Kylian Marcos (Le Temps): The agricultural sector is currently experiencing a revolt in several European countries. In Switzerland, the revolt is focused on the administrative burden. These are closely linked to subsidies, aren’t they? Isn’t this a trap that has fallen on farmers?
Patrick Dümmler (Avenir Suisse): Switzerland’s excessive regulations for the agricultural sector and the very high level of subsidies by international standards are the front and back sides of the same coin. Every subsidy requires a legal basis, and the legislator often goes so far as to define not only the objective of the subsidized activity, but also the way in which this objective is to be achieved. Focusing on the achievement of objectives rather than on the means and methods of achieving them would lead to a reduction in regulation. The most powerful lever, however, is the reduction of subsidies and their legal basis.
Agricultural subsidies
Subsidies in the agricultural sector are government payments to agriculture that can pursue various objectives, such as promoting certain activities, offsetting burdens, ensuring the security of food supply, protecting the environment, or supporting farms. Subsidies are financed through direct and indirect taxes that burden private households and companies. In other words, resources are being taken away from them to redistribute them in favour of the agricultural sector. (PAD)
Are you preparing an update of the analysis of the cost of agriculture, which you last published in 2020?
No, not at the moment. This is because little has changed in agricultural policy in recent years, parliament has suspended the discussions on agricultural policy 22+, effectively burying it. Thus, our cost estimate from 2020 is probably still relevant today.
In this analysis, you are critical of the current system. What do you think could be done to optimize the financing of agriculture in Switzerland?
We should gradually reduce the high level of regulation and subsidies. This would mean that the entire sector would be more market-oriented and not just based on what brings the most subsidies. We have many entrepreneurial and innovative farmers. But with every idea today, you have to ask yourself whether it is worth implementing in view of the subsidies that flow for existing products.
In addition, we should separate the largely structure-preserving subsidies from the compensation that farmers receive for providing public goods. This includes, for example, the maintenance of the cultural landscape or protecting the environment, from which we all benefit. We estimate that of the total of around CHF 4.4 billion in subsidies – federal and cantonal levels combined – around 2/3 currently have a structure-preserving effect and only 1/3 is used for the justified compensation of public goods.
In 2020, you called for the opening of borders to agricultural products, as well as for a change in benefits of general interest (PIG). What do you see as the role of agriculture in Switzerland? Should its role still be to feed us, or to protect the environment? Or some other role?
The provision of public goods is an important task which, as mentioned, should also be paid for by the general public. Farmers are at the forefront here because they have the knowledge to perform this task successfully. In principle, however, it would also be possible for a specialized service provider to make an offering. The success to provide the public goods and the compensation needs to be measured against clear targets. In terms of biodiversity, for example, this could mean increasing the number of different insects, animals and plants in a meadow.
The production of food is also an important task, but this should not be financed by subsidies, but by the price that farmers receive for their products on the market.
Food production should not be financed by subsidies, but rather by the retail prices that farmers achieve on the market. Protesting farmers. (Adobe Stock)
The security of food supply should not only be ensured through domestic sources, but also through a variety of possible foreign sources. Free agricultural trade with other countries would be an important prerequisite for this, so that the supply chains are well established. Even during the Second World War, Switzerland was not self-sufficient, but imported food from abroad. Today, customs barriers are very high and therefore domestic production has a clear advantage over foreign production.
Question taken from Blaise Hofmann’s book (Faire Paysan): Why does agriculture – which accounts for less than 1% of the country’s gross domestic product – absorb 7.2% of the Confederation’s expenditure?
The agricultural sector has a strong lobby in parliament, and the number of parliamentarians with a connection to the agricultural sector was even increased in the last elections. The sector is heavily overrepresented compared to other industries and knows how to create majorities for its concerns by swapping votes. To exaggerate, you could say: abroad, farmers demonstrate in front of parliament, in Switzerland they sit in parliament.
If subsidies for agriculture were lowered to the EU average of 33% of income, what would be the result in Switzerland? Wouldn’t this spell the end of agriculture in Switzerland?
According to OECD data, subsidies in the EU account for less than 20% of farm income. In Switzerland, the average is 50%, although the differences are large. If the Swiss level is adjusted to the EU level, in the short term this will probably further accelerate the structural change that is already underway. In the medium term, however, it can be assumed that the entrepreneurial potential will be released and the remaining farms will have adapted. The reduction of subsidies would not be the end of Swiss agriculture; we would have an agriculture that is closer to the market. Austria took this step when they joined the EU. Today we talk about Austria as a producer of delicatessen for the EU market.
Today, farmers live off direct payments, which you would like to see reduced. You are opposed to these positions, but don’t you have an enemy: the margins of distributors and the agri-food industry?
It sounds paradoxical at first, but there is not too little money in the system today, but too much. Farmers – the Swiss Farmers’ Union always refers to farming families – are used politically as a justification for subsidies. In the style of “we have to help them”. Yes, very often they work hard and their wages are comparatively low. The subsidies are often intended for them, but ultimately end up in the pockets of suppliers. The price level for fertilizer, seed, animal feed and tractors is high. At the same time, the buyers of agricultural products, such as processors or retailers, pay farmers low prices and thus optimize their margins. Farmers are caught between suppliers and buyers. One reason for this is that we have too little competition in Switzerland. From the perspective of a farmer three companies dominate the supplier and buyer market.
In your opinion, is there a model agricultural policy in Europe or anywhere else in the world?
There is probably no such thing as the ideal agricultural policy. It is always a trade-off between different objectives: Environment and animal welfare, security of supply, farmers’ income and affordable food prices. The current Swiss agricultural policy hardly achieves any of these goals; it seems that only upstream and downstream parts of the value chain benefit.
Many environmental goals are only insufficiently achieved, even if isolated improvements can be observed. Security of supply focuses too much on self-sufficiency, i.e. the expansion of domestic production – that leads to a more intense agricultural production – instead of establishing diverse international trade relations for agricultural goods. Farmers’ incomes have recently improved, but many farms are still over-indebted. Due to the rigid border protection for agricultural goods, food prices in Switzerland are among the highest in the world, which hits poorer consumer families hard. The high subsidies are a burden on the federal budget and the money is then lacking elsewhere, for example in defence, health or education. In short: Switzerland probably has one of the worst agricultural policies in the world. We don’t need more of the same agricultural policy, but fundamental reforms.
A shortened version of this interview was published in the Swiss French-language daily newspaper “Le Temps.”
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