May 20, 2010
The belief of the European Commission and a majority of EU member governments that income support is the main objective of the Union’s agriculture policy is a major obstacle to the constructive reform of the CAP. Despite the continuing claims of the farm unions to the contrary, modern European agriculture no longer needs taxpayer support. Protection of the environment and the development of rural economises – particularly in the more disadvantage eastern regions of the Union – do however need the assistance of public funds.
Despite the increasing efficiency of European agriculture over the last half century, the basic underlying motive of support is still the same as that adopted by the founding fathers in the late 1950s. The farms that produce the bulk of the EU’s food and food exports are now among the most efficient in the world and could compete without any state aid. In the face of this evidence the EU authorities continue to lash out an average of €300 plus for every farmed hectare. As the recently released subsidy payment figures indicate, every year this makes many large farm businesses into ‘subsidy millionaires’. To make matters worse, as the Commission’s own figures show, the policy does not adequately maintain the incomes of smaller farmers.
Many economists now argue that the time has come to call a halt to this economic lunacy. The next phase of CAP reform after 2013, they argue, should mark the conversion of the common agricultural policy into a common rural and environmental policy. Veteran agricultural policy analyst Professor David Harvey told a recent economist’s conference: . “We suggest that the present CAP is not coherent, nor legitimate, nor sustainable. The future CAP should be based on three pillars – Food Market, Rural Development and Environment – in order to better target policies as well as to create a clearer distribution of different policy issues”.
There is too the problem of international acceptability. There is a growing concern among trade negotiators that, despite claims to the contrary, the single farm payment on which current policy is based is not ‘production-neutral’. In other words, that the annual generous dab in the wallet from Brussels to European farmers allows them to compete unfairly in international markets. Most independent analysts would argue that if a subsidy allows a farmer to remain in production when without the subsidy he would give up, then the total level of production is likely to be higher than without the subsidy, In addition, the most efficient farms will be able to produce at a lower cost and therefore a lower price than they would without the SFP. Thus from the point of view of international competition, the EU is able to produce more and at a lower price than if the SFP did not operate.