In recent months, companies from several industrial sectors have come to us because they are facing problems with preferential treatment being given by governments to agricultural products or by-products. Having examined the various instances of this phenomenon, we at HLC believe this trend will grow. Why is this happening? What can be done?
The farming lobby has always been powerful in Europe and the United States. However until recently the preferential treatment given to farmers was largely paid for by the public, both in the form of taxation and higher prices as a result of protection.
This has come to a head with the issue of biofuels, where in particular the US government has seen the opportunity to give favours to the US farming lobby; yet economists are increasingly suggesting the arguments just do not stack up.
This issue is relevant for the food industry, but also a number of other sectors, including the pulp and paper industry.
In Europe, something else is happening. There is a private acknowledgement inside the farming lobby and its traditional protectors within the EU that the CAP will not be able politically to sustain its favours at previous or current levels. As a result, the farming lobby is encouraging government to bestow favours in other ways to offset this trend. Increasingly apparent is the favouritism of agricultural by-products where they compete against chemical-based products.
The response of a number of industrial sectors has been to argue the case with government using rational, economic arguments. This is necessary but not sufficient.
These sectors need to understand the law of concentrated versus diffuse influence on politicians. Farmers are like fishermen, their power is concentrated, their opponents are diffuse. That is why the CAP and CFP have gone in the direction they have in the first place. In addition to the rational arguments, life-cycle analysis and the like, you need to focus on the politics of this head-on.
When preparing your strategy,work out who is being harmed in addition to yourselves. Every time we at HLC have looked at this, the list is long, and surprising. Reach out to these interests. Align with the other industrial interests affected – there are a number. When talking to politicians, be explicit about the politics as well as the economics. Explain the public interest in political terms. Convey the impression you are prepared to go out to the media and multiplier interests. And do go to the media – get the argument on the public record, but keep the wider media plan in your back pocket.
Politicians currently believe it is in their political interest to privately support farmers over industry, that this is where ‘their bread is buttered’. The only way to win is to change their mind. To do that, it is necessary to influence public opinion. Commercial entities are often reluctant to engage in public political activity. In this case, if they do not, the argument will be swung by those with the most political clout in the light of public indifference.
The effect of biofuels on top of already high food prices has been well known to those involved for a while, but is increasing in public awareness. Being seen to be on the right side of this argument may turn out to be very popular.