February 23, 2010
Discussions at this week’s meeting of European Union agriculture ministers had an inevitable predictability. The major subject was the farmers’ disadvantaged position in the food marketing chain. Unsurprisingly, the answer to the ‘problem’ of farmers’ perceived inadequate share of the profits of food production and marketing for the majority of the Council is more – more protection and more state spending. It has to be understood that even in these stringent times, agriculture ministers do not and never have inhabited the same planet as finance and trade ministers, not to mention taxpayers. Most of the suggestions put forward would involve piling more measures and costs onto those already built into the CAP.
Mercifully, the ministers were in general agreement that measures which have been phased out are no longer relevant. The problem is that the broad structure of the ‘traditional’ market manipulating CAP is still in existence. While these market measures have been utilised less in the recent past, a massive direct social subsidy system has been bolted onto the original structure. This is why the CAP now costs the EU budget €50+ billions a year compared with the €30 billions of the mid-1990s.
While a minority of member states, including Denmark, the UK and Germany argued that the CAP needs more market orientation, the majority favour expansion of the CAP’s safety net market intervention measures, plus the development of new mechanisms for stabilising prices and revenues. One of these is the favourite of the current Presidency, Spain: cut-rate or free loans to farmers to hold their products off markets when prices plummet and release them when markets recover. This would probably be a better alternative to the current system of official intervention buying and income payments linked to historical agricultural output.
Such a system has formed the basis of the United States agriculture policy for several decades. Although still having major imperfections, it costs the US taxpayer a great deal less, It allows the Americans to bolster their farmers’ incomes against market vagaries for something like a third of the annual cost of the CAP. The problem is that the policy which Madrid has in mind would be in addition to the present system, not an alternative.
But at least the Spanish scheme does not go as far as the belt and braces approach of the French agriculture ministry. To bolster the farmer’s place in the food chain Minister Bruno Le Maire wants more market intervention to operate in all commodity sectors. Further, Le Maire wants a ‘Generalised Safeguard Clause’ which could be applied to regulate officially the relationship between farmers and food buyers. In other words, exemption for the farming industry from the Rome Treaty’s competition rules and the Single Market. This was too much even for the new and clearly interventionist Agriculture Commissioner Dacian Ciolos. He warned that any new measures must “respect certain principles” and must not lead the CAP backwards or contradict the Health Check reforms.Brian Gardner