2. Political Coalitions in Agricultural and Food Policies

Not surprisingly, this makes the choice of the policy instrument the subject of lobbying itself. I discuss the endogeneity of instrument choice in agricultural and food policy in Chap. 5.

The growth of agricultural protection in many OECD countries was associated with the growth of cooperative agribusiness and food-processing companies. The growth and concentration of agribusinesses and food-processing companies created a strong political coalition with farm interests in lobbying for agricultural policies (Anderson 1995). Farm-related cooperatives and business organizations in the agri-food sector became important interest groups, with, for example, agricultural credit cooperatives, dairy and sugar processing companies joining farm unions in actively lobbying for government support and import protection for their sectors. Since farm lobbies and agribusiness interests were increasingly well capitalized and concentrated, they became an important force in orchestrating public policies that benefited their interests (Gawande and Hoekman 2006; López 2008).

Other examples are Ivanova et al. (1995) and Swinnen (1996) who disaggregate policy impacts among many agents along the wheat-bread value chains in Bulgaria.

In response to concerns on abuse of market power and unfair practices in the food supply chain emerged in the EU, the European Commission establishment the High Level Forum for a Better Functioning Food Supply Chain, which includes different stakeholders from the food supply chain. The Forum agreed on a set of principles of good practices in vertical relationships and launched a voluntary framework for implementing the principles of good practice (the Supply Chain Initiative). However, regulations differ significantly between EU member states (Swinnen and Vandevelde 2017).

Food scares that plagued the EU in the 1990s resulted in major legislative changes such as the Basic Food Law Regulation, including the creation of the European Food Safety Authority (EFSA). Consumers’ quality and safety concerns also triggered strong reactions from the food processors and retailers. This included both the introduction of private standards to address concerns that were/are not addressed by public regulations, the pre-empting of public regulations by private standards, and their lobbying to influence the nature of public food regulations (Winfree and McCluskey 2005; Vandemoortele and Deconinck 2014).

Formally D ^A represents the value marginal product of agricultural production which shifts up with the per unit subsidy level (see Ciaian and Swinnen 2006, 2009).

For an analysis of the political economy of fertilizer subsidies in Africa, see Mason et al. (2017).

For example, organizations such as the OECD and the World Bank emphasized how the EU (and other countries including the USA) was hurting the world’s poor by contributing to low agricultural and food prices through their agricultural subsidies. Non-governmental organizations (NGOs) took the same position. See Swinnen (2011) for details.

General Agreement on Tariffs and Trade.

Another key difference between the EU and the USA was the regulatory environments and attitudes. When GM emerged as a major policy issue the regulatory environment in Washington DC was dominated by the Reagan-era anti-regulation philosophy (Charles 2001). In contrast, in the EU, the GM policy issues became most important when food safety crises of the 1990s contributed to a great weariness about new food technologies, including genetic modification (Swinnen et al. 2011). As explained in Chap. 10, the food safety crises led to several policy initiatives to regulate the food chain.

See also Chap. 9 on how fundraising incentives interact with policy objectives for NGOs and international organizations and Swinnen et al. (2011) for a formal model of this.

The US biofuels legislation was built on a history of tax exemptions and tariffs (taxes on imports), but the fundamental policy shift was the introduction of mandates for the use of biofuels in transportation—the Renewable Fuel Standard (RFS) in 2005 (de Gorter et al. 2015; Lobell et al. 2014; Naylor 2012). The impacts of the US biofuels legislation were large. From 2004 to 2012, the amount of corn used for ethanol increased from about 1.2 billion bushels to about 5 billion bushels. Over 40% of US corn use now goes to ethanol.

In the EU, from encouraging this sector through production targets and blending mandates, the EC is now backtracking and seeks to minimize the use of food-crop based biofuels. The new biofuel sustainability requirements of the 2009 Renewable Energy Directive try to limit the impact of biofuels on rising food prices (European Commission 2009). In 2012, the EC published a proposal limiting the use of food-crop-based biofuels at 5% of consumption of energy for transport in 2020.

What makes this piece of legislation particularly interesting is that the provision of nutritional assistance provides a safety net for low-income consumers, particularly in times of high or volatile food prices caused in part by agricultural policies like the corn-ethanol program. The convergence of special interests creates a peculiar equilibrium in US food and agricultural policy that is extremely difficult to disrupt.