'We cannot afford to lose sight of the long-term challenges'
The Organisation for Economic Cooperation and Development (OECD) carries out a wide variety of policy analysis – including agricultural policies - and provides data and policy recommendations to OECD-member states and partner countries. We presented Marion Jansen, Director of Trade and Agriculture at the OECD (TAD), with some relevant and pressing Dutch agricultural policy questions. While Marion and her team look at global opportunities and challenges for the agricultural sector, their work has important implications for the policy world in The Hague.
Can you introduce yourselves, the OECD and TAD?
Having spent the first 18 years of my life in Zuid Limburg, it is an immense pleasure for me to be interviewed by the Netherlands Agricultural Network. I am deeply aware of the importance of agriculture for the Dutch society and of the global leadership role the Netherlands has in research and education in agricultural economics and sciences.
Agriculture is also an important sector for the OECD, an organization that was originally founded to support the reconstruction of Europe after the Second World War. The Committee of Agriculture was one of the first OECD committees to be created, reflecting the importance of agriculture for growth and wellbeing on the continent. Currently, the OECD has 38 Members. The Netherlands and most other EU countries are members of the OECD.
As the Director of the OECD’s Trade and Agricultural Directorate since September 2020, I provide intellectual stewardship and strategic vision to the OECD’s work on trade, agriculture and fisheries. In the field of agriculture we advise governments on how to address the triple challenge of food systems: feed a growing world population, provide incomes for those working along the food supply chain and doing all this in an environmentally sustainable way.
What are TAD’s most important reports?
The Trade and Agriculture Directorate publishes two annual flagship reports: the FAO-OECD Agriculture Outlook and the Agricultural Policy Monitoring and Evaluation Report.
The Agricultural Outlook is the global reference publication for forward looking policy analysis and planning in agriculture. The report provides ten-year prospects for agricultural commodity and fish markets at national, regional and global levels and is published with the FAO. The market expectations used for the report are based on the consensus opinion of senior experts from all OECD member countries and other major agricultural producers and exporters. As a result, this report builds on the accumulated knowledge of one of the strongest international networks of experts in agriculture.
The Agricultural Policy Monitoring and Evaluation Report is the international reference publication for the measurement and monitoring of government support to agriculture. The report covers 54 countries and allows stakeholders to assess how government support has evolved over time but also to compare support policies to agriculture across countries. Our 2022 report, for instance, focuses on the role of agriculture and of agricultural policies in combatting climate change.
What are the challenges of a more sustainable agricultural sector in the next 10 years?
We cannot afford to lose sight of the long-term challenges of the agricultural sector. The sector is expected to provide safe, nutritious food to a world population that is expected to approach 10 billion in 2050, to provide incomes to more than 500 million farmers and others in the food chain, and to do all of this in an environmentally sustainable way, adapting to climate change and contributing to lower GHG emissions.
These challenges are part of broader global challenges. Of the 17 UN Sustainable Development Goals, nearly all link directly or indirectly to agriculture and food systems. But food systems are not on track to meet these goals. In order to navigate this complex triple challenge, the agricultural sector must manage to do more with less.
In the 2022 OECD-FAO Agricultural Outlook Report, we analyzed what productivity growth would be needed for agriculture to contribute to solutions to these challenges. Results from the analysis showed that average agricultural productivity must increase by 28% over the next decade to meet the United Nations Sustainable Development Goal on Zero Hunger while keeping agricultural emissions on track for Paris Agreement targets. This is triple the productivity increase achieved over the past decade. The challenge ahead is immense and can only be met by determined policy action in collaboration with main stakeholders.
Actual issues
What are the consequences of the Ukraine war? What are the long-term consequences that the OECD sees here?
The war in Ukraine is a human tragedy that has already destroyed and displaced far too many lives. Russia’s largescale aggression against Ukraine is also adding pressure to agricultural markets. Food prices had been steadily rising since mid-2020, but the ongoing war has proliferated disruptions and led to additional price pressure. According to the 2022 OECD-FAO Agricultural Outlook wheat prices could in the medium-term be 19% above pre-war levels if Ukraine loses its capacity to export. In this context, the EU Solidarity Lanes and the Black Sea Grain Initiative brokered by Türkiye and the United Nations are important contributions to global food security.
This situation puts pressure on governments to provide additional support to the agricultural sector. Support has already been increasing in recent years and reached USD 817 billion per year over 2019-21 for the 54 countries covered by the OECD-FAO Agricultural Outlook, a 13% increase over the USD 720 billion reported for 2018-20. Unfortunately, the share of general services for the sector including public investments in agricultural innovation systems, biosecurity services and off-farm infrastructure continues to shrink despite the importance of these investments for climate change and food systems goals. It accounted for 13% of total transfers to the sector in 2019-21, down from 16% two decades earlier. The OECD encourages governments to watch the nature of their support closely and to use their increased spending during crisis situations to raise the importance of spending on general services rather than reducing it.
How does the OECD view the role that chain parties can play in increasing sustainability, and particularly in making sustainability profitable? And how do you deal with international value chains in this respect, how do we ensure that we can make international sustainability worthwhile?
Important investments will be needed in order for the agriculture sector to meet the 28% productivity growth target necessary to keep on feeding the world, whilst contributing to climate change mitigation. Long-term carbon pricing trajectories can play a key role to render such investments more viable. In addition, greater cross-border co-operation on climate policies is necessary, including carbon pricing, to mitigate leakage, lower the cost of emission reductions, and improve worldwide access to low-emission technologies. The OECD is providing a platform for such cooperation.
Businesses can play a major role in contributing to economic, environmental and social progress, especially when they minimise the adverse impacts of their operations, supply chains and other business relationships. Recent years have seen many new initiatives taking a “supply chain lens” to reduce the environmental impacts of food systems. These include a wide range of voluntary and mandatory initiatives.
Many of these initiatives seek to ensure that consumers and investors have access to information on food products and production to allow them to choose products that are in line with their environmental values. Some initiatives focus on supply chain due diligence, or ask firms to disclose impacts of their entire supply chain. Firms are also increasingly benchmarked, and make corporate pledges, regarding their supply chain. With the advent of new technologies for tracing products and impacts along supply chains, voluntary sustainability labels can now communicate actual environmental impacts. By creating the opportunity for firms to connect to new consumers who prioritise environmental sustainability, these initiatives create opportunities to generate synergies along value chains. If firms can have confidence that their investments in sustainable practices will be rewarded through consumer purchasing behavior, they have an incentive to make these investments.
To make agriculture more sustainable, you can tighten the production requirements, but how do you deal with trade/imports from other countries? On the basis of the international trade rules, it is difficult to ban products on the basis of production requirements.
Global trade rules embodied in the WTO Agreements are intended to ensure that trade flows as smoothly, predictably and freely as possible. At the same time, the WTO Agreements explicitly recognize sustainability as a central principle. While there is no specific agreement dealing with the environment, under WTO rules members can adopt trade-related measures aimed at protecting the environment provided a number of conditions to avoid the misuse of measures for protectionist ends are fulfilled.
In other words, it is possible to deal with production requirements in an open world and without being in breach with WTO rules. That said, the existing rules are relatively vague and open for interpretation. A number of WTO members have therefore started so-called “Trade and Environmental Sustainability Structured Discussions (TESSD)”. These are intended provide additional impetus to discussions on stronger rules in support of a global trading system that protects and preserves the environment in accordance with sustainable development.
How does the OECD view the area-based approach, which the Netherlands now favours ?
The Netherlands is taking strong action to reduce excessive deposition of nutrients on sensitive natural protected areas, the largest share of which comes from ammonia emissions from the agricultural sector. The government has taken an area-based approach that reflects the importance of the local situation to determine the need for emissions reductions to address this. This is an important policy feature to ensure that emissions reductions are as cost-effective and efficient as possible. Working closely with local governments and stakeholders can help to build consensus and ownership for such policies. The fact that responsibility for planning and implementation for emissions reductions has been devolved to regional governments is therefore to be welcomed.
The area-based approach taken by the Netherlands is an important way to target limited funds effectively for maximum impact. The ammonia deposition problem is inherently local in nature, so addressing it with policies that are able to act on the same scale is a sensible design choice. At the same time, the Netherlands is taking a layered approach to their nutrients policy. Operating alongside the area-based policies are others that are designed to reduce N emissions and surpluses over the whole country. This reflects the fact that while the ammonia problem is a serious crisis at the moment, the Netherlands faces longstanding challenges of nutrient surpluses that should not be forgotten.
The area-based approach is well-aligned with two important OECD policy design principles. The first is that policies should be targeted as directly as possible to the objective they are designed to address. The second is that payments should be tailored to achieve that objective at least cost. Applying these principles helps assure that government expenditures are proportionate and that public finances are used responsibly, avoiding either over-compensation of beneficiaries or needlessly affecting unrelated operations. The Netherlands has committed a substantial amount of resources to addressing the problem of nutrient deposition on sensitive habitats and will need to demonstrate to the public that this is money well spent.