Wednesday, April 29, 2009

Blanket subsidies to continue after 2020

Pillar 1 subsidies are likely to continue after 2020, forecast Professor Allan Buckwell, the Policy Director of the Country Land and Business Association, in an interesting talk at the President's Seminar of the Royal Agricultural Society of England (RASE) in London yesterday.

He emphasised that agriculture should be able to look after itself. What it needed was imagination and drive, having the ideas about what customers want and having the energy and determination to see it through.

There was a possibility of big change in the next CAP reforms comparable to what happened in 1992 and 2000. However, he was concerned that we might not take the opportunity.

Trade liberalisation was in suspense. There was a real debate about going on about the extent to which we believed in international trade. Countries in Asia might think that the solution to their food security was to buy up land and rights to farm in Africa.

The 20th century trend in agriculture was for prices to fall in real terms, despite the growth in world population and income. However, this downward trend had slowed in the last twenty prices. Now we were in an era of more volatile prices. But if scarcity did produce systematically higher prices, what did that mean for policy? More support for farmers or less? It was hardly likely to lead to more support.

In seven out of the last eleven years farm income without support payments in the UK would be negative and even when positive was miniscule. The rapid removal of farm support would require structural adjustments.

Farmers thought that Pillar 2 was too bureaucratic and inaccessible to many farmers. For governments the administrative costs were high, there was the requirement for co-funding and the issue of whether benefits were discernible.

The status quo position on the Single Farm Payment was to cut, but how far and how fast. There was a wide distribution of payments among member states - Greece with its cotton and tobacco subsidies at one end with high payments and new member states like Latvia at the other. The distribution per beneficiary was even broader, although here the Czech Republic, Slovakia and the UK came out on top.

Would there be more uniform payments? What is the purpose of the payments? France favoured a basic husbandry payment. Which features of Pillar 2 could be dropped?

Putting the case for a food and environmental security policy, Professor Buckwell asked who is against food and environmental security? Who disputes that these are threatened? Europe faced the task of feeding its own population and possibly others as well.

The key point in food security was long-run production capacity - not letting good land to be built on or go under salt water. Knowledge and skills and research and development were also of key importance. One had to achieve food security as the key goal but without avoidable environmental degradation.

€53 billion (the CLA's estimate of the total cost of the policy) was not an obscene amount to be spending. He was not saying that the current policy was right, but any policy would need a significant budget.

Agricultural economist Sir John Marsh intervened from the floor to point out that subsidies kept resources in use which were les than optimal. We needed to be specific about what it was were were trying to create. CAP was originally created because of what seemed to be a fairly straightforward relationship between food availability and consumption. It then became a social policy because there were farmers with low incomes. Environmental aspects was too broad a term. The measurement of value to the public as a whole was less well defined.

There was an interesting exchange between Professor Buckwell and Martin Haworth of the NFU revealing 'differences of emphasis' between the two organisations. Haworth quetsioned whether both food and environmental security were under threat. He didn't agree that there was environmental degradation as things were getting better.

He disagreed with Allan Buckwell's suggestion that one should work with green organisations. It was dangerous to form an alliance with environmental organisations as this involved accepting that agricultural production was part of the environmental problem. In the set aside debate, environmental oganisations had convinced themselves that the only solution was to de-intensify agriculture in the form of set aside.

Haworth told Buckwell, 'What you are proposing is quite a dangerous way forward and not one we would support. We support the current architecture of pillar 1 and 2.'

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2 Comments:

Anonymous Anonymous said...

I agreed whith you but I still cannot understand why the 2008 review of the CAP is unlikely to bring significant change to the policy?

4:19 AM  
Anonymous Anonymous said...

Because of the incapacity to stop subsidies

4:27 AM  

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