Italian Agriculture: Economy, EU Policy, and Future Challenges

Introduction

Agriculture represents the lifeblood of any civilization. Human societies settled into communities for the purpose of growing crops, thereby making their lives easier. For most of the history of civilization, agriculture was the dominant form of economy. Wealth was measured in arable land or in the number of animals owned. Even after the invention of money, agriculture remained a critical source of wealth. In pre-unified Italy, the city-states often generated wealth through trade, but in the countryside wealth remained tied to agriculture, as food was the most important commodity for most people.

In the twentieth century, food scarcity became rare in developed nations, and agriculture diminished in relative economic importance. Other goods took on greater value as anxiety over basic sustenance faded. Today in Italy, agriculture accounts for approximately 2% of the economy, worth roughly $3.6 billion, and employs 3.9% of the country's labor force — just over one million people (CIA World Factbook, 2014). Many forces have shaped the Italian agricultural industry, including technological and political changes, and these forces are the focus of this paper.

Brief History and Crop Overview

Though the region has been populated — and wealthy — for millennia, Italy as a modern nation-state only emerged in 1861, when its many city-states merged under a common central government for the first time since the Roman Empire. Those city-states generated wealth through trade, but they also controlled much of the surrounding agricultural land. The new centralized government eventually played a major role in setting agricultural policy, particularly after the Second World War, when the modern democratic government was formed. Italy formally joined the European Union in 1999, a move that brought further change to the country's agricultural sector.

An important element of background is understanding what crops Italy actually grows. The country has a diverse geography, ranging from the Alps in the north to the dry Mediterranean climate in the south. The northern half of the country is generally well-suited to agriculture and produces a wide range of crops. Local food traditions dating from the city-state era have kept Italy's crop diversity strong, owing to the historical need to remain regionally specialized. A good example is the tomato: the San Marzano tomato, a base ingredient in authentic Neapolitan pizza, hails only from the slopes of Mt. Vesuvius. Many Italian agricultural crops have similar local varietals and strict geographic constraints.

The major crops driving the Italian economy include a wide variety of fruits and vegetables, grapes, potatoes, sugar beets, soybeans, wheat, olives, and dairy products (CIA World Factbook, 2014). Many of these are subsequently processed into major food exports — wine, olive oil, pasta, tomato sauces, and cheese. While most Italian regions produce wine and cheese, fruits and vegetables are more abundant and diverse in the north, while olives are particularly prevalent in the southern regions. In some southern regions, such as Basilicata, Calabria, and Molise, agriculture contributes more than 20% of employment, making it far more economically significant there than in the industrialized north (no author, 2014).

The EU and the Common Agricultural Policy

Since joining the EU, Italy has become subject to European regulations governing agriculture. This has both opened up export markets within Europe and subjected the agricultural industry to a new layer of bureaucracy. The EU also provides subsidies and rural development programs, several of which Italy has taken advantage of. Farming in Italy tends to be smaller in scale, particularly in the south, and these subsidies help maintain price floors that allow small farmers to operate profitably. These subsidies were initially more focused on northern products but were expanded after Italy's accession to include olives, tomatoes, and citrus (no author, 2014).

The main EU program affecting Italy is the Common Agricultural Policy (CAP). This program has created incentives for farm consolidation, because the price floors available to consumers mean that more efficient farms can extract higher profits. CAP works by removing normal market pricing mechanisms in favor of mandated pricing applied across the entire continent. The smaller, family-run farms of the south have generally benefitted less from EU membership than the larger operations in the north (no author, 2014).

Conclusion

Agriculture has always been important to Italy, and the sector remains critical to the economies of the southern provinces, where it can supply up to 20% of employment. These provinces, however, are also the least efficient and the most vulnerable to climate change and shifting hydrological conditions. There is considerable reason to doubt whether the strength of southern Italy's agriculture can be maintained if current market conditions persist. Italy may well see a further reduction in prominence as an agricultural exporter — it is already smaller than Belgium in agricultural export volume and much smaller than the Netherlands. Comparable countries such as Germany and France have substantially larger agricultural sectors, and Italy is now losing market share to Spain.

The EU, in particular, has not proven especially beneficial to Italian agriculture overall. Farmers in the north have benefitted from EU rules, but in the south — where most Italian agriculture is located, by both GDP contribution and employment — EU membership has served primarily to reduce Italy's market share. Agricultural policy is therefore a significant priority for Italy in its EU dealings, and the country is actively seeking to steer EU policy toward rules that will benefit its farmers and offset some of the market losses of the past fourteen years.

Overall, there is still room for cautious optimism, because Italy holds a large global market share in certain niche products. Domestic demand is also robust, as the Italian diet emphasizes the uniqueness of regional produce, ensuring stable demand for fresh seasonal fruits and vegetables. However, too much of the sector's income is at risk from global competition and from climate change, with very little in the way of coherent policy response to address either threat.

References

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