Media  Global Economy  2014.03.14

Multifunctionality in agriculture and the direct payment of government subsidies

English translated version of "Business Prospect" on NHK Radio Channel 1 on February 4, 2014

1. A direct payment of government subsidies will be made to farmers from the next fiscal year which aims to promote multifunctionality in agriculture. What is multifunctionality?

Agriculture is said to perform multiple functions; not only producing agricultural products but also fostering water resources, preventing floods, conserving ecosystems and contributing to a beautiful landscape among other things. This is multifunctionality in agriculture.

Of these functions, I would say that, besides supplying food, the most important function of agriculture in Japan is that which relates to water. Most Japanese people think that Japan is a poor country in terms of natural resources. Japan imports oil and mineral resources and produces things such as steel, automobiles and electronic products. Countries such as Australia and those in the Middle East are rich in natural resources, but have failed to develop a vibrant industrial sector. This is due to these countries' lack of water. In the steel industry for example, iron ore is heated to process into iron plates. Water is needed for post-processing: to remove impurities and to cool the iron. Without access to water the industry cannot be developed. It used to be said that water and safety are free in Japan. In this respect, Japan is a rich country as water resources are indispensable for developing industry.

The average annual precipitation in Japan is 1,700 millimetres, which is twice as much as the world's average; Japan has the third highest rainfalls in the world. Rainfall does not remain on land unless it is collected in some way. In Japan we have a lot of rain in mountainous areas. A well-known story is that a foreign engineer hired by the Japanese government during the Meiji Era of the late nineteenth century who was assigned to teach Japanese engineers about flood control works shouted "It's a waterfall" when he first saw a river flow in Japan. This story illustrates the characteristics of Japanese rivers, which are very different from wide and slow-flowing European rivers like the Rhine. In Japan rainfall is captured, retained and stably supplied by the processes of forests and paddy fields which have been maintained for a number of generations over the last 3000 years. Rainfall is captured and retained by the wood and soil of forests which drain them into rivers. River water as well as rainfall is also captured and retained by paddy fields, and slowly flow downstream. Through these operations water is not evaporated and can be utilized. The average annual water consumption in Japan is equivalent to 300 millimetres of annual precipitation, which is largest in the world; six times larger than the world's average. In addition, forests and paddy fields perform a function as a large green "dam" preventing large floods from occurring despite Japan's mountainous land form and consequently disaster-prone environment.

2. How do you describe the characteristic use of paddy fields in Japanese agriculturengress?

In arable lands, repetitive cultivation of the same crop may cause problems in soil by reducing plant nutrients and increasing pathogens thus decreasing yields. Therefore, three-course systems are adopted in Europe whereby different crops are planted in each year for a three-year period.

In the case of paddy fields, by contrast, water brings plant nutrients from forests and washes away pathogens and waste materials. Water actually "washes" the soil. Therefore, successive cropping does not cause any problems for paddy fields. Rice can be planted every year in the same paddy field. This is the reason why agriculture in Japan has survived for several thousand years. As a result, paddy fields are one of the most important means for agricultural production in Japan.

3. What is your opinion on the direct payment of government subsidies to farmers for the implementation of multifunctionality in agriculture?

If the price of domestic agricultural products is excessively high compared to imports and thus imposes an unreasonable burden on citizens and consumers, domestic agricultural operations need not be protected despite the importance of multifunctionality. In other words, it is wrong to protect the agricultural sector solely because of the benefits of multifunctionality regardless of the cost borne by citizens and consumers.

Furthermore, domestic agricultural production should be the cheapest option available. If other sources can deliver the same value at a lower cost we should consider abandoning domestic agricultural production. For example, if the price of domestic agricultural products is too high we may import agricultural products at the market price while some benefits of multifunctionality such as maintenance of water resources and flood prevention can be achieved by forestation and forest conservation. It may reduce the financial burden on the public. In other words, the protection of agriculture needs to be justified not only by the effectuation of multifunctionality but also by lower production costs which in turn will reduce the financial burden on citizens.

Recently there have been proposals supporting a direct payment of government subsidies to farmers in order to promote multifunctionality. This will mean further increasing the burden on taxpayers. If we wish to avoid an increase in the cost to the public we may want to consider reducing the price of agricultural products and thus alleviating the burden on consumers. The government has used multifunctionality as an excuse for the protection of agriculture and imposed on consumers domestic prices higher than that of the international market. If the direct payment of government subsidies is to be made to promote multifunctionality then the price of agricultural products must also be reduced. Otherwise, citizens are forced to pay twice for multifunctionality in agriculture: once as consumers of agricultural products and again for the subsidy as taxpayers. I would think that if maintaining multifunctionality in agriculture is financed by the government, it is unreasonable to expect consumers to pay again for the same purpose.

In Japan multifunctionality in agriculture is closely linked with paddy fields which are one of the most important elements or tools of agricultural production. However, the rice paddy set-aside program has been in existence for more than 40 years in Japan. This policy incentivises farmers not to use paddy fields as paddy fields. Due to this policy one million hectares of paddy field have been lost in Japan since 1970 when there were 3.44 million hectares. It is real waste to have lost such a large area of paddy fields which have been maintained for about 3,000 years. We must review these contradicting policies which, on the one hand, aim to maintain multifunctionality in agriculture and on the other hand decrease the number of rice paddies which facilitate multifunctionality.

(This article was translated from the Japanese transcript of Mr. Yamashita's speech in the "Business Prospect" session of the radio program "First in the Morning News" broadcast by NHK Radio Channel1 on February 4, 2014.)