Impact of the WTO liberalisation on organic farming in Switzerland

Summary

Although a number of policies measures have been implemented since the 1990s with the aim to improve the competitiveness of the farming sector, Swiss farms still produce at much higher costs than their colleagues in neighbouring countries. For this reason, future liberalisation policies such as the WTO Doha Round are a major challenge for agriculture in Switzerland. Against this background, the potential impact of current WTO trade talks has been analysed on land use, livestock husbandry and the financial performance of organic and non-organic farms in Switzerland using the sector-based farm group model CH-FARMIS.
According to the model results, land use and the number of farm animals change in line with projected commodity prices. Due to considerable cost disadvantages, agricultural liberalisation affects arable and pig production in particular. At the same time the amount of grassland as a proportion of total farmland is expected to increase. Furthermore, the model results suggest that organic farms would respond to a potential WTO trade agreement in a similar way than non-organic farms. However, changes in land use and livestock husbandry are expected to be somewhat more pronounced on non-organic farms than on organic farms.
Due to falling commodity prices, it is expected that revenues from agricultural production will decrease and cause a significant reduction in agricultural incomes. It is anticipated that organic and non-organic farms are only partially able to compensate for lower commodity prices by lower production costs, higher direct payments or changes in farm management. In line with anticipated producer prices, the highest income losses are expected for farms located in the valley region with large arable or pig production. The lowest income losses are expected for grassland farms in the mountain region. In addition, the results indicate that, on average, organic farms are less severely affected by the WTO liberalisation than non-organic farms. Accordingly, the relative profitability of organic farms is likely to improve with increased liberalisation. In view of the prospect that organic farms are likely to be less severely affected financially by liberalisation policies, it can be assumed that the number of organic farms will increase.