One cannot disagree with Franz Fischler’s opening contention: CAP reform is certainly on track. We are now far from the surplus-building, budget-busting monstrosity of 20 years ago. The policy objective of supporting farm incomes without stimulating excessive agricultural production has been largely achieved, thanks to reforms introduced by Fischler and his Irish predecessor as EU Agriculture Commissioner, Ray MacSharry. The problem now is that we still have a long way to go to make European agricultural and rural policy internally and externally acceptable, and we will not get any further down the track if we accept Franz Fischler’s arguments for treating agriculture ‘differently’.
The fact is that the current reform of EU farm policy is only partial, and still has far to travel before it achieves economic and social efficiency. There are three main reasons why this is so. A mass of market intervention and support measures still remain in place; high tariffs, production quotas, set-aside, intervention purchase, export subsidies and other mechanisms distort markets, and too many options remain for member states to continue with coupled production-linked payment schemes that stimulate output for which there is no ready market.
The removal of these obstacles to liberalisation is essential if the Union is to meet its trade obligations to developing countries and the Lisbon Agenda’s targets for economic efficiency. But this will not be achieved if policymakers accept Dr Fischler’s arguments justifying the continuation of agricultural subsidisation. As justification for the present policy, he restates the fundamental fallacy that governments’ interference in agriculture is justified because farming is different from other industries
No one disputes that agriculture is an important part of our common European culture and identity. The same is true of almost every other country in the world, and particularly of those ex-colonial countries that are now the EU’s major competitors in world agricultural markets. These nations were forged on the bedrock of agrarian expansion, and the process remains a vital part of their culture and national identities.
The ancient Greeks and Romans and medieval European governments may have protected their farmers, but they certainly did not subsidise them. Yet these societies largely created the rural environment in which we live today. And who anyway is to judge whether or not the landscape of the Auvergne or the Scottish Borders is more beautiful than Iowa, New South Wales or New Zealand?
The farmers of the last of these countries are a good example of why it is unnecessary to treat agriculture differently from other industries. In the last 25 years, the New Zealand government has cut subsidies from 35% of average farm incomes to less than 3%. Despite this, farm incomes there are now higher, the area of farmed land has not decreased, farms are more efficient and pressure on the environment has been diminished.
It is hard not to agree with the proposition that the recent CAP reforms have created a win-win situation for European farmers. They now not only have highly protected access to what is probably the largest and richest food market in the world, but are also paid a guaranteed €300-plus per hectare per year of taxpayers’ money just for being a farmer. To claim this bounty they need produce nothing. While such a policy may be a considerable improvement on what went before, it is still highly inefficient.
The key issue that bedevils Europe’s farm policy is that we still haven’t broken the vicious circle in which subsidies distort factor markets – input products and services - and thus create excessive costs for the agricultural industry, which in turn seeks to cope with its increased production costs by demanding protection and high prices. Yet recent research has also shown that only a small percentage of direct subsidies paid to farmers actually benefit the recipients because land prices and other input costs rise to absorb most of the value of the subsidies. In France, only 20% of direct subsidies now actually benefit the farmers.
The reality is that agriculture is no different from any other industry. Subsidies are not needed to protect the environment, encourage good animal welfare or maintain food standards. Like any other businessmen, farmers will perform these functions unaided by the state to fulfil their normal undertakings to their customers. European farmers in any case have a massive advantage over their foreign competitors - immediate access to Europe’s large and prosperous marketplace. They need neither subsidies nor protection.