Food or fuel? What European farmers can contribute to Europeʹs transport energy requirements and the Doha Round

Farm support in higher income countries is a testament to the fundamental social and economic importance of agriculture, yet domestic efforts to support this sector can arouse multilateral discord in a world of global food markets. In this paper, we argue that the advent of biofuels offers a new opportunity for agriculture to contribute to society, and to do so in a way that reduces trade rivalry and improves energy security. Holding current agricultural production constant, we find that the EU has the potential to reduce oil imports between 6% and 28% by converting eligible agricultural crops into biofuels under two differing conversion scenarios. Further, 33% of food support could be removed with no net farm revenue loss, using the biofuel premia (compared with food value) of corn and rapeseed to compensate for subsidy reductions. These results can help overcome the current impasse in global trade negotiations by reconciling the needs of EU farmers with those who would gain from more liberal international trade.