Tuesday, December 27, 2005

Analysis not matched by outcome

The UK Government produced a good critique of the CAP as part of its efforts to secure further reform in the EU budget negotitations. Unfortunately, it had little impact on the outcome. As The Economist has commented, 'Despite the promised review in 2098, the deal puts off any further serious reform of the CAP until 2013.'

Nevertheless, the key arguments are worth reproducing. The paper makes the key point that the reforms that have taken place so far are only partial for three main reasons:
1. A mass of market intervention and support measures remain in place
2. High tariffs, production quotas, set-aside, export subsidies (albeit now to be phased out by 2013), intervention purchase and other mechanisms distort markets
3. To many options remain for member states to continue with coupled direct production-linked payment schemes, albeit reduced in scale

The paper sees the capitalisation of subsidy and support values into the price of land as a major obstacle to change. Much of the money paid out doesn't benefit farmers because of capitalisation of land values and the charges of suppliers of other inputs. In France, for example, where much of the land is owned by non-farmers, the actual value of susbidies remaining with farmers is as low as 20 per cent of the original payment.

The paper also has a welcomed pop at the much repeated and rarely criticised argument about the environmental impact of 'food miles'. Research commissioned by Defra shows that the transport of imported agricultural produce by sea accounts for only 1.5 per cent of the total external costs associated with food transport to and within the UK. This is mainly because fewer long journeys of large ships replace many short journeys by HGVs. One might add that much of the global warming effect results from trips made by car to out-of-town supermarkets.

The paper argues that the challenge for the EU is to ensure that agriculture is treated no differently from other sectors of the economy. This is where there is a fundamental division between the UK and its opponents who argue that the CAP produces food security benefits, high quality food, preserves cherished landscape and maintains the fabric of rural society.

There is, perhaps, a tension here with the UK government's stated objective of an agriculture that is 'socially responsive to the needs of local communities.' That is where rural development policy comes in, but it has taken a hit under the budget agreement.

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