The purpose of the Campaign for the Eradication of Agricultural Subsidies in Europe, (CEASE) is to provide a platform upon which to bring together and organise voices opposed to the EU’s Common Agricultural Policy (CAP).
What exactly is the problem with the CAP? Under the current system European farmers are subsidised with EU taxpayers' money to the tune of €45.5 billion per year (2005 figure). This represents over 40% of the EU's total annual budget and amounts to about €100 per EU citizen. The system started as a way of ending food shortages after WWII, a problem that does not seem particularly acute in the EU today. Today, subsidy payments are distributed on an increasingly unequal basis, with more and more of the money landing in the hands of large multinational companies, rather than small family farmers as people often assume.
The system works by guaranteeing producers a minimum price for agricultural goods like milk, butter and sugar. This price is normally significantly above the world market price. Farmers also receive subsidies depending on the amount they produce, although this system is currently being replaced with single payments that are 'decoupled' from production. However you look at it though, the fact is that EU producers receive unfair support meaning they enjoy lower production costs than their competitors in other parts of the world.
So what is the result of all this? The system is quite simply an example of terrible economics. We support farms (often large multinational companies) that would be unable to turn a profit if it wasn't for generous subsidy payments. EU governments keep prices within the member states up by buying large amounts of the products themselves. This results in the over-production of goods since producers don't have to play by the normal market rules. These surpluses (of e.g. milk and sugar) are then 'dumped' on foreign markets at below cost price (by means of export subsidies). This floods those markets with cheap subsidised goods causing local producers to go out of business. When you think that the markets in question are mostly those in poor, developing countries, where a large proportion of the population depends on agriculture to make a living, the consequences of this madness are devastating and can even lead to starvation.
All very well you might say, why don't we simply buy more goods from outside the EU? The increased competition is sure to eventually force prices within the EU down as well as help poor farmers in developing countries, right? Think again. Not only does the EU dole out unfair subsidies to its farmers with one hand, it uses the other to close the door on products from outside the EU. Agricultural goods from other countries are subjet to import tariffs. What this basically boils down to is that, when imported, agricultural goods are subject to a duty which ensures that they will not be competitive against our domestic (subsidised) produce. This is, to a large extent, the sticking point in the ongoing Doha Round of WTO negotiations. A further consequence is of course that consumers inside the EU have to pay higher prices. Yes, you heard correctly, EU producers are subsidised with our money and we have to pay higher prices! That's a two-handed economic slap in the face for every EU man, woman and child!
What can we do about this? Just like beating alcoholism, the first step is to recognise that we have problem. This blog is obviously not the first place the problem has been recognised. NGOs like ActionAid and Oxfam have, for a long time, campaigned on the issue. Guardian columnist Victor Keegan has also been drawing attention to what is happening with his blog KickAAS and, more recently, the sterling work of farmsubsidy.org has been lifting the veil of secrecy surrounding CAP payments and shedding light on exactly who gets what. So why are subsidies still being payed out? It's time to take a stand and unite on a single platform with one voice, reach out to citizens across Europe and target the campaign at those who make the decisions. This won't be easy. Although only a very small minority benefit under the current system, the farming lobby is a formidable force. It is hoped that CEASE will do to agricultural subsidies something like what the Jubilee movement has done for third world debt. I promise to come back shortly with a 'to do list' to this effect. In the meantime I am hoping this blog will act as a portal to engage with other interested people, stimulate the debate and (hopefully) lead to the formation of a trans-European army of anti-CAP activists!
Although the winds of change are starting to blow through the corridors of Brussels (with a total decoupling of payments promised by 2013) it is the opinion of this blog, as the name suggests, that the system of farm subsidies should CEASE completely. "That's imposible" you might exclaim "surely our countryside will go to ruin and there will be millions out of work". Well, here's some food for thought (excuse the pun); there is already one developed country that has totally abolished farm payments, namely New Zealand. Considering one of the first things one associates with the Kiwis is their lamb, as well as the fact that there are colossal distances between their producers and foreign markets, I think it's fair to say that if they can do it, so can we!
Saturday, March 10, 2007
Stop this madness...right now!
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23 comments:
The above statement is a concise summary of the arguments against the CAP. Yet, they do not provide the real picture and therefore do not help to meet the objective.
1. The costs for the tax payer. Every item of public expenditure would entail this kind of costs per inhabitant, when you sum European and individual country exopenditure. The issue is that agriculture is almost the only one that is completely centralized in the EC. But this total EU expenditure is 2% of the total public expenditure in Europe (both central and country budgets) which is comparable to the weight of the sector in the economy.
2. Yes payments to farmers are decoupled and linked to clear policy objectives like animal welfare, environment protection, management of rural landscpae and food safety.
3. Because of decoupling, trade distortions are minimized. Export subsidies are (and should be) rapidly abolished.
4. Developing countries benefit enormeously from greater access to European markets, at this point in time already far the bigger importer of agricultural products from developing countries, bigger than all other OECD states together. Market access has been widened so much that developing countries at this point lack the productive and commercial capacity to meet the demand and only fill 52% of the potential market quota.
5. Starvation and devastating effects are not lifted by abolishing the CAP. In those circunstances were EU export were reduced (dairy to jamaica) it was not the Jamaican farmer that benefitted but the exporting New Zealand and Australian farmers. This is also food for thought.
6. I welcome every initiative to work on hunger in the world. But there are no easy solutions. Production and trade capacity has to be built in the developing world. This is at this point far more important than the continued attack on CAP. Do not take this as an argument against further trade liberalization. This should be continued, but without trade capacity building, liberalization will bring no benefits to third world farmers and populations.
5. Let us use the right fact and figures and clearly state the objectives in order to campaign for the right issues. Our campaign should be in favor of massive investments in farmer controlled production, processing and marketing facilities.
Thanks Kees for adding your comments and also, for being the first to do so! I wanted to try and provide a response to the many points you raise:
1. This may be true but we have to ask ourselves if there is any other kind of industry that receives this kind of support. What do we (i.e. those not working in the farming industry) gain from the CAP? Why don't we give €45 billion to support Europe's IT industry? Well, because it can turn a profit on its own. It seems a bit futile to throw away so much money on something that could be done more efficiently in other parts of the world and also force EU consumers to pay higher prices at the same time!
2. and 3. As far as I'm aware we're far from a state of complete de-coupling of payments. We can pursue the policy objectives you mention without the use of farm subsidies. In any case, the idea that single payments are not 'trade distorting' seems to overlook some basic rules of economics. Yes, they may be less trade distorting but they still reduce the costs of production and give EU farmers an unfair advantage over thoses who have to go it alone. If your costs of production are lower than mine you can afford to sell for a lower price. And don't forget the other aspects of the CAP. Import tariffs are pretty trade distorting (just ask the WTO)!
4. and 5. Yes, many developing countries (though notably not those who have the most efficient agricultural sectors such as India and Brazil) did benefit by increased access to EU markets, under the 'Everything But Arms' initiative for example. However, as you rightly point out, these countries have already reached capacity with their exports. One could argue that this was a fairly cyncical move by the EU and that they never expected to be flooded with cheap goods from these countries since agriculture there is not very well-developed.
In my opinion part of the money saved by abolishing the CAP should be re-channelled as aid and used to invest in the agricultural sectors of these developing countries. Those who are currently net importers of e.g. grain could rapidly be made into efficient exporters. I also think developing countries, such as Jamaica, should be allowed (and even encouraged) to use protectionsit policies while their agricultural sectors are developing (just as all other industrialised countries have done in the past). This will prevent the flood of cheap imports from other parts of the world even after export subsidies from the EU are abolished. I know this may sound contradictory - I am for abolishing protectionist policies in the EU but also think that there are reasons developing countries can, and should, use similar policies themselves. The long-term result will be a more even playing field where international trade is fairer.
6. In order for these countries to increase their trading capacity they need more investment and also the ability to protect their nascent agricultural industry (see previous point). They also need to know that they have a market for their goods afterwards and aren't competing with subsidised output from the developed world. Nobody is going to invest in increasing capacity if there is no market for it afterwards.
If we do pay people to maintain land in EU countries we should have them do something useful with it e.g. reforestation to counter CO2 levels or other forms of environmental protection. We don't need use the producuction of goods which can be more efficiently produced elsewhere as an excuse to give them money.
Please note Adam, that I am not particularly in favour of the CAP. Yet it is no madness and this campaign, that is going on for many years, is driven on the wrong arguments. I remember being in the launch of CAP back in 1988. Scholars presented the outcomes of economic modelling demonstrating the beneficial effect of trade liberalization for the world. But as every kid can expect, trade liberalization favours especially those who in fact trade. So the major gains where to be expected in Oceania, Japan, Europe and North America. Developing countries, some could gain but others were even to loose in the models. Yet, according to these scholars this could be remedied with development aid.
Now, 25 years later one witnesses a continued liberalization from 1988 up to now without the corresponding massive increase in aid. I really do not see so much the point for European farmers to continue and support this policy, as they accepted the change for welfare sake and especially for a better fate of their colleagues in the developing world.
I think you also loose to easily out of side the fact that food supply cannot depend on imports only. In case of major disasters or war (and why should no new wars wage in Europe?) logistics go disrupted and countries should be able to maintain minimum levels of food supply.
Some groups even propagate food sovereignty, some regional self reliance in food. Although the concept is rather vague and multi-interpretable in some cases it goes that far as to deny access to European markets for agricultural products from outside the union. This is extreme as it would throw the Africans back on their own markets with less purchasing power.
The CAP at this point does not support production, but the additional requirements of a demanding market that wants meat animals to live nice up to the day they are slaughtered, that does not want meadows but well endowed landscapes, that wants safe foods with complete control over the chain and protection for environment. It is not so much to reduce the costs of production or enable sale at prices below world prices, because Oceania in many cases produces much cheaper due to its favourable natural endowment. These demands of society are paid by society, like also the punishments of shop lifters, the education of our kids, the pavement of roads etc. is paid by us all, including those who benefit from the measures. Again the CAP policy does not spend more on supporting governmental measures than is spend in other economic sectors of a similar seize. The distortion appears because of the fact that the spending for agriculture is the only one that is done through Brussels.
I think the fact remains that €45 billion is a lot to spend to secure, at best, rather questionable benefits for the vast majority of EU citizens and extremely damaging consquences for enormous numbers of third world farmers. One can't realistically expect people to compare that figure of 2% and compare it to national expenditure on healthcare or crime reducton. That obviously results in measurable benefits for everyone footing the bill.
With regard to food sovereignity, I understand why this argument is put forward and I agree that if we were to rely on food imports from just one source it could be potentially dangerous. However, if we encourage the development of agricultural sectors in other countries and give them open access to our markets we will achieve much better food security in the long run. That way we diversify the risks involved, e.g. war breaking out in a certain part of the world or a disease striking a certain country or region.
In any case, I think the example of New Zealand is living proof that getting rid of subsidies does not lead to the destruction of the agricultural sector. Wool, lamb and dairy products still feature high up on the list of New Zealand's main exports. They only have one major trading partner in the vicinity, Australia, which also has a well developed agricultural sector that they have to compete with. If their farmers can adapt to life without subsidies, why can't ours? European farmers have unfettered access to multiple markets on their doorsteps. And do farmers in New Zealand mistreat their animals or degrade the environment more than we do because they aren't given handouts by their government?
We become repetitive in our arguments. The benefits to European non-farmers are: save food, better environment, better live for animals, nice landscape. This cost € 0,41 per day per inhabitant of the European union. Yes, governments spends comparable amounts on other sectors, like IT. The investments in information technology research and infrastructure are supported by governments, like every sector of the European economy knows state interventions. Still, I do not argue that the CAP and agricultural support should continue this way. Like many agricultural production (horticulture etc.) also the nowadays main protected crops and dairy production in due course will be left unprotected. Great, no problem with that. The issue at stake is: does it help the developing world? No, because the mere fact that European and North American production will not be supported anymore, does not provide them –at least not the vast masses of small scale producers- with the capacities to compete with those highly efficient producers.
This has also much to do with the tariff escalation on processed agricultural products, an issue that is less commented but far more important to campaign on. Chocolate bars and soluble coffee cannot be processed in developing countries, but for their home markets. Due to high tariffs on processed products there is no sense in exporting them to European markets.
Aren't we more or less in agreement then? The system cannot continue as it is. Will getting rid of subsidies solve the problems of the developing world? Not on its own, there is no quick fix as anyone will tell you. But it will certainly help, assuming we keep up increased levels of aid and allow the states in question to develop their nascent agricultural sectors.
I'm with you on abolishing the tariffs on processed goods as well. That is in fact something I planned to bring up in a future post.
You didn't mention New Zealand. Why don't their farmers need subsidies to survive? In fact, the majority of countries don't support their agricultural sector in this way (mostly because they can't afford to) so why do we? The only logical explanation I can come up with is that it is so deeply entrenched in our farming sector's mentality that they violently resist any change to the status quo. There are also many vested interests, mostly those of large multinationals and extremely rich landowners (after all, they are by far the biggest recipients of the cash - not the struggling family farmer who'd much rather see the back of the current system).
I also think some of the "benefits" to non-farmers you mentioned are, to put it politely, very much subject to debate. E.g. that the current system in some way helps to protect the environment. There's all sorts of evidence that the methods of agriculture promoted by the CAP damage the environment enormously. Take a look at the report 'Green and Pleasant Land' in my links. If we don't need to farm why on Earth are we doing it? We could pay people to start up reforestation projects instead. That would actually bring real benefits to those paying the bill.
The logic of this 'weight of the sector in the economy' argument is that we should pay small shopkeepers subsidies equivalent to their economic displacement. And there is quite a lot of literature which suggests that, despite decoupling, domestic subsidies have trade distorting effects.
Gee, where have some of you guys been in the last 40 odd years? Unborn, I guess. The CAP began in 1962 and I reckon some of you should look up its development over this period. Might also help if you studied economics. And then get into some of the detail of the current regulations and examine the weird and wonderful world of modern subsidies. And for all this regulation and bureaucracy and cost, circumspice! Have we got what we want, whether in terms of food availability and quality, landscape, ecology and environment, or fairer (less unequal) distribution of income through trade? I don't think so.
But then I am just a disillusioned economist that has wasted almost a lifetime analysing policy and for every step forward have seen another step back. I am retiring to a small farm .....
This is an excellent website, please keep up the excellent work, CAP is controlled by powerful, influential lobby groups, CAP exists for the benefit of wealthy land owners and agri businesses, Europe needs a major and transparent debate, those that benefit have a disproportionate voice in Brussels
Shopuld we stop subsidies for health, education, houses. You have fallen for a con trick by a extremist capitalist argument.
The CAP subsidises food production. Just as we subsidise health, education, and houses. If we do not subsidise food production, then we will have more famines, and have our food security destroyed. You should campaign for Africa to have have CAP.
www.lonympics.co.uk/CAP.htm
I think you are the one who's fallen for some kind of extreme propaganda. CAP coupled with unfair trade rules is causing farmers in Africa to go out of business and resulting in a lack of food security. MThe vast majority of CAP money ends up in the hands of multinationals not small scale independent farming families as you seem to believe. You can't just dismiss criticism as extremist capitalism - if anything it's completely the opposite!!
Thanks for sharing the link, but unfortunately it seems to be offline... Does anybody have a mirror or another source? Please answer to my post if you do!
I would appreciate if a staff member here at eu-subsidies-must-cease.blogspot.com could post it.
Thanks,
Peter
Thank you, that was extremely valuable and interesting...I will be back again to read more on this topic.
Thanks for sharing the link, but unfortunately it seems to be down... Does anybody have a mirror or another source? Please answer to my post if you do!
I would appreciate if a staff member here at eu-subsidies-must-cease.blogspot.com could post it.
Thanks,
Peter
I very much would like to talk to you.
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