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CAP Reform – European leaders must see the wood from the twigs

Article by Jack Thurston

September 15, 2006

Last week Denmark took over the rotating Presidency of the European Union declaring the three top priorities as “enlargement, enlargement and enlargement”. Agriculture is the most contentious and unresolved element of historic agreements that will bring the first wave of former-communist central European countries into the Union. It is no coincidence that the European Commission is this week/today [Wednesday 10 July] announcing radical proposals for the reform of the Common Agricultural Policy.

Over the years the CAP has come to represent all the failings for which the European Union is criticised. It is bureaucratic, expensive, wasteful, undemocratic, open to fraud, and has a sclerotic resistance to reform. It takes up half of the EU budget, food prices to European shoppers are the highest in the world and farm incomes have not only failed to keep pace with the rest of the economy, they have fallen dramatically in recent years. We owe it to ourselves – and to the 10 countries seeking to join us – to prove that the European Union has the imagination and political will to tackle the biggest single policy failure of the European integration project. In domestic terms, tangible proof that the EU can make the grown-up decisions needed put its house in order will be a boost for those who argue for British membership of the eurozone.

The last reform attempt in 1999 was meant to prepare the CAP for enlargement but failed, largely thanks to French obstruction. But since then Germany has been struck by a BSE crisis that led to a radical shift in its farm policy. New priorities of consumer protection, organic farming and animal welfare and a desire to limit the massive financial drain on German taxpayers have convinced the German government of the need for reform.

Sensing the shifting sands, EU Agriculture Commissioner Franz Fischler has surprised everyone with a brave and radical proposal for reform. His plan will eliminate incentives for farmers to over-produce, set specific environmental requirements for farms that receive taxpayer support and limit annual subsidies to a maximum of £200,000 per farm. Money cut from production subsidies will be channelled into new environmental and rural development programmes. But there are important safeguards. The changes will not disadvantage the 60% of Europe’s farms that receive less than £3,500 a year in support.

The French government was so shocked by leaks of the proposals that it issued rebuttal so rapid that it would make New Labour’s finest spinners proud.

British Governments of both sides have long seen themselves as cheerleaders for CAP reform. But when it comes to the crunch there has been a tendency to retreat to a policy of defending the narrow and short-term interests of British farmers. It is understandable that DEFRA Secretary of State Margaret Beckett will come under pressure from farmers. What is less acceptable is that her officials are very likely to be advising her to block proposals that they deem to be against “the national interest”. Defining the national interest as the right of around 500 barley barons to receive unparalleled levels of corporate welfare is the kind of thinking that contributed to the unfair reputation of DEFRA’s predecessor MAFF as the Whitehall branch of the National Farmers’ Union. The Commission is proposing a package not a menu. Once reform-minded countries start picking it apart it will rapidly unravel.

Much is made of the impact that enlargement might have on the EU budget. An image is conjured of 2 million Polish farmers marching to Brussels, with pitchforks aloft and asserting their rights to fat subsidy cheques. The reality is that the combined agricultural output of the 10 accession countries is about that of Spain. Polish agricultural output is just 3.8% of its GDP. More than half of Polish farms are subsistence operations.

Central Europe has spent most of recorded history being invaded or exploited by powerful neighbours. It’s not surprising they’re suspicious that the unexpected appearance of a radical CAP reform proposal in the last months of accession negotiations is part of an underhand attempt to do them down. The EU must work hard to dispel any impression of sharp practice. The British Government is right to insist that new members become equal members and that transition measures are as short as possible. We need to show them how costly have been our mistakes in pursuing industrial agriculture at all costs. And how subsidies always end up undermining the prosperity of innovative and market-oriented farmers. Instead of allowing Brussels to tie up accession countries in red tape, we should be pushing for greater flexibility in how new members can spend their share of EU money.

In the Doha Declaration that kicked of a new round of WTO negotiations, western governments made explicit promises to help the world’s poorest countries. Reducing agricultural subsidies tops the list. Any sign that the rich countries are about to renege on these pledges will invite developing countries to abandon the talks and will confirm the view that the WTO is about nothing more than imposing the will of big business on the world’s most vulnerable people.

Unfortunately the unilateralism of the Bush Presidency has found yet another outlet in a massive new farm subsidy package that wipes out all the progress Bill Clinton made in reducing subsidies. This is a setback but it presents Europe with an opportunity to take the moral high ground at the WTO and make real a more humane vision of the global economy through fairer trade designed to help the world’s poor.

European leaders fluffed the last attempt at CAP reform in Berlin in 1999. Once German elections this September are out of the way none of the largest four EU countries will be holding elections for at least two years. Will this be a moment for political leadership to transcend the needs of powerful domestic farm lobbies? At a defining moment in the history of Europe, agriculture policy is about much more than farming.

Jack Thurston, Special Adviser, MAFF (1999-2001), is currently working on the Foreign Policy Centre’s Future of European Rural Communities project.

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