In both the European Union and the United States, the public has raised concerns over the damaging effects of modern agriculture. Both regions have developed agri-environmental programs (AEPs), but the conceptual background is quite different. We argue that the EU programs treat agriculture and the natural world as complementary, while the US programs primarily treat them as substitutes. As a result, the EU pays farmers for the production of environmental amenities from farming, while many of the US programs generate environmental externalities by limiting agriculture. The US approach is much more site-specific, which may imply larger environmental gains per dollar, but less flexibility to offset reductions in production subsidies. The EU AEPs, by contrast, are very broad, but are adopted by many farmers who do not receive production subsidies, creating a new group of subsidy recipients who may have their own objectives for the trade talks. In part because of these broad-based AEP and rural development programs, the EU appears to have a freer hand in removing trade-distorting price supports. However, by encouraging smaller, remote farmers to produce high-value market goods (e.g. organic), the EU may have created a domestic lobby for protecting these markets from increased international competition.
Available at: http://works.bepress.com/gordon_rausser/2/