Importance of Agriculture in EU and Italy

Trade and Economics - March 11, 2024

The tension between the economic importance and public perception of EU agricultural policies has become evident in recent farmer protests in various European countries.

Agriculture remains a fundamental pillar of the European Union (EU), although its contribution to the EU’s Gross Domestic Product (GDP) stands at less than 2%. This sector, apparently marginal in terms of economic contribution, continues to receive a third of the community budget in the form of agricultural subsidies through the Common Agricultural Policy (CAP).

The CAP, established in 1962, initially aimed to ensure food security and control inflation by maintaining reasonable prices. Over the years, the CAP has undergone several reforms, with an increasing emphasis on environmental sustainability and support for agricultural incomes. Today, the CAP represents more than a third of the EU’s multiannual budget, funding both direct subsidies to farmers and rural development measures. The size and structure of the agricultural sector varies considerably between EU member countries. Most farms are small and family-run, with 95% of businesses run by families. However, there are significant differences in the size and productivity of agricultural holdings between the various member countries. The EU is a net exporter of agricultural products, with a trade surplus of €33 billion in 2022. However, agricultural exports vary considerably between member countries, with the UK, US and China among the main EU trading partners.

The EU’s environmental policies have generated debate among farmers, who sometimes consider them too strict. However, agriculture continues to significantly influence land use and greenhouse gas emissions in the EU. Approximately 38% of European territory is dedicated to agriculture, with notable variations between member countries. Greenhouse gas emissions from agriculture have fallen by 4.8% since 2005 but remain a significant part of total EU emissions. The CAP has introduced environmental constraints, such as the obligation to leave 4% of agricultural land uncultivated to promote biodiversity, arousing criticism and requests for flexibility from farmers.

Recently, the European Commission announced concessions to farmers, withdrawing a proposal to reduce the use of pesticides by 2030 and avoiding setting precise agricultural emissions reduction targets in the communiqué on climate targets for 2040. In conclusion, agriculture it remains a vital sector for the EU, contributing to food security, jobs and the wider economy. However, agricultural policies must balance environmental sustainability with economic competitiveness and support for agricultural incomes, in order to address future challenges effectively and sustainably.

Despite the successes and challenges faced so far, European agriculture faces a number of crucial issues that require innovative solutions and a long-term strategic approach.

  1. Environmental sustainability: The EU has set itself the ambitious goal of becoming the first climate-neutral continent by 2050. To achieve this goal, agriculture must play a key role in reducing greenhouse gas emissions and adopting of more sustainable agricultural practices. Farmers could be incentivized to adopt more environmentally friendly agricultural practices through financing and incentive programs.
  2. Technology and innovation: The adoption of innovative technologies, such as precision agriculture, biotechnology and artificial intelligence, can increase production efficiency, reduce the use of natural resources and improve the overall sustainability of the agricultural sector. The EU should invest in research and development to promote technological innovation in the agricultural sector.
  3. Digitalisation: The digitalisation of agriculture, through the use of sensors, drones and remote monitoring systems, can enable farmers to make more informed decisions and optimize the management of agricultural resources. However, there is a need to ensure that access to digital technologies is fair and inclusive for all farmers, regardless of their size or financial resources.
  4. Resilience to climate change: European agriculture is vulnerable to the effects of climate change, including extreme weather events, droughts and increases in temperatures. Farmers need to adopt climate-resilient agricultural practices and diversify their crops to reduce the risk of seasonal failures.
  5. Food safety: Ensuring food safety remains a key priority for the EU. European agriculture must be able to produce enough food to meet the growing demand of an ever-expanding population, while ensuring the quality and safety of food products.
  6. Global markets: The EU must continue to actively engage in global markets, both as an exporter and importer of agricultural products. Promoting fair trade and commercial relations based on principles of reciprocity can help ensure the competitiveness and sustainability of European agriculture on international markets.

Italy, for example, is known to be home to an ever-evolving agricultural sector and, in recent decades, Italian agriculture has gone through a phase of transformation, moving from a traditional image to a protagonist of a renewed economic, social and environmental interest. In this article, we will explore the challenges and opportunities of the Italian agricultural sector, analysing its characteristics, its successes and its future prospects. Italian agriculture has a long history of tradition and innovation. With a variety of microclimates and fertile soils ranging from the Tuscan hills to the Po plains, from the vineyards of Sicily to the orchards of Campania, Italy offers an ideal environment for diversified agricultural production. However, the Italian agricultural sector faces a number of challenges, including global competitiveness, environmental sustainability, digitalisation and attracting young talent.

Italy finds itself competing with other European and international countries on the global market. While on the one hand the “Made in Italy” brand continues to be a symbol of quality and craftsmanship in the food sector, on the other hand it is necessary to face competition from foreign producers who offer products at more competitive prices. To remain competitive, Italian agriculture must focus on innovation, product diversification and the valorisation of protected designations of origin (PDO) and protected geographical indications (PGI).

Environmental sustainability has become an imperative for Italian agriculture, given the importance of climate change and the growing demand for healthy and sustainable food products from consumers. Italian farmers are adopting sustainable agricultural practices, such as organic farming, responsible use of water and natural resources, and reducing the environmental impact of pesticides and fertilizers. Furthermore, Italy is investing in the research and development of innovative technologies to improve the efficiency and sustainability of the agricultural sector.

Digitalisation is transforming the Italian agricultural sector, offering new opportunities to increase productivity, optimize resources and improve product traceability. Italian farmers are adopting digital technologies, such as the Internet of Things (IoT), artificial intelligence (AI) and robotics, to monitor crops, automate processes and manage resources more efficiently. Furthermore, digitalisation is facilitating the connection between producers and consumers, enabling greater transparency and trust in the food system.

To secure the future of Italian agriculture, it is essential to attract and support young talent in the sector. Many Italian rural areas are facing the problem of depopulation and aging of the agricultural population, with consequent risk of loss of knowledge and skills. To reverse this trend, it is necessary to create opportunities for young farmers by providing them with access to finance, professional training and technical support. Additionally, it is important to foster an entrepreneurial and innovative culture that values agriculture as a challenging and rewarding career.

Despite the challenges, the future of Italian agriculture is bright and full of opportunities. With its wealth of knowledge, its renowned culinary culture and its passion for quality, Italy has what it takes to become a global leader in high-quality, sustainable agriculture. Through innovation, collaboration and commitment to sustainability, Italian agriculture can continue to thrive and inspire the world. Italian agriculture represents a precious heritage and a fundamental resource for the country. With a far-sighted vision and collective commitment, Italy can transform current challenges into opportunities for growth and development, ensuring a sustainable and prosperous future for future generations.Agriculture remains a crucial sector for the EU, with challenges and opportunities that require a far-sighted vision and strategic approach. Through innovation, sustainability and international collaboration, the EU can continue to develop a modern, resilient and future-oriented agriculture that can ensure food security, protect the environment and support the rural economy. Addressing current and future challenges will require a joint commitment from governments, farmers, industry and society as a whole. Only through a holistic vision and effective cooperation will it be possible to build a sustainable future for European agriculture and for generations to come.

Alessandro Fiorentino