COMPOUNDING THE CAP’S ORIGINAL SIN

Posted by Brian Gardner on 12/11/12
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The current wrangle among EU agriculture ministers over the post 2014 agricultural budget is merely the latest act of the endless CAP fantasy which has been running since the early 1960s. It reflects the continual patching up of a policy which was fatally flawed from its very beginning. The CAP began as an attempt to keep small farmers small by fiddling with the
markets for agricultural products and thus artificially inflating prices. Even a sixth form economics student could have pointed out that such an objective could not be achieved by such means. It just makes large farmers larger and more greedy for more land on which to increase their share of the state-fuelled bonanza. Small farmers stayed small – and poor.

Thirty years later, the penny dropped: maintaining the rural population could only be done by  paying farmers directly to stay on the land.

Having finally made this startling discovery, Commissioners and farm ministers of the 1990s then compounded the essential lunacy by coupling what were in effect income subsides to production objectives. As a result, overpaid large farmers got bigger and pushed the much beloved small farmers out of markets not only for cereals, meat and dairy products, but also for the basis of their production: the land itself. Having learnt little, Commissioners and ministers are still at it.

The latest instalment of the saga involves the ‘rationalisation’ of the income subsidy system  which mercifully has largely replaced the monstrous cash guzzler of the old market manipulation based policy. Farmers now selling most of their products in open markets largelyfree of official surplus buying and export subsidisation are still heavily rewarded by the state for just being farmers by straightforward subsidy payments based on the area of their land. These payments range from a mere €164 a hectare in Portugal to a monstrous and irrelevant €590 in Greece. The average payment for the EU27 works out at around €260 a hectare. And as far as the taxpayer is concerned, this change has done nothing to reduce the total bill. The EU agricultural budget is currently running at over€50 billion a year- two and half times the total of the 1990s.

So what are the 27 ministers and their henchmen in the Agriculture Council now arguing about? A plan by the European Commission to harmonise the payments into one equal payment to be paid at the same rate from the Arctic Circle to the Hellespont  and west to the Atlantic  coast of Ireland. A perfectly reasonable proposal one might have thought. But no, because of course, this would mean that not only would the payment per farmer fall substantially in some countries, but so to would the amount which each country’s exchequer gains from  the Brussels funds.

The ministers of course have long since totally abandoned the political principle which the CAP is supposed to enshrine: the ability to maintain incomes and therefore rural populations  in the least favoured areas of the Community. They also appear to be ignoring the implicit undertaking of the Council when the direct subsidy system was first born in the early 1990s, that such subsidies were only intended to be transitory. The implication then was that they would be phased out when the agricultural industry had absorbed the shock of adapting to the world market in the wake of the partial reform of the CAP forced on the Community by the  1994 WTO multilateral liberalisation agreement.

Thus what the Agriculture Council should be considering now is not how to continue spending 50 to 60 billion a year on farm subsidies not only until 2020 or indeed  for all eternity, but rather how they could be phased out by the end of 2014-20 financing period. <12/11/2012>

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Commentary on European developments from the perspective of long term professional interest in European and international agriculture and food policy, nurtured over three decades spent in Brussels observing and analysing the development of the CAP. more.



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