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CAP reform: No more stalling

Article by Chris Haskins

September 15, 2006

President Chirac, at the recent Brussels summit, has delayed the reform of Europe’s Common Agricultural Policy, but he has not, and cannot rule it out indefinitely. He, with the other members of the European Union, as well as the United States and Canada, have agreed to submit proposals to the World Trade Organisation next spring, which would significantly liberalise global trade in agricultural products by giving developing countries better access to the markets of the rich. If this is to be achieved, radical reform of the CAP, especially with regard to the reduction of market subsidies, protectionist tariff barriers and the dumping of surpluses on world markets, will be essential.
The main reason behind the reluctance of Presidents Chirac and Bush to accept reform is that their powerful farm lobbies fear that they would not be able to survive in an unprotected global market. But these fears are largely unfounded.
The population of the world is expected to rise by 50% over the next thirty years, and this will require a comparable increase in food production. The concern should not be about the future of farming, but rather that Dr Malthus’ gloomy, and so far unfulfilled prediction, that population growth could lead to widespread starvation will at last come true. For example, environmental concerns about the conversion of rain forest to arable farming could severely restrict the growth of cultivatable land in the future. This would however suggest an encouraging prospect for the world’s farmers.
European farmers have the advantage of being close to 400 million affluent consumers who increasingly want to buy fresh food which is safe. It is much easier and reassuring to source perishable food from ‘local’ sources. Whilst New Zealand farmers can supply long-life butter, they cannot ship fresh milk to Europe to satisfy the needs of the yoghurt and soft cheese markets.
Because of a favourable climate, good soil and competitive farm structures, large numbers of European farms will prosper in an open world market. The dairy cows of Normandy and Cork can compete with anyone, as can the grain producers of Schleswig-Holstein, the Paris basin and Eastern England. Nobody can produce pigs like the Danes, or potatoes like the Poles.
But whilst Cornwall produces excellent daffodils, Lincolnshire grows high quality vegetables, and Kent superb fruit, they frequently cannot harvest them because of labour shortages. Ironically, if we restrict migration from Eastern Europe and elsewhere, we will put these farmers out of business. British workers are no longer prepared to do these arduous, physically-demanding, jobs.

High quality regional foods will maintain and increase their share in affluent markets, as discriminating shoppers choose to buy expensive ham from Parma, Stilton cheese from Leicestershire, French soft cheese, Welsh lamb, Scottish beef (despite BSE), and Italian olive oil. There is a growing market for authentic, locally produced, organic food, though farmers need to be careful that supply does not exceed demand in a small, niche market, as is happening with devastating consequences with organic milk.
At one time farmers in Europe struggled to collect their harvest because of adverse weather conditions, but modern plant breeding makes crops more resilient to weather extremes and engineering technology has made harvesting a speedier and more efficient process.
British farms remain uncompetitive compared with their European and North American counterparts because of their reluctance to co-operate with each other. By working together, they can buy their fertiliser and seed much more cheaply, they can reduce their capital by sharing working assets, and increase their prices by investing in primary processing and co-operative marketing.
Already over half of British and EU farmers supplement their income through non-agricultural activities, typified by part-time farmers in Bavaria working on the BMW assembly line. This trend will accelerate as IT connects remote farms to the world of commerce and if planners become more flexible in allowing redundant farm buildings to be converted for other uses, consistent with a sustainable environment. Rural tourism is booming, linked with the growing trend towards several short-break holidays a year. From Cornwall to Silesia, from Bavaria to Brittany, from the Lake District to Tuscany, farmers are diversifying into the holiday trade.
The value of farm land, especially in the more densely populated parts of Europe remains high despite the difficult trading conditions. Farmers who own their land are, therefore, asset rich if income poor. They have the option of selling-up and relying on the proceeds – their average age is 58 – or alternatively disposing of especially valuable plots, to raise capital for expansion, which many younger, progressive farmers are doing in Britain today. However, this option is not available to tenant farmers, and there is a case for a review of their rights vis-à-vis their landlords.
There are large numbers of European farmers, who for reasons of location (e.g. remote Welsh farmers), soil, climate and size (e.g. Southern Italy), are not economically viable today and will be less so in future. If existing subsidies are withdrawn, taxpayers will have to decide whether they are prepared to make direct payments, to promote a sustainable environment, to encourage such farmers to remain in business. Under the reform proposals of the Commissioner for Agriculture, Franz Fischler, all farmers would be entitled to such payments, which would also be compatible with a WTO settlement.
But this hopeful prospect would only be achieved if farmers abandon their dependence on state hand-outs. Inefficient farmers have as little reason to expect to be protected by government as any other inefficient businesspeople. The present system seeks to do just that.
CAP reform must concentrate on incentivising responsible, enterprising farmers, unencumbered by bureaucracy and market restraints. Seeking to maintain the status quo is both wrong and unachievable.

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