EU Agricultural Support: Overview and Comparison with the United States

Summary

The European Union (EU) is one of the United States’ chief agricultural trading partners but also a major competitor in world markets. Historically, both the United States and the EU have provided significant government support for their agricultural sectors. In the United States, federal farm policy has traditionally focused on price and/or income support programs concentrated on row crops including grains, oilseeds, and cotton as well as sugar and dairy. In contrast, the EU provides more extensive support to a broader range of farm and food products—including livestock products and fresh and processed fruits and vegetables.

Significant structural differences in their respective farm sectors have helped to shape differences in farm policy. The United States has double the farmland base (over 1 billion acres versus about 457 million acres), while the EU has five times the number of farms at 10.8 million with an average size of 47 acres, compared with 2.1 million U.S. farms at an average size of 441 acres. As a result, EU outlays per acre appear much larger than in the United States, whereas U.S. outlays per farm appear much larger. In general, the small size of EU farm holdings, their substantially larger number of farms relative to the United States, and the larger share of rural population (25% versus 18%) has played a strong role in the formation of EU farm policy as compared to the United States. The EU tends to have a stronger rural development emphasis and allows frequent exemptions for identifiably small farming units from certain cross compliance restrictions and payment limitations.

Since the mid-1990s, both regions have reoriented their domestic agricultural policy toward less market-distorting policies in response to both internal budget pressures and international trade commitments. EU policymakers have faced additional pressures to reform domestic agricultural policy, due to the EU’s steady growth to 28 European nations and 508 million people by 2013—including the agriculturally intensive but economically poorer countries of Eastern Europe.

Several policy trends have emerged in both the EU and United States, including the following:

Traditionally, the United States uses less trade-distorting support than the EU, although the EU has made substantial reductions in the volume of its trade distorting support.

When measured as a share of total gross farm receipts, support for market-distorting commodity programs has decreased for both the EU and United States, but the EU’s share remains about double the U.S. share.

In both the EU and United States, support for less distorting non-commodity-type programs (e.g., conservation, rural development, agro-forestry, and nutrition) has increased substantially and now accounts for a majority of total farm support.

U.S. consumers have received net benefits from agriculture-based support programs, whereas EU consumers have generally transferred more support to agricultural producers than they have received in off-setting benefits (i.e., the EU’s consumer subsidy estimate is negative), although the net transfer has been declining over time as a share of gross farm receipts.

Because the United States and the EU figure prominently in the development and use of global agricultural policy, information comparing their farm support programs will likely be of interest to Congress as the United States prepares for another round of domestic farm bill negotiations and engages in international trade negotiations on several fronts, including the Transatlantic Trade and Investment Partnership (T-TIP) with the EU, the Trans-Pacific Partnership (TPP) with Pacific Rim nations, and within the WTO’s multilateral negotiating forum.