| Paris, June 21, 2011
The SGPA (Global Support to Agricultural Production):
A new indicator to promote transparency and the emergence
of an international governance system for agriculture
In its efforts to reach an international consensus on the need to improve global agricultural commodity markets, the French presidency of the G20 is insisting on a prerequisite – transparency of data concerning physical and financial agricultural markets.
For the think tank momagri, such requirement must also apply to all types of direct or indirect support to agriculture and food, in line with the reinforcement of international cooperation advocated by France.
With this in mind, momagri is publishing the first results of its indicator that has been named SGPA – Soutiens Globaux à la Production Agricole, or Global Support to Agricultural Production. The SGPA indicator is a unique frame of reference based on an international classification allowing to compare both amounts and purposes of public, budgetary, extra-budgetary and financial support earmarked for agriculture.
Applied to the United States and the European Union for the years 2006-2009, it has provided unquestionable results. In the past five-year average, Europe spent half as much than the U.S. for agriculture, if we also include all types of direct support, such as exchange rate consequences, domestic food aid or tax measures.
momagri intends to expand its work to the agricultural policies conducted in Brazil, China, Australia, New Zealand and other key producing nations, so that comparisons can be continued to bring about, in 2012, the creation of an international ranking of the world’s key agricultural support policies.
Download the detailed overview of the SGPA indicator
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A look at the SGPA indicator
The United States/European Union SGPA indicator shows that in 2009:
- The American Administration supported its agriculture by up to 57 percent of the US agricultural output value, and the European Union up to 21 percent only, that is to say a ratio of 1 to 2.7 and an annual spending of $162.3 billion in the United States and €81.3 billion in the European Union.
- Relative to the US and EU population, the ratio is 1 to 2.4, that is to say €190 per person in the European Union and $455 per person in the US, in purchasing power parity and per year.
On the whole, the gap between American and European agricultural support expenditures increased between 2006 and 2009.
“These figures are not only showing the reality of resources earmarked for agriculture, but are also permitting to analyze the differences in support procedures and their effectiveness when confronted to agricultural price volatility,” says Jacques Carles, Executive Vice President of momagri and former agricultural budget administrator at the European Commission.
The first insight drawn from comparing the US/EU SGPA indicators shows that the American policy is much more reactive to international agricultural price fluctuations than the European policy, and this allows for more effective support to farmers’ income.
How? Through contra-cyclic support to output and through stimulus of domestic demand by national food aid, which cannot be considered as income replacement, since numerous income-assistance programs are also available in addition to a very solid network of charitable organizations.
The second insight, which is generated by the first, shows that the flexibility of American regulatory tools constitutes a key feature, while the main European system – the SPS (Single Payment Scheme that is decoupled from production and accounts for 38 percent of all agricultural aid paid in 2009) – is totally inflexible – insufficient when prices are low and criticized when they are high.
The SGPA approach thus allows not only to understand the meaning of an agricultural policy, but also its actual cost and its level of compliance with the economic and social needs of agriculture. As stated by Pierre Pagesse, Founder and Chairman of momagri, “The benefits and drawbacks of the American and European support systems are clearly shown and fundamentally question the WTO negotiation framework, in which the European Union is wrongly accused.”
After completing comparative studies with other key agricultural countries, “It will then be possible to accept that all these nations are operating with varied but meaningful systems to support their agriculture – a genuine strategic asset in a world that will soon count nine billion people,” emphasizes Pierre Pagesse.