GATT and Crofting
The Uruguay Round Around Ullapool
by
Osbert Lancaster and Alastair McIntosh
First
published in Scottish Affairs, No. 12, 1995, pp. 73-86.
Osbert Lancaster was a research consultant at the Centre for Human
Ecology, University of Edinburgh and is now a Business Adviser with Midlothian
Enterprise Trust. Alastair McIntosh is a trustee of the Isle of Eigg Trust, a
member of the Scottish Crofters' Union and MSc Teaching & Development
Director at the Centre for Human Ecology, University of Edinburgh.
The negotiations of the Uruguay Round of the General Agreement on Tariffs
and Trade (GATT) were finally completed on the 15th of December 1993. Peter
Sutherland, director general of the GATT, announcing the close of the round said
that the accord was 'a momentous and historic achievement' which would bring
'more trade, more investment, more jobs and a larger income growth for all'
(Financial Times 1993). The Financial Times leader (op. cit.) welcomed the
conclusion of the round as a 'triumph in adversity' and claimed that the
inclusion of farm trade will 'reinforce market‑based agricultural reforms
and [give] developing countries a chance of exploiting their comparative
advantage as food producers'. Others are less optimistic about the effects of
the GATT. The most publicised concerns have focussed on agricultural production
in the third world, such as in India where over half a million farmers gathered
to protest against GATT, especially the power it gives to multinational
companies to enforce intellectual property rights on scientifically improved
seeds (Schwarz 1994). Nearer to home it is claimed that GATT will have a
negative impact on farmers ‑ especially small farmers ‑in France
(Rowe 1993).
In this paper we look at the possible impact of the GATT on the crofting
communities in Scotland. Crofting represents only a tiny sector of Scottish
agricultural output. But in terms of cultural and ecological significance it
arguably represents, as Prince Charles told the 1993 Scottish Crofters Union
conference in Stornoway, '... a model which many other communities throughout
the world, would do well to emulate ... (having) something to teach mainstream
European agriculture at a time when over-production is an ever-embarrassing
problem, when at least some governments are seeking environmental benefits
within European agricultural policies, and when there is increasing concern to
protect our remaining rural communities' (Crofter, 1993). It is our finding
that, in the short term, crofting unlike vernacular livelihoods outside of
European Common Agricultural Policy protection, is not likely to be threatened
by GATT. However, in the medium to long-term it is imperative that policy makers
take account of the GATT constraints if subsidy regimes by which the rest of
society supports this valued aspect of European heritage are to be maintained.
CROFTING
Crofting is a form of feudal agricultural smallholding whereby, in law,
the crofter is 'vassal' to a 'feudal superior'. It has roots in both traditional
usufructural (ie. overlapping rights to usage) resource use systems of the
pre-seventeenth-to-eighteenth century clan (family) systems, and in the
processes of effective land enclosure which intensified following the breaking
of the power of the Highland chiefs in the 1746 Battle of Culloden. As with the
process of enclosure throughout Britain, land became a commodity to be bought
and sold without reference to resident communities and valued, not for the
number of people it could support, but for its profitability and sporting
potential (McIntosh et. al. 1994 a & b).
In the 1880s growing indigenous land rights awareness lead to riots and
rent strikes, resulting in gunboats, police and troops being sent to such places
as Skye and Lewis to suppress communities protesting the
usurpment of their traditional land usage rights, lack of secure tenure,
summary evictions and a history of ruthless clearances to the newly
industrialised cities and colonies abroad.
Aided by the growing communicative power of the press locally and in
London, the crofters organised politically through such bodies as the Highland
Land League. In 1886, following the Napier Commission's enquiry into the plight
of the crofters, the British government passed the Crofters Act which met a
number of, though not all, of the demands of the Land Leaguers. This effectively
gave crofters their own native reservations. It did not return the land to those
who had been formerly dispossessed of it, thus, 'Whereas most states keep their
people in the country and their animals in reserves, Scotland seems to do things
the other way round' (Nelson, 1994). Nonetheless, through providing heritable
security of tenure usually through patrilineal primogeniture the 1886 Act meant
that tenancy could stay in the family. Croft rents were now outside the laws of
private contract and subject to judicial scrutiny. They have now become
peppercorn. The Crofters Act of 1886 has been largely responsible for the
survival of the crofting way of life and the cultural landscape which it
maintains as a significant indigenous European vernacular way of life of the
1990s.
A survey for the Scottish Crofters Union (Kinloch & Dalton, 1990)
gives a picture of the typical croft at the end of the 1980s: average area of
land tenanted by the croft is 19 hectares (45 acres), while common grazing
rights give crofters access to a further 67 ha (164 acres), most of the later
being poor quality rough grazing. The average area of grassland and cropped land
is 14 ha (34 acres). Sheep are the predominant stock (occurring on 85% of the
crofts surveyed, with an average of 107 head per croft) while cattle are less
prevalent (63%, 7 head). Only one third of the crofts surveyed grew crops
‑mainly oats and some barley, both grown primarily for use as livestock
feed on the croft.
Crofters and their families have traditionally derived only part of their
income from crofting ‑ other sources of income have included employment
and self employment outwith the croft, fishing, weaving and increasingly tourist
related activities. Indeed, only 5% of the crofters surveyed relied solely on
the croft as a source of income. Table 1 shows average incomes from different
activities ‑ although the variation between crofts in the survey is wide.
Agricultural production on the croft accounts for only 4% of the income of
crofts in the survey, although on the larger crofts with over 151 ewe
equivalents the average net income from this source is £1880 pa.
While one's initial reaction to these figures might be that crofting is
hopelessly uneconomic and that crofts should be amalgamated to form larger more
viable agricultural units (as has often been advocated in the past), it can be
strongly argued that crofting can provide a diverse rural economy with a high
population density. Angus Macleod, one of the founders of the Scottish Crofters
Union, pointed out that 'the important thing about crofting is that it kept
people on the land while farming, on the other hand, has been emptying the
countryside' (Hunter, 1991). Hunter (op. cit.) contrasts the crofting areas of
Scotland ‑such as the harsh Atlantic coast of Lewis ‑ where one
passes 'not just the occasional modern house but dozens, even hundreds', with
Morven ‑ as area cleared in the nineteenth century ‑ where 'you will
find few people; see little in the way of habitation; observe practically no
recently constructed homes.' Hunter suggests
that crofting is 'a perfectly rational way of organising the occupation of land
in a part of Britain where the returns to agriculture are. . . severely limited
by unalterable climatic conditions.' It must also be asked whether the viability
of crofting might be substantially improved were crofters freed from their
native reservation status and returned access to the bulk of the land, which is
currently tied up in estate farms and shooting grounds. Scotland's feudal
heritage leaves it with one of the worst patterns of land distribution in the
world - worse than most Latin American states. 80% of private land is owned by
the equivalent of just 0.08% of the population. A 1976 study showed that that 35
companies or individuals possess one-third of the Highland's 7.39 million acres
of privately-owned land. Just one family, that headed by the Duke of Buccleuch,
owns a land area four times the size of the European Union's smallest state,
Luxembourg (McIntosh et al, 1994 a & b; Nairn, 1994). Accusations of
crofting being 'uneconomic' must therefore be tempered from the historical
perpective of inner-colonial disempowerment, dispossession, and the clearance of
half a million people, and from forward-looking appraisals of how things could
be if mounting demands for community land restitution are achieved.
Crofters are eligible for subsidy support and grants in relation to their
farming activities in the same way as other agricultural producers in Scotland.
Crofters can also take advantage of other grants and loans for undertaking
agricultural improvement that are available to them alone. The value of such
subsidies to those in the Scottish Crofters Union survey is shown in tables 2
and 3. Given the low level of income derived from crofting activities (see table
1) it is evident that sheep and cattle subsidies are important to maintaining
the viability of agricultural production on the croft. Some of the crofters in
the survey received other types of grants or payments for managing their
activities in accordance with Environmentally Sensitive Area and Nature
Conservancy Council requirements. It is likely that such payments will become
increasingly common as statutory and voluntary bodies seek to work more closely
with farmers and crofters to maintain and enhance environmental quality and
biodiversity by influencing agricultural practices.
In the light of GATT, such subsidy regimes raise a number of questions
about the future of crofting. Will GATT, which promises to reduce subsidies for
agriculture, affect it? Will GATT constrain the development of new funding
mechanisms for sustainable agriculture and conservation in the Scottish
Highlands and Islands? How might such constraints affect future changes in the
physical, biological, economic and cultural landscapes of the area?
Introducing GATT
'The Final Act Embodying the Results of the Uruguay Round of Multilateral
Trade Negotiations' is the latest version of the General Agreement on Tariffs
and Trade, originally established in 1947. According to its own publicity (GATT,
undated) GATT seeks to establish trade liberalisation, stability and
predictability in trading conditions along with non‑discrimination and
fair trade. The Uruguay Round brings a number of new sectors within the aegis of
GATT, most notably services, intellectual property and agriculture. The original
intention of the US and other agricultural exporting countries, with exception
of Europe, at the start of the Uruguay Round, was to completely eliminate
agricultural protection and support in ten years. In the course of negotiations
this goal was moderated and the final Agreement on Agriculture aims to achieve
its goals through three key mechanisms. Firstly by improving market access,
secondly by reducing levels of domestic support and lastly by limiting export
subsidies.
° Improved
market access will primarily be achieved by converting non‑tariff barriers
to tariff equivalents, which will then be reduced by 36% by 2001.
° With
the exception of certain types of support deemed to have a minimal impact on
trade (the so‑called 'green box' policies), the total level of domestic
support ‑ production subsidies ‑ is to be reduced in
aggregate by 20% by 2001.
° Export
subsidies are to be reduced to a level 36% below the 1986‑90 base period,
and the quantity of subsidised exports reduced by 21% by 2001.
GATT and CAP
The European Union (EU) participates in GATT as one entity rather than as
individual countries and most of the effects of GATT on European agriculture
will be felt through the EU's Common Agricultural Policy (CAP).
The original form of CAP was agreed by the six founding members of the
European Community at the Stresa conference in 1958. The underlying objectives
of CAP, laid down by the Treaty of Rome and developed at the Stresa conference
in 1958 included the keystone policy that prices would be fixed above the world
market level, reflecting the higher production costs within the community. This
was ‑ and still is ‑ achieved in three ways:
° direct
central intervention in the market;
° a
system of variable levies to prevent imported goods undercutting EU production;
° and
export refunds which allow traders to sell on the world market without making a
loss in comparison with the domestic market.
While CAP has been successful in achieving one of its key objectives
‑ increasing food production ‑ this has been at the price of
ever‑increasing expenditure, declining farm incomes, increasing costs of
storing surplus stocks and increasing damage to the environment caused by
intensive farming methods. In recognition of these problems ‑ and
impending conflict with the GATT ‑ a reform package was agreed on 30 June
1992. The main elements of the package are: more direct payments to farmers and
significant cuts in support prices, moving them closer to world prices. The
following objectives have been set for the reformed CAP:
° maintain
the EU's position as a major agricultural producer and exporter by increasing
the competitiveness of its farmers;
° reduce
production to levels closer to market demand;
° focus
support for farmers' incomes where it is most needed;
° encourage
farmers to remain on the land
° protect
the environment.
CAP reform in practice
The aspects of the CAP reform which most directly affect crofters are the
support systems for sheep and beef production as these have the greatest impact
on their incomes from agriculture. The following schemes are the primary means
of EU support for sheep and beef producers in Scotland: the Sheep Annual Premium
(SAP) Scheme, the Suckler Cow Premium (SCP) Scheme, Beef Special Premium (BSP)
Scheme, and in certain areas the Hill Livestock Compensatory Allowances (HCLA)
Scheme. Changes have already been made to these schemes following the 1992 CAP
reforms and further changes will be phased in
over the next few years up to 1996. The main changes are as follows
(Cook, 1993):
° Quantities
bought into intervention will be halved over the period 1993 to 1996 and
intervention prices will be reduced by 15% over the same period.
° Farmers
will receive compensation for the resulting fall in market prices:
‑
Beef Special Premium (BSP) and Suckler Cow Premium (SCP) will increase;
‑ An 'extensification' premium
will be paid on top of BSP and SCP where stocking rates are low.
°
This compensation is not open ended:
‑
a maximum 'claim rate' per hectare of forage has been introduced;
‑ BSP is limited to 90 head
per farm and a limit to the total number of BSP allowed in Scotland has been
introduced;
‑ Individual farms have been
allocated SCP and SAP quotas based on past stock numbers.
It is difficult to analyse how the changes to CAP will affect crofting
for two reasons: firstly crofters and croft holdings do not form a homogeneous
group ‑ a croft in Orkney, where the predominant stock is often beef
cattle, and where crops form a significant output, is very different from a
croft in the Western Isles where sheep predominate. Secondly, the 1992 CAP
reforms include significant changes to the support mechanisms for arable
products which, combined with the livestock sector reforms, will result in
changes to agricultural systems throughout the United Kingdom and the EU which
will impact on animal feed prices, breeding stock prices, lamb and calf prices,
and indeed land prices. How these effects will filter through to the crofter is
difficult to predict. The Scottish Agricultural College has developed computer models (Cook, 1993) which examine the
possible effects of CAP reforms once they are fully established in 1996.
Unfortunately the farm types analysed by the model are much larger than the
typical croft and Cook emphasises that each farm must consider its own unique
position. However the model predicts that in general livestock farms in Less
Favoured Areas (such as most of the Highlands) with relatively low stocking
densities will benefit financially from the reforms. The main reasons for the
improved financial performance are: low stocking density means the farms benefit
from the extensification premium, the livestock numbers on such farms are below
the quotas for any one holding, increased SCP, and the fact that cattle are
finished at 24 months means that each animal receives two BSP payments. Without
further analysis of the specific situation of crofters it is difficult to say
how crofters will be affected by the CAP reforms, however it appears from Cook's
analysis that crofters might ‑on average ‑ benefit from the reforms.
Looking ahead
The first question we asked in this paper was 'will GATT, which promises
to reduce subsidies for agriculture, affect crofting?' We have tried to answer
this above and our tentative answer ‑paradoxically ‑ is that
crofters may in fact benefit from increased subsidies as a result of CAP
reform, driven in part by the need to conform to the GATT. It should be noted
that this outcome is a result, primarily, of the EU's stance in the
negotiations, and its success in placing a number of support mechanisms in the
'green box' where they are excluded from support reduction commitments.
The other questions we asked were: 'Will GATT constrain the development
of new funding mechanisms for sustainable agriculture and conservation in the
Scottish Highlands and Islands?' and 'How might such constraints affect future
changes in the physical, biological, economic and cultural landscapes of the
area?' The answer to the former is undoubtedly 'yes'. Any new funding mechanisms
that involve agriculture will have to conform to the GATT, mainly by meeting the
green box criteria, and will have to take account of likely changes to the GATT
in 2001. Although the exact effect such constraints will have on the physical,
biological, economic and cultural landscape is impossible to assess we attempt
to suggest some areas where these constraints will impact.
The 'Green Box'
The criteria domestic support policies must meet in order to be exempt
from GATT's reduction commitments are laid down in Annex 2 of the Agreement on
Agriculture (GATT, 1993) ‑ the so‑called 'green box'. The rationale
for the green box is that the exempted policies have no, or minimal, trade
distortion effects or effects on production. For this reason the fundamental
criteria are that the support must be provided through a publicly‑funded
programme, not involving transfers from consumers, and the support must not have
the effect of providing price support to producers. Detailed
policy‑specific criteria and conditions are laid out, however a selection
of the constraints of most relevance to
the future development of support mechanisms under CAP or other methods of
support are given below:
° Payments to
producers under an income support programme must not be:
‑ related to type or volume of
production, or to livestock numbers, unless an agreed, historical, base period
is used;
‑ related to prices applying
to any production after the base period;
‑ and no production shall be
required in order to receive such payment.
° A 'resource
retirement' (set aside) programme must not specify any alternative use for the
land that involves agricultural production.
°
Investment aids through a structural adjustment programme must not be
dependent on the recipient producing any specific product.
°
Payments under an environmental programme must not exceed the costs
‑ or loss of income ‑incurred by complying with the programme.
In addition to the above green box policies, programmes of support
meeting the following criteria need not be included in the support reduction
commitments:
° Product‑specific
support which does not exceed 5% of the total value of production of the product
during the relevant year.
°
Non‑product‑specific support which does not exceed 5% of the
value of total agricultural production.
All of the above criteria will have to be met when further changes to the
Common Agricultural Policy are made, and when any other support mechanisms are
proposed ‑ whether at a European, UK or Scottish level.
The Crofting landscapes
The areas where crofting occurs can be considered to consist of a number
of interlaced landscapes: physical, biological, economic and cultural. In the
past, rural policy has often treated these in a fragmentary manner. However, as
the Norway and Scotland report of Reforesting Scotland (1994, p. 19) suggests,
the concept of "cultural landscape" might provide an integrative
principle for future rural policy:
"Cultural landscape is a useful concept which acknowledges the long
interaction of humans with the landscape - the links between human use,
traditions and skills. It is used in Norway as a means of preserving certain cherished landscapes which
represent particular associations and land use practices which are in danger of
disappearing. In Scotland, the concept of cultural landscapes may be a useful
way of synthesizing the past with the present, the social with the natural, to
build a new, more integrated, productive and diverse landscape. As a concept it
has been used widely in archaeology but has much to offer rural communities in
understanding the past and planning for the future."
This is consistent with the Scottish Office's important, even visionary,
"Rural Framework" (1992) policy document, which, in addition to
asserting sustainability, affirms that, "Diversity, once a common feature
of rural communities, needs to be re-established and pursued."
Certain keystones of the cultural landscape, such as a 'diverse rural
economy' and 'keeping people on the land', are addressed by economic development
programmes, and to an extent by agricultural support. Less tangible aspects
contributing to the maintenance of cultural landscape include the hefted
relationship between a crofter and the land, the daily and seasonal rhythms
associated with tending livestock, and the cooperation between crofters within a
township as sheep are gathered in from common grazing for shearing.
Derived benefit from cultural landscape includes the milking songs and
other songs of the past and music industry of the present, high quality tourism,
clean waters and 'green' product images, poetics of global significance, a
resevoir of people (mostly elderly) who have actually lived the sustainable
livelihoods others now aspire to (albeit thankfully augmented with high-tech
communications, medical advances and contraception), and the considerable
psychological satisfaction to be observed, for instance, in retired people daily
tending a few sheep. In such respects, it might even be argued that
micro-agricultural support helps substitute for social costs such as old folks
homes and other welfare services. It contributes to that most essential
characteristic of a purposeful life - meaningfulness. The anecdote of an old
woman on Lewis who would not move into a state-provided home (with no byre!)
until her cow had died, is but one of many such cases in point (McIntosh, 1994,
p. 58).
This is not to paint an unrealistically romantic picture of crofting.
Both authors are well aware from personal experience of the tensions and
stresses can occur within such communities, but the fact remains that it is to a
large extent the individual and collective ways of life of crofters and others
in these communities that make the crofting areas of Scotland characteristic and
contribute to their value. Although such intangible features can never be
supported directly it is important that they are taken into account and, if not
enhanced, at least not eroded when new support mechanisms are developed. It
should be noted that part of the EU's insistence on the green box in GATT was to
enable CAP to support smaller agricultural producers and hence maintain rural
communities.
There are a number of mechanisms the UK government and the EU use to
promote rural development and to protect the environment. These include the
Guidance Section of the European Agricultural Guidance and Guarantee Fund,
European Regional Development Fund
and the European Social Fund. The EU recognises that these funds will become
increasingly important as the total agricultural support provided by CAP
decreases. These three funds are directed primarily at projects to protect the
environment, large scale infrastructure projects, provision of industrial sites,
services for small businesses, training and job creation programmes. While such
assistance may play an important role in maintaining the rural economy
of the Highlands and Islands of Scotland it is important that the impact
of agricultural activities on the 'landscapes' described above is considered.
Many traditional agricultural activities can provide species rich habitats,
while a crofting community without cattle or sheep would be culturally
impoverished. It is important therefore that agricultural support that promotes
environmentally sensitive agriculture and contributes to the cultural landscape
continues, albeit in parallel to the other forms of support from the funds
described above. While GATT will not directly affect the latter, it will be an
important factor in the development of any funding mechanisms that seek to
encourage particular farming practices.
There are many traditional, but artificial, environments that are created
and maintained by agricultural activities and which provide valuable species
rich environments, including the machairs of the Western Isles, traditionally
managed oat fields and traditionally managed hay fields. The machairs are flower
rich grasslands created on coastal sand dunes by the placement of seaweed, dung
and soot-impregnated roofing material for the growing of potatoes, while the
late cutting of hay, as distinct from the modern early cutting for silage,
allows the birds to finish nesting. These habitats (like the old, flower rich
hay meadows in parts of England), which depend by their very nature on
particular crops being grown and specific production techniques being employed,
are already much reduced as a result of changes in the agricultural market and
farming practice. If a decision was made to use public funds to encourage
crofters to continue to farm in this way, or indeed to re‑adopt other such
practices that are no longer widely practised but have environmental and other
benefits, what difficulties does GATT put in the way of those charged with
developing a funding framework?
One of the aims of the reformed CAP is to focus support for farmers'
incomes where it is most needed ‑primarily small farmers working in
difficult conditions. It is possible that crofters will be recipients of such
funds. If that were the case a neat solution would be to pay crofters to farm in
those traditional ways described above. This would not be allowed under GATT
because payments under an income support programme can only be related to the
type of production carried out in a historic base period, not current
production, and indeed such a programme can not require that any production is
carried out as a condition of payment.
Another method of encouraging and supporting crofters to meet the above
objectives would be to establish an environmental programme that paid crofters
to farm particular crops using specific methods. This would only conform to GATT
if payments do not exceed the
costs, or the loss in income, incurred by complying with the programme. While
such a programme might be attractive to crofters who were motivated to achieve
these objectives for other reasons it is difficult to see how a programme of
this sort could have any significant effect in encouraging the widespread
adoption of the farming practices proposed if there is no financial reward
associated with it.
It must not be forgotten that GATT does not require the abolition of
subsidies for agriculture, only the reduction them, and that with the current
reforms of CAP the target set by GATT have already been
achieved. So long as that limit is not exceeded most forms of support can
be used and because the reductions apply to the aggregate support across the EU,
not support for individual products in each country, there is room for
considerable flexibility. This flexibility is enhanced by the exemptions given
to support for specific products that does not exceed 5% of the total value of
production of the product, and support not related to a specific product that
does not exceed 5% of total agricultural production.
How these exemptions and the available flexibility is used within the
Common Agricultural Policy will depend largely on the European Commission and
member governments. However the majority of funding programmes will have to meet
the requirements of GATT and the examples discussed above illustrate how GATT
will have a significant effect on the development of future funding regimes, and
how the effect of this unprecedented global agreement will be felt, in one way
or another, in the crofting communities of Scotland.
Because of CAP shielding, the crofting communities are potentially in a
much better position than other small farmers in the world who, arguably, face
growing competition from those forms of industrial agriculture most willing to
work on the lowest common denominators of soil and labour exploitation. However,
the protective provisions of CAP and GATT will only be capable of being used to
sound effect if recognised and strategically planned for now. This might
represent a significant agenda for such bodies as the Scottish Office's
Department of Rural Affairs and the Scottish Crofters' Union.
END
Table 1
Sources of Income for Crofters and Spouses
£ per croft pa
%
Crofting
326
4
On Croft (non‑crofting)
241
3
Outwith Croft
6218
72
Unearned
1886
22
Total
8671
100
Notes:
1) includes bed & breakfast, cottage letting, weaving
2) includes employment, self employment
3) pensions, benefits, investments
from: Kinloch, M and Dalton, G. (1990).
Table 2
Gross Income from Livestock, including subsidy
No. of
No. of Income
Subsidy
*Income
crofts
head
(£)
(£)
/head (£)
Sheep
55
107
1499
1575
29
Cattle
41
7
1813
641
351
* including subsidy
from: Kinloch, M and Dalton, G. (1990).
Table 3
Production grants to crofters
No. of crofts
Ave. gross income
from grant
17
£839
Production grants included payments for land improvement, fencing,
drainage etc.
from: Kinloch, M and Dalton, G. (1990).
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Kinloch, M and Dalton, G
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Scotsman (p. 13), 30 November 1994.
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13), Glasgow, 12 November 1994.
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‑ 17
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