5 Multifunctionality as a policy paradigm

5.1 Shifting policy paradigm

Moyer and Josling (2002*) call multifunctional agriculture a third agricultural policy model or paradigm (Table 1) that has the potential to replace the old dependent model and the present competitive model advocated by the U.S. and the WTO. Although the old model has been very successful in increasing commodity production, it has showed its limits due to market problems, problems of unfair competition, ecological problems and social problems. The competitive or liberalisation paradigm believes that competition leads to the best allocation of resources and low costs. Public intervention is only seen as risk management with some safety nets in case of serious disturbed markets or sanitary or other problems. The problem is that not all produced outputs are market goods but that there are joint products that risk to disappear in markets only remunerating the commodity aspects of food. World market prices are seen as only reflecting the commodity production costs and not the extra costs linked to the provision of the non-tradable public goods. Blind liberalisation may therefore lead to the disappearance of farming systems which, as was discussed earlier, are superior in the production of (local) public goods. Therefore, Moyer and Josling (2002*) support the idea of a new paradigm focussing on protection of other functions of agriculture. Also Potter and Burney (2002) and Potter (2006*) conclude that, although multifunctionality is a genuine, but in some respects, unique, feature of European agriculture, it receives its full meaning in relation to the perceived threat of extensive agricultural restructuring to biodiversity and landscape values. They think the concept has profound implications for policy design, suggesting a need to retain some element of income support in the policy mix in order to defend environmental assets against the extreme consequences of farm structural change.

Also in the social sciences literature multifunctionality is regarded as a possible new paradigm or regime for agriculture (van der Ploeg and Roep, 2003*; Wilson, 2004*). They relate the multifunctional model to a new agri-food system with new relations between producers and consumers. The concept in their view refers to quality food chains that are fully embedded (socially, culturally and ecologically) in the local territory. In this model agriculture plays a pivot role and is a driver for rural change, transition and development (Knickel and Renting, 2000*; Marsden et al., 2002*). Farmers are much more seen as rural entrepreneurs who combine a number of farm and non-farm activities partly paid by commodity markets and partly by government markets. An extensive review by van der Ploeg and Roep (2003*) revealed that already a large part of farmers gain income from non-farm activities. They argue for higher added value markets (local quality products) and more attention for the contributions of farming to the environment, the local culture and so on. However, other authors are more sceptical about the new model (Burton and Wilson, 2006*). Their study questions the idea that any transformation from productivism to post-productivism and multifunctionality will be in the form of a simple linear transition. Results from a survey of farmers in Bedfordshire (U.K.) and evidence from other studies throughout Europe and Western agricultural regimes demonstrate that – despite much talk of an increasing ‘conservationist’ component to farming – farmers’ self-concepts are still dominated by production-oriented identities. They conclude, therefore, that there is a temporal discordance between the macro- and micro-structural elements implied in the multifunctional model, and that we are witnessing at most a partial macro-structural driven transition towards a post-productivist agricultural regime. Other authors also acknowledge that some farmers are more likely to switch to multifunctional agriculture than others. As was mentioned before, some farm types are more appropriate to develop multifunctional activities then others (inter alias Gilg and Battershill, 1999; McNally, 2001; Vanslembrouck et al., 2002; Loureiro and Jervell, 2005; Jongeneel et al., 2005). Even more, some others, inter alias van der Ploeg and Roep (2003) and Schmitzberger et al. (2005), indicate the importance of farm responses, farming styles and farmer behavior on the process. They found that farms who are less cost oriented seem to be more susceptible to switch their farming system and to incorporate other functions in their behavior. The farming styles concept could therefore be an interesting research area to analyze the link between farmers’ behavior and multifunctionality.

Although the concept of the multifunctionality paradigm has highly been contested and debated (Anderson, 2000; Holmes, 2002; Walford, 2003; Potter and Tilzey, 2005*) it has become a leading paradigm for creating a framework for explaining policy actions, mainly in Europe inter alias because of the declaration in 2000 of the European Ministers of Agriculture that:

“The fundamental difference between the European model and that of our main competitors lies in the multifunctional nature of agriculture in Europe and in the role it plays in the economy and the environment, in society, and in the conservation of the countryside; hence the need for maintaining agriculture all over Europe and protecting farmers’ income.” (Agenda 2000, 1998)

The European Model of Agriculture, as Potter (2006) mentions, has further developed to a bimodal model by creating a beneficial environment for producers with the potential to compete at the world market and by supporting producers in marginal locations to supply nature, leisure and niche products through rural development plans and direct income support. This multifunctionality model allows for payments compensating the increased costs of production systems that effectively produce social values which are not valued by food or related markets.

Much of the economic literature and debate with respect to multifunctionality as policy term is related to trade issues. This literature was particularly large at the start of the Doha round of WTO with heavy debates between supporters and opponents of the concept. A nice overview of the viewpoints concerning the trade aspects at that moment is given by Burrell (2001, 2003). A key concern was whether attempts to protect multifunctional attributes are merely disguised barriers to trade (Blandford, 1999; Bohman et al., 1999; Orden et al., 1999; Dobbs and Pretty, 2001; Blandford and Boisvert, 2002). Supporters mainly emphasize the non-tradability of non-commodity outputs and therefore argue that protection of farming systems which are superior in the production of non-commodities deserve protection (Gallardo et al., 2003).

Some authors, such as Wilson (2001), Van Huylenbroeck and Durand (2003*) and Knickel and Renting (2000), have taken away the concept from the direct policy debate and demonstrate that it has some grounded conceptions to encompass ideas on the restructuring of the farming sector. As we have demonstrated in Section 4, some farming systems can be superior in their combination of market and non-market goods than others (maybe linked to their farming style as mentioned above). The question is then how to stimulate the transition to such systems. One main misunderstanding is that the multifunctionality concept is a disguised argument for income support to non-efficient farmers. This does not need to be so, on the contrary, multifunctionality as a concept does not refuse efficiency but only suggests to measure efficiency not merely in profit terms but also in terms of socially desired outcomes (Van Huylenbroeck and Durand, 2003). Farmers have to be stimulated to search for new markets in which they may have a competitive advantage either because of their social superior outcomes (such as higher value markets, local products, food products for agri-tourists) or because of their efficiency in what we can call public markets: the delivery of outputs for which the state is (partly) paying (such as agri-environmental outputs, green care, health services and so on).

Multifunctionality policies therefore have only to correct for missing markets and stimulate rural entrepreneur companies either individually or in group (territories) to finding unique selling and delivery positions and income combinations. Where necessary, multifunctionality policies should organise public markets for non-tradable goods and facilitate new rural coalitions or networks based on new arrangements between the private and public sector, in such a way that they stimulate the most efficient providers and not only provide income support systems to non-efficient farms. A multifunctionality policy is in other words not equivalent to an income support policy to less competitive farms that otherwise can not survive, but stimulates efficient provision of local public goods.

5.2 Policies and instruments in the multifunctionality paradigm

We will in this contribution not discuss or try to summarize the literature on possible policies and instruments for public good provision (see, inter alias Hanley et al., 2006) but rather we schematise based on Van Huylenbroeck and Slangen (2003) and Van Huylenbroeck (2005*) a number of possible arrangements going from private-private arrangements in the food market (e.g. regional labels in the food industry) or in other markets (e.g. coalitions or contracts between tourism or water supply sector and farmers) over coalitions with NGOs (e.g. with wild life trust or nature conservation organisations) or even private users interested in non-commodity products (e.g. hunters), to new arrangements with the public sector, either more regulative or through the creation of new markets such as e.g. the pricing of agri-environmental outputs or the production of ‘green’ energy (Figure 8*).

Figure 8: Intermediate institutions (A = arrangements and C = Coalitions) to deliver a changed commodity-non commodity output bundle (see Van Huylenbroeck, 2005, for more explanation).

Most of these forms of cooperation or alliances can not only have a positive effect in the case of the supply of private goods, but also in the supply of impure public goods like wildlife and landscape. The Dutch case of environmental cooperatives (Polman, 2002*), that organises agri-environmental schemes for a group of farmers, is a good example of such an arrangement. From an institutional economics point of view these cooperatives are a way to cope with market failure, save on transaction costs, build up countervailing power, provide an alternative to government intervention and prevent hold-up problems (Polman, 2002). One can as well suspect some environmental benefits from this kind of organization because the territorial scale on which they operate is larger than the individual farm scale. Dutch research in national landscapes concluded that cooperation of different land owners, such as farmers, nature and landscape managers, recreation operators and other rural people leads to more combined functions and a better and broader infrastructure (Overbeek and Terluin, 2006). This could lead to what Merlo (2001) calls rural entrepreneurs or a kind of ‘partnership’ type of rural company active in food and fibre production, but also in the maintenance of the countryside, offering recreational services and so on. Such partnership type of company could consist of farmers, municipalities, environmental NGO’s, consumer and other organizations and individual citizens. Individual farms are still recognizable, but the responsibilities are shared in the collective organization (Stedula, 2004). An emerging example is the Stadteland Cooperation in the Netherlands in which rural managers (producers) and consumers of agricultural products in the broadest sense participate (de Lauwere et al., 2006). Besides typical agricultural partnerships, one can also think about partnerships between agriculture and other local stakeholders who profit from multifunctional agriculture. An example of this is the VITTEL case in France where the water company has closed a partnership contract with farmers in its water source area (Nestlé, 2006). We may also investigate possibilities of new forms for financing the provision of public goods, such as a rural tourism or real estate tax for remunerating farmers for their contribution to landscape amenities, water management, flood control and so on. Portrait rights could be a solution for alliances at the territorial level between farmers and companies using the local-agrarian identity to create added value.

The last point brings us to the regional or territorial scale. Food regions will more and more compete on the basis of local identities and added value creation in the high segment food market. As illustrated in Table 2 coherent planning and policy discourses can be developed depending on the strengths and opportunities in a region while taking into account the added value of production systems for the environment, the local economy and social cohesion (Allaert et al., 2006*).

In areas with a still competitive commodity producing agriculture, planning and policy will mainly aim at bringing the agricultural sector more in line with the constraints of a peri-urban zone. These policy objectives can then be translated into incentives to push farms and agro-industry to invest in higher value chains so that agriculture (and also the non-commodity production linked to his) becomes less dependent on world commodity markets and thus less vulnerable. This may be combined with agri-environmental contracts. An example of the Dutch cheese brand ‘Beemster’ for which the CONO dairy co-operative gives an extra premium to dairy farms in the Beemster region who meet certain environmental standards. This leads in turn to milk with higher quality and enables the co-operative to sell the processed cheese at a higher price (Oerlemans and Hees, 2006). For regions with a strong agri-business network based on contractual relations with local industry – e.g. the Flanders Vegetable Valley in the coastal area of Belgium (Vandermeulen and Van Huylenbroeck, 2006b) – the competitiveness of the agro-industrial network can be strengthened by increasing the territorial embedding. This would result in an agri-business complex which is more dependent on local resources and thus more difficult to be relocated to lower cost production regions. Areas with strong territorial advantages may further exploit these advantages by bringing in more agro-ecological elements and vertical linkages so that wider markets can be reached. This can be done by combining the territorial complex with an agro-industrial complex or by strengthening ecological elements in the production (e.g. switching to organic farming). A good example of this is the ‘Parmigiano-Reggiano Cheese’ in Italy in which many farmers, cheese dairy and ripening firms have succeeded in developing a high quality cheese production with less pressure on the environment (de Roest and Menghi, 2000). Lastly, also regions with important or sensitive ecological networks may learn from territorial approaches to strengthen the marketing of ecological products (eventually combined with rural tourism). An example of how organic production and ecological networks can lead to economic benefits for farmers is the dairy production in mountainous regions in Austria, Switzerland, or Italy (Figure 9*). These farmers are financially supported by the government, but also benefit from a good cooperation with supermarket chains (Milestad and Hadatsch, 2003). These are only a few examples which prove that multifunctionality can go hand in hand with industrial or regional strategies and might be a powerful strategy to safeguard local agricultural production and at the same time local public goods. Territorial and ecological embeddedness (for the development of the concept see, inter alias, Penker (2006) and Kirwan et al. (2007)) is therefore not only interesting as a concept for contextualising multifunctionality but also a promising area for future research in rural economy and rural geography. Competitiveness of local agro-food and territorial systems will indeed become a more important concept for the rural future than the competitiveness of individual farms. Research in the densely populated and urbanised fringe around Brussels proves that the local level instruments can indeed make a difference in stimulating multifunctionality and diversification of the production system (Vandermeulen et al., 2006). Hereby the development of indicators linking socio-economic requirements with landscape and territorial potentials may be a promising avenue (Wiggering et al., 2006*).

Figure 9: Tuscan landscape with an agricultural character.