzerland 1963 -67..... Kennedy Round 62 countries participated

Tokyo, Japan 1972 -79... Tokyo Round 102 countries participated

Punta del Este, Uruguay 1986 -93.. Uruguay Round 117 countries participated

I

SOURCE Office of Technology Assessment, 1995

ations, lower tariffs on food items from these

rounds brought about a steady increase in world

food trade and a steady rise in U.S. food imports.

With increased food trade came a globalization of

food tastes: Americans ate more European

cheeses, and Europeans ate more American chicken, pork, and beef. Even though Europe and the

United States carefully protected their farm sectors from import competition (which increased the

overall difficulty of negotiating lower trade barriers), some trade barriers to food products were

eased. Trade between the United States and Europe continued to increase.

Trade also expanded between the United States

and Asian countries, although the composition of

that trade was different. Exports from the Pacific

Rim countries were largely industrial products;

Pacific Rim imports were more heavily oriented

toward raw materials and bulk commodities. Japan, for example, imported large quantities of raw

materials from the United States and exported

large amounts of finished goods (which helps explain the large trade differential between the two

countries). In 1993, the trade U.S./Japanese differential amounted to $60.5 billion, or 46 percent

of the total U.S. trade deficit (2).

Exports to Japan from the United States totaled

$46.7 billion in 1993, while imports from Japan

amounted to $107.2 billion. Of the $46.7 billion in

goods that Japan imported from the United States

in 1993, $8.4 billion consisted of agricultural

goods (figure 3-3). Although these figures made

Japan the world’s largest single market for U.S.

agricultural goods, such shipments offset only a

small portion of the $60.5 billion Japanese trade

surplus. Figure 3-3 also illustrates that despite

years of negotiations over market access for such

products as beef and citrus fruits, U.S. agricultural

exports to Japan have increased only modestly.

INTERNATIONAL TRADE POLICY AND

U.S. AGRICULTURE

The gradual easing of import restrictions on food

and agricultural products is a post-World War H

phenomenon. Before the war—more explicitly,

during the Great Depression—the United States

had established an extensive framework of import

restrictions designed to protect its farmers from

import competition. That restrictive framework

was part of an extended history of promoting agricultural exports abroad and protecting agricultural

interests at home.

As early as 1789, the first Congress of the

United States—in only its second legislative

act—levied tariffs on imported goods. The move

was not aimed solely at protecting domestic industries from foreign competition. Rather, it was

chiefly designed to raise revenue. From 1789 until

the introduction of an income tax in 1913, tariffs

and land sales were the main sources of revenue

for the federal government. However, as incomes

taxes provided the government with operating

funds, and as industrial development made U.S.

industries less dependent on tariffs or other forms

of economic protection, the focus of U.S. trade

policy moved away from tariffs and toward eco-
52 Agriculture, Trade, and Environment

120

■ U.S. agricultural exports to Japan

100 ❏ Total U.S. exports to Japan

.

80- Japanese exports to the U.S.

I

I

40 I

20-

0 I

1984 1985 1986 1987 1988 1989

Calendar years

1990 1991 1992 1993

SOURCES: Executive Office of the President, Council of Economic Advisors, Economic Report of the President (Washington,

DC: U.S. Government Printing Office, 1995), U S Department of Agriculture, Foreign Agricultural Service, Desk Reference

Guide to U.S. Agricultural Trade, Agriculture Handbook No 683, revised January 1990

nomic development. In 1916, Congress passed the

Underwood-Simmons Tariff Act, which specified

that the President could lower many tariffs, and

that some items could be made duty free. When

the United States entered into World War I in

1917, tariffs became a moot issue, as the overseas

war effort required large exports of U.S. products.

The evolution of an agricultural trade policy independent of the nation’s generally open trade

policy began after World War I. Farmers had been

encouraged by the federal government to expand

their production capacity to meet the war needs.

When the war ended abruptly in 1918, they were

confronted with shrinking markets and falling

prices. Responding to demands for relief, Congress enacted the Emergency Tariff Act of 1921,

which imposed heavy duties on imported agricultural goods. However, the action had little effect

on farm prices, which continued to be depressed

by the excessive supplies burdening commodity

markets. To make matters worse for farmers, in

1922 Congress passed the Fordney-McCumber

Act. This legislation gave the President the power

to raise tariffs on items farmers purchased—a

power that the President exercised 32 times during

the next decade, mostly to raise industrial tariffs.

As industrial tariffs rose, farmers charged they

were being treated unfairly because they were

forced to buy inputs on a highly protected domestic market, while selling products on open markets

abroad. The debate went on for a decade. Twice

Congress passed legislation to rectify the apparent

inequity; twice Presidents vetoed it. As rural economic conditions continued to deteriorate, Congress produced legislation establishing a Farm

Board to ensure orderly marketing of farm commodities (1929); voted in the Smoot-Hawley Tariff Act, which raised tariffs to record highs ( 1930);

and approved an Agricultural Adjustment Act

(1933) that established stable domestic prices for

agricultural goods aimed at “parity” with other

sectors of the economy. The Farm Board proved

unworkable, the Smoot-Hawley Tariff Act a disaster, and the AAA in need of amendment.
Chapter 3 Global Markets and International Trade Agreements | 53

Throughout the history of the nation, Presidents have been

responsible for initiating changes in trade policy.

The AAA was amended to address trade problems in 1935. Section 22 authorized quantitative

limits on imports of certain commodities, such as

wheat, cotton, and some sugar, so that domestic

price support programs for these commodities

would not be hampered.2 Section 32, in contrast,

was an initial move toward establishing export

subsidies. The new section provided funds (30

percent of all revenues earned from tariffs and duties) for financing programs to dispose of surplus

agricultural commodities. In the initial years, the

disposal efforts focused on giving surplus items to

domestic groups, such as schools and churches,

although some funds were spent to subsidize specific commodity exports. Neither was very successful in solving surplus production problems.

Only the outbreak of World War II brought the

. . . and the Congress has been responsible for determining

the final direction and magnitude of change in the nation's

trade policy.

magnitude of demand needed to balance out excess agricultural supply.

EVOLUTION OF EXPORT PROMOTION

PROGRAMS

Farm exports boomed with the outbreak of World

War II, and the farm economy remained strong for

most of the next decade. With the end of the Korean War in 1953, however, U.S. farm exports fell

precipitously and agricultural surpluses grew. In

1954, Congress passed the Agricultural Trade Development and Assistance Act (Public Law 480)

to boost farm exports. The act, which came to be

commonly known as the Food for Peace program,

offered food assistance to needy nations and also

provided the basis for U.S. overseas market development programs.

2

Numerous amendments were made to Section 22. The first came on February 29, 1936 (c. 104, Sect. 5,49 Stat. 1152); the rest on June 3,

1937 (c. 296, Sect. 1, 50 Stat. 246); January 25, 1940 (c. 13, 54 Stat. 17); July 3, 1948 (c. 827, Title I, Sect. 3, Stat. 1248); June 28, 1950 (c. 381,

Sect. 3, Stat. 261); June 16,1951 (c. 141, Sect. 8(b), 65 Stat. 75); August 7,1953 (c. 348, Title I, Sect. 104,67 Stat. 472); and January 3,1975

(Pub. L 93-618, Title I, Sect. 171,88 Stat. 2009). In more recent years, Section 22 has become less importantt, as lower price supports have

reduced the incentives for other countries to export price-supported items to the United States.
54 | Agriculture, Trade, and Environment

The Foreign Market Development Program

(FMDP)—a term that covered all of the new

promotion programs authorized by P.L.

83-480—drew together the U.S. Department of

Agriculture (USDA) and private U.S. interest

groups to promote overseas sales of U.S. agricultural products. The programs under FMDP used a

variety of means to aid exports, which included

developing livestock production in other countries to promote exports of U.S. feedstuffs, as well

as food store displays in other countries to

introduce foreign consumers to retail products

made with U.S. food grains. These so-called

cooperator programs slowly built markets abroad.

The food aid programs similarly introduced a

wide range of food commodities to foreign consumers. All of the programs focus on building

long-term demand and consequently operated

even during the export boom years of the 1970s.

Today, the cooperator programs operate with an

annual budget of roughly $37 million (4). Under

P.L. 480, the United States annually exports about

$1.5 billion in food and agricultural items, or

more than $15 billion in agricultural goods since

1980 (17). Donations under Section 416 of the

Agricultural Act of 1949 (as amended in 1985)

continue to provide surplus commodities held in

Commodity Credit Corp. (CCC) inventories.3

Outlays for Section 416 totaled $2.2 billion between 1983 and 1993. These programs were expanded during the 1980s, as commercial sales

slumped.

Other programs to assist U.S. agriculture were

established during the slump of the 1980s, including such CCC mechanisms as the Export Guarantee Program (GSM-102, which provides sixmonth to three-year credit for foreign purchasers

of U.S. agricultural goods) and the Intermediate

Export Credit Guarantee Program (GSM-103,

which provides three-year to 10-year credit for

foreign purchasers). Both programs assure U.S.

banks that loans to foreign buyers who default will

be repaid by the U.S. government. GSM-102, the

major credit guarantee program inaugurated in

September 1980, has assisted in the export of $35

billion in agricultural commodities, including $7

billion that also received subsidies under the Export Enhancement Program (EEP). As reauthorized by the Food Security Act of 1985, the Export

Enhancement Program “sweetens” trade deals by

giving exporters bonus certificates that may be redeemed for commodities owned by the CCC.

Since its inception in 1985, EEP has distributed

more than $6.2 billion in bonuses, leading to shipments of 143 million tons of wheat, 6.2 million

tons of wheat flour, 13.2 million tons of barley,

917,000 tons of rice, and a variety of other agricultural exports (17).

The Food, Agriculture, Conservation, and

Trade Act of 1990 produced the Market Promotion Program (MPP) as a replacement for the Targeted Export Assistance (TEA) program that operated from 1986 to 1990. Both programs were

intended to boost exports of specialty crops, processed commodities, and consumer food items.

The MPP was authorized to operate for fiscal

years 1991 through 1995 to help U.S. producers

and other groups to promote exports of U.S. agricultural products by assisting exporters with cash

or CCC generic commodity certificates.4 According to USDA, an MPP annual authorization of

$200 million was expected to lead to an annual increase of between $400 million and $1.4 billion of

agricultural exports (16). From 1990 through

1993, when appropriations approximated $200

million, exports of intermediate (semiprocessed)

commodities rose an average of $166 million

annually. Exports of consumer-oriented food

items rose an average of $1.5 billion annually between 1990 and 1993.

3 CCC is USDA’s financing institution for its price support and export operations. It can draw up to $25 billion for the U.S. Treasury.

4 Generic certificates are paper statements issued by USDA that authorize the holder to receive commodities owned by the CCC equal in

value to the amount specified in the certificate. As its name suggests, the generic certificate may be redeemed for any commodities owned and

available from the CCC.
Chapter 3 Global Markets and International Trade Agreements 55

Fiscal year EEP total Wheat EEP total Percent wheat

$1,000s $1,000s

1985 22,477 10,920 48.6

1986 256,250 126,922 49,5

1987 927,759 541,601 58.4

1988 1,013,655 819,534 8 0 8

1989 338,765 288,929 8 5 3

1990 311,751 241,882 77,6

1991 916,599 767,702 83.8

1992 968,199 813,205 8 4 0

1993 967,278 774,826 80.1

1994 (until 3-17-94) 597,678 452,888 7 5 8

Total 6,320,411 4,838,410 7 6 6

SOURCE: U.S. Congress, General Accounting Office, Wheat Support The Impact of Target Prices Versus Export Subsidies,

GAO/RCED-94-79 (Washington, DC, June 1994), p 48-49

IMPACT OF EXPORT PROMOTION U.S. government makes few efforts to promote

PROGRAMS

Twenty-one percent of all agricultural exports in

FY 1993 were assisted by one kind of government

program or another (16). But has this panoply of

promotion programs, which together account for

more than 70 percent of all U.S. funds spent on export promotion (l), been a marked success? The

answer is both yes and no. Examined from the perspective of the commodities supported, the programs have had a positive influence on export levels. Confirmation comes in various forms,

including the strong support these programs receive from the commodity interest groups involved and the large amount of criticism leveled

against them by competitors abroad. Much of that

criticism focuses on the price-depressing effects

of export subsidies, which lower the returns for

their nonsubsidized commodity exports.

If the assessment is broadened beyond the specific commodities involved and takes into account

world markets that are moving toward processed

and consumer-ready food items, as discussed in

chapter 2, the benefits of the current programs are

less clear. The rapid growth of processed food

trade globally and the weaker markets for bulk

commodities have changed overseas marketing

opportunities. With the notable exception of the

MPP, which is geared toward promoting fruits,

vegetables, poultry, wine, and wood products, the

consumer-oriented food items. The cooperator

programs, for example, have traditionally spent

far more on grain, feed, and oilseed exports than

on such consumer-oriented products as fruits,

vegetables, and meats (l). Likewise, most EEP

funds have been directed toward subsidizing exports of wheat, in an effort to stave off EU dominance in the global wheat market (table 3- 1). EEP

support can be and has been criticized because the

subsidized sales may have taken place anyway,

and instead of reducing overall EU sales, EEP’s

effect may simply have been to divert those sales

to other countries. This in turn could have reduced

U.S. market share in those countries. With the

MPP, the major question is whether, if the program did not exist, private interest groups would

have spent the same amount of money on market

promotion. There appears to be little argument

with MPP’s focus on higher valued products.

By contrast, EEP’s heavy focus on bulk commodities can be criticized for other reasons. Before the world food shortages of the 1970s, many

importing nations had little appreciation for the

benefits of grain stockpiles, but their outlook is

different today. The effect is clear in stagnating

global trade in bulk commodities, and in stable

levels of bulk commodity exports from the United

States. Although bulk commodity exports may increase in the future, such increases will likely be
56 | Agriculture, Trade, and Environment

due to ephemeral phenomena (bad weather, for example) or heavy export subsidies (which raises

questions about the net benefit gained). From the

nation’s standpoint, a more effective policy would

be to take advantage of markets that are growing

rapidly, such as those for vegetables and meat, and

reduce emphasis on markets that are stagnant, such

as those for wheat and other bulk commodities.

A second problem with current export promotion programs is their lack of cogency. Even if the

MMP is a step in the right direction, for example,

it has been criticized as suffering from a vagueness

of purpose and direction, which renders it less efficient and effective than it should be. Critics contend that other programs suffer from a similar malaise. Abel, Daft and Early conclude that:

USDA’s allocations of market development

funds [for the FMDP and MPP] have sometimes

taken place without sufficient regard to maximizing the effectiveness of these expenditures

with respect to either expanding exports or

benefiting agricultural producers. Neither Congress nor USDA has provided a clear and defensible set of criteria that define the intended universe of market development activities to be

covered by both the FMDP and MPP (1). 

There have been many suggestions for improvement. Some contend that the FMDP and the

MPP need more specific guidelines for which

products to promote, that the programs’ objectives should be more clearly defined, and that export performance and future prospects should be

evaluated market by market (1).

A final problem associated with government

programs is that they simply cost too much. To

maintain export shipments of bulk commodities

in the face of shrinking global markets, more and

more programs have had to be added, with higher

costs. Early on, programs such as Section 416 and

Titles II and III of P.L. 480 provided food aid at

little or no cost to foreign recipients. As foreign

competitors complained and U.S. costs for cargo

preference rose,5 the United States substituted export credit guarantees for food aid. Export loans

were extended to any market in which there was a

reasonable prospect of repayment, a step that has

come under considerable criticism.6 When loans

and food aid were no longer effective, given

changing global food trends, the United States

added direct export subsidies through EEP. At

each step, costs increased. Bulk shipments, however, flattened out after initially responding to

EEP subsidies, in contrast to a continuing growth

in shipments of value added food items. (See figure 3-1.)

Although experts disagree about the future of

bulk commodity exports, there seems to be more

of a consensus that growth in processed and consumer-ready food exports will continue, barring a

major downturn in the world economy. This prognosis leaves the United States with hard choices

regarding the ideal level of land retirement programs; the optimum amount of crop output; the

appropriate level of export promotion outlays for

bulk and processed commodities; and the amount

of outlays for research on traditional and industrial crops, as well as for improved understanding

of global markets. Because these choices each involve trying to anticipate future trends in global

agricultural production and demand, none of them

is clear cut. It is also important to keep in mind the

state of domestic food balances, even though food

surpluses have been a far larger problem than food

scarcity in the United States over recent decades.

INTERNATIONAL TRADE AGREEMENTS

The United States pursues its agricultural trade

goals not only through domestically based export

promotion programs and trade restrictions, but

also through a variety of international trade agree5 Federal law requires that a specified proportion of food aid be shipped on American cargo ships, which have substantially higher costs per

ton of cargo shipped. The costs of shipping food aid rose as the so-called cargo preference law was implemented.

6 GAO estimated that about $6.5 billion of the $13.55 billion in outstanding loan guarantees would not have been repaid if the programs had

ended on June 30, 1992 (9). Substantial losses were incurred when Iraq defaulted, following the Gulf War in 1990. After the breakup of the

Soviet Union, Russian defaults were prevented only through debt rescheduling by the so-called Paris Club.
Chapter 3 Global Markets and International Trade Agreements | 57

ments. A decade of negotiation was required, but

today the United States is party to the U.S.-Israel

Free Trade Agreement, the U.S.-Canada Free

Trade Agreement (FTA), and the North American

Free Trade Agreement (NAFTA) with Canada and

Mexico. It is also a founding member and major

sponsor of the General Agreement on Tariffs and

Trade (GATT), which dates back to 1947 and was

succeeded this year by the World Trade Organization (WTO).

Since its inception, GATT and more recently,

the WTO has been the chief mechanism through

which the United States has pursued international

trade negotiations and the goal of trade liberalization. Eight rounds of multilateral negotiations to

lower tariffs have taken place. Each of these

rounds significantly reduced tariffs on industrial

products, but had much less of an impact on agricultural trade—partly because agriculture trade is

affected less by tariffs than by nontariff barriers

(NTBs) such as import quotas, border fees, variable levies, and import licenses. Although these

barriers have generally been inconsistent with

GATT rules, GATT members, over the decades,

have become quite adept at acquiring exceptions

or waivers that suit their needs.7

The United States, for example, secured a

GATT waiver for its dairy price support programs

in 1951.8 In 1955, it received another waiver for

Section 22 quotas on sugar.9 The United States

also encouraged special GATT treatment for agriculture when it set up programs to aid exports of

agricultural products, including direct export subsidy programs and food aid programs. Both were

prohibited for industrial products under GATT

rules. As other countries began to implement export subsidies, the United States pushed for and

won agreement in the Tokyo Round for limits on

export subsidies for agriculture. The provision—

that subsidies are acceptable only as long as a

country does not take more than an equitable share

of the world market—limited but did not prohibit

countries from operating agricultural export subsidy programs.10

The exceptions granted the United States have

not been unique. The EU, for example, used similar exemptions to operate the Common Agricultural Policy (CAP) it established in 1961. Such

moves to protect domestic agriculture under

GATT have been considerably at odds with decades of GATT efforts to liberalize trade, most of

which had little effect on agriculture. The Kennedy Round negotiations (1965-1967), for instance,

were not markedly successful in reducing barriers

to agricultural trade. After extended efforts to

break an impasse between the United States and

the EU (then the European Community, or EC),

the agricultural discussions ended up focusing on

a further reduction of tariffs and a World Grains

Arrangement that, concluded under the auspices

of the International Wheat Council, ultimately did

not work. The Tokyo Round (1974-1979) also

7 Article XI of the General Agreement prohibits the use of quantitative import and export restrictions. There are three exceptions that relate

to agriculture: (a) temporary export restrictions may be applied to prevent or relieve shortages of food or other essential products; (b) import

restrictions may be used for any agricultural or fisheries product where such restrictions are necessary to enforce domestic marketing or production restriction programs or for the removal of temporary surpluses; and (c) both import and export restrictions may be used if necessary for

establishing standards for classification, grading, or marketing of commodities (11).

8 When imports of dairy products threatened to interfere with the price support program in 1951, Congress amended Section 22 of the Agricultural Act of 1935, making mandatory the imposition of import quotas or fees whenever imports threatened to render ineffective any domestic

price support program—even if the quotas or fees were inconsistent with the obligations of the United States under previous trade agreements.

The 1951 amendment to Section 22 stated that “[n]o trade agreement or other international agreement heretofore or hereafter entered into by the

United States shall be applied in a manner inconsistent with the requirement of this section.” 7 U.S.C. 624(f).

9 In addition to Section 22 import restrictions, import quotas on sugar are imposed using authority under Headnote 2 of Part 10A of Schedule

1 of the U.S. Tariff Schedule (TSUS). The United States also has a GATT waiver for this headnote authority. For a discussion of other import

restrictions used by the United States, see (11).

10 An “equitable share” was defined in the Subsidies Code negotiated in the Tokyo Round as “the average share in three recent, representative years” (11).
58 | Agriculture, Trade, and Environment

brought little progress, even though agriculture

was identified as a separate agenda item in the Tokyo Declaration.11 In the end, the United States

provided additional access for cheese and other

livestock products, Japan expanded its quotas for

beef and citrus imports, and the EU reduced its tariffs on tobacco, beef, and poultry.

Unsurprisingly, agriculture proved a major

stumbling block in the recent Uruguay Round

(1986-1993). Throughout the early years of the

Uruguay Round negotiations, the United States

pushed for the complete elimination of all subsidies and restrictions on agricultural trade, while

the EU argued for a slow phase-out of agricultural

subsidies. Early in 1989, after the inauguration of

a new U.S. President, and the appointment of a

new cabinet and a new U.S. trade negotiator, the

United States eased its hardline position on agriculture, while the EU, responding to budget pressures from higher agricultural spending, eased its

opposition to reduced support levels. Eventually,

after negotiations had broken down several times

over the extent to which support levels should be

reduced, an “historic” agreement was reached in

December 1993. After extensive review, legislation was introduced into both houses of Congress

to approve the Uruguay Round Agreements

(URA). On December 1, 1994, the Senate followed the House of Representatives in passing the

legislation by a wide margin of votes. After seven

years of negotiations and six months of consideration by the Congress, the URA went into effect

on January 1, 1995. Its agricultural provisions are

summarized in box 3-2.

TERMS OF THE NEW TRADE

AGREEMENTS

The new bilateral and multilateral agreements for

managing international trade are more inclusive

than past agreements. Among the new issues that

have been recognized and addressed for the first

time is the impact of trade on the environment. In

a multilateral context, trade and environmental issues will be addressed by a new WTO Committee

on Trade and the Environment, which has been

commissioned “to immediately prepare for the

WTO’s work in this area by examining:

 the transparency of the present international

system;

 exports of domestically prohibited goods;

 the relationship between the GATT dispute

settlement system and that of international environmental agreements;

 environmental measures with an effect on

trade, such as packaging, labeling, and marking

requirements, product standards, and environmental taxes or charges; the relationship between market access and the environment (including tariff escalation)” (4).

Trade and environment issues are addressed

further in chapter 5 of this report.

❚ GATT (WTO)

The URA’s provisions on agriculture have been

touted as significant steps toward liberalizing

global agricultural commerce. They cover a range

of issues, including domestic subsidies, tariffs,

import quotas, intellectual property rights, and

certain health and safety standards. The new provisions require WTO members to eliminate all

quotas, variable levies, voluntary export restraints

(VERs), and similar nontariff barriers to agricultural trade, and replace them with tariffs. Accordingly, for the United States, all Section 22 quotas

and Meat Import Act VERs must be converted to

tariffs, which must be lowered by an average of 36

percent over six years (24 percent for developing

countries) beginning in 1995. Tariffs on each category of imports must be cut a minimum of 15 percent (10 percent for developing countries). With

regard to agricultural products that are currently

subject to import quotas or bans, members must

ensure that imports account for at least 3 percent

of the base-period domestic consumption in 1995

and 5 percent by the year 2000. (An exception to

11 The Tokyo Declaration can be found in (3).
Chapter 3 Global Markets and International Trade Agreements 59

IMPLEMENTATION PERIOD:

Six years, beginning in 1995 (1 O years for developing countries).

MARKET ACCESS:

Convert nontariff barriers (NTBs) to tariff equivalents, reduce tariffs by 36 percent on average, with minimum tariff cuts of 15 percent; require minimum access of 3 percent, expanding to 5 percent of base

period domestic consumption levels for products covered by NTBs; maintain current access for products covered by NTBs with greater than 5 percent access; and establish special quantity-triggered and

price-triggered import safeguards for agricultural products subject to tariffication. Base period for increased market access actions is 1986-1988.

EXPORT SUBSIDIES:

Reduce quantity of subsidized exports from 1986-1990 base by 21 percent; reduce budgetary outlays

for export subsidies from 1986-1990 base by 36 percent, begin reductions from the higher of

1986-1990 average or, under certain conditions, the 1991-1992 average; make reduction commitments

on a product-specific basis; impose budgetary disciplines on export subsidies for processed products;

ban use of export subsidies for products not subsidized during the base period. Base period for export

subsidies is 1986-1990.

INTERNAL SUPPORT:

Reduce total aggregate measurement of support by 20 percent, with credit for reductions made since

1986; establish criteria for non-trade-distorting policies; and provide criteria for production-limiting policies. Base period for internal support IS 1986-1988.

SANITARY AND PHYTOSANITARY MEASURES:

Base SPS measures on science, using risk assessment methodologies; encourage use of international

standards but recognize the right to use stricter standards; require transparency in development and

Implementation of SPS measures.

SPECIAL AND DIFFERENTIAL TREATMENT FOR DEVELOPING COUNTRIES:

Require lower reduction commitments for developing countries, equal to two-thirds of corresponding

commitment for developed countries, to be Implemented over 10 years; exempt least-developed countries from reduction commitments. Base period for internal support actions is 1986-1988.

DUE RESTRAINT PROVISION:

Provides that policies that conform to the new disciplines and commitments on domestic and export

subsidies are sheltered from international challenge under WTO/GATT during the implementation period.

SOURCE: U. S. Department of Agriculture, Foreign Agricultural Service, Agricultural Provisions of the Uruguay Round, Washington,

DC, January 1994, p. 9.

this rule is Japan, which, instead of converting its 21 percent in volume, within six years, using

ban on foreign rice to a tariff immediately, agreed 1986-1990 as a baseline. With regard to domestic

to import 4 percent of domestic consumption in farm subsidies, the new agreement requires all

1995, and 8 percent within eight years.) members to reduce current domestic support to

The URA text on export subsidies follows sim- farmers by 20 percent over a six-year period (10

ilar lines. The major agricultural exporters (the years for developing countries), using 1986

United States and the EU) must cut their export through 1988 levels as a base. Certain support prosubsidies by 36 percent in budget outlays, and by grams deemed to have few or no adverse effects on
60 I Agriculture, Trade, and Environment

Recent congressional action on trade matters includes the

North American Trade Agreement (NAFTA) and the Uruguay

Round Agreements (URA). NAFTA will lower trade barriers

between Mexico, Canada, and the United States while the

URA will ease trade barriers and reduce export subsidies

between a hundred or more nations.

trade—such as conservation measures, crop insurance, and extension programs—are exempted

from this requirement, as are deficiency payments

and food aid programs. Although deficiency payments are not considered to affect international

trade patterns adversely, their impact on production patterns in the United States suggests that

U.S. exports may be skewed in favor of the crops

covered by target prices. Thus, while the United

States is free to continue target price programs under the URA, their effects on domestic production

patterns and export composition raise questions

about the wisdom of using them.

Health and safety issues associated with agricultural trade generally fall under the rubric of

“sanitary and phytosanitary” (SPS) measures,

which include regulations to protect human, animal, or plant life and health from disease, nonindigenous species, dangerous levels of pesticide use,

and so forth. Traditionally, GATT’s article XX exempted from GATT rules domestic measures

“necessary to protect human, animal, or plant life

or health”-a description that includes most SPS

measures. However, the URA emphasizes that

members may employ SPS measures “only to the

extent necessary to protect human, animal, or

plant life or health” and must use SPS measures

that are “least restrictive” to trade. The text also

stipulates that SPS measures cannot generally be

maintained “without sufficient scientific evidence.” An exception permits countries-under

certain circumstances in which scientific evidence

is not available—to set SPS standards that are not

based on scientific evidence. Technical regulations and standards, such as packaging and labeling requirements, must conform to similar rules.

Finally, the URA establishes the WTO, which,

as noted above, has now taken on the GATT agenda and other responsibilities. Perhaps most germane for agricultural trade, the WTO has much

stronger powers with regard to trade disputes than

GATT did. Under the WTO, panel decisions hold

unless there is a unanimous member vote against

them. Under the old provisions, panels of experts

were convened to resolve disputes between members, but authority to enforce decisions was extremely limited. Any GAIT member could, in

fact, block a panel decision, and GATT could not

actually enforce the decisions of its panels. Its

only prerogative was to grant permission for the

complaining nation to use trade sanctions against

an offending nation if the latter did not comply

with the GATT panel ruling. Under the new provisions, a defending party:

. . . cannot block the formation of a panel and

strict time limits are imposed for each step of the

process. Once the panel has issued a report it will

no longer be possible for wither party to block

adoption of the report . . . Perhaps the most significant improvement in the process is that the

complaining party will be given the right to

retaliate if the offending party does not implement the recommendations of the panel within

the agreed or arbitrated time limits (14).

One result of the URA is much stronger

sions for enforcement of panel decisions.

provi-
Chapter 3 Global Markets and lnternational Trade Agreements | 61

Negotiations under the Uruguay Round went on for 7 years, covering Presidents Reagan, Bush, and Clinton. The negotiations

ended in December 1993 and Congress gave final approval for the massive agreement in December 1994. Most of the URA

provisions will be implemented by 2000. -

■ NAFTA

Agricultural trade was not the defining issue in the

NAFTA negotiations that it was in the Uruguay

Round talks. Nonetheless, the United States, Canada, and Mexico remained deadlocked for months

over many of the same issues: domestic agricultural practices and other NTBs. At the behest of

Canada, which sought to preserve its supply management system in dairy and poultry products, as

well as its subsidies for transporting grain, two

separate agricultural market access agreements

were negotiated: between the United States and

Mexico, and between Mexico and Canada.12 The

United States and Canada agreed that they would

continue to abide by the U.S.-Canada FTA’s agricultural trade provisions.

Unlike the URA, which simply reduces tariffs

on many of the agricultural goods traded among

its members, NAFTA completely phases out

North America’s regime of agricultural tariffs.

The time period for the tariff phase-out depends

on the crop or product. For example, tariffs on

about one-half of the agricultural products traded

between the United States and Mexico were eliminated on January 1, 1994, when NAFTA came into

effect. However, tariffs on extremely “import-sensitive” agricultural exports-products that have

traditionally required substantial legislative
62 | Agriculture, Trade, and Environment

protection from imports—are phased out over 15

years. Import-sensitive products include corn and

beans for Mexico, and orange juice, peanuts, and

sugar for the United States.

NTBs, such as import quotas, are handled in a

slightly different manner. Under NAFTA, the

United States and Mexico must convert them either to ordinary tariffs, which are phased out according to the agreed-upon tariff schedules, or tariff-rate quotas (TRQs). In opting for a TRQ, either

Mexico or the United States may allow a specified

amount of duty-free imports of a certain good, and

impose a predetermined tariff (equal to the estimated value of the preexisting NTB) on all imports above that amount. The specified amount

expands, and the tariff is lowered, until all imports

are duty free. NAFTA also provides “safeguards”

against trade surges for selected products, which

means that if imports exceed a specified level for a

specified product, the importing NAFTA country

may levy short-term tariffs on that product. The

specified “trigger” levels increase over a 10-year

transition period. Such products include live hogs

(Mexico) and fresh tomatoes imported between

certain dates (United States).

Although such provisions generally apply to

industrial products, NAFTA requires that certain

agricultural products meet a rules-of-origin test—

that is, to qualify for NAFTA’s preferential rates,

these products must be entirely grown or substantially processed in a NAFTA country. As an example, the peanuts used in making peanut butter that

is traded between Mexico and the United States

must all be grown in a NAFTA country; and traded

sugar must be grown and refined in a NAFTA

country.

NAFTA’s position toward domestic agricultural subsidies, as well as export subsidies, is considerably less stringent than that of the URA. With regard to domestic supports, NAFTA simply

exhorts members to “endeavor to work toward

support measures that (a) have minimal or no

trade-distorting or production effects; or (b) are

exempt from any applicable domestic support reduction commitments that may be negotiated under the GATT.” The agreement also recognizes

that export subsidies are “inappropriate,” except

as a means of countering subsidized exports from

countries outside the NAFTA group. Consequently, the NAFTA text includes several measures that

address the issue: for instance, a NAFTA exporter

must give another NAFTA country at least three

days’ notice before introducing an export subsidy.

Quality and SPS standards were an important

part of the NAFTA negotiations. The final NAFTA text, for example, allows the United States to

continue using marketing orders—specifications

regulating quality, cosmetic appearance, and as a

result, quantity and price—for fruits and vegetables. However, the agreement also states that

when they institute such measures, the United

States and Mexico must offer no-less-favorable

treatment to “like” products that are imported for

processing. With regard to SPS standards, NAFTA upholds each party’s right to choose and maintain the SPS measures it deems appropriate for its

needs. The measures must, however, be grounded

in scientific principles and risk assessment, must

not constitute a disguised barrier to trade, and

should be used only to the extent required to attain

a country’s chosen protection level. NAFTA’s

treatment of labeling and packaging requirements

follows similar lines. These areas are discussed

further in chapter 5.

Given that agricultural trade has been a particularly contentious issue in North America of late,

the NAFTA dispute resolution provisions are key

to the ultimate success of the agreement. Like the

WTO, NAFTA relies on panels of trade and economic experts to settle potential disputes among

members, and allows for consultation with experts

in other disciplines. The agreement also creates a

trilateral commission on agricultural trade that

will monitor how the NAFTA agricultural provisions are implemented and administered.

IMPLICATIONS OF GATT AND NAFTA

A major difference between the URA and NAFTA

is that limits on export subsidies are included in

the URA. Export subsidies assumed a much greater importance under the URA because of its

broader coverage. During the URA negotiations,

export subsidies escalated as the United States and

the EU vied for a nearly stagnant world market.
Chapter 3 Global Markets and International Trade Agreements 63

Outlay commitment U.S.$1,000 EU1,000 ECU Canada C$1,000

Wheat & products

1995 765,490 2,069,400 311,000

2000 363,815 1,141,100 199,000

Rice

1995 15,706 58,100 NA

2000 2,369 39,600 NA

Coarse grains

1995 67,735 1,296,700 116,000

2000 46,118 882,900 75,000

Meat (beef, pork, poultry)

1995 21,377 2,300,800 NA

2000 37,874 1,468,400 NA

Dairy products

1995 185,626 3,046,600 126,500

2000 116,618 2,011,400 80,800

SOURCE:International Agricultural Trade Research Consortium (Tim Josling, et al ), “The Uruguay Round Agreement on Agriculture An Evaluation, ” Commissioned Paper No 9, University of Minnesota, St Paul, Minnesota, July 1994

Both governments tried to position themselves for

maximum negotiating advantage. Under the final

agreement, all countries that use export subsidies

will gradually lower their use. The levels negotiated by the United States, the EU, and Canada,

the three largest subsidizers, are summarized in

table 3-2 for major commodities for 1995 and

2000.

The amount of subsidies negotiated and the

amount specified in the individual country schedules submitted to GATT were measured in each

country’s currency, which makes comparisons

among countries more complicated. To overcome

this difficulty, subsidies for 1995 and 2000 were

converted into U.S. dollars using exchange rates

from November 199413 and are shown in table

3-3. Wheat export subsidies are the largest for the

United States and Canada, while dairy subsidies

are the largest for the EU, followed by meat,

wheat, and coarse grains. Levels of export subsidies for wheat and wheat products will be cut nearly in half between 1995 and 2000 for all countries.

For coarse grains, the reduction is not as large

(about one-third). For meat, the EU will remain a

large subsidizer even in 2000, as it will for dairy

products.

The amount of agricultural export subsidies allowed for 2000 are lower for all countries and all

commodities. An overall reduction of 36 percent

was agreed to by Canada and the EU, while the

United States agreed to a reduction of 49 percent.

Some variations among commodities and within

commodity groups were evident in the final U.S.

subsidy numbers, although the differences are not

extreme. With regard to dairy products, for example, there were large reductions for some items

and smaller reductions for others. U.S. wheat subsidies were lowered more in percentage terms than

coarse grains, but the total amount of subsidy for

wheat was much larger. Export subsidies for rice

were cut significantly, but some offset was provided by the marketing loan program, which allows growers to repay their price support loans at

world market prices, then sell their rice for either

domestic consumption or export at lower prices

and still cover costs of production. Examined

from this perspective, the marketing loan program

is another form of export subsidy. It is available

13On November 9, 1994, the ECU traded at 1.2599 U.S. dollars and the Canadian dollar traded at 0.7375 U.S. dollars, according to the Wall

Street Journal, p. C 16.
64 | Agriculture, Trade, and Environment

for crops other than rice, although USDA has chosen not to implement it for them.

Export subsidies are only a part of total outlays

for agricultural commodities. In addition, producers in the United States and the EU receive production payments that offset lower market prices.

These payments act as indirect export subsidies

although, because they are available to internal

buyers as well as export buyers, they are not technically export subsidies. Neither U.S. deficiency

payments nor the new compensation payments

under the reformed CAP had to be lowered under

the terms of the URA.14 Each country must establish a ceiling for the amount of support afforded

producers through internal support mechanisms.

Average support provided to producers for all

commodities must be less than levels extended for

the 1986-88 period. Since payments have declined in the interim years, this leaves open the opportunity for both countries to provide larger income support payments in the future. However,

since income support payments cover a large portion of total production, costs are considerable and

may act as a constraint on their use, given budget

limitations in both the United States and Europe.

The URA allows other types of indirect export

subsidies to continue. Schott (4) outlines the details:

The agreement expressly excludes several

types of export subsidy programs from the new

disciplines. Export credits, credit guarantees,

and insurance programs are not covered, but

governments commit themselves to develop and

adhere to internationally agreed disciplines in

these areas. In addition, privately financed export aid is not covered as long as it is not mandated or arranged by the government or extended

to products receiving other governmental support.

This provision ensures that those producer-financed export subsidy schemes that provide benefits comparable to those under similar government programs are subject to GATT disciplines.

Food aid programs were also excluded from coverage. This exemption could become important if

countries redefine export shipments to countries

in economic or environmental distress.

Besides the URA, the United States is also implementing the terms of NAFTA. Will the two

agreements help the United States to compete

more effectively in the world market for food and

agricultural products? They are projected to do so,

albeit modestly. According to USDA, the URA is

expected to boost U.S. agricultural exports by

$1.6 billion to $4.7 billion in nominal terms by

2000 (3.8 to 11.0 percent increases over 1993 exports of $42.6 billion), and between $4.5 billion to

$8.7 billion by 2005 (13). Farm income is expected to be $1.1 billion to $1.3 billion higher than

would otherwise be the case in 2000 (2.4 to 2.8

percent increases over 1993 net farm income of

$45.5 billion), while government outlays are projected to decline by $0.7 billion to $1.3 billion

(4.4 to 8.1 percent decreases over 1993 government outlays of $16.0 billion). In 2005, farm income is projected to increase by $1.9 billion to

$2.5 billion, and government outlays could decline by $2 billion to $2.6 billion (13).

Estimates from other organizations, although

they project expanded trade, are less optimistic.

The U.S. International Trade Commission (ITC),

for instance, concludes that “because the Uruguay

Round agreement will increase both export opportunities and the level of imports for most agriculturalsectors, the overall net trade effects are likely

to show negligible to modest gains at the sector

level.” As a result of the URA, the ITC projects

small (1 to 5 percent) increases in exports of livestock, meat, poultry, and eggs; modest increases

(5 to 15 percent) in exports of such bulk commodities as grains, as well as in fruits and vegetables;

and “sizable” increases (more than 15 percent) in

dairy products and beverages (18). Also according

to the ITC, U.S. agricultural exports of grains and

14 In 1992, the EU reformed the CAP, instituting mandatory set asides to lower output and compensating European farmers with government

payments that are based on the hectares of crops planted, not on the level of output. U.S. target price payments are based on acreage and yields

although the yields are frozen at 1985 levels. Flex acre provisions provide additional limitations with payments limited to 85 percent of the base

acres on a farm.
Chapter 3 Global Markets and International Trade Agreements

Outlay commitment U.S.$1,000 EU$1,000 Canada$1,000

Wheat & products

1995 765,490 2,607,237 229,363

2000 363,815 1,437,672 146,763

Rice

1995 15)706 73,200 NA

2000 2,369 49,892 NA

Coarse grains

1995 67,735 1,633,712 85,550

2000 46,118 1,1 12)366 55,313

Meat (beef, pork, poultry)

1995 21,377 2,898,778 NA

2000 37,874 1,850,037 NA

Dairy products

1995 185,626 3,383,841 93,293

2000 116,618 2,534,163 59,5900

 65

SOURCE: lnternational AgriculturalTrade Research Consortium (Tim Josling, et al ), “The Uruguay Round Agreement on Agri

culture An Evaluation, ” Commissioned Paper No 9, University of Minnesota, St Paul, Minnesota, July 1994

oilseeds, certain fruits, poultry, and dairy products

to Mexico are likely to increase modestly to considerably in the long term under NAFTA, while

imports from Mexico will rise somewhat for frozen vegetables, citrus juice, and some fruits, such

as strawberries, grapes, and melons. In an assessment somewhat similar to that of the URA, the

ITC concludes that NAFTA “will likely have a

minimal impact on overall U.S. agricultural competitiveness” (19).

Could the gains have been greater? A key factor

would be whether internal subsidies, such as those

that the EU and United States provides its farmers,

are actually affected by the URA. In the final analysis, this appears not to be the case. The base years

from which reductions in domestic farm subsidies

are calculated (1986- 1988) represent a period in

which the governments of both the United States

and the EU lavished considerable sums on their respective agricultural sectors (through both production and export subsidies). Since that time,

however, domestic budget woes, plus the easing

of financial problems in U.S. agriculture, have led

to reform of U.S. policies and forced the EU to

launch reforms of the CAP. These reforms and reductions have lowered total outlays on agricultural programs considerably. Consequently, even

though total outlays must be lowered by 20 percent under the URA, actual reductions will not be

required.

In addition, and as noted earlier, the URA exempts a number of subsidies from its disciplines,

such as conservation measures, crop insurance,

and disaster programs. These programs are not

considered to have adverse effects on trade because the payments do not ultimately support

commodity prices. Included among them are general service programs such as research, extension,

and pest and disease control, as well as inspection,

market promotion, and infrastructure support.

The result is an agreement on internal supports

that is, according to Josling et al., “elaborate window dressing, but transparently nothing of substance” (6). The United States will not have to

make additional cuts to comply with the URA,

and the EU’s concessions will be “relatively limited” (6). Reductions in export subsidies will also

be modest, given ongoing CAP reform, although,

notably, the United States will match the EU’s

ton-for-ton reductions in subsidized exports in

wheat. By extension, it seems likely that, as Josling et al., point out, “the United States will . . . concentrate its export subsidy bonuses in those markets that continue to face subsidized competition
66 | Agriculture, Trade, and Environment

from the EU” (6). Developments such as these

may in fact serve to draw U.S. attention and dollars to promoting high-value products, although

the process may be slow and incremental. In its report on the URA, the ITC noted that U.S. exports

of such high-value products as fruits and vegetables, poultry, livestock and meat, beverages, and

certain specialty items may benefit from new provisions in the URA’s SPS agreement.15

Because both the URA and NAFTA lower and/or

eliminate tariffs and traditional NTBs such as

quotas, some have speculated that member countries may compensate by using their SPS regulations as barriers to agricultural imports. Kuo and

Yanagisawa contend, for example, that both Japan

and South Korea may seek to protect their newly

opened rice markets by imposing discriminatory

safety standards on post-harvest chemical treatments of rice (8). Such uses of health and safety

standards are not new: the EU’s Third Country

Meat Directive and its ban on meat products from

animals given certain hormones are cases in point.

In a related matter, packaging and labeling requirements that fall under the aegis of “environmental” measures have increasingly been the subject of disputes involving such products as traded

beverages. Whether high-value U.S. agricultural

exports would be significantly impeded by a global increase in SPS and “environmental” measures

used as trade barriers is not yet clear, but remains

a possibility—and the ability of the WTO or

NAFTA to effectively and consistently prevent

the use of SPS and environmental measures in this

manner has yet to be determined. These subjects

are discussed further in chapter 5.

TRADE AGREEMENTS AND DOMESTIC

PROGRAMS

Although the URA will have little direct influence

on the level of domestic subsidies that the United

States and the EU give their farmers, it seems likely that the new trade agreements, along with ongoing budgetary pressures, will exert pressure to disengage from the elaborate system of farm support

mechanisms that both countries currently have in

place. Lower tariffs and the process of converting

certain NTBs to tariffs will bring more competition from outside suppliers. Price supports may

again act as incentives for other countries to ship

more products to the United States. Target price

programs may become more costly as foreign supplies lower global and internal market prices, expanding the differential between target and market

prices and increasing the level of budgetary payments.

The United States has already taken steps to

correct some problems that have grown out of the

increased globalization and greater trade orientation of the past two decades. An example is the

creation of flex acres in the 1990 farm bill, a step

that was designed to lower budgetary cost and reverse the decline in U.S. soybean acreage. The decline was the outgrowth of complex interactions

between the economics of domestic farm programs and the expansionary tendencies of foreign

suppliers. (See box 3-3.) But the result was more

soybean acreage in Brazil and Argentina and less

acreage and fewer exports of soybeans and soybean products from the United States.

Beyond the internal problems, current farm

programs also have led to external problems. One

very visible problem has been the matter of wheat

imports from Canada. The problem revolved

around a U.S. target price for wheat that encouraged more wheat production than markets would

absorb without large export loans and export subsidies. These programs expanded exports and

raised the domestic price of wheat, drawing in

wheat from Canada. Before the U.S.-Canada FTA

was implemented, such shipments were discouraged by threats of Section 22 actions. Under the

FTA, however, Canada had the opportunity to ship

wheat into the United States. Although technically permissible, the shipments led to tensions between the two countries, as U.S. wheat farmers

saw the benefits of export expansion programs si15 The agreement provides for “mutual acceptance of national inspection systems and adoption of a “regionality” provision that permits

exports from certified disease-free areas within a country” (18).
Chapter 3 Global Markets and International Trade Agreements | 67

Soybeans, like all crops, must compete for available cropland. As part of this competition, farmers compare

expected returns per acre from other crops with expected returns from soybeans. In making these comparisons,

farmers take into account that wheat, corn, other feed grains, rice, and cotton are covered by both price support

programs and deficiency payments under target price programs. Soybeans are covered only by price supports

The availability of price supports and, since 1973, target price payments for other crops, favors the production

of other crops over soybeans This is especially true across the Corn Belt, where yields of corn have Increased

relative to soybean yields As corn yields rose and production exceeded market requirements, acreage reduction

programs were Instituted to hold down total output of corn and other program crops As a portion of the nation’s

cropland was idled, less acreage was left for soybeans, which contributed to a downward trend in soybean acreage From a high of 72 million acres of soybeans planted in 1979, U.S. soybean acreage declined and totaled 61

million acres in 1994, while acreage in other countries continued to rise (figure 3-4).

FIGURE 3-4: Area of Soybean Harvest, 1964-1993

30-

25- United States

SOURCES U S Department of Agriculture, Economic Research Service, Production, Supply and Demand Database, 1994

In an effort to reverse the downward trend in soybean acreage, the 1990 farm bill provided that soybeans

could be planted on a portion of acreage previously devoted to corn and other major program crops without loss

of future eligibility for target price payments. This flexibility provision, along with unusual weather conditions, ended

the downward trend in soybean acreage. Modest increases occurred in 1991 and 1992, with more than 59 million

acres planted. Acreage Increased to 60 and 61 million acres for 1993 and 1994, respectively—although some analysts argue the increase may have been due to the extremely wet spring and fall of 1993, which prevented plantings of other program crops. The added flexibility IS not given much credit for the increased acreage. Soybean

acreage is not expected to increase very much unless further changes are made in current farm legislation.

SOURCE Office of Technology Assessment, 1995

phoned off to a competitor country. After several clarified-but the fundamental conflict remains,

years of dispute, the United States requested in even though the URA will further limit the use of

1992 that a dispute settlement panel be setup to restraints on wheat imports.1 6

resolve the issue. Some aspects of the case were

16 For an extended review of the U.S.-Canada trade dispute over wheat, see (12).
68 | Agriculture, Trade, and Environment

As the URA is implemented over the next several years, other conflicts between the new agreements and old farm program regulations are likely

to arise. Similarly, there may be more conflicts between the old programs and new global market

trends. Two examples where current program regulations are in conflict with global market trends

are the prohibition on planting of fruits and vegetables on flex acres and the prevention of grazing

on Conservation Reserve acres. Both tend to hold

down production of items that are in growing demand in world markets. While they may have

been well intentioned when initially established,

the new trends in global markets have made both

of questionable value to the nation.

CHAPTER 3 REFERENCES

1. Abel, Daft and Earley, Agricultural Export Market Development Programs: Ensuring Future Success (Alexandria, VA: January 1994).

2. Executive Office of the President, Council of

Economic Advisors, Economic Report of the

President (Washington, DC: U.S. Government

Printing Office, 1995).

3. General Agreement on Tariffs and Trade, Basic

Instruments and Selected Documents, Supplement No. 20, Geneva, 1974.

4. Institute for International Economics (Jeffery J.

Schott assisted by Johanna W. Buurman), The

Uruguay Round: An Assessment, Washington,

DC, November 1994.

5. International Agricultural Trade Research Consortium (Tim Josling, et. al.), “The Uruguay

Round Agreement on Agriculture: An Evaluation,” Commissioned Paper No. 9, University of

Minnesota, St. Paul, Minnesota, July 1994.

6. Josling, Tim, et al., The Uruguay Round Agreement on Agriculture: An Evaluation of the Outcome of the Negotiations, International Agricultural Research Consortium, Commissioned Paper

No. 9, May 1994.

7. Kennedy, Joseph F., and Visser, Jon, “An

Introduction to U.S. Agricultural Programs,”

Agricultural Policies in a New Decade, Kristen

Allen (ed.) (Washington, DC: Resources for the

Future/National Planning Association, 1990).

8. Kuo, Cheng-tian, and Takuya Yanagisawa, “The

Politics of Japan’s Rice Trade,” Journal of Northeast Asian Studies, vol. 11, winter 1992, pp. 19-39.

9. U.S. Congress, General Accounting Office, Report to Congressional Requesters, Loan Guarantees: Export Credit Guarantee Programs’ Costs

are High, GAO/GGD-93-45, (Washington, DC:

December 1992).

10. U.S. Congress, General Accounting Office,

Wheat Support: The Impact of Target Prices Versus Export Subsidies, GAO/RCED-94-79 (Washington, DC: June 1994).

11. U.S. Congress, Senate, Committee on Agriculture, Nutrition, and Forestry, Agriculture in the

GATT: Toward the Next Round of Multilateral

Trade Negotiations, prepared by the Congressional Research Service, Comm. Print No. 99-162

(Washington, DC: U.S. Government Printing Office, June 1986).

12. U.S. Department of Agriculture, Economic Research Service, Agricultural Outlook, August 1994.

13. U.S. Department of Agriculture, Economic Research Service, Agricultural Outlook, November

1994.

14. U.S. Department of Agriculture, Foreign Agricultural Service, Agricultural Provisions of the Uruguay Round (Washington, DC: January 1994).

15. U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agriculture Handbook No. 683,

revised January 1990.

16. U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agriculture Handbook No. 683,

revised January 1993.

17. U.S. Department of Agriculture, Foreign Agricultural Service, Desk Reference Guide to U.S. Agricultural Trade, Agriculture Handbook No. 683,

revised April 1994.

18. U.S. International Trade Commission, Potential

Impact on the U.S. Economy and Industries of the

GATT Uruguay Round Agreements, ITC Investigation No. 332-353 (Washington, DC: 1994).

19. U.S. International Trade Commission, Potential

Impact on the U.S. Economy and Selected Industries of the North American Free-Trade Agreement, ITC Investigation No. 332-337 18 (Washington, DC: 1993).
Agriculture’s

Broadening

Environmental

Priorities

overing nearly half of all the land in the United States,

farms and ranches have a profound effect on the nation’s

environment. The quality of water and wildlife habitat—

and indeed, the continuing productive capability of soil

itself—depend on how farmers and ranchers manage their land, and

how the environment responds to their management techniques.

Research and monitoring of agroenvironmental conditions—those produced by the interaction of agricultural and environmental systems—provide some broad evidence of agriculture’s role in the quality of soil, water, and wildlife resources. The

first section of this chapter reviews the evidence, which indicates

that some agricultural practices have had a significant impact on

the nation’s environment. While, on the one hand, erosion of

cropland has decreased significantly for several decades, agriculture remains the nation’s primary contributor to surface water

pollution, principally because of sediment deposition and

agrichemical runoff from dryland and irrigated systems. Nitrate

from fertilizers used in agricultural production have leached into

and contaminated groundwater, exceeding federal drinking water

standards in many agricultural areas. Comprehensive monitoring

of agricultural pesticides in groundwater is not yet available, but

some state studies focused on agricultural areas indicate concentrations in excess of drinking water standards do occur. Further, observations of wildlife show that impaired water quality as

well as agricultural land uses can degrade the quality of habitat of

aquatic, wetland, and terrestrial species. Indeed, agricultural

practices have been linked with at least one-third of endangered

species and with the extinction of species. But conservation programs introduced in the mid 1980s have also significantly increased some species populations. | 69
70 | Agriculture, Trade, and Environment

It is important to note that at this time, a comprehensive assessment of agriculture’s effects on

environmental quality is not possible, because

agroenvironmental monitoring is incomplete and

the interactions between agricultural activities

and the environment are not well understood.

There is a pressing need not just for more research,

but for more sophisticated agroenvironmental science to clarify the functioning of agroenvironmental systems, describe their conditions, and interpret the environmental implications of those

conditions.

The second half of this chapter focuses on the

basic approaches the federal government is using

for both known and emerging agroenvironmental

problems. Currently, Washington gives incentives

to farmers and ranchers to adopt conservation and

environmental technologies through several different kinds of programs. Voluntary educational

and technical assistance programs, which came

into being during the Great Depression, have remained one of the government’s chief vehicles for

doing so—even though there is a lack of scientific

evidence to indicate that without subsidies, such

programs lead to significant environmental improvements. Subsidy programs have produced

conservation and environmental gains, but generally have not been targeted to areas of greatest environmental significance and have not always encouraged cost-effective practices. Further, they

are increasingly vulnerable to budget-cutting

pressures. Compliance schemes, a landmark development of the 1985 Food Security Act, link environmental performance on high erodible lands

and wetlands to receipt of agricultural program

payments. Regardless of their efficacy to date, the

schemes suffer two basic shortcomings—the size

of the compliance penalty and thus the size of the

incentives to implement the conservation plan

may not align with environmental priorities, and

their longevity depends upon continued renewal

of agricultural program benefits.

Environmental regulations also affect several

types of agricultural activity, although less so than

for other industries. However, the perceived impacts of regulation are broad, perhaps because

several new efforts have begun over the past two

decades. Pesticide registration involves a protracted and costly review process that is behind

schedule and has created impediments to innovation. Problems in reregistering compounds for minor use crops with small pesticide markets exemplify the costliness, prompting recent administrative improvements. Farmers applying for permits to alter wetlands for agricultural purposes

have also met with time delays, although the delays are improving. Water pollution controls for

confined animal operations have not been uniformly enforced. Treatment of agricultural pollutants in coastal zones is still in the planning stages;

endangered species protection within the agricultural sector is largely undocumented; and imports

of harmful nonindigenous species accompanying

expanded trade are covered by an incomplete set

of regulations. The prospects of future potential

regulatory efforts are likely contributing to the

broadly perceived impacts of regulation.

Taken as a whole, the incremental institutionalization of at least 40 separate federal agroenvironmental programs, with no comprehensive oversight, has meant that there is no clear set of

environmental objectives and priorities for the

agricultural sector. Clarifying agriculture’s environmental responsibilities, and the public and private roles in accomplishing those objectives,

would reduce uncertainty for all sides and allow

scarce public resources to be focused on high priorities.

Given the potential scope and long-run seriousness of many poorly understood agroenvironmental interactions, and given the various problems

that persist in many government programs, the future environmental agenda for agriculture must

accommodate incomplete science, while also promoting research and program incentives for

achieving agricultural production and environmental quality simultaneously. Interest in such

“complementarity” between agricultural production and the environment has grown within the

research community, among farm producers,

among agribusinesses, and among consumers.

Technological research and development aimed at

enhancing such complementarity holds considerable promise to achieve improved environmental
Chapter 4 Agriculture’s Broadening Environmental Priorities | 71

quality while maintaining competitiveness. Nonetheless, the low level of federal funding for

agroenvironmental research and lack of major

program goals to enhance such technology will

slow the reorientation of public research priorities

from traditional production emphases to complementary technologies.

AGRICULTURE AND ENVIRONMENTAL

QUALITY

Since the 1960s, public awareness of the links between agricultural practices and the environment,

and evidence that those links can have serious implications for both human and environmental

health, has been growing. Consequently, federal

and state legislation has increasingly been aimed

at ensuring that farming practices balance output

goals with soil, water, and other environmental

quality objectives. Wetlands, which were once

considered undesirable swamps, are now recognized for their contributions to water quality,

flood control, and habitat. Erosion control, once

pursued mainly to preserve crop yields, now plays

a strong role in reducing water pollution from sediment and agrichemical runoff. Some agricultural

lands are cultivated for crop production while also

protecting wildlife habitat.

The environmental effects of agriculture may

be re-evaluated when residential and agricultural

activities come in close proximity. For example,

localized leaching of farm chemicals into groundwater may be perceived as more harmful if that

aquifer becomes the primary source of public

drinking water in new residential areas. The environmental effects of long-standing farm practices

such as aerial pesticide applications or hog production may also be redefined by the proximity of

residential and agricultural lands.

Despite growing evidence of agriculture’s effects on the nation’s environment, the nature of the

effects are not sufficiently documented. At this

writing, many federal programs independently

monitor natural resources, but their data are not

designed to be integrated into an overall assessment. No federal databases comprehensively

evaluate national water quality conditions, trends

in soil quality (except erosion), or agriculture’s effects on wildlife. Moreover, federal programs do

not address many of the biological, chemical, and

physical links between agricultural practices and

environmental conditions. Indeed, many agrichemicals have not been evaluated fully for their potential effects on the health of humans or environmental systems. The National Research Council

(NRC) has noted that the nation’s agroenvironmental research agenda is too poorly funded

(about 12 percent of the total agricultural research

budget) and lacks focus (65).

Institutional obstacles to constructing highquality databases and analytic tools are compounded by technical complexities, such as variations in prevailing technologies, cultural practices, policy and program effects within and

among regions—and the sheer range and diversity

of natural resource endowments. As an illustration, more than 2,111 distinct watersheds have

been mapped within the continental United

States.1 Cutting across land and water divisions

are natural habitats with a profusion of wildlife,

plant, insect, and microbial life. Diverse agroecosystems—dynamic associations of crops, livestock, pasture, other plants and animals using air,

soil, and water span this resource base, encompassing nearly one billion acres of privately and federally owned cropland, woodlands, grazing lands,

wetlands, and waterways (figure 4-1).

The links between environmental conditions

and biological health2 implications are a matter of

special concern in evaluating agriculture’s effects

on the environment. In some cases, this link has

been expressly addressed: the maximum contaminant levels (MCLs) established by the U.S. Environmental Protection Agency (EPA) are used for

monitoring drinking water quality to protect hu1A watershed is an area of land from which water drains to a stream or to a lake, wetland, or reservoir.

2Biological health, as used in this report, refers to the viability and safety of plants, wildlife and humans.
72 | Agriculture, Trade, and Environment

FARM

The term “agroecosystem” Indicates that farms do more than produce cultivated vegetation and domesticated animals. Farina also affect nutrient

cycling, hydrologic flows, soil and water quality, and wildlife habitat. The term also refers to the area that most directly supports the environmental

and productive functions of farms and, conversely, in which most environmental effects of production-such as sediment deposition, modification

of wildlife habitat, or changes in water quality-are likely to be detected.

SOURCE: Adapted from EPA Environmental Monitoring and Assessment Program (EMAP), 7992 Agroecosystem Pilot Project Plan

(EPA/620/R-93/010), January 1993.
Chapter 4 Agriculture’s Broadening Environmental Priorities 73

Percent of Rank of

Percent assessed that agriculture

Total resource Percent impaired of fully support as source

Water baseaassessed assessed designated uses of pollutants

Rivers and streams 3.5 million miles 18 38 56 1 - primary source

Lakes, ponds, reservoirs 40 million acres 46 44 43 1- primary source

Great Lakes shoreline 5,382 miles 99 97 2 N A

b

Ocean shoreline 56,121 miles 6 14 80 NA

Estuaries 36,890 sq. milesc

74 32 56 3- notable sourced

Wetlands 277 million acres 4 50 50 1 - primary source

NA - Not Available.

a Contiguous United States and Alaska.

b Atmospheric deposition is ranked first.

c Not including Alaska.

d Municipal point sources and urban runoff are ranked first and second.

Percent impaired plus percent fully supporting may not sum to 100.

are now fully supporting but at risk of impairment.

SOURCE: EPA, National Water Quality Inventory, 1992 Report to Congress

man health. In general, however, standards that

link environmental quality and biological health

are tentative or nonexistent, a result of inadequate

science, incomplete policy guidance, and the

complexity of the issues.

❚ Primary Elements of Natural Resource

Quality3

Surface Water Quality

As a result of normal farming practices, soil sediment, pesticides, nutrients (nitrate and phosphorous), toxic metals, and pathogens can and do

make their way into the nation’s surface waters

(rivers, streams, lakes, ponds, wetlands, and estuaries). Water quality data collected by the Environmental Protection Agency (EPA) suggests that

the majority of the nation’s surface waters that

The difference is comprised of “threatened” waters—those that

were assessed in 1992 were of sufficient quality to

support one or more “beneficial use” designated

by states4 (table 4-1). However, EPA and state officials consider nonpoint source pollution5 from

agriculture to be the major contributor to remaining national surface water quality problems (120).

Although the federal government does not systematically monitor surface water quality conditions6 and their environmental implications, agriculture’s predominant role in polluting surface

water-especially in regions where crops are intensively cultivated or where livestock operations

are concentrated—is corroborated by numerous

reports and studies conducted by government and

independent researchers. The U.S. Geological

Survey (USGS) recently found that 71 percent of

U.S. cropland is in watersheds where at least one

3This review of agriculture’s effects on the environment focuses on the three primary natural resource groups—water quality, wildlife, and

soil quality. Discussion in chapter 6 covers the effects of air pollution on agricultural productivity. The potential effects of climate change on

agricultural and environmental systems are covered in “Preparing for an Uncertain Climate,” U.S. Congress, Office of Technology Assessment,

1993.

4Designated beneficial uses include aquatic life support, fish consumption, shellfish harvesting, drinking water supply, recreation (swimming and boating), and agricultural production (120).

5

The term “nonpoint source” or “nonpoint” refers to the inability to trace pollution to a specific source or “point” of origin.

6USGS studies of water conditions, while consistently collected and extensive, are not designed to satisfy the need for comprehensive monitoring. State-reported data compiled by EPA do not represent a statistical sample, and moreover, are not consistently collected across states.

They are, at most, suggestive of national surface water quality (120).
74 I Agriculture, Trade, and Environment

Rain and irrigation waters carry sediment and chemicals from

cropland into surface waters. Drainage off fields, as shown

above, or from underground tile empties into streams, rivers,

lakes, or wetlands. The cumulative effect of drainage like this

from many fields influences the quality of entire watersheds.

Almost three-quarters of all U.S. cropland lie in watersheds

where levels of sediment, fertilizer residues, or bacteria from

livestock manure exceed EPA guidelines.

agricultural contaminant exceeds guidelines established by EPA for recreational safety or the

ecological health of the water (83).

Several large-scale studies show that agriculture has played a significant role in supplying the

nitrogen, phosphorus, and sediment found in the

nation’s surface waters (35,82,120). Crutchfield

et al. (19) found that 50 percent of nutrients reaching freshwater systems nationwide come from

agricultural runoff, and the U.S. Geological Survey’s National Water Quality Assessment (NAWQA) sampling program confirmed that, in 90 percent of the watersheds studied, agriculture

supplied most of the nutrients found in rivers and

streams in rural areas (116). Evidence also indicates that the level of common agricultural pollutants in regional watersheds declined during the

last decade (83).

The environmental implications of agricultural

pollutants in surface water depend on how prevalent the pollutants are; how toxic they are to humans, aquatic life, and other wildlife; how chemically stable they are in water; and how mobile they

are in water systems. Existing research as noted

above suggests that agricultural pollutants are

prevalent in surface water, especially in areas

where land is cultivated intensively with mechanical tillage, and irrigation and/or chemicals are applied. Research on the toxicity of agricultural pollutants remains incomplete—nitrate and some

pesticides are established toxins, but the vast majority have not been fully tested. It is not known

how quickly nutrients and pesticides degrade in

water, but field studies suggest that chemicals are

more stable in water than in soil (37), and sediment does not degrade. Some agrichemicals and

sediment can migrate long distances through rivers and streams. Volatile agrichemicals can be

transported through the atmosphere and deposited

with rain into surface waters far beyond their region of origin (39).

According to state reports, agricultural runoff

of nutrients and sediment is a primary cause of

“impairment” of lakes, ponds, wetlands, and estuaries (120).8 High nutrient levels promote eutrophication, a condition of excessive algal growth

that depletes dissolved oxygen in aquatic habitat

and increases the incidence of fish kills. Buildup

of sediment, known as siltation, reduces water

quality for drinking or recreation, fills in bodies of

water, reduces navigability, increases the likelihood of flooding, and interferes with the spawning (reproduction) of many kinds of fish. Annual

damages from agricultural siltation have been estimated to be between $3 and $13 billion in 1980

(14) and between $5 and $17.6 billion in 1989

(101). The large range for damages reflects that

both studies had to use preliminary and incomplete water quality and economic information.

Atrazine and other herbicides as well as insecticides are almost always detected in surface waters

in regions where they are used (36,64,83,103).

7

The contaminants monitored were suspended sediment, dissolved nitrate, total phorphorus, and fecal coliform bacteria (83).

8

Estuaries are water passages where the sea tide meets a river current and contain brackish(mixed salt and fresh) water.
Chapter 4 Agriculture’s Broadening Environmental Priorities | 75

Within regions where fertilizer use and livestock

are common, evidence of nitrate in surface water

may vary considerably across the region (36).

Herbicide and nitrate concentrations in surface

water vary seasonally but, in many streams,

agrichemicals may be detected year-round as they

are slowly released from storage in surface water

reservoirs, groundwater, and soil (36,54,76). The

seasonality of insecticide concentrations is similar to that for herbicides, but, compared to herbicides, insecticides in surface water are less persistent, concentrations are lower, and peak concentrations occur later in the season (36).

While nitrate levels peak in fall, winter, and

early spring, herbicide concentrations tend to peak

in the late spring and early summer when heavy

rains wash agrichemicals from newly treated

fields. During this “spring flush,” herbicide levels

in streams and rivers often exceed EPA drinking

water standards expressed as MCLs (appendix

4-1). Atrazine has been measured at more than 30

times the MCL in some Midwestern streams and

more than 3 times the MCL in large rivers (37).9 In

most cases, nitrate and herbicide levels fall to

within federal standards by late summer, as

agrichemicals are utilized, degraded in riverbed

sediment, stored in soil or groundwater, volatilized into the atmosphere, or carried downstream.

The stability of agricultural pollutants in water

enhances the likelihood that when agricultural

pollutants disappear from flowing waters in the

regions where they originate, they may be transported to coastal zones, lakes, wetlands, or reservoirs. Indeed, researchers found that agriculture

supplied an average of 24 percent of total nutrients

and 40 percent of total sediment in 78 estuarine

systems (18). At least one herbicide was detected

in 92 percent of the reservoirs sampled in 10 midwestern states between April and November of

1992.10 Perhaps the best known example of the

mobility of agricultural pollutants involves

California’s Kesterson Wildlife Refuge where accumulations of selenium carried in irrigation

flows draining into the refuge poisoned waterfowl

and made the wetland uninhabitable.

Recent monitoring showed generally less than

3 percent of each herbicide applied on farms in the

Mississippi Basin and the equivalent of 15 percent

of all nitrogen fertilizer used on regional crops enter the Gulf of Mexico from the Mississippi River.

These percentages equate to 123 and 321 metric

tons, respectively, of common herbicides like metolachlor and atrazine and 967,000 metric tons of

nitrate (6). Tributaries from Iowa, Illinois, and

Minnesota were determined to be significant

sources of agrichemicals transported to the Gulf,

illustrating that agricultural pollutants can remain

stable and mobile over long distances. Similarly,

diazinon, a spray pesticide used on orchards in the

Central Valley of California, has been detected

throughout the Sacramento-San Joaquin Delta

and San Francisco Bay, in concentrations that exceed aquatic health recommendations established

by the National Academy of Sciences (114).

Reservoirs and large lakes that are slow to recharge (i.e., where water replacement takes 6

months or more) can become “sinks” for agricultural pollutants transported seasonally by streams,

rivers, and the atmosphere. Reservoirs sampled in

1990, 1991, and 1992 held atrazine levels that exceeded EPA drinking water standards even in winter months, when chemical concentrations would

be expected to be at their lowest (38). Agrichemicals, such as DDT, atrazine, and alachlor, which

can volatilize into the atmosphere and be deposited with rainfall, may accumulate in reservoirs

and have been detected in all of the Great Lakes

(box 4-1) (39,80). Herbicide residues can pose a

9Maximum contaminant levels (MCL), or drinking water standards, have been established by the U.S. Environmental Protection Agency

for several herbicides and nitrate (see appendix 4-1). MCL’s for herbicides are based on an annual average of four or more samples and are

legally enforceable under the Safe Drinking Water Act. The MCL for nitrate is based on a single sample and not an annual average. MCL’s have

been established only for individual compounds and do not address the possible effects of complex mixtures of pesticides and their degradation

products.

10Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
76 Agriculture, Trade, and Environment

Persistent Contaminants in Freshwater Sources: Great Lakes

Toxic agrichemicals remain in the Great Lakes surface waters despite strenuous efforts at remediation and despite significant reductions in industrial sources of pollution In the Great Lakes basin,

which holds 21 percent of all the fresh water on earth (1 0,80), concentrations of toxic contaminants

generally went down between the 1970s and 1980s, Decreased concentrations of agricultural pesticides, especially organochlorines such as dieldrin and DDT-related compounds, in fish tissue are considered a key indicator of that trend However, the decline in contaminants leveled off in the early

1980s, leading scientists to reconsider the Iikely behavior of waterborne pollutants within the Great

Lakes environment

Several causes for the chemical persistence have been observed, Some chemicals, notably DDT,

are extremely persistent (i e , resist degradation). Toxins that are bonded to bottom sediment are remobilized by dredging or by the natural shifting of the lake bottoms, Slow Ieaching of contaminants from a

variety of sources continues Chemicals from agricultural runoff and industrial or municipal effluent are

transferred from tributaries. Volatile pollutants are transported across regions and even continents

through the atmosphere and deposited through rainfall into the Great Lakes, Finally, water in the Great

Lakes has an extremely long residence time. It will take a full century for the water currently contained in

Lake Michigan to be naturally filtered and replenished; in the case of Lake Superior, volume replacement will take 172 years (79), As a result, these lakes are vulnerable to the cumulative effects of runoff,

atmospheric deposition and the persistence of the contaminants which they contain

Atrazine has been detected in Lake Superior in pristine Iocations that are inaccessible to all migration pathways except for the atmosphere (39) In fact, atmospheric deposition ranks as the primary

source of pollutants in the Great Lakes (1 20) Some of the persistent agrichemicals were banned in the

United States as much as 15 years ago but are believed to enter the Great Lakes Basin through the

atmosphere Others are manufacturing residues of pesticides that were never actually in use in the

Great Lakes basin at all but manufactured in the region for export.

Independent and synergistic effects of pesticide contaminants, primarily on wildlife and human

health, are still being investigated. Reproductive failures, developmental abnormalities, morphological

abnormalities, and tumors in wildlife have been Iinked to agrichemicals, byproducts of agrichemical

production, and their breakdown products (10) Some of the species known to be affected by persistent

contaminants in the Great Lakes include mink, otter, double-crested cormorant, herring gull, snapping

turtle, lake trout, and bald eagle (10)

Persistent Agrichemicals in the Great Lakes

Compound Agricultural uses Use status Pathway to Great Lakes basin

Mirex insecticide canceled 1976 release during manufacture

Hexachlorobenzene fungicide canceled 1990 atmospheric deposition

Dieldrin soil Insecticide canceled 1971 leaching

DDT/DDE insecticide canceled 1971 atmospheric deposition

Toxaphene cotton crop insecticide canceled 1982 atmospheric deposition

Source” Office of Technology Assessment, 1995
Chapter 4 Agriculture’s Broadening Environmental Priorities | 77

special problem for public water supplies that

draw from surface waters because conventional

water treatments cannot remove them.

Wetlands are recognized best for their role as

wildlife habitat, but they also function as surface

waters, acting as a sink and filter for agricultural

pollutants, and serving as flood storage and control areas. The economic significance of these surface waters extends beyond water quality and has

been estimated in the billions of dollars for the recreation, timber, and trapping benefits that they

provide (42,92). Today, about 5 percent of the

lower 48 states are comprised of wetlands falling

from about 10 percent in 1780 (21). Very little data

has been collected to describe the quality of wetlands or their roles in attaining improved surface

water quality, however. According to EPA, states

(which are responsible for monitoring water quality and for monitoring wetlands conservation under the Clean Water Act) have not yet adopted criteria to evaluate wetlands quality and function,

including water quality roles (123).

MCLs developed by EPA for use as drinking

water quality criteria, are often used as the benchmark for evaluating surface water quality. Overall,

however, the effects of chronic, low-level exposure to agrichemicals on human health11 and on

wildlife have not been fully determined. The National Cancer Institute and other organizations

have reported correlations between significant exposure to certain pesticides and cancer in humans

(7,58). The relationship between elevated nitrate

levels in drinking water and methemoglobinemia

(“blue baby syndrome”) has been clearly established (47). The risk of cancer from exposure to nitrate has been less well-defined (11), although it

has been shown that N-nitroso compounds—

many of which cause cancer in laboratory animals—are produced in the human digestive tracts

of people who ingest water-borne nitrate (56). The

evidence, although incomplete, also suggests that

low-level, continuous exposure to nutrients and

pesticides can harm aquatic plants and wildlife

(10,64).

The adoption of so-called best management

practices (BMPs) can reduce nitrate and pesticides

in surface water that degrade the quality of drinking water and negatively affect wildlife that use

water resources. Technologies to reduce manure,

sediment, and chemical runoff have led to sometimes dramatic improvements in surface water

quality, as case studies in several states show (87).

However, widespread adoption of BMP’s may not

produce rapid improvements in environmental

quality because interactions among soils, surface

water, and groundwater may be difficult to manage with BMP’s alone. For example, the quality of

the South Platte River in Colorado is strongly influenced by groundwater quality. It is estimated

that, even with complete elimination of all nitrogen leaching, nitrate currently held in groundwater might enter the river for the next 25 years (54).

Groundwater Quality

There has been no comprehensive assessment of

national groundwater quality, but accumulating

evidence from national and state studies is helping

to understand agriculture’s role. Monitoring has

confirmed that nitrate and agricultural pesticides

are in groundwater in almost every state. Analyses

of hydrologic systems show that soil, surface water quality, and groundwater quality are interlinked (124). Furthermore, the susceptibility of

groundwater to agrichemical leaching is marked

by significant variability across the nation, but

land use plays an important role.

For example, nitrate levels are much more likely to exceed drinking water standards in groundwaters under cropland than under any other land

use. Monitoring and analyses of pesticides have

not yet revealed their roles in groundwater quality

on a comprehensive basis. However, a range of

11The range of acute (short-term) and chronic (long-term) health effects that might be investigated could include gastrointestinal or circulatory disorders, cancer, neurotoxicity, immune system dysfunction, genotoxicity, and endocrine disruption. See appendix 4-1 for potential health

effects of agricultural chemicals that guide EPA drinking water standards.
78 I Agriculture, Trade, and Environment

— found detectable nitrate levels in 52 percent of

Numerous state studies show that fertilizer residues and pesticides do leach into aquifers. Hera, USDA researchers test

the effects of different tillage practices on pesticide movement to groundwater. Because comprehensive monitoring of

national groundwater quality is not performed, overall trends

in groundwater quality are unknown, and the extent of

groundwater degradation due to agriculture is uncertain.

pesticide concentrations have been found under

cropland by individual studies, some in excess of

drinking water standards.

Evidence that agricultural pesticides and nutrients were reaching aquifers began to accumulate

in the . 1970s (box 4-2). By 1990, at least 46 pesticides had been detected in groundwater in 26

states, and nitrate contamination had become

more prevalent (86,93). EPA’s review of groundwater studies conducted from 1971 to 1991 in 45

states revealed that 132 pesticides or their breakdown products had been found. Of the 23 compounds detected most often, virtually all were

associated with agriculture (118). More recently,

of 44 states that submitted reports to EPA in 1992

declaring that agriculture was a source of groundwater contamination, approximately one-third

ranked agricultural activity as the source of “highest priority” contaminants (120).

EPA’s National Survey of Pesticides in Drinking Water Wells (NPS) (117), which randomly

community wells and in 57 percent of rural domestic wells. Less than 3 percent of detections exceeded the MCL for nitrate. Detectable pesticide

residues were found in 10 percent of community

wells and 4 percent of rural domestic wells. Fewer

than 1 percent of wells exceeded MCLs for pesticides. From these results, EPA concluded that

groundwater quality was a local or regional rather

than national issue.

By contrast, groundwater studies conducted in

45 states, compiled as part of EPA’s Pesticides in

Groundwater Database (PGWDB), focused on

areas of intensive pesticide use (1 18). Historically,

the majority of such sampling has been targeted to

agricultural, rather than nonagricultural areas. As

a consequence of this sampling strategy, the

PGWDB reported a greater number of wells in

violation of pesticide MCLS than did the NPS. Indeed, in its interpretation of the data, EPA cautioned that these high pesticide concentrations

probably do not mirror statewide conditions because most studies sampled heavily in agricultural

areas where pesticides are used extensively. For

example, 11 percent of California wells and 27

percent of New York wells sampled between 1971

and 1991 contained pesticides in excess of federal

drinking water standards or MCLs (118). Even

though agriculture is not the only source of pesticides in groundwater, many of the pesticides

found most often in state studies are used in agricultural production. These partial studies suggest

that agricultural areas may be at greater risk to

groundwater contamination from pesticides.

Studies conducted by USGS confirm that high

nitrate concentrations are often found in aquifers

under agricultural areas (59). Nitrate levels in excess of federal drinking water standards have been

detected in many aquifers. For example, along the

South Platter River in Colorado, groundwater nitrate levels have exceeded MCLs for 20 years,

leading to impairment and, in some cases, abandonment, of public drinking water wells (54). In

the Lower Susquehanna area of Pennsylvania, all

38 wells with nitrate concentrations higher than

the MCL were located in agricultural areas (54). In
Chapter 4 Agriculture’s Broadening Environmental Priorities 79

Nitrate levels increased between 1974 and 1984 in the Central Platte River Valley, Nebraska (30)

In California, the nematocide DBCP was found in more than 2,000 wells in the San Joaquin valley and

was known to have contaminated groundwater for 7,000 square miles. Between the late 1970s and

mid-1980s, more than 50 pesticides were found in the groundwater of 23 California counties (45).1 

Several pesticides associated with potato crops, Including aldicarb, were confirmed in the groundwater

underlying Suffolk County, Long Island, in 1979-80 (45) 2

Between 1982 and 1983, state officials in Wisconsin detected 12 pesticides in the state’s groundwater,3

and developed a monitoring priority list of 45 pesticides determined to be most susceptible to leaching

(45)

In Florida, extensive and highly concentrated presence of aldicarb and EDB, and Isolated, low-concentration cases of silvex and Iindane in state groundwater were confirmed in 1982-83 (45).

Pesticide residues have been detected in 33 percent of over 700 wells tested in Iowa and 39 percent

of over 500 wells in Minnesota (1 30).

In 1985, 84 of more than 430 National Wildlife Refuges were threatened by groundwater and surface

water contaminants, 35 from agricultural causes (1 30).

Between 1986 and 1988, elevated concentrations of nitrate, atrazine, and Indicator minerals related to

agricultural activities were detected on the Delmarva Peninsula of Delaware, Maryland, and Virginia

(41)

1 The presence of a host of agricultural pesticides were confirmed through monitoring, a partial Iist includes 1,2-dibromethane

(EDB), 1,2-/1,3-dichloropropane (D-D), simazine, atrazine, carbofuran, DDT and its associates, 2-4-D,Endosulfan, Dinoseb (DNBP)

and lindane---all in more Iimited cases and/or at much lower concentrations than DBCP (45).

2

aldicarb, carbofuran, chlorothalomil, dacthal, dinoseb, oxamyl, D-D, EDB

3

alachlor, metolachlor, aldicarb, dinoseb, atrazine, butylate, eptam, cyanizine, carbofuran, chloramben, DCPA, and metribuzin.

Most detects were for aldicarb, followed by atrazine, alachlor, and metoachlor.

a regional study of 12 Midwestern states,12 Kol- rigation are used more extensively in these repin et al. (51) found that 29 percent of samples

contained elevated nitrate levels and 6 percent

were equal to or greater than the MCL. Sampling

at 12,000 sites revealed that groundwater under

agricultural croplands exceeds EPA drinking water standards (MCLs) for nitrate 16 percent of the

time versus 6 percent or less for groundwater under land in other uses (59).

Efforts have been made to determine what

conditions lower or raise the potential for contaminants to leach into underground aquifers in different regions of the country. Mueller et al. (59) noted

that groundwater in certain agricultural regions—

parts of the Northeast, Midwest, and West

Coast—are more vulnerable to nitrate leaching

because the soil in these areas does not hold water

and nutrients easily, and because fertilizers and irgions than elsewhere. In general, shallow aquifers

(within 100 to 150 feet of the land surface) are

most susceptible to nutrient leaching. Kellogg et

al. (49) estimated that the areas where groundwater was most vulnerable to pesticide leaching were

the Corn Belt, Southeast, and Lake states.

Groundwater in the Northern and Southern Plains,

they posited, might be most vulnerable to nitrate

leaching.

The actual pattern of groundwater contamination may be somewhat more variable than vulnerability models predict because of the diversity

within and among watersheds of a given region.

For example, even though fertilizers are used extensively in the Corn Belt, little nitrate appears in

the region’s groundwater—which suggests that a

subsurface geological barrier that prevents

12Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
80 | Agriculture, Trade, and Environment

agrichemicals from leaching into groundwater exists in the region (49,59). However, other areas of

the Midwest, including Iowa and Wisconsin, have

different soils and geology, and the groundwater

in them is highly vulnerable to leaching of atrazine, other pesticides, and nitrate. Mueller et al.

(59) note that in areas where they cannot infiltrate

groundwater, agrichemicals may be diverted to

surface waters in runoff rather than fully used by

crops, held in the soil, or degraded. A notable exception to this pattern occurs in the Southeast,

where both surface water and groundwater show

very little leaching of agrichemicals. A combination of poorly drained soils, interspersal of agricultural land with forests and wetlands, and high

levels of soil organic matter that sequester chemicals and accelerate their degradation may be the

reason (54).

Increasingly, states have used fertilizer reduction programs or restricted the use of leaching pesticides in efforts to help clean up groundwater that

clearly exceeds state or EPA drinking water standards. However, these state efforts demonstrate

the difficulty of getting agricultural contaminants

out of groundwater. On Long Island, researchers

expected aldicarb residues in aquifers to decompose according to a half-life of three years. However, aldicarb proved to be stable in aquifers, and it

is now predicted that aldicarb levels will exceed

the state safety guideline of 7 ppb for decades (45).

Similarly, although a rigorous program of nitrate

management in the Central Platte of Nebraska has

resulted in measurable improvement in local

groundwater nitrate levels, land use changes alone

are unlikely to reduce nitrate levels to drinking

water standards within the lifetimes of those currently farming because of the long residence time

of groundwater in aquifers.

Changes in how land is used may not be enough

to improve groundwater quality, because chemicals that degrade quickly in soil are often much

more stable in chemical conditions that are typical

of aquifers. Technological reinforcement of land

use changes may not be sufficient to reverse contamination, either. A 1994 report by the National

Research Council (NRC) noted that it may be impossible to remove agricultural contaminants

from groundwater with current clean-up technologies. Even when it is feasible, remediation remains very complex and potentially ineffective

while well replacement is often prohibitively costly (66). Because approximately 50 percent of all

U.S. residents and at least 95 percent of rural residents (a total of 130 million people) get their

drinking water from groundwater aquifers (59),

the potential risk associated with groundwater

quality problems could be widespread.

Wildlife Habitat

Because U.S. agriculture covers such a vast land

area—as much as one-half of the nation’s coterminous land base—its effects on the quantity and

quality of habitat and on the rate of species disappearance are the subject of some concern.13 Available research suggests that patterns of agricultural

land use, the degree of diversity in crops and animals produced, and the amount and kinds of

chemicals used largely determine how agriculture

affects wildlife habitat both on and off the farm.

Field studies show that trends over the last decades—especially in areas where crops are cultivated intensively—have reduced both the quantity and quality of regional natural habitat. At the

national level, agricultural development is the

most frequent cause of habitat alteration or loss

and the most prominent reason for endangerment

among all species, especially mammals and amphibians (32). Grazing is also a significant cause

of endangerment, particularly affecting plants in

certain regions (32). In total, the status of more

13 Some scientists estimate that at the present, extremely rapid rate of species loss, two-thirds of all living species, worldwide, could be

extinct by the end of the next century (73). This has promoted interest in evaluating the status of species in the United States.
Chapter 4 Agriculture’s Broadening Environmental Priorities 81

than one-third of all species listed as threatened or

endangered has been linked to agriculture. 14

Land (terrestrial) habitats are eliminated, degraded, or fragmented when forests are cleared,

wetlands are drained, and grasslands are cultivated. New kinds of vegetation may be established in place of native species. While some wildlife species are attracted to and thrive in the highly

modified, frequently fragmented habitats that result, others are not. The range of the red fox, for

example, expanded westward as a result of agricultural development. For ground nesting birds,

on the other hand, which require large tracts of

grasslands, islands of nesting cover interspersed

with cropland have increased their exposure to

predators (3,125).

Once land has been allocated to farming, the

types of practices put in place can either enhance

or further reduce the compatibility between production and habitat protection. Agricultural land

use trends dominated by large, contiguous fields;

cultivation of only one or two crops; and elimination of native tree stands, grassland corridors, and

long-term nesting cover play a key role in reducing the amount of terrestrial habitat for many

birds, mammals, insects, and plants (figure 4-2).

Miles of water (aquatic) habitat are reduced, and

the remaining habitat degraded, by straightening

Over the last four decades, farm fields have gotten bigger, crop diversity has declined, mixed crop/livestock farms are less common, natural stream

flows have been altered, native plants have been removed from field edges and stream banks, and mechanical and chemical inputs have intensified

While some wildlife have thrived in the new farm landscapes, many have declined.

SOURCE: Office of Technology Assessment, 1995 Assistance provided by Dale Crawford, National Biological Service, Fort Collins, Colorado.

14In 1989,45 percent of federally listed Endangered and Threatened species were associated with some form of agriculture (113). In 1994,

38 percent of species listings were related to agriculture (32). The decline in percent does not necessarily infer improvement. as the number of

listed species has increased. Also, these statistics were developed separately, not as part of continuous study.
82 Agriculture, Trade, and Environment

streams (channelization) to support field drainage

and irrigation. Nearly 22,000 miles of streams in

Minnesota have been lost due to channelization

(70). Eliminating vegetation from stream banks or

altering in-stream water flows (through flood control, for example) can further reduce the quality of

aquatic habitats. The result of these trends has

been a reduction in species abundance and diversity, particularly in certain regions (3 1,70,1 25).

Studies of avian populations east of the Mississippi River found that the total number of bird species has declined as forests have been converted

into intensive cropland. Moreover, among the

species that remain in the cropland setting, the

populations of some birds—such as red-winged

blackbirds and house sparrows-have increased

while the populations of other birds that were once

dominant have declined (9).

In the eastern Great Plains region and upper

Midwest, the conversion of 30 to 99.9 percent of

native prairie, much of it to intensive crop production, represents the largest reduction of any North

American ecosystem (78). This conversion has

caused sharp declines in the populations of many

wildlife species that have historically depended

on that habitat, and grassland birds are declining

faster than any other group of species in North

America (78). At least 55 grassland species in the

United States are listed as threatened or endangered, 728 more may soon be listed, and several

species indigenous to the Great Plains such as the

Audubon bighorn sheep and plains wolf are now

extinct (78).

Trends in certain (“keystone”) species may indicate the viability of other species that are dependent on them for habitat or food. As an example,

the loss of 98 percent of the prairie dog population

in the Great Plains has been correlated to declines

in the populations of dependent species, including

the black-footed ferret, swift fox, ferruginous

hawk, and mountain plover (55,78). Similarly, the

populations of “indicator species,” used to assess

farmland habitat quality for all nongame species

in 14 Midwestern states, declined significantly

(24 to 96 percent) between the 1950s and late

1970s (31). However, because crop cultivation

promotes the increase of certain “edge” species

like rabbits. white-tailed deer, robins, and cowbirds, underlying changes in species abundance

and diversity brought about by agricultural development may not be obvious to the casual observer.

Because they are inherently more complex than

cropland and generally involve less intensive cultivation, rangeland regimes in the West and Southwest can be relatively more compatible with native habitat uses. However, technologies for

maintaining native grasses on semiarid and arid

rangelands are lacking, and the introduction of

non-indigenous plant species to improve grazing

conditions or to control pests has caused critical

declines in animals, insects, and plants that are

unique to these areas (77,95). Grazing in riparian

areas, especially in the Southwest, California and

the Northwest, has increased sedimentation in

some streams, covering spawning sites, clogging

fish gills, and elevating water temperature.

Since the 1970s, appreciation for the unique

function of wetlands as wildlife habitat has

grown. As a specialized form of surface water,

wetlands provide seasonal or permanent habitats

for one-third of the nation’s endangered and

threatened species and sustain 75 percent of commercially landed fish and shellfish (42,92). The

The prairie pothole region of the Great Plains remains a

unique example of natural wetland/grassland habitat in an

intensive agricultural region. An important hub of the Central

Flyway used by migratory birds, the pothole region is also the

breeding ground for more than half of all ducks native to

North America.
Chapter 4 Agriculture’s Broadening Environmental Priorities | 83

Prairie Pothole Region, about one-fourth of which

lies in the Dakotas, produces 50 percent of North

America’s duck population (112). Prairie pothole

ecosystems also provide habitat for mammals,

such as deer, mink, and fox, and are thought to

play a critical role in maintaining plant diversity

(112). Wetland losses due to agricultural conversion have declined considerably since the 1950s,

and an increasing number of farmers are exploring

the potential for compatibility between cultivating crops and restoring wetlands on suitable parts

of their fields.

The extent to which normal use of agricultural

chemicals affects wildlife species is not fully understood, but a range of direct and indirect effects

on terrestrial species have been documented (33).

EPA estimated that in the 1980s, one to two million birds died every year from exposure to the

pesticide carbofuran (113). The U.S. Fish and

Wildlife Service (FWS) determined that nearly 20

percent of species that became endangered or

threatened in 1988 had been adversely affected by

pesticides (113). Pesticides can reduce insects that

provide food for birds and other animals, an effect

that is associated with declining populations of

the bobwhite quail (3).

As noted previously, aquatic life can be harmed

by nutrients carried in runoff to surface waters.

Eutrophication reduces dissolved oxygen and

may release toxins into the aquatic habitat. In addition, herbicides in the aquatic environment can

diminish the food supply for fish and other herbivores. Chronic, low-level concentrations of both

herbicides and insecticides in surface water have

been linked to reproductive failure and developmental abnormalities in fish and other aquatic organisms (10,64). Some pesticides that become

concentrated in animal tissue (“bioaccumulate”)

as they move through the food chain to predatory

birds and mammals may have long-ranging and

pervasive negative effects on both aquatic and terrestrial habitat quality, and particularly on sensitive species (10).

Changes in some farming practices and field

patterns can reverse the decline of many species

and enhance wildlife habitat both on and off the

farm. Multi-cropping systems increase diversity

of habitat structure and species richness (31,78).

Field patterns that minimize fragmentation of

habitat areas or that intentionally link habitat areas

through landscape corridors can greatly benefit

wildlife. Wetlands are being restored on farms in

several states. Land set-asides, such as those

created by the Conservation Reserve Program

(CRP), can improve long-term grassland cover.

Declining populations of pheasants, migratory

waterfowl, and grassland birds have made dramatic reversals on lands (48,61). Changes in irrigation

water use are also being used to enhance aquatic

habitat (box 4-3).

Innovative applications of agricultural technologies may also make farming more compatible

with wildlife habitats. In California, post-harvest

flooding and cage-rolling of rice straw is providing seasonal wetlands for migratory waterbirds.

This innovation is an alternative to rice straw

burning, which will be banned by the year 2000

(27). Some farmers are exploring the relationship

between various commodity crop mixes and bird

habitats (111). Various techniques to reduce

agrichemical use, create riparian buffers to keep

runoff out of surface waters, and plant grassland

edges alongside fields (to provide habitat) are being investigated. Such technologies, used in tandem with new land use patterns, point to cases in

which it may be possible to enhance both agricultural productivity and wildlife habitat.

Soil Quality and Soil Erosion

The rate of soil erosion is often used as a benchmark of soil quality, but it is only one indicator.

The term “soil quality” covers physical, chemical,

and biological elements, including microbial density, organic content, electrical conductivity, acidity, structure, chemical contamination, and infiltration rate, in addition to smell, color, and

texture (26). Soil quality can also be assessed in

terms of the soil’s capacity to perform productive

and environmental roles. In this regard, there are

three key indicators of soil quality:

 productive capacity (the capacity to promote

the growth of plants);
84 Agriculture, Trade, and Environment

In response to Increased pressure to safeguard the environment, the federal government and the

California State Water Resources Board have taken actions in a prime agricultural area to protect water

for fish and wildlife (126) Under the new federal law (P.L. 102-575), about 15 percent of the Bureau of

Reclamation’s Central Valley Project water normally available to agriculture is reserved for flow requirements for fish and wildlife propagation and restoration, During years of normal precipitation, this reservation level would not significantly affect agriculture However, in years of low precipitation, water available to farms would be reduced accordingly, In effect, the project’s drought buffer goes to fish and

wildlife rather than to farmers

The California State Water Resources Board actions were taken to improve water quality in the Sacramento-San Joaquin Delta Estuary They include measures to make more water available during fish

migrations and fees on irrigation districts to finance wildlife habitat and urban conservation measures

What are the possible implications for California’s Iucrative agricultural trade sector if the scheme is fully

Implemented? According to a study by the U.S. International Trade Commission, agricultural production

and exports wiII not decrease significantly in the long term, but the composition of those exports wiII

change to include more crops such as fruits and vegetables, and/or crops that use less water (1 26) On

December 15, 1995, the state of California and the federal government signed an agreement resolving

the particular elements of how to Implement the new law—a complicated process because multiple

environmental statutes and several political jurisdictions were involved.

The final details will be worked out by state and local officials, but it appears that farmers will face

the greatest annual costs, and cities wiII have less water in dry years, while commercial and recreational Interests stand to gain (20) The process of reaching a consensus water quality plan involving multiple, fractious parties with large stakes at risk was considered a future model for such negotiations.

SOURCE: Office of Technology Assessment, 1995

ecosystemic function (the ability to regulate infiltration and surface movement of water within a watershed); and

environmental function (the ability to act as a

buffer for water and air quality by sequestering

and degrading carbon, agricultural chemicals,

and organic wastes).

Despite the intuitive appeal of the soil quality concept, it remains immature and therefore comprehensive data or assessments are not at hand (64).

Soil erosion is only one element of the broader

soil quality concept, but it is the only element with

extensive data. Despite some questions about the

reliability of historical data,15 national estimates

reveal that aggregate cropland erosion has declined significantly over the past four decades.

The average water erosion rate has fallen approximately 50 percent, from six to about three tons per

acre, and the wind erosion rate has declined about

one-third, from about nine to six tons per acre between 1945 and 1992 (50). Between 1982 and

1992, National Resources Inventory (NRI) data

show decreases in water and wind erosion of 22

percent on cultivated land (71). Reduced erosion

on all U.S. cropland saved nearly one billion tons

of soil in the past decade (25).

Marked differences in soil erosion are apparent

when data are examined regionally. Between 1982

and 1992, erosion declined the most in the Northern Plains (31.7 percent), followed by the Mid15The accuracy of erosion control statistics is complicated by different sampling and measurement methods. Data are marginally more

consistent than they were when the National Resources Inventory was instituted in 1977, but comparisons overtime should be made cautiously.
Chapter 4 Agriculture’s Broadening Environmental Priorities 185

Soil quality depends on more than the rate of erosion. Color

texture, organic content, electrical conductivity microbial

populations, acidity porosity and concentration of toxic substances are some of the many other characteristics that determine the quality of soil.

west (21 percent), Southern Plains (14.8 percent),

and the Mountain region (7.4 percent) (25). Water

and wind erosion patterns varied within those regions, depending on which crops were planted.

For instance, soil erosion due to water increased

on all cultivated land in the Southern Plains, on

soybean acreage in the Northern Plains, and on

cotton acreage in the Mountain region. Soil erosion due to wind increased on wheat and soybean

acreage in the Midwest, and on wheat acreage in

the Mountain region (25). Furthermore, the 1992

NRI data reveal substantial variation in soil erosion trends within regions (50).

Even though these statistics suggest overall improvement, they do not describe remaining erosion problems, and do not distinguish the influence of management from lands of varying

erodibility moving into and out of production

(71). Indeed, the most recent aggregate declines in

erosion may heavily reflect the idling of acres

(more than one-third of the country’s most erodible land) in the Conservation Reserve Program

(CRP) (25). Figure 4-3 portrays the patterns of

cropland vulnerable to long-term productivity declines due to water and wind erosion. The acreage

categories include those croplands estimated to be

eroding above levels that can sustain long-term

productivity, termed the “T" level, 16 plus the highly

erodible lands currently enrolled in the Conservation Reserve Program (CRP) that could return to

crop production after their contracts expire.

The effect of management changes on erosion

can be estimated by isolating acreage that remained in cultivation between 1982 and 1992.

NRI data suggest that erosion rates on land continuously planted with crops declined by 1.6 tons per

acre between 1982 and 1992, a finding which suggests that farmers were using more effective conservation practices over that decade (25,64,71).

A shift in technology away from “clean-tilling” and toward crop

residue management has been a key factor in reducing both

soil and water runoff from fields. While reduced tillage may

not yield environmental benefits under all conditions, studies

indicate that it generally improves soil and surface water

quality Its effects on groundwater and wildlife are not fully

understood.

16The tolerance, or "T," level is set by the SCS and approximates the maximum target erosion level above which unacceptable on-site degradation is believed to occur. The accuracy and usefulness of T levels is somewhat controversial.
861 Agriculture, Trade, and Environment

The severity of soil erosion depends on a combination of inherent soil characteristics, climatic factors, and land management. The number of acres

now eroding over the level that leads to long-term productivity losses, the “T” level, plus the number of CRP acres with the potential to erode at a

rate over T if returned to crop production, comprisas the total vulnerability of U.S. cropland to erosion-mduced declines in productivity

SOURCE: OTA, 1995. Compiled from data provided by Tim Osborn, Agricultural Economist, USDA/ERS, personal communication, 1995; J. Jeffrey

Goebal, ’’Estimated Average Annual Sheet and Rill and Wind Erosion ln Relation to T-Value of 1992 Cropland," US. Department of Agriculture, Natural

Resources Conservation Service, 1995.

Although farmers used conservation tillage more Rangelands pose special soil quality problems.

during the past decade,17 they may also have en- Box (8) suggests that rangeland productivity on

gaged in more contouring and strip cropping, private and public lands has generally improved

constructed terraces and grass waterways to con- since the Taylor Grazing Act of 1934. In 1982,

trol erosion, and shifted their crop rotations. more than 33 percent of rangelands were judged to

17 BOX 2-1 of Chapter 2 defines conservation tillage. Dicks (25) notes that between 1983 and 1991, the acreage under no-till management

increased from 8.6 million (2 percent of the total crop base) to 24 million; however, no correlation has been made between the option of no-till and 

highly erodible land. He suggests that although conservation tillage by definition should produce conservation gains, conservation is likely not

the most important inducement for adoption. Pierce and Nowak (71) conclude from analysis of 1992 NRI data that conaervation tillage acreage

declined between 1982 and 1992, and that adoption is not highly correlated with the most highly erodible acres. These findings conflict with

official USDA estimates reported in chapter 2, but an explanation for the conflict is lacking.
Chapter 4 Agriculture’s Broadening Environmental Priorities | 87

be in “excellent or good condition” (22). However, the 1982 and 1987 NRI showed that 19 percent of acreage (76 million acres) eroded over the

“T” level (22,109). The 1992 NRI shows that

rangelands suffer from higher wind erosion rates

than land used for other purposes, and that few improvements have been observed since 1982 (25).

Ruyle (77) notes that rangelands are inherently

vulnerable to erosion, and explains that poor management can exacerbate the problem.

Erosion indicators are mostly measures of soil

quantity and cannot convey comprehensive soil

quality conditions. But historical trends in erosion

may suggest the changes in overall soil management which, in turn, influence soil quality (64).

The level of correlation between erosion trends

and soil quality remains unclear. Moreover, conservation practices designed to reduce erosion

may or may not improve overall environmental

quality. Conservation tillage is a prominent example. Conservation tillage changes the biological,

physical, and chemical properties of soil, but the

balance between benefits and risks is not totally

predictable. In field studies, conservation tillage

has been linked to beneficial sequestering of carbon in the upper layer of soil, which helps prevent

loss of ozone-depleting gases; to improving wildlife habitat by reducing mechanical disturbance of

ground nesting sites; to retention of bulk organic

matter, which aids water retention and infiltration

as well as promotes microbial life; and to reduced

erosion and water runoff. The long-term environmental effects of conservation tillage are still under investigation. Some conclude it will “. . . contribute to a net decrease in total potential water

quality degradation (104).” However, there is conflicting evidence on the effects of conservation

tillage on groundwater quality (28,40). Perhaps

the most important result of studies to date is that

the benefits associated with conservation tillage

have not occurred universally. As with all technologies, its applicability varies depending on sitespecific hydrogeological and soil characteristics,

cultivation practices, and the management skills

of the farm producer. Several initiatives are under

way to develop techniques for evaluation that may

allow farmers to directly gauge the impacts of

their farming practices on soil quality.

❚ Strengthening Agroenvironmental

Science

There is a vast difference between the percentages

of USDA research monies devoted to increasing

agricultural production (historically more than 60

percent) and addressing environmental issues related to agriculture (historically about 10 percent).

This relative lack of federal support for agroenvironmental research will limit the quality of information available to university scientists, extension agents, federal and state program managers,

agribusiness, farm consultants, farmers, and environmentalists. Knowledge of unique regional

agricultural, socioeconomic, and environmental

characteristics is also critical to devising effective

policies—both in terms of production and environmental enhancement—in agricultural regions.

Incomplete information may lead to agroenvironmental policies that are poorly targeted and unnecessarily costly to the private and public sectors.

Expanded monitoring alone is unlikely to fill

the gaps in knowledge, because the nature of

many agricultural interactions with environmental resources remains poorly understood. (See box

4-4.) Indeed, more monitoring without better science to guide the monitoring will likely be inefficient. As noted above, the significance of many

agrichemicals for water or soil quality and, consequently, for biological health, is still under investigation, and the significance of habitat modification and destruction brought about by intensive

cultivation remains a topic of debate. The role of

agriculture in the functioning of specialized or

rare ecosystems, such as wetlands, has not been

extensively examined. The need, then, is not just

for more research, but for more sophisticated

agroenvironmental science. Three areas in particular (derived from the analyses of this chapter and

corroborated by recommendations of the National

Academy of Sciences (64,65) must be explored:

the functioning of environmental and farming systems and their interrelationships, the spatial environmental conditions that flow from these rela-
88 Agriculture, Trade, and Environment

Water resources—surface water and groundwater—have been studied for decades, and yet national

trends in the condition of this important resource have never been evaluated systematically. At the state

level, water quality assessments are performed every two years (as stipulated by the Clean Water Act

(CWA), but they do not represent a coherent strategy to monitor the conditions and implications of national water quality. As a result of current research and monitoring, questions remain about the extent of

agricultural contamination and about its significance for aquatic habitat, for the availability of safe drinking water, for agricultural production, and for recreation. As noted in this chapter, water safety standards

adopted by the EPA reflect that the implications of poor water quality remain only partially known. What

don’t we know about water quality? Why don’t we know? Who should be asking researchers to fill in the

missing answers?

Researchers have found that agricultural herbicides, insecticides, and nitrogen fertilizer residues are

prevalent in rivers, streams, lakes and reservoirs in regions where they are used. Furthermore, some of

these agricultural chemicals, notably herbicides, have been found to degrade more slowly in water than

they do in soil. This stability in water, combined with the natural movement and linkages among surface

waters and between surface water and groundwater, result in the capability of agricultural pollutants to

migrate great distances, affecting water quality hundreds of miles from their point of origin. Such findings raise a number of questions for agricultural producers, consumers and policymakers:

■

■

■

■

■

●

How long do agrichemicals remain in regional surface waters and at what concentrations?

What conditions affect the speed at which these chemicals degrade? Can technology help?

How far can agrichemicals go in water systems? Are they ultimately stored, degraded, or transported

indefinitely?

Do commonly found levels of agrichemicals affect the ability of water to support plants and wildlife?

How many people, nationwide, are exposed to agrichemicals in excess of safe drinking water levels?

What effects on human health can emerge from regularly swimming in or drinking low-dosage mixtures

of many herbicides, Insecticides, and fertilizer residues?

While some of these questions have been asked in some studies, a focus on the links between water

systems, conditions, and implications has not been emphasized in most large-scale studies of water

quality. A research agenda that focuses on conditions without supplying a context of understanding for

environmental or health implications makes it very difficult for such research to be meaningful in the

policy process. By the same token, a policy agenda that remains disengaged from the research agenda Increases the risks that relevant questions will remain unanswered.

The best example of the inadequacies of current research and monitoring of the nation’s water resources may be state water quality reports submitted to EPA under section 305(b) of the CWA. These

data form the basis of EPA’s biannual Water Quality Inventory report submitted to Congress, they are

frequently cited in research reports about national water quality; and they remain the most comprehensive national monitoring effort to date. Because of the way studies are conducted, however, they may

not accurately reflect national trends. For instance, 305(b) evaluations only include a fraction of riverways, lakes, estuaries and coastlines (see table 4-1 ), but the evaluations performed need not represent

a scientific sample. From year to year, and state to state, evaluations are not required to follow consistent protocols or result in trend information. Thus, the CWA process has produced 20 years of data that

add up to an incomplete and even incompatible set of answers.

SOURCE Off Ice of Technology Assessment, 1995
Chapter 4 Agriculture’s Broadening Environmental Priorities | 89

tionships, and the dynamic implications of these

conditions for environmental health.

Analyses have underscored the importance of

understanding how agricultural systems interact

with environmental systems (64,93). An agroecosystem approach parallels a shift in emphasis from

on-farm, on-site environmental concerns to linking on-site practices with off-site conditions and,

indeed, with the total agroenvironmental system.

The fundamental research questions are not

whether interaction between agricultural and environmental systems occurs, but how it occurs.

The geographical diversity of environmental

conditions and regional variations in agricultural

production make a better understanding of geospatial relationships crucial. Inadequate spatial information precludes better targeting of program

responses. For example, as Mueller et al. (59) and

Smith et al. (83) illustrate in their research, effective targeting of water quality policies would entail: a good understanding of regional vulnerability to agrichemical leaching and sediment erosion,

and monitoring data that describe actual water

quality conditions.

A critical dimension of farm and environmental systems is the way they interact over time.

These long-term dynamics provide a link to understanding long-term implications for agroenvironmental health. The stress, response, adaptation, and recovery or extinction processes that are

integral to ecological resources take place often

over long periods of time, as mentioned with

groundwater pollution and rehabilitation.

Many traditional soil and water conservation

programs have been implemented over past decades without precise understanding of these systems, conditions, and environmental implications.

However, as population and production pressures

places more stress on environmental resources, it

is not at all clear that general guidance can suffice.

The diffuse and diverse nature of agricultural runoff, which has impeded progress on nonpoint water pollution for 20 years, is unlikely to be resolved without much more sophisticated

understanding of the problem than currently exists. In particular, such problems require more sophisticated science than past efforts to help develop programs that meet environmental goals while

maintaining farm profits and U.S. competitiveness in international agricultural markets.

FEDERAL CONSERVATION AND

ENVIRONMENTAL PROGRAMS

Since the early 1970s, public pressure has progressively expanded the mandate of both traditional farm legislation and general environmental

laws to go beyond boosting agricultural productivity to promoting environmental health. As programs to manage the environmental side effects of

agricultural practices have expanded, traditional

soil and water conservation programs have declined, relatively speaking. These developments

reflected a growing recognition of farmings’ effects on environmental quality not captured by

market prices, and rising concern about the longterm sustainability of production (17).

Depending on the definition of a program, there

are at least 35 separate USDA programs for conservation and environmental purposes, including

about 12 for research and data gathering (appendix 4-2). At least another 20 are administered by

other agencies, including EPA, the Department of

Interior, the U.S. Army Corps of Engineers, and

the National Oceanic and Atmospheric Agency

(appendix 4-2). Estimated public expenditures for

all programs are $6.5 billion for 1995 (104).

The large number of programs raises questions

of overlap, conflict, coordination, and mixed incentives to farmers and ranchers, but a comprehensive program analysis has not been conducted,

even within USDA. Opportunities for reconfiguring and targeting the programs—to clarify the signals and incentives they give to farmers, agribusiness, legislators, and environmentalists and to

save budget expense—may exist. Possible policy

options for restructuring program approaches are

explored in the last chapter. Diagnosing the nature

of private incentives to adopt agroenvironmental

practices is a key principle to be used in any restructuring (5).

Three general types of federal policy approaches to soil conservation, water quality, and
90 | Agriculture, Trade, and Environment

wildlife habitat issues are discussed in this section. Voluntary efforts aided by education, technical assistance, and subsidy programs have been

the predominant approach to environmental management in agriculture. As illustrations, the dominant soil conservation programs are examined in

detail. Environmental compliance schemes,

which are integrally linked to farm commodity

programs and supply programs, are discussed

next, followed by an assessment of regulatory approaches. The objective of the assessment is to review the performance of the three program approaches and identify strengths and weaknesses

for application to agriculture’s broadening environmental agenda. In the chapter’s final section,

we discuss the potential of technology research

and development aimed specifically at enhancing

agriculture’s environmental performance while

simultaneously maintaining profitability. These

“complementary technologies” have not received

program emphasis, but hold the potential to bring

private incentives into closer correspondence with

public environmental objectives. 

❚ Voluntary Education, Technical

Assistance, and Subsidy Programs

A multitude of past and present USDA conservation and environmental programs are comprised

of either voluntary education, technical assistance, and/or subsidy (VETAS) elements. These

kinds of programs have historically received more

funding, and have a broader scope, than other

kinds of conservation and environmental programs.18 Education and technical assistance and

subsidies for conservation practice cost-sharing or

for land rental and easement payments have often

been operated together. Thus they are examined as

one category here. In situations where conservation-oriented technologies do not offer cost savings or other private benefits, education and technical assistance are likely to be ineffective without

subsidies.

Estimated annual expenditures for USDA conservation and environmental programs total just

under $3.6 billion for 1994, although that figure is

projected to fall to about $3.1 billion in 1995 (appendix 4-3). With the primary exception of technical assistance and administration for compliance

schemes detailed in the 1985 farm bill, those monies fund VETAS programs. More than 50 percent,

almost $1.8 billion of the total, will pay for land

that is set aside in 1995 under the CRP, plus the

Water Bank and Wetland Reserve programs. Most

of these land “rentals” by the government are

scheduled to end sometime between 1996 and

2005. The largest share of the remaining $1 billion

will pay for technical assistance, extension services, and administration, followed by public

works projects such as emergency watershed

protection, which helps flood recovery efforts.

Less than $100 million is slated to install costsharing practices under the Agricultural Con18The Natural Resources Conservation Service (NRCS), formerly the Soil Conservation Service (SCS), provides farmers with education

and technical assistance. Typical education/assistance efforts include laying out erosion control practices such as terraces, and providing information about conservation crop rotations, tillage options, and wildlife habitat. The Extension Service also provides conservation education

and technical assistance, sometimes in cooperation with the NRCS and sometimes separately, depending on the state and the project.

Several programs distribute subsidies. The Agricultural Conservation Program (ACP), begun in the 1930s and now operated under the Consolidated Farm Service Agency (CFSA), provides financial assistance in the form of cost-sharing to implement conservation practices. For example, farmers are given a share of the expense of installing terraces (usually 50 percent or more) subject to CFSA eligibility requirements,

available funding, technical approval by NRCS, and approval by a local conservation board. Annual ACP payments are limited to $3,500 per

farm, which can effectively rule out large-scale projects in any year. Other programs using conservation practice cost-sharing monies include

the Great Plains Conservation Program, Emergency Conservation Program, CRP, Wetland Reserve Program (WRP), and the Colorado River

Salinity Control Program.

In addition to cost-sharing subsidies, rental and easement payments remove land from production temporarily or attach use restrictions for

conservation purposes. The CRP, approved in the 1985 farm bill, has set aside 36.4 million acres to control erosion and for other environmental

purposes. The maximum annual rental bill so far has been $1.8 billion. The WRP, though much smaller, protects wetlands through rental and

easement payments. Also, the Water Bank Program has rented land near water bodies for habitat and other purposes.
Chapter 4 Agriculture’s Broadening Environmental Priorities | 91

servation Program (ACP) in 1995—a drop of nearly

50 percent from levels during the past decade.

Appendix 4-3 presents the expenditures for

each USDA conservation-related program from

1983 to 1995. Although there are at least 35 programs, a large number of them have relatively low

funding—a few large programs account for the

majority of expenditures. Many programs were

authorized at higher levels, but actually received

little or no funding. A comprehensive review of all

the ETAS programs has not been conducted and is

not possible here. Rather, the discussion focuses

on the largest program component—soil conservation—and the largest single program within

soil conservation—the CRP. These soil conservation programs, especially during the last decade,

have also incorporated water quality objectives

and affected wildlife habitat.

Soil Conservation Programs

Federal soil conservation programs began in the

Great Depression, when farmers faced the combined woes of a collapsing economy, drought, and

massive erosion on their land. One program authorized work on soil erosion control as a means

to reduce unemployment (72). To overcome legal

obstacles to paying income support to farmers for

restricting production, soil conservation programs and farm income payments were joined.

Both programs have endured. “Despite the ‘New

Deal’ intent of providing emergency relief, the

farm commodity programs and the soil conservation programs have continued with few modifications to the present” (4).

Several evaluations have found that soil conservation program expenditures could be redirected and result in greater erosion control

(100).19 In a 1974 study, USDA estimated that

cost-sharing used for conservation practices in the

Great Plains Conservation Program (GPCP)

could help to further reduce wind and water erosion if those subsidies were used for more cost-effective erosion control practices (107). Another

USDA study found that lands with erosion rates

very near the so-called T level received nearly half

of ACP financial assistance (98). By implication,

that half of the available program subsidies was

not applied to land with severe erosion problems.

Evaluations by the General Accounting Office

(GAO) of the technical and financial assistance

programs also concluded that improved targeting

of program resources could lead to better control

of erosion (88,89). In a later evaluation, the SCS

found that 40 percent of its technical assistance

was applied to lands eroding under the T level

(108). In the same study, the SCS determined that

the effectiveness of technical assistance was lower

in areas targeted for erosion control, which implied that more intensive effort was needed to accomplish erosion goals in those areas.

The 1977 GAO study also found that farms participating in the conservation programs did not

achieve erosion rates significantly lower than

those on farms that did not participate. A countylevel study similarly found that farmers with SCS

conservation plans did not achieve significantly

greater erosion control than farmers without such

plans (29).

19In the midst of these evaluations (1977), Congress passed the Soil and Water Resources Conservation Act (RCA), which directed USDA

to collect comprehensive resource data to assess the nature of conservation problems on private lands, evaluate conservation programs, and

construct a National Conservation Plan (NCP). The RCA established the National Resources Inventory (NRI), conducted in 1982, 1987, and

1992, which provides critical data for program evaluations and monitoring resource trends (110).
92 | Agriculture, Trade, and Environment

Two principal findings emerge from these and

other evaluations. First, soil conservation education, technical assistance, and practice cost-sharing have not been focused on the most severe

erosion problems or on delivering the most costeffective practices. Second, voluntary education

and technical assistance alone have not led to significant conservation benefits (60). By their nature, these information programs are most effective if they make operators aware of practices and

technologies that offer cost savings or increased

returns while simultaneously reducing erosion—

the complementary or “win-win” situations.

These findings also likely apply to VETAS approaches to water quality and wildlife problems

where insufficient targeting has occurred and

farmers face major practice costs.

Evaluations also suggest that cost sharing or

subsidies are likely the most important determinants in inducing farmers to adopt certain agroenvironmental practices (29,34). If conservation

benefits are to be realized in cases where farmers

do not have private economic incentives, either

subsidies or some form of regulation must be

employed. The other, longer term alternative is to

develop profitable technologies that can be substituted for currently unprofitable technologies.

In a comprehensive assessment following the

studies of the late 1970s and early 1980s, the

USDA’s Economic Research Service (ERS) performed the first nationwide benefit-cost assessment of the ACP, Conservation Technical Assistance (CTA), and the GPCP (100). Estimated

erosion control benefits and reduced offsite damages were compared with costs. A key finding: on

average, the estimated benefits exceeded costs

only for land eroding at a rate of more than 15 tons

per acre. Given that the programs were devoting

most of their resources to lands eroding at a rate of

less than 10 tons per acre, and nearly half of program resources went to lands eroding at a rate of

less than five tons per acre, the study concluded

that significant public benefits could be secured

by redirecting program resources to the lands that

were eroding the most. ERS made five major recommendations for program reform, which have

anticipated policy developments to a substantial

degree:

1. target erosion control programs,

2. include offsite damage reduction as an erosion

control benefit,

3. base conservation incentives on public benefit,

4. estimate erosion control benefits and costs, and

5. improve research and data for program evaluation.

On the heels of these evaluations, and with the

benefits of 1977 and 1982 national surveys of natural resource conditions and a National Conservation Plan, the 1985 farm bill authorized three major erosion control programs aimed directly at

highly erodible lands. The CRP, a massive effort

to retire highly erodible or other environmentally

vulnerable land through voluntary 10- or 15-year

contracts, was the principal program.

Conservation Reserve Program

Although the achievements of the 1985 farm bill’s

conservation measures cannot be documented until full implementation and evaluation of all effects, several studies have assessed their preliminary performances. The CRP has been the subject

of intense scrutiny because it represents the largest

expenditure of conservation funds, nearly $20 billion, and affects nearly 10 percent of U.S. cropland. Preliminary evaluations have arrived at two

basic conclusions: the program appears to generate net economic benefits, mostly from environmental improvements, but net governmental costs

are positive, implying a drain on the federal trea-
Chapter 4 Agriculture’s Broadening Environmental Priorities | 93

sury.20 At this writing, a final economic judgment

cannot be made, because it is still not possible to

measure with precision the full physical and biological effects and the dollar value of environmental benefits.

Regardless of such difficulties, one conclusion

of CRP evaluations has been strong and virtually

unanimous: the early benefit-cost ratio could have

been much higher with better environmental targeting and more effective controls on the payments made to farmers for “renting” their land

(67,74). As a result of the 1990 farm bill, USDA

changed CRP enrollment procedures to address

environmental priorities specified in the farm bill

legislation. The changes included a rudimentary

targeting scheme as well as a provision to hold

rental payments at or below market levels (67).

A regional study of the land enrollment patterns in California, Idaho, Oregon, and Washington shows that the 1990 CRP was more successful

in concentrating enrollment of land in highly

erodible counties than the 1985 version (129). On

average, this change should produce more environmental benefits, but detailed assessments of

enrollment patterns within the counties are also

necessary. Concern now centers on what will happen to CRP lands after the government stops renting them. Experience with the Soil Bank, an earlier major long-term set-aside program in operation

from 1958 to 1972, shows that most (probably

two-thirds or more) of the idled land will again be

used for producing crops and could trigger another

round of environmental problems—which in turn

would increase the need for remedial programs.

❚ Conservation and Environmental

Compliance Programs

The compliance provisions of the 1985 farm bill

represent a departure from traditional agricultural

conservation and environmental programs. They

were, in fact, considered landmark legislation, because they made farmers adhere to conservation

standards in return for their agricultural program

benefits, including commodity deficiency payments. The compliance mechanisms were meant

to help control erosion on existing cropland (conservation compliance); they were also intended to

regulate farmers’ efforts to turn grasslands into

cropland (Sodbuster), and convert wetlands to

cropland (Swampbuster). The Sodbuster and

Swampbuster provisions were a tacit recognition

20The first comprehensive assessment, conducted midway through CRP enrollment and before the 1988 drought lowered crop surpluses,

estimated the potential supply control, food cost, environmental benefits, and other effects of a 45-million acre CRP, as authorized in the 1985

farm bill (128). The preliminary investigation concluded that the CRP would likely produce net economic benefits in the range of about $3.5

billion to $11 billion. However, the study methodology and data were admittedly incomplete concerning such subjects as the effects on consumer food price increases, interaction between government supply control instruments, some environmental benefits, and the likely pattern of

enrollment after midway signup. Although its net economic benefits were estimated to be positive, the CRP was projected to cost the federal

budget more than it saved in reduced supply control expenses—a range of $2 billion to $6.6 billion over the program’s life.

To reflect new developments, an updated CRP assessment was conducted after the effects of the 1988 drought had been felt and more lands

had been enrolled in the CRP (102). Although the studies are not strictly comparable, because the methodologies used to estimate production,

supply control, and price effects differed, the basic conclusions remained the same. The CRP was estimated to produce net economic benefits in

the range of $4.2 billion to $9 billion, but the likely net government cost rose to $6.6 billion to $9.3 billion. Notably, from a net economic perspective, increased farm profits and higher food costs nearly offset each other, and the environmental and timber supply benefits accounted for

most of the positive margin. Again, the methodologies for estimating the value of environmental benefits are crude, relying on estimates based

on large area projections rather than specific documented effects.

If the projected soil erosion reductions or presumed linkages to environmental resources are not accurate, then the estimated environmental

benefits, such as water quality, will not be what they are expected to be. Also, recent survey results indicate that most enrolled acres will likely be

used for agriculture again if CRP payments end, and so the expected benefits may be brief (85). Ex post studies of environmental changes resulting from the CRP should be conducted to check the accuracy of estimated effects. For example, a study of changes in stream water quality

conditions in southern Illinois, where large amounts of CRP land were enrolled, did not reveal improvements had occurred as anticipated (23).

The geographic pattern and timing of benefit streams do affect the program’s economic bottom line. Similar assessments should be conducted

on timber and wildlife benefits, which account for between about $5 billion and $6 billion of the net benefits. The final benefits and costs of the

CRP remain unclear until those assessments are completed.
94 | Agriculture, Trade, and Environment

on the part of legislators that, as traditionally administered, federal commodity program payments likely gave farmers economic incentives

for converting grasslands and wetlands to crop

production (42,52).

Not surprisingly, the measures have been the

subject of controversy since their inception.

Farmers worried that meeting the originally proposed conservation standards would cost too

much and force them out of the commodity programs, thus denying them price and income supports. The SCS ameliorated that concern by developing the concept of alternative conservation

systems (ACSs), which were intended to allow

farmers more flexibility in attaining the compliance standards (99). Widespread adoption of

conservation tillage systems by many farmers

(primarily to save fuel, labor, and machinery

costs) often satisfies conservation compliance requirements and appears to have minimized potential economic distress for the overall sector. However, an internal investigation of the application of

the ACSs suggests they were used without clear

and consistent rationales and have not been documented to achieve compliance erosion control

standards (106).

A mid-term external investigation of the conservation compliance measures suggested that the

programs were not being implemented in a uniform manner to achieve the standards defined in

program regulations (84). Generally, near onehalf of the cases in sampled counties did not satisfy the requirements of implementing regulations.

The same external field-level evaluation of the

Swampbuster provisions indicated that the sanctions did slow the conversion of wetlands to cropland, but were not being uniformly enforced (84).

Another evaluation conducted by the USDA’s Office of Inspector General, based on a 1991 audit,

found a similar rate of noncompliance (105). (The

sample size was, however, extremely small.) In

contrast, SCS internal status reviews of progress

have indicated a small percentage of producers are

not in compliance with their plan requirements

(103). There is no official explanation available

for the different findings of the external reviews

and internal status reports. Questions about sampling, different performance criteria and standards, and measurement of plan implementation

require answers. Congressional oversight hearings have been held on these issues.

These mixed evaluations are not entirely unexpected. Compliance measures placed SCS, now

the Natural Resources Conservation Service

(NRCS), in a quasi-regulatory role, which is in

marked contrast to its traditional role of serving

clients mostly on a voluntary and willing-cooperator basis. Thus, “cultural” issues have probably

retarded effectiveness (91). Also, the novelty and

sheer size of the compliance task stretched NRCS

personnel and institutions far beyond their traditional resources and roles. Some unevenness in

enforcement from region to region could therefore

be expected. Whatever the relative roles of these

constraints, conservation compliance measures

are still inadequately enforced (91).

Regardless of administrative efficacy in implementing them, compliance mechanisms have basic shortcomings as agroenvironmental measures.

First, agricultural program payments, i.e., the incentives for achieving compliance, may not be

correlated with priority environmental problems

(43). Moreover, compliance schemes linked to

agricultural program payments lose their effectiveness when they are often needed most. When

commodity prices rise and deficiency payments

decline, the penalty for not complying with conservation measures also falls. Further, in such a

situation, production pressure expands and increases farmers’ incentives to farm more intensively or bring new land into production. Finally,

as the federal budget shrinks and agricultural program payments fall, the relative scope and effectiveness of compliance programs declines. The

last two limitations are expected to become more

evident over the next decade, as agricultural trade

is liberalized and pressure to cut the federal budget

grows.

❚ Agroenvironmental Regulation

Although precise figures do not exist, agriculture

appears to be affected less by environmental regulation than other industries. The reasons include
Chapter 4 Agriculture’s Broadening Environmental Priorities | 95

agriculture’s long history of voluntary subsidy approaches, and its basic structure: diffuse, diverse,

and numerous (nearly 2 million) operations that

generate mostly nonpoint pollution are difficult to

identify, monitor, and regulate. However, when

environmental problems are concentrated in certain inputs, subsectors, or local areas (and so can

be monitored and measured) and minimum environmental standards have been established, regulatory approaches have been applied. Almost by

definition, the regulatory approach is best-suited

to cases in which private incentives and public environmental goals are quite disparate.

Pesticides

Pesticide registration is the largest regulatory effort affecting U.S. agriculture. The government

began regulating chemicals used in U.S. agriculture at the beginning of the 20th century (75). The

goal at that time was to protect farmers from commercial frauds. The history and performance record of the effort delineates the challenges of regulating a diverse and diffuse industry in the face of

scientific uncertainty.

The registration and reregistration of products

is a complicated and lengthy process that does not

appear to satisfy consumers, environmental

groups, or industry groups. It can take four to eight

years for a product to undergo an elaborate scientific review. At this writing, more than 3,000

chemicals are classified as pesticides under the

Federal Insecticide, Fungicide, and Rodenticide

Act (FIFRA)—a listing that includes active pesticide ingredients and more than 2,000 inert ingredients that are not subject to reviews (96). Perhaps

because the review process can be interminable,

the vast majority of 880 active pesticide ingredients have not been fully cleared by EPA review

and remain effectively unregulated. Further,

EPA’s efforts apparently have had relatively little

effect on the total use or sale of agricultural pesticides (69) Critics allege that severe resource

constraints within EPA have hampered its ability

to make effective registration decisions. However,

evidence suggests that active participation by either environmental or pesticide industry interest

groups in the registration process does significantly affect EPA’s registration decisions (16).

Pesticide use in the United States grew steadily

from 1950 to 1984, but leveled off and started to

fall in the mid-1980s (12; table 2-7). On the

whole, as fewer acres have been cultivated, smaller amounts of pesticides have been used. The

modest decline in the mid-1980s may also reflect

the cumulative effects of rising pesticide prices,

regulation, and the introduction of more potent

compounds. Restrictions on the use of products,

posted on legally binding labels, define permissible methods of application, maximum dosages,

preharvest intervals, and use restrictions near

water.

The threat that a new compound will not be approved by EPA has increased the profit potential

of more environmentally benign pesticides, and

has encouraged the introduction of a variety of

new products (69). Accordingly, although overall

pesticide application rates have changed only

slightly, the composition of products may have

changed much more. Unfortunately, the lengthy

and costly EPA review process has probably restricted the rate at which the new, more environmentally benign products appear (62). Efficient

regulation can stimulate innovative technologies

that reduce the cost of meeting environmental performance standards.

Inevitable uncertainty pervades any evaluation

of pesticide policy and programs. Critical assessments seem unending, and there are few definitive

conclusions that all sides can endorse. The costs of

restricting or banning a pesticide can be reliably

estimated in the short run, but long-term estimates

are more difficult to make, primarily because it is

unclear what problems new products might pose

and what kinds of management practices will be

used to respond to regulatory action.

Generally, the farm sector as a whole has not

suffered economically from pesticide regulation.

Consumer prices of products produced with

banned or restricted chemicals have risen slightly

instead (69). Individually, however, some farmers

may lose—or gain—from pesticide regulation.

Farmers who have traditionally depended on re-
96 | Agriculture, Trade, and Environment

stricted compounds may grow and sell less, for example, while farmers who have not used such

compounds can benefit from the price rises resulting from lower yields and less supply. Farmers

who grow crops on which relatively limited

amounts of pesticides are used, termed “minor

use” crops, such as vegetables, fruits, nuts, and ornamental crops may be particularly disadvantaged. The lack of broad markets that, say, corn

and soybeans have, means the cancellation of the

registration of compounds for minor used crops

can cause significant losses. In effect, because

“minor use” compounds have what is considered

to be a relatively small market, it is not always

profitable to reregister or develop substitutes for

canceled compounds.21 In this context, it is interesting to note that crops requiring “minor use”

pesticides may account for fully 45 percent of total

U.S. agricultural output and $5 billion in exports

(127).

Regulation of individual compounds, whether

they are used for soybeans or tomatoes, is not likely to cause severe economic harm when good substitutes are available. However, eliminating a

whole class of chemicals without apparent substitutes could cause serious economic hardship in the

short run (68). Consequently, the sequence of regulatory decisions, substitutability among chemicals, and the availability of nonchemical alternatives to pesticides are extremely important. The

potential risks of using a pesticide must be

weighed against costs and the likelihood of developing a substitute to ascertain the magnitude of

both short-run and long-run effects.

Even though it is possible to estimate regulatory costs, current science and data usually cannot

measure regulatory benefits, or the costs of inappropriate pesticide use. Pesticide-laden runoff

that contaminates streams, rivers, and lakes, as

well as pesticide residues that leach into groundwater or remain on foods, can damage the environment and have been associated with cancer, developmental impairments, and reproductive problems

in humans. Yet the precise nature of the links between pesticides and the damage they cause is

poorly understood. Long-term epidemiological

(human health) information on the effects of pesticides individually, and in combination with other

chemicals or environmental stresses, is lacking.

Also lacking is long-term information on how

pesticides, individually and in combination with

other chemicals and stresses, affect environmental

systems. As a result, EPA reviews must often use

incomplete and surrogate data to infer risks to humans and the environment from pesticides. Many

existing pesticides are being used while tests on

them are being completed.

Two important developments in pesticide

policy occurred in 1993 (53). A National Academy of Sciences panel on pesticides in the diets of

infants and children recommended moving to a

health-based standard with careful consideration

of children’s exposure, and additional testing of

pesticides for developmental toxicity (63). The

panel noted that because of their weight and diet,

children may be at risk of developmental effects

from pesticide residues—and so pesticide risk assessments should differentiate between children

and adults. In addition, the Clinton administration

issued a new pesticide proposal for a unified

health-based negligible risk standard for fresh and

processed food; a quicker review process, during

which registrants must prove that their products

are safe or lose approval; special provisions for

21 EPA has recently been trying to improve minor use registrations. Based on national surveys, the reregistration of about 1,000 minor use

pesticides will not be pursued by manufacturers and another 2,600 new pesticides will be needed for minor uses by 1997—creating a need for up

to 3,600 minor use products very shortly. To retain important minor use compounds, EPA is: 1) working closely with USDA and an interregional

research group that facilitates minor use pesticide research, 2) granting waivers for low volume/minor use data where feasible, 3) moving to

revise its crop groupings for residue testing to encourage minor use registrations, 4) encouraging third-party registrations, 5) providing fee

breaks and expedited processing, 6) coordinating with agricultural users and the pesticide industry, and 7) considering legislative changes

(123).
Chapter 4 Agriculture’s Broadening Environmental Priorities | 97

“minor use” registration and reregistration; and

programs to encourage integrated pest management (53,122). These actions, some requiring

congressional action, have yet to be approved.

Whether they will mark a fundamental policy

change for USDA—from primary emphasis on

expanding food production by using pesticides to

more emphasis on the possible health and environmental risks of pesticides—remains an open

question.

Confined Animal Facility Water Pollution

Confined animal operations such as feedlots—

some of which, depending on their size and nature, can generate large quantities of nutrients and

bacteria—and be a “point” (readily identifiable)

source of water pollution. Under the Clean Water

Act, such operations fall under regulatory programs to control excessive effluents. States may

require the use of specific technology or adherence to certain pollutant limits, as well as monitoring and reporting. EPA delegates the responsibility for implementing such water pollution control

provisions, and for achieving designated water

quality standards, to states. For its part, EPA is responsible for ensuring compliance with federal

legislation.

A review of 10 state programs shows considerable variation in the scope and degree of pointsource control programs for these animal facilities

(46). Some technical assistance and cost-sharing

programs were available in all states through the

ACP to help producers comply with the federal

standards. Half of the states also provided financial assistance. There are insufficient data to

compare the net control costs of these facilities

with those of industrial sectors subject to similar

regulation. A study conducted for EPA suggested

that the applicable regulations were unevenly and

weakly enforced (15).

Coastal Zone Water Quality

Pollution of coastal zone waters became a subject

of growing concern in the 1980s. As noted earlier

in this chapter, coastal estuary water quality has

been affected by nitrate and sediment from agricultural sources. Congress enacted a set of Coastal

Zone Act Reauthorization Amendments (CZARA)

in 1990, which laid out a comprehensive process

for improving water quality. Programs aimed at

coastal nonpoint source pollution were included.

For agriculture, the act sets out specific ways to

attain coastal zone water pollution reductions

(121). First, farmers in coastal zones are required

to adopt “economically achievable” management

measures within three years from a list compiled

by the federal or state/local agencies. (Presumably, farmers will be given education and technical assistance, but will not be eligible for substantial cost-sharing.) Plans for controlling

agricultural and other sources must be submitted

by June 1995. If states do not comply with the

CZARA provisions, they may possibly forfeit

coastal zone development grants and other related

federal funds.

During the first stage, the CZARA process requires that certain technologies be implemented

for all agricultural land in coastal zones by January 1999. Different technology lists apply to crop

and livestock enterprises, for example. Following

a two-year monitoring period (to January 2001),

the states have three more years to implement

additional measures where necessary to achieve

specified water-quality standards. States must ensure the implementation of the measures through

enforceable mechanisms, including regulation

and innovative incentive schemes. Because the

CZARA will be implemented over the next several years, its effects on agriculture remain uncertain—but potentially large. For example, almost

all counties in Michigan may be affected by

CZARA rules because of their proximity to the

Great Lakes. One analysis estimates the annual

costs of the proposed measures as typically less

than $5,000 per farm for most farm sizes (44).

Wetlands Alterations

Section 404 of the 1972 Federal Water Pollution

Control Act Amendments regulates actions taken

to alter wetlands—including converting them to

agricultural uses. Designed primarily to deal with

wetlands adjacent to navigable waters, section
98 | Agriculture, Trade, and Environment

404 requires permits administered by the U.S.

Army Corps of Engineers for the discharge of

dredge and fill material. The role is one long

associated with federal regulation of navigation.

Most normal agricultural activities were explicitly excluded under section 404 provisions, until

President Bush issued his “no net loss of wetlands” (NNL) policy dictum in 1987.

Attempts to implement that policy have necessitated more inclusive definitions of wetlands and

have put more agricultural activities under the

scrutiny of the section 404 review and permit

process. Changes in levees, dikes, and drainage on

farmland classified as wetland, and other agricultural wetland conversion, may require a section

404 permit. Under a 1994 agreement between the

U.S. Army Corps of Engineers, the FWS, EPA,

and the SCS, final rules exempt wetlands converted to cropland before December 1985 from

section 404 requirements (131). Most recently, the

NRCS was given responsibility for certain aspects

of the section 404 program affecting agriculture.

The impact of section 404 wetland permit regulation has been in dispute. Some data imply that

the overall restrictiveness has not been great: 67

percent of the applications made in 1990 were approved, 30 percent were withdrawn or processed

as general permits, and only 3 percent were denied

(42). The time and resources involved in seeking

the permit, however, can be considerable. A study

of a sample of permit records for 1992 concluded

that it took the average applicant 373 days to get

through the “individual permit” process, and that

93 percent of the individual permit applications

exceeded the 60-day “evaluation-time” target (2).

Such individual permit applications normally

constitute about 10 to 15 percent of the section

404 permit applications and apply to controversial

cases requiring lengthy evaluation. However,

when the remaining 85 to 90 percent of general

permits are added to individual permits, the average time for the process falls significantly (132).

During 1994, the average time was 27 days for the

total of more than 48,000 applications, and the

time for individual permits fell to 127 days. In addition, the backlog of applications more than two

years old fell from 202 to 81 between January

1994 and January 1995 (24). Despite these statistics and the trends they reveal, substantial uncertainty may still exist in farmers’ minds about the

section 404 process and consequences. In addition

to regulatory reform to minimize unnecessary delays and costs, educational programs may be necessary to explain the permitting process and reduce uncertainty for those farmers likely to be

little affected.

Endangered Species

The potential application of land use restrictions

under the Endangered Species Act to restore

threatened and endangered species causes significant worries among agricultural producers who

rely on using the lands implicated in recovery

plans. The restrictions may affect producers’ pesticide use, for example; their plans to convert pasture to cropland; or other development options.

Understandably, producers fear that public restrictions will impose costs without compensation.

To date, the impacts on agriculture appear to be

isolated cases that may significantly decrease incomes in specific areas. Possible recovery plans

invoked for threatened and endangered fish species in Western waters may be broader in scope.

Moore and Weinberg (57) report that of the 93 fish

species considered threatened or endangered, 67

are found only in Western rivers—a large number

of which provide water for agricultural irrigation.

Potential recovery plans for the Columbia River’s

sockeye salmon runs could restrict irrigation in a

large section of the Pacific Northwest (IdahoWashington-Oregon) and impose significant

costs on specific agricultural subsectors, even

though the costs to the overall regional economy

would be small (1). A larger concern centers on

potential restrictions based on the number of species expected to become threatened or endangered

over the next 10 years. Little systematic analysis

of the overall effects on agriculture has been undertaken due to the uncertain path of species preservation actions and required management measures.
Chapter 4 Agriculture’s Broadening Environmental Priorities | 99

Harmful Nonindigenous Species

The accidental importation of harmful nonindigenous species has caused significant commercial

losses to agriculture and degraded the environment. However, regulatory mechanisms and rules

to screen unwanted species introductions appear

incomplete. This issue is discussed in detail in

chapter 5.

❚ Stimulating Agroenvironmental

Technology Development and Adoption

Despite a broadening environmental agenda, public agricultural research and technology development continues to focus predominantly on increasing production, as it has for most of this

century.22 Public research funds simply have not

been targeted to developing technologies aimed at

simultaneously enhancing environmental quality

as well as agricultural production. Since the

1970s, more than 60 percent of agricultural research by federal research agencies and by state

land grant universities has been related to production, while about 10 percent has been dedicated to

natural resource or environmental topics (chapter

2). The result has been policies and programs that

put production and conservation goals in competition with each other.

Interest in promoting “complementarity” between agricultural production and the environment has grown within the research community,

however, and among farm producers, in some agribusinesses, and among consumers. The broad

adoption of conservation tillage and growing use

of soil nutrient testing, as well as producer involvement in collaborative R&D networks across

the country are supportive of the “complementarity” notion (93). Consumers favor a reduction in

farm chemical use and show increasing demand

for food with fewer chemical residues (81). The

market potential for some complementary technologies is reflected in enthusiasm for emerging

technologies such as precision farming (described

below). Environmental groups also stand to gain

from supporting complementary technologies,

because they can help achieve lower cost and

longer lasting environmental improvements.

Market forces have “induced” agricultural

technology innovation that reduces the costs of

relatively expensive market inputs, such as land

and labor. The costs of these inputs are not difficult to determine. However, the costs of many environmental problems associated with agriculture—such as degraded drinking water or diminishing wildlife habitats—are difficult to capture in

the marketplace. Consequently, the environmental costs (and benefits) stemming from agricultural production generally have not been incorporated into the costs farmers pay or the prices they

receive for their goods, and there is little impetus

for technological innovation that ameliorates, or

even addresses, environmental problems.

Public policies, too, are responsible for the

technological bias toward agricultural production. Public subsidies may encourage farmers to

adopt some technologies to clean up pollution, but

as a rule, those subsidies do not act as incentives

for developing technologies that will enhance

both environmental quality and agricultural output. Pesticide regulation is the major exception,

insofar as the restriction of certain agrichemicals

essentially creates market incentives for costeffective, more environmentally sound alternatives. However, regulation may not always be the

best approach for stimulating complementary

technologies. The present agricultural program

regime has fostered a piecemeal approach to

agroenvironmental technology innovation: complementarity is the exception rather than the rule,

and potential public and private benefits are lost as

a result.

22Current allocations to agroenvironmental research reflect two special initiatives enacted in the 1985 and 1990 farm bills—the National

Research Initiative and the Sustainable Agriculture Research and Education (SARE) program. Both were implemented as competitive grants

programs through USDA. The National Research Institute allocates 20 percent of its grants to research topics of natural resource or environmentally related content (65). The SARE program promotes multidisciplinary research applied to farm problems with significant agroenvironmental content.
100 | Agriculture, Trade, and Environment

Technological innovations are not costless. Either private industries or the public sector, or both,

must invest in research and development. The

chief challenge to public and private technology

development will be in identifying critical goals

for the sector as it confronts present and future

challenges, and stimulating complementary

technology innovations that enable individual

producers on diverse farms to meet those goals.

The Transition to Complementarity

In practical terms, “technology” means the management scheme by which various practices and

inputs—labor, information, machinery, water,

chemicals, biological inputs, and capital—are

combined into a coherent system to achieve certain goals. As noted in chapter 2, a virtual technological revolution is under way in agriculture, and

is having a profound impact on both technological

tools and goals. Just as the emphasis on producing

abundant food spawned technologies that promoted intensive production and economies of

scale, the shift toward a emphasis on both abundant food and environmental quality signals the

need for new technologies that prevent pollution

and maintain profitability from the outset. For industries such as agriculture, in which nonpoint

pollution processes dominate and monitoring enforcement costs are high, preventing pollution

may be less expensive and more effective than

treating pollution after the fact.

Some analysis suggests that pollution prevention technologies may not be efficient enough to

offset the investment required to adopt them and

thus not be complementary technologies (97).

However, the success of pollution prevention

technologies is determined by the efficiency with

which it meets socially defined pollution control

goals, not simply by its private rate of return in the

absence of environmental quality goals. Complementary technologies move a step beyond this

standard by requiring environmental quality improvement while maintaining or improving private profitability.

The feasibility of developing and tailoring

complementary technologies has not been investigated because, as noted above, there are few market and/or public program incentives to do so.

However, some agricultural and environmental

technologies currently used suggest that there is

great potential for development and adoption of

complementary technologies within the agricultural sector. Possible examples of these technologies include: integrated pest management, conservation tillage, soil nutrient testing, rotational

grazing, and organic farming systems.

Initiating development of complementary

technologies requires first defining the criteria by

which their performance will be assessed. For example, critical thresholds for environmental quality and production could be set on a regional or national basis. Environmental quality components

include water quality, soil quality, and wildlife

habitat criteria and the minimum standards relevant to the region. Similarly, production criteria

would capture the crop and livestock regional priorities. Within those critical thresholds (the “feasible set” of technologies), trade-offs between the

two goals could provide stimulus for further innovation.

The existence of a feasible range suggests that

no single complementary technology will be the

“best” choice in all cases and in all regions of the

country. There will likely be no “silver bullets.”

On different kinds of farms, or in the hands of different farmers, the complementarity of a given

technology is likely to differ as well.

While complementary technologies may be

distinctly different from each other, their successful application uniformly requires sophisticated

management skills and a “holistic” or “systems”

approach to farm management (94). Thus, the nature of farmer management capacity and goals defines the technology set most relevant to his or her

farm. Chief among the tools that may make complementary technologies more feasible are biotechnology, biologically based pest controls, and

information technologies.

Biotechnology

Biotechnology involves the insertion of genes carrying desirable traits into plants or animals. As

outlined in chapter 2, there are many plausible ap-
Chapter 4 Agriculture’s Broadening Environmental Priorities | 101

placations for biotechnology in agricultural production, ranging from pest resistance in plants to

increased growth efficiency for livestock. Most

current biotechnology applications are designed

primarily to reduce risks associated with crop production or to increase production efficiency, with

only incidental consideration of environmental

concerns. But there is no reason that biotechnology could not be employed directly toward complementary aims. Biotechnology could be used, for

instance, to develop drought-tolerant crops

(which could permit a significant reduction in irrigation and its negative environmental consequences). Rather than turning their efforts toward

creating Bt-engineered corn (which may enhance

the resistance of pests to the toxin) or herbicidetolerant crops (which do not encourage reduced

chemical use or any other conservation practice),

scientists might instead investigate the feasibility

of conferring inherent resistance to pests without

toxins. Markets, however, may not stimulate research and development in that direction because

of incomplete environmental pricing.

Biologically Based Pest Controls

The term “biologically based pest controls” refers

to a wide variety of products designed to substitute for conventional synthetic insecticides, herbicides, and fungicides. Biologically based pest

controls involve the introduction of predators,

parasites, pathogens, pheromones or natural competitors specifically to control pests (13). Overall

adoption to date of such approaches is low, and biological pesticides currently comprise only a fraction of the total pest control market. Nevertheless,

use is growing and is now quite high to control

certain pests such as gypsy moths and pest mites

in strawberry fields (13).

Interest in exploring biological alternatives to

conventional pest control may increase, corresponding to increasing concerns about human

safety and environmental quality. The Sustainable

Agriculture Research and Education (SARE) proTesting soil for stored nitrogen helps farmers decide how

much fertilizer their crops realty need. In many states, such

testing has enabled farmers to save money and curtail nitrate

leaching by reducing fertilizer applications. Further development of inexpensive, readily available soil testing technologies could increase the benefits to both farmers and water

quality

gram has funded field research into the effectiveness of some biologically based pest management

technologies. EPA has designed an accelerated

registration process for biologically based pesticides, on the assumption that they are environmentally preferable to synthetic products. Marty

may pose fewer threats to human health than some

conventional pesticides, but their potential impacts on ecosystems need to be carefully examined. 23

Information Technologies

Information technologies generally enable farmers to manage their farms in a more sophisticated

and cost-effective manner. The range of infor-
102 I Agriculture, Trade, and Environment

‘Scouting” to determine the abundance of pests in farm fields

is an increasing& common aspect of both conventional and

alternative methods of pest control. Armed with data colIected in the field, with knowledge of pest behavior and the

availability of various technologies, farm managers can seek

the most effective yet environmentally sound control strategies. Here, researchers observe the effectiveness of an insect

trap baited with pheromones.

mation technologies available to farmers is quite

broad and the full set of technologies based on intensive use of information continues to evolve. In

many cases, these technologies may permit farmers to make market transactions more efficiently

(through electronic mail, for instance, and electronic auctions) and minimize their use of certain

costly inputs by permitting them to target their resources better (through precise application of agricultural chemicals, computer-simulated trials,

“just-in-time” inventory maintenance, and other

means). Of particular interest from the environmental perspective is the capacity of informational technologies to ameliorate the negative environmental impacts of agricultural production.

“Precision (or “site-specific”) farming” involves using advanced satellite information-retrieval and information-management products to

improve farm management. Among other things,

private firms offer precision-farming technologies to make pesticide and fertilizer use more efficient. Global positioning systems (GPS), used in

conjunction with ancillary data from census, surveys, or other sources, can help farmers predict

crop yields and vary inputs as needed in different

parts of even a single field. Used in tandem with

computer-assisted or telecommunications-enhanced decision-making software (“expert systems”), these data can serve myriad functions:

provide soil quality data to researchers, increase

efficiency of input use, predict crop yields for producers, and anticipate and control potential environmental problems resulting from the adoption

of certain production practices. Theoretically, precision farming can help farmers reap broad environmental benefits while enhancing the productivity of their farms. These technologies are still

being developed, however, and their full potential

to satisfy the criteria for complementarity remains

unknown.

Other systems-oriented, information-intensive

technologies may also help farmers tailor their

management of inputs and pest control to their

own needs. Perhaps the most prevalent approach,

typically called integrated pest management

(1PM), involves “scouting” or monitoring fields

for the presence of target pests. Based on scientific

principles of pest reproduction and behavior, pesticide applications can be very specific. Although

integrated pest management is not always synonymous with reduced agrichemical use, it is less ecologically intrusive than repeated, blanket spraying

of pesticides.

Another system-based alternative, integrated

crop management, uses certain crop mixes to

create an inhospitable habitat for pests and boost

production. Many of the approaches to production

developed through the SARE program and

through state-supported and private sustainable

agriculture networks use information intensively

to manage production and environmental goals.

In the end, these and other technologies discussed above could make it easier for farmers to

decide how to achieve optimal yields as well as
Chapter 4 Agriculture’s Broadening Environmental Priorities 103

maintain soil quality, safeguard water quality, and

minimize degradation of wildlife habitats. To the

extent that new technologies help operators and

public agencies develop and use a better understanding of how agricultural systems and environmental interaction affect both on-farm productivity and on-site and off-site resource quality, they

may enhance the environmental agenda for agriculture while enhancing on-farm profitability. In

general, the future significance of these technologies for agriculture and the environment depends

on: 1) their practical relevance to production, 2)

their availability, and 3) their ultimate rate of

adoption (table 4-2). Even though the potential for

complementarily is high, technologies that simultaneously address production and environmental

goals may not become broadly available until specific environmental and agricultural production

goals are set to provide signals for private markets

and guide public research allocations.

Technology Agricultural Availability Factors affecting Potential environmental

category application=

of technology adoption benefits or costs

Biotechnology ■ weed control (c) ■ significant public, pri- ■ risks of transition ■ may reduce or substitute

■ insect control (c) vate research ■ consumer for some pesticide use

■ disease control ● regulatory process acceptance ■ may Improve agricultural

(c,l) Incomplete ■ management nonpoint pollution problems

■ reproductive ■ few current ability ■ may reduce poisoning of

control (1) applications satisfy ■ relevance to nontarget plant and animal

● market readiness complementarily on-farm goals species

(c) criteria ■ rates of technolo- ■ may create problems with

■ herbicide gy development weediness and nonindigeresistance (c) and transfer nous species

“ cost ■ may reduce stress on natural inputs through enhanced

efficiency

■ benefits may be vulnerable

to pest resistance

Biologically ■ weed control (c) ■ uneven public, ● as above ■ as above

based Pest ● insect control (c) private research and ■ may enhance biodiversity in

Controls ■ pathogen control development

■ limited number of

agroecosystems

(c) ■ may reduce biodiversity

products when biocontrol diminishes

 ■ some active public nontarget species

sector uses

■ potential for

complementarity

not clearly

established

lnformatlon- ■ weed control (c) ■ emerging private, ■ as above ■ as above

Intensive

■

insect control (c) public ■ may facilitate comple

Management b 

■ enterprise plan- research mentarity between producning (c,l,m) ■ limited number of ap- tion and agroenvironmental

■ resource plications planning

monitoring (ae) ■ some active private ■ may reduce public cost of

■ whole farm plan- sector uses of proto- monitoring of soil, water

ning (c,l,m,ae) types conditions

■ potential for ■ may encourage

complementarily not cooperation between

clearly established private and public resource

management

a Activity category: c= crops, I = livestock, m= marketing, ae= agroenvironmental

b These include integrated crop management, certain nutrient management schemes, whole farm planning approaches, integrated pest management, and other pollution-prevention technologies.

SOURCE: Office of Technology Assessment, 1995
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Appendix 4-1:

National Primary

Drinking Water

Standards

Sources of contaminant in

Contaminants drinking water

Giardia Iambia 4 0 Skeletal and dental fluorosis Natural deposits; fertilizer, aluminum

industries, water additive

Total Coliform* < 5%+ Indicates gastroenteric pathogens Human and animal fecal waste

Turbidliy*

—

Interferes with disinfection, filtration Soil runoff

Viruses TT Gastroenteric disease Human and animal fecal waste

Mercury* (inorganic) 0.002 Kidney, nervous system disorders Crop runoff; natural deposits, batteries,

electrical switches

Nitrate’ 10 Methemoglobulinemia Animal waste, fertilizer, natural deposits,

septic tanks, sewage

Nitrite 1 Methemoglobulinemia Same as nitrate; rapidly converted to

nitrate

Alachlor 0.002 Cancer Runoff from herbicide on corn,

soybeans, other crops

Aldicarb sulfone* 000 2 Nervous system effects Biodegradation of aldicarb

Aldicarb sulfoxide* 0.004 Nervous system effects Biodegradation of aldicarb

. — .

Atrazine 0.003 Mammary gland tumors Runoff from use as herbicide on corn

and noncropland

Carbofuran 0.04 Nervous, reproductive system effects Soil fumigant on corn and cotton;

restricted in some areas

2,4-D* 0.07 Liver and kidney damage Runoff from herbicide on wheat, corn,

rangelands, lawns

Dibromochloropropane 0.0002 Cancer Soil fumigant on soybeans, cotton,

pineapple, orchards

Lindane 0.0002 Liver, kidney, nerve, immune, circulatory Insecticide on cattle, cotton, soybeans,

canceled 1982

Methoxychlor 0 0 4 Growth, liver, kidney, nerve effects Insecticide for fruits, vegetables, alfalfa,

livestock, pets

(continued)

 111

4
112 Agriculture’s Broadening Environmental Priorities

MCL Potential health effects from Sources of contaminant in

Contaminants ~ (mg/L) ingestion of water drinking water

Pentachlorophenol 0.001 Cancer, liver, and kidney effects Wood preservatives, herbicide, cooling

tower wastes

Toxaphene 0.003 Cancer Insecticide on cattle, cotton, soybeans;

I canceled 1982

2,4,5-TP 0.05 Liver and kidney damage Herbicide on crops, right-of-way, golf

courses; canceled 1983

Dalapon 02 Liver, kidney Herbicide on orchards, beans, coffee,

lawns, road/railways

Dinoseb 0.007 Thyroid, reproductive organ damage Runoff of herbicide from crop and

noncrop applications

Diquat 002 Liver, kidney, eye effects Runoff of herbicide onland, aquatic

weeds

Dioxin 0.00000003 Cancer Chemical production byproduct,

impurity in herbicides

Endothall 01 Liver, kidney damage Herbicide on crops, land/aquatic

weeds, rapidly degraded

Endrin 0002 Liver, kidney, heart damage Pesticide on insects, rodents, birds;

restricted since 1980

Glyphosate 0.7 Liver, kidney damage Herbicide on grasses, weeds, brush

1 Hexachlorobenzene 0001 Cancer Pesticide production waste byproduct

Hexachlorocyclopentadiene 005 Kidney, stomach damage Pesticide production intermediate I

Oxamyl (V ydate) 02 Kidney damage Insecticide on apples, potatoes,

tomatoes I

Picloram 05 Kidney, liver damage Herbicide on broadleaf and woody I

plants I

Simazine 0004 Cancer Herbicide on grass sod, some crops,

aquatic algae

1,2,4-Trichlorobenzene 0.07 Liver, kidney damage Herbicide production, dye carrier

,

Arsenic’

I

005 Skin, nervous system toxicity Natural deposits; smelters, glass,

electronics wastes, orchards
| 113

ppendix 4-2:

Listing of Federal Conservation

and Environmental Programs

 Related to Agriculture1,2

Education and Technical Assistance12

1. Comprehensive State Ground-Water Protection

(EPA)

2. Conservation Technical Assistance

3. Extension Education

4. Flood Prevention

5. Forest Stewardship

6. Resource Conservation and Development

Research or Data Activities

7. Agricultural Research Service

8. Army Corps of Engineers (U.S. Army)

9. Bureau of Land Management (DOI)

10. Bureau of Reclamation (DOI)

11. Cooperative State Research Service

12. Environmental Protection Agency (EPA)

13. Economic Research Service

14. Fish and Wildlife Service (DOI)

15. Forest Service

16. Geological Survey (DOI)

17. National Agricultural Library

18. National Agricultural Statistics Service

19-24. Natural Resources Conservation Service

19. National Resources Inventory

20. Resource Conservation Act Appraisal

21. River Basin Surveys

22. Soil Surveys

23. Snow Surveys

24. Plant Material Centers

Regulation or Compliance

25. Animal and Plant Health Inspection Service

26. Coastal Nonpoint Pollution Control (NOAA and

EPA)

27. Conservation Compliance

28. Dredge and Fill (wetlands) Permits (U.S. Army

Corps of Engineers)

29. Endangered Species Protection (DOI)

30. National Pollution Discharge Elimination System Permits (EPA)

31. Pesticide Registration (EPA)

32. Pesticide Record Keeping

33. Safe Drinking Water Act (EPA)

34. Sodbuster

35. Swampbuster

1Programs are categorized based on their predominant program approach.

For a brief description of the programs, see U.S. Department of Agriculture, Economic Research Service, Natural Resources and Environmental Division “Agricultural Resources and Environmental Indicators,” Agricultural Handbook No. 705, December 1994, pp. 162-174.

2Lead agencies are identified for programs outside the U.S. Department of Agriculture: EPA = Environmental Protection Agency; DOI =

Department of the Interior; NOAA = National Oceans and Atmospheric Administration.
114 I Agriculture’s Broadening Environmental Priorities

Subsidies, Compensation, and Public Works 49.

36.

37.

38.

39.

40.

41.

42.

43.

44.

45.

46.

47.

48.

Agricultural Conservation Program

Clean Lakes Program (EPA)

Colorado River Salinity Control

Conservation Loans and Easements

Conservation Reserve

Environmental Easement Program

Emergency Conservation

Emergency Watershed

Endangered Species Conservation (DOI)

Farmland Protection

Flood Control

Forestry Incentives

Forestry Stewardship Incentives

50.

51.

52.

53.

54.

55.

56.

57.

58.

59.

60.

Great Plains Conservation

Integrated Farm Management

Integrated Pest Management

National Estuary (EPA)

Nonpoint Source (water quality) (EPA)

Rural Clean Water Program

Range Improvements ( DOI, Bureau of Land

Management)

Small Watershed

Water Bank

Water Development and Management (DOI,

Bureau of Reclamation)

Wetlands Conservation (DOI)

Wetlands Reserve

SOURCES U S Department of Agriculture, Economic Research Service, Natural Resources and Environment Division, “Agricultural Resources

and Environmental Indicators, ” Agricultural Handbook No. 705, Washington, DC, December 1994, and Jeffrey A Zinn, “Implementation of Resource Conservation Programs Enacted in the 1990 Food, Agriculture, Conservation and Trade Act, ” memorandum to Congress, Congressional

Research Service, Jan 31, 1992
| 115

ppendix 4-3:

USDA Conservation

Expenditures, by Activity

and Program

Fiscal Years 1983-1995
116 Agricultural Trade and Environment
Activity/program 1983 1984 1985 1986 1987

FS Stewardship Incentives Program (SIP) 0 0

SCS Great Plains Conservation Program (GPCP) 12,2

Subtotal Cost-sharing 2164

3. Public works project activities (SCS):

Emergency Watershed Protection 225

Flood Prevention (operations) 227

Resource Conservation and Development (RC&D) 144

Small Watershed Program (operations) 160.6

Subtotal SCS public works projects 220.2

4. Rental and easement payments (ASCS):

Conservation Reserve Program (CRP) 0.0

Water Bank Program (WBP) 88

Wetland Reserve Program (WRP) 0.0

Subtotal rental and easement payments 88

5. Conservation data and research:

Agricultural Research Service 635

Cooperative State Research Service 279

Economic Research Service 5 0

Forest service (forest environment research) 197

National Agricultural Library (water quality) 0 0

SCS programs:

River basin surveys 164

Soil surveys 514

Plant materials centers 3 8

Snow surveys 3 8

Subtotal SCS 755

Subtotal conservation data and research 1916

00

123

2143

220

9 9

9 7

876

1291

0.0

8 8

0 0

8 8

637

296

7 7

204

00

156

535

40

39

770

1984

00

125

2100

5 0

139

8 5

880

1154

0 0

8 8

0 0

8 8

637

328

5 4

203

0 0

149

548

41

4 0

778

2000

00

115

1807

797

191

77

808

1873

0 0

8 4

0 0

8 4

624

313

40

239

0 0

14.2

543

3 9

3 8

762

1978

00

114

4481

148

115

72

827

1162

4100

8 4

0 0

4184

593

310

4 0

282

0 0

121

582

4 6

50

797

2022

1988 1989

00

118

5048

135

113

70

834

115.2

7601

8 4

0 0

7685

605

331

31

293

0 0

121

677

4 9

5 4

900

2160

$ million1

0 0

122

3898

100

128

67

837

1132

11621

90

00

1171.1

659

345

30

31 1

0 0

121

682

5 0

55

908

2253

1990 1991 1992

00

129

3532

949

160

4 2

817

1968

1393.7

122

0 0

14060

736

406

4 6

353

0 3

123

681

7 2

5 4

930

2473

6. Conservation compliance and sodbuster (ASCS & SCS) (expenditures are included in other programs listed above):

Total 1,1244 1,0285 1,0212 1,0625 1,7303 2,1843 2,5234 2,8414

199

164

2790

200

128

5 7

826

121.1

15901

131

0 0

16032

736

50.6

5 5

407

0 3

128

698

7 9

5 6

960

2667

2,9845

0 8

162

2660

700

214

6 5

896

1875

16125

171

0 0

16296

739

497

5 8

390

0 3

133

726

81

5 7

996

2683

3,1400

1993 1994

enacted

178

164

3105

731

238

2 6

1013

2008

15100

171

4 4

1531 5

743

517

6 3

418

0 3

133

72.6

81

5 7

996

2740

3,1521

179

164

2804

2480

229

4 6

1069

3824

17292

74

47.3

17839

767

512

5 0

420

0 3

135

739

8 9

5 8

1021

2773

3,5481

1995

enacted

183

6 3

1399

1250

0 0

40

141

1431

1739.0

00

630

18020

760

432

40

422

03

130

726

81

58

99.5

2652

3,133.7

1 Derived from material provided by the Off Ice of Budget and Program Analysis (OBPA) USDA.

SOURCES: U.S. Department of Agriculture, Economic Research service “Agricultural Resources, Cropland, Water, and Conservation Situation and Outlook Report, ” Agricultural Report

30, May 1993, and U.S. Department of Agriculture, Economic Research Service, Natural Resources and Environment Division, “Agricultural Resources and Environmental Indicators,”

Agricultural Handbook 670, December 1994
Expanding

Agricultural Trade

and the Environment:

Complementary

or Conflicting?

s global economic integration proceeds, and as domestic

and international environmental priorities broaden, increasing concern has focused on how trade might affect

the environment—and how environmental programs

might affect trade.Whether the expanding trade and environmental forces can work together, or whether they necessarily conflict,

has been a matter of prolonged debate (10,18). In fact, in the space

of 20 years, the scope of the debate has widened from economic

and environmental issues under U.S. jurisdiction to include international commerce and global environmental questions. The

simple label “trade and environment” consequently covers a

large, complicated, and ever-growing web of topics that are crucially important to legal, economic, and environmental interests

alike (23,64).

Chief among the most striking developments has been a steady

rise in world trade. The nominal value of world agricultural trade,

for example, has risen fivefold since 1970, from about $40 billion

to more than $200 billion (86). The North American Free Trade

Agreement (NAFTA) and the Uruguay Round Agreements

(URA) of the General Agreement on Tariffs and Trade (GATT)

will further fuel that trade. Other regional agreements designed to

lower trade barriers, such as the Mercado Comundel Sur (MERCURSOR) pact among Argentina, Brazil, Uruguay, and Paraguay, will likely do the same.

Coupled with rising production for domestic consumers, increases in agricultural trade placed new pressures on the U.S. environment in the 1970s and early 1980s. As they produced more,

farmers used more machinery, pesticides, and fertilizers, and irrigated more acres. Technological advances made it less costly to

convert prairies, wetlands, and other areas to farmland. As a re- | 119
120 | Agriculture, Trade, and Environment

sult, all levels of government introduced more environmental management initiatives affecting

agriculture. (See chapter 4 and also chapter 6,

which documents similar trends in national

agroenvironmental programs among selected

trading partners and competitors.) While the pressures on input use abated slightly in the late 1980s

and early 1990s, the potential exists for a recurrence with trade expansion.

Multilateral and global environmental initiatives have multiplied as well. Since the early

1970s, both developed and developing nations

have been increasingly active, and have sought

cooperation on transboundary environmental

problems such as ozone depletion, endangered

wildlife, and greenhouse gases. Several major international conferences have marked the expanding multilateral environmental interests—U.N.

Stockholm Conference (1972) leading to the

United Nations Environment Program (UNEP),

the 1987 World Commission on Environment and

Development addressing sustainable development, and the 1992 U.N. Conference on Environment and Development held in Rio de Janeiro,

Brazil, producing climate change and biodiversity

conventions.

Such conferences and other fora have devoted

considerable attention to trade and environment

issues, but definitive answers to fundamental

questions remain elusive. How and how much

will expanded trade ultimately affect national and

international environments? Will domestic and

multilateral environmental protection measures

conflict with liberalized trade? Or are the two

forces basically complementary?

It is difficult to answer these questions definitively because research on them is immature (78).

Imperfect knowledge of how new global trade regimes, new environmental management agreements, and the markets for traded goods operate—

and, ultimately, of how the environment is related

to agriculture—have made the agricultural trade/

environment debate to this point primarily a conceptual exercise. Most analyses have focused on

defining terms and potential complementarities

and conflicts, instead of providing direct, quantifiable links between agricultural trade and environmental conditions, or between environmental

management and trade flows. A growing number

of quantitative studies are analyzing the size and

nature of the domestic and international linkages

(for example, 39,83), but much more effort is required.

This chapter examines what is currently known

about how agricultural trade and the environment

affect each other in the United States—and advances hypotheses about their future relationship.

International developments that complement or

work against national interests are also covered.

For the purposes of this chapter, the term “environment” refers to natural resources such as water,

soil, wildlife, and so forth. (See chapter 4.) Food

safety questions are, for the most part, not addressed.

Pearson lucidly defines four trade and environment policy issues that are the collective focus of

this chapter. First is the effect of environmental

regulation on trade. According to some schools of

thought, costly environmental regulations can

force domestic producers to lose export markets or

move overseas. As this chapter will demonstrate,

however, studies of nonagricultural industries indicate that exports have been little affected and

that overseas migration has not been significant

overall. Because the U.S. agricultural sector is

subject, for the most part, to voluntary conservation and environmental programs implemented

with subsidies, the overall effects of these programs on trade flows and firm location should be

negligible as well. Moreover, many competitors

abroad must comply with similar agroenvironmental programs. (See chapter 6.)

On the other hand, some agricultural sectors

may suffer from environmental regulations in the

short term. A case in point is the fruit and vegetable sector, which relies on the pesticide methyl

bromide for crop production, but also to treat food

exports and imports. Methyl bromide depletes the

ozone layer, however, and its use is to be phased

out by 2001 under the Montreal Protocol on Substances that Deplete the Ozone Layer and the U.S.

Clean Air Act. Clearly then, the effects of a broadening environmental agenda on trade will depend

on the specific types of environmental programs
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 121

implemented. Complementary research and

technology developments targeted to achieve environmental and trade objectives simultaneously

are a sensible option to reduce conflicts. (See

chapter 4.)

Second to be considered is the role of product

standards. National product standards, such as tolerance levels for pesticide residues, serve as nontariff measures to screen certain imports. The

URA established new health and safety, as well as

“technical barriers to trade,” codes that address

this issue. Among other things, the codes specify

that product standards should be based on science

and restrict trade no more than necessary to

achieve a nation’s desired level of protection.

However, certain agricultural product standards

are crucial to addressing environmental ills. For

example, keeping harmful nonindigenous species

(HNIS) out of the United States (now a major environmental concern) depends primarily on enforcing measures covered by the codes, such as

quarantines. It is not clear whether these kinds of

standards will come under fire as unjustifiable

barriers to trade. If they do, only future rulings by

the World Trade Organization (WTO), the trade

community’s successor to GATT, will determine

their status.

The third major topic to be addressed in this

chapter is the effect of trade liberalization and expansion on the environment. NAFTA and the

URA do not require the United States to reduce

current commodity program payments affecting

production, or to “decouple” (i.e., separate) the

payments from levels of production. Thus, potential environmental changes from commodity program reform should not be expected. Shifts in

agricultural production that result from the new

trade agreements will likely cause little overall

change in U.S. environmental conditions. Indeed,

environmental conditions may improve in some

areas, as imports displace environmentally damaging domestic production. Certain other areas—

such as border zones, where trading could flourish—may come under increased environmental

stress, and HNIS, such as invasive weeds on

rangelands, could pose new commercial and environmental risks as they enter through trade pathways. Controlling domestic environmental quality hinges principally on how U.S. agroenvironmental programs are run. These programs are not,

at this writing, wholly effective: they do not offer

comprehensive and enduring environmental coverage, or incentives for complementary technology research and development.

Expanding agricultural trade may pose special

risks for developing countries that have inadequate environmental programs and would respond to higher world prices by producing more

products for export. Pressures on transboundary

and global environmental resources of interest to

the United States, such as border water resources

and habitats for migratory wildlife, may result

in significant costs. The present patchwork of

multilateral environmental agreements does not

appear able to systematically address this kind of

dilemma.

Fourth, and finally, this chapter looks at how

trade measures are used to meet international environmental objectives. NAFTA and the URA

were the first trade agreements to incorporate significant environmental provisions, but the ultimate efficacy of those provisions depends on future political dynamics. In contrast, the use of

trade measures in a limited number of international environmental agreements has been demonstrably effective. Current WTO rules do not

specifically address the use of international environmental trade measures, and therefore clear

guidelines are not at hand. Further, critical questions about the conditions justifying unilateral or

multilateral actions and extraterritorial objectives

remain unanswered. Such “offensive” environmental trade measures have not been widely applied to agriculture, although they may be in the

future. Clear rules promulgated by the WTO

would assist environmental and trade efficiency.

An international organization responsible for global environmental management could work with

the WTO to ensure that both global trade and environment needs receive appropriate consideration.

Based on careful examination of the issues, it is

OTA’s conclusion that efforts to expand agricultural trade and upgrade environmental quality can

complement each other, if appropriate envi-
122 I Agriculture, Trade, and Environment

For the first time in history the signing of a trade pact-the North American Free Trade Agreement-was accompanied by an

environmental side-agreement to pursue regional environmental protection.

ronmental management programs are in place and

are properly run. Unfortunately, current programs

at domestic and international levels do not ensure

that this will happen. Reconstitution and retargeting of environmental programs; more funding for

technology research and development that aids

both trade and environmental quality; introduction of new institutions; and greater levels of multilateral cooperation are essential.

EFFECTS OF ENVIRONMENTAL

PROGRAMS ON TRADE

COMPETITIVENESS

As environmental concerns escalated in the early

1970s, the trade community began to worry that

a country’s efforts to promulgate environmental

legislation might impose high compliance costs

on its industries-and so damage their ability to

compete in international markets (58). Further,

some argued that if the compliance costs were

subsidized by governments, environmental resources would continue to be undervalued and

squandered. The Organization for Economic

Cooperation and Development (OECD) addressed the issue back in 1972, when it published

its Guiding Principles Concerning the International Economic Aspects of Environmental Policies. This document marked the international debut of the “polluter-pays principle” (PPP), which,

simply stated, requires polluters in the private sector, and not governments, to pay for the environmental degradation they cause.

The PPP reflects a sound trade and environmental policy principle: unless private parties pay

the full amount it costs them to produce goods

(and eventually pass those costs onto consumers

through higher prices), environmental and other

resources will be misused and trade will be ineffi-
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 123

cient (3,56). The actual costs of environmental

degradation are usually not included in the prices

producers pay or in the prices they charge to consumers because, in economic terms, property

rights for many environmental resources are undefined or work poorly (57). Essentially, the full

costs of using environmental resources in agricultural production—or of inadvertently degrading

them through agricultural practices—are left out

of the market prices for agricultural goods. A classic example of this dilemma is field runoff carrying sediment, fertilizer, or pesticides, which pollutes water downstream. The cost of the pollution

is not paid by the polluter, and so he or she does

not incorporate that cost into the price of his or her

products. A related principle implies that there

will be insufficient positive environmental services unless the parties that generate those services are subsidized. An agricultural example

might be compensating farmers for environmental benefits that also accrue to other parties, such

as providing habitat for migratory wildlife.

If significant environmental problems stemming from freer trade are ignored by markets, then

freer trade does not necessarily guarantee that a

society’s welfare will improve—that is, that a society will be on the whole better off than it was before it liberalized trade (3). Prices that do not take

all costs into account also convey incomplete signals to private and public environmental technology research and development. (See chapter 4.)

Theoretically, appropriately targeted policies that

do take external environmental costs (and benefits) into account could lead to gains in both trade

and environmental quality (3). Unfortunately, accurate and comprehensive “environmental” or

“natural resource accounting,” which would assess those costs and benefits, is not yet possible

(9).

For governments not to levy an environmental

charge under the PPP means that parties other than

the polluter lose income or otherwise have to pay a

“significant” cost for what the polluter has done.

In some cases, the environmental consequences of

agricultural production may not result in “significant” external costs. In others, farmers may have

economic incentives to address the environmental

problems they have caused, because the damages

directly affect their assets and/or profits. Losses of

soil productivity due to erosion fall into this category. Clearly, a first step in remedying environmental problems, whether they are generated by

trade or domestic sources, is to determine what

kinds of activities result in significant external effects, whether negative or positive.

Governments use regulatory standards, taxes,

subsidies, and other policy instruments to “pay”

for negative or positive environmental effects. But

public subsidies of pollution abatement costs, for

example, violate the PPP and have been discouraged by the Organization for Economic Cooperation and Development (OECD) and GATT accords.1 Despite such arguments against subsidies,

they remain the dominant approach in U.S.

agroenvironmental management programs. (See

chapter 4.) Other industrial countries have been

similarly disinclined to factor the PPP into their

agroenvironmental policies (76). However, the

use of environmental subsidies in agriculture is

expanding, and could pose future problems.

❚ Impacts on Agriculture

Like producers in other industries, farmers fear

that the costs of complying with environmental

programs will significantly constrain their ability

to compete with foreign firms. For agriculture,

such diminished competitiveness has not been a

major issue until now, because most conservation

and environmental programs have been voluntary

and implemented with subsidies, or have been a

side requirement of commodity program subsidies. (See chapter 4.) There are currently regulations pertaining to pesticide registration, water

runoff from confined animal operations, and land

use controls to protect endangered species. Also,

1 Because not all environmental effects are counted in the market, it is argued, polluters, in effect, receive an implicit subsidy (54,71).
124 | Agriculture, Trade, and Environment

potential regulations may be used to improve the

water quality of coastal zones. But the prospect of

more, and more extensive, regulations has generated worries about their impacts on competitiveness. At this writing, the net costs of environmental programs affecting U.S. agriculture, including

subsidies, regulatory expense, and private benefits, are unknown. Some studies have attempted

estimates, but their data are incomplete (29).

Because there is little compliance cost information available for agriculture, it is useful to look at

how trade in other U.S. industries has been affected by the environmental regulations that they

have been forced to follow for more than 20 years.

The evidence indicates that pollution abatement

costs (PACs) do not have a large influence on

overall trade patterns, nor do they, on the whole,

induce industries to migrate overseas (19,74,80).

Some sectors with relatively high PACs, such as

chemical manufacturers, may be disadvantaged

because of the kinds of pollution they produce

and/or the kinds of regulations they face. Still,

such cost differences should be compared with the

environmental benefits they create to determine

their benefit-cost consequences for the nation.

Whether agriculture is or will become a sector

with high PACs is, as suggested above, not clear.

Data are incomplete, and the provisions of future

environmental programs are unknown. Current

environmental regulations, as discussed in chapter 4, do not engender large overall costs for agriculture that negatively affect trade. More likely, if

trade is adversely affected, it is because current

agroenvironmental programs predominantly use

subsidy approaches that do not conform to the

PPP. For the United States, the magnitude of subsidies have been small to date, about 4 percent of

total product value, suggesting small overall effects on trade (76). However, those subsidies are

not restricted in total by NAFTA or the URA, and

are growing. The largest subsidy programs—acreage set-asides such as the Conservation Reserve

Program (CRP), which restrict production—are

those most likely to interfere with agricultural

trade.

Although the overall effects may be negligible,

specific sectors may suffer as the result of particular pollution problems and regulations. The methyl bromide controversy is an example that is often

cited. Methyl bromide is a chemical used as a soil

fumigant pesticide in the production of crops, and

in the treatment of agricultural imports and exports. Methyl bromide also depletes ozone in the

atmosphere, and its use will be phased out in the

United States by 2001 under the Montreal Protocol and U.S. Clean Air Act. In the South, the production and/or export of cotton, tobacco, citrus

fruits, and peanuts may be reduced if the use of

methyl bromide is restricted (43). Forsythe and

Evangelou (27) estimate that without methyl bromide, fresh fruits and vegetables imports would

cost the United States $1.1 billion more over five

years. This estimate is based on the short- and medium-term costs of substituting irradiation treatment for methyl bromide, and does not take into

account any possible environmental benefits. Ferguson and Padula (26) estimate the economic

costs of banning methyl bromide as a soil fumigant at $1 billion per year for producers and consumers. Their estimate does not incorporate the

development of substitute technologies before the

ban that might lower costs. The regional distribution of costs are uneven, concentrating in the

southeastern states and California. Yarkin, et al.

(92) estimate that California walnut growers

would lose $9.9 million (or about 3 percent) of

their gross returns in the short term from the

phase-out. Long-run impacts again depend on the

development of substitute treatments, and whether other countries follow the ban. The impacts of

such bans generally tend to moderate in the longer

run, as new technologies emerge to substitute for

the restricted product.

Gauging impacts on future competitiveness requires details on the nature of new conservation

and environmental programs. The discussion of

agriculture’s broadening environmental agenda in

chapter 4 suggests that environmental management costs could rise appreciably, in particular for

sectors that generate large amounts of very damaging wastes. Depending on the extent and nature

of the management programs, U.S. agricultural

competitiveness in world markets could be reduced—a hazard for all sectors subject to increas-
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 125

ing environmental compliance costs (80). Any

loss in trade profits, however, should be weighed

against environmental gains that accrue from the

program requirements. Although the results pertain to an export competitor rather than to the

United States, analyses by Lueck and by Halley

empirically estimate that under some potential

European Union (EU) agricultural nitrate reduction and water quality programs, EU food production and trade could decline. (See chapter 6 for a

more detailed discussion of this topic.) In such an

instance, the United States could gain some of that

market—but it would have to consider all of the

significant environmental effects stemming from

expanded production to ensure a net benefit.

TRADE AND ENVIRONMENTAL EFFECTS

OF PRODUCT STANDARDS

National product standards relating to human, animal, or plant health, and to the conservation of

natural resources, can affect the ability of traded

goods to enter foreign markets. Permissible pesticide residue levels, auto emissions technology requirements, and other standards are intended to

treat the effects of using a product, whether of domestic or foreign origin. Such standards may be

used legally under WTO rules2 by the United

States to regulate imported goods, or by foreign

countries to control U.S. exports—but they must

be applied uniformly to the product in question,

whether imported or domestically produced, to

avoid discrimination against foreign products.

Thus, the WTO rules for product standards simultaneously protect U.S. agricultural exporters from

unfair requirements in foreign markets and protect

U.S. citizens against food, environmental, or other risks caused by imported goods.

During the early 1970s, concern centered on the

potential for product standards to serve as nontariff barriers. Pearson notes that some individuals

in the trade community have historically responded by advocating harmonization of standards whenever possible, to avoid barriers and reduce the high costs of selling in markets that each

have different standards for exporters to meet. Devices such as the Codex Alimentarius Commission (which aims to harmonize global food and

agricultural standards); GATT rules on health,

safety, and other technical measures; and regional

trade groups like the EU have facilitated harmonization. The potential benefits of harmonization

include minimizing the use of product standards

as trade barriers, as well as reducing the high costs

of design, production, inventory, and information

required to sell in a variety of markets with different standards (58). The potential costs of harmonization include less accommodation of countries’ individual preferences and abilities across

countries to achieve the standards and the transaction costs of negotiation (43). The balance between benefits and costs will determine the incentives to harmonize any particular set of standards.

Harmonizing natural-environment-related product standards may be more complicated than it is

for health and safety standards, because of countries’ diverse natural resource and social conditions. Some environmental groups have in fact

challenged harmonization efforts, arguing they

could lead the world’s trading nations (all of

which have different incomes, environmental

concerns, natural resource endowments, abilities

to assimilate pollution, and desired levels of

protection) to adopt the lowest standards possible

for the sake of uniformity. Little systematic evidence is available to analyze the potential for socalled downward harmonization. Esty, citing the

Montreal Protocol’s effective upward harmonization for phasing out CFCs, argues that just the op2 Specifically, article XX provides for two categories of general exceptions related to the environment. Article XX(b) allows exceptions for

measures “necessary to protect human, animal or plant life and health,” and article XX(g) permits exceptions for measures “relating to the conservation of exhaustible natural resources.” Any measures implemented under the exceptions must not be “applied in a manner which would

constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on

international trade” (48).
126 | Agriculture, Trade, and Environment

posite may occur (23). But the strength of upward

harmonization forces will likely vary according to

each specific environmental problem, and its potential benefits and costs.

❚ New Product Standards Codes

The URA approved new codes for health and safety (called sanitary and phytosanitary, or S&P), and

for technical barriers to trade (TBT), both of

which address the question of product standards.

The S&P code permits a country to impose trade

measures to protect human, animal, or plant life or

health from risks arising from the spread of pests

and disease, and from additives or contaminants

found in human food, beverages, or feedstuffs.3

Key provisions of the new agreement base measures on scientific principles; use international

standards as minimums where they exist (thus

achieving partial harmonization); preserve federal, state, and local governments’ rights to set their

preferred level of risk protection and standards;

state a preference for least-trade-restrictive measures; avoid disguised restrictions on trade; and

provide opportunities for governments to demonstrate equivalency of protection from different

measures (e.g., chemical versus nonchemical

treatments) (48).

In negotiating the S&P agreement, the United

States focused primarily on two food safety issues: preventing foreign governments from using

false criteria to limit U.S. food exports, and ensuring that high U.S. food safety standards could be

maintained (48). However, the new S&P code offers the opportunity for the 123 signatory countries to use product standards to protect their natural environments as well. Although the S&P code

does not require signatories to adopt existing international standards as minimums, it improves

matters by integrating more science, requiring

risk assessments, and permitting higher national

standards to avoid downward harmonization (67).

The TBT agreement essentially defines the

process for distinguishing legitimate uses of product standards, technical regulations, and conformity assessment procedures from efforts to use

them as disguised barriers to trade. “The TBT

agreement addresses the development and application of mandatory and voluntary product

standards which affect trade, and the procedures

used to determine whether a particular product

meets a standard” (48). For example, a measure

requiring that foreign automobiles be equipped

with air pollution emissions equipment falls under

the TBT code. Possible agriculture-related issues

falling under the TBT code include food-packaging requirements for waste disposal purposes,

food product labeling, and definitions of the ingredients and processes used in certain food products, such as “fresh” milk.

The TBT agreement ensures a URA signatory

country’s rights to protect human health or safety,

animal or plant life or health, and the environment

as legitimate objectives. Only environmental

measures related to product standards, however,

are covered. The TBT agreement does not, therefore, cover most measures under the Clean Water

Act, Clean Air Act, or similar legislation. Key

provisions of the agreement include nondiscrimination against imports, measures that do not restrict trade more than necessary, and measures that

are established in a more transparent way (48).

The agreement also promotes the use of international standards where they exist, but preserves

the right of countries to enforce more stringent

standards at the federal, state, or local levels if

they choose. The latter provision also addresses

fears that use of international standards could

cause downward harmonization of U.S. standards. (NAFTA also ensures that countries have

the right to set higher standards and encourages

upward harmonization.)

3 “S&P measures include a wide range of health protection and food safety measures, such as: quarantine procedures; food processes and

production methods; meat slaughter and inspection rules; and procedures for the approval of food additives or for the establishment of pesticide

residue tolerances” (48).
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 127

The principal thrust of the new S&P and TBT

codes to be administered under the WTO is to reduce unjustified restriction of trade by product

standards. In that respect, they are directly applicable to agricultural trade, but concern food safety

more than natural environment issues. A wellknown case is the EU’s action to ban imports of

beef raised with the aid of growth hormones. The

prospects for more disputes of this kind are considerable, given the URA provisions that reduce

other forms of border protection. Data detailing

such actions related to agriculture have not been

assembled systematically for the nation or for its

trading partners. The sole recourse for judging the

extent and degree of potential trade restriction affecting agriculture—whether for food safety or for

natural environment reasons—is extrapolation

from isolated cases. A recent survey of agricultural crops from the southern United States found

that existing product standards (and environmental regulations) do not significantly hinder the region’s competitiveness in international markets,

with the exception of the forthcoming methyl bromide ban discussed above (43).

The new codes also provide a mechanism and

rules to address environmental protection through

product standards. The rules place the burden of

proof on the country imposing trade measures for

environmental purposes, thus forcing the country

to defend its action as an article XX exception

(23). The crucial test for environmental issues

comes in whether WTO panels will approve product standards for environmental purposes, and under what conditions. Most cases relating to environmental matters that were brought before GATT

panels in the past were either deemed not applicable to the exceptions code, or were not eligible for

treatment as exceptions (78). There is consequently little evidence that the GATT processes have

been an important venue for addressing trade-related environmental risks. Moreover, the panels

that rule on such disputes have not included environmental scientists in the past, and have operated

in closed sessions.

A review of key environment-related cases

does not reveal a consistent set of principles for

countries to use when planning to institute environmentally related product standards (23). As an

illustration, an initial GATT dispute panel ruled

that U.S. import restrictions against tuna caught

by Mexican fishermen were illegal, because the

environmental problem extended beyond U.S.

borders. (See appendix II.) However, a subsequent

dispute panel requested by the EU did not find

such extraterritoriality a violation of the GATT

rules (48). Perhaps the diversity of findings and

lack of central principles should not be surprising,

given the changing makeup of the panels and the

different specifics of each case. Nonetheless, the

United States plans to raise the scope of article XX

exceptions related to the environment as a WTO

agenda item (48). Clarifying the scope will help

countries to makes decisions on domestic and international environmental issues. Also, the

United States has urged the WTO to consider

broader representation on environmental dispute

panels, and to make the hearings and decisions

more accessible to the public.

❚ Harmful Nonindigenous Species

The role of nonindigenous species in U.S. agriculture has varied over time. Some introduced species, including soybeans, wheat, and cattle, have

helped to create new agricultural industries, jobs,

and wealth in the United States. But others have

caused widespread and continuing damage. An

estimated 50 to 75 percent of major U.S. weeds are

nonindigenous and cause extensive damage to

public and private lands; and 40 percent of the insect pests afflicting agriculture and forestry (including Russian wheat aphids, European and

Asian Gypsy moths, and imported fire ants) are

nonindigeous as well (28,66).

Also referred to as “exotic,” “alien,” “introduced,” or “non-native” species, such harmful

nonindigenous species (HNIS) have, in the past,

been accidently or deliberately introduced into the

United States, sometimes through trade. The invasions of knapweeds and cheatgrass/medusahead

to western native rangelands and the introduction

of melaleuca, a fast- growing tree to dry out south

Florida wetlands, are examples. Future expansion
28 I Agriculture, Trade and Environment

A number obnoxious weeds have been spread through trade

causing commercial and environmental damages.

of agricultural trade will likely provide HNIS with

new avenues into the United States (79). Controlling them at the border illustrates the product standard approach to dealing with possible environmental damages related to agriculture.

The costs of HNIS can be significant. From

1906 to 1991, the cumulative economic damage

caused by 79 NIS organisms or species cases, less

than 14 percent of the total invasions, was estimated at $97 billion (in 1991 dollars). HNIS agricultural weeds were not included. Estimates of future damages from 15 very harmful animal and

plant diseases range between $66 billion and $134

billion (in 1991 dollars) (16). These estimates are,

unfortunately, based on incomplete data, and almost certainly underestimate the actual costs because 1) in many cases, damage estimates were

unavailable; 2) some commercial costs, such as

private control expenses, were infrequently incorporated; and 3) the costs of certain losses to the environment, such as declines in recreational fishing, were not always quantified. According to the

OTA assessment, much of the commercial damage is done to the agriculture and forestry industries. The environmental costs included declines

in indigenous species and transformations of ecological communities and ecosystems. These environmental damages are significant, and extend beyond agriculture and forestry to national parks and

other areas.

When the private parties or public agencies responsible for introducing HNIS are not responsible for paying such commercial and environmental damages, they will not be inclined to evaluate

new introductions for the potential harm they

might cause.4 In those cases, the government may

play a role in regulating trade, to prevent the

introduction of HNIS. The S&P code is used for

HNIS cases. The code sanctions the use of quarantines, for example, to minimize the chances that

HNIS will enter a country. The United States has

invoked this provision on a number of occasions:

for example, to place restrictions on cut flowers

from the Netherlands, and to ban seed potatoes

from Canada and avocados from Mexico. Future

actions, however, may be viewed as nothing more

than protectionism, and open to challenge under

WTO rules. GATT has rarely been used for such

challenges in the past, though, because, as stipulated in article XX and elsewhere, it upholds a nation’s right to establish its own rules and regulations regarding health and safety (which cover

HNIS).

Preventing the introduction and spread of

HNIS is an endeavor full of uncertainty and risk.

Governments must not only establish criteria and

procedures for controlling introductions, but also

choose control strategies once HNIS have been

introduced. Further, governments must determine

acceptable levels of environmental and human

risk, set risk thresholds above which formal decisionmaking approaches are invoked, and identify

4 Some states require the deposit of funds to pay expenses in case nonindigenous species cause damage or require public action.
Chapter 5 Expanding Agricultural Trade and the Environment: Complementaryor Conflicting? | 129

tradeoffs that may have undiscernible outcomes

(79). Despite the considerable uncertainty, a review of selected economic studies shows that the

benefits of controlling HNIS exceed the costs,

usually by a large margin, with one exception

(16). Early detection and eradication of HNIS can

prevent much greater eradication or control costs

after the pest has become widespread.

The key policy question relating to agricultural

trade is whether to upgrade standards for screening imports. The OTA study cited above concludes that “perfect screening, detection, and control are technically impossible and will remain so

for the foreseeable future” (79). Aiming for a

“zero entry” standard would not only be prohibitively expensive, but unrealistic. Setting standards that are too high may unduly restrict trade,

shut out helpful NIS, and lead other countries to

retaliate by upgrading their own standards. However, setting product standards that are too lax exposes agriculture, other industries, and natural

areas to the possibility of severe damage. A strategy of targeting agricultural crops and environmental systems at greatest risk from HNIS might, in

this context, be the most effective way to deal with

the problem.

As previously mentioned, the new URA product standard provisions stipulate that member

countries must base their S&P measures on international standards (if they exist), and harmonization of standards is encouraged. The OTA assessment concludes that “complete harmonization

of pest risk standards is probably not achievable,

although agreeing on analytical processes may

be” (79). Resolving scientifically complex issues

of this sort through WTO panels will require expert environmental science input.

As the United States embarks on expanded

trade relations with Mexico and Canada through

NAFTA, new HNIS cases in North America will

likely grow. For example, Mexico has recently

changed its regulations affecting imported Canadian and U.S. Christmas trees-ostensibly to

screen for gypsy moth infestations. However, it

does not apparently have a clear scientific basis

for doing so. Previous bilateral agreements have

Imports of containerized freight allow the introduction of

harmful nonindigenous species to affect agriculture and the

environment throughout the country instead of just U.S. porfs

of entry

attempted to halt the transmission of foot and

mouth disease between Mexico and the United

States, as well as the invasion of the zebra mussel

in the Great Lakes between Canada and the United

States. Considerable resources have been devoted

to coordinating pest prevention approaches with

each country. NAFTA, in a vein similar to that of

the URA, affirms members’ rights to maintain

“the level of protection of human, animal or plant

life or health in the territory of a party that the

party considers appropriate”; it requires that such

measures be based on both scientific principles

and risk assessment; it notes that in establishing

their levels of protection, members “should take

into account the objective of minimizing negative

trade effects”; and it encourages harmonization of

standards where appropriate, but discourages

downward harmonization. It also made criteria for

defending challenges to product standards more

deferential to environmental measures and gave

more access to environmental expertise for dispute panels than previous GATT or new WTO

rules (21). The agreement does not directly address the problem of HNIS, but it does establish a

Committee on Sanitary and Phytosanitary Measures that is charged with improving health and

safety conditions throughout North America. A

subcommittee devoted exclusively to HNIS
130 | Agriculture, Trade, and Environment

might help to improve those conditions yet further.

DOMESTIC ENVIRONMENTAL EFFECTS

OF AGRICULTURAL TRADE

LIBERALIZATION AND EXPANSION

The potential environmental effects of changes in

trade or trade policy have been described and categorized in myriad ways. Grossman and Krueger

sort them into scale, product composition, and

technique (i.e., production technology) categories. Runge (65) expands that set to include effects

from general improvements in resource use causing less waste and from improved (environmental) policy. Building on these concepts, the OECD

recommends national governments conduct a

comprehensive review of the effects that trade

measures or agreements might have on the environment. The review covers five categories (52):

1. Structural effects, which are associated with

changes in the patterns of (micro or firm-level)

economic activity (e.g., includes improved

farm resource use);

2. Technology effects, which are associated with

changes in physical, biological, or other processes or production methods;

3. Scale effects, which are associated with the

overall level of economic activity induced by

changes in trade flows and the implications for

environmental pollution and cleanup;

4. Regulatory effects, which are associated with

legal or policy effects of a trade measure or

agreement on environmental regulations, standards, subsidies, or other programs; and

5. Product effects, which are associated with the

export or import (but not production) of specific products that can harm or improve environmental quality.

The following analysis uses the OECD terms to

examine the effects that expanded and liberalized

agricultural trade might have on the U.S. environment. The structural and technology categories

are combined to capture the shifts in crops and

livestock enterprises with their closely tied production technologies. Major product effects are

not expected to be significant (save for the effect

of HNIS, which has already been detailed), and

are not discussed.

❚ Structural and Technology Effects

Farmers’ decisions about what kinds of crops to

grow; where to grow them; and how to combine

land, water, and other resources to produce their

products all have environmental consequences.

For example, in response to larger markets overseas, a farmer may use more land to grow certain

crops, or use land more intensively—that is, by

tilling more pasture or prairie, or applying more

fertilizers or pesticides. Conversely, farmers who

have been protected from foreign competition by

tariffs, quotas, or other trade barriers may change

the kinds of crops they plant and the way they

grow them if, as a result of trade liberalization,

they are faced with more foreign competition. Depending on how the land is used after the trade restrictions are removed, stress on the environment

could increase or decrease.

The environmental effects of a farmer’s decisions will depend on what combination of choices

he or she makes with regard to particular resources. For instance, the amount of water runoff

or chemical leaching that results from producing

corn depends on whether the corn is planted on

steep uplands or on sandy, permeable lowland

soils that overlie shallow groundwater susceptible

to chemical leaching. Some environmental consequences, such as erosion runoff and muddy

streams, are obvious locally, but cannot be easily

traced further downstream. Others, such as

groundwater contamination or wildlife effects

from habitat changes, may not be completely revealed for some time.

The shifts in agricultural trade caused by NAFTA and the URA will determine the size, location,

and nature of such new strains on the environment. The U.S. Department of Agriculture

(USDA) estimates that expected increases in production related to the agreements are relatively

small, ranging from a low of about 1.5 percent of

acres planted in major crops in the year 2000 to a

high of approximately 3 percent in 2005 (85).
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 131

Crop-specific estimates indicate that wheat

acreage increases by 5 to 8 percent, coarse grain

acreage by 1 to 2 percent, soybean acreage by 3 to

4 percent, and cotton acreage by 2 to 5 percent

(compared with what the situation would be without the agreements). Land that currently remains

“idle” under government supply control programs

would likely meet the additional export demands

in 2000 and probably up to 2005, although it

would mean some increase in erosion and other

environmental damage. Another set of estimates

by the International Trade Commission (ITC)

shows smaller net production increases. (90) (See

chapter 3.).

Looking at these overall changes is, however,

merely a starting point. To project the possible environmental effects of expanding agricultural

trade, it is necessary to examine specific changes

in production and in the means of production (i.e.,

production technologies). OTA contracted with

researchers at Texas A&M University to analyze

what regional shifts in agricultural production

would occur, and what possible environmental

stresses would result, from projections of expanded agricultural trade under NAFTA and the URA

(44). The analysis assumed that the current commodity programs continued with Acreage Reduction Program (ARP) levels at 1990 levels of about

27 million acres; that commodity program base

flexibility remained at 15 percent of enrolled commodity program acres; and that 10 million acres

of the most highly erodible land in the Conservation Reserve Program (CRP) were kept out of

production.

Estimates show that overall cropland use rises

less than 1 percent by the year 2000 under the

higher USDA export projections with the URA

and NAFTA. The enlarged cropland base from

CRP lands returning to production, coupled with

average technology improvements, nearly offset

the rise in net export demand. None of the major

environmental measures showed changes of more

than 1 percent and some even declined (for

instance, water use and phosphorus). Overall, the

combination of changes in crops and technology,

when spread across all farmland, was not estimated to cause significant damage to, or for that

matter improvement in, the environment. The low

projected erosion rates result from a combination

of cropland returning to production under conservation tillage techniques; the retention of the

most erosive lands in the CRP; wheat production

technology, which causes less erosion than the

production technologies used for some of the

crops it is projected to replace (59); and other

changes. The larger agricultural export estimates

for 2005 would, it is assumed, have larger effects

on the nation and various regions, but would probably not increase any environmental measures by

more than 3 percent. These findings are consistent

with general assessments of the environmental effects of trade and trade liberalization (51) and for

other countries (e.g., 61).

Commodity Program Influences

For the OTA analysis conducted by Texas A&M

researchers, it was assumed that agricultural commodity programs would operate as they do now

because the URA did not mandate change for the

most part. The URA establishes a ceiling and reduction schedule for total domestic agricultural

support (which the United States has already met),

exempts deficiency payments from the ceiling and

reduction calculations, and preserves the United

States’ authority to make commodity specific

payments and acreage set-asides.

Even though the URA did not effectively reform commodity programs, budget pressures and

other forces will likely lead to further changes in

them. Assuming that there will be additional reform, what type of environmental effects might

follow? Basically, how the crops, livestock, and

their production technologies spread across the

natural resource base determine what happens to

the environment (5). Much depends on the precise

nature of any reform—for example, whether income and price supports are eliminated or just

“decoupled” from particular crops and production

levels, and whether land set-asides continue. Also

pertinent are assumptions about how competing

exporters may reform their programs, and how

those reforms might affect world markets and

price levels. For example, if all WTO countries simultaneously removed subsidies that encourage
132 | Agriculture, Trade, and Environment

domestic overproduction, world prices would rise

significantly in the short term as global supplies

fell. In the longer term, other sources of supply

(e.g., developing countries) could appear and

make markets stable again—at prices that would

be higher than what they are now, but lower than

what they would be during the initial short-run

surge.

Investigations of the environmental effects of

reforming agricultural support programs have

taken place on the international, national, and regional levels. It is important to consider that the

science and data to describe the production-environment relationships at ecosystem levels simply

do not exist, and so precise calculations are impossible to make.5 Nonetheless, results from all levels provide largely consistent and corroborative

results. (See appendix I.) Generally, multilateral

reform of commodity programs—by lowering or

decoupling price subsidies and by reducing land

set-asides—would likely decrease chemical

pollution and many other stresses on domestic environmental resources, such as water withdrawals

for irrigation. Although the analyses focus on reforms in prior years, the findings are still relevant

because the basic structure of U.S. commodity

programs has remained unchanged. Kuch and Reichelderfer (37) note that the potential environmental effects of reform will likely be limited in

industrialized countries. Moreover, agricultural

program payment levels in industrialized countries have been decreasing, which implies that less

environmental change will occur if support is

withdrawn because the programs are exerting less

effect on production. (See chapter 6.) Kuch and

Reichelderfer stress that the extent of environmental impacts depends largely on the kinds of environmental programs in place after agricultural

programs are reformed. A separate assessment arrives at the same conclusion (50).

Because current studies of program reform do

not fully describe long-term adjustments, overall

estimates of environmental improvement are

probably lower than they need be. (Flexible, costeffective environmental programs might, for

instance, induce farmers to change their production methods, and so further reduce impacts on the

environment.) (See chapter 4.) Some analyses

have indeed indicated that pollution could be reduced more over the longer term (1). The overall

implications for global environmental conditions

are not clear, but are likely to be positive, because

there will probably be less chemical use in developed countries, and some livestock production

will move to developing countries (thus reducing

higher concentrations of livestock in the developed countries).6 However, that positive outcome

depends on the developing countries’ abilities to

translate increased income from trade gains into

more effective environmental protection.7 At

least one negative domestic environmental effect

is forecast: erosion rises as land that had been idle

under the ARP or CRP is planted.

Import Liberalization

NAFTA and the URA also reduce some U.S. trade

barriers against foreign agricultural products, thus

5 Fairly complete data on the production of crops and livestock and the use of fertilizers, energy, and other inputs by major U.S. regions are

recorded each year by USDA, which separately collects data describing the condition of natural resources used in agriculture (82, 87). However,

data that describe existing agricultural production technologies and crops and how they relate to the environment are not collected on a comprehensive basis, perhaps owing to the size and cost of the task. Without that information, unfortunately, precise estimates of the environmental

effects of expanding agricultural trade across ecosystems are not possible.

6Anderson (2) explains that production patterns and technologies in developing countries rely relatively more on extensive land use for

growing crops and livestock, and less on increased fertilizers and pesticides, than in developed countries. As a result, production shifts under

policy reform would be expected to put relatively more pressure on the land resources in developing countries and less on chemical use in

developed countries.

7 There is doubt that developing countries can design and implement effective environmental programs to ameliorate significant problems

in the event of full agricultural trade liberalization, especially in the short term (42).
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? 133

increasing market access for imports. Currently,

several kinds of U.S. agricultural products are still

protected from foreign competition, including

sugar, dairy products, and peanuts. Generally, in

such cases, domestic production (and land use)

expands to fill domestic demand, and producers

receive more for their products than they could if

they faced unsubsidized foreign competition. If

protected sectors are not subject to effective environmental programs, they may use more

tected sectors do, simply because they are larger.

But protected sectors earn high “pure” profits

(profits in excess of all production costs) and can

invest in developing technologies to retain their

profit position. 8 That is, if they are required to

meet certain environmental standards, they may

do it at a lower cost than they could when faced

with more competition.

Box 5-1 explains how the south Florida sugar

cane industry, which has benefited for decades

"unpriced" environmental resources than unpro- from protectionist policies, may be able to develThe environmental problems facing the Florida’s Kissimmee-Okeechobee-Everglades watershed

(69) center on three major issues:

1. Water Quantity, Distribution, and Timing —How much water goes where, when, and how is it distributed?

2. Water Quality —How “clean” should the water be, and what is the best way to make it clean?

3. Cost —Who pays the bill?

As a result of the current water management system, the remaining Everglades natural areas receive

about half as much water, and about 200 tons more phosphorus, than they originally did (69) The

drainage and flood control system constructed to aid urban, agricultural, and other developments has

not only heavily contributed to present environmental conditions, but has also defined how land wiII be

used. Agriculture has taken over a large amount of the drained land (about a half million acres of former

custard apple swamp and marsh) As a result, agriculture will figure prominently in any solution to the

area’s environmental problems

Since 1988, Florida, working with federal agencies, has developed an environmental Improvement

plan for the Everglades Passed in 1994, the Everglades Forever Act (EFA) defines a plan to

begin restoring a significant portion of the remaining two-million-acre Everglades ecosystem by reducing the

amount of phosphorus-enriched agricultural stormwater entering the system, improving the quantity and distribution of freshwater, and setting deadlines to achieve these objectives (70).

EFA also creates funding mechanisms that address all three of the issues raised above In addition,

it establishes mechanisms to control harmful nonindigenous species (HNIS), even though problems

with HNIS are not linked directly to Everglades agriculture.

For agriculture specifically, EFA has several important implications More than 40,000 acres of manmade filtering wetlands, called stormwater treatment areas (STAs), wiII be created in the Everglades

Agricultural Area (EAA). The STAs are designed to reduce the amount of phosphorus in stormwater

runoff before the stormwater enters Everglades and Water Conservation Areas, and to improve the Everglades hydroperiod. Specifically, the interim water quality target is 50 parts of phosphorus per billion,

(continued)

8 Whether allowing a sector to earn pure profits (and essentially granting it associated research and development advantages) reflects the

most appropriate use of those funds remains an open public policy question.
134 Agriculture, Trade, and Environment

and the amount of water flow IS estimated to increase by 28 percent and lengthen the duration of flow.

After the interim measures have been implemented, a scientific process will be used to determine the

final targets for water quality

The question of who pays how much IS also addressed Sugar and vegetable growers must pay

about $25 per acre per year in the form of an “agricultural privilege tax” over the next 20 years to

construct the STAs If further pollution control measures are required to reach the final targets, the cost

could rise to $35 per acre from 2006 to 2113 under assumed conditions (60) Vegetable growers are not

subject to the potential Increase. When the STAs are completed, EAA growers will pay $10 per acre for

operation and maintenance costs, while farmers operating outside the EAA but in the area wiII pay

about $2 per acre Supplemental funding will be collected from public sources such as highway tolls

EFA also requires all farmers in the area to develop and implement innovative best management

practices (BMPs) to reduce all pollutants flowing into runoff waters Since these BMPs are not in place,

the true costs are not known. Current estimates are $1 per acre to achieve the minimum 25-percent

reduction in phosphorus emissions (which wiII obviate the need for the $10 tax Increase) The estimates

rise to about $25 per acre for a 45-percent reduction (91) Florida sugar growers were estimated to

have received an average of about $230 of pure economic profit or rent per acre from 1986 to 1990

(69) Future profits are projected to decline slightly from the $230 level The total tax and BMP charge

would reduce pure profits to about $200 per year for the 20-year construction period Converting the

taxes and BMP costs to a per- pound of sugar basis (based on 1986-90 yields) implies that the charges

constitute a O 5 cent increase per pound, or just over 2 percent of average price of sugar over the same

period.

These figures reveal that, on the whole, sugar growers have ample capacity to absorb the environmental charges, Gwen their large pure profits, sugar growers have resources to develop innovative

technology to reduce the BMP costs even further, assuming that flexible environmental policies prevail

Sugar production appears to be an economic fact of life under current market conditions and given the

relatively low-cost south Florida production technology---despite the fact that large federal subsidies

were used to develop that efficient technology Trade Iiberalization will not likely displace Florida’s sugar

industry, although it may reduce its size.

Environmental restoration of the Everglades must proceed with these realities in mind What should

be the sugar industry’s role in that restoration process? Under the EFA environmental targets, the average costs imposed on sugar producers take only a small portion of their pure economic profit Achieving environmental restoration beyond the current EFA targets—by reducing the area of sugar production—would be expensive in two respects. First, taking land out of production wiII be costly as

evidenced by the large pure profits and land values. However, removing the sugar program protection

will lower the land values and therefore lower land acquisition costs Second, unless some mechanism

can be found to allow the lands to revert to natural conditions, alternative land uses may do more environmental damage. Data often reveal that using land for urban and industrial purposes generates much

greater pollution per unit area, Assuming that the elimination of domestic sugar subsidies releases

some land from sugar production, it does not follow that environmental conditions wiII Improve automatically, That determination depends on how the land IS ultimately used and the environmental rules under

which it will be used,

* Material in this section was drawn from a contractor report prepared for OTA by Rand Snell and William Boggess “Water,Agricultural, and Environmental Policy Issues in South Florida, ” June 1994
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 135

op cost-effective technologies to meet high environmental standards (69).9 Also explained is the

notion that the ultimate environmental effects of

any land leaving sugar production depends on the

applicable environmental policies. In south Florida, either vegetable farms or residential developments may do more harm than existing sugar production (69). It is crucial to note that these

findings do not support the use of protectionism to

improve the environment. Indeed, open competition between domestic and foreign producers is

conducive to achieving long-run economic and

environmental benefits. However, the case study

indicates how difficult it can be to devise effective

environmental policies when dealing with an historically and economically anomalous situation.

If Florida’s sugar growers had always faced competition, then effective environmental programs,

and public research targeted to complementary

technologies, would likely have benefited society

more than the growers’ current efforts at environmental cleanup do. The messages from chapter 4

and from this case are the same: the nature of

agroenvironmental management programs is the

most critical element to determining environmental quality.

Overall, import liberalization resulting from

the URA will probably exert a limited effect in the

near-term due to ambiguous rules governing the

process (67). Some measures were included to

guard against foot-dragging by importing countries reluctant to open their markets, however,

there are no guarantees of improved market access

(73). Certain areas where protected crops dominate and significantly affect the environment may

undergo considerable change over the longer-term

as pressure for further liberalization grows.

Again, it is obvious that emphasis must be placed

on identifying regional pockets where the environment will be greatly stressed, and on targeting

these areas with appropriate agroenvironmental

programs.

❚ Regulatory Effects

The nature of the environmental effects that result

from expanded and liberalized agricultural trade

depends not only on the magnitude and types of

changes in production, but also on domestic environmental policy—more specifically, on the way

governments manage or change their environmental programs due to the trade measure or

agreement.

The possible return of idled acres to production

demonstrates once more that domestic environmental programs ultimately dictate the consequences of trade expansion. The basic problem is

that comprehensive, effective policies do not cover areas facing significant risks of environmental

damage. Can current domestic environmental

programs effectively treat any pockets of stress or

other large problems, such as invasive HNIS,

without significantly interfering with trade flows?

Cost-effective management programs can induce

technological changes over time, such as improved conservation tillage practices, better soil

9 Popular belief dictates that protected (and less than fully competitive) industries are likely to be less vigorous in reducing cost than other

industries. The Florida sugar industry’s declining production and processing cost structure do not support that notion. The incentive to continue

earning, and even to enlarge, their pure economic profits, coupled with the large capital base afforded by price protection, has evidently led to

technological innovation and production cost decreases through economies of size (69). In this “trustified capitalism” formulation, the pure

economic profits are necessary to allow the firms to invest in research and development that will lead to innovation. Industries comprising many

competitive firms do not enjoy the necessary capital base or profit-making opportunities to permit such dynamic technological innovations,

although they have strong incentives to adopt existing technological improvements. If accurate, this view of technological innovation has two

implications for the issues at hand. First, profit-producing trade restrictions that protect certain industries (such as sugar) may allow them to

conduct kinds of research and development that may not be considered a priority in other industries. Second, if the industries remain protected

and retain their customary profit levels, they will be able to meet environmental requirements at lower costs through their technological innovations. A related observation is that more-competitive industries will not be as likely to generate technological innovation in meeting environmental standards, because they cannot earn pure profits. In the latter case, if competitive markets remain an overriding public goal, the rationale

for public research and development assistance directly follows (22).
136 | Agriculture, Trade, and Environment

testing that can reduce fertilizer application rates,

and increased use of biological pest controls to reduce applications of chemical pesticide applications. These changes can simultaneously lessen

environmental damage and reduce the estimated

cost of environmental compliance, thus helping

trade to remain competitive.

How do existing programs measure up when all

the environmental benefits and costs are considered? Two criteria may be used. First, are the standards or levels for environmental quality too high

or too low? On this matter, analysts can provide

information about the likely environmental, economic, and social benefits and costs of various

standards—but the public, through Congress,

must ultimately decide what the appropriate standards are. Second, are existing mechanisms adequate to ensure that farmers and consumers fully

pay environmental costs and receive compensation for providing environmental benefits? Environmental programs come in a variety of forms:

production or emissions controls, technology requirements, purchase of land or water rights, and

subsidies and taxes. The basic question is, which

mechanism achieves the environmental objective,

in the short term and long run, at the lowest possible cost?

The United States has nearly 60 years of experience in applying conservation and environmental

programs to agriculture. Chapter 4 reviewed programs that deal with soil conservation, water quality, wetlands protection, pesticide registration,

and other issues. The principal conclusions of the

review were:

 traditional voluntary education and technical

assistance efforts have not produced widespread and enduring change;

 subsidy-based programs have produced benefits, but for the most part have not been targeted

for maximum opportunity to yield benefits;

 compliance programs do not match environmental priorities and are vulnerable to budget

cuts;

 regulatory efforts have been spotty and have

not stimulated timely technology innovation;

and

 research and development efforts to understand

agroenvironmental priorities, and to develop

technologies that produce complementary production and environmental effects, have been

insufficiently funded.

The recurrent themes of insufficient targeting

and incomplete coverage suggest that the agroenvironmental programs currently in place will not

cope well with any trade-induced pockets of environmental stress or invasions of HNIS. Moreover,

those shortcomings, when considered along with

insufficient science and technology R&D, do not

promise a long-run complementary path for agricultural trade and the environment.

❚ Scale Effects

As mentioned previously, increases in agricultural

production resulting from NAFTA and the URA

are not expected to exert significant stress on the

environment. Indeed, as increased agricultural

trade raises incomes, the environment could benefit. A growing body of evidence indicates that as

per-capita income levels increase, environmental

pollution decreases, although the relationship is

not fully understood (32,40,41).

One of the key determinants of this relationship

is the rising demand for environmental quality as

income levels increase. However, recent reviews

of evidence on this relationship suggest that the

rise in demand may not be as large as thought previously (36). Changes in the composition and

technology of production also play important

roles. If this relationship applies to agriculture, increased income from trade growth could improve

agroenvironmental conditions.

The hypothesized effects pertain to expanding

trade under NAFTA and GATT. As liberalized

trade places more pressure on environmental resources and raises incomes, stronger environmental management programs will emerge. The resulting effects on the environment will,

accordingly, depend on the balance between the

two forces and the timing of problems and management programs. Given that expanded trade

will not change either U.S. production patterns or

income dramatically (estimated at less than 0.2
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 137

percent of GDP) over the next five years, the nearterm effect is likely to be small (67). In the long

run, income growth from general development,

including expanded trade, will spur improvement

in the national environment, but only gradually.

The nature of that improvement will be defined by

incentives for technology development and behavior change encouraged by environmental programs. Whether the improvement extends to global environmental resources, such as plant and

animal biodiversity, is unclear because of the difficulty of cooperatively managing those resources.

TRADE MEASURES TO ACHIEVE

INTERNATIONAL ENVIRONMENTAL

OBJECTIVES

Some of the transboundary or global environmental problems stemming from increased agricultural trade affect U.S. interests. Pesticides may contaminate air and rivers that cross into U.S.

territory; losses of plant and animal species may

reduce the gene pool available for domestic production and ecological functions. In such cases,

national environmental programs will not be

enough to ensure that the problems are addressed

(68). Regional or international mechanisms, such

as multilateral environmental measures tied to

trade, stand a better chance of success. So far, two

trade-related approaches have been used. The first

approach has been to work through trade agreements to accomplish environmental goals; the

second, to use trade measures within international

environmental agreements.

❚ Environmental Provisions Related to

Trade Agreements

NAFTA presented the first opportunity to use a

trade liberalization agreement for advancing regional environmental objectives. Mexico suffers

from severe environmental problems—especially

along its border with the United States, where

most of the country’s foreign-owned “maquiladora” plants are located. NAFTA opponents argued

that if the agreement were implemented, Mexico

could become a “pollution haven” for industries

that did not wish to pay the costs of complying

with U.S. or Canadian environmental laws. Such

arguments proved persuasive, even though the

Mexican and U.S. governments had earlier concluded an integrated border environmental plan to

clean up the region.

Ultimately, the NAFTA negotiators were compelled to include several unprecedented “environmental” provisions in the body of the agreement,

making it the world’s first “green” trade pact (21).

The NAFTA text states, for example, that the provisions of certain international environmental

agreements (e.g., the Basel Convention on the

Control of Transboundary Movements of Hazardous Waste, and the Montreal Protocol on Substances that Deplete the Ozone Layer) generally

take precedence over NAFTA provisions. NAFTA members are allowed to set their own levels of

environmental protection, within certain parameters. NAFTA further exhorts members to enforce

their own environmental laws, and to refrain from

attempting to attract foreign investment by lowering, or failing to enforce, environmental standards. It also allows members to impose some environment-related performance requirements on

foreign investors, and to refrain from granting patents for inventions that might harm the environment.

Public pressure also led to the addition, in

August 1993, of a NAFTA environmental side

agreement, which deals more specifically with

transboundary environmental concerns. The North

American Agreement on Environmental Cooperation (NAAEC) lays the groundwork for addressing regional environmental issues through a

tripartite Commission for Environmental Cooperation (CEC), funded by the three NAFTA members. The CEC’s mission is to monitor how NAFTA’s environmental provisions are implemented,

work toward harmonizing and raising North

American environmental standards, develop ways

to enhance the North American environment,

function as a clearinghouse for NAFTA-related

environmental issues, and review cases of members’ alleged nonenforcement. Cases may go to an

arbitral panel under the CEC if a NAFTA party allegedly engages in a “persistent pattern of failure”
138 | Agriculture, Trade, and Environment

to enforce a particular environmental law or laws.

Thus, the CEC is geared not only to regional environmental improvement, but also to leveling the

trade playing field by punishing lax enforcement

of domestic environmental laws—which, theoretically, might affect industries’ location and investment decisions. Finally, NAAEC commits countries to provide for public participation in

domestic environmental policymaking and enforcement (21).

An agreement such as NAAEC is unprecedented in the history of trade negotiation and represents a landmark achievement in linking regional

environmental and trade issues. Nonetheless, it is

difficult to determine whether NAAEC will be a

particularly useful institution for addressing

transboundary environmental issues, for three key

reasons:

 First, the NAAEC provisions significantly restrict the kinds of nonenforcement actions that

may be challenged. Under NAAEC, only a

“persistent pattern” of nonenforcement (which

is defined in the text only as “a sustained or recurring course of action or inaction”) may be

challenged, and a member “has not failed to effectively enforce its environmental law” if its

action “results from bone fide decisions to allocate resources to enforcement in respect of other environmental matters determined to have

higher priorities.” The agreement also stipulates that sanctions against a NAFTA member

that does not enforce its own environmental

laws must take into account “the level of enforcement that could reasonably be expected of

a party given its resource constraints,” and that

NAFTA members may withhold information

on a case from the CEC under certain circumstances.

 Second, as critics such as Charnovitz (15) argue, the CEC has no enforcement power beyond allowing one member to institute trade

sanctions against another. Such action would

be taken only after a significant amount of time

had elapsed and significant sums had been

spent on litigation. However, the CEC can conduct fact finding and publish the results in attempts to use adverse publicity to instigate

pollution cleanup.

 Third, and crucially, the NAAEC agenda conceptually treats transboundary and domestic

environmental problems as equal concerns. As

a consequence of casting their environmental

net so widely, it is possible that the NAAEC

member states may not be able to focus the

attention they otherwise could on pressing

transboundary problems. As the Environmental Protection Agency (EPA), other agencies,

and countless experts have confirmed, the border region between the United States and Mexico suffers from serious pollution problems

(89), which may be exacerbated to some extent

by NAFTA. Such problems as the highly polluted New River, which flows from the industrialized and overcrowded Mexican city of

Mexicali through California’s agricultural Imperial Valley, may be one of the most polluted

rivers in the world, with problems yet to be fully addressed (38). However, in one of the first

cooperative efforts under NAFTA, the U.S. Environmental Protection Agency (EPA) and the

Mexican Secretariat for Social Development

have cooperatively made the reduction of New

River pollution a high priority on both sides of

the border (84). Several other initial activities

between the United States and Mexico suggest

a principal focus on border-related problems,

so for the moment the potential for spreading

efforts too broadly appears small (84). The

countries are also cooperating on studying similar agroenvironmental problems (e.g., rangeland erosion), and possible transfer of technologies (81).

A more direct approach to the problem of the

border region, and by extension to transboundary

environmental problems related to trade, has been

through bilateral agreements between the United

States and Mexico, and through the recent creation, in NAFTA’s implementing legislation, of

the North American Development Bank (NAD

Bank) and the Border Environment Cooperation

Commission (BECC). As mentioned above, the

United States and Mexico released an Integrated
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting?

Environmental Plan for the Mexican-U.S. Border

Region in February, 1992, which aims to attack

border pollution problems through joint efforts to

promote training, education, and planning programs, and to better enforce the nations’ environmental laws. The border plan has been criticized

as vague, without commitments to specific projects (34), and its allocation of $200 million for

1994 from the United States falls strikingly short

of the billions of dollars that some experts deem

necessary to improve sewage systems, water

pollution, and air pollution in the area. For example, Hufbauer and Schott (34) recommend that $5

billion be dedicated to the border region over five

years.

NAD Bank’s initial purpose is to make loans

for infrastructure projects that will ensure cleaner

water, adequate wastewater treatment, and adequate solid waste disposal in the border region.l0

Located in San Antonio, Texas, and capitalized by

the governments of the United States and Mexico,

NAD Bank will make some $2 billion to $3 billion

in guarantees and loans available for these projects. For 1995, $56 million was appropriated by

Congress. The bank will work cooperatively with

BECC, which will help locate, design, assess the

environmental impacts of, and approve the projects in communities on both sides of the border.

As these institutions are so new, it is not possible

to gauge their efficacy, although the U.S. House

Committee on Banking, Finance, and Urban Affairs found that the NAD Bank proposal was “seriously defective” because the bank’s financial

mechanisms were potentially unworkable (77).

One area that might test the efficieny of NAAEC

and NAD Bank lies along the southwest Texas and

Mexican borders, where trade liberalization will

expand industrial growth. Box 5-2 explains some

of the cross-border problems of the Lower Rio

Grande Valley and the current difficulties in addressing the issues. Interestingly, there is little

I 139

Increased trade and manufacturing activity along the U. S.-

Mexican border causes increased pressure on transboundary

environmental resources,’ here an effluent from a Mexican

cottage industry drains into the Rio Grande River which U.S.

agriculture draws on for irrigation.

chance that gradual reduction of trade barriers

here will induce substantial agroenvironmental

problems. Rather, concerns center on the negative

effects that nonagricultural growth could have on

agriculture, especially with regard to transboundary flows of polluted water.

Although it in no way rivals NAFTA as a

“green” trade pact, the URA has new “environmental” provisions as well. The text sets the environmental stage for the World Trade Organization

(WTO). Explicit mention of the need to address

environmental issues and pursue sustainable development appears in the WTO preamble (49).

Specific environmental provisions include the

10 An obvious question is why subsidized loans may be acceptable tO use for transboundary pollution but not for national environmental

problems under the OECD principles. The answer maybe one of necessity: subsidies are necessary to induce transboundary cooperation because multilateral regulations requiring cooperation do not exist and collaboration is costly.
140 Agriculture, Trade, and Environment

Adjoining the Mexican border and its maquiladora plants, the Lower Rio Grande Valley (LRGV) of

Texas lies at the heart of expanding trade between Mexico and the United States The LRGV is replete

with valuable environmental resources, such as several rare and endangered wildlife species The Rio

Grande River is an integral resource for the region, but its quality deteriorates as it approaches populated areas downstream. Air quality is also a concern, as urban sprawl, Industry, and transportation

expand in response to the region’s growth, Many of the LRGV’s environmental resources are shared

across the border and so require multinational approaches for effective management.

Surface and groundwater quality are two transboundary challenges Because the river and its reservoirs provide and receive U.S. and Mexican municipal, industrial, and agricultural waters, it is a critical

resource Above the cities of McAllen and Reynosa, Rio Grande River water quality is primarily influenced by releases from the Falcon Reservoir (on the western edge of the LRGV) and is excellent

(72) But as the river continues southeast, it becomes increasingly degraded Below the two cities, for

example, the river does not meet quality standards for swimming due to elevated fecal conform bacteria

levels, primarily the result of Inadequate treatment of Mexican municipal sewage. Five Mexican cities—

Juarez, Cludad Acuna, Piedras Negras, Nuevo Laredo, and Reynosa---dump 60 million gallons of raw

or partially treated sewage into the Rio Grande each day (20), Untreated sewage IS dumped into the

river by colonias (unincorporated rural subdivisions) on both sides of the Rio Grande. Fecal conform

levels below Nuevo Laredo are 33 times greater than the allowable safe Iimits. Further, phosphorus and

chlorophyll a levels in sediment are concerns as is DDE (a derivative of DDT during degradation) toward the river’s mouth

These river water quality problems are Iinked to agriculture in two ways. First, irrigation water for

fresh vegetables and other crops is taken from the degraded portion, and may cause problems for food

safety Second, agricultural nutrient and pesticide effluents can move to the river from Mexican farms

Pesticide and fertilizer use have generally Increased over the past two decades, with potential for runoff

to surface waters and leaching to groundwaters (88). Some researchers believe that agricultural pesticides may be a source of birth defects along the U S -Mexico border (1 1). However, a recent U.S. Environmental Protection Agency (EPA) study did not find sufficient pesticide exposures near Brownsville to

warrant health concerns. Within Texas, there are also surface water quality problems in the Arroyo Colorado, which flows from Hildago county to the Laguna Madre on the Gulf Coast: principally elevated

levels of phosphorus, ammonia, nitrate, chlorophyll a, and fecal coliform, plus concerns about manganese, selenium, DDE, and PCBs. The Texas Natural Resource Conservation Commission attributes most

of the problems to municipal effluents.

Groundwater in the LRGV ranges in depth from 180 feet in the west to 20 feet or less near the coast

Generally, groundwater quality problems stem from excess sodium chloride, bicarbonate, and sulfate,

most of which occur naturally and are not directly attributable to agricultural activities, The Texas Water

Commission reports that some groundwaters are vulnerable to pesticide leaching, but they are generally too salty for Irrigation or human consumption, For a 17-county area of southern Texas, where there are

high-growth centers (for instance, McAllen, Eagle Pass, and Laredo), the groundwater levels are declining due to pumping with Iittle systematic planning and intervention from either or both countries, In this

larger region, there are some aquifers at risk, At present, Texas and Mexico have no history of cooperation to manage transboundary aquifers, With Increased economic growth, the potential for further

groundwater mining for municipal and Industrial purposes will increase, and allocation problems wiII

Iikely grow.

There are other Important transborder environmental issues, Growth in fresh fruit and vegetable imports from Mexico, along with an Increasingly diverse product mix, will place additional demands on
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? 141

U.S. Food and Drug Administration resources to monitor fresh produce as it crosses the border (47)

Available Information reveals a significant gap between U.S. and Mexican pesticide standards regarding their impacts on human health (63). Newman notes that Mexican regulations on pesticide use are

Increasingly similar to those in the United States, but questions about relative enforcement are unanswered Another effect stems from Increased air pollution accompanying greater motor vehicle transport of commerce (and toxic spill potential), which can negatively affect crop yields, human health, and

aesthetics Mexico’s current vehicle smog emission standards are less restrictive than those of the

United States (63) Finally, managing wildlife habitat, some for endangered species, in the face of expanding populations poses a considerable multilateral challenge

Environmental Program Responses

Existing institutions in both countries do not adequately address environmental losses or exploit potential environmental gains (e g , wildlife habitat). Most of the region’s environmental problems stem

from the absence of effective mechanisms, markets, public policies, or lack of enforcement of policies,

to balance benefits and costs or risks An assessment of the existing environmental institutions shows a

mixed picture of policy effectiveness In some cases, the policies may unnecessarily constrain competitiveness. In short, the LRGV region appears to suffer from incomplete environmental policy coverage on

both sides of the border, as well as for managing critical transnational resources

Effluents coming from Mexican sources are subject to Mexico’s General Ecology Law (1988) and

Implementing institutions. Mexico has taken several steps forward in environmental management during

the past decade. Mexico’s poor economic state has, however, hampered the implementation and enforcement of more stringent environmental standards Additional resources for monitoring, technical assistance, and enforcement wiII be necessary to control water pollution effluent from Mexican cities as

they grow. A similar prognosis applies to air quality and wildlife habitat protection

Effectively addressing these issues wiII require cooperation between agriculture and other sectors,

between domestic government agencies, and most important, between Mexico and the United States

Three courses of action warrant consideration (62) First, public officials could evaluate the harmonization of environmental standards between the United States and Mexico, including those pertaining to

agricultural production and lands. Following NAFTA provisions, the harmonization process should not

lower the level of protection in either country, and preferably harmonize to the higher level in either

country Second, environmental problems stemming from public entities such as wastewater treatment

facilities could be attacked by creating innovative funding mechanisms. Most of the border communities are not high-income areas and wiII require financial assistance to eventually meet existing water

and air quality standards. Third, programs could be developed to assist public agencies in both countries on environmental monitoring and enforcement activities. Technical training on instrumentation, inspection protocols, and data monitoring and interpretation should be high-priority activities. Coordination across the border is key The translational Institutions created as part of the NAFTA process, such

as the North American Development Bank and the Border Environment Cooperation Commission, have

the potential to help in this regard, but are only skeletons at this point Their potential effectiveness wiII

depend largely on the vigor with which private and public parties infuse them with energy, resources,

and wise policy choices (7)

*Material in this section was drawn from a contractor report, “Agricultural Trade and the Environment Potential Impacts on the

Lower RIO Grande Valley of Texas,” by C.P. Rosson Ill, A. Pagano, E.B. Summerour II, L.L. Jones, R D Lacewell, T. Ozuna, A. Wise,

M J Taylor, and S.M. Masud of the Department of Agricultural Economics, Texas A&M University, July 1994
142 | Agriculture, Trade, and Environment

new S&P and TBT agreements already discussed

in this chapter, permission for selected environmental subsidies, and a dispute settlement procedure that is more open to public scrutiny (48). In

addition, and like NAFTA, the URA text allows

panels that are convened to settle trade disputes to

seek expert scientific and technical advice regarding environmental matters. Finally, the WTO established a permanent committee on trade and the

environment with broad terms of reference and a

two-year period for reporting recommendations.

The inconsistency of the URA subsidy provisions with the polluter-pays principle (PPP) merits further comment. Governments are generally

permitted to subsidize efforts that “promote adaptation of existing facilities to new environmental

requirements imposed by law.” Such subsidies

must be one-time measures and are limited to 20

percent of the cost of adaptation. But agriculture is

treated differently: the agreement permits the use

of agricultural environmental subsidies, as long as

those subsidies have no or minimal “trade-distorting” and production effects, are part of an clearly

defined government program, and cover only added cost or lost income (48). Such payments are not

subject to treaty subsidy reduction commitments,

and are not subject to countervailing duties or to

multilateral subsidy dispute challenges during a

nine-year “peace clause.” After that, they can be

challenged if they are thought to have been abused

(e.g., used as disguised production subsidies). Obviously, this provision for agricultural environmental subsidies conflicts with the PPP and previous GATT policy, unless the subsidies are used

to enhance environmental quality levels beyond

those considered social norms, i.e., provide positive environmental services.

U.S. officials estimate that the URA will subject the nation’s environment to a small amount of

direct pressure from agricultural production

growth that, diffused over an extended period,

will lead to environmental losses and gains. They

also believe that the URA will indirectly improve

environmental quality by encouraging specialization and larger farms that are better able to adopt

and employ environmental technologies; through

larger consumer incomes and demands for safe

food and less pollution; and by leading to less

marginal land in production (48). Specific evidence on the nature and magnitude of these effects

is not provided.

The NAFTA provisions are generally considered to be substantially “greener” than those of the

new GATT accord. But whether all of the NAFTA

provisions are entirely workable is not clear. Hufbauer and Schott, for example, observe that complaining NAFTA parties may find it difficult to

prove that another member has intentionally lowered environmental barriers to encourage investment. The efficacy of the NAFTA environmental

provisions and institutions hinge on the strength

of public agency and private interest group commitments to carrying out the skeleton arrangements in the agreements (6). Taken together, however, the new GATT and NAFTA “environmental”

provisions constitute a novel attempt to incorporate some environmental concerns into international trade agendas, although they do not, as

written, deal in any detail with transboundary or

global environmental effects of expanded trade.

❚ Environmental Trade Measures

Clearly, not all trade-related environmental problems will fall under NAFTA and URA provisions.

Tropical forest destruction, greenhouse gas buildup, ozone depletion, and species extinction, for

example, are among the “global commons” issues

that potentially affect or are affected by policies

and practices related to trade. For example, Malaysia’s cutting of tropical forests has affected the

environment beyond its borders, but forest production and trade policy choices understandably

remain a national prerogative (31). As noted previously, methyl bromide, which is used extensively in production and to kill HNIS on imports, damages the ozone layer.

Trade measures such as embargoes, sanctions

and quarantines, offer possible instruments for addressing environmental problems outside trade

pacts. With varying degrees of success, trade measures are used in international environmental

agreements, such as the Montreal Protocol on

Substances that Deplete the Ozone Layer and the
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 143

Convention on International Trade in Endangered

Species of Wild Fauna and Flora. Several hundred

“legal instruments” are in place to deal with international environmental issues (12). These

instruments come in a wide variety of guises, and

have differing degrees of potential efficacy and effects on trade (14). For example, Barrett (8) reasons that the Montreal Protocol will sustain itself

with the help of the threat of credible and substantial trade restrictions because the potential benefits from collective cooperation in ozone reduction outweigh the compliance costs. As of 1992,

only 17 international environmental agreements

employed trade measures (30). Esty had counted

20 by 1994, including a few that directly or indirectly relate to U.S. agriculture, such as the International Plant Protection Agreement (which relates to HNIS) and a code of conduct on pesticide

distribution and use (23). Understandably, many

of these environmental trade measures (ETMs)

pertain to resources such as marine fisheries and

wildlife, which cross borders, or to global environmental phenomena such as air pollution.

Many types of ETMs exist, including domestic

standards, domestic taxes, import/export restrictions, and sanctions. Charnovitz (14) discusses

the wide variation in degrees of unilateralism,

scope of discrimination, degrees of intrusiveness,

and beneficiaries of restrictions, and concludes

that ETMs have existed since the 1800s and are

not just the invention of “green” activists. Also,

based on a review of actual ETMs, clean distinctions between product and process standards, between unilateral versus multilateral actions, and

between trade and environment instruments are

easier in theory than practice.

Combining many dimensions of ETMs, Esty

sorts potential “offensive” uses of trade measures

for the environment into four types of approaches:

 “trade restrictions or sanctions expressly authorized by international agreement and imposed

multilaterally;

 unilaterally imposed trade measures employed

in support of internationally agreed standards

(and thus at least tacitly internationally condoned);

 unilaterally imposed trade measures invoked

without the benefit of any multilateral agreement but aimed at global or transboundary

harms affecting the country imposing the measures;

 unilaterally imposed trade measures invoked

without any multilateral agreement and aimed

at extraterritorial harms with no direct physical

impact on the country imposing the measures

(23).”

Category 1 is the option preferred by the WTO

and the most common type of agreement. This

kind of ETM may have the greatest potential to

remedy global environmental problems that extend over large areas. The second category covers

“multilateral unilateralism” and can be “legitimate” even in the absence of multilateral action.

U.S. trade measures against Norway for violating

the International Whaling Commission’s rules are

an example. Dispute panels have traditionally

ruled against a country acting alone—that is, “unilaterally”—and using trade provisions to achieve

environmental responses outside a country’s borders—that is, “extraterritorially.” However, the

U.S.-EU tuna-dolphin dispute panel did not find

either type of action illegal (48). Although unilateral-extraterritorial measures may be legal under

GATT, their efficacy and efficiency in resolving

transboundary and global environmental problems requires careful review. If the offending

country has access to other markets for its environmentally damaging exports, then unilateral action may be insufficient. Also, the possibilities of

transshipment may negate the direct export sanctions. In such cases, other types of actions—such

as technical or financial assistance, or institutional

reform—may be more effective and have fewer

negative repercussions for international trade.

Understandably, the preference for multilateral

actions and restrictions over national actions

stems from WTO’s focus on permitting traded

goods to move freely, and on avoiding discrimination against foreign products through nontariff

barriers. Not surprisingly, the WTO preferences

may not be in line with environmental reality.

Many of today’s transboundary and global envi-
144 | Agriculture, Trade, and Environment

ronmental problems may not be remedied through

product approaches and multilateral agreements.

Increasing attention is being given to the application of process and production method (PPM)

measures, because environmental damage stems

from those processes, rather than from products.

(See appendix II.) However, because it is difficult

to monitor and judge their legitimacy, PPMs can

potentially be used as disguised nontariff trade

barriers for a number of sectors, including agriculture.

When only one country incurs physical environmental injury, unilateral action may be the

only recourse. The key issues, according to Esty,

are whether a bona fide environmental injury exists, and who applies the standard (23). Such multilateral conflicts highlight GATT’s past inattention to environmental matters and the absence of

an effective international environmental body to

handle such issues. The new WTO Trade and Environment Committee may help clarify some issues. Until an acceptable consensus test for the legitimacy of environmental measures affecting

trade emerges, the offensive use of such measures

will remain controversial and risky. “The response

to international environmental problems remains

uncoordinated, unfocused, insufficient, and susceptible to competitively driven disregard” (24).

As a result, global commons problems—including those affecting and affected by agricultural

production—may be unlikely to improve consistently and significantly overall.

In the end, it appears that existing trade-related

institutions do not, and other proposed institutions may not, have the funding, efficacy, or flexibility to deal effectively with transboundary and/

or global environmental issues (including

agricultural linkages) related to trade. Strikingly,

however, there are numerous institutions and

agreements whose functions may be complementary, and whose overall focuses and objectives

may be similar. In the short run, it may behoove

the parties to these institutions and agreements to

better coordinate their efforts in the interests of efficacy and economy, particularly given the straitened governmental budgets of the 1990s. In the

long run, institutions that address various agendas

and efforts may be needed. Suggestions for both

short-run and long-term solutions are considered

in the last chapter of this report.

APPENDIX I: POTENTIAL

ENVIRONMENTAL EFFECTS OF

COMMODITY PROGRAM REFORM AND

TRADE LIBERALIZATION

This appendix examines the three types of analyses that have been performed on the potential environmental effects of commodity program reform and international trade liberalization. The

first type takes a global perspective; the second

considers the U.S. situation; and a third looks at

the regional effects of liberalization and program

reform within the United States.

Examples of global studies include those by

Anderson and by Lutz. In scenarios for world

trade liberalization in 1990, Anderson (2) found

that world food production changes very little, but

shifts away from the highly protected agricultural

sectors of the industrialized countries to the agricultural sectors of developing countries—especially when developing countries stop taxing their

own farmers. World food prices rise mainly because farmers in countries where subsidies are

reduced stop overproducing. The total long-run

economic gains, which accrue principally to producers and taxpayers, are about $60 billion to

$100 billion. If it is assumed that only developed

countries will implement the reforms, and that developing countries still produce less (because they

continue to tax their farmers), food prices rise

more.

The environmental effects of world trade liberalization have been inferred from the regional nature of changes in agricultural production. Such

estimates do not, however, include any detailed

analysis of natural resource conditions. It is clear,

however, that the global use of agricultural chemicals and intensive livestock feeding decline as

crop and livestock production move to developing

countries, where farmers tend to use fewer chemicals and more land than in developed countries.

Moreover, farmers in developed countries will

likely use fewer chemicals as their subsidies
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? 145

300

200

100

Japan ●

I

-----Finland -------

European Community (12) 

/

Sweden ●

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ----------------

Austria . Switzerland ●

10 20 30 40 50 60 70

Producer subsidy equivalentsa

aThe producer subsidy equivalent IS a measure of the value of monetary

transfers from domestic consumers and taxpayers to producers, expressed as percentage share of the total value of farm production

SOURCE: K Parris and J. Melanie, “Japan’s Agriculture and Environmental Policies. Time to Change, ” Agricultural and Resources Quarterly

5(3):386-399,1993.

decrease. Figure 5-1 displays the general association between fertilizer use and the degree of producer subsidization in OECD countries, a positive

and increasing relationship between application

rates and subsidy level, known as the producer

subsidy equivalent (PSE). A similar relationship

exists for pesticides (figure 5-2). The portrayed

relationships do not account for variations in soils,

climate, or other production factors, but the

associations are striking. In Anderson’s view, reductions in chemical use and the globalization of

livestock production would likely reduce the pressure that agricultural production brings to bear on

Japanb ●

350 I

Finland ●

60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /

I

European Community (12) ●

/

Switzerland

Sweden. ●

Austria .

20 ------------ ---- -“ ----------- “ ----- -- -----------------

Norway

10 ------------- ~< -- ---- ------

● 

10 20 30 40 50 60 70 80

Producer subsidy equivalents

a Expenditures have been converted to U S dollars by the OECD’s Purchasing Power Parities

b

Japan’s pesticide use IS US$378/ha with a PSE value Of 74 percent

CThe producer subsidy equivalent IS a measure of the value of monetary

transfers from domestic consumers and taxpayers to producers, expressed as a percentage share of the total value of farm production

SOURCE: K. Parris and J Melanie, “Japan’s Agriculture and Environmental Policies: Time to Change,’’ Agricultural and Resources Quarterly

5(3):386-399, 1993.

the environment. Some environmental damage

would inevitably occur in developing countries

that produce more, but Anderson argues that their

increased incomes will eventually provide the

means for better environmental control. Fears of

widespread deforestation are not well-founded,

because the evidence indicates that farmlands in

developing countries will not expand much even

if prices go up ( 13). Some reforestation will likely

occur in developed countries when programs for

land set-asides are discontinued.
146 | Agriculture, Trade, and Environment

In a similar study, Lutz also projects positive

environmental outcomes for the industrialized

countries. He is less optimistic about stemming

environmental damage from increased agricultural production in developing countries, however,

and concludes that the net effects of liberalization

and reform on the environment are unclear. Lutz

acknowledges that removing subsidies for fertilizer and other inputs and introducing effective environmental programs in developing countries,

could lead to a positive outcome for the global environment. As explained in the chapter, environmental standards generally rise as a country’s income increases.

The Anderson and Lutz studies of necessity

have little detail on environmental changes because of their aggregate focus. However, their

findings illustrate a fundamental point: agricultural program reform (liberalization) is not likely to

reduce the overall scale of world production a

great deal, but the regional composition of agricultural production, and technology, will shift significantly, from developed to developing economies, thus raising concern about the efficacy of

environmental management in developing countries affecting transboundary and global resources.

Reliable estimates of the environmental impacts engendered by such trade and production

shifts continue to elude current science. As an example, Antle and Crissman (4) illustrate the difficulties of forecasting precise environmental outcomes of trade and production shifts among

Ecuadorian farmers under simple reforms. Therefore, while some analyses of the effects of aggregate shifts suggest that stress on the global environment may be alleviated, they hinge on the

supposition that effective environmental programs are in place.

A second type of study focuses on the overall

effects of U.S. commodity policy reform, without

considering reform efforts by other countries.

Such a scenario is unlikely because the United

States alone would suffer production and trade

losses if other countries continued to subsidize

agriculture, but it offers some insight into possible

national adjustments. One group estimated how

crop production and resource use would change in

the late 1980s, if direct income payments to farmers were substituted for commodity-specific incentives, and if annually diverted land under the

Acreage Reduction Program (ARP) were allowed

to return to production (46). (Land held out under

the Conservation Reserve Program (CRP) would

remain fallow.) In other words, given this scenario, incentives for farmers to produce more crops

fall, and more land becomes available. Conceptually, production could increase or decrease, depending on the balance between the reduced incentives and the availability of more land for

production. Empirically, the authors estimate that

overall U.S. farm output would decline—in essence, that the impact of the reduced incentives

outweighed the attractions of increased land. Total

erosion increased because more land was being

tilled, but chemical use declined. Table 5A-1 presents estimates of changes in environmental stress

from a base case in which commodity programs

continued. Generally, the shifts were small in relation to total figures, varied significantly over regions due to changes in crop mixes and technology, and amounted to substituting more land and

erosion for fewer chemicals. The increases in erosion came from more land being planted. The

chemical decreases came from shifts in the mix of

crops, as well as lower crop prices. The authors

point out that the magnitude of short-run effects

depends on the strength of commodity program

incentives when reform is undertaken. It is worth

noting that if all CRP land were allowed to return

to production, erosion and chemical use would increase.

Tobey and Reinert (75) also analyzed reductions in U.S. price and income supports as measured by PSE decreases, and in ARP set-aside reductions. The CRP was retained, as in the

previous study. Their estimates for combinations

of 20 and 40 percent PSE and ARP reductions

show environmental damages decline from 3 to 11

percent. Lower fertilizer use is judged to outweigh

the effects of increased erosion from reduced ARP

set-asides causing higher offsite sedimentation

damage. In general, the greater the substitutability

between ARP lands and fertilizer, the greater the

environmental improvement. In the longer term,
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? 147

Changes

Corn Cotton Soybeans Wheat 4-Crop total

Erosion (10,000 tons) + 164 -44 -1,284 4,874 3,709

N (1 ,000 tons) -420 -15 -4 10 -429

P2O5 (I ,000 tons) -75 - 3 -19 16 -81

Herbicides (10,000 LB) -1,075 -12 -663 -45 -1,795

Insecticides (10,000 LB) 13 -20 -85 -45 -135

‘Conservation Reserve Program retained

SOURCE: J. Miranowski, J. Hrubovcak, and J Sutton, “The Effects of Commodity Programs on Resource Use, ”

Commodity and Resource Policies in Agricultural Systems, R Just and N. Bockstael (eds.) (New York, NY Springer-Verlag,1 991 ).

which neither the Miranowski, et al., nor the

Tobey and Reinert studies could fully explore,

greater substitution is likely as operators exhaust

all management techniques, and as new technologies emerge to use the less expensive land and

conserve relatively more expensive inputs such as

pesticides and fertilizers. The increased erosion

and runoff clearly indicate that management programs are a key factor in determining the eventual

environmental outcome of any commodity policy

reform.

The third type of analysis examines the consequences of policy reform for specific U.S. regions.

A study performed by the World Resources Institute looked at what might happen if there were a

multilateral move to reform commodity payments

into income supports, and if export subsidies and

import restrictions were simultaneously eliminated by major trading countries (25). Global food

supplies were estimated to decrease and world

food prices to rise. Economic and environmental

effects were estimated for case farms in Pennsylvania and Nebraska, compared to 1985 base levels. A special feature of the analysis was its incorporation of “natural resource accounting”

methods, under which the environmental costs of

farming, such as soil degradation and offsite water

pollution, were charged against crop profits-an

illustration of the polluter-pays principle (PPP)

detailed in the chapter 5 text. Table 5A-2 displays

the estimated effect on net farm income for various crop rotations on the Nebraska farm, without

and with natural resource accounting and a soil depreciation charge. 11 The estimates suggest that if

trade is liberalized and the PPP applies, farmers

would make as much money by growing some

rotations that put less stress on the environment.

Increased profits would stem primarily from a

combination of higher prices and lower production costs.

Another regional study estimated that increases

in target prices and other supports make the adoption of irrigation technology more profitable and

thereby increase groundwater depletion in Nebraska’s northern Ogallala aquifer (35). The combination of price supports and set-asides was estimated to substantially increase depletion within

five years of implementation. Table 5A-3 shows

the estimated effects. A third regional study estimated that a 50-percent reduction in commodity

program price support would decrease irrigated

water use by one-third in the Plains and Pacific

states (33). In essence, the reduced program incentives make it less profitable to grow program

crops that need large amounts of water. The figure

was smaller for the Mountain states, where

11 The rationale for deducting soil depreciation charges through an external environmental policy is unclear. Several studies have shown

that soil depreciation through erosion and other processes are reflected to a considerable degree in expected net returns and cropland prices (45).

If such internal accounting is accurate, external charges are redundant.
148I Agriculture, Trade, and Environment

Baseline NEV

MLDC NEV

Increase

NEV

c c

HFCB

FOCB

ORGCB

HFROT

FOROT

ORGROT

MLDC

cc HFCB FOCB ORGCB HFROT FOROT ORGROT

72 480 483 474 348 344 340

250 561 561 553 458 449 445

(233) b 78 78 70 (25) (34) (38)

(483-250) (561-483) (561 -483) (553-483) (458-483) (449-483) (445-483)

- Net economic value

- Conventional continuous corn

- Conventional corn-beans, w/herbicides and fertilizer

- Corn-beans w/fertilizer but no herbicides

- Organic corn-beans

- Corn- beans-corn-oats/clover w/herbicides and fertilizer

- Corn- beans-corn-oats/clover w/fertilizer but no herbicides

- Organic corn-beans-corn-oats/clover

- Multilateral Decoupling

a

lncreases (or decreases) in Net Economic Value for each rotation are based on the most profitable conventional rotation--the fertilizer-only

corn-beans rotation (FOCB)--under baseline policy The table shows the result of a movement from FOCB under baseline policy to the given

rotation under multilateral decoupling

(MLDC NEV ROTATION - Baseline NEVFOCB = lncrease RoTATloN )

These calculations assume output prices as in table 4 of Faeth et al. (1991 for Multilateral Decoupling)

bFigures in parenthesis are negative.

SOURCE: P. Faeth et al., “Paying the Farm BiII: U.S. Agricultural Policy and the Transition to Sustainable Agriculture” (Washington, DC World

Resources Institute, March 1991), p 15

Effective price of wheat Effective price of corn Average pumping

(dollars per bushel) (dollars per bushel) Irrigated acreage lift (feet)

Scenario 1984 1985 2004 1984 1985 2004 1985 2004 1985 2004

Base 3.8354 37949 3770 0 3.1600 2.8719 2,8527 710,066 701,561 123.59 125.82

1 3,8341 3.7932 37569 3.0737 2,8714 2,8527 711,209 711,208 126,25 125,75

2 3.8366 4.0125 48647 3.2495 3.0950 4,0869 723,757 796,816 126,85 130,27

3 3.5961 3.4882 3.4168 3.0542 2.5992 2.0187 690,377 632,134 125,23 122,28

4 4,1304 4.1022 5,6325 3.2652 3.1449 4.5065 730,475 818,173 127,17 131,20

5 4.0164 39877 4.7115 3.1323 3.0290 3.6735 722,443 757,055 126,79 128,46

6 4,0964 40431 4.0313 3.1600 2.9946 3.6475 712,554 772,019 126,31 129,16

*Scenarios are defined as: 1. A 10% reduction in price supports for wheat and corn (with corresponding changes in price controls for the farmerowned reserve). 2. A 10% increase in price supports for wheat and corn. 3. A 10% reduction in both price supports and target prices for wheat and

corn. 4. A 10% increase in both price supports and target prices for wheat and corn. 5. A 10% reduction in the diversion requirement. 6. Maintain -

ing the high diversion and support of 1983

SOURCE: R. Just, E Lichtenberg, and D Zilberman, “Effects of Feed Grain and Wheat Programs on Irrigation and Groundwater Depletion in Nebraska, ” Commodityand Resource Policies in Agricultural Systems, R E Just and N Bockstael (eds.) (New York, NY Springer-Verlag, 1991 ), pp.

215-232
Chapter 5 Expanding Agricultural Trade and the Environment: Complementary or Conflicting? | 149

profitable alternative crops that also need large

amounts of water can be grown.

APPENDIX II: PROCESSES AND

PRODUCTION METHODS

An increasingly frequent proposal is to impose

trade measures for environmental purposes based

on the nature of production processes (termed

processes and production methods, or PPMs)

(23,93). Process standards may resemble product

standards, but the issues and problems are quite

different. Product standards deal with the effects

of using a product by domestic parties; PPMs are

meant to control negative environmental byproducts of the production process in foreign countries. For product standards, the problem is observable and easily monitored, and the actions can

be legally exercised under WTO rules by the importing country. For PPMs, the production process occurs outside country borders, is not easily

monitored, and cannot be legally used to screen

imports under WTO rules. But the rising emphasis

on PPMs is critical, because environmental problems generally arise from the production process,

not the product.

Sovereignty is an issue central to the notion of

PPMs. Can one country demand that the goods it

imports from another be produced in what it

deems an “environmentally correct” manner?

This question has achieved notoriety in the 1990s

with the tuna-dolphin dispute first between the

United States and Mexico, then between the

United States and the EU (48). The dispute began

when the United States boycotted tuna imports

from Mexico on the grounds that Mexican fishing

practices violated the U.S. Marine Mammal

Protection Act (MMPA), which restricts certain

seafood imports from nations whose fishing practices kill marine mammals such as whales and dolphins. Claiming that such an action violated international trade rules, the Mexican government

registered a complaint with GATT.

An initial GATT dispute panel ruling in 1992

found that the U.S. action indeed violated GATT

disciplines. GATT, the panel maintained, prohibits a member from taking trade measures to enforce its own laws regarding animals or exhaustible natural resources outside its jurisdiction, and

from taking such measures because a foreign

country’s production methods do not satisfy domestic regulations. At the behest of Mexico, the

report ultimately was not presented to or adopted

by the GATT Council, which would have had the

power to impose actual sanctions. The EU

launched a similar case against the United States.

In May 1994, a second GATT dispute panel ruled

that article XX exceptions could be applied to protect resources outside a country’s jurisdiction, but

that the embargo was still illegal under GATT, because the action would not effectively achieve

U.S. conservation objectives (48). The Office of

the U.S. Trade Representative requested a public

review of the second GATT decision.

Current WTO rules do not generally permit the

use of PPMs to address environmental problems,

although the issue was not definitively addressed

by the URA. Article III requires that imported

goods receive treatment no less favorable with respect to internal laws and regulations than the

treatment accorded “like” products of national origin (48). A central issue with respect to PPMs is

whether those laws can differentiate between different goods based on the processes or methods

used in their production, if those processes or

methods are not reflected in the observable and

measurable physical characteristics of the product

itself .

WTO article III rules potentially conflict with

international environmental agreements incorporating trade measures based on PPMs. For example, the Montreal Protocol has established a

schedule for the phase-out of ozone-depleting

substances by restricting trade in the substances—

and restricting trade in products produced with the

substances. Because production processes and not

products cause much environmental damage, the

conflict between WTO’s emphasis on avoiding

trade barriers and efforts to pursue legitimate environmental objectives is genuine.

What constitutes legitimate environmental activities is another unanswered question. Can a

country act unilaterally to restrict the entry of a
150 | Agriculture, Trade, and Environment

product made by using inputs that cause environmental damage to the acting country? For example, could the United States restrict the entry of

certain agricultural commodities produced in

Mexico that use a banned U.S. pesticide which,

eventually, migrates into U.S. territory and threatens endangered species? Under current WTO

rules, the answer appears to be no. When can several countries act multilaterally to diminish transboundary or global environmental problems and

avoid WTO sanctions? These questions capture

the extraterritoriality and unilateral/multilateral

dimensions of trade-environmental conflicts that

are unsettled by WTO or any other organization.

As mentioned in the chapter, problems in identifying goods because of transshipment and the advisability of using instruments other than trade measures require consideration in these cases.

A growing number of potential PPM cases,

some agricultural in content, are necessitating further discussion and review by international bodies. The OECD has issued a note outlining the

conditions under which PPM-based trade measures might be used; their effectiveness, feasibility, and efficiency considerations; and alternatives

to such measures (53). Young has also proposed a

set of disciplines to guide the use of PPMs that

preserve maximum benefits from freer trade while

allowing countries to pursue environmental objectives beyond their borders. As noted above, the

major PPM issues turn on the feasibility of monitoring processes and production methods in foreign countries—and the potential for abusing

them, by using them as nontariff barriers to trade.

Using effective low-cost alternatives (e.g., sharing technical assistance and technology) may help

to avoid the problems that may accompany PPMs.

Consensus positions or principles on PPM use

have not been issued. However, as mentioned

above, several agricultural cases of productrelated PPMs may emerge in the near future, including genetically engineered plants and organic

farm products that require clarification of international rules. This topic will likely be one of the key

issues for the WTO’s new Trade and Environment

Committee.

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International

Comparison of

Agriculture, Trade,

and Environmental

Policies

s expanding trade puts new emphasis on the relationship

between agriculture and the environment, it is prudent to

examine what effects various policy responses to this relationship will have on national or regional economies, and

on U.S. competitiveness in world markets. Are other countries

experiencing agroenvironmental problems similar to those of the

United States, and how do their responses compare with ours? If

the United States regulates agriculture to preserve its environment, will it still be competitive in world agricultural markets?

Do other countries offer more support to their agricultural sectors

than the United States does? Do other countries restrict agricultural trade more, or less?

This chapter begins to put into perspective the relative position

of the United States among its many trading partners with respect

to domestic agricultural support policies and agroenvironmental

policies. The partners considered here are Argentina, Australia,

Brazil, Canada, France, Germany, Japan, Mexico, the Netherlands, New Zealand, Taiwan, and the United Kingdom—a group

that includes most of the United States’ major agricultural markets and sources of agricultural imports. With some exceptions,

these countries share certain economic characteristics: generally,

10 percent or less of their populations are working in the agricultural sector, which accounts for between 2 and 5 percent of total

gross domestic product (GDP). As a percentage of total exports,

their agricultural exports span a broader range, from 0.4 percent

for Japan to 58 percent for Argentina. The United States’ agricultural exports make up 11 percent of its total exports. (See table 6-1

for general population and economic information.)

| 157
Population

(in 1,000s)

Country 1992

Argentina 33,100

Australia 17,611

Brazil 154,163

Canada 27,426

France 57,266

Germany a

80,343

Netherlands 15,179

U.K. 57,963

Japan 124,150

Mexico 92,342

New Zealand 3,417

Taiwan 20,400

U.S. 254,910

Percent of

population

in agricultural

economy

10

5

23

3

5

4

3

2

6

29

9

12

2

Agricultural

Total land Percent of GDP as a

(in 1,000s land in percent of

of Ha) agriculture total GDP

1992 1992 1989

273,669 10 10

764,444 6 5

845,651 7 11

922,097 5 3

55,010 35 5

34,931 34 FR 6

NL 2

3,392 27 5

24,160 27 2

37,652 12 3

190,869 13 8

26,799 2 13

3,601 24 4

916,660 20 3

Agricultural

exports as a

percent of

total exports

1991

58

24

25

8

14

3

5

23

7

0,4’

10

52

NA

11

Agricultural

imports as a

percent of

total imports

1991

4

4

12

6

9

12

11

13

11

NA

12

7

NA

5

a

FR=Federal Republic, NL=New Lander

*1992

NA=Not Applicable

SOURCE : American Institute in Taiwan, Annual Report, Agricultural Situation, AGR Number TW3062, 1993; Food and Agriculture Organization of the United Nations, Country Tables (Rome, Italy:

1993); Food and Agriculture Organization, Production Yearbook, 1992, voI 46 (Rome, Italy: 1993), Food and Agriculture Organization, Yearbook, Trade, vol. 46 (Rome, Italy: 1992); U S Department of Agriculture, Economic Research Service, International Agriculture and Trade Reports: Asia and Pacific Rim Situation and Outlook Series, RS-93-6 (Washington, DC: September 1993)
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 159

Since 1970, agricultural production in OECD1

countries has expanded by about 40 percent, even

though arable and permanent cropland increased

by only 3 percent and the agricultural labor force

decreased by more than 30 percent. Such a jump in

production largely reflects greater use of energy,

fertilizers, pesticides, machinery, irrigation, and

high-yielding crop varieties. Use of energy and

tractors increased by 40 percent in OECD countries over the past three decades; use of nitrogen

fertilizers, by almost 60 percent; and areas of irrigated land, by 20 percent (51). It is crucial to note

that the increase in production would not have

been possible without the support of government

policies that, for the most part, did not take into account the environmental impacts of intensive agricultural practices. Now, however, governments

are faced with increasing conflicts between longstanding agricultural policies and newly established environmental goals.

All of the countries considered in this chapter

intervene in their agricultural sectors to achieve

certain national objectives, such as maintaining a

secure, safe, and adequate food supply; increasing

agricultural productivity; and enhancing living

standards of farm families. In recent years, however, budget constraints, international pressure,

and socio-economic changes have led most countries to cut back on government support for their

agricultural sectors. New Zealand went so far as to

eliminate government support altogether in 1984,

other than for pest and disease control and some

research. Mexico and the European Union (EU)

(until 1994, known as the European Community,

or EC), have advanced efforts to separate, or “decouple,” agricultural support from product prices.

As part of its economic reforms, Argentina has

drastically reduced the implicit tax it levies on its

agricultural sector. Australia and Taiwan are the

only countries among those considered that have

not decreased their overall support to the agricultural sector in recent years, although Australia appears to be moving in that direction.

All countries use some combination of border

measures—tariffs, quotas, export promotions,

health and safety regulations, licensing schemes,

and other devices—to protect domestic agricultural producers and enhance their opportunities to

increase agricultural exports. Taken together,

these measures can restrict overall world trade.

However, through increased participation in regional trade blocs, such as the North American

Free Trade Agreement (NAFTA), and in the

World Trade Organization (WTO) (which was until January 1995 known as the General Agreement

on Tariffs and Trade, or GATT), many countries

are opening their borders to freer trade.

As noted earlier, this move toward freer trade,

which has taken place over the past few decades,

has coincided with (and in some cases has contributed to) growing environmental concerns and a

range of government efforts to address those concerns. By the mid to late 1980s, most governments

had instituted at least some environmental legislation and regulations, and had taken moderate measures to help mitigate problems. The implementation, enforcement, and effectiveness of these

policies and regulations varies widely from

country to country.2 Among the industrialized

countries, there is not a significant discrepancy in

the percentage of GDP that is used for pollution

abatement and control by the public and private

sectors (see also chapter 5). The percentage of

GDP spent by the public and private sectors com1 OECD (Organization for Economic Cooperation and Development) member countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain,

Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

2 When attempting to compare countries’ agroenvironmental policies, it is important to note (1) that a country’s state of environmental

health must be known in order to determine whether action is even warranted, and (2) that the degree of implementation and enforcement is key

to determining the efficacy of policies. This chapter looks only at trends in agroenvironmental policies, and does not systematically address

points (1) or (2).
160 Agriculture, Trade, and Environment

bined for pollution abatement and control ranges

from 1.1 percent in France and Japan3 to 1.6 percent in West Germany and the United States. Expenditures by the public sector alone range from

0.4 percent in the United Kingdom to 1.0 percent

in Japan (table 6-2) (53).

Public and private

Country Public sector sectors

Canada 0.9 NA

u s 0 6 1.6

Japan

b

1,0 11

France 0.5 11

W. Germany 0.8 1.6

Netherlands c

0.9 1,5

United Kingdom 0,4 1 5

aData on the costs of pollution control in the primary agricultural sector

are generally not included in calculations of pollution control and

abatement expenditures because the data in this area are scarce

bPartial Figure Data of current expenditure for the business sector are

not available

cFigures for 1989.

NOTE: Table 6-2 shows pollution and abatement control expenditures

of both the public and private sectors for air and water pollution. These

figures can give an idea of the economic costs a country chooses to

face in mitigating pollution However, as a comparison these numbers

cannot tell the reader anything about the current state of a country’s

environment, about the environmental state a country desires to

achieve, or the amount of pollution control each country obtains per

unit of currency For example, country A and country B could be

spending the same percent of GDP on pollution abatement and control, but country A’s environment might be twice as polluted as country

B’s

SOURCE: OECD, Environment Monographs, No 75, Pollution Abatement and Control Expenditures in OECD Countries (Pans, France

1993).

Although the nature and extent of the problems

may vary, most countries are contending with

similar agroenvironmental ills. Until recently,

however, the agricultural sectors of most countries were largely excluded from environmental

policies and regulations. Often, initial policies addressing agroenvironmental issues focused on

soil erosion, because it directly affects agricultural

productivity. As agroenvironmental priorities

have broadened, however, many countries have

begun to include provisions for enhancing water

quality, as well as protecting habitats, wetlands,

and other countryside amenities in their agricultural policies. Canada, Japan, and the United

States have each eliminated their wetlands by

more than 70 percent in some regions, but have

now introduced policies geared to protecting remaining wetlands that are deemed significant, or

to preventing a net loss of wetlands.

Most countries are grappling with the environmental effects of agricultural production by discouraging harmful practices or encouraging beneficial ones. It must be kept in mind, however, that

agricultural assistance is still predominantly

linked to production rather than to general environmental goals. To a large extent, existing agricultural policies either effectively raise farmers’

prices for output or decrease prices for inputs—

both of which encourage farmers to adopt intensive farming practices that may be harmful to the

environment. Agroenvironmental policies may

then be introduced to counteract these effects.

However, the artificially high prices for agricultural goods make it difficult for other land uses,

such as wildlife habitat, to compete with agricultural uses.

This dilemma is being addressed now by governments the world over. Faced with shrinking

budgets, they are finding it more and more difficult to rationalize maintaining such conflicting

policies—and they are increasingly unwilling to

pay not only the’ financial, but also the environmental, costs of supporting their agricultural sectors as they did in the past. Partly as a result,

agroenvironmental policies are moving away

from strictly voluntary efforts to cross-compliance schemes and mandatory measures. These

policies may cause production costs to rise, but if

all, or most, countries are implementing similar

policies and all face increased costs, the ultimate

effects on competitiveness may be minimal. U.S.

farmers may face less severe tradeoffs between

productivity and environmental protection than

some of their European counterparts, because they

3 This is a partial figure, as data on business sector current expenditure in Japan are not available.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 161

use inputs less intensely and their arable land area

is more extensive (62).

In the context of this chapter, it is not OTA’s

intention to determine which countries have

cleaner environments, which countries have more

stringent regulations protecting the environment,

which countries have been more successful in

implementing agroenvironmental laws, which

countries have the freest trade policies, or which

countries offer the most support to their agricultural sectors. Instead, the chapter focuses on the

trends mentioned previously: movements toward

less government support of the agricultural sector,

more open borders, and more stringent, or at least

explicit, agroenvironmental policies. The first

section of the chapter briefly examines the agriculture and agricultural trade policies of each

country. It demonstrates the many similarities

among countries in their agricultural sector goals,

in the problems they face, and in the evolution of

events over the past few decades. The second section focuses on some of the environmental concerns increasingly being incorporated into agricultural policies and regulations. Examples again

show remarkable similarities among countries in

the kinds of agroenvironmental problems they

face, and in their responses to those problems.

TRENDS IN AGRICULTURAL SUPPORT

AND TRADE POLICIES

As noted above, all governments intervene in their

agricultural sectors to achieve certain national objectives related to food supply and farm income.

To achieve these objectives, governments employ

combinations of price supports, subsidies, and

market boards, as well as trade measures such as

tariffs, quotas, export promotions, and licensing

schemes. Health and safety regulations, although

designed to protect consumers and the environment, can also be used to restrict trade. To varying

degrees, these policies affect how domestic goods

are produced, have negative effects on world market prices, and restrict international trade flows.

Such economically undesirable results, along

with tighter budget constraints, have led governments to offer less support to their agricultural

sectors than they previously did. Further fueling

the move toward less support is the increasing importance of international trade agreements, which

have put pressure on countries not only to reduce

their trade barriers, but to cut back on domestic

subsidies. Even though the Uruguay Round of the

GATT put the agricultural sector squarely on the

negotiating table, it is not clear to what extent government policies will actually change. However,

most countries have already taken measures to

reduce government support of their agricultural

sectors.

In this regard, New Zealand is a unique example: it essentially eliminated government support

for agriculture in 1984, and its government transfers to farmers are now the lowest in the industrialized world (69). Mexico has also taken significant

steps to reduce government support by introducing, in 1993, an agricultural reform program

called PROCAMPO, which decouples farm income support from production decisions and

moves its agricultural sector significantly toward

a market-directed system. The EU, too, has made

efforts to decouple agricultural support from

yield, although not to the extent of New Zealand

and Mexico.

The extent of government transfer payments to

agricultural sectors is commonly measured by using producer subsidy equivalents (PSEs). The

Economic Research Service (ERS) of the U.S.

Department of Agriculture (USDA) began calculating PSEs in 1986, for use in the Uruguay Round

of the GATT negotiations. PSEs are intended to

provide an overall measure of government policies that support agriculture, and so offer a means

of comparing programs from country to country

and over time. What they show, in effect, is the

amount of compensation that would be required to

maintain farmers’ incomes in certain agricultural

sectors, if government polices affecting agriculture (both agricultural and trade policies) did not
162 | Agriculture, Trade, and Environment

exist. This report uses an aggregate PSE for all

agricultural sectors, which demonstrates the extent of subsidies or implicit taxes relative to farmers’ gross revenues (73).4

An analysis of the percentage change in PSEs

between 1985 and 1992 clearly demonstrates a

trend toward less intervention by governments in

the agricultural sector, including the elimination

of many government-supported marketing boards

(table 6-3). New Zealand’s and Mexico’s PSEs

changed the most, decreasing by 91 and 73 percent, respectively.5 The PSEs for the United

States, the EU, and Canada decreased by 35, 33,

and 9 percent, respectively. The increased PSE for

the United States during 1991 and 1992 reflects,

in part, an increase in direct payments as export

subsidies for rice. Japan’s PSE decreased by only

10 percent, and the PSEs for Australia and Taiwan

increased. The change in PSEs for Argentina, dramatic at 66 percent, is unique because it does not

reflect declining government subsidies for agriculture. Instead, Argentina has reduced the implicit tax on the agricultural sector in a move toward a more market-driven agricultural economy.

The PSE for Brazil has varied widely, making it

difficult to ascertain a clear trend. The policies and

economic forces behind these trends are discussed

in more detail in the country sections below.

❚ New Zealand

In 1984, New Zealand initiated major reforms in

the structure of its economy, including agriculture

(the leading economic sector) and the highly protected manufacturing sector. An increase in the

public debt, from 10 percent of GDP in the early

1970s to more than 50 percent of GDP in the early

1980s, was the impetus for the reforms. Part of the

reason for the debt was New Zealand’s loss of

favored-nation trading status with the United

Kingdom when the UK entered the Common Market. The United Kingdom had accounted for twothirds of New Zealand’s export market. But high

oil prices, unfavorable conditions in the world

commodity markets, and the protectionist policies

of New Zealand’s main trading partners also made

the country’s support for its agricultural and

manufacturing sectors unsustainable.

Before the mid-1950s, New Zealand’s agricultural sector had needed little government support.

During the late 1950s and 1960s, however, commodity prices fell, and the government severely

restricted imports, in order to stimulate expansion

in its manufacturing sector. By the mid-1960s, the

government had also introduced policies to maintain or increase agricultural production whenever

farm incomes declined. From the mid-1970s, and

particularly from 1980 to 1984, government intervention in the agricultural sector became extensive (57), even though its support could not offset

excess costs indirectly imposed on agriculture

from government protection of the manufacturing

sector. Government protection of the manufacturing sector artificially increased farm input and labor costs. Such support also proved extremely expensive. By 1983, government assistance for the

livestock sector, the country’s primary agricultural sector, was more than 33 percent of the sector’s

total value (35). Support also stunted diversification efforts because it favored some products,

such as sheepmeat, over others (57). More than

half of government support to agriculture between

1980 and 1984 consisted of price supports and direct payments to boost output.

4 USDA/ERS notes four caveats pertaining to PSEs. First, variations exist in how policies are included in determining each commodity PSE

and which commodities are included in determining the aggregate PSE. Variations here could significantly change the nature of the data. Second, some developing countries do not include the effects of exchange rate policies, which can be an important component in the PSE measure.

Third, the reliability of the data varies from country to country. Fourth, a country can lower the percentage PSE without changing total transfers

to producers merely by shifting transfers from indirect programs to price support programs or direct payments (73). This report uses the numbers to determine trends of government support within a country rather than among countries.

5 Percent changes in PSEs, except for New Zealand and Argentina, are calculated by using the 1986, 1987, and 1988 average as a base year.

This base was chosen because it was used during the GATT negotiations. For New Zealand and Argentina, 1985 was used as the base year to

show the changes that resulted from their reform efforts prior to 1986.
Percent change

using 1986–1988

Country Item 1985 1986 1987 1988 1989 1990 1991 1992 average as base yeara

Argentina 4-commodity -31.5b -24.4 3.0 -17 5 -46,6 -65.6 -28.3 -10,8 +66

C

Australia 9-commodity 9.4 10.9 7.5 6.7 6.4 9.9 NA NA +18

Brazil 6-commodity 26,9 30.8 -8.1 NA NA NA NA NA NA

Canada 13-commodity 36.0 41,5 41,0 33.5 34,4 36.7 39,1 36.0 -9

European Union 13-commodity 3 5 7 4 7 7 51.4 38.1 30.1 NA NA NA -33

Japan 10-commodity 70,0 76.9 78,7 77.4 71,0 70.8 NA NA - l o

Mexico 14-commodity 26.1 34.0 36.5 20.9 14,9 17,1 12,3 8.0 -73

New Zealand 5-commodity 22.0 9.0 5.0 3.0 2.0 NA NA NA -91d

Taiwan 11 -commodity 24.6 24.7 24,7 25,9 29,2 28.6 28.3 31.6 +26

e

U.S. 12-commodity 23.4 34.2 31.5 23.5 18,5 18.0 18.8 19.3 -35

a

The end year used to calculate percent changes varies among countries and IS the latest year for which there are data.

bA negative number represents an implicit tax on the agricultural sector.

c

The change in PSE for Argentina between 1985 and 1992 indicates that the implicit tax on agriculture has decreased by 66 percent

dUsing only 1985 as the base Year

eThe aggregate PSE for Taiwan increased even though there were no major policy changes that occurred during this period The increase IS due in part to high guaranteed purchase prices for

all the crops included in the 11-commodity aggregate.

NA = Not Available.

SOURCE: U.S. Department of Agriculture, Economic Research Service, Estimates of Producer and Consumer Subsidy Equivalents, Statistical Bulletin 913 (Washington, DC December

1994).

0
164 | Agriculture, Trade, and Environment

The principal goals of deregulation and liberalization were to lower inflation and interest rates

throughout the economy and to secure more favorable exchange rates. The agricultural sector initially supported these changes, and reform was essentially completed by 1988. Supplementary

minimum price schemes were eliminated, along

with low-cost funds provided to producer boards.

The PSE for New Zealand decreased from 32 percent in 1982 to 2 percent in 1989. Most of the current support is in the form of research and training,

pest and disease control, and natural disaster assistance. Although the effective rate of assistance

to both agriculture and manufacturing has declined, assistance to agriculture has decreased

more rapidly, resulting in an implicit 6-percent tax

on agriculture. In 1991, the government introduced additional measures to reduce this implicit

tax (35,57).

These reforms have had a powerful impact on

New Zealand’s agricultural sector. The severity of

initial conditions, rapid implementation of the reform policies, imbalances in structural reforms

among sectors, uncertain economics of world

agricultural markets, and severe droughts in 1988

and 1989 have all contributed to a long and difficult adjustment period. However, the advantages

of the reform measures are now evident. Overall,

since policy reform, public debt has risen less rapidly than GDP, and fiscal surpluses are expected

for 1994-1995 and subsequent years. The doubledigit inflation rates of the 1970s and 1980s have

dwindled to about 1 percent since 1990. Generally, reform has contributed to a more diversified

and resilient agricultural sector. Specifically, reform has affected land use and values, the nature

and quantity of input use, employment, investment, and trade.

Although data on farm size and land use are incomplete and do not allow for detailed analysis on

land use changes, some trends can be discerned.

On the whole, the number of large and small farms

has increased (42,44). The percentage of farms

whose debt exceeds 50 percent increased from 10

to 24 percent between 1984 and 1986, but by

1992, the percentage of these highly indebted

farms decreased to 9 percent, as they either restructured their debt or were sold. At the other end

of the scale, the percentage of farms with low debt

increased from 14 to 21 percent between 1986 and

1992. These farms managed to increase their savings continuously throughout these years, with

the exceptions of 1986 and 1989. The total area

farmed decreased from 21.2 to 17.3 million hectares between 1984 and 1993. Conversely, though,

the number of farms increased during the same period, from 76,633 to 79,666, and permanent fulltime employees increased from 22,787 to 23,310

between 1984 and 1991 (35). Between 1982 and

1988, real farmland values fell by more than 50

percent, demonstrating the extent to which government support for agriculture was capitalized

into the value of farmland. But by 1993, real land

prices had risen to about 88 percent of their 1982

levels.6

Subsidies in place before reform heavily favored sheep production. Now, in the absence of

subsidies, sheep production has declined, and beef

and dairy production have increased (67). The

number of sheep, for example, decreased from 70

million in 1982 to 52 million in 1992.7 Without

government subsidies, many sheep farms operating in marginal environments, such as high-country pastures, were no longer viable. Many of these

areas were planted with private forests (35). The

amount of land in forestry increased 39 percent

between 1983 and 1993, while sheep, beef, and

cropping land has decreased 10 percent (5). With

the elimination of accelerated write-offs for machinery and development costs, as well as the

elimination of import restrictions on cereal crops,

arable farming has also declined. The fruit and

vegetable sector, in contrast, has increased in area

and value.

6 Information supplied by the New Zealand Ministry of Agriculture and Fisheries, Agriculture Policy, External Relations, 1994.

7 Information supplied by the New Zealand Ministry of Agriculture and Fisheries, Agriculture Policy, External Relations, 1994.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 165

New Zealand’s natural disaster assistance

policy has also undergone extensive changes, to

make it more consistent with overall economic

objectives. The goal is to ensure that adverseevents assistance policy does not impede agricultural restructuring. Under a risk-sharing policy,

for example, one area of New Zealand received assistance for drought every year from 1978 to 1986.

The government has been working to tighten the

criteria for eligibility. In 1986, specific meteorological criteria, such as soil moisture deficits,

were developed to determine whether an event

would be classified as “adverse” (43).

Agriculture contributed about 20 percent to

New Zealand’s GDP in the 1950s, but only 13 percent between 1990 and 1992. Overall, total agricultural exports have increased in real terms by 1

percent (183 percent in nominal terms) between

1984 and 1992. Exports of pastoral farm products

(e.g., products from sheep) decreased, but exports

of meat, dairy products, and fruit and vegetables

increased. Although agricultural exports still

dominate, they fell as a percentage of total exports

from an average of 67 percent between 1979 and

1981 to 54 percent in 1991 (19). 

❚ Mexico

Mexico joined GATT in 1987, and since then has

privatized much of its economy, including activities related to agriculture. Mexico’s most recent

and comprehensive agricultural reform policy,

PROCAMPO (Programa de Apoyos Directos al

Campo), was first announced in 1993. It is designed to move the country’s agricultural sector

closer to a market-driven system and to work in

concert with NAFTA to liberalize trade. Average

tariffs on imports have since dropped from 45 to

9 percent.

PROCAMPO replaces price supports, which

were often well above international levels, with

direct income supports. Input subsidies, except

for electricity, have been abolished, and import licenses, tariffs, and state trading companies no

longer offer the agricultural sector any significant

protection (4). PROCAMPO should help diminish incentives for overproducing the commodities

included in the program: corn, beans, wheat, rice,

cotton, soybeans, safflower, barley, and sorghum.

These are the crops planted by 85 percent of Mexico’s agricultural producers. The program was initiated from 1993 to 1994, and should be fully implemented by 1995. For the first 10 years of the

program, producers will receive fixed payments

(in real terms), which will be phased out over the

following five years. The Mexican government

estimates that the program will initially increase

its outlays in 1995, but reduce them in subsequent

years (71). As part of its NAFTA commitment to

liberalize trade with the United States, the government of Mexico has begun to upgrade its health

and safety regulations, although the regulatory authorities have few resources with which to pursue

their tasks (4).

The recent reform of Mexico’s land tenure system has contributed significantly to the drastic

changes taking place in Mexico’s agricultural sector, because it allows increased participation by

the private sector. Until 1991, article 27 of the

Mexican Constitution of 1917 required the government to give land to any group of farmers who

claimed property rights in accordance with the applicable legislation, even if it meant expropriating

unused and underused land from private owners.

Individuals could not own the land, but they could

form communal groups called ejidos, and work

the land collectively. Between 1917 and 1987,

approximately 100 million hectares had been expropriated and more than 50 percent of Mexican

farmland was operated under the ejido system.

However, in an attempt to prevent the reappearance of large land holdings, ejidos could not sell,

rent, or use the land for collateral before 1991.

Mexico’s agricultural trade balance dropped

from a surplus of 2.3 percent of GDP in 1960 to a

0.3 percent deficit by 1980. Despite its very favorable conditions for agriculture, Mexico has become a net importer of food (including maize and

wheat). Partly in response, a 1991 amendment to

the country’s constitution paved the way for corporate investment, joint ventures, and private

ownership of ejidos, to encourage modernization.

These changes are intended to provide more secu-
166 | Agriculture, Trade, and Environment

rity to agricultural land investors, protect against

expropriation, allow ejidos to rent their land, and

create a foundation for greater capitalization of the

agricultural sector. New investors seem particularly interested in the prospect of growing fruit

and vegetables. Although the new legislation does

not change the allowable size of individual land

holdings (100 hectares of irrigated land for row

crops per individual, 300 hectares for orchards, or

enough land for 500 head of cattle), it allows the

creation of associations or corporations that can

own up to 25 times the amount that individuals

can own (2,500 hectares of irrigated land for row

crops, 7,500 hectares for orchards) (10).

These reforms are creating significant adjustment problems. In the long term, as many as 90

percent of Mexico’s 2.4 million maize producers

could be dislocated, and overall, a total of 3.5 million small and medium-size farms (10,85). Dislocation in the short term could be limited not only

because investors might find it difficult to acquire

fragmented land, but also because they might

move cautiously at first, waiting to see how the

new law plays out in the courts. There has also

been a sharp decline in the agricultural share of

GDP as the nation’s economy has expanded: agriculture as a percentage of total GDP was 8 percent

in 1989, but dropped to 5.8 percent by 1993

(4,19). In addition, input prices have risen as commodity prices have fallen, affecting the use of fertilizers, pesticides, and improved seeds. According to the American Embassy in Mexico City,

farm organizations have orchestrated large demonstrations to demand some transitional help,

such as the restructuring of outstanding loans (4).

Estimates of farm loans in default range as high as

$4 billion. The government decided that its bank,

which holds approximately 33 percent of delinquent loans, would stop seizing assets in response

to loan defaults (61).

USDA estimates that the policies of PROCAMPO will lead to lower producer and consumer prices for all crops in the program. Lower producer prices should lead to fewer acres planted

with corn—an estimated 700,000 hectares in the

first three years. At present, Mexico’s primary

crop is corn, which accounts for more than half of

Mexico’s cropland and more than 40 percent of

the country’s total crop value. About 34 percent of

corn output is consumed on the farm, which

means that many farmers have not benefited from

price supports. Consequently, their farming decisions will not be affected as much as commercial

farmers, who have benefited from the price

support system. Subsistence farmers will, however, benefit from direct income support payments, because the payments are based on the

amount of land historically planted in eligible

commodities (71).

In addition to NAFTA, Mexico has entered into

free trade agreements with Chile (1991), with the

Latin American Association for Integration

(ALADI), and with the Central American Common Market (MCC). Trade with Chile grew by 50

percent between January and June 1992, and by 30

and 32 percent with ALADI and MCC, respectively, during the same period. Mexico is also pursuing negotiations with Colombia and Venezuela,

as well as with the Asian-Pacific Economic Cooperation group.

❚ European Union

Like the United States, the EU has been struggling

in recent years to change agricultural policies and

practices that, while arguably relevant decades

ago, do not reflect the realities of the 1990s. In the

1950s, when the Common Agricultural Policy

(CAP) was instituted, European agriculture

employed a full 26 percent of the total workforce

(compared with 12 percent in the United States in

1955), and was a highly relevant part of the European economy. Nonetheless, the living standards

of European agricultural workers lagged behind

those of urban workers, just as European farming

practices and technology lagged behind those of

other parts of the world (9). Consequently, the

original objectives of the CAP were to increase

agricultural output through capitalization and

technology, to improve the living standards of

agricultural producers, stabilize agricultural markets by protecting the sector from international

price fluctuations, ensure an abundant supply
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 167

of food, and establish reasonable prices for consumers.

After three decades, the objectives of the CAP

have largely been met—but the environment in

which the European agricultural sector operates

has become qualitatively different. The EU has

changed from a net agricultural importer to the

world’s second-largest exporter. Income gains

have been realized, but have not been equally distributed: the top 25 percent of farmers, who make

80 percent of all agricultural sales, have gained the

most. Overall, in real terms, farm income unambiguously slipped between 1970 and 1992 (84). As

in the United States, operators of small and

medium-size farms began to rely more and more

on income generated off the farm. European agriculture’s contribution to the region’s GNP has decreased, and the agricultural labor force has

shrunk even as production and productivity have

increased. “While in the first years of the EU’s existence there was a general consensus to pursue

policies aimed at increasing production and economic returns, the last decade has witnessed the

growth of a more socially oriented political agenda. The latter is a part of the emerging support

for environmental, food, and natural resource

issues” (9).

These new concerns are largely unrelated to

production issues of the past. Although commodity organizations resisted any reform in the CAP,

they came under increasing pressure from other

politically organized groups, both within and outside agriculture, to support changes. The greatest

impetus for change, however, was the financial

burden imposed by current policies under the

CAP, which, all told, absorb 70 percent of the EU

budget. Generally, reform proponents wished to

reduce agricultural supply, diversify production to

target changing consumer demands, target assistance to low-income farmers, decouple assistance

from the amount and type of commodity produced, and bring agricultural policies more in line

with environmental policies.

In 1992, the EU adopted CAP reforms designed

to steer the agricultural sectors of members away

from price supports and toward land area payments over a period of four years. The reforms apply to all products incorporated in the common

market organization, with the exception of sugar,

wine, fruit, vegetables, pig meat, poultry meat,

and eggs. The three main reforms include lower

price supports, land area payments that are decoupled from production levels, and arable land

set-aside schemes that offer farmers compensation payments. In the case of land area payments, a

switch from a per-unit to a per-hectare payment effectively ensures that payment is not based on

yield (36). Under this new regime, cereal crop intervention prices were lowered by about 33 percent. To compensate for the lower price, farmers

who produce more than 92 tons of grain are required, and paid, to set aside 15 percent of their arable area for five years. The land set-asides apply

to the total cultivated area, rather than to each crop

area, and the area payment rises in line with price

support reductions. For milk, milk products, and

beef, reform measures decreased intervention

prices by 2.5 to 15 percent (45).

In 1993, the EU Commission moved to make

the set-aside program more flexible by offering

three-year rotational set-asides, under which 18

percent of arable land would be taken out of production; and a combination of rotational and nonrotational set-asides, under which a minimum of

20 percent of arable land would be taken out of

production. One proposal suggests that farmers be

allowed to set aside more than the minimum required amount of arable land (although such a

scheme might pose budgetary problems). According to the Food and Agriculture Organization

(FAO), less than 1 percent of the then-EC’s arable

land was covered under the set-aside program in

its first year of operation (15). In 1993, set-asides

in the 12 EU member states were estimated to be

13.1 percent. The figure for the United Kingdom

was 15.6 percent; for France, 13.3 percent; for

Germany, 15 percent; and for the Netherlands, 5.3

percent (3).
168 Agriculture, Trade, and Environment

❚ Canada

Like most of the countries covered here, Canada

saw its PSE decline in recent years. This phenomenon is, however, less a reflection of explicit

policy than of changing levels of support for

individual commodities. Support has remained

relatively low for livestock, moderate for poultry,

and high for dairy products. Support for grains

and oilseeds, on the other hand, has varied. It

increased markedly after the mid- 1980s, when international price competition grew fiercer (73).

Generally, Canada’s agricultural tariffs are low,

averaging 2 percent or less in 1991 for grains,

fresh meat, and dairy products. Almost 95 percent

of Canada’s agricultural tariff lines are bound,

which means that it cannot increase any of them

without first going through official GATT procedures and addressing comments from other countries. Canada also maintains quantitative border

restrictions for dairy, eggs, and poultry, as well as

restrictions on domestic production. The country’s dairy sector is oriented toward local markets

and meeting domestic demands; its wheat sector,

conversely, is geared toward exports. Canada is

one of the world’s toughest competitors in international grain markets. The goal of its wheat support

programs is to moderate the effects of fluctuations

in world markets on domestic prices and incomes.

But transportation subsidies and price supports

have not fully offset the losses in income stemming from a continuing drop in world cereal prices

(21,22). Total financial assistance to agriculture

amounted to 57 percent of Canada’s agricultural

GDP from 1988 to 1989. As with the EU, public

assistance has not prevented Canadian farm incomes from declining. They have been decreasing

since 1988.

❚ United States

In 1991, the United States exported $37.6 billion

worth of agricultural goods. The agricultural trade

surplus represented 0.3 percent of GDP in 1992,

compared with 0.9 percent in 1980. The top three

agricultural export markets for the United States

are Japan, Canada, and Mexico, which accounted

for 21.12, and 8 percent, respectively, of U.S. exCountry Billions on dollars

Japan

Canada

Mexico

S. Korea

Former U.S.S.R.

Taiwan

Netherlands

Germany

U.K.

Spain

Total

7.74

4,41

2,88

2,16

1,76

1.74

1.56

1,13

0.88

0.86

37.60

SOURCE: U.S. Department of Agriculture, Foreign Agricultural Service, Foreign Agriculture (Washington, DC December 1992)

ports in 1991 (74). (See table 6-4.) The principal

U.S. export crops include feed grains, soybeans.

live animals and meat, wheat, cotton, vegetables,

and fruits. The United States controls 77 percent

of the world export market for corn and 73 percent

for sorghum. (See table 6-5.) The most competitive grain market it faces is the world wheat market. The United States controls 31 percent of that

market; Canada and the EU control 22 percent

each. Because the United States’ share of world

production or world trade of grain, meat, oilseeds,

and sugar is so large, U.S. farm policies have a major impact on world export markets for these and

competing products.

The United States continues to use high tariffs

to protect sugar and tobaccos, and it employs import quotas to protect dairy products, cotton, peanuts, sugar, and beef and veal. Wheat, coarse

grains, rice, oilseeds, cotton, tobacco, and dairy

are still heavily subsidized and therefore have significant competitive advantages in the world market. Nevertheless, the PSEs for both wheat and

barley decreased by more than 40 percent between

1987 and 1992. The PSEs for dairy, beef, and sugar also fell, between 12 and 21 percent; the rice

PSE, in contrast, increased 8 percent. Income support payments decreased by 55 percent during the

same period, and input assistance transfers

dropped by 59 percent (73). The decline in input
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies 169

Production

Country/commodity Percent of world

production

Corn

u s 42

China 20

Brazil 5

EU 5

Mexico 3

Argentina 2

Sorghum

U.S. 33

India 27

China 8

Mexico 5

Argentina 3

Australia 2

Wheat

U S. S. R.* 18

China 17

EU 14

U.S. 13

India 8

Canada 6

Australia 3

Rice

China 36

India 22

Indonesia 9

Thailand 3

Japan 3

Oilseeds

U.S. 28

China 15

Brazil 8

Argentina 8

EU 5

Canada 3

Cotton

China 24

U.S. 18

U. S. S. R.’ 14

Brazil 4

Beef and Veal

Us. 22

U. S. S. R.* 18

EU 17

Brazil 7

Argentina 5

Export

Country Percent of world

exports

Import

Country Percent of world

imports

us.

China

Argentina

Canada

EU

U.S.

Argentina

Australia

U.S.

Canada

EU

Australia

Argentina

Thailand

U.S.

EU

Australia

U.S.

Argentina

EU

Canada

Brazil

U.S.

U. S. S. R.*

Australia

EU

Australia

Us.

New Zealand

Argentina

Brazil

77

12

6

0.3

0.2

73

17

3

31

22

22

13

5

32

18

8

4

47

15

10

8

6

34

9

6

24

22

12

9

8

6

Japan

U. S. S. R.*

Taiwan

EU

Mexico

Japan

Mexico

Taiwan

Other

U. S. S. R.*

China

Japan

Brazil

Others

Brazil

EU

Japan

Mexico

Others

Japan

Us .

Japan

EU

U. S. S. R.*

Canada

Brazil

28

18

9

6

3

45

38

1

42

16

10

6

3

66

7

37

19

6

41

12

31

15

13

8

6

5

(continued)
170 Agriculture, Trade, and Environment

Production Export Import

Country/commodity Percent of world Country Percent of world Country Percent of world

production exports imports

Dairy Products**

EU 42 EU 45 U. S. S. R.* 20

U.S. 19 New Zealand 20 Japan 19

U. S. S. R.* 11 Australia 11 EU 13

New Zealand 3 U.S. 6 Us. 10

Australia 2 U. S. S. R.* 1 Australia 2

*Former U.S.S.R

**Dairy products Include butter, cheese, and nonfat dehydrated milk

SOURCE: U.S. Department of Agriculture, Foreign Agriculture Service, Foreign Agriculture (Washington, DC December 1992) and Dairy: World

Markets and Trade, FD-1-95 (Washington, DC: April 1995)

assistance transfers is accounted for mainly by decreases in credit subsidies for operating and real

estate loans, and for commodity loans through the

Commodity Credit Corp.

Agricultural export promotion programs received 75 percent of the total spent in fiscal year

1991 on promoting all U.S. exports. Approximately 21 percent of U.S. agricultural export revenues are supported by government subsidies. (See

chapter 3.) These programs include the Marketing

Promotion Program, the Public Law 480 food aid

program, the GSM-102 and 103 export credit programs, the Export Enhancement Program (EEP),

and the Dairy Export Incentive Program. Under

EEP, 74 percent of U.S. exports of barley, and

close to 60 percent of wheat and frozen poultry exports, were subsidized in 1993. Since 1991, the

United States has spent more on EEP and has targeted three new countries under the EEP wheat

program. It has also applied an antidumping duty

on New Zealand kiwi fruit of 100 percent, which

has made it impossible for the fruit to be imported,

and has tightened quotas on meat imports. Federal

outlays for domestic milk support fell to $125

million in 1993, down from $2 billion in 1987.

Subsidies still exist, however, and are often 75

percent higher than the subsidized item’s export

price (24).

The Agricultural Adjustment Act of 1933 continues to restrict the imports of dairy products,

peanuts, cotton, and sugar. Imports of sugar above

the tariff quota were subject to a tariff of roughly

76 percent, which was reduced 13 percent in 1992.

Under the provisions of the GATT Uruguay

Round, the United States will replace the current

tariff-rate quota for sugar with a tariff equivalent

of 17 cents per pound, which will be reduced 15

percent (the minimum required) by the year 2000.

Tobacco imports face a high tariff of 46 percent,

and U.S. manufacturers are required to use 75 percent domestically grown tobacco in their products.

❚ Japan

Japan is the largest net agricultural importer in the

world. The United States supplies 36 percent of

Japan’s agricultural imports, including 87 percent

of its corn imports, 73 percent of soybean imports,

53 percent of wheat imports, 42 percent of fresh

fruit imports, and 55 percent of beef and veal imports. Japan is the world’s largest foreign market

for U.S. farm products, accounting for 20 percent

of all U.S. agricultural exports. Despite its large

agricultural purchases, however, Japan is under

pressure from its international trading partners to

open its markets to a wider variety of agricultural

imports, especially high-value, processed products.

Japan’s agricultural policies of the past halfcentury were greatly influenced by the country’s

experience of food shortages during and after

World War II. In 1943, Japan enacted the Staple

Food Control Act, which put domestic distribution of major food items, including rice and rice

trade, wheat, and barley, under state control. Food

shortages continued until the late 1950s, when Ja-
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 171

pan’s agricultural sector began to recover. Japan

attained self-sufficiency in rice by the late 1960s,

and by the 1970s it began yielding surpluses.

To achieve its agricultural policy objectives,

Japan uses a combination of border measures such

as quotas and tariffs, direct price supports to producers, and subsidies on agricultural inputs. Rice,

wheat, and barley farmers receive most of the agricultural assistance provided by the government.

Until recently, rice accounted for 50 percent of Japan’s agricultural policy costs. Japan maintains

supply controls on milk and rice, and quasigovernmental bodies, such as the Livestock Industry Promotion Corp., operate price support regimes for certain dairy products and sugar, as well

as price stabilization schemes for beef and pork.

The government also offers deficiency payments

for feeder calves, soybeans used for food, and

milk for processing.

Agricultural policies were modified to adjust to

Japan’s rapid economic growth between the 1950s

and 1970s. During this period, much of the agricultural labor force shifted to the manufacturing

sector, and agriculture as a percentage of GDP decreased from 9 to 3 percent (66). Between 1961

and 1992, the labor force in agriculture decreased

from 26 to 12 percent. To shield the agricultural

sector from the effects of displacement, the Japanese government enacted the Agricultural Basic

Law in 1961. The law aimed to reduce the disparity between urban and rural living standards, to

raise productivity by increasing farm sizes, and to

tailor production to the changing demands of Japanese consumers.

In the early 1980s, Japan began a further, gradual reform of its agricultural policies in response

to growing rice surpluses. The Rice Paddy Agriculture Establishment Program, through production quotas and financial incentives for planting

alternative crops to rice, has succeeded in diverting about one-third of all paddy land to other

crops, such as soybeans and wheat—crops that

were being imported in large numbers—and vegetables. It has also succeeded in reducing rice

production by one-fifth. Until 1984, the government also subsidized the sale of rice in the world

market and sold it cheaply for use in industrial

processes and for feed. Support prices for rice

were reduced in 1987, 1988, and 1990, and government control of rice marketing has loosened to

the extent that private firms may purchase directly

from farmers instead of through the Government

Food Agency (23).

Although the economic importance of rice in

Japan has been declining, it is still high, accounting for 47 percent of the gross value of agricultural

production in 1960, and 29 percent in 1989. Seventy-five percent of Japanese farm households

produce rice and 56 percent market rice. A significant decline in rice self-sufficiency—that is, a

move toward importing more rice—would have

far-reaching consequences (87). More than 50

percent of Japan’s farmers are over 60 years old,

and they could have a particularly difficult time

adjusting to a more liberal rice market. On the other hand, only one-fifth of farm households are financially dependent on farming. For the remaining four-fifths, farming accounts for only 15 to 20

percent of household earnings.

The average household income of full-time

farmers lags behind that of part-time farmers and

urban households. A recent policy proposal by the

Ministry of Agriculture, Forestry, and Fisheries,

dubbed New Directions, targets government support to full-time farmers (70).8 New Directions

also advocates maintaining border measures, to

ensure that Japan maintains its self-sufficiency in

producing various foodstuffs. The fundamental

structure of the staple food control system and the

production quota system for rice remain essentially unchanged in the New Directions proposal.

8 Recent legislation includes the Act for the Improvement of the Basis of Farm Management (1993). This legislation supports the policy

proposals of the Basic Direction of New Policies for Food, Agriculture, and Rural Areas (1992) of the Ministry of Agriculture, Forestry, and

Fisheries.
172 | Agriculture, Trade, and Environment

Most of Japan’s high tariff rates are imposed on

agricultural and food products, rather than on

manufactured products. However, in the GATT

Uruguay Round, Japan agreed to convert its import barriers on agricultural products (except for

rice) to tariffs, and to reduce its bound tariffs by an

average of 36 percent over a six-year period beginning in 1995. There is to be a minimum reduction

on each tariff line of 15 percent (79). Japan also

agreed to allow rice imports equivalent to 4 percent of domestic consumption in 1995 and equivalent to 8 percent of consumption in 2000.

One group of Japanese economists at the University of Tokyo’s Agriculture Department found

that open trade in rice would cut Japanese consumers’ demand for domestic rice by two-thirds

(87). In this case, Japan’s self-sufficiency rate

would fall to 33 percent. Over the next decade, the

government would like its rice sector to increase

paddy productivity and become more internationally competitive. Japanese farmers currently cannot compete because key rivals such as Thailand

and the United States have larger (100 to 200

times larger) and more efficient farms, and/or significantly lower wage rates. Until Japanese farmers can become more competitive, the government

will continue to protect them.

Japan’s PSE fell 10 percent between 1985 and

1990,9 reflecting a decline in government support

for all commodities. Lower producer prices accounted for most of the reduction. Border measures remain the government’s strongest form of

support.

❚ Argentina

Until recently, Argentina was the only country of

those considered in this chapter to rely on its agricultural sector for resources to support industrial

development. But in 1991, Argentina introduced

policies to deregulate, decentralize, and privatize

its economy, in an effort to reduce these transfers.

Export taxes— including export taxes on all agricultural products except unprocessed oilseeds—

were eliminated and exchange rate regimes reformed (20). Such policy changes decreased the

implicit tax on the agricultural sector by 66 percent between 1985 and 1992 (73). Along with other trade liberalization measures, they should also

help reduce the costs of agricultural production in

Argentina and increase demand for its products

abroad. Argentina’s agricultural sector consequently has a great opportunity for expansion,

mainly through productivity gains but also

through increased acreage. Investment, especially

in infrastructure, is extremely important for future

growth.

Agriculture and agri-based products have often

constituted 70 to 80 percent of Argentina’s total

export earnings. Oilseeds, fats, and oils are the

country’s most valuable export commodities. Because two-thirds of the world’s annual trade in

wheat is exported with subsidies, credit guarantees, or as aid, Argentina has had difficulty competing in the world wheat market in past years. Its

share in the world wheat market has declined by

50 percent since the 1950s.

❚ Australia

Australia is one of only two countries examined

here whose PSEs rose since 1985. (See table 6-3.)

Australia’s higher PSE does not, however, reflect

new policies advocating increased government

support for agriculture. In fact, the overall level of

support for agriculture in Australia has remained

relatively low and essentially stable since 1982.

The PSE jump stems in part from a large payment

made to the country’s wheat producers in 1986,

which was triggered by a drop in world wheat

prices below Australia’s guaranteed minimum

price (GMP). It was the first GMP payment since

1973. In 1989, a new Wheat Marketing Agreement deregulated the domestic wheat market, and

the country’s embargo on sugar was replaced with

a tariff-rate quota (73).

Although Australia’s PSE has not changed significantly, some major policy changes toward less

9 Using an average from the years 1985 to 1987 as a base.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 173

government intervention are taking place. Estimates indicate that the PSE decreased by 4 percent

and 6 percent in 1991 and 1992, respectively (51).

❚ Taiwan

Once based on agriculture, Taiwan’s economy has

come to be firmly rooted in industry. In the early

1970s, agriculture accounted for 30 percent of

Taiwan’s GDP; by 1991, it represented only 4

percent. Taiwan is currently a net importer of

agricultural goods: primarily bulk commodities,

such as feed grains, and intermediate agricultural

products.

Between 1953 and 1968, Taiwan’s agriculture

sector was heavily taxed to supply the bulk of the

resources necessary to fuel a new industrial sector.

In addition, to ensure that it would have the

amount of rice it deemed necessary for economic

stability, the government controlled rice production, marketing, and trade. Subsequently, however, the government shifted from taxing agriculture to subsidizing it. Restrictive border measures

initially intended to protect scarce foreign exchange now served to protect the domestic agricultural sector (34). Then and now, trade barriers

in the form of very high tariffs, an import-licensing system, and import bans hinder imports of

most agricultural products, including rice, wheat,

sugar, tobacco, milk, and beef.

In the 1950s, agriculture represented about 90

percent of the value of all exports from Taiwan,

but from 1960 to 1964, its share dropped to 62 percent. From 1985 to 1989, the figure was 7 percent.

Farm crops account for 44 percent of the value of

agricultural production; fisheries, 28 percent; and

livestock, 27 percent (60). Rice production accounts for 40 percent of the country’s crop acreage

and approximately 80 percent of all government

expenditures on crops (33). Although the total

area planted in rice has been decreasing since

1965, productivity per hectare has increased over

the years, due in part to increased chemical inputs,

improvements in rice varieties, and improved irrigation practices (33). Prices for rice, corn, sorghum, soybeans, and sugarcane are artificially

supported through programs designed to ensure

supply and increase farm income. Domestic prices

for these products are much higher than world

market prices.

Although Taiwan’s agricultural sector benefits

from price supports, high tariffs, and import bans,

production levels for most crops, except vegetables, are declining (74). The government abandoned unlimited purchase of rice in 1976 because

it lacked sufficient storage space and funds. Further, to reduce production to a level that would

meet domestic demand only, the government

introduced control measures in 1984 that included

riceland diversion, rotation, and set-aside programs. In contrast, hog and pork production has

been increasing, although the environmental

problems presented by porcine waste, as well as

economic pressures, may adversely affect the sector in coming years.

Taiwan applied to join GATT in 1990. Two

years later, the GATT ruling council voted to grant

Taiwan observer status and to accept its membership application for review. As a result, Taiwan is

trying to make its agricultural and trade policies

consistent with the GATT requirements (74). The

country’s government is currently considering

two reform measures: direct income supports for

farmers, with the gradual elimination of supports

for production; and incorporation of the hitherto

unpaid costs of production—such as environmental degradation—into the cost of agriculture. Taiwan has asserted its commitment to reducing tariffs by up to 20 percent on 483 items in 1994 (79).

However, since the government abandoned martial law in 1987, farmers have become an outspoken political force, and they strongly support agricultural subsidies. Politically, it will be difficult

for Taiwan to eliminate or reduce these subsidies

enough to conform with GATT requirements.

The increase in Taiwan’s percentage PSE is not

due to any explicit change in government policy. It

can be attributed in part to the appreciation of Taiwan’s currency since 1985, changes in world prices,

and changes in domestic prices. Taiwan offers

high guaranteed purchase prices for all of the commodities used in calculating its PSE, and, as noted

above, maintains restrictive border measures.
174 | Agriculture, Trade, and Environment

Taiwan’s Council of Agriculture, through its

1991-1997 Agricultural Adjustment Plan (AAP),

intends to ensure domestic food security, make

the highly protected agricultural sector more market-oriented, achieve zero agricultural growth

through 1996, move toward a more environmentally sound agricultural policy, and increase rural

incomes from 70 to 80 percent of urban incomes.

The plan has successfully reduced production of

subsidized agricultural products such as rice and

sugar, but it does not dismantle the system of artificial support for agriculture. AAP has increased

public awareness of what changes the nation must

expect as it pursues GATT membership (6).

❚ Brazil

In 1990, Brazil initiated major reforms in its economic and agricultural policies making them

more open to world markets. It lifted almost all

nontariff barriers to trade and export controls, reduced tariffs, revamped its monetary system, and

initiated a privatization program. Specific reforms

of note have included the Brazilian government’s

moves to decrease the country’s average tariffs

from 32 to 14 percent over the period 1990 to

1993; lift restrictions on soybean imports and exports, as well as on grain imports; and relinquish

its 25-year control of wheat marketing.

Brazil generally supports domestic market

crops (rice, wheat, corn) more than export market

crops (soybeans, beef, poultry). As a result, some

Brazilian producers have a difficult time competing internationally. Poultry, for example, which

receives a 6.2 percent subsidy in the United States,

is subjected to a 7.6 percent tax in Brazil.

ENVIRONMENTAL PROVISIONS IN

AGRICULTURAL POLICY

Environmental awareness in most countries increased during the 1960s and 1970s. Although the

approaches to environmental problems and the

philosophical underpinnings of government action

varied, most governments had at least some environmental legislation and regulations in place by

the mid to late 1980s. The implementation, enforcement, and effectiveness of these policies and regulations has differed from country to country.10

Most countries have been slow to incorporate

the agricultural sector into their environmental

policies, programs, and regulations. Except in the

case of product and safety standards, producers

have faced few restrictions in choosing inputs and

technology, and have felt relatively free to alter

their landscapes to increase production. In the

United States, for example, return flows from irrigation are not covered under the Clean Water

Act, and pesticide programs have focused on

chemical production rather than chemical use by

farmers (88). However, many countries now recognize that they have achieved, or are currently

achieving, the objectives of agricultural policies

at the expense of the environment. (See chapter 4

for a discussion of how agricultural practices affect the environment.) Countries now recognize

than many agricultural practices and established

agricultural policies are in conflict with their more

recently developed environmental objectives. As

they contend with environmental problems stemming from agricultural practices, governments are

generally pursuing more restrictive agroenvironmental agendas. This trend reflects changing environmental values, greater scientific understanding

of the links between agricultural practices and environmental quality (15), and earlier efforts to

tackle point source pollution that were not fully

successful in achieving the desired environmental

quality. Among the items on the new agendas are

programs to align economic signals with environmental goals, such as policies that attempt to decouple financial support from agricultural product

prices and reduce incentives to use agrichemicals.

Regulations and programs that restrict fertilizer

10 As noted earlier, it is important to be cautious when attempting to compare the agroenvironmental policies of different countries. The

country’s state of environmental health must be known in order to determine whether action is even warranted, and the degree of implementation and enforcement should be addressed as a means of determining the efficacy of policies. This chapter examines trends in agroenvironmental policies only. It does not systematically address the aforementioned issues.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 175

and pesticide use to protect water quality, wetlands,

and wildlife habitats, as well as preserve the countryside for recreational uses, are also on the rise.

In Canada, the Sustainable Agricultural Initiative of the 1990 Green Plan addresses the need for

the agriculture industry to operate in a more “environmentally rational” way. The Canadian Green

Plan allows the federal minister of agriculture, the

provinces, and the private sector to enter into initiatives that include measures to halt soil degradation, develop shelterbelts,11 provide stable supplies of clean water, make agriculture and wildlife

more compatible, manage pollution, protect and

use genetic resources, limit greenhouse gas emissions, and improve energy efficiency on farms

(25). The country’s Farm Income Protection Act

requires periodic assessments of the environmental impacts of all programs implemented under the

act (22). Environmental impact assessments have

become an important feature of Canadian agricultural policy. The act also permits insurance to be

withheld, restricted, or enhanced for the purpose

of protecting the environment.

Financial assistance programs, integrated pest

management programs, and research on “biorational” products and soil conservation are all contributing to Canada’s desired transition to sustainable development. Nonetheless, institutional

barriers still present a primary obstacle to the transition (39). The Canadian Wheat Board’s system

of quota allocations, for instance, is tied to “improved” land—a stipulation that encourages farmers to bring marginal land, which is often particularly susceptible to degradation, into production.

In addition, payments made through the Western

Grain Stabilization Act are tied to past output,

which again encourages farmers to focus on high

output regardless of how sustainable their practices are (81).

The EU has taken several steps over the past

decade to formally address environmental problems resulting from agricultural practices. It is integrating environmental concerns into the formulation of agricultural policy, modifying

existing agricultural policies to reduce their negative environmental impacts, and employing economic incentives for farmers to use environmentally benign land management practices. The EU

began incorporating measures into the CAP to restrict production and promote environmental

quality in the early 1980s, and the 1992 CAP reforms have continued this effort by incorporating

a package of environmental measures associated

with agricultural practices. The measures are all

voluntary and offer farmers annual payments for

implementing certain land management practices

(32). The measures include:

 creating new environmentally sensitive areas

(ESAs). These are designated areas in which

farmers may voluntarily abide by certain management practices in return for compensation.

 allowing the public to use ESAs.

 creating new nitrogen sensitive areas (NSAs).

These are areas where nitrate concentration in

groundwater exceeds 50 mg/l.12

Other practices, such as preserving salt marsh

habitats and moorland vegetation, and using organic farming methods, are also eligible for financial assistance. The funds for these measures represent about 5 percent of total CAP expenditure.

The United States is also broadening its

agroenvironmental agenda to include, in addition

to soil conservation, water quality improvement

and protection of wildlife habitat. (See chapter 4.)

Most agroenvironmental problems fit into the

following three categories identified by an FAO

11 A shelterbelt is a row or rows of trees or shrubs that help protect crops from storms and protect soil from wind erosion.

12 The EU and the United States use different methods for measuring nitrate levels. The EU measures the level of nitrate concentration by

measuring the whole NO3 molecule; the United States measures the level of nitrate concentration by measuring just the nitrogen (N) component

of the molecule. The U.S. drinking standard of 10 mg/l is roughly equivalent to the European standard of 50 mg/l (50 mg/l of nitrate measured by

the EU method is equivalent to 11 mg/l of nitrate measured by the U.S. method.) (41)
176 Agriculture, Trade, and Environment

Country Mammals

Percent

threatened

Canada 193 6.2

U.S. 466 10,5

Japan 188 7.4

Australia 349 12.3

New Zealand 78 2.6

France 115 50.4

Germany 94 39.4

Netherlands 66 28.8

U.K. 44 NA

Birds

Species Percent

known threatened

514 3.3

1,090 7,2

668 8.1

760 3.4

282 15.2

353 37.4

237 28.3

170 22.4

520 28.3

Fish

Species Percent

known threatened

1,066 4.4

2,640 2.4

207 10.6

3,592 0.4

1,061 0.8

75 22,7

70 70

34 79,4

341 2.6

a

The classification of “threatened” refers to the number of species considered endangered or vulnerable. The definitions

are applied with varying degrees of rigor in Member countries, although international organizations such as the International Union of Concerned Scientists and the OECD are promoting standardization

b

The number of species known does not necessarily reflect the number of species in existence.

SOURCE: Organization for Economic Cooperation and Development, Environmental Data Compendium1993

(Paris, France 1993).

conference on the socioeconomic aspects of environmental policies in European agriculture (15):

■

●

■

pollution and contamination of soil, water, air,

and food, resulting from increased use of

agrichemicals and excess amounts of livestock

effluents;

deterioration of the quality of natural resources,

including soil, water, forests, and traditional rural landscapes;

reduction in wildlife species and habitats, and

loss of biological and genetic diversity.

The extent and severity of these problems varies not only among but also within countries, as

the environment ability to absorb waste and contaminants is not uniform. Agricultural practices

detrimental to the environment in one area maybe

environmentally benign in another.

The next sections look at agroenvironmental

policies, programs, and trends in several countries. The sections specifically address habitat destruction, as well as water contamination from nitrate fertilizers and livestock, as examples of

common agroenvironmental problems. Both the

problems and policy responses are outlined.

❚ Protecting Wildlife Habitat from

Intensive Farming

The relative numbers of threatened or endangered

species diverge dramatically among the countries

examined in this chapter. While mammals represent a fraction of those species, they provide a

point of comparison. Canada has the lowest percentage of threatened or endangered mammals

(6.2 percent) and France the highest (50.4 percent)

(52). In the United States, 10.5 percent of known

mammal species are considered threatened or endangered. (See table 6-6 for other countries and

species.) In 1994, the number of threatened and

endangered species in the United States exceeded

900. Very few studies have measured the loss of

habitat due to fragmentation or the edge effect

created as a result of agricultural practices. 13

13 Although some habitats may not be completely converted to farm use (or urban or industrial use), they can be fragmented so greatly that

they no longer suit the life-cycle needs of some species. Fragmentation also creates more edge environments (where distinct habitats meet).

Although edge environments are normally rich in diversity, the species found in them differ from those found in interior habitats.
Chapte 6 International Comparison of Agriculture, Trade, and Environmental Policies

As discussed in chapter 4, any modification to

land or water resources changes their capacity to

sustain plants and animals. Destruction or even

modification of habitat by agricultural practices

can lead to a reduction in species abundance and/

or species diversity. Globally, of species extinctions since 1600, fully 36 percent of those that resulted from known causes are attributed to habitat

destruction or modification (86). About one-third

of the federally listed threatened or endangered

species in the United States are associated with

agriculture. (See Chapter 4.) In West Germany,

581 plant species are listed as “declining”: 173 because of farmland drainage, 89 because of herbicides, and 56 because of excess nutrients from fertilizers (38).

Converting wetlands to agricultural use is a primary example of disturbing wildlife habitats and

damaging natural resources. Until recently, no

country had specific policies to protect wetlands.

In fact, several had incentives encouraging their

“destruction” or their “improvement” to productive uses. With greater scientific understanding of

the complexity of wetland ecosystems came an increased appreciation for their functions and, subsequently, greater pressure to protect them. (Aside

from acting as habitats for fish, waterfowl, invertebrates, and other wildlife, wetlands absorb urban runoff and flood waters, filter pollutants, improve water quality, and offer recreational

opportunities. The value of these wetland functions is often hard to quantify.) However, several

governments’ agricultural policies, existing simultaneously with wetland protection policies,

indirectly encourage the conversion of wetlands

to other uses. For example, price supports and program benefits based on cultivated acreage encourage farmers to cultivate on marginal lands as well

as wetlands. As a result, before any concerted efforts to protect them were made in any country, a

large percentage of the world’s wetland areas had

been converted to other uses or had been significantly degraded.

Wetlands constitute about 6 percent of global

land area. During this century, wetland losses

have been very high and wetland quality—in

This aerial Landsat image shows how agricultural expansion

can severely effect native habitats. In this area of southern

Mexico (left), most of the tropical forest has been cleared t o

make way for cropland. By contrast, neighboring Guatemala

(right), has retained much of its forests.

terms of species diversity and certain functions—

has diminished. Many authorities classify wetland ecosystems as among the world’s most

threatened environmental resources (50). The loss

of wetlands, as discussed above, can be attributed

to the conversion of wetlands to agricultural, industrial, commercial, and residential uses. Degradation of wetland quality can be attributed to air

and water pollution, as well as water supply diminution. Between 1980 and 1990, Canada lost an

estimated 23 percent of its wetlands; France, 8.5

percent; and West Germany, 22 percent. Although

similar information was not available for the

United States, New Zealand, or the Netherlands

for this time period (52), federal data show that
178 | Agriculture, Trade, and Environment

about half of the original wetlands in the conterminous U.S. have been lost, with 80 percent going

to agricultural conversions. Indeed, a comprehensive picture of the state of the world’s wetlands

does not exist, because very few wetlands are assessed or monitored. In the United States (excluding Alaska), for example, only 4 percent of the nation’s wetlands have been assessed, and no state is

currently operating a comprehensive wetlandmonitoring program (77).

Concern about the agricultural impacts on the

environment was voiced early in the United Kingdom, with the construction of industrial farm

buildings in the 1950s. The dramatic decline of

some bird species, which was linked to synthetic

pesticides; the loss of different habitat types such

as wetlands, hedgerows, and moorlands; and the

destruction of nature conservation sites increased

public awareness of agriculture’s impact on the

environment. In 1984, the Nature Conservancy

Council published a survey of habitat loss and

concluded that since the mid-1950s the nation had

lost 95 percent of its lowland herb-rich grasslands,

50 percent of its ancient woodlands, more than 60

percent of its lowland raised bogs, and 33 percent

of all its upland grasslands, heaths, and mires (84).

In the United Kingdom, wetland loss due solely to

agricultural land use and practices was estimated

at 150,000 acres per year during the 1970s and early 1980s. A strong, well-organized rural conservation movement developed in Britain, and the

whole system of agricultural support, rather than

the activities of individual farmers, came under attack as the root cause of undesirable environmental changes.

Since 1949, England has had a provision to designate Sites of Scientific Special Interest (SSSIs).

Yet, even though it became evident that changing

agricultural and forestry practices were damaging

these areas, the SSSI program had no authority to

protect them from intensive agricultural activity.

In 1981, the government passed the Wildlife and

Countryside Act to offer further protection. This

act specifically authorized regulation of farming

practices such as plowing, draining, and pesticide

and fertilizer application to protect these designated areas. Even with this new authority, though,

the SSSI program failed to protect valued habitats—in part because it was complex, and because

it was administered by the Department of the Environment (DOE) rather than the Ministry of

Agriculture, Fisheries, and Food (MAFF). The

two agencies did not work together. “A commonly

noted shortcoming of countryside management

and the conservation regulation of farming practices was that they typically involved the conservation agencies swimming against the tide of

agricultural support” (84). Thus, while MAFF

was offering financial inducements to farmers to

increase productivity and output, DOE was offering incentives for farmers not to increase farming

intensity (84). One study of the United Kingdom

found that in the early 1980s, some 80 percent of

the payments to farmers to refrain from intensive

production were essentially subsidies to forgo

other subsidies to produce more intensively (15).

Although MAFF was slow to collaborate with

other environment agencies or the environmental

community on concerns about the impact of farming on the environment, the farming lobby actively engaged in discussions with the environmental

community. However, the farm lobby insisted on

maintaining agricultural autonomy and stressed

the need for informal and voluntary policies to address environmental issues related to agriculture

(84).

SSSIs were the precursors to ESAs. In 1984,

the United Kingdom proposed modifying the

CAP to create ESAs. Within ESAs, farmers would

be encouraged to farm using traditional and/or environmentally benign methods. About the same

time, MAFF worked to replace grant programs

that had been criticized for promoting environmental degradation with a grant program that encouraged planting hedges, repairing traditional

walls, planting broad-leaved shelterbelts, and hiring consultants to provide landscaping advice. In

1986, the Agriculture Act required agriculture

ministers to balance “the conservation and promotion of the enjoyment of the countryside, the support of a stable and efficient agricultural industry,

and the economic and social interests of rural

areas” (84).
Chapter 6 international Comparison of Agriculture, Trade, and Environmental Policies 1179

Many species that are dependent on wide expanses of native

forest or grassland habitats cannot thrive in fragmented,

farmland habitats. Population trends in many bird species

offer clues about the effects of agricultural practices on native

wildlife.

The EU Council of Ministers passed the New

Structures Directive as Article 19 of Council Regulation 797/85 on Improving the Efficiency of

Agricultural Structures. This article allows member states to introduce special national schemes

that encourage farming practices favorable to the

environment in ESAS. In England in 1985, ESAS

became the first “specifically environmental measure to be supported directly from the agricultural

budget.” In 1987, it was agreed that such schemes

could receive up to 25 percent support from the

EU budget (84).

In 1987, the first ESAS were established, followed by additional designations in 1988, 1993,

and 1994. Farmers in areas designated as ESAS

may enter into a voluntary agreement to adopt a

certain set of agricultural practices in return for

1 4The success of the ESA program, compared with the SSS prograrn, has been addributed to several factors: theESAscheme is administered

by agricutural officials rather than conservation officials, participation is voluntary, it is less complicated to participate in the program, and it is

less restrictive (84).

15 Protecting aquatic habitat could require more intensive action such ss undoing the structu ral changes to hydrologic systems that were

often put in place to accommodate agricultural needs. (See chapter 5, box 5-l.)

annual compensation. There are usually different

options from which the farmer may choose, each

associated with a different payment scheme. Management stipulations usually include some combination of restrictions on fertilizer use; prohibitions on the use of pesticides and herbicides;

restrictions on livestock densities; restrictions on

the installation of drainage schemes or fencing;

and requirements to maintain walls, barns, and

hedges. Farmer participation has been enthusiastic. By the end of 1987, fully 100,000 hectares of

land in England were entered into the program,

representing 87 percent of the land targeted for

ESA designation. All of the 1988 ESA designations were renewed at the end of five years. In

1993, the United Kingdom had 1.7 million hectares in the program; the proposed area for 1994 is

2.2 million hectares.14 However, farmers who

choose not to participate in the ESA program may

still receive subsidies for environmentally damaging practices, reflecting the persistence of conflicting policies (84). Germany, the Netherlands,

and France also have ESA schemes.

In the United States, the Conservation Reserve

Program (CRP), introduced in the 1985 Farm Bill,

was specifically designed to achieve conservation

goals by encouraging farmers to withdraw highly

erodible or environmentally sensitive lands from

crop production for a period of 10 years, in return

for annual payments. By 1989, a total of 8 percent

of U.S. cropland was enrolled in the program. As a

result of the 1990 amendments to the Farm Bill,

new rules for CRP operation placed greater emphasis on water quality improvement and public

wellhead protection as criteria for accepting land

into the program (67). 15 Thirteen percent of the

land contracted into the program in March and

July of 1991 came from conservation priority area

watersheds such as the Chesapeake Bay and Great
180 Agriculture, Trade, and Environment

Lakes regions. The 1990 act mandated that a minimum of 16.2 million hectares be enrolled in the

CRP, up from the 14 million hectares of 1985(14).

Although the CRP was not conceived, nor is it

managed, as a program to protect wildlife, it has

resulted in improved habitat for wildlife. Generally, the negative effects of modern agriculture on

countryside amenities and wildlife habitat are of

greater concern in the EU than in the United States

and receive a great deal of attention from policymakers in some EU countries (2).

In addition to the CRP, the 1990 act created the

Wetlands Reserve Program (WRP), which provides payment and cost-sharing assistance to

farmers who agree to return previously farmed or

converted wetlands to healthy wetland condition.

The WRP is designed to incorporate up to 405,000

hectares of wetlands and protect them by easement for 30 years. The Swampbuster program

concentrates on protecting existing wetlands by

making farmers who convert wetlands without a

permit ineligible for USDA program benefits. The

Swampbuster program and a similar program for

soil erosion, Sodbuster, were the first steps taken

in the United States to move from completely voluntary programs to programs that, although still

voluntary, had financial repercussions if not followed.

In the United States, agriculture is no longer the

primary cause of wetland losses (figure 6- 1). Yet,

of the wetlands lost over the past two centuries, 80

percent has been attributed to the conversion of inland wetlands to agricultural uses. Agricultural

conversions of wetlands have slowed since the

mid-1980s. However, an estimated 2.11 million

hectares of wetlands are still considered prime

land for agricultural production.

Between 1950 and 1975, the United States lost

wetlands at an estimated rate of 400,000 to

500,000 acres per year. The rate decreased to

250,000 acres per year after 1975. In the

mid-1980s, wetlands of the conterminous states

<— to “other lands”

<--- to urban uses

<–- to agriculture

Wetlands conversion

between the 1780s

and 1980s averaged

585,000 acres/year.

0 -

1954-76 1976-83 1982-87 1987-91

SOURCE: Thomas E Dahl, Wetland Losses in the United States 1780's

to 1980’s (Washington DC U S Department of Interior, Fish and Wildlife

Service, 1990)

covered approximately 103 million acres (of nearly 2 billion acres) ( 13). The U.S. Fish and Wildlife

Service estimates that 50 percent of the wetlands

that existed during colonial times in the lower 48

states are now gone. Roughly 5 percent of the lower 48 states is currently covered by wetlands, and

about 45 percent of Alaska is comprised of wetlands.

Roughly 75 percent of remaining U.S. wetlands are located on private land. Increasing loss

of these wetlands led the U.S. government to embrace a policy goal of no net loss (NNL) of wetlands in 1989.

U.S. wetlands are not protected by any single

federal law or regulation. Several programs at all

levels of government play a limited role in protecting wetlands. To influence the behavior of

landowners, federal programs have used a combination of direct payments, removal of various
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 181

federal subsidies, and a mitigation banking system.16 State and local programs have concentrated

on zoning and land use controls.

Canada contains one-quarter of the world’s

wetlands. As in the United States, roughly 70 percent of all Canadian wetlands are located on private land, and most of the remaining wetlands on

federal land are located in the northern territories.

Since 1800, an estimated 20 million hectares—14

percent of Canada’s total wetland base—have

been drained or lost to other functions. Millions

more hectares have been seriously degraded or are

at imminent risk. The loss is felt in every region:

65 percent of the Atlantic coastal salt marshes are

gone, more than 50 percent of the potholes in the

central prairies have been lost, and 70 percent of

the Pacific estuary marshes are gone or degraded

(26). In Canada, as in the United States, there is no

single federal law protecting wetlands. The federal policy on wetland conservation commits all

federal departments to a goal of NNL of wetland

functions on federal lands and waters, and in areas

affected by the implementation of federal programs. In areas where wetland loss has been severe, no further loss of remaining wetlands is allowed. 

Six challenges are listed for the NNL policy, including defining NNL, encouraging dialogue

among all relevant stakeholders, and spreading

the costs of achieving NNL among those who

benefit:

. . .[T]he goal does not imply that individual wetlands will in every instance be untouchable or

that the no net loss standard should be applied on

an individual permit basis—only that the nation’s overall wetlands base reach equilibrium

between losses and gains in the short run and increase in the long term. (37)

In the province of Ontario, wetlands are generally depleted in the southern portions of the province. No provincial legislation specifically addresses wetlands or expressly requires their

protection. However, the policy generally advocates no loss of wetland function or wetland area

of provincially significant wetlands in the Great

Lakes-St. Lawrence region, and no loss of wetland function of provincially significant wetlands

in the Boreal region. It also encourages the conservation of other wetlands throughout Ontario.

Some wetlands are protected under the Fisheries

Act, the Canada Wildlife Act, and provincial legislation creating parks and wildlife areas. The

Conservation Land Tax Reduction Program and

the Conservation Lands Act offer tax rebates to

owners of wetlands meeting certain criteria if they

leave their wetlands in their natural state (29).

The North American Waterfowl Management

Plan (NAWMP), a joint venture between the

United States and Canada, was formally initiated

in 1986, with the goal of restoring North American waterfowl numbers to their mid-1970s level.

One objective of NAWMP is to encourage agricultural producers to set aside land for waterfowl

habitat (to maintain potholes and native uplands).

However, NAWMP has primarily been concerned

with the effects of management on waterfowl populations. “The effects of agricultural prices, government programs, et cetera, on private land-use

decisions that affect the availability of wetlands

have largely been ignored” (80).

A 1988 study using surveys of farmers in

southeastern Saskatchewan indicated that government support programs contribute to wetland

depletion in western Canada. The model looked at

four price scenarios for wheat. A price of $2.50/bu

represents no government support; $3.50/bu represents intermediate support; $4.50/bushel represents the baseline; and $5.50/bushel represents a

high level of support. The percentages of wetlands

converted under each scenario are 57 percent, 72

percent, 81 percent, and 86 percent, respectively

(80). In addition, payments to farmers to maintain

16 A wetlands mitigation banking program was developed to compensate for unavoidable wetland loss due to development activities such

as road construction. The program allows for development as long as plans include off-site creation of wetlands, wetland restoration, or wetland

enhancement of other sites. The program is administered primarily under the Clean Water Act and includes the participation of federal agencies,

nonprofit organizations, and private entities (64).
182 Agriculture, Trade, and Environment

waterfowl habitat are higher than they would have

to be in the absence of grain-support payments.

❚ Fertilizer Consumption and

Environmental Impacts

In addition to soil conservation, one of the first

agriculture-related environmental issues to receive broad attention was the nitrate pollution of

groundwater and surface water. The primary

sources of nitrate pollution include nitrogen fertilizers and animal manure from intensive animal

husbandry (72). In humans, high levels of nitrate

have caused respiratory failure in infants and may

be linked to stomach cancer. Nitrate leaching into

ground and surface waters is a principal causes of

eutrophication. 17 The effects of these inputs on

the environment depend on management practices, soil composition, topography, and climate.

In some circumstances, nitrate could leach into

groundwater rapidly, and in other circumstances

leaching could take decades (12,72,75). Although

the United States and the EU have set the consumption level of nitrate for humans at 50 mg/l,

surface water quality can be adversely affected by

nitrogen at levels as low as 14 mg/l (31,40).

Research has clearly shown agriculture to be

the greatest source of nitrate contamination in

ground and surface waters, with concentrations

increasing three-fold (in forested or prairie areas)

to 60-fold (in agricultural areas) (31). Except for

the Netherlands, fertilizer consumption per hectare increased in all of the countries examined in

this chapter between 1979 and 1991, even though

the general trend is toward a decrease in total fertilizer consumption. Japan’s consumption of fertilizer has been waning since 1986, when it

reached a high of 434 kg/ha. Likewise, Mexico’s

fertilizer consumption reached a peak in 1987

with 75 kg/ha and has been decreasing since. During the 1980s, fertilizer subsidies were about 40

percent, but Mexico phased them out in 1991 (l).

Brazil has decreased consumption steadily since

Fertilizer Fertilizer

consumption consumption

(in 1,000s of metric (kg/ha)

Country tons) 1979 and 1991 1979 and 1991

Argentina

Australia

Brazil

Canada

France

Germany a

FR

NL

Netherlands

U K

Japan

Mexico

New Zealand

U.S.

130

1,214

3,567

1,808

51905

3,597

1,713

694

2,235

2,344

1,134

546

20,941

166

1,164

3,148

2,074

5,683

2,873

1,765

561

2,450

1,839

1,559

362

18,428

3

25

27

18

242

421

320

728

252

365

25

888

80

6

27

53

47

289

247

581

317

387

63

934

100

a

FR=Federal Republic, NL= New Leader

NOTES Japan’s fertilizer consumption has been decreasing since

1986 when it reached a high of 434 kg/ha. Fertilizer consumption in

Mexico and Brazil has also been decreasing Mexico’s fertilizer consumption reached a peak in 1987 with 75 kg/ha and has been decreasing since then Brazil has also decreased consumption steadily since

1987

SOURCES: Food and Agriculture Organization of the United

Nations, Country Tables (Rome, Italy 1993), Food and Agriculture Organization of the United Nations, Yearbook, Fertilizer,

vol. 41 (Rome, Italy 1991)

1987. In 1991, Argentina and Australia consumed

the lowest amounts of fertilizer: 6 kg/ha and 27

kg/ha respectively (table 6-7). Argentina’s low application rates of fertilizer are partly due to its rich

soil. However, soil degradation is one of the country’s main agroenvironmental problems and, as it

continues, farmers may resort to using more fertilizers. The highest consumption of fertilizer in 1991

was found in New Zealand and the Netherlands,

with 934 kg/ha and 581 kg/ha, respectively. The

United States consumes 100 kg/ha (table 6-7).

Nitrate Pollution in the EU

Nitrate pollution became a serious concern in the

1980s---especially in the EU, which has one of the

world’s highest rates of fertilizer use and its high17 Eutrophication is a process through which excess nutrients, principally phosphorous and nitrogen, cause algae blooms, which in turn

deplete the dissolved oxygen levels in a body of water.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies 1163

est livestock densities. In 1980, the EU passed a

Drinking Water Directive that set the maximum

allowable concentration of nitrate in groundwater

at 50 mg/1. It did not legislate any way to enforce

this level. The standards were to be met by 1985,

but Ireland is the only member state that has done

SO (72).

In the former West Germany, 5 percent of

drinking water tested exceeds the standard, and in

France, 2 percent of drinking water tested exceeds

the standard. In the Netherlands, the average nitrate concentration found 30 meters below sandy

soils is 106 mg/l, more than twice the standard

(72). At the EU level, of the total amount of nitrogen applied, 57 percent is residual. Germany,

France, and the United Kingdom account for more

than 65 percent of the total residual nitrogen of the

EU. However, the Netherlands has the highest residual nitrogen levels of all EU countries (These

statistics incorporate data from the EC-1018 only)

(72). About 45 percent of the nitrogen from fertilizers applied to the soils in the Netherlands is

more than crops need. In addition, nitrogen from

manure (principally from pigs) amounts to 1.5

times the amount of nitrogen from fertilizer, giving the Netherlands a total residual nitrogen level

of 77 percent of the total amount applied. Part of

the problem is that manure is considered something to dispose of, rather than a production input

that could offset the use of manufactured fertilizers. To address the problem, the Netherlands is

introducing some of the most stringent legislation

concerning nitrate contamination among the EU

countries.

For the EU as a whole, wheat and course grains

account for 45 percent of nitrogen use. For the

Netherlands, the nitrate problem stems principally from livestock production (2). Until recently,

efforts to control the negative environmental

impacts of livestock production focused on regulating the amount and method of manure spreading and improving manure storage. These efforts

Nitrate pollution in surface water and groundwater can result

from the leaching of fertilizer or manure used on cropland.

Livestock wastes, improperly stored, area significant source

of nitrate as well as pathogens that degrade water quality

are not sufficient, because they do nothing to decrease the amount of total manure produced. Policies to restrict livestock numbers and to tax feed

manufacturers are now being introduced in the

Netherlands (table 6-8) (15).

Various farming practices can be employed to

limit the amount of nitrate reaching ground and

surface waters. These efforts can be put in three

categories: “attempts to match nitrogen availability to plant growth requirements[, which] include

plant tissue testing, crediting for the nitrogen content of manure, use of slow release fertilizers, and

split applications of nitrogen; practices that physically block nitrate movement such as storing manure in lined lagoons and using vegetative filter

strips around field edges; [and] changes in farming practices such as using conservation tillage,

planting a postharvest cover crop, and using crop

rotations that minimize the need for nitrogen”

(48). Generally, governments have used voluntary

programs and subsidies to diminish agriculture’s

negative impact on the environment. Persistent

problems have forced some governments to consider other methods.

18The EC-10 refers to the original members of the European community, now the European Union: Belgium, Denmark, France, Greece,

Germany, Ireland, Italy, Luxembourg, the Netherlands, and the United Kingdom.
184 Agriculture, Trade, and Environment

Country Dairy Beef Pigs Layers Broilers Sheep Total

Germany 349 651 549 25 102 42 1,717

France 416 1,043 275 33 299 327 2,393

Netherlands 149 176 249 19 143 16 752

U.K. 208 604 217 25 254 511 1,819

Total 1,555 3,408 1,851 142 1,064 1,625 9,645

SOURCE U S Department of Agriculture, Economic Research Service, “The EC Nitrate Directive and Its Potential Effects on

EC Livestock Production and Exports of Livestock Products, ” by Dale Leuck in Environmental Policies: Implications for Agricultural Trade, edited by John Sullivan, USDA/ERS-FAER #252, Washington, DC, June 1994

The EU recognized the limitations of member

country programs in meeting the drinking water

standard and the discrepancies among countries in

implementing the necessary programs to meet the

standard. As a result, in 1991, after two years of

debate, the EU Council of Environmental Ministers passed the Nitrate Directive. The purpose of

the Nitrate Directive is to prevent nitrate levels in

water from exceeding the standard of 50 mg/l. Under the directive, regions with excessive amounts

of nitrate are classified as vulnerable zones, and

farmers residing in those areas must adhere to

“codes of good practice.” The codes include limits

on livestock densities, rules concerning the storage and application of slurry, limits on application

rates for chemical fertilizers, rules concerning appropriate fertilizer application, and record keeping (40). Member states may take different approaches to incorporating these principles into

practice. Regions outside vulnerable zones are

also encouraged to follow the codes of good practice. The minimum standards for the code are set

at the EU level, but member countries may set

standards that are more strict. Countries with vulnerable zones have until 1995 to establish plans to

reduce their nitrate levels to the 50 mg/1 standard

or below. They then have four years to implement

their plans. Enforcement of the directive relies in

large part on citizens groups to make formal complaints if farmers do not comply with the directive. Farmers in member states such as the United

Kingdom. Germany, and the Netherlands, which

have stronger and more active citizens’ groups

than other EU members, will be held to strict compliance standards. Farmers in other counties may

not be monitored so closely (40).

The Nitrate Directive was designed to place the

burden of reducing residual nitrogen on reducing

livestock numbers. In the Netherlands, for example, farmers could eliminate residual nitrogen if

they reduced their livestock numbers by 65 percent and cut fertilizer use by 28 percent. The necessary livestock reductions are not as drastic for

the EU as a whole. Pig production would have to

be reduced by 11.7 percent, dairy stock by 7.8 percent, and beef by 4.8 percent (72). The impacts of

these reductions on the ability of member countries to remain self-sufficient are shown in table

6-9. The EU as a whole becomes just less than

self-sufficient in pork, poultry meat, and eggs.

The Netherlands become less than self-sufficient

in beef and veal, butter, pork, and poultry meat.

The largest drop in the Netherlands comes with a

decrease in egg self-sufficiency, from 339 to 119

percent.

Because a significant portion of EU agricultural products is exported, any policy change that affects production could also affect world trade. For

the EC- 10, the Nitrate Directive could lead to a decline in beef exports of 50 percent and a decline in

dairy exports of 34 to 100 percent. The EU would

become a net importer of pork and poultry (table

6-9) (72). Given these projections, the Nitrate Directive should spur research and development as

demand grows for new technology to improve the

quality, storage, and application of manure. In addition to the Nitrate Directive, other EU policies
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies 185

Poultry

Country Beef/Veal Butter Cheese Dry milk Pork meat Eggs

Netherlands a

1991-1992 194 174 294 27 257 205 339

Estimated 68 61 103 9 90 72 119

EC-1 O

1991-1992 110 111 109 132 105 108 102

Estimated 105 102 100 121 93 97 92

a

For example, in 1991-1992, the Netherlands self-sufficiency rate for cheese was 294 percent, meaning that they met 100

percent of their domestic demand and then could export the remainder Under a fully implemented Nitrate Directive the

Netherlands would still meet their domestic demand for cheese, but would have much less available for export, 3 percent.

SOURCE: U.S. Department of Agriculture, Economic Research Service, “The EC Nitrate Directive and its Potential Effects on

EC Livestock Production and Exports of Livestock Products, ” by Dale Leuck in Environmental Policies Implications for Agricultural Trade, edited by John Sullivan, USDA/ERS-FAER #252, Washington, DC, June 1994

that were not implemented specifically for environmental reasons—such as a new superlevy

equal to 115 percent of the target price for milk

produced beyond a quota----could help to decrease

nitrate levels.

The Netherlands

Dutch farmers, who export about 65 percent of

their total output, generally use more chemical

fertilizers than farmers in any other country, In

1991, Dutch farmers used 581 kg/ha of chemical

fertilizer (18). Such intensive farming has caused

environmental problems, most notably nitrate

contamination of groundwater. The government

realized in the early 1980s that the problem could

be addressed only by requiring significant

changes in the agricultural sector. The current

policy holds that export expansion cannot interfere with national environmental priorities.

Well before the Nitrate Directive was passed,

the Netherlands was struggling with the environmental problems posed by excessive manure. In

1986, the government implemented a three-phase

program to address the nitrate issue. The first

phase (1987-1990) aimed at stabilizing the problem by setting standards for the maximum amount

of manure that could be applied per hectare. The

initial standards were set high enough that the current level of manure could be disposed of, but set

strict regulations on the expansion of existing

farms or the establishment of new farms. The second phase (1991-1994) gradually tightened the

maximum application standards. Phase three

(1995-2000) further tightens the standards to balance application of fertilizer and manure against

what the Dutch environment can absorb (46).

Farmers are initially allowed to meet fertilizer reduction goals in any way they choose. However, if

they have not met the goals by the specified time,

they are subject to a tax on input use (68). In addition, 200,000 hectares of land have been retired in

a program analogous to the CRP in the United

States. An estimated 90 percent of Dutch farmers

comply with the regulations of these programs.

Through the Fertilizer Act, the government has

set up a national manure bank that allows farmers

who have too much manure to transport it to other

parts of the country that are below the manure

standard. Large-scale manure-processing plants

are also being developed to process manure in

pelted form for export. In 1988, the Netherlands

established a tax on livestock feed manufacturers.

The revenue from the tax goes toward financing

education and research on manure disposal (15).

Germany

Germany’s Council of Environmental Advisors

considers nitrate contamination of the groundwater one of the most serious environmental problems attributed to agriculture although, as in other
186 I Agriculture, Trade, and Environment

countries, the problem remains regional. In 1987,

a full 46 percent of the nitrate problem stemmed

from agricultural practices. In 1983, a total of 800

out of the 6,000 water supply facilities exceeded

the 50 mg/l nitrate level, up from 129 in 1979. Until recently, nitrate pollution was addressed at the

supply end: aquifers were closed, new boreholes

were drilled, and polluted water was mixed with

clean water. Now, the chief policy objective is to

reduce nitrate pollution from agricultural sources,

although these measures are not yet well implemented (58).

Under a 1986 drinking water ordinance and the

Act on Water Resource Management, local authorities are to determine which water collection

areas need protection. Standards for agricultural

practices can be set within these areas. If farmers

have to employ practices more stringent than

those stipulated in the act in order to meet its standards, and if, consequently, their incomes drop as

a result of lower yields or higher production costs,

the act provides compensation for them. Designated protected areas range from between 3 and 40

percent of a region. Germany’s Fertilizer Act,

instituted in 1989, contains an amendment that allows fertilizer use only if “the code of good agricultural practice is followed,” which means that

fertilizer application must be determined by considering the nutrient requirement of crops, the nutrient content of the soil, and the productivity of

the soil. The Act to Support Rural Farming prescribes livestock densities. If these are exceeded,

farmers may lose certain subsidies. The government also plans to enact a Fertilizer Application

Ordinance, which will fulfill the requirements of

the EU Nitrate Directive and further define “good

agricultural practices.”

Nitrate Pollution in the United States

A national survey of rural drinking water wells in

the United States found that 3 to 6 percent of them

contained nitrate concentrations above the drinking water standard of 1Omg/l established by the

U.S. Environmental Protection Agency (see footnote 11). Elevated nitrogen levels have been detected in some groundwater or surface water of all

50 states (31,48), although not all of these cases

exceeded EPA standards. Still, in Nebraska, an estimated 20 percent of drinking water wells exceed

the standard, and in southeastern Pennsylvania 28

percent exceed the standard (48). Cases of local or

regional nitrate problems are not uncommon

across the United States.

Surface water draining from areas of intensive

cropland or livestock operations regularly contains elevated nitrate levels. In the San Joaquin

Valley, one of the most intensive agricultural areas

in the country, nitrate levels regularly exceed

1Omg/1 (47). Groundwater under agricultural

lands also tends to exceed this nitrate standard

nearly 3 times more often then water beneath any

other land use (see chapter 4). Besides posing a

problem for drinking water, nitrate carried in surface water flows promotes eutrophication in rivers, lakes and estuaries, thus impairing their ability to serve as aquatic habitat (see chapter 4).

The United States does not have a basic policy

on nitrate pollution equivalent to the Nitrate Directive of the EU. Rather, the nitrate problem is

addressed, or could potentially be addressed, in

sections of the Safe Drinking Water Act (SDWA),

the Clean Water Act (CWA), the Toxic Substances

Control Act (TSCA), and the Coastal Zone Management Act (CZMA). However, the provisions

in these acts for addressing the nitrate problem are

mostly voluntary, and there is no federal implementation of nitrate policy.

Under the CZMA Reauthorization Amendments of 1990, the 29 states and territories with

federally approved coastal zone management

programs are required to develop enforceable policies and mechanisms to implement nonpoint

source pollution control programs. Six nonpoint

source management measures address a range of

related issues: erosion and sediment control, small

and large confined animal facilities, pesticide

management, grazing management, irrigation

management, and nutrient (including nitrate)

management. The nutrient management measure

requires all farms in the coastal zone to:

. . . develop, implement, and periodically update a nutrient management plan to: 1) apply nu-
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies | 187

trients at rates necessary to achieve realistic

crop yields, 2) improve the timing of nutrient application, and 3) use agronomic crop production

technology to increase nutrient use efficiency

(76).

States are required to develop their plans for

EPA and NOAA (National Oceanic and Atmospheric Administration) approval by July 1995.

After approval, they have three years to fully implement their plans. If states choose not to develop

plans, they will forgo federal funding under section 319 of the CWA, which establishes a national

program to control nonpoint sources of pollution,19 and section 306 of the CZMA. Some

states, such as Texas, may choose to incur the loss

of federal funding. Others, like Pennsylvania, have

redefined their coastal zone boundaries to exclude

areas with high manure supplies.20 Because there

is no federal implementation of these nutrient management measures, there is no further recourse to

require states to develop meaningful plans.

USDA also coordinates voluntary and educational programs on preventing nutrient problems

with cost-share funding provided by the Agricultural Conservation Program (ACP) run by the

Consolidated Farm Services Agency (CFSA) and

the educational programs of the Natural Resources Conservation Service (NRCS). These

programs are discussed in chapter 4.

❚ Air Quality

In addition to acting as a generator of environmental damage, agriculture is also the recipient of

damage from other sources. External environmental impacts on agriculture include natural

disasters such as floods and droughts; conversion

of farmland to urban uses; global climate change;

and air, water, and soil pollution from urban and

industrial sources (55). This section singles out air

pollution and its impact on agriculture.

Pollution generated in urban centers can be

transported to agricultural areas through wind and

rain, and can affect crop productivity by inhibiting

photosynthesis, respiration, and nutrient uptake.

Crop damage can occur through direct exposure to

pollutants or from the indirect effects of pollution.

One study looking at the regions of eastern North

America, Europe, and eastern China and Japan

found that 9 to 35 percent of the world’s food crops

are exposed to ozone concentrations (i.e., increased ozone levels) above a threshold shown to

reduce crop yields by 5 to 10 percent. The study

suggests that the current loss of the world’s cereal

and other crop yields due to ozone is 3 percent

(11). Another study of the eastern United States

estimated that a 10-percent reduction in ozone levels would result in yield increases of 4.1 percent

for corn and 3.0 percent for soybeans, and that a

10-percent reduction would result in a yield increase of 3.4 percent for corn (82,83). In 1984,

crop damage due to ozone cost an estimated $2

billion (65). “On a national scale in North America and western Europe, current losses of agricultural production due to air pollutants are small relative to other factors, but local impacts on

sensitive crops may be substantial” (7). Yield

losses averaged over the state of California from

ambient ozone in 1984, for example, were an estimated 20 to 30 percent for sensitive crops such as

grape, cotton, citrus fruits, beans, and onions. In the

Los Angeles basin, where ozone concentrations

are among the highest in the world, production of

many sensitive crops has been abandoned (7).

In the United States, air quality standards are

determined and regulated through the Clean Air

Act of 1970 (amended in 1977 and 1990). The

U.S. approach to regulation is generally more

centralized than that of Canada, France, the Netherlands or Japan, for example, but less centralized

than that of Taiwan or China. The federal government is responsible for setting the minimal, binding national ambient air quality standards

(NAAQS), approving and overseeing state programs, and providing financial and technical as19 Personal communications, Roberta Perry, EPA, Oct. 26, 1994 and Andy Manale, EPA, Dec. 7, 1994.

20 Personal communication, Andy Manale, EPA, Dec. 7, 1994.
188 I Agriculture, Trade, and Environment

Poor air quality can reduce crop productivity Here, federal researchers study how exposure to ozone effects various crops.

sistance to states. The states are responsible for

developing and implementing programs that will

result in compliance with federal standards. The

Clean Air Act of 1990 broadens the scope of regulations pertaining to ozone and particulate to include smaller sources that were previously exempt. In addition to NAAQS, the act provides for

the Prevention of Significant Deterioration (PSD)

Program, which aims to maintain air quality in

areas already below the NAAQS.

Although the Clean Air Act of the United

States has brought notable improvements in air

quality, many areas do not yet comply with the act.

In 1994, a total of 92 areas (more than 400 counties) violated the ozone standard, even though ambient ozone levels declined by 14 percent between

1980 and 1989. And although ambient concentrations of S02 decreased by 24 percent between

1980 and 1989, a total of 44 counties were classified as “nonattainment” areas for S02 in 1994

(65,78). NOx emissions21 increased by 8 percent

between 1970 and 1989, largely due to increased

fuel consumption. NOx emissions have also increased in several other countries, including Canada, Japan, and Germany (table 6-10).

21 Nitrogen oxide, NO, and nitrogen dioxide, NO2, are collectively referred to as NOx. Likewise, SOx refers to the sulfur oxides, including

sulfur dioxide or S02.
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies 189

Trends of N02 Concentration in Selected Cities

Nation City 1980 1984 1985 1986

Canada

U.S.

France

Germany

Netherlands

U.K.

Japan

Montreal

Vancouver

New York

Los Angeles

Pans

Berlin

Frankfurt

Amsterdam

London

Tokyo

Kawasaki

O 027

NA

0.032

0.047

NA

0.017

002 6

0.019

0031

003 4

002 7

0,022

0.024

0.032

0,043

NA

0,019

002 3

0.020

0,040

0031

0.033

0.021

002 2

0.031

004 4

NA

0.020

0.021

002 2

0.031

0.030

0031

0.020

002 3

0.030

0.044

NA

001 9

002 2

002 5

003 4

003 0

003 3

Nation

Canada

U.S.

France

Germany

Netherlands

U.K.

Japan

Trends of Suspended Particulate Matter in Selected Cities

City 1980 1984 1985 1986

Montreal

New York

Los Angeles

Pans

Berlin

Amsterdam

London

Tokyo

Kawasaki

0.014

0.013

0.008

0.031

0.032

0.009

0.025

0.018

0.014

0.006

0.014

0.005

0.019

0.023

0.007

0.017

0.010

0.011

0.007

0.013

0.004

0.018

0.023

0.006

0.015

0.009

0.010

0.006

0.012

0.004

0.017

0.023

0.005

0.016

0.009

0.009

Trends of S02 Concentration in Selected Cities

Nation City 1980 1984 1985 1986

1987

0.023

0.021

0.033

0.037

NA

002 2

002 5

002 8

0.037

003 3

003 3

1987 1988

0.005

0.012

0.004

0.016

0.026

0.005

0.014

0.009

0.010

Canada

U.S.

France

Germany

Netherlands

U.K.

Japan

Montreal

Vancouver

New York

Los Angeles

Paris

Berlin

Frankfurt

Amsterdam

London

Tokyo

Kawasaki

0.082

006 8

005 6

009 0

0.051

009 8

0.073

006 6

0.021

0.048

NA

0,057

003 5

0,050

008 5

0,047

012 0

0.034

0.065

0.018

0,052

0.046

1988

0.024

002 3

0.033

003 9

NA

002 2

0.026

002 8

0.033

0.033

003 3

1987

0.048

0.043

005 0

0.084

004 9

012 4

0.068

0.063

0.015

0.053

0,042

0051

004 0

004 6

007 8

004 6

0.125

005 8

005 3

001 5

005 8

0.047

005 3

004 4

004 8

0.081

004 6

009 5

0071

004 5

0.016

0.059

0051

000 5

0011

000 4

001 2

001 8

000 5

0.014

000 7

001 0

1988

004 5

003 7

0.050

0.084

002 9

009 0

0061

004 4

001 9

0.053

004 7

NOTE: The readers should be cautious when interpreting this table, especially because of large differences in the number of monitoring sites and

method of monitoring among countries A comparison between two or more cities IS not advisable, a comparison of trends IS preferable

NA=Not Available.

SOURCE: Government of Japan, Environment Agency, Quality of the Environment in Japan, 1992, Organization for Economic Cooperation and

Development, Environmental Data Compendium 1991 (Paris, France, 1991)
190 | Agriculture, Trade, and Environment

Canada’s air quality is similar to that of the

United States, but its approach to regulation is

much more decentralized. Under the Canadian

Clean Air Act of 1971, the federal government has

the authority to set nonbinding guidelines. Binding air quality standards and the regulations necessary to achieve them are generally set by the provincial governments (one exception is that the

federal government sets standards for automobile

emissions from new vehicles). Although levels of

SO2 and total suspended particulates (TSPs) have

been decreasing, more than half of all Canadians

are exposed to unhealthy amounts of smog, ozone,

NOx, and volatile organic compounds (VOCs)

(25,27). Between 1979 and 1987, the amount of

ozone in Canadian air increased by 7 percent.

Japan has invested heavily in industrial stationary source pollution control technology and has

established one of the most sophisticated air

pollution monitoring networks in the world, partly as a result of serious pollution problems in the

1960s and increased public outcry.22 Compared

with other OECD countries, Japan now has the

lowest per-capita and per-unit GDP emission levels of SOx (see footnote 21) and NOx. Japan established environmental quality standards (EQS)

in 1967 under the Basic Law for Environmental

Pollution for SO2, NO2, CO, PM-10, and photochemical oxidants.

Nonetheless, air quality problems in Japan persist. NOx emissions decreased 21 percent between

1970 and 1989, largely due to improvements in

combustion technology and the introduction of

catalytic converters on motor vehicles. However,

because the transportation sector continued to

grow, and the EQS for NO2 were relaxed in 1978,

NOx emissions have increased since 1985.

The European Union has established air quality

directives for SO2, NO2, suspended particulates,

and lead. Member states must comply with pollutant levels deemed generally acceptable, and must

strive to achieve the more stringent guidelines.

Member states must also draw up improvement

plans for areas that exceed the acceptable levels.

The directive addressing SO2 incorporates a

“standstill principle” similar to that of the PSD in

the United States, under which air quality is not allowed to deteriorate significantly even in areas

well below the maximum allowable limits for

these pollutants (30).

Germany, France, and the Netherlands are generally in formal compliance with the air quality directives of the European Union. The United Kingdom has a a good legal record but still needs to

address specific issues that remain unresolved,

such as the exemption of Northern Ireland from

many of the regulations, the sulfur content of gas

and oil, and vehicle emissions. The Netherlands

has one of the EU’s best records for implementing

the directives; Germany, France, and the United

Kingdom have experienced relatively few problems. The directives addressing vehicle emissions

and emissions from industrial plants have been especially difficult for member states to comply

with (30).

Several countries participate in both bilateral

and multinational agreements. For example, the

United Nations Economic Commission for Europe Long-Range Transport of Air Pollutants addresses NOx and will address SO2 and VOC; the

U.S.-Canada Air Quality Agreement, signed in

1991, commits both countries to specific targets

and timetables for reducing acid deposition precursors; a joint communiqué signed by the United

States and Mexico in 1990 calls for a plan to reinforce border cooperation on a range of environmental issues, including air quality (65). Table

6-11 shows how various countries’ air quality

standards compare with those of the World Health

Organization (WHO). National U.S. standards are

22 Environmental awareness grew in Japan during the late 1950s and early 1960s, when several widespread diseases—Minimata disease,

Itaiitai disease, and Yokkaichi asthma—were associated with the manufacture of the chemical acetaldehyde, the mining of cadmium, and the

operation of petrochemical plants. The Japanese government eventually instituted one of the world’s most advanced compensatory programs

for the victims of pollution. The program was abolished in 1988 (8).
Chapter 6 International Comparison of Agriculture, Trade, and Environmental Policies I 191

Countries with Air Quality Standards Brazil Japanb

Brazil

More Stringent than WHO Standards EU Japan

Japana U.S. (CA)

Countries with Air Quality Standards Argentina Taiwan Argentina

Less Stringent than WHO Standards Taiwan Brazil U s .

U.S. (CA) EU

U s .

U.S. (CA)

a

24-hour standard used

b

1-hour standard used

SOURCE: UNEP/WHO, Earthwatch Global Environment Monitoring System Urban Air Pollution in Megacities of the World,

Blackwell Reference, 1992

set below WHO standards for S02 and ozone, although California’s standard for ozone is set

above the WHO standard. Only Japan air quality

standards are set higher than the WHO standards

for N02

, S02, and ozone.

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Opportunities for

Redesigning Policies for

Agriculture, Trade,

and the Environment

he previous chapters have demonstrated that global integration, expanding and changing world agricultural

markets, and heightened environmental concerns are defining new policy challenges and opportunities for the

United States. These trends manifest themselves in global markets that demand growing amounts of value-added agricultural

products; an emerging environmental agenda that extends beyond traditional conservation concerns; and an expanding research agenda that increasingly emphasizes environmental

protection, food safety, marketing and trade, and profitable, yet

environmentally sustainable agricultural systems.

Unfortunately, federal policies and programs affecting the

agricultural sector have not changed sufficiently to address these

new concerns. Indeed, they conflict with the new developments

in significant ways. They promote production of bulk commodities and hinder possible opportunities for U.S. farmers in fast

growing, value-added export markets. They divert major resources to soil conservation while other issues of significance—

water quality, wildlife habitat, and soil quality—remain relatively neglected. Almost two-thirds of agricultural research funding

is devoted to increasing farm output, but more output will mean

more federal subsidies to export surplus crops, and still more federal funds to “idle” land to control surpluses.

As the United States moves toward the year 2000, and as continuing budget pressures constrain traditional subsidy solutions,

government must explore innovative approaches to these dilemmas. Furthermore, tensions between agricultural policies and

trends in both trade and environmental spheres create costly inefficiencies. Seeking complementary and mutually reinforcing policies for agriculture, trade, and the environment could not only | 197
198 | Agriculture, Trade, and Environment

lessen budget pressures but also help ensure that

the nation’s policies are oriented to the future, not

anchored to the past.

Seeking complementarity would involve:

 synchronizing domestic trends with global

forces,

 targeting program resources on priority areas,

 encouraging development of technologies that

serve multiple objectives, and

 using markets or market-like mechanisms

wherever possible.

This chapter presents policy options for agriculture, trade, and the environment that illustrate

how policies and institutions can be complementary rather than in conflict. As the United States

heads into the 21st century, such complementarity

could have a key influence on the role and standing of U.S. agriculture in an ever-expanding global economy. Moreover, seeking complementarity

among agricultural, trade, and environmental policies will permit the United States to seize the opportunities of global market expansion while protecting and advancing domestic goals related to

environmental quality as well as the competitiveness of the agricultural sector. Options to modify

existing programs and legislation, or to introduce

new programs and legislation that pursue complementarity for agriculture and trade, agriculture

and the environment, and trade and the environment are examined in turn.

POLICY OPTIONS FOR AGRICULTURE

AND TRADE

A paramount message of this report is that today’s

farm programs no longer serve the needs of the

agricultural economy and the nation. Farm programs are costly, many work at cross purposes

with each other, and they are aimed at achieving

goals that many Americans no longer consider a

priority. Production subsidy programs, for example, create surpluses that require costly export

subsidy programs to dispose of them. To stem production of surplus crops, millions of acres are laid

idle at government cost—and production of other

products that are in ever-greater demand overseas

is stymied. Acreage bases concentrate the application of fertilizers, pesticides, and other inputs on

fewer acres, increasing risks for the environment.

All the while, research programs concentrate on

generating more crop output, and little heed is

paid to solving newer problems relating to trade

and the environment.1

A new approach is needed for the agricultural

sector—one that aims at bringing about greater

harmony among agricultural production and new

budget realities, the environment, and international markets. This is not to say that traditional goals

should be abandoned completely. As its economy

grows, the United States continues to require

abundant supplies of safe and affordable food and

fiber. But the tenor and realities of the times have

changed, and government programs must change

with them. Many citizens now view food safety,

for instance, as a major concern, making the impact of farm programs on chemical use in agriculture as important as their impact on farm income

and farm exports. Citizens are also demanding

greater environmental protection, which puts

more pressure on management programs. Income

levels of farm households are now on a par with

nonfarm households, raising questions about programs that transfer government payments to the

farm sector. And with regard to trade, consumer

demand abroad now favors a mix of U.S. agricultural exports that includes more horticultural and

highly processed food. Consequently, the composition of agricultural goods has become as important to reducing the nation’s trade deficit as the

expansion of export tonnage but is not reflected in

1Research to increase output of price-supported crops continued long after surpluses accumulated at least partly because farmers were protected from losses on increased production. Research institutions were in turn protected from the normal effects that producer losses would have

had on public support for such research projects. How research allocations in land grant universities would have changed in the absence of price

support programs is open to varying interpretations ranging from “not much” to “a lot.” This assessment did not attempt to complete an in-depth

evaluation of this issue.
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 199

federal policies on export promotion. To take

greater advantage of evolving opportunities for

expanded trade, farm production patterns must be

allowed to respond more to market forces rather

than being constrained by traditional farm commodity programs. Such flexibility is consistent

with new budget realities that favor reallocation, if

not reduction, of funds for agricultural programs.

One alternative for moving toward more market-oriented farm programs would be to continue

the trends established in the 1985 and 1990 farm

bills. This approach would pose few surprises for

market participants. After 60 years, commodity

programs have become well known and their impacts can be anticipated. Changes in weather and

variation in export demand remain the primary

sources of variation in program costs and farm incomes. Rising levels of productivity also affect

program costs, as output pushes ahead of markets

and requires budgetary expenditures on storage

and export disposal programs. Coupled with the

budgetary costs for direct production subsidies,

such expenditures can be sizable and difficult to

estimate precisely, given the uncertainty of future

default rates on government-guaranteed export

loans (chapter 3).

Extending current commodity programs would

ensure an abundant food supply for the nation and

modest increases in food prices. Budgetary costs

for price and income support programs would be

expected to average in the $9 billion to $11 billion

range.2 (Expenditures averaged $11.3 billion for

fiscal years 1991-95.) The value of farm exports

would continue to grow, with steady gains coming

from increased sales of value-added food exports

and occasional upswings in commodity exports.

Bulk commodity exports would respond to variations in weather in other countries and changes in

internal policies. Aggregate farm income would

remain fairly constant, especially in real terms,

with sudden boosts in the occasional year of

drought or other natural disasters overseas. Per

capita farm income would increase as farm numbers decline.

There are, however, numerous other approaches to farm legislation beyond an extension

of current programs, ranging from the elimination

of direct payments and price support programs to

the targeting of price support programs toward

small and moderate-size farms or environmental

enhancement. Which kinds of farm programs

should be implemented, how much funding they

should receive, and where they should be targeted

are issues to be decided through the legislative

process. OTA’s goal, in the following sections, is

to outline a selected set of available options to enhance policy discussions.

ISSUE 1: Harmonize Farm Commodity Programs

and International Market Trends.

U.S. farm commodity programs have at times

hindered efforts to expand agricultural trade. As

discussed previously in this report, the United

States implemented large acreage reduction programs to hold down production of major crops

(e.g., wheat, feed grains, rice, and cotton) throughout most of the 1980s. To ensure that acreage

would be reduced, the government required farmers to cut back on the amount of land they planted

in return for federal payments. The programs had

an unintended effect on trade: along with reducing

acreage of the program crops, they also reduced

acreage of soybeans—a nonprogram crop—

which were in great demand in international markets. Competitor countries took advantage of

those markets, expanding their acreage of soybeans to meet global demands. Similarly, the

United States has continued to implement commodity programs that focus land resources very

2The Congressional Budget Office (CBO) reported on Mar. 6, 1995, in a personal communication, that budget expenditures for CCC net

outlays for commodity programs are expected to average $8.4 billion from FY 1995 to FY 2000. In arriving at this figure CBO excluded disaster

payments, included the effects of the new Uruguay Round agreement provisions, assumed that there would be no wool and mohair payments

after FY 1996, and assumed that dairy expenditures would remain low.
200 | Agriculture, Trade, and Environment

heavily on a few bulk commodities—even as

global markets shift away from bulk commodities

and toward more trade in value-added food products.3

The 1990 farm bill gave farmers some additional flexibility as to how they could use their program acres, but only modest changes in land use

resulted. An important goal of the bill—a substantial increase in soybean acreage—was not

achieved. Some expansion of value-added food

exports occurred, but not at rates equal to the expansion in global markets (chapter 3). If the

United States is to fully use its natural advantages

in agricultural production in the future, additional

changes in farm legislation are required. Three options are examined below.

OPTION A: Phase out all income transfer programs for agriculture between 1995 and 2000, and

allow land use and exports to respond to signals

from national and international markets.

Income transfer programs (also known as target

price or deficiency payment programs) provide

farmers with direct payments from the federal

treasury. Their purpose is to stabilize farm income

by protecting farmers against fluctuations in commodity prices. When the market price of a commodity rises above its target price, a producer receives no payments. When market prices are

below target prices, the government makes payments to producers to compensate for the difference between market prices and target prices. In

other words, income risks are shifted from farmers

to taxpayers at large.4

The impact of eliminating target price payments over a five-year period would be concentrated on farmers producing target price crops. As

the economic returns for these crops declined,

some farmers in higher-cost regions would discontinue production, shifting land and capital resources to other crops and to livestock production.

Other farmers in low-cost production areas might

expand production as their counterparts in highcost areas stopped planting these crops. Commercial farmers would make the adjustments relatively quickly, where adjustments were economically

beneficial. Part-time farmers might be less responsive, since most depend less on income from

farming and are perhaps less attuned to commodity market changes.5

For the sector as a whole, the impact on farm income from eliminating direct government payments would be modest. As illustrated in chapter 2

(figure 2-5), the decline in direct government payments between 1987 and 1993 was more than offset by increases in cash receipts. With farm numbers declining between 1987 and 1993, average

per-farm income from farming activities in3Producer payments under commodity programs have distorted cropland use in agricultural production, although estimates of the amount

are lacking. What is clear is that program payments have tied too many acres of cropland to surplus crops such as wheat, rice, cotton, and feed

grains, and resulted in acreage diversion programs which, in turn, left fewer acres available for crops, such as soybeans, that have experienced

growing global markets for products. The cost of this distortion may be significant. Had soybean acreage, for example, continued to expand in

the 1980s to meet growing global markets, instead of declining, the need for acreage diversion programs would have been diminished or even

eliminated. Of course, other countries’ policies relating to export subsidies also played a role in these trends and international trade negotiations

were used to reverse these directions. However, trade negotiations turned out to be a rather weak tool for maintaining U.S. global market share

for soybean products.

4Established in the 1973 farm bill and extended in the farm bills of 1977, 1981, 1985, and 1990, target price payments are calculated as the

difference between the target price and the market price (or the loan rate, whichever is higher) of a commodity, multiplied by a farmer’s eligible

production, where eligible production is based on a farmer’s historical acreage base and yield history. After the payment is calculated, a treasury

check is issued to the farmer for the amount of the payment. In 1994, for example, the target price for wheat was $4 a bushel and the projected

target price payment was 85 cents a bushel. A farmer with 20,000 bushels of eligible wheat would have received a $17,000 payment from the

government.

5The 1995 Economic Report of the President notes that about one-third of all farmers receive payments. “Moreover, two-thirds of program

payments go to the largest 18 percent of farms—even though the average income of these recipients is triple that of the average U.S. household

(p. 142).”
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 201

creased over this period. When rising income

from off-farm sources is included with farm income, both U.S. Department of Agriculture

(USDA) and Census Bureau data indicate that

farm households earned incomes, on average, that

were equal to those earned by the rest of the nation’s households (chapter 2). This trend would

likely continue with a phaseout of target price payments. Cash receipts, which rose by an average of

$5.3 billion annually between 1987 and 1993,

would rise as exports, industrial uses, and other

uses of farm commodities increased. The increases would accrue to farms producing food

items in growing export demand or commodities

for expanding industrial uses.

Under a phaseout of direct payments, incomes

on larger farms would likely decline the most. The

current distribution of payments favors larger

farms, although target price crops are a smaller

part of the overall output for many of these farms

than for smaller farms. Losses for the larger farms

would be mitigated by income from other sources,

such as nontarget price crops and livestock products.

As noted above, some indication of the aggregate impact on farm income can be ascertained

from the results of the 1990 farm bill. That legislation lowered the percentage of program acres on

which payments were made from 100 to 85 percent. Aggregate farm income showed no noticeable reduction as a result of the change. Although

the elimination of farm program payments would

not be achieved as painlessly, especially for farmers producing target price crops, the impact on aggregate farm income would be moderate if phased

in over a five-year period. The impact would be

relatively mild for farmers who are flexible and

able to shift some of their resources to producing

other crops.

Land values would decline with the elimination

of programs benefits, especially in the initial period of uncertainty following the establishment of

such a policy. The real price of land, as opposed to

the nominal price, might decline for a number of

years until production patterns fully adjusted to

market forces. The decline and duration would depend partly on how aggressively the United States

took advantage of opportunities for exporting

items that are in growing demand (such as fruits

and vegetable, red meats, and oilseed products)

and partly on whether commodity support programs were withdrawn suddenly or phased out

gradually.

Export composition would be affected by eliminating production payments. Some reduction in

export subsidy costs could be expected as the incentives for producing surplus crops declined.

The mix of crops planted and harvested would

change: fewer acres of program crops would be

planted in regions with fewer natural advantages

and more acres in regions with greater natural advantages. For example, wheat production would

tend to be concentrated more in the Great Plains

and corn production in the Corn Belt, as land-idling programs became less attractive to growers in

these regions. Production would be discouraged

in other regions where acreage has expanded to

take advantage of programs benefits.

As acreage was concentrated in areas of natural

advantage, the average costs of production would

decline, making the United States more competitive in global markets and improving economic

conditions in rural areas. More acreage in production would mean more purchases of inputs and

other products, which in turn would strengthen tax

bases and other institutional systems. The condition of streams and groundwater might, however,

worsen in areas where more crops were grown, if

erosion and applications of chemical fertilizers

and pesticides increased.

The budgetary implications of eliminating direct payments for farmers under commodity programs are significant. In 1993, direct payments

amounted to $8.6 billion of the $16.0 billion spent

on price and income support programs; in 1994,

$4.6 billion was spent on direct payments, out of a

total of $11.8 billion. Direct payments are expected to total $5.0 billion in 1995, with total costs

for farm programs set at $9.8 billion. (Direct payments are payments made to farmers under target

price programs, marketing loan programs, and

other minor crop or livestock programs. Additional costs for storage, interest, and other expenses

for operating storage and export disposal pro-
202 | Agriculture, Trade, and Environment

grams are not included in direct payments, but are

included in the total amounts spent on price and

income support programs. These other costs

would decline if the incentive to produce surpluses were eliminated.)

There would be little impact on food prices

from a withdrawal of direct government payments. Less production of target price crops in less

advantageous areas would be offset by more production in areas of natural advantage. Over time,

shifts in production patterns would lead to fewer

surpluses, fewer export subsidies, and smaller expenditures for disposing of surplus commodities.

If export programs continued to be operated

aggressively with smaller supplies, food prices

would increase more, as they are linked to export

subsidy programs—a point driven home after the

severe drought of 1988. With export subsidy programs operated aggressively in 1989 and 1990,

consumer food prices increased 5.8 percent each

year, well above normal increases.

The impact on farm numbers, farm size, and

farm structure is difficult to forecast. Most smaller

farms depend primarily on income earned off the

farm, and the situation would not change if direct

government payments were eliminated. The total

number of farms, however, would likely continue

to decline.

OPTION B: Phase out both commodity loan and

storage programs and direct income transfer programs between 1995 and 2000.

Other major income stabilization programs extended to agriculture are nonrecourse loan and

storage programs. These programs are designed to

ensure the orderly marketing of farm commodities

by reducing the amount of commodities coming

to market at harvest time and increasing marketings at other times during the year. The government offers farmers loans based on the quantity of

their commodities and equal in value to a specified support price multiplied by the quantity of

commodities. The stored commodities act as

collateral to secure the loans, and when the loan is

due, the grower may pay off the loan and reclaim

the commodities or turn over the commodities to

the government as full payment of the loan, regardless of the price and value of the commodities. If the commodities are valued at less than 

the loan, the government absorbs the loss (hence

the term “nonrecourse loans”). Another variant,

the marketing loan program, allows farmers to repay loans at world prices, which generally are

lower than U.S. prices. Losses on loan and storage

programs will total $4.0 billion for fiscal years

1991 through 1995.

The elimination of loan and storage programs

would increase instability in farm commodity

markets, although the degree of instability is difficult to estimate. Certainly, some instability would

be offset by the many new marketing arrangements that have evolved in recent years, such as

futures markets, contract farming, vertical integration, and forward sales through elevators and

other private firms (chapter 2). All such arrangements have become stabilizing mechanisms that

even out sales throughout the marketing year.

Nonetheless, the uncertainty accompanying the

end of government-sponsored stabilization programs would have marked effects. Farm markets

have not been free of government involvement for

more than 60 years, and there are few, if any, farmers or other market participants who can even recall farm commodity markets in which the forces

of supply and demand alone established prices

and determined sales. Global demand has become

more important, increasing the importance of factors such as weather on other continents (and, especially, in the southern hemisphere). At the same

time, other factors such as improved global communications have diminished the impacts of

weather, and of new seed varieties, by keeping all

market participants better informed. None of these

factors pertained when markets were last free of

direct government influence.

The greatest impact of eliminating commodity

loan and storage programs over a five-year period

would be the adjustments required of individual

growers and other market participants. No longer

would farmers who place commodities in storage

and file for a commodity loan with a U.S. Department of Agriculture (USDA) agency be able to use
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 203

such a simple marketing plan. Marketing decisions would be more complex, involving greater

awareness of trends and events occurring at home

and overseas. In the initial period, it is quite likely

that market prices would fluctuate more, and

farmers would find it necessary to develop new

marketing techniques. With a few years of experience, the variability in markets and market prices

would be expected to diminish as private stabilizers (e.g., vertical integration, future sales arrangements, contract farming, hedging on futures markets, and so forth) replaced government mechanisms.

The economic impact of this option is difficult

to estimate with accuracy, and the behavior of the

private storage trade is difficult to judge. Available studies tend to examine relatively small

changes in loan rates rather than their elimination.

Such estimates probably are not very good guides

to the events and trends that would transpire with

the end of stabilization programs. A five-year

phaseout of these programs would give all sides

time to analyze conditions and take steps to protect their own interests. For some, that might

mean building storage facilities. For others, it

might mean developing new marketing relationships with local elevators or other agribusiness

firms. For all farmers, it would require more attention to market details. Planning for marketing of

crops would become as important as planning for

planting and harvesting if loan and storage programs were eliminated.

The largest economic impact of this option

would fall on farmers without the capacity to carry

stocks of commodities beyond harvest time.

These farmers would receive lower prices and lose

income if they were forced to sell at harvest time.

Any impact on land values would follow from the

impact on crop prices. If relatively few farmers increased their marketings at harvest, the impact

would be small. In general, though, land buyers

would reduce risk by offering less for land, which

could result in lower land prices until growers

gained experience with open markets. Depending

on the degree of added price variability, consumers might see some additional fluctuations in food

prices.

Budgetary costs for loan and storage programs

would be reduced, saving up to $4 billion between

1995 and 2000. The composition of agricultural

exports would change as commodity programs

gave less support to production of price-supported

crops; fewer surplus commodities would mean

lower expenditures on export subsidies. The impact on rural communities would vary. There

would be losses in areas where commodity programs now induce farmers to maintain acreage of

crops against the forces of natural advantage.

OPTION C: Target commodity loan and storage

programs to small and moderate-size farms.

The major impact of eliminating loan and storage programs would fall on farmers who could not

carry their commodities beyond harvest time in

years of unusually low prices. These farmers

would be forced to sell their commodities at the

lowest part of the annual price cycle, to earn funds

to pay for harvesting and other operational costs.

They would thus accept losses on crops that, if

held for a few months, might be sold for higher

prices. Scenarios such as this originally led to the

establishment of USDA’s Commodity Credit

Corp. (CCC), which funds current loan and storage programs.

An alternative to eliminating these programs

would be to limit access to them, by placing a cap

on the amount of commodities that could be

placed under loan by any one farmer. The cap

could be set at various levels, although a limit on

the average amount of wheat, corn, cotton, rice, or

soybeans grown on farms producing those commodities would seem reasonable. If the average

wheat farm, for example, harvests 300 acres of

wheat, with an average yield of 40 bushels per acre

or 12,000 bushels of wheat, the loan program

could be limited to placing this much wheat under

loan at the 1994 loan rate of $2.58 per bushel. If

the average corn farm harvests 200 acres of corn,

yielding 125 bushels per acre or 25,000 bushels of
204 | Agriculture, Trade, and Environment

corn at the 1994 loan rate of $1.89 per bushel, the

loan program could be limited to placing this

quantity of corn under loan annually. Other crops

could have quantity limitations that reflect average farm size.

Placing limits on eligibility for price support

loans would break with tradition. Although limits

have been imposed on direct payments to farmers

from the government, loan and storage programs

have remained open-ended. As farm size increased and productivity rose, the quantities that

any one producer could place under loan gradually

increased. However, increased eligibility did not

result in an automatic increase in budget costs.

Stocks accumulated in one period have been sold

at a gain in a later period. For example, following

the drought of 1988, CCC price support operations returned to the government $926 million

over costs in FY 1989 and $399 million over costs

in FY 1990. These gains were more than offset in

FY 1993, however, when losses on price support

operations amounted to $2.1 billion, and in FY

1994, when losses were $621 million.

Under this option, small and moderate-size

farms would continue to be eligible for full loan

coverage, while larger farms would be forced to

turn to other price stabilization methods and other

sources of credit. One result might be that farms

would tend to diversify their cropping patterns, so

that a maximum amount of several crops could be

placed under loan. For example, a large wheat

farm might plant part of its holdings in another

crop, so that it would be eligible for loan coverage.

In such circumstances, it might be necessary to

place an upper limit on the total amount of loans

that the CCC would give to any one farmer. Other

federal entities impose such limits: the Small

Business Administration, as an example, sets a

loan limit of $500,000 for any one business. A

similar limit for any one farm for all commodity

loans would not be unreasonable.

The economic impact of targeting loan program benefits would be modest. Small and moderate-size farms would retain a substantial degree of

stabilization. Larger farms would turn even more

to forward contracting, hedging, and other private

risk-reduction alternatives. Land values would be

relatively unaffected. Budget outlays on price

support programs would be less than the $4 billion

spent between fiscal years 1991 and 1995. As long

as loan rates were held below market prices, farmers would not turn over large amount of commodities to the CCC. Exports of commodities would be

modestly encouraged. Large farms with large

quantities of ineligible commodities might tend to

sell more commodities at harvest time, which

could lower annual average prices and increase international competitiveness. Alternatively, CCC

loan programs might be less important to these

farms and limits on loan size would therefore have

little effect. The impact on farm structure would

be modest, although risk would increase for larger

farms, which could discourage concentration of

acreage in fewer hands. If the number of farms stabilized to a greater degree, rural communities

would benefit.

ISSUE 2: Align export promotion programs and

global agricultural markets.

As noted throughout this report, the composition of world food trade has changed, and international markets now favor higher valued food

items. The share accounted for by consumeroriented food products rose 17 percentage points

between 1980 and 1993, and the share accounted

for by intermediate food products increased 3 percentage points. In contrast, the share accounted for

by bulk commodities fell by 20 percentage points,

from 49 to 29 percent of total global trade. Over

the same period, U.S. export shares also changed:

consumer-oriented food products rose 23 points

and intermediate food products rose 3 points. The

share accounted for by bulk commodities declined

26 points, from 70 to 44 percent. In January 1995,

USDA reported that “[h]igh-value product exports reached $25.9 billion, or 60 percent of total

export value in fiscal year 1994, up from a 56-

percent share the previous year.” The shift also

had a regional component. Asia surpassed Europe

as the main market for U.S. agricultural exports in

1978 and slowly expanded its share of U.S. exports in the intervening years.
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 205

Such a large change in the composition of

world food trade in the course of only a decade has

placed the United States, with its heavy emphasis

on bulk commodities, at a disadvantage. Large export subsidies were required to dispose of the surplus commodities that were being produced under

the incentive of domestic farm programs (chapter

3). As commodity exports shrank in the early

1980s, farm income declined and rural land values

dropped sharply, creating crisis conditions across

the grainbelt and raising questions about the effectiveness of export promotion programs. A subsequent assessment of the programs concluded that

“USDA’s allocation of market development funds

has sometimes taken place without sufficient regard to maximizing the effectiveness of these

expenditures with respect to either expanding exports or benefiting agricultural producers.” (See

chapter 2.)

While the evidence gathered in this study suggests changes would be useful, continuing market

development and export promotion programs

with their current emphasis on bulk commodities

is the course of action that holds the least uncertainty for the nation. However, it poses the weakest prospect for export growth in the food sector.

Commodity exports may boom in an occasional

year but the longer term trend is toward expanded

global trade in value-added food products (figure

2-7). Extending the current export expansion

strategy would represent the least controversial

approach from the standpoint of commodity organizations and other export interests. Budgetwise,

market development and export promotion programs would require about $250 million dollars

annually, or approximately $1.25 billion from

1995 to 2000.

This study includes three other options for ensuring that promotion programs provide maximum benefit in terms of export earnings. A prerequisite for all of the options is more and better

marketing research. Less than 5 percent of all public funds for agricultural research is allocated to

domestic and international market research, and

little, if any, of that amount is directed toward international markets. The dramatic shift of world

trade away from bulk commodities and toward

value-added items went unnoticed for nearly a

decade due, in part, to a lack of research on international markets. For the United States to become proficient in marketing food to international

markets, it must become more knowledgeable

about countries’ internal conditions, about their

food tastes and taboos, and about the cultural habits that shape food consumption. Then it must

shape marketing programs to match other countries’ needs and desires. Such work represents a

major challenge for the research community, as

well as the business community, in the future.

OPTION A: Reorient market development and

export promotion programs toward products that

global markets demand.

Improving the effectiveness of export expansion programs requires a shift in emphasis and

budgetary expenditures. Currently, export promotion funds are used to dispose of surpluses produced in response to commodity program incentives. If the full cost of disposing of these

surpluses were totaled (including expenditures for

production subsidies, market development programs, export credit costs, and export subsidies)

for exporting the last several million tons of each

subsidized crop, the result would likely be net

costs, not net benefits. To ensure that there are net

benefits to exporting agricultural products, the

United States needs policies that match those

products more closely with demand in evolving

markets. This new approach would require changing both the commodity programs that influence

the structure of farm production and the manner in

which export promotion programs are operated.

The production system can be improved by allowing market prices to have a greater influence

on production levels. Target prices that are frozen

over a period of years are not appropriate guides

for determining the composition of farm output

from year to year. Such prices have nothing to do

with supply and demand, and therefore may guide

production along paths that have no market relevance. More appropriate guidance can be pro-
206 | Agriculture, Trade, and Environment

vided by international market signals, but they

must be acknowledged and understood by more

farmers and/or exporters. To that end, it is important to broaden the base of current knowledge

about foreign markets, and to expand the pool of

knowledgeable persons and firms involved in exporting. More active participation—not only by

bulk commodity exporters, but also by livestock

and specialty crop exporters, exporters of semiprocessed-processed commodities, and exporters

of highly processed food products—is essential.

One way to achieve this aim would be to revise

the program evaluation process, adopting a zerobased budgeting approach for export promotion

programs. Exporters would have an opportunity

to submit proposals for funding projected activities over a five-year period. Proposals accepted

would be funded for those five years, and funding

would be phased out over a second five-year period. The primary goal would be to make export

promotion programs more like pilot programs

than permanent entitlements. A secondary goal

would be to make federal funding available to a

broader range of agricultural interests, with the

prospect of maximizing export gains for the nation and for the agricultural sector. It is worth noting here that the nation has invested billions of

dollars in developing a highly efficient agricultural sector and retains an interest in maximizing the

role agriculture can play in reducing the nation’s

trade deficit. With this in mind, it seems reasonable that a full evaluation of market development

and export expansion programs should be carried

out to determine their current effectiveness.

If this option were adopted, a private-public

cooperative arrangement would be established

along the lines of the traditional market development programs, but with a broader participation

base. The goal would be to take advantage of all

sources of information, both public and private, to

discover new market opportunities that may accrue as incomes rise in the newly industrialized

countries, as populations increase in developing

countries, and as changes in government regulations take place in the hundred-plus countries covered by the General Agreement on Tariffs and

Trade (now the World Trade Organization or

WTO).

The budgetary gains that would accrue from

pursuing this option are modest. Funding for

traditional export promotion programs currently

totals about $250 million annually. Export subsidies under the Export Enhancement Program cost

around $1 billion annually (even though the cost

will decrease, as stipulated in the Uruguay Round

Agreements, or URA). Expenditures for traditional market development programs total about $37

million. The relatively new Market Promotion

Program has operated with a $200 million budget.

Revising these programs as OTA suggests would

not produce major budget savings. Instead, the

major benefits would come in the form of improved program efficacy and greater opportunities

for all U.S. agricultural exporters. Overseas markets are currently expanding to include a full range

of food items, from bulk commodities to the thousands of food items now available in American supermarkets. A new approach would offer U.S. exporters the chance to compete more effectively in

those markets.

This proposed change in approach would require a substantial change in philosophy. Increased exports would have to be seen as a means

of balancing trade accounts, rather than as tools to

improve specific sectors of the economy. Private

business would be encouraged to open up new

markets to increase export earnings for the nation,

rather than boosting the earnings of a commodity

group or the corporate earnings of an export company. Continuing trade deficits and the transfer of

national wealth that it entails should be adequate

incentive for the nation to revisit not only agricultural export promotion programs, but also the basic philosophy that underlies all U.S. export expansion policies.

OPTION B: Eliminate government-funded export

promotion programs and turn over market development activities to private companies.

Market development programs for agricultural

commodities began during an era of commodity
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 207

surpluses that followed World War II. Production

had expanded to meet war needs and the end of

hostilities brought a drop in global shipments, as

Europe and Asia slowly resumed producing their

own food. The decline had a heavy impact on U.S.

farmers, who had geared up production to help the

wartime efforts of the nation. As commodity

stockpiles grew, every possible source of demand

was examined, with the goal of getting rid of some

amount of American grain or cotton. Private organizations representing wheat growers, cotton

farmers, and producers of other commodities were

encouraged to set up overseas market development programs. Their efforts focused on introducing American farm products to buyers in other

countries. Over time, their activities broadened to

include the establishment of feed mills, flour

mills, bakeries, and other operations that would

use bulk commodities from the United States.

Times have changed. The small organizations

spawned by government-sponsored market development programs have become major organizations, using check-off funds from producers to finance activities. Federal funds still flow to these

organizations to support activities from an earlier

era. Most representatives of these organizations

would probably argue that any reduction in federal

funds would make them terminate their overseas

market development activities. Although an immediate reaction might be that any cutback should

not be condoned, further examination might conclude that there are few buyers around the globe

who do not already know that the United States is

a major supplier of bulk commodities. Furthermore, sales of bulk commodities are largely, if not

totally, independent of traditional market development activities. Sales are arranged and concluded by large multinational corporations that

also provide trade servicing activities if problems

arise.

As the nation faces tightening budgets, the

traditional market development programs of

USDA could be reexamined, with the intent of

phasing out government support from 1995 to

2000. If representatives of commodity organizations were still required to be stationed in overseas

posts, federal support could be forthcoming in different forms. (As an example, check-off funds for

paying costs of market development operations by

farmers could be made tax deductible.) But if

traditional market development programs were

phased out, it is likely that many traditional

market development activities would cease. By

the same token, it is doubtful that bulk commodity

exports would be affected very much. The most

important impact would be the loss of mutual support that now exists between commodity organizations and the foreign arm of USDA. The current

working relationships are excellent and a good example of how government and private nonprofit

organizations can work together. Nevertheless,

good working relationships do not substitute for

serving the broader public interest.

This option calls special attention to the need

for continuing trade negotiations to gain access to

other country markets, and for discouraging the

use of export subsidies globally. No single country can afford to eliminate market expansion programs, although countries can reassess which

commodities or products will gain the most from

promotion efforts.

OPTION C: Encourage the adoption of state-ofthe-art computerized information systems to improve the process of transmitting overseas trade

prospects to U.S. food exporters.

Global trade, like all other business activities,

has increased its tempo in recent decades. There

are more suppliers of any given item, and there are

more buyers in more countries. Exporters must

compete with suppliers from other countries to

satisfy foreign buyers, who have many options

available for filling their needs. In these circumstances, the time that elapses between the discovery of a trading opportunity and the development

of an offer to sell must be minimized. Many large

companies save time by locating personnel overseas, but many smaller companies do not have the

resources necessary for covering the large number

of countries now engaged in agricultural trade.

One legitimate function of government, given

the need to reduce the nation’s trade deficit, is to

assist smaller companies and firms in discovering
208 | Agriculture, Trade, and Environment

overseas trade opportunities. Such a program already exists within USDA: Foreign Agricultural

Service officers stationed in approximately 70

countries send back trade leads for U.S. businesses. As communication technologies continue

to improve, the system should be updated to ensure that U.S. suppliers are provided with information about trade opportunities in the most

timely fashion possible.

As an initial step toward implementing this option, congressional hearings could examine how

the system currently operates, evaluate how well

trade leads are being transmitted from foreign

sources to U.S. exporters, and consider ways of

using the information highway to improve the effectiveness of the program. The adverse consequences of updating the system would, of course,

be the costs of purchasing new communications

equipment and training personnel to operate it.

Such training is crucial for persons who, as part of

their jobs, must adjust to the constant flow of new

technologies out of research laboratories.

ISSUE 3: Develop a new approach for stabilizing

grain supplies during years of drought or other natural disasters.

Less U.S. government involvement in setting

crop production and storage levels would mean

less protection against unanticipated shortfalls in

crop production, either in the United States or in

other countries. Such protection has been an inadvertent result of the loan and storage programs

used to support domestic commodity prices. As

noted in the previous section, storage programs

were originally intended to provide farmers with

an alternative to selling all their crops at harvest

time, when prices are low. In practice, however,

storage programs became a market of last resort

for the surpluses that were produced over much of

the period from 1933 through 1993. The result

was large carryover stocks in many years, which

added to government costs but also ensured that

the nation would have an adequate food supply,

even when drought or other weather-related disasters struck.

U.S. grain production currently exceeds domestic needs by such large margins that even such

calamities as the drought of 1988 and the flood of

1993 were barely felt by the nation’s consumers.

The risk of supply shortages does, however, loom

over consumers in other countries that import a

large proportion of their total food supplies. While

American consumers might face higher food

prices during a global food shortage, foreign consumers—especially low-income consumers in developing countries—could face starvation. In effect, then, the insurance benefits of U.S. carryover

stocks now go in part to foreign countries, while

the costs for carrying those stocks are borne at

home. Like other agricultural policies established

decades ago, policies regarding stockpiles need to

be evaluated in the new marketing situation that

now faces agriculture.

Continuing agricultural storage programs is

still feasible, unless budgetary restrictions become too severe. Their annual cost in recent years

has approximated $800 million, which includes

costs for purchase, storage, transportation, and

disposal of stockpiles. Storage programs could be

maintained with or without other facets of commodity programs, although the amount of stockpiles could become burdensome without production controls. Other options for managing

stockpiles are developed below.

OPTION A: Establish an international grain reserve with special drawing rights, limited to nations

that contribute to the maintenance of stockpiles.

One option for lowering the risk of future food

shortages is to shift from domestic food reserves

to international food reserves, a process that has

already partly occurred. In 1972, the United States

carried 34 percent of global grain stocks; by 1994,

the U.S. share was 25 percent, on a par with its

23-percent share of world grain production. The

memory of food shortages during the early 1970s

and other influences have led to larger stockpiles

in other countries. But there remains a question of

whether these stocks would be shared in the event
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 209

that other countries suffered intense food shortages.

The major dilemma posed by maintaining an

international grain stockpile is how to share the

burden of costs and benefits. One option is for the

United States to undertake international negotiations under the auspices of the United Nations,

with the goal of establishing an international grain

reserve. Countries could be allotted drawing

rights in proportion to their contributions to establishing and maintaining the stockpile. Alternatively, an international institution similar to the

International Monetary Fund (IMF) could be established to maintain stability in global food supplies. Some form of SDRs (the special drawing

rights used by the IMF) could be used for grain

rather than for currency. A third alternative would

be to turn the CCC into a quasi-government corporation similar to the Farm Credit Administration and sell shares to interested nations, who

would then have drawing rights on CCC stocks

during global shortages. A fourth alternative

would be for grain-exporting countries to band together and jointly carry a minimum level of grain

reserves to be sold only during shortages.

Whichever option might be considered, the

process of establishing an international grain

stockpile would involve determining the proper

level of stocks to cover expected variations in

global grain production. Some indication can be

derived from past experience. For example, a

1972 decline in world grain production of 30 million tons led to very serious world food shortages

and a record increase in domestic food prices. In

1993, world grain production dropped 80 million

tons, but had little effect on world food supplies.

Large carryover stocks in other countries were, in

part the reason that 1993’s low production levels

did not create havoc in world food markets.

Growth in world population (and hence vulnerability to grain shortages) will take place mostly

outside the United States. The impact of future

grain shortages due to bad weather will generally

fall on other countries that have high populationland ratios. Initiating international stockpile discussions is one way of drawing attention to the

likely impacts of future grain shortfalls. The alternative is to allow weather-induced shortages to focus attention on the issue.6

OPTION B: Phase out all government-initiated

storage programs and allow market expectations to

set the level of carryover stocks.

The original establishment of grain stockpiles

was inadvertent, the outgrowth of price-support

programs that were established not to build stockpiles but to support farm prices and incomes. In

the intervening decades, stockpiles of grain have

become an end unto themselves, with grain growers receiving storage payments and, occasionally,

windfall profits when world shortfalls cause

prices to escalate sharply. The return of stockpiles

to private hands would change the economic landscape in which commodity prices are determined,

although the prices themselves might not change.

In contrast to the current situation, in which commodity price increases are dampened by the existence of government-held stockpiles that may be

released, a shift to privately held stockpiles would

allow private holders of stocks to determine the

path of commodity prices.

The dynamics of food price inflation would obviously change if this option were adopted. In the

past, there has been pressure on the government to

release its stocks of grain during shortages and

thereby moderate food price inflation. Such pressure was balanced against interest in allowing

6Other analysts have suggested that the U.S. increase its food grain reserves only, e.g., raise the wheat reserve from 4 to 10 million tons as a

device to protect food supplies. Such a step would provide some protection for low income countries which consume food grains as food but

would give little protection to the United States, which tends to use feed grains for animal production. During the last major food crises in

1972/73, choices had to be made between allowing grain to be exported to prevent starvation or retained for animal production at home. The

balance resulted in domestic food prices rising 20 percent between December 1972 and December 1973.
210 | Agriculture, Trade, and Environment

commodity prices to increase, so that growers

could earn higher incomes. With stocks in private

hands, food price inflation would no longer be the

major criterion for determining when stocks are to

be released. Private holders would place more emphasis on the economic gains to be achieved by

holding stocks off the market until prices have risen. The limiting factor would become the availability of other countries’ grain stocks, which

could be shipped to the United States if domestic

prices rose high enough to pay transportation and

handling costs. In this context, it is worth noting

that the terms of the Uruguay Round Agreements

provide increased access to the U.S. grain market

for foreign suppliers. More access will limit price

hikes during periods of grain shortfalls and encourage release of stocks held by private firms.

Essentially, the lowering of trade barriers increases the availability of supplies for all nations,

and price fluctuations will be related to transportation costs as well as to domestic supply conditions.

Although the outcomes with and without government stockpiles might differ during grain

shortages, the results during more normal years

would generally be similar. Private stockpiling interests would evaluate supply-demand conditions

and make judgments about the profitability of

holding different levels of stockpiles. Sizable

stocks would be held by exporting interests to ensure their ability to meet export contracts. Speculators would hold some stocks in anticipation of

weather-related shortfalls in production. The level

of speculative stocks would vary, with larger

stocks held in the aftermath of a severe drought

and lower stocks held after a series of favorable

weather years.

As the stocks of other countries have grown,

and as trade agreements have increased access to

supplies from other countries, it appears more and

more possible to extract the U.S. government

from its current role in stockpiling programs. In

closing, however, it should be indicated that doing

so could have significant ramifications for U.S.

foreign policy. In the event of a global shortfall,

for instance, the United States might be faced with

having to discourage exports to maintain price stability—which would raise concerns in foreign

countries and in U.S. foreign policy circles. It is

essential to balance this potential problem against

the gains that would accrue from the elimination

of government-held stockpiles to determine the

best outcome for the nation.

POLICY OPTIONS FOR AGRICULTURE

AND THE ENVIRONMENT

The U.S. public has developed a broader appreciation of agriculture’s relationship to the environment since the 1970s. Agricultural production exerts detectable and, in many regions of the

country, significant effects on the quality of water,

wildlife, and soil resources (chapter 4). Although

short-run trade projections do not indicate a large

expansion in those effects, long-term production

and world population growth will likely intensify

pressure. At present, there are four major

constraints inhibiting attempts to address agriculture’s broader environmental agenda:

 environmental goals for agriculture remain unclear;

 inadequate science and monitoring hamper

agroenvironmental priority setting and program design;

 many agroenvironmental programs do not adequately recognize the roles of private incentives and disincentives in program execution;

and

 research and development to provide complementary technologies that link production and

environmental goals have not been given priority, thus reducing options and flexibility.

These four constraints are all interrelated. Obviously, agriculture’s environmental goals must

be defined before programs to achieve those goals

can be designed, and improved agroenvironmental science is crucial to identifying priority targets

and implementing programs effectively. With

clear program directions, improved science, and

better functioning markets, however, public and

private technology research and development can

be mobilized to alleviate agroenvironmental

problems more efficiently.
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 211

❚ Establishing Environmental Goals for

Agriculture

Despite six successive decades of federal involvement in conservation programs, the U.S. agricultural sector remains without comprehensive and

consistent goals concerning water quality, soil

quality, and wildlife resources (chapter 4). One

such goal might be to eliminate agricultural water

pollution that violates minimum drinking water

standards by 2010. Related objectives could specify the nature of pollution reductions by given

dates; for example, the control of fecal coliform

bacteria and other pollutants from confined animal feeding operations by 2005.

Current environmental management efforts affecting agriculture emanate from at least 40 federal programs, begun at varying times to address

specific issues (chapter 4). This plethora of programs reflects the incremental approach the federal government has taken to solving agriculture’s

environmental problems, which has resulted in

fragmentation as well as possible confusion and

conflict. A comprehensive evaluation of the many

programs within USDA or in all federal agencies

has not been undertaken to determine their consistency and overall efficacy.

The absence of consistent and comprehensive

goals poses significant uncertainty and costs for

farmers, ranchers, agribusiness, environment users, consumers, and government agencies. Pressures from long-term production and trade

growth, coupled with increasing use of the rural

environment, will likely exacerbate the situation.

Placing U.S. agriculture on an economically and

environmentally sustainable path requires comprehensive agroenvironmental goals, not only to

guide current management efforts, but also to encourage public and private development and application of technologies that promote financial

and environmental health.

Environmental goals for agriculture could be

established in three ways. First, Congress could

clarify the goals that are explicit or implicit in the

40 existing programs. This approach has not been

taken for other industrial sectors perhaps because

an industry-by-industry approach varies from

overarching water, air, and other major legislation

aimed at specific environmental resources or

problems. Second, Congress could instruct an

agency, such as USDA or the U.S. Environmental

Protection Agency (EPA), to establish goals,

drawing on input from industry, other federal

agencies, state and local government, environmental interests, and other stakeholders. Again,

there is little evidence to suggest such a top-down

approach might be successful due to the combination of large deliberation costs and the industry

not having a lead role in setting the goals.7

The third approach would vest responsibility

for establishing goals in the private sector, with facilitation by government and input from other

stakeholders. Of course, the private sector’s environmental goals would be established under applicable government legislative requirements, such

as the Safe Drinking Water Act’s standards, to ensure the broader public interest. Preliminary evidence indicates that this private sector approach is

feasible. The lndustries of the Future (IOF) program, which the U. S. Department of Energy

(DOE) initiated in 1992, works with the country’s

seven most energy- and waste-intensive industries

to establish future goals, including environmental

improvement, thereby creating a future investment strategy (6). The Department’s objective is

to use industries’ visions and goals to target its

technology research and development assistance.

Several sectors have established their goals or are

in the process of doing so working cooperatively

with the government agency. Complementing the

IOF is EPA’s Common Sense Initiative (CSI),

7 In 1911, Congress charged USDA with defining long-term conservation objectives on private agricultural lands through the Soil and Water Resources Conservation Act, but the resulting National Conservation Plans (NCP) have not guided federal, state, or private activities. As

evidence, the 1992 NCP did not receive congressional hearings, and the conservation objectives of the 1985 and 1990 farm legislation do not

draw on the NCP goals or related discussions (13).
212 | Agriculture, Trade, and Environment

introduced in 1994. Through the Initiative, EPA

works cooperatively with six pilot industries and

all stakeholders to construct environmental plans

that are to be applied industry by industry, rather

than pollutant by pollutant (8). By design, a number of the Initiative’s pilot industries are the same

as those under the IOF program. Because the CSI

has just gotten under way, it is not possible to evaluate its efficacy.

The IOF and CSI approaches capitalize on industry leadership and/or stakeholder input to

create better opportunities for devising environmental programs that complement private incentives. It may be more difficult to establish private

goals for agriculture, because of the large number

of farm groups and other stakeholders, the many

different kinds of production operations, and the

expansive nature of environmental interactions.

However, the private sector approach has the natural advantage of putting industry in a lead role to

clarify its goals, thereby providing guidance for

governmental program assistance.

ISSUE 1: Strengthen agroenvironmental science

and monitoring.

Agriculture’s relationships to water quality,

soil quality, and wildlife health have not been

comprehensively monitored or documented, despite numerous regional and local studies. The

major obstacles to better knowledge have been

relatively meager funding for environmental issues (about 10 percent of the federal agricultural

research budget has been devoted to research on

such subjects, compared with about 60 percent for

productivity studies8), and the absence of an overarching federal agroenvironmental research agenda to promote targeted and coordinated agroenvironmental programs. Existing federal research

programs have been described as lacking consistent goals and mechanisms to target key national

priorities. Agroenvironmental research has become a bit more of a priority recently, but the efforts have been judged insufficient and untargeted

by scientific associations. The upshot is that the

current information base lacks comprehensive

data on environmental conditions, the relationships between agricultural and environmental

systems, and related biological health issues that

are precise enough to guide policymaking, program implementation, and technological innovation (chapter 4).

Incomplete monitoring and science lead to two

risks: the risk of acting too late or too narrowly to

address environmental quality problems, and the

risk of over regulation and lost competitiveness.

Redirecting research to investigate the full range

of environmental issues related to production,

rather than almost exclusively pursuing higher

yields, could lead to greater compatibility between agricultural practices and the environment.

It is true that redirecting some funds away from

improving production could cause concerns about

food security. However, a shift in research toward

complementarity rather than competitiveness between agricultural production and environmental

quality could simultaneously address productivity and environmental goals. The two options

presented here offer opportunities to achieve more

complementarity.

OPTION A: Congress could fund more federal

research to strengthen knowledge of agroenvironmental systems, conditions, and implications.

Three key agroenvironmental topics deserve

more emphasis than they have been receiving: 1)

the interaction of agricultural and environmental

systems, 2) the geographic patterns of agroenvironmental conditions, and 3) their environmental

health implications. Improved knowledge of

these subjects would likely benefit the environ8It could be argued that productivity research contributes to enhanced environmental health by reducing stress on the land and water base to

grow a given amount of food and fiber. However, this outcome has not been a major goal of the agricultural research programs and their fund

allocations. Comprehensive evidence on the potential beneficial effects of productivity research in comparison to potential degradation is lacking.
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 213

ment as well as long-term industry competitiveness by allowing more precise program applications and minimizing unnecessary burdens.

Current agroenvironmental research institutions may neglect to examine key environmental

questions needed for policy response, such as the

cumulative and interactive effects of agrichemicals on biological health. The sophistication and

cost-effectiveness of federal research at USDA,

EPA, and the U.S. Department of the Interior

could be enhanced by enacting a policy stipulating

that all applied research funding decisions with

agroenvironmental implications incorporate production, natural resource, and environmental factors. By implementing such a policy, government

would recognize the need for a full accounting of

significant environmental effects to supplement

the market incentives driving productivity, thus

encouraging complementary approaches. Such a

policy also begins to lay the foundation for more

effective program targeting and for developing innovative complementary technologies (chapter 4).

A research planning survey could examine the

environmentally related data produced by all federal agencies to identify important “gaps,” and reserve funds for a “gaps research portfolio.” That

portfolio could be guided, at least initially, by existing evaluations of agroenvironmental research,

such as National Research Council (NRC) studies, and by expert panels. Innovative federal data

collection groups such as the Federal Geographic

Data Committee, the Consortium for International Earth Science Information Network, and EPA’s

Environmental Monitoring and Assessment Program could assist in such a gap analysis and portfolio design. Although data gaps and quality

problems would not be eliminated by agency collaboration, these efforts could help improve overall data quality.

Additional incentives could be given to promote private-sector involvement in public research, such as granting limited patent protection

or exclusive licenses for private-sector innovators. The research capabilities of agribusiness and

environmental organizations could also be included in federal agency research efforts. However, private participation in agroenvironmental

research may be limited by potential conflicts of

interest between public and private goals, as well

as the costs of collaboration. (The potential for

public-private partnerships is discussed more fully in Issue 3, Option B.)

Without a clear federal commitment to improve

agroenvironmental research and providing sufficient rewards to scientists, agency administrators

can anticipate lost resources in endless coordination meetings. The chief potential drawback to redirecting research, however, may be agency resistance to the reallocation of existing authorization.

Ultimately, bureaucratic incentives must be restructured to reward collaborative and coordinated research on priority issues. If, for technical

or bureaucratic reasons, interagency coordination

and collaboration prove impossible, Congress

could assign full responsibility to one agency—

for example, USDA or EPA. Without a strong

commitment by Congress to redirecting agricultural research toward environmental topics, the

criteria and standards by which departments will

judge grant proposals will become bureaucratic

hurdles rather than effective filters. If the research

reallocation is implemented under the condition

of no new funding, the shift of some production

research funds to agroenvironmental research

may meet institutional resistance. Therefore, development of a focused and well-documented research agenda is a prerequisite to such a research

reallocation.

An initial research priority would be the establishment of a comprehensive set of minimum

standards that ensure sustainable biological

health. Some federal guidelines (standards) have

already been established, particularly for drinking

water quality (chapter 4, appendix 1), but these

guidelines mostly concern human health and may

not address all potential environmental problems.

As a first step, more complete water quality standards can be devised. Water quality may be the

best single indicator of agriculture’s role in environmental conditions affecting biological health.

The quality of surface and ground waters directly

affect drinking water, aquatic habitat, and recreational uses such as swimming, boating, and fishing. The quality of surface water defines the vi-
214 | Agriculture, Trade, and Environment

ability of much terrestrial habitat and is closely

related to soil quality; water is perhaps the most

important factor in the transport of pollutants

through waterways or through atmospheric

cycles.

Developing biological health guidelines is

likely to be resource-intensive, although much of

the cost could be redirected from existing federal

agricultural research. Coordinating and streamlining research initiatives would be achieved by redirecting rather than augmenting existing budget

authorization. Budget redirection of this kind

would clarify the federal goals and provide for

more strategic management of existing research

and program funds. Given the difficulty of the

task, a periodic congressional oversight schedule

would help ensure that standards were devised in a

timely fashion.

OPTION B: Congress could direct that improved

science be used to target high-priority agroenvironmental problems.

Since the mid-1980s, federal conservation and

environmental programs relating to agriculture

have been increasingly focused on particular

problems and geographic areas. Unfortunately,

weak and incomplete agroenvironmental science

hampers the potential of targeting. As noted

above, increased understanding of the interlinking

of agricultural and environmental systems, geographic conditions, and biological health implications would aid targeting.

Until these weaknesses are remedied, opportunities for improved targeting exist with available

information. The most elaborate targeting protocol emerged from congressional instructions in

the 1990 farm legislation to improve the environmental cost-effectiveness of CRP enrollments.

Three steps were taken: the list of eligible lands

was enlarged to include special water quality

areas, a rental bid cap was established so that CRP

payments could not be more than the market rate,

and parcels were ranked by a calculated environmental benefit index. Analyses of the results suggests that the targeting process did improve environmental benefits per dollar of CRP expenditure.

Nonetheless, further improvements are possible,

including the addition of other environmental dimensions such as wildlife. Applying this kind of

targeting process to other agroenvironmental programs for water and soil quality, wetlands protection and wildlife habitat holds the potential to improve cost-effectiveness.

To further improve targeting efficacy in the face

of incomplete science, Congress could assemble a

group of leading scientific experts to assist in

identifying priority areas. Box 7-1 describes an

exercise that OTA conducted to investigate the

feasibility of improved national targeting using

expert scientific judgment. The process proved to

be low cost and resulted in certain geographical

targets serving multiple subjects such as water

quality, soil quality, and rangeland health and

wildlife. The expert panel could be a first national

step toward identifying priorities, followed by

further refinement of priorities at the state or local

levels, where knowledge of environmental details

is greatest. Targeting within even a single watershed can improve program efficacy.

Targeting would involve costs for information

collection and analysis. Public investments in research and technology can reduce those information costs. Targeting program efforts to highpriority areas may also involve higher program

costs to make changes in land and water use, as evidenced by the increased rental payments for targeted CRP enrollments after 1990. However, the

higher program benefits may still exceed costs.

Finally, the reallocation of agroenvironmental

program assistance will likely induce political resistance from those benefiting from the current

distribution.

ISSUE 2: Strategically target agroenvironmental

programs based on private incentives.

Evaluations indicate that strategic improvements in the way agroenvironmental program approaches are employed would provide more enduring and cost-effective solutions (chapter 4). In

general, they have not been targeted enough to the

situations where the program complements private incentives or offsets private disincentives.
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment 215

OTA convened a group of leading scientists to examine 10 major environmental subjects related to

agriculture: soil quality, surface water quality, groundwater quality, water conservation, wetlands, rangeIands, rural landscapes, plant diversity, insect diversity, and wildlife. The principal purpose of the exercise was to determine whether it was possible to identify geographical priorities for each subject. Each

panelist had a simple but challenging task: draw up a list of the 10 areas in the country that should

receive targeted program attention for his or her subject The physical size of the geographic area was

not restricted, but panelists were asked to be as precise (and keep their areas as small) as possible.

(Large areas inherently diminish targeting efficiency, unless the environmental or conservation problem

in question applies in equal measure throughout the area ) A geographical information systems expert

facilitated the targeting experiment.

The exercise resembled a Delphi process of soliciting expert judgment, then sharing it with other

panel members and OTA staff, and then feeding it back to the panelists for possible revision. Each

panelist was asked to consider environmental, economic, and social criteria in making his or her

choices, but was not required to adhere to a fixed procedure. A major project goal was to extract as

much expert judgment as possible from the panel members without imposing constraints on them, thus

encouraging innovative approaches. (A potential disadvantage of this method is that the panelists,

each using different criteria, weights, and standards, might come up with inconsistent results. However, imposing a standard protocol would either make the exercise impossible or create other unknown

problems given incomplete science.) Each panelist was encouraged to consult with peers around the

country to put together the best database. A majority of panelists contacted from five to 30 peers to

incorporate their views. Thus, the panel’s priorities reflect a broad range of professional input.

Five overall findings emerged from the exercise:

■

■

■

■

■

It is possible to identify general geographic areas/regions that need special program attention--that

is, it is possible to set priorities--by using existing data augmented by expert scientific judgment

The national selection of priorities yields approximate boundaries and should be augmented by a

companion state and local process to identify the most pressing problem areas and farms within the

priority regions, using the best scientific expertise in those areas

The geographical priorities for several conservation and environmental subjects overlap considerably, suggesting that the potential for program complementarily exists.

In the process of selecting priorities, weaknesses in science and data are quickly apparent These

weaknesses can help define the research and data collection agendas to aid conservation and environmental monitoring and problem remediation.

The databases on several subjects, most notably plant and insect biodiversity, are not adequate to

define even approximate geographic priority areas with confidence. However, keeping these subject

areas in the priority-setting process is essential to covering the whole agroenvironmental system

OTA is continuing to refine the expert panel approach to environmental targeting, with a special focus on identifying environmentally sensitive lands of national importance.

SOURCE: Office of Technology Assessment, 1995.

Voluntary education and technical assistance pro- based programs could be better targeted to priority

grams, which can work well in certain circum- areas and to implementing cost-effective technolstances and do not incur high net costs for agricul- ogies. As matters stand, some regulations affectture, have not produced significant and ing agriculture’s environmental performance

wide-ranging environmental results. Subsidy- could be implemented in simpler and less costly
216 | Agriculture, Trade, and Environment

ways. Two options that complement one another

could potentially redress some of the current programs’ shortcomings.

OPTION A: Congress could put existing programs into three basic approaches.

Key to structuring more effective federal programs is identifying the strength of private incentives to implement environmental practices

(chapter 4). The multiple existing programs may

be categorized into three major approaches based

upon the nature of those private incentives:

 When farmers have incentives to adopt

technologies that increase profit and simultaneously improve environmental conditions

(the “win-win” case), voluntary education and

technical assistance can accelerate and expand

adoption.

 For situations in which farmers have insufficient incentive to adopt technologies that provide environmental benefits to other parties,

voluntary compensatory (subsidy) programs

may be necessary.

 When farmers have inadequate incentives to

discontinue damaging practices that violate

minimum environmental standards, regulation

may be necessary.

Employing this categorization offers the potential to diagnose which program is most suitable in

responding to specific targets or targets where private incentives are similar. Streamlining programs in this manner can minimize overlap and

conflict. It could also help evaluate program performance more systematically. For example, all

problems requiring compensation to offset farmer

disincentives can be put under one category to

compare their relative benefit and budget consequences as a group.

Regardless of the mix of agroenvironmental

programs adopted, all measures could be implemented under the guidance of a whole natural resource management farm plan. Such a plan incorporates soil quality, water quality, and wildlife

habitat into the farm’s production system on an integrated basis, rather than treating them as separate components. Requiring development of the

plan by the farmer with expert private and public

assistance, captures the operator’s intimate

knowledge of the farm’s natural resources. That

knowledge is essential to best design management

systems that achieve agriculture’s environmental

goals while simultaneously achieving profit and

production objectives.

In structuring more effective federal programs,

it is also important to delegate authority and responsibility to the governmental levels at which

programs can be operated most cost-effectively.

Federal leadership and oversight will be needed to

achieve national environmental goals that apply

uniformly across the country, such as decreasing

pollutants in air or water that cross state or national borders. However, state and local governments

likely have the best information in their areas on

environmental benefits and incentives to reduce

compliance costs in achieving national goals.

Education and Technical Assistance

As noted above, voluntary education and technical assistance programs will likely be cost effective when it comes to new technologies that offer

net benefits to farmers and to the public. Such

technologies as soil nutrient testing and conservation tillage, for instance, often reduce production

costs as well as improve soil or water quality.

Adoption of similarly beneficial technologies

may be hampered, however, by lack of information, fear of the risks involved in change, insufficient financing, the need for new management

skills, or conflicts with other public programs. In

these cases, education and technical support, perhaps supplemented by temporary cost-sharing,

may help farmers overcome their reluctance. The

public environmental benefits accruing from use

of the new technologies would likely be ongoing,

as private interest in continuing to use the new

technologies ought to be high. The costs of each

educational and/or technical assistance program

would depend upon the program’s scope but probably would not be significant, because the infrastructure for these programs already exists.

Existing government and university education

and technical assistance efforts, such as the Natu-
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 217

ral Resources Conservation Service’s Conservation Technical Assistance Program and the Extension Service’s outreach programs, could be

focused on these opportunities. The process of

constructing a whole farm natural resource plan

will likely identify such education and technical

assistance needs. In general, more systematic effort needs to be given to identifying the environmental problems and potential technological solutions that offer “win-win” outcomes than past

program efforts. As chapter 4 revealed, there is a

lack of evidence to indicate past federal education

and technical assistance programs have caused

significant conservation gains implying they have

not been targeted predominantly to those “winwin” situations. 

Compensation (Subsidies) for

Environmental Services

Discussion in chapter 4 indicated that subsidybased programs have not been well targeted. The

compensatory approach should be reserved for

those priority situations where the public desires

performance beyond minimum environmental

standards and farmers do not have natural economic incentives to achieve the desired levels.

Vermont’s nonpoint water pollution control program rewards farmers in this manner after they

have fulfilled minimum practice requirements.9

At the national level, the present ambiguity about

environmental goals relating to agriculture means

that minimum standards are determined program

by program rather than for all subsidy programs as

a group.

A critical first step in improving subsidy program performance is to employ the geographical

targeting protocol described in Issue 1, Option B.

Where federal funds are being used, the national

identification of priorities is necessary to ensure

national goals are served. State and local authorities can further refine the targets after the selection

of national priority areas.

The next step is to identify cost-effective practices for the environmental situation. Subsidies

should finance contracts or practices that provide

the broadest and most enduring environmental

benefits per tax dollar spent as a matter of principle.10 For example, if the environmental problem

requires long-term protection, such as the restoration of migratory wildlife habitat to allow population recovery, then securing a long-term practice

avoids the administrative cost and possible environmental disruption of renegotiating short-term

arrangements. The long-term arrangement may

even cost more per year but still yield greater net

benefits. Also, as a rule, flexibility should be given to farmers to design and implement innovative

practices that are sensitive to local conditions but

satisfy national environmental performance standards. Finally, in situations that provide incentives for both the federal government and the

states to undertake such programs, a matching

block grant program could be used.

9To improve state water quality, Vermont has established a two-tiered system of approved agricultural practices (AAP’s) and best management practices (BMP’s) that, when signed into law in 1995, will apply to all Vermont farmers (9). AAP’s define categories of practices that all

farmers must follow to prevent nonpoint source water pollution from agriculture; the practices relate to discharges, nutrient and pesticide storage/applications, soil cultivation, waste management, buffer zones next to streams and rivers, and structures. BMP’s are anticipated to further

enhance environmental benefits but adopting them is voluntary. Because BMP’s confer environmental benefits in excess of their AAP responsibilities, farmers who adopt them are entitled to public payment.

10Programs such as this would have to be designed to avoid conflicts with Uruguay Round Agreements (URA) restrictions on agroenvironmental subsidies. The URA added three requirements to subsidy (green) payment program design: 1) payments must be part of a clearly defined

government program, 2) the subsidies must have no or minimal trade-distorting effects, and 3) payments must be limited to added cost or lost

income from the practice or technology shifts (chapter 5).
218 | Agriculture, Trade, and Environment

Regulation for Minimum Environmental

Standards

If agricultural practices that do not meet minimum

environmental standards cause significant public

risks or costs, regulation may be the only answer.

Farmers do not typically have economic incentives to change production practices that cause

damages off their farm, except if they are threatened with public program sanctions or private

lawsuits. Pesticides migrating to drinking waters,

as well as nutrient and fecal coliform pollution

from confined animal facilities, are among the

agroenvironmental problems traditionally handled through regulation. Regulations are feasible

only when the pollutant or desired practice can be

measured and monitored for enforcement. Because agriculture has many nonpoint pollution

problems diffusely spread across the land that are

difficult or impossible to measure, monitor, and

enforce, environmental regulation may apply to

practices or quality conditions.

For regulations that apply uniformly across the

nation, such as pesticide registration, or that apply

to pollution flows crossing state and national borders, federal action can ensure equitable treatment

over states to fulfill national responsibilities.

However, in many cases, such as water quality

programs, it is more technically feasible, and

more efficient, to delegate implementation to state

and local governments. The minimum environmental standards may have to vary by state or even

within the state, according to the regional nature

of environmental resources, production technologies, and public demands. In one of the first applications, Vermont has recently proposed a set of

accepted agricultural practice rules applying to all

farms. Where nonpoint sources dominate, monitoring regulatory compliance will likely depend

on evaluating implementation of whole farm natural resource plans.

The budget cost of using regulations for minimum environmental standards is not clear. If some

regulatory approaches for minimum standards replace existing subsidy programs, federal budget

savings may accrue, depending on the added administrative expense of designing, monitoring,

and enforcing the regulations. Costs to the private

sector—for purchasing equipment to meet regulations, perhaps, or for paying noncompliance penalties—may increase. But the amount depends on

the level of the standard and the regulatory mechanism used. Some alternatives to traditional regulation, which often requires farmers to choose from

a list of acceptable practices, hold the potential to

lower those costs. Capitalizing on the knowledge

and incentives held by farmers offers ways to reduce regulatory rigidity and cost. Pollution permits may be traded among farmers to meet an

overall pollution reduction goal, as air pollution

rights are now traded. For example, a tradable permits program for water quality in the grasslands

region of California’s Central Valley could save

20 percent compared with traditional best management practices (12).

Another alternative to traditional regulation

would be to exempt farmers from citizens’ lawsuits and the multiple (sometimes conflicting)

regulatory requirements of different agencies if

they are actively implementing approved whole

farm natural resource management plans for their

farms. The plan would be approved by the state or

federal agency responsible for implementing the

regulation. The efficacy of this “regulatory exemption” approach hinges on two factors: the

strength of farmers’ incentives to reduce regulatory burden, avoid lawsuits, and clarify uncertain

compliance status; and the costs of implementing

the management plan. Public statements by farm

groups suggests that the incentives may be significant for many farmers.

The costs of meeting the management plan requirements depend on the level of public environmental standards and the flexibility given the

farmer in meeting the requirements. Given minimum environmental standards, the development

of the detailed plan could be vested with the farmers—an approach that could promote flexible, innovative approaches. Federal and state government resources would be used primarily for

education about goals and standards, as well as

for monitoring and enforcement. Private-sector

agroenvironmental consultants would likely respond to the planning demands by farmers and
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 219

provide technical assistance. The major challenge

of this approach is defining exactly what a farmer

must do to be exempted from suits brought under

environmental regulation and regulatory penalties. An implicit benefit of the approach is to reward farmers who have taken steps to improve the

environment, rather than paying farmers to stop

harming it (as past programs have).

OPTION B: Congress could facilitate private

market approaches.

Clearer definitions of public agroenvironmental goals, minimum quality standards for farmers,

and private incentives for adopting environmentally preferred technologies or practices may facilitate market resolution of some agroenvironmental conflicts. In effect, this approach pursues

private compensation for environmental services.

These market approaches are not well-suited to

large issues involving many diverse parties or to

emergency situations. The purchase of nature preserves by nonprofit conservation organizations is

a relevant example, as is the sale of recreation

privileges on private farmland for hunting or other

purposes. Also, clarifying the assignment of legal

liability for environmental damages under common law may help resolve some local environmental disputes by private parties through the

courts.

Legislative action can encourage the development of market approaches to enhance agroenvironmental management. Standardizing consumer

labeling on product or process standards on agricultural products is a relevant example. Market research shows that consumers increasingly prefer

purchasing food, fiber, or other products that contribute to human health and environmental quality. This trend suggests that federal involvement in

standardizing labeling could be a cost-effective

way of leveraging significant private sector incentives toward production and environmental complementarity within the market place. Consumer

information, primarily through product labeling

and reliable certification of process standards, is

critical to allowing consumers to convey market

preferences. Standards for organic farm products

are a relevant example. Consumer demand for organic food products has shown sustained, high

growth for several years.

Unlike nutritional labeling, environmental labeling remains optional, in some cases, controversial, and generally unsystematic. Process certification standards, like organic food labeling, vary

from state to state and depend on the requirements

of different certifying organizations. Such disorganization makes consumer choices more difficult and reduces consumer confidence in the validity of market information. The 1990 farm bill

requested definitions of organic food standards,

but progress has been slow.

Industry trends toward vertical coordination

may tie the retail and production sectors closer together, so processors can better influence product

quality and environmental side effects. Food

manufacturers are increasingly negotiating contracts with producers that specify agroenvironmental practices to enhance marketing appeal

(chapter 2). The federal government could play an

essential role in this process by ensuring that markets can be formed and operated easily across state

and country boundaries. Congressional action on

these issues may also avoid the possibility of other

countries restricting imports of agricultural-related products due to uncertain human and environmental health status.

ISSUE 3: Accelerate agroenvironmental technology research and development.

The pursuit of complementarity between agricultural production and environmental quality objectives has not been emphasized in the United

States. Although other countries also appear to

have neglected such initiatives (1), the United

States may be missing out on benefits of competitiveness and technology export expansion, as well

as improved domestic environmental quality, by

failing to stress complementary technologies for

agriculture.

If production technologies can be developed

that manage pollution or otherwise protect ecosystems within sustainable limits and maintain

profit, they make sense from private economic,
220 | Agriculture, Trade, and Environment

environmental health, and taxpayer perspectives.

If certain technologies are widely used, they can

have a significant and positive environmental impact—most notably on water and soil quality and

wildlife habitat.11 Conservation tillage, soil nutrient management, and “precision farming” are

some of the most common examples cited. However, the potential of these technologies to fully

capture complementary production and environmental objectives has not been assessed. The prospects for a single technological “silver bullet” are,

of course, remote. More likely, a range of such

technologies must be tailored to different kinds of

farms and environments. Even so, it is not clear

that all environmental problems can be solved in a

cost-effective manner with complementary technologies. Nevertheless, the evidence indicates

that they have broad potential in the United States

(chapter 4).

The dominant agricultural technologies of

today generally promote output efficiency, to ensure an inexpensive and abundant food supply.

However, technologies oriented primarily to increasing output may have larger costs associated

with them than anticipated—even in the course of

normal use, some may cause excessive environmental degradation (chapter 4). Despite a wellestablished research and extension system, the

present agricultural technology research and development agenda may not be keeping pace with

changing needs of farmers, consumers, and those

who use rural environment resources for recreation or other uses. Maintaining the present

technology research and development strategy

could ensure low-cost food supplies in the short

term, and perhaps in the long term. But the toll on

environmental health will likely increase. Two related options aimed at avoiding such a predicament, and at promoting complementary technology, are examined below.

OPTION A: Congress could make complementary technologies the centerpiece of federal agricultural research, development, and assistance.

Congress could take a preliminary step toward

promoting complementary technologies by commissioning a review and evaluation of existing

agroenvironmental technology developments.

Such a review would assess the prospects for improving environmental quality and agricultural

productivity simultaneously in the public and private sectors. Based on such an evaluation, Congress, together with USDA, could identify the

most strategic federal role in stimulating and disseminating complementary technologies.

The second step would be to redirect USDA research along the lines described in Issue 1, Option

A. Congress could oversee the shift toward mutual reinforcement among efforts to promote nonchemical pest control, sustainable agriculture,

water quality improvement, soil quality improvement, wildlife conservation, and productivity improvement. Potential conflicts between a complementarity focus and commodity program incentives

may require legislative action.

Obstacles to refocusing USDA’s research and

development programs in this way may be organizational and philosophical. In its review of

USDA’s sustainable agriculture programs, for example, GAO found that coordinating the activities

of these programs was very difficult. Coordination was a striking challenge among agencies that

were under the jurisdictions of different assistant

secretaries.12 Although USDA has recently undergone a reorganization, communication prob11Foreign market opportunities for these technologies may exist as well, although the technologies require natural resource and production

specific contexts.

12A senior USDA manager involved in directing the water quality initiative said he did not believe that water quality and sustainable agriculture goals are the same: water quality focuses on technological changes to protect groundwater, such as satellites and lasers to analyze soil;

whereas sustainable agriculture focuses on biological and management changes, such as crop rotations. In contrast, a senior sustainable agriculture program official believed water quality protection and the technology development are part of the scope of sustainability (4).
Chapter 7 Opportunities for Redesigning PoIicies for Agriculture, Trade, and the Environment 1221

lems among research, conservation, and other

programs may still exist.

Congress could facilitate public private partnerships to develop complementary

technologies for agriculture.

A strategy to leverage private research and development of complementary technology with directed public funds could be both feasible and productive, especially given budget constraints.

Federal/private partnerships aimed at developing

complementary technologies could be better focused and significantly expanded at the national

and regional levels. Such collaborations could

spur a broad spectrum of private innovation dedicated to the dual objectives of making profits and

promoting environmentally sound production

technologies. Research and development funds

could be directed specifically toward enabling

producers to meet minimum environmental quality standards, for example, as outlined under Issue

2, Option A above.

In plans for its IOF partnership program, DOE

characterized the goals of the new partnerships in

a statement that could well apply to public/private

partnerships for complementary technologies for

agriculture:

Initially spurred by a command and control

mindset, industry and government have been

moving rapidly toward a more sophisticated

perspective that embraces pollution prevention,

efficient resource use, and renewable energy.

The reasons for this shift are simple: advanced,

integrated process technology can simultaneously improve the efficiency of energy and resource use, improve the quality of products, and

reduce waste while reducing costs and enhancing competitiveness. Such technology . . . benefits the industry, the environment, and the nation (6).

Congress could enable the partnerships to develop a range of complementary technologies, including crop rotations, diversified farming systems, biological controls for pest management,

genetic engineering of crops with attributes of

drought and other climatic tolerances, and computer-assisted decisionmaking systems. Such a

range of technologies would be essential for an industry characterized by many different types of

farming and environmental systems (chapters 2

and 4). Further, federal involvement would ensure

a greater emphasis on public environmental benefits in the creation of such new technologies. In the

past, applications of research into privately patented technology have generally not been

constrained to provide direct public benefits, such

as improved environmental quality, and so potential returns on the public investment have been

lost. That would change if the options to emphasize agroenvironmental performance and complementary technologies are adopted.

Corporate partnerships will likely focus their

efforts on applied research that can lead to profitmaking commercial applications. Some technologies that hold significant profit potential may not

require public partnership at all. (“Precision farming” may be such a case.) However, it is unlikely

that the full potential to enhance public environmental performance will be captured in those

cases. Some complementary technologies may

not have much potential to boost corporate profits.

Special public efforts may therefore be required to

encourage the development of such technologies.

A particularly effective model for research and development may be the federally funded Sustainable Agriculture Research and Education (SARE)

program, which encourages collaborative problem solving by leveraging private innovation with

public funds.

POLICY OPTIONS FOR AGRICULTURAL

TRADE AND THE ENVIRONMENT

As international agricultural exports and imports

grow, the environmental repercussions associated

with trade and production change accordingly

(chapter 5). The environmental effects of expanding domestic agricultural production to meet foreign demand during the next decade will be small

overall. Some localized areas where the effects of

trade are felt most, such as border zones, may be

significantly affected.
222 I Agriculture, Trade, and Environment

The amount of environmental damage or improvement resulting from trade expansion depends principally on how effective management

programs are, not on the volume of trade in

question. Present programs for managing the environmental side effects of production suffer

shortcomings (chapter 4). If improved through

cost-effective monitoring, targeting, decentralized management, and technology development,

as discussed above, the programs could cope with

any significant environmental problems related to

trade. They would be unlikely to have a negative

influence on competitiveness or encourage agricultural producers to migrate overseas. Rather,

trade will be affected primarily by the possible improper application of future environmental controls as nontariff barriers to international agricultural commerce.

The policy challenges in this arena are to ensure

that management programs address the special environmental concerns related to agricultural

trade--even those that transcend domestic borders and trade-related institutions. One well-publicized concern is the inadvertent importation of

harmful nonindigenous species; another is how to

develop trade-related institutions for coping with

transboundary and global environmental problems related to expanding international agricultural commerce. A third is how to develop institutions, apart from trade organizations, to better

manage global environmental resources of interest to the United States and susceptible to pressure

from expanding agricultural trade. A final consideration is how to exploit opportunities for expanding environmental technology trade to assist other

countries in managing agroenvironmental risks

that may affect U.S. interests.

Control invasions of harmful nonindignous species.

Chapter 5 described how expanded international commerce opens new pathways for importation, intentional and accidental, of foreign species. Although many of the foreign species

introduced (such as new plant varieties) will benefit the agricultural sector, a number will cause

harm, if past events are an indicator. A partial accounting of past damages from selected previous

invasions of harmful nonindigenous species

(HNIS) totals about $100 billion (a figure that

does not fully incorporate economic or environmental losses). Future losses from a limited number of significant cases may well exceed that figure. Both cost estimates are conservative. Many of

the commercial damages are concentrated in the

agricultural sector and its related natural environment.

The growing problem of nonindigenous weeds

has particular relevance for agriculture. The OTA

assessment reviewed in chapter 5 proposed four

separate options for improving the patchwork of

incomplete programs controlling their entry and

spread:

Option: Congress could amend and expand

the Federal Noxious Weed Act to rectify several

widely acknowledged problems regarding definitions, interpretations, and its relationship to

the Federal Seed Act . . .

Option: Congress could require that all entities introducing nonindigenous plant material

conduct pre-release evaluations of its potential

for invasiveness . . .

Option: Congress could require that the Animal and Plant Health Inspection Service

(APHIS) conduct periodic evaluations of its port

and seed inspection systems to test their adequacy and provide feedback for improvements . . .

Option: Congress could monitor and evaluate closely the weed control efforts undertaken

by federal agencies as a result of the Federal

Noxious Weed Act amendments in the 1990

Farm Bill (5).

As concerns about pesticide safety may reduce

the range of control measures, changes in the Federal Noxious Weed Act and weed management on

federal lands have particular importance for agriculture. Other aspects of the options are being addressed: APHIS, for instance, is developing performance standards for port inspection. More may

be taken up in the farm bill deliberations.

Several general issues related to HNIS also relate to expanded agricultural trade and the envi-
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 223

ronment. First, a comprehensive HNIS monitoring system does not exist, which means that

changes in the rate or composition of invasive and

detrimental species cannot be assessed. Second,

there are insufficient criteria and standards to evaluate the invasive character of new species that affect agricultural production and related environmental resources. Finally, agricultural trade may

be a source of HNIS that will affect the environmental health of fish, wildlife, and other natural

areas. Options for addressing these problem areas

include measures for improved border control and

screening, control and eradication programs for

natural areas (for example, parks), enhanced environmental education for prevention, better emergency responses, improved funding and accountability mechanisms, and provisions for reviewing

and regulating biological control organisms.

Three types of benefits could result from lowcost improvements in targeted control, without restricting the exchange of helpful species or other

trade. First, agricultural production losses from

HNIS such as weeds would decline. Second, damages to protected natural areas would diminish.

Finally, effective multilateral guidelines for trade

involving foreign species could prevent other

countries from restricting U.S. agricultural exports through misapplied health and safety regulations. Additional public resources would be needed to implement most of the options. Agricultural

trade flows should not be unnecessarily restricted

if control programs successfully target HNIS

without negatively affecting the introduction of

helpful foreign species.

ISSUE 2: Improve trade-related institutions for

managing agricultural trade and environmental

effects.

Some of the most challenging environmental

problems related to trade are transnational in nature. If one country increases its agricultural production, for example, lakes and rivers that it

shares with other countries may become more polluted, and rare or endangered species that fly,

swim, or walk across borders may be destroyed.

Multilateral institutions geared toward addressing

these problems (while ensuring that unnecessary

restrictions are not imposed on trade) are now

emerging. But because they are so new, there is

little evidence with which to gauge their effectiveness. The two courses of action described below

are intended to ensure the full and timely implementation of their agendas.

OPTION A: Ensure oversight of the North American Agreement on Environmental Cooperation’s

(NAAEC) provisions related to agriculture.

Congress could provide timely oversight of

NAAEC implementation, a landmark achievement in linking a regional environmental management agreement with a trade pact. There is little

experience to draw on in anticipating the nature of

progress and problems with NAAEC. It appears

that some new U.S.-Mexico initiatives are under

way, but significant obstacles may exist or emerge

to prevent them from in achieving their full potential. The administration is responsible for collecting information on the North American Free

Trade Agreement (NAFTA) and NAAEC, and

could brief Congress so that it can actively treat

emerging problems. The NAFTA/NAAEC implementing legislation requires periodic reporting,

and this option reinforces timely reporting. A

periodic oversight schedule seems prudent and a

low-cost first step.

An integral part of the reporting should be assessments by the United States, Canada, and Mexico of agroenvironmental problems related to

trade and progress in managing those problems.

Under the agreement, the North American Commission on Environmental Cooperation must review progress and problems under the agreement,

and make its assessments open to the public. Little

expense should be incurred in presenting those

findings to Congress on a timely, regular basis.

Another part of the NAFTA/NAAEC oversight

could be a review of environmental regulations

that are not scientifically justifiable and serve as

nontariff barriers to agricultural trade. Building a

public database to accurately describe and monitor these developments would aid both govern-
224 | Agriculture, Trade, and Environment

mental and private-sector efforts to minimize unnecessary obstacles while promoting legitimate

environmental management.

OPTION B: Review the progress of the World

Trade Organization (WTO) on resolving agroenvironmental issues related to trade, such as trade in

genetically engineered organisms and organic farm

products.

Along with NAFTA, the Uruguay Round

Agreements (URA) open the door to expanded

U.S. agricultural trade with the world by lowering

trade barriers and reducing export subsidies. If

history is any guide, however, the food safety and

environmental regulations of each member country may increasingly be used as nontariff barriers

to trade. The URA established new rules on sanitary and phytosanitary (SPS) measures to protect

human, animal, or plant life or health from the

risks of spreading pests and diseases, and from additives or contaminants found in food, beverages,

or feedstuffs. The new agreement requires that

agricultural product standards be based on the best

available science, sets some minimum international standards, requires risk assessment, and

employs a least trade-restrictiveness test, among

other provisions. A new Technical Barriers to

Trade (TBT) code also establishes a standard international protocol for distinguishing legitimate

uses of product standards for food labeling, packaging, composition, and other functions.

The SPS measures directly and indirectly touch

on some agroenvironmental issues, such as HNIS

and pesticide use and residues. However, the outcomes of SPS disputes related to environmental

issues must await future WTO case rulings. There

are concerns that the TBT code, in contrast to

NAFTA rules, gives too much discretion to dispute panels on environmental matters (10). Apart

from dispute panels, other WTO mechanisms to

handle environmental matters include the Article

XX (g) provision relating to conservation of natural resources, but much uncertainty also exists

about their potential applicability. It may be more

difficult for Congress to review the activities of

the WTO’s Trade and Environment Committee

than to review the activities of NAAEC, because

the committee’s operations are not as open as

those of NAAEC. However, the Office of the

United States Trade Representative (USTR) is

participating in the Committee’s activities along

with other WTO members, and should be able to

keep abreast of progress and emerging problems.

The development of processes, criteria, and

standards related to agricultural production

technologies and products are all important

agroenvironmental issues. A key concern of late

has been the proper application of product-related

and process standards to trade in genetically engineered plants and animals, as well as trade in organic farm products. Early scientific and policy

attention to such concerns could reduce the possibility of unnecessary trade restrictions and significant environmental risks. Other process and production method (PPM) issues related to

agriculture—for which there are no clear guidelines and rules—may arise. There are currently,

for example, proposals to develop guidelines for

rewarding WTO countries that keep their trade regimes open while they address emerging transboundary and global environmental issues related

to PPMs (11). Generally, a wide array of environmental trade measures could be advanced, each

with very different legal, trade, and environmental

implications. The expense of careful congressional review of these and other developments is low,

given the potential for keeping agricultural trade

open and addressing agroenvironmental problems

worldwide.

ISSUE 3: Develop international institutions outside trade organizations to manage transboundary

environmental issues related to agriculture.

Many transboundary and global environmental

phenomena either transcend trade or are better

handled through forms of multilateral cooperation

other than trade agreements. The Montreal Protocol on reducing ozone-depleting substances and

the Rio Conventions on climate change and biodiversity are examples of such multilateral cooperation. Although there are more than 1,000 international environmental agreements, their
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 225

overall effectiveness has not been assessed (chapter 5). The small number (about 20) that use trade

measures appear to be effective. It is important to

note, however, that existing multilateral environmental institutions do not have sufficient authority and resources to resolve complicated international environmental problems (2).

Addressing these transboundary and global issues will take time because the links between the

environment and agricultural trade are poorly understood, management institutions are immature,

and multilateral negotiation and collaboration are

slow, costly processes. Immediate attention should

be given to structuring productive agreements and

institutions that help the United States avoid large

environmental risks and keep international agricultural trade as unrestricted as possible. The two

options delineated below build on each other to

address the issue.

OPTION A: Congress could review international

environmental management agreements affecting

agriculture.

Past efforts to address environmental problems

beyond U.S. borders have generally been made on

a case-by-case basis, as the negotiation and signing of the Convention on Trade in Endangered

Species (CITES), NAAEC, and the Montreal Protocol demonstrate. This approach conserves negotiation, implementation, and enforcement resources, which are, as matters stand, expended

only on problems that achieve international notoriety. So far, such agreements have not restricted

trade in any major way. Nonetheless, this case-bycase approach is often reactive rather than proactive, especially with regard to management issues

that hold potential for large-scale and irreversible

environmental change. There are a few multilateral funding institutions that address international

environmental problems—such as the Global Environmental Facility (GEF) of the World Bank,

United Nations Development Program, and the

United Nation’s Environment Program—but at

this writing they suffer from a lack of resources.

The GEF fund, for instance, depends on voluntary

contributions and appears to be far too small to

contend effectively with the welter of global environmental problems it faces.

One agricultural trade problem that has resulted, in part from the implementation of international environmental agreements (and has been

hotly debated in recent years) concerns methyl

bromide. Widely used as a soil fumigant in producing certain crops, and for treating agricultural

exports and imports, methyl bromide also depletes ozone and is targeted for reduction under

the Montreal Protocol. EPA, under authority of

the Clean Air Act, is planning to phase in a total

ban on methyl bromide use in the United States by

2001. Estimates show that a reduction or ban

would yield benefits far in excess of costs (7). But

countries that are not taking such a stringent approach, or have not signed the Montreal Protocol,

may consequently enjoy a competitive advantage

in the international agricultural marketplace. Preliminary estimates indicate the ban would cause

short-term annual losses of about $1.2 billion to

agricultural producers and consumers, assuming

that there are no new chemical substitutes for

methyl bromide. A congressional review of possible federal actions that might help the U.S. agricultural sector adjust to the methyl bromide

phaseout, such as technology research and development, would be extremely useful.

OPTION B: Examine the feasibility of a global

management institution to treat adverse environmental consequences of agricultural trade expansion.

Congress could initiate multilateral discussions on the adequacy of current institutions to address transboundary and global environmental

problems that significantly affect U.S. interests.

Commentators have suggested alternative approaches and institutions with different implications for U.S. involvement (2,3,11). A global environmental organization that would incorporate

existing piecemeal programs could work with the

WTO to ensure that economic and environmental

agendas do not clash. As evolving science reveals

new links among transnational environmental

systems, and as nations’ economies become in-
226 | Agriculture, Trade, and Environment

creasingly globalized and interdependent, the

benefits of comprehensively investigating linkages seem apparent. As with other policy options

advanced in this section, the expense of the preliminary investigation would be minimal in comparison with the potential benefits.

Issues related to agricultural production, which

has an impact on so much water and land around

the globe, would be one element of the review.

Many analysts believe, for example, that the

greatest environmental challenges from liberalizing and expanding agricultural trade will occur in

developing countries that have immature environmental management institutions. The proposed

review could address this concern by coming up

with a blueprint for precautionary management

assistance to these countries. Another important

function of the review could be to develop an information base that would help scientists and policymakers to anticipate the nature of likely environmental problems and possible research

responses.

ISSUE 4: Foster private and public agroenvironmental technology transfer.

Because the United States has developed considerable environmental management experience

from almost three decades of programs, its industries have developed the capacity to competitively

produce and export technology abroad. Environmental technology is in fact now a U.S. export

growth industry, and it may serve national interests well by providing foreign countries with the

training and technology to treat global/transboundary environmental problems that may eventually

affect the United States. (New technologies for applying pesticides to minimize harm to nontarget

wildlife species that migrate to U.S. territory are

an example.) There is no major role for the federal

government to play in promoting this marketbased approach to remedy environmental problems. The government could, however, assemble

information and conduct analyses to ensure market access for U.S. firms and to appraise targeted

public research assistance.

Little is known about the applicability of environmental technology exports related to agriculture. As explained in chapter 4, environmental

management in agriculture has not (unlike other

industries) been highly regulated. As a result, the

sectors supplying agroenvironmental technologies to domestic industry have been motivated

mostly by subsidies rather than regulation. It is not

clear if the dominant voluntary subsidy approach

has yielded a competitive advantage in international environmental technology markets. Some

new complementary production-environmental

technologies, such as information-based nutrient

management, could apparently be used in foreign

settings.

The potential benefits of assisting other countries in dealing with environmental management

problems that result from expanding agricultural

production may warrant attention from the public

and private sectors. The public interest is in managing transboundary or global environmental resources; the private interest is potential export

earnings. Two options explored below would help

both parties reap benefits from agroenvironmental

technology trade.

OPTION A: Assemble an information base on

trade in agroenvironmental technologies.

Both public agencies and private firms need information about the status, trends, and obstacles

confronting them in marketing agroenvironmental technologies abroad. Although the international trade market in environmental technology appears relatively open, the particular problems and

opportunities for the agriculture sector have not

been systematically investigated.

Ensuring sufficient effort to achieve environmental goals may require more than open private

markets—some public activity may be necessary.

NAAEC, for example, is investigating transborder environmental problems and how environmental technologies might be used to alleviate them.

Public policies that discourage or inhibit particular technologies that promote environmental

protection, such as burdensome registration proc-
Chapter 7 Opportunities for Redesigning Policies for Agriculture, Trade, and the Environment | 227

esses for new chemical or biological pesticides,

may require governmental attention. Congressional hearings on issues related to agroenvironmental technology trade could help assemble the

first information base on the subject.

OPTION B: Authorize a multilateral publicprivate panel on agroenvironmental technology

transfer.

Environmental technologies seem to face relatively few trade barriers, as noted above, and little

government involvement appears necessary to

make the industry a beneficial force for promoting

the health of the domestic and international environment. The full potential for sharing agroenvironmental technologies that address key transboundary and global environmental management

questions cannot, however, be realized by private

markets alone. Certain cases will require more

government assistance.

Where transboundary or global environmental

issues exist, the management problem becomes

more difficult because multiple governments and

complex negotiation become necessary. The

protection of plant and animal species diversity

that serves production and environmental needs

outside one country’s borders is a good example.

Expanding agricultural production and environmental change in foreign countries from trade liberalization raises the issue of technology transfer

to address these issues.

Convening an international panel on agroenvironmental technology transfer to design institutions and procedures for promoting the public and

private diffusion and voluntary adoption of human, biological, and physical technologies would

be a low-cost first step. Some programs already

under way at the Organization for Economic

Cooperation and Development are investigating

ways to promote such transfers, and increased

congressional attention would aid such efforts.

Improved market access for U.S. companies

would likely result from such initiatives, as well

as public-private collaborative technology research and development.

EPILOGUE

This chapter has presented policy options for agriculture, trade, and the environment that illustrate

how policies can be complementary rather than in

conflict. As the United States heads into the next

millennium such complementarity could have a

key influence on the standing of U.S. agriculture

in a global economy. Indeed, seeking complementarity among these policies will allow the United

States to capture the opportunities of global market expansion while protecting and advancing domestic goals related to environmental quality as

well as to the competitiveness of the agricultural

sector. Moreover, seeking complementary and

mutually reinforcing policies will likely lessen

budget pressures. Equally important, pursuing

complementarity can help ensure that the nation’s

policies are oriented to the future, not anchored to

the past.

CHAPTER 7 REFERENCES

1. Crosson, P., and Anderson, J.R., “Concerns

for Sustainability: Integration of Natural Resource and Environmental Issues in the Research Agendas of NARS,” Research Report

4 (The Hague: International Service for National Agricultural Research, 1993).

2. Esty, D.C., Greening the GATT: Trade, Environment, and the Future (Washington, DC:

Institute for International Economics, 1994).

3. Runge, C.F., Free Trade, Protected Environment: Balancing Trade Liberalization and

Environmental Interests, (New York, NY:

Council on Foreign Relations, 1994).

4. U.S. Congress, General Accounting Office,

“Sustainable Agriculture: Program Management, Accomplishments and Opportunities,”

GAO/RCED-92-233 (Washington, DC: September 1992).

5. U.S. Congress, Office of Technology Assessment, Harmful Nonindigenous Species in the

United States, OTA-F-566 (Washington, DC:

U.S. Government Printing Office, September

1993).
228 | Agriculture, Trade, and Environment

6. U. S. Department of Energy, “Industries of the

Future: Partnership Implementation Plans”

(Washington, DC: February 1995).

7. U.S. Environmental Protection Agency, Regulatory Impact Analysis: Protection of Stratospheric Ozone, Volume I (Washington, DC:

1988).

8. U.S. Environmental Protection Agency,

“Common Sense Initiative” (Washington,

DC: 1994).

9. Vermont Department of Agriculture, Food

and Markets, “Proposed Accepted Agricultural Practice Rules” (Montpelier, VT: December 1994).

10. Ward, J., and Cameron, J., “Environmental

Priorities for the World Trading System: Recommendations to the WTO Committee on

Trade and the Environment,” Natural Resources Defense Council, 1995.

11. Young, M.D., “Ecologically-Accelerated

Trade Liberalization: A Set of Disciplines for

Environment and Trade Agreements,” Ecological Economics, vol. 9, No. 1, January

1994, pp. 43-52.

12. Young, T., and Congdon, C., “Plowing New

Ground: Using Economic Incentives to Control Water Pollution from Agriculture” (Oakland, CA: Environmental Defense Fund,

1994), 136 pp.

13. Zinn, J.A., Senior Analyst, Natural Resources

Policy, Congressional Research Service, personal communication, March 1995.
| 229

ork Group, Reviewers,

and Acknowledgments

ENVIRONMENT WORKGROUP –AUGUST 4–5, 1994

Arthur Allen

National Biological Survey

Ft. Collins, CO

Ken Berg

U.S. Department of the Interior

Washington, DC

Michael Conzen

University of Chicago

Wilford Gardner

University of California–Berkeley

Ralph Heimlich

U.S. Department of Agriculture

Washington, DC

Jon Kusler

Association of Wetland Managers

Berne, NY

Bill Larson

University of Minnesota

Pat Leahy

U.S. Geological Survey

Reston, VA

Joe McHugh

Cornell University

Ithaca, NY

Brien Meilleur

Missouri Botanical Garden

St. Louis, MO

George Ruyle

University of Arizona

Gregory E. Schwarz

U.S. Geological Survey

Reston, VA

Quentin Wheeler

Cornell University

Ithaca, NY
230 |

REVIEWERS

David Baldock

Inst. for European Environmental Policy

London, United Kingdom

Nicole Ballenger

Board on Agriculture

Washington, DC

Willard Cochrane

Stillwater, MN

Mark Drabenstott

Federal Reserve Bank of Kansas City

Marvin Duncan

North Dakota State University

John Dyck

U.S. Department of Agriculture

Washington, DC

Neil Harl

Iowa State University

Dave Ingersoll

International Trade Commission

Washington, DC

Hisashi Ishida

Embassy of Japan

Washington, DC

Dennis Keeney

Iowa State University

Ronald Knutson

Agricultural & Food Policy Center

Texas A&M University

Barry Krissoff

U.S. Department of Agriculture

Washington, DC

Ron Lacewell

Texas A&M University

John Lee

Mississippi State University

Stephen B. Lovejoy

Purdue University

W. Lafayette, IN

Andy Manale

U.S. Environmental Protection Agency

Washington, DC

Barry Marshall

New Zealand Embassy

Washington, DC

James R. Moseley

Purdue University

West Lafayette, IN

Don Paarlberg

West Lafayette, IN

Robert Paarlberg

Wellesley College

Wellesley, MA

Guillermo Ramos

Embassy of Mexico

Washington, DC

Wayne Rasmussan

Annandale, VA
| 231

Daryll E. Ray

Agricultural Policy Analysis Center

University of Tennessee

C. Ford Runge

University of Minnesota

Randy Schnepf

U.S. Department of Agriculture

Washington, DC

Candace Stevens

Environment Directorate, OECD

Paris, France

John Sullivan

U.S. Department of Agriculture

Washington, DC

Phil Szmedra

U.S. Department of Agriculture

Washington, DC

Jim Tobey

Environment Directorate, OECD

Paris, France

Luther Tweeten

Ohio State University

Jeff Zinn

Congressional Research Service

Washington, DC

ACKNOWLEDGMENTS

Jon Anderson

Natural Resources Conservation Council

Vermont Department of Agriculture, Food &

Markets

Jack Barbash

U.S. Geological Survey

Menlo Park, CA

Steven Borgelt

University of Missouri

Columbia, MO

Kenneth Cantor

National Cancer Institute

Bethesda, MD

Elizabeth Chornesky

Office of Technology Assessment

Craig Cox

Committee on Agriculture, Nutrition & Forestry

U.S. Senate

Art Daugherty

U.S. Department of Agriculture

Washington, DC

John Doran

University of Nebraska–Lincoln

Agricultural Research Service

U.S. Department of Agriculture

Allan R.J. Eaglesham

Cornell University

Ithaca, NY

Jacques de Miramon Fitz–James

Trade Directorate, OECD

Paris, France

Wendell Fletcher

Office of Technology Assessment
232 |

Noel Gollehon

U.S. Department of Agriculture

Washington, DC

Donald Goolsby

U.S. Geological Survey

Washington, DC

Martha Groom

North Carolina State University

George Hallberg

Iowa Hygienic Laboratory

Dennis Helsel

U.S. Geological Survey

Washington, DC

Alison Hess

Office of Technology Assessment

Maureen K. Hinckle

National Audubon Society

Washington, DC

Wilfred Legg

Directorate for Food, Agriculture, & Fisheries

OECD

Paris, France

Teresa Mauer

Appropriate Technology Transfer for Rural Areas

(ATTRA)

Fayetteville, AR

Bruce McCarl

Texas A&M University

John Miranowski

Iowa State University

Clayton Ogg

U.S. Environmental Protection Agency

Washington, DC

C. Tim Osborn

U.S. Department of Agriculture

Washington, DC

M. Stephanie Patrick

Cargill, Inc.

Washington, DC

Dalton Paxman

Office of Technology Assessment

Fran Pierce

Michigan State University

Marc Ribaudo

U.S. Department of Agriculture

Washington, DC

Max Schnepf

Soil and Water Conservation Society

Washington, DC

Rodney Sobin

Office of Technology Assessment

John Sutton

U.S. Department of Agriculture

Washington, DC

Paul Taylor

Taylor Farms

Esmond, IL

Gale W. Teselle

U.S. Department of Agriculture

Washington, DC

Mary Tiemann

Congressional Research Service

Washington, DC

Harry Wells, Jr.

U.S. Environmental Protection Agency

Washington, DC

Phyllis Windle

Office of Technology Assessment
| 233

ndex

A

AAA. See Agricultural Adjustment Act

AAP. See Agricultural Adjustment Plan

ACP. See Agricultural Conservation Program

Acreage Reduction Programs, 23-24, 146

Acreage set-aside programs, 124

ACSs. See Alternative conservation systems

Act on Water Resource Management, 186

Act to Support Rural Farming, 186

Agricultural Act of 1949, 54

Agricultural Adjustment Act, 52-53, 170

Agricultural Adjustment Plan, 174

Agricultural Basic Law, 171

Agricultural Conservation Program, 91, 92, 187

Agricultural exports

types of, 39

value of, 40, 49

Agricultural imports, 50

Agricultural privilege tax, 134

Agricultural programs

international trade agreements, 6-7

link to trade and environmental interests, 1-2

policy options, 198-221

redirecting market research, 5-6

Agricultural research

funding allocation, 12-13

opportunities for new policies, 15-16

Agricultural system. See also Farms

advanced computer technologies, 32-33

bulk commodity trade, 38-41

contract production, 35-36

domestic marketing trends, 33-35

economic status of farm households, 20-22

fertilizer use, 27, 29

global marketing trends, 37, 41-42

impact of global markets, 17-18

increased market orientation, 3-6

industrial uses of farm commodities, 36-37

irrigation water use, 24-26

new technologies, 6, 30-33

output of commercial and part-time farms, 18-20

pesticide use, 29-30

research and development, 42-43

retail foods, 37

size and diversity of farms, 22-24

tillage methods, 26-27, 28

U.S. exports, 42

value-added food trade, 37-39

vertical integration, 35-36

Agricultural tariffs, 7

Agricultural trade

environmental effects of trade liberalization and

expansion, 130-137

environmental programs and, 123-125

measures to achieve international environmental

objectives, 137-144

policy options, 221-227

product standards and, 125-130

trade and environmental policy issues, 119-122

trade barriers, 50-51

Agricultural Trade Development and Assistance

Act, 53

Agriculture Act, 178

Agroecosystems, 71-72

Agroenvironmental issues. See also Environmental

issues

agroecosystem, 71-72

erosion, 83-87

federal conservation and environmental programs,

89-94

groundwater quality, 77-80

international issues, 14-15

overview, 69-71

policy change opportunities, 15-16

regulations, 94-99

soil quality, 83-87

stimulating technology development and

adoption, 99-103

strengthening agroenvironmental science, 87-89

surface water quality, 73-77
234 | Agriculture, Trade, and Environment

targeting programs, 214-219

wildlife habitat, 80-83, 84

Agroenvironmental technology. See also

Complementary technology

information base, 226-227

multilateral public-private panel, 227

options, 212-214

research and development, 219-221

Air quality, 141, 187-191

ALADI. See Latin American Association for

Integration

Aldicarb, 80

Alien species. See Harmful nonindigenous species

Alternative conservation systems, 94

American Farm Bureau Federation, 37

Animal and Plant Health Inspection Service, 222

Animal health technologies, 32

Animal reproduction technologies, 32

APHIS. See Animal and Plant Health Inspection

Service

Aquatic habitats, 84

Argentina, policy reform, 172

ARPs. See Acreage Reduction Programs

Asia, food imports, 41

Atrazine, 74-77

Australia, policy reform, 172-173

Bacillus thuringiensis, 31

Basic Law for Environmental Pollution, 190

BECC. See Border Environment Cooperation

Commission

B

Beneficial uses designation, 73

Best management practices, 77, 134

Bioaccumulation, 83

Biological health, 71

Biologically based pest controls, 101

Biotechnology, 30-31, 100-101

Bird habitats, 82-83

Blue baby syndrome, 77. See also

Methemoglobinemia

BMPs. See Best management practices

Border Environment Cooperation Commission,

138-139

Bovine somatotropin, 31

Brazil, policy reform, 174

bST. See Bovine somatotropin

Bt. See Bacillus thuringiensis

Bulk commodities

factors effecting export of, 47-48

marketing trends, 38-41

Bureau of Reclamation, 84

Bureau of the Census, 20

C

Calgene, 6

California, groundwater studies, 78

California State Water Resources Board, 84

Canada

Air Quality Agreement, 190

export subsidy commitments, 63-65

Green Plan, 175

North American Free Trade Agreement, 61-62

policy reform, 168

U.S.-Canada Free Trade Agreement, 41, 48, 57,

66

wetlands conversion, 181

CAP. See Common Agricultural Policy

Cargo preference, 56

CCC. See Commodity Credit Corporation

CEC. See Commission for Environmental

Cooperation

Central American Common Market, 166

CFSA. See Consolidated Farm Services Agency

Channelization, 81-82

Chile, 166

CITES. See Convention on International Trade in

Endangered Species of Wild Fauna and Flora

Clean Air Act, 124, 187-188

Clean Water Act, 88, 97, 186

Coastal Zone Act Reauthorization Amendments, 97,

186-187

Coastal Zone Management Act, 186

Coastal zone waters, 97

Codes of good practice, 184

Codex Alimentarius Commission, 125

Colorado, groundwater studies, 78

Commercial farms

government payments to, 21-22

household income, 20-21

output, 18-20

Commission for Environmental Cooperation,

137-138

Committee on Trade and the Environment, 58

Commodities markets, 36

Commodity Credit Corporation, 54, 170, 203-204

Commodity loan and storage programs, 202-204

Commodity programs

environmental effects of, 131-132, 144-149

price support study, 147-148

Common Agricultural Policy, 57, 166-167

Common Sense Initiative, 211-212

Communications technology, 2-3

Compensation-based programs, 63, 217

Competitive imports, 50

Complementarity, 99-100, 197-198
Index | 235

Complementary technologies, 9, 220. See also

Agroenvironmental technology

Compliance programs, 9-10, 70, 93-94

Computer technologies, 32-33, 207-208

Confined animal facilities, 97

Conservation and environmental programs

compliance programs, 9, 93-94

Conservation Reserve Program, 92-93

list of, 113-114

overview, 89-90

soil conservation programs, 91-92

voluntary education, technical assistance, and

subsidy programs, 90-91

Conservation compliance programs, 93-94

Conservation expenditures, 116-117

Conservation land set-aside programs, 8

Conservation Needs Inventory, 23

Conservation Reserve Program, 9, 23-24, 83, 85,

92-93, 124, 179, 214

Conservation Technical Assistance, 92

Conservation tillage, 9, 26-28, 86

Consolidated Farm Services Agency, 187

Consumer-oriented food products, 38-39, 40-41

Contract production, 4, 35-36

Convention on International Trade in Endangered

Species of Wild Fauna and Flora, 143

Cooperator programs, 54

Crops

erosion vulnerability of croplands, 85-86

land available for, 23

land retirement programs, 23-24

CRP. See Conservation Reserve Program

CSI. See Common Sense Initiative

CTA. See Conservation Technical Assistance

CWA. See Clean Water Act

CZARA. See Coastal Zone Act Reauthorization

Amendments

CZMA. See Coastal Zone Management Act

D

Dairy Export Incentive Program, 170

DDT, 76

Deficiency payment programs, 42, 60, 63, 200

Department of the Environment, 178

Diazinon, 75

Dieldrin, 76

Disease control, 31

DOE. See Department of the Environment; See also

U.S. Department of Energy

Dolphins. See Tuna-dolphin dispute

Drinking water. See also Water quality

contaminants, 111-112

maximum contaminant levels, 71, 73

nitrate pollution, 182-187

pesticides in wells, 78

standards, 111-112

Drinking Water Directive, 183

Drinking water wells, 186-187

Due restraint provision, 59

E

EAA. See Everglades Agricultural Area

Economic integration. See Global economic

integration

Economic Research Service, 92

Edge species, 82

Education and technical assistance. See Voluntary

education, technical assistance, and subsidy

programs

EEP. See Export Enhancement Program

EFA. See Everglades Forever Act

Ejidos, 165-166

Electronic sensors, 33

Emergency Tariff Act of 1921, 52

Endangered and threatened species, 80-83, 176-177

Endangered Species Act, 98

Environmental compliance programs, 93-94

Environmental issues. See also Agroenvironmental

issues

agricultural research, 12-14

agriculture’s positive and negative effects on the

environment, 7-9

international issues, 14-15

measures to achieve international environmental

objectives, 137-144

policy change opportunities, 15-16

product standards, 125-130

regulation for minimum standards, 218-219

trade and environmental policy issues, 119-122

trade liberalization and expansion, 10-12,

130-137

Environmental programs. See also Conservation and

environmental programs

effect on the environment, 135-136

incomplete and ineffective coverage, 9-10

policy options, 210-221

trade competitiveness and, 122-125

Environmental quality standards, 190

Environmental targeting, 215

Environmental trade measures, 143

Environmentally sensitive areas, 175, 178-179

EPA. See U.S. Environmental Protection Agency

EQS. See Environmental quality standards

Equitable shares, 57

Erosion, 83-87

ERS. See Economic Research Service

ESAs. See Environmentally sensitive areas

ETMs. See Environmental trade measures
236 | Agriculture, Trade, and Environment

EU. See European Union

European Union

air quality directives, 190

export subsidy commitments, 63-65

nitrate pollution, 182-185

policy reform, 166-167

Third Country Meat Directive, 66

trade agreements, 57-58

Eutrophication, 74, 83, 182

Everglades Agricultural Area, 133-134

Everglades Forever Act, 133-134

Exotic species. See Harmful nonindigenous species

Expert systems, 33

Export credit programs, 170

Export Enhancement Program, 39, 54-56, 170

Export Guarantee Program, 54

Export promotion programs

evolution of, 53-54

impact of, 55-56

policy options, 204-208

Exports

factors effecting, 47-48

global marketing shifts, 41-42

markets, 168

production and trade information, 169-170

types of, 39

U.S. dilemma, 42

value of, 40, 49

F

Farm Board, 52

Farm commodities, 36-37

Farm commodity programs, 199-204

Farm Credit Administration, 209

Farm Income Protection Act, 175

Farms. See also Agricultural system

agricultural output, 18-20

diversity of income, 4

government payments to, 21-22

household income, 20-21

projected income, 64

size and diversity, 22-24

FAS. See Foreign Agricultural Service

FDA. See U.S. Food and Drug Administration

Federal Insecticide, Fungicide, and Rodenticide Act,

95

Federal Noxious Weed Act, 222

Federal programs. See Conservation and

environmental programs; specific programs by

name

Federal Water Pollution Control Act Amendments,

97-98

Feed grains, 24

Feedlots, 97

Fertilizer Act, 185, 186

Fertilizer Application Ordinance, 186

Fertilizers. See also Pesticides

consumption of various countries, 182

degree of producer subsidization in OECD

countries and, 145

environmental impact, 182-187

use in the U.S., 27, 29

Field nutrient testing, 9

FIFRA. See Federal Insecticide, Fungicide, and

Rodenticide Act

Flex acres, 66, 67

Flexibility provision, 67

Florida, sugar cane industry, 133-134

FMDP. See Foreign Market Development Program

Food, Agriculture, Conservation, and Trade Act of

1990, 9, 54

Food aid programs, 53-54, 64, 170

Food costs, 34, 35

Food for Peace program, 53

Food Security Act, 9, 26, 54, 70

Fordney-McCumber Act, 52

Foreign Agricultural Service, 38

Foreign Market Development Program, 54

Free Trade Agreement, 41, 48, 57, 66. See also

North American Free Trade Agreement

FTA. See U.S.-Canada Free Trade Agreement

Fungicides, 29

FWS. See U.S. Fish and Wildlife Service

G

GAO. See General Accounting Office

GATT. See General Agreement on Tariffs and Trade

GEF. See Global Environmental Facility

Gene-deletion viral vaccines, 32

General Accounting Office, 91

General Agreement on Tariffs and Trade, 2, 37, 119,

149

implications of agreements, 62-66

international trade negotiations, 51

terms of agreement, 58-61

General Ecology Law, 141

Genetic engineering, 6, 30-31

Germany, nitrate pollution, 185-186

Global commons issues, 142-143

Global economic integration. See also International

issues

effect of environmental regulation, 10-12

impact on United States, 2-3

Global Environmental Facility, 225

Global markets

export promotion programs, 53-56

factors effecting, 47-48

implications of agreements, 62-66
Index | 237

marketing shifts, 41-42

terms of new trade agreements, 58-62

trade agreements, 51-53, 56-58, 66-68

trends, 37

U.S. imports and exports, 48-51

Global positioning systems, 102

GMP. See Guaranteed minimum price

GPCP. See Great Plains Conservation Program

GPS. See Global positioning systems

Grain circular, 41

Grain products

contract production, 35-36

supply stabilization, 208-210

Grain reserve, 208-209

Grasslands, 81

Great Lakes, 76

Great Plains Conservation Program, 91, 92

Green Plan, 175

Green Revolution, 49

Groundwater quality. See also Water quality

effects of agriculture, 8, 77-80

nitrate pollution, 182-187

transboundary environmental issues, 140-141

Growth promotants, 31

Guaranteed minimum price, 172

H

Habitats. See Wildlife habitats

Harmful nonindigenous species, 11, 99, 127-130,

222-223

Harmonization, 125-126, 141

Health and safety codes, 126-127

Herbicides, 29, 31, 74-77

HNIS. See Harmful nonindigenous species

I

IMF. See International Monetary Fund

Import-sensitive products, 7, 62

Imports

effect of liberalization on the environment,

132-135

factors affecting, 50-51

quotas, 62

value of U.S. agricultural imports, 50

Income stabilization programs, 202-204

Income support payments, 63

Income transfer programs, 200

Indicator species, 82

Industrial crops, 36-37

Industries of the Future, 211-212

Information technologies, 6, 101-103, 207-208

Insect control, 31

Insecticides, 29, 75

Integrated crop management, 102

Integrated pest management, 102

Intensive farming, 24-25

Intermediate Export Credit Guarantee Program, 54

Intermediate food products, 38

International issues

agricultural production in OECD countries, 159

air quality, 187-191

economic information, 157-158

environmental impact of fertilizers, 182-187

environmental provisions in agricultural policy

overview, 174-176

population information, 157-158

protecting wildlife habitats from intensive

farming, 176-182

trends in agricultural support and trade policies,

161-174

International Monetary Fund, 209

International Plant Protection Agreement, 143

International trade agreements. See Trade

agreements

International Trade Commission, 64

International Wheat Council, 58

Intrafirm trade, 2

Introduced species. See Harmful nonindigenous

species

IPM. See Integrated pest management

Irrigation, 24-26, 147-148

Israel, Free Trade Agreement, 57

ITC. See International Trade Commission

J

Japan

policy reform, 170-172

trade with United States, 51, 52

K

Kennedy Round negotiations, 57

Keystone species, 82

L

Land retirement programs, 8, 23-24

Land tenure system, 165-166

Latin American Association for Integration, 166

Loan and storage programs, 202-204

Lower Rio Grande Valley, 140-141

LRGV. See Lower Rio Grande Valley

M

MAFF. See Ministry of Agriculture, Fisheries, and

Food

Marine Mammal Protection Act, 149

Market Promotion Program, 54, 56

Market research redirection, 18
238 | Agriculture, Trade, and Environment

Market signals, 17

Marketing loan programs, 63

Marketing Promotion Program, 170

Marketing trends

bulk commodity trade, 38-41

contract production, 35-36

domestic food costs, 33-35

global markets, 37, 41-42

industrial uses of farm commodities, 36-37

retail foods, 37

value-added food trade, 37-39

vertical integration, 35-36

Maximum contaminant levels, 71, 73

MCC. See Central American Common Market

McDonald’s Corporation, 25

MCLs. See Maximum contaminant levels

Meat Import Act, 58

Mercado Comundel Sur, 119

MERCURSOR. See Mercado Comundel Sur

Methemoglobinemia, 77. See also Blue baby

syndrome

Methyl bromide, 11, 124

Metolachlor, 75

Mexico

environmental provisions of trade agreements,

137-142

import-sensitive products, 7

North American Free Trade Agreement, 61-62

policy reform, 165-166

transboundary environmental issues, 140-141

Ministry of Agriculture, Fisheries, and Food, 178

Minor use pesticides, 96

MMPA. See Marine Mammal Protection Act

MNCs. See Multinational companies

Moldboard plow, 26-27, 28

Montreal Protocol on Substances that Deplete the

Ozone Layer, 12, 124, 142-143

MPP. See Market Promotion Program

Mulch tillage, 27

Multinational companies, 2, 3

N

NAAEC. See North American Agreement on

Environmental Cooperation

NAAQS. See National ambient air quality standards

NAD Bank. See North American Development

Bank

NAFTA. See North American Free Trade

Agreement

National ambient air quality standards, 187

National Oceanic and Atmospheric Administration,

187

National Research Council, 71

National Survey of Pesticides in Drinking Water

Wells, 78

National Water Quality Assessment, 74

Natural resource accounting, 147

Natural Resources Conservation Service, 94, 187

Nature Conservancy Council, 178

NAWMP. See North American Waterfowl

Management Plan

NAWQA. See National Water Quality Assessment

Nebraska, irrigation study, 147-148

Netherlands, nitrate pollution, 185

New Directions, 171

New Structures Directive, 179

New York, groundwater studies, 78

New Zealand, policy reform, 162, 164-165

1985 farm bill, 26, 179

1990 farm bill, 200

Nitrate Directive, 184

Nitrate

in groundwater, 8, 77-80

pollution of international significance, 182-187

in surface water, 75, 77

Nitrogen dioxide, 189-190

Nitrogen sensitive areas, 175

NNL. See No net loss of wetlands policy

No net loss of wetlands policy, 98, 180-181

No till method, 27

NOAA. See National Oceanic and Atmospheric

Administration

Non-native species. See Harmful nonindigenous

species

Nonpoint source pollution, 73

Nonrecourse loans, 202

Nontariff barriers, 57, 62

North American Agreement on Environmental

Cooperation, 137-139, 223-224

North American Development Bank, 138-139

North American Free Trade Agreement, 2, 7, 57,

119, 223. See also Free Trade Agreement

environmental provisions, 137-142

implications, 62-66

terms, 61-62

North American Waterfowl Management Plan, 181

NPS. See National Survey of Pesticides in Drinking

Water Wells

NRC. See National Research Council

NRCS. See Natural Resources Conservation Service

NSAs. See Nitrogen sensitive areas

NTBs. See Nontariff barriers

O

OECD. See Organization for Economic Cooperation

and Development
Index | 239

Off-farm income, 20-22

Organic products, 37

Organization for Economic Cooperation and

Development, 122, 159

Ozone, 142-143, 187

P

PACs. See Pollution abatement costs

Part-time farms

government payments to, 21-22

household income, 20-21

output, 18-20

Payment-in-Kind program, 39

Pennsylvania, groundwater studies, 78

Pesticides. See also Fertilizers

degree of producer subsidization in OECD

countries and, 145

in Great Lakes surface waters, 76

in groundwater, 77-80

registration, 10, 70, 95-97

transboundary environmental issues, 140-141

use in the United States, 29-30

Pesticides in Groundwater Database, 78

PGWDB. See Pesticides in Groundwater Database

Phosphorus, 133-134

PIK. See Payment-in-Kind program

Policy options

for agriculture and the environment, 210-221

for agriculture and trade, 198-210

for trade and the environment, 221-227

Polluter-pays principle, 122, 142, 147

Pollution abatement costs, 124

Pollution control, 160

Porcine somatotropin, 31

PPM. See Process and production methods

PPP. See Polluter-pays principle

Prairie Pothole Region, 82-83

Precision farming, 102

Prevention of Significant Deterioration Program,

188

Price supports, 42, 66, 67

PROCAMPO. See Programa de Apoyos Directos al

Campo

Process and production methods, 144, 149-150, 224

Process standards, 11

Processed foods. See Consumer-oriented food

products

Producer subsidy equivalents, 145, 146, 161-163

Product standards, 11, 125-130, 126-127

Production payments, 63

Products markets, 36

Programa de Apoyos Directos al Campo, 165-166

PSD. See Prevention of Significant Deterioration

Program

PSEs. See Producer subsidy equivalents

pST. See Porcine somatotropin

Public Law 480, 53, 54, 170

Q

Quotas, 58

R

Rangelands, 82, 86-87

Research and development, 42-43

Retail marketing, 37

Rice Paddy Agriculture Establishment Program, 171

Ridge tillage, 27

Rules-of-origin test, 62

S

Safe Drinking Water Act, 186

Sanitary and phytosanitary measures, 60, 62,

126-127, 224

SARE. See Sustainable Agriculture Research and

Education

Satellite technology, 33

SCS. See Soil Conservation Service

SDRs. See Special drawing rights

SDWA. See Safe Drinking Water Act

Section 22 action, 49, 53

Sediment, 74

Selenium, 75

Sensors, 33

Set-aside programs, 8

Siltation, 74

Site-specific farming, 102

Sites of Scientific Special Interest, 178

Slippage, 24

Smoot-Hawley Tariff Act, 52

Sodbuster provisions, 26, 93-94

Soil Bank, 93

Soil conservation programs, 91-92

Soil Conservation Service, 26

Soil quality, 9, 83-87

Somatotropins, 31

Soybeans, 67

Special drawing rights, 209

SPS. See Sanitary and phytosanitary measures

SSSIs. See Sites of Scientific Special Interest

Staple Food Control Act, 170

STAs. See Stormwater treatment areas

Stormwater runoff, 133-134

Stormwater treatment areas, 133-134

Subsidy-based programs, 9, 70, 217

Sugar cane industry, 133-134

Sulfur dioxide, 189-190

Surface water quality. See also Water quality

effects of agriculture, 8, 73-77
240 | Agriculture, Trade, and Environment

nitrate pollution, 182-187

transboundary environmental issues, 140-141

Surplus production, 53

Suspended particulate matter. See Total suspended

particulates

Sustainable Agricultural Initiative, 175

Sustainable agriculture, 30

Sustainable Agriculture Research and Education,

101

Swampbuster provisions, 93-94, 180

T

T levels. See Tolerance levels

Taiwan, policy reform, 173-174

Target price programs, 200

Targeted Export Assistance program, 54

Tariff-rate quotas, 62

Tariffs, 7, 51-53

Taylor Grazing Act of 1934, 86

TBT. See Technical barriers to trade

TEA. See Targeted Export Assistance program

Technical assistance programs, 9

Technical barriers to trade, 11, 126-127, 224

Technological developments

advanced computer technologies, 32-33

animal health technologies, 32

animal reproduction technologies, 32

biotechnology, 30-31

disease control, 31

effect on the environment, 130-131

fertilizer use, 27, 29

growth promotants, 31

insect control, 31

irrigation water use, 24-26

pesticide use, 29-30

tillage methods, 26-27, 28

weed control, 31

Texas, transboundary environmental issues, 140-141

Texas Natural Resource Conservation Commission,

140

Third Country Meat Directive, 66

Threatened or endangered species, 80-83, 176-177

Tillage methods, 26-27, 28

Tokyo Declaration, 58

Tokyo Round of the General Agreement on Tariffs

and Trade, 37, 57

Tolerance levels, 11, 85

Total suspended particulates, 189-190

Toxic Substances Control Act, 186

Tractors, 27, 28

Trade. See Agricultural trade

Trade agreements

domestic programs and, 66-68

environmental provisions, 137-142

global markets and, 56-58

implications of agreements, 62-66

overview, 6-7

terms of new agreements, 58-62

Trade barriers, 50-51

Trade liberalization, 11-12, 144-149

Trade wars, 49

Transboundary environmental issues, 140-141,

224-226

Tropical forest destruction, 142-143

TRQs. See Tariff-rate quotas

TSCA. See Toxic Substances Control Act

TSPs. See Total suspended particulates

Tuna-dolphin dispute, 149

U

Underwood-Simmons Tariff Act, 52

UNEP. See United Nations Environment Program

United Kingdom, habitat protection, 178-179

United Nations Conference on Environment and

Development, 120

United Nations Economic Commission for Europe

Long-Range Transport of Air Pollutants, 190

United Nations Environment Program, 120

United Nations Stockholm Conference, 120

United States

export subsidy commitments, 63-65

nitrate pollution, 186-187

policy reform, 168-170

United States Trade Representative, 224

URA. See Uruguay Round Agreements

Uruguay Round Agreements, 2, 7, 43, 58, 119, 142,

224

agriculture provisions, 59

indirect export subsidies, 64

U.S. Army Corps of Engineers, 98

U.S.-Canada Air Quality Agreement, 190

U.S.-Canada Free Trade Agreement, 41, 48, 57, 66

U.S. Department of Agriculture

complementary technologies, 220

conservation expenditures, 116-117

Conservation Needs Inventory, 23

farm household incomes, 20

Foreign Agricultural Service, 38

grain circular, 41

promotion of overseas sales of U.S. agricultural

products, 54

U.S. Department of Energy, 211

U.S. Environmental Protection Agency, 73, 78, 186,

211-212

U.S. Fish and Wildlife Service, 83

U.S. Food and Drug Administration, 30

U.S. Geological Survey, 73-74

U.S.-Israel Free Trade Agreement, 57
Index | 241

USDA. See U.S. Department of Agriculture

USGS. See U.S. Geological Survey

USTR. See United States Trade Representative

V

Value-added foods

marketing trends, 37-39

new technologies, 6

world trade, 5

Variable levies, 58

VERS. See Voluntary export restraints

Vertical integration, 4, 35-36

VETAS. See Voluntary education, technical

assistance, and subsidy programs

Voluntary education, technical assistance, and

subsidy programs, 9, 90-91, 216-217

Voluntary export restraints, 58

Vulnerable zones, 184

W

Water Bank program, 90

Water erosion, 84

Water quality. See also Groundwater quality;

Surface water quality

coastal zone waters, 97

confined animal facilities and, 97

effects of agriculture, 7-8, 73-77

inadequacies of current research and monitoring,

88

sugar cane industry and, 133-134

Water Quality Inventory, 88

Waterfowl habitats, 181

Weed control, 31

Wells. See Drinking water wells

Western Grain Stabilization Act, 175

Wetlands. See also Surface water quality; Wildlife

habitat

alterations regulation, 97-98

conversion of, 177-178, 180

function, 77

Wetlands Reserve Program, 90, 180

Wheat

export enhancement program bonuses, 55

imports, 67

land retirement programs, 24

Wheat Marketing Agreement, 172

WHO. See World Health Organization

Wildlife and Countryside Act, 178

Wildlife habitats

effects of agriculture, 8, 80-84

protecting from intensive farming, 176-182

Wind erosion, 84, 87

World Grains Arrangement, 57-58

World Health Organization, 190-191

World Trade Organization, 2, 43, 57-61, 139, 142,

224

WRP. See Wetlands Reserve Program

WTO. See World Trade Organization