The war in Ukraine and the future of the green agricultural transformation in the EU? Political economy considerations

Threatened global food security

Both Ukraine and Russia have successfully transformed their agro-food sectors since the collapse of the Soviet Union. From one of the world’s largest net importers of grain in the 1970s and 1980s, they turned into major exporters, especially of crops. Today, almost a third of the wheat traded worldwide comes from Ukraine and Russia as does 15% of corn, and as much as two-thirds of sunflower oil. 

Not surprisingly, the reduced supply on global agricultural markets and ensuing higher food prices due to the partial fallout of those two big producers threatens food security, mainly for low-income countries in the Middle East and North Africa and South Asia where the bulk of income is spent on food. These countries are specifically dependent on food imports from the countries involved in the war. 

To mitigate this situation, global agricultural production must become more productive to maintain global food inventories on a high level, as the International Food Policy Research Institute (IFPRI) has urged. In a free market environment, this would relatively easily happen as the higher food prices that reflect increased scarcity incentivize other players to fill the gaps by ramping up their production. EU countries are obvious candidates to do so given their very good natural conditions for agriculture. However, the reforms of the Common Agricultural Policy (CAP) of the EU since 2014 and its linking to the Green Deal in 2020, which have made the greening of agriculture the explicit primary focus, actually provide disincentives to increase agricultural production in EU member countries. Their provisions severely curtail freedom of action and private property rights. They mandate until 2030 the sharp reduction of the use of pesticides and herbicides by 50% and of fertilizers by 20%, the set-aside of at least 4% of cropland, the increase of total EU farmland under organic farming to 25%, and restrictions of the use of farmland for production to protect biodiversity. 

The problem with these restrictions is that they reduce productivity and increase land consumption significantly. Therefore, a rethinking of the EU’s agricultural policy is warranted in order to ensure global food security. This, in turn, requires that key political actors in member states and on the EU level perceive the war as an external factor that is strong enough to move policy preferences in this direction and, at the same time, weakens entrenched vested interest considerably so that a “window of opportunity” for change is open and can be seized by policy-makers.

Reactions and interests

In the CAP, the EU institutions predefine the general framework of agricultural policy and its targets, but member states have discretion in the choice of measures for reaching these targets. Therefore, any rethinking of the green agenda for EU agriculture must be initiated and approved by Brussels. Brussels indeed reacted to the war. In July 2022, the EU Commission and Parliament agreed to suspend temporarily for a year those provisions of the farm-to-fork strategy that obliged farmers to crop rotation and set aside four percent of arable land in order to enable them to grow more grain. The suspension of leaving 4% of landfallow has been prolonged for another year in February 2024 .

The economically strongest and one of the most influential member countries of the EU is Germany. It is also the member state where the determination of its governments and of the publicized opinion to take the lead in advancing the green transformation has been particularly strong. This holds not only for the current federal “traffic light” coalition government under Chancellor Olaf Scholz with its strong green coalition partner but also for the previous Christian-liberal and grand coalition governments under Chancellor Angela Merkel. Already her governments were pushing forward the green transformation of agriculture. The present coalition federal government with its Green Minister for Agriculture Cem Özdemir only wants to continue this course more resolutely. Nevertheless, he largely followed the proposals of the EU Commission, and also suspended for Germany the rules on crop rotation and the mandatory set-aside of farmland for 2023 and then again for 2024, albeit reluctantly This was a painful concession for the Greens. Holding not only the Ministry of Agriculture, but also the Ministry of Environment and the Ministry of Economy and Climate Protection, the Green Party has hoped to speed up the green transformation of the entire economy. The war in Ukraine unexpectedly disrupted these plans, at least for the time being. 

Yet, a suspension is not a repeal. A deeper analysis of the interests involved shows that so far, the major EU institutions have not fundamentally questioned the Green Deal for agriculture. The war has induced them to deviate from the greening path only temporarily, while the long-run commitment to forward the green transformation has remained unchanged as of the end of 2023. Largely, the same can be observed in Germany. So far, none of the political parties both in the current German coalition government nor in the opposition, with the exception of the Alternative for Germany (AfD), question the green transformation. 

At the same time, the formerly powerful German farmers’ association (DBV) has lost influence in shaping agricultural policy and the public opinion of environmental and development organizations. In fact, German farmers’ lobby has become split. Although the DBV called for rethinking the current agricultural policy strategy, it does not demand the complete repeal of the Green Deal for agriculture, but requires only less utopian targets. This is criticized by a new farmers’ interest group called “Landschafft Verbindung (LsV)” (The countryside connects), which was founded in 2019 in response to ever stricter greening regulations for agriculture in Germany. It has already organized tractor demonstrations in various German cities against the greening plans and demands, making food security the absolute priority of agricultural policy. By contrast, organic farming associations as well as environmental and development groups lobby against lifting ecological restrictions and advocate for stitching to the green agenda. 

Prospects

Towards the end of 2023, these political constellations did not indicate that the current course of EU’s agricultural policy toward intensified greening might be thwarted any time soon. Instead, the major political actors seemed to play for time, hoping to push ahead with the green transformation after the end of the war in Ukraine. At present, this stance is facilitated, because the situation on global agricultural markets has eased due to increased production by other suppliers. However, during the first half of 2024, there appeared signs of growing discontent with the Green Deal among the population that moved the EU Commission to concessions. 

One sign is the protests of farmers backed by other self-employed workers and the transportation sector that have spread across several EU member states since December 2023. EU farmers object to the ever-stricter environmental rules that tie their hands to increase production. At the same time, they face higher energy-intensive input costs and intensified import competition from non-EU countries, especially from Ukraine under a tariff-free scheme introduced after Russia’s 2022 invasion, where farmers are not subject to the same strict regulations as in the EU. What protesters oversee is Russia’s significant influence on global agricultural markets, in particular for grain. As agri-food products are exempt from the sanctions imposed on Russia by the West, in 2023, European countries still imported a substantial share of their grain from Russia rather than from Ukraine. 

The second sign is the results of the elections to the European Parliament of 9 June 2024, in which parties from the right-wing political spectrum with a critical stance towards increasing centralization in the EU in general and towards the Green Deal in particular significantly gained votes in some member countries. The farmers’ protests have already urged the European Commission to row back on some of its targets and to derogate the cut of pesticide use and the obligation to leave farmland fallow for another year. 

In April 2024, Euractiv reported that a draft for the CAP period 2024-2029 now prioritizes food security over sustainability. Whether this indicates the beginning of a gradual withdrawal of the greening agenda for agriculture remains to be seen. Any interventionist economic policy creates an enmeshment of political and economic interests that perpetuates rent-seeking and rent-provision and revolving doors between the political and economic elite. So does the green agenda in the EU and in Germany. According to Randall Holcombe’s political capitalism approach, such systems of mutual benefits are generally quite stable because the mass that would benefit from another policy faces much higher costs to organize itself compared to the individual benefits of organizing than the established elites. In the EU of June 2024, this stability seems to have at least begun to shake. 

What happens further, will depend on how the EU’s political leaders react to the outcome of the EU parliamentary elections. No profound changes might be expected in the new EU parliament itself. While losses were dramatic for the Greens, the hitherto two dominant parliamentary groups, the European People’s Party and the Progressive Alliance of Socialists and Democrats, will remain the largest fractions and probably stick to the status quo. 

How the majorities will change in the most powerful political body of the EU, the European Council, the assembly of the national leaders of the 27 member states, depends on the results of upcoming national elections, in particular in the two largest member states, France and Germany. In both countries, the current governing parties have lost considerable votes in the EU elections, prompting France’s president Emanuel Macron to schedule snap elections for the end of June 2024, while Germany’s next federal elections are due one year ahead. Given stagnating economic growth and excessive costly restrictions imposed on individual freedom in the name of fighting climate change, the narrative of ecologism of climate catastrophe and the alleged harmful effects of capitalism on the environment appears to have lost some support in both countries. This makes likely changes in government that might further water down the greening ambitious for the EU’s economy, including agriculture. This in turn has implications for Ukraine.

Implications for Ukraine

The EU tends to aim to raise rivals’ costs by exporting its socially and ecologically justified overregulation to new member states in order to protect the competitiveness of old member states. The adoption of the Green Deal, which a number of scholars recommend for Ukraine, has this effect too. Yet, if greening regulations were relaxed, the effect of raising rivals’ cost is dampened and Ukraine could further optimize productivity and export performance of its agriculture and the entire economy. The example of post-World War II West Germany’s integration into what then was the European Economic Community confirms this prospect. The integration allowed West Germany’s production to expand, thereby benefiting from economies of scale. The resulting productivity gains in turn boosted wages and social well-being of the population.

Already now, Ukraine has reoriented its export of crops, particularly wheat, from the MENA region to the EU. After full accession and with a reformed Common Agricultural Policy that prioritizes food security, Ukraine could further unfold its potential, thereby making not only itself, but the enlarged EU a global player on agri-food markets. It is self-evident that in the continuous endeavor to adapt production processes to the needs of the EU and global market, Ukrainian companies should employ the most efficient technologies also with regard to ecology. Yet, it is crucial that these technologies are also economically viable. As the 1974 Nobel Prize laureate for economics F.A. Hayek has demonstrated, which technologies these are can most reliably be determined only with the help of free market competition in its function as a discovery procedure and not by the “pretense of knowledge” of political actors, which dominates so much in EU’s Green Deal.