Non-Trade Concerns in agricultural and environmental economics: how J.R. Commons and Karl Polanyi can help us.

Author:Barthelemy, Denis

Some of conflict around agriculture in the World Trade Organization (WTO) is focused on Non Trade Concerns (NTCs). In the first section of this paper, we present how the Organization for Economic Co-operation and Development (OECD) connects these NTCs to the notion of multifunctionality and tries to promote its own "positive" approach. In the second section, we use J.R. Commons's conception to propose a specific interpretation of the OECD's position. This position implicitly constitutes a particular institutionalist practice aimed at reducing the multifunctionality of agriculture, while proposing recourse to the market as an "organizing social order." But, Commons' point of view suggests that trade and non trade outputs result from the same institutional process, and therefore may not be analytically separated. In the third section, we use Polanyi's framework to suggest that NTCs cannot be considered as "non economic" items, but belong to the "substantive economy" where they take place with their own regulation, resource-allocation decisions, non market price system, and in opposition and complementarity to market economy.

From Agricultural Market Liberalization to Multifunctionality

In the 1980s, states apparently gave a single goal to agricultural policy: liberalize trade in agricultural products, making a substantial and progressive reduction in support and protection (Daugbjerg and Studsgaard 2005). Since the early 1990s, societal objectives have started to be explicitly considered with measures like "greening the agricultural policy" in Industrial Societies (Larkin et al. 1995; Laurent and Bowler 1997). Moreover, the 1994 Uruguay Round Agreement on Agriculture (URAA), article 20, encouraged WTO member countries to "take into account ... non-trade concerns" and introduced the concept of multifunctionality. Multifunctionality means to produce several outputs at the same time. Thereby economists recognized that economic policies may include legitimate domestic objectives such as preserving family farms and rural landscapes or ensuring food safety, food security, and animal welfare. (1) These concerns reflect a fear that free market expansion and globalization may undermine the provision of valued non-market amenities and cultural traditions associated with agriculture.

The OECD (2001) defined agricultural multifunctionality and proposed a guideline to analyze it in a document prepared in close connection with members of traditional agricultural and environmental economics. (2) We wish to underline the two following points of this approach, which will subsequently be discussed.

The definition retained by OECD (2001, 14) lets it be known that societal objectives are treated "in the context of empirical works," wherein multifunctionality seems to be a natural and objective characteristic of certain economic activities, whose feature is jointness in the production of commodity and non-commodity outputs. Therefore, sources of legitimate jointness are described as resulting from irreducible technological interdependencies, or the presence of non-allocable input or allocable fixed factors, what OECD calls multifunctionality's "positive definition." Other sources of jointness--social organization, firm's boundaries, cultural tradition, etc.--would be considered "normative" ones, resulting from political choices and therefore less legitimate.

Jointness between production outputs induces market failures. The OECD's ideal multifunctional situation is that non-commodity outputs would be private goods that would give rise to specific markets ensuring efficiency in resource uses. Unfortunately "bad market goods" do exist, for instance in the case of "public goods." The OECD's problem becomes how to minimize public intervention, and "possible policy failures associated with incorrect estimation of the demand of public goods" (OECD 2001, 20). (3) To solve it, the OECD proposes to divide the different aspects of "bad market goods." In this manner, it attempts to find a way for marketing some of them, for instance it separates use values and non-use values of the same public good, in the hope that market exclusion mechanisms may be instituted. (4)

An Implicit Institutional Constructivism

The OECD-recommended method attempts to make agriculture as little multifunctional as possible. Furthermore, we must point out that this method needs to use an underground institutionalist method (Barthelemy and Nieddu 2004). In this, we may recognize Commons's point of view, according to which markets are instituted. It allows us to criticize both sides of the position held by the OECD and economic mainstream in this field.

The OECD forwards the hypothesis that one can separate technical and political jointness, thereby making technical jointess legitimate, but not political. This is grounded in the belief that technical aspects could by themselves determine if something is a commodity or not, and also its value. Commons's Reasonable Value is clearly built up in opposition to this mainstream conception of Natural Value. "The ultimate unit of activity ... correlates law, economics and ethics" (Commons [1934] 1990, 58). Therefore, the technical dimension of an economical object may not be considered independently from the property definition, and the ability for being a commodity may not be considered as a natural feature of an object. (5) Discussing materiality or immateriality of objects, Commons (652) lets us see that the latter aspect does not have economic meaning without the collective (judicial) decision to connect it with property determination. To take a basic example, jointness between hog production and negative environmental externalities did not economically exist before social damage was politically and judicially recognized (Hayden, 2005).

The relationship between private and public interest is not to be seen solely as an opposition. Although private interests may give rise to individual market efficiency, it always remains connected with collective efficiency. "Each economic transaction is a process of joint valuation by participants, wherein each is moved by diversity of interests, by dependence upon the others, and by the working rules which, for the time being, require conformity of transactions to collective action" (Commons...

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