An economist has argued that Iceland’s protectionist agricultural policy hampers the development of the country.
One of the major points of contention regarding Iceland’s possible entry into the European Union concerns the country’s agricultural sector. The Farmer’s Association of Iceland is against joining the EU, as they believe the agricultural sector will not be able to compete with imports. One economist contends that Iceland’s protectionism already makes agriculture unprofitable, and in fact stands in the way of the country fully recovering.
Daði Már Kristófersson, an associate professor at the economics department of the University of Iceland, told RÚV that subsidies to farmers are inordinately great. In fact, a new report from the Organisation for Economic Co-operation and Development shows that 1.2% of Iceland’s GDP is devoted to agricultural subsidies – the highest of any country in the OECD. He also contends that subsidies lead to unprofitable agricultural practices, instead of compelling farmers to adopt new and more economically sound strategies for production.
Daði proposes lifting import tariffs on agricultural products. This, he believes, would result in major changes in the agricultural sector; that in particular, farmers would get more innovative and make the market more competitive. As it is, subsidies send the message that farmers do not need to exercise more economical means of production or change their business practices.
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