Tuesday, June 29, 2010

Productionist move at Defra

Rural development programmes should place more emphasis on competitive agriculture and less on environmental considerations, according to new farm minister Jim Paice:
Rural development

In some respects this may be seen as a return to a MAFF-style productionism at Defra, even if the name of the department has not (yet) changed. However, it is often forgotten that there are three dimensions to sustainability: economic, social and environmental. What the balance should be between these is a matter for debate.

The biggest challenge facing Defra is the budget cuts that are going to hit it given the ring fencing of the NHS and lower than average cuts that are likely in defence and education. If it wasn't for coalition politics, one might wonder why Energy and Climate Change needs to be a separate ministry.

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Monday, June 28, 2010

Disclosure of subsidies may end

Transparency in the CAP may be reduced with a ruling which suggests that EU rules which require member states to publish details of payments to individual farmers may be invalid. An opinion by an ECJ Advocate General is often indicative of the view that the Court itself may take. German farmers had challenged the rules on the grounds that they were an invasion of their privacy.

Advocate General Elinor Sharpston said that the rules were disproportionate and that there were discrepancies in the reasons the European Commission and the European Council had given for needing the legislation. The assumption that farmers consented to disclosure when they applied for subsidies was also open to question on the grounds of whether it was explicit enough.

Reform advocates have used the information to draw attention to the very large sums of money paid under the CAP to big landowners or to food processing companies making use of export subsdies. Farmers' organisations argued that members of the public often confused Single Farm Payments with profits.

How many members of the public have been interested is open to question. The information is not that readily digestible and is not equally available for all member states (in the UK it can be found on the Defra web site). However, when I have looked at information relating to farms in areas I am familiar with (admittedly not a representative sample) I have been surprised by how relatively low the payments have been. They would be higher, however, in areas like East Anglia and Lincolnshire.

Depending on the nature of the final ECJ ruling, the Commission may have to redraft the rules rather than scrap them altogether.

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Tuesday, June 22, 2010

What's wrong with the CAP

A polemical attack on the CAP using data from farmsubsidy.org which nevertheless admits that the chances of real reform are slim: CAP

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Thursday, June 17, 2010

CAP consultation draws a big crowd

The consultation on the future of the CAP has been so popular that the deadline has been extended: Deadline

3,700 responses have been received, although that is not so many when one considers the size of the EU. I also wonder how many of them were from ordinary citizens or consumers and how many from special interests that derive benefits from the policy?

I am rather sceptical about such consultations as I think that they rarely change the minds of decision-makers who pick out those responses that suit their thinking. But I wouldn't want to discourage anyone from responding.

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Thursday, June 10, 2010

How the NFU sees the challenges

After some delay, I am returning to the NFU paper on 'The CAP after 2013.' I would agree with their basic definition of the challenges facing farming: 'Put simply, farmers across the world will be required to produce considerably more food, from finite and precious resources, amid a changing climate and at the same time impacting less on the environment.'

The NFU specifies the benefits of the CAP in the following terms:
1. European consumers expect food that is produced to exacting environmental and welfare standards. These lead to higher regulatory costs which do not always apply to third country imports. The CAP is a form of compensation for these costs.
2. The CAP plays a key role in the EU's long-term food security.
3. There is a territorial cohesion role in terms of allowing farming activity to be spread throughout the EU. It also underpins rural employment [only in some, generally more remote locations in my view].
4. The policy helps to ensure that agricultural production is environmentally sustainable and helps to maintain some of our most important landscapes and environments. [This is essentially an argument for the second pillar].

But perhaps the real point is that 'Fundamentally, the CAP helps to address the failure of agricultural markets to develop fair and profitable returns to farmers.' What constitutes a 'fair' return is a moot point, but in my view farmers have experienced what I would regard as anti-competitive behaviour by supermarkets, especially in the UK. The solutions, however, reside in more effective use of competition policy (more on this in a later post].

Arguments (1) and (2) are really those that underpin the SFP. However, the actual costs imposed on (1) fall far short of present SFP payments. (2) is more difficult to quantify, particular given the uncertainties associated with climate change, but there are grounds for taking an 'insurance' payment against this.

Without the SFP, many farms would cease production. This would probably hit public benefits more than food production given that it is the most marginal farms that would cease production. What this points to (in the absence of an acceptable bond scheme) is a SFP at a reduced rate.

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Saturday, June 05, 2010

The French perspective: the new French food law

Recently I had the opportunity to talk to some French agriculture and food policy advisers. This was very informative in the sense of understanding where we differ. The French stance on these matters is a product of their own values which in turn reflect their historical development. One has to understand their stance, even if one does not agree with it.

One topic was the new French law on the 'modernisation' of agriculture which I understand has reached the Senate. I think our understanding of modernisation is somewhat different from the French one. There appear to be three broad objectives: creating a public policy for food; stabilising and re-regulating the agricultural market; and ensuring food security.

Apparently, there is a view in France that there is need to combat new food behaviours. From an English perspective, I would say that this was no concern of the Government, but again this reflects the difference between a liberal and an étatiste tradition.

France was once the country of the one hour lunch: indeed it was not unknown for some lunches to extend more than hour and be washed down with more than a glass of 'vin ordinaire'. However, the view is that France has moved away from having a fixed eating time and young people are turning to fast food. This is thought to be not good for public health, but above all it is believed that restoring traditional behaviour would open the market for agricultural products.

France would also like to strengthen corporatist associations of producers, but admits this would require competition law changes at EU level. A somewhat more sensible idea is to seek longer-term contracts between farmers and the hypermarkets.

However, some of the goals sound a little strange to English ears. Preserving the food heritage is one. Now, whilst I do not share the English middle class love affair with France, I would admit there is something special about a Parisian café. But does this require government intervention?

The policy also seeks to rely on educated citizens, that is educated about food and that objective would certainly resonate with many in England. However, the notion of keeping competitive enterprises on all parts of the territory is a less comfortable one, even if one admits that many parts of France are thinly populated and at risk of depopulation. (Whether depopulation is necessarily a bad thing is itself an interesting question).

A British participant in our discussions argued that the structure of dirigisme facilitated collusion and was essentially anti-competitive. Were the objectives coherent and did they try to cut across the expressed preferences of the French people? The attempt to stabilise might be an attempt to immoblise.

Not surprisingly, this was seen as a rather polemical point on the French side. They explained, that their policy was not economically rational, but was a [normative] choice. The production of food had a very strong public good component and belonged to public policy. However, it was admitted that French consumers had a very limited role in food policy formation.

More from our discussions at a later date.

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Wednesday, June 02, 2010

Ag econ folks give it large to SFP

The intention of the European Commission to retain the SFP as the centre piece of the CAP after 2013 is a fundamental error according to leading agricultural economists. In a paper by David Harvey and colleagues to the Agricultural Economics Society conference in Edinburgh, it was argued that direct farm payments should be phased out.

The very idea of general direct payments was said to be unjustifiable. Payments should be reoriented from payments that are still historically linked to production-based payments and towards the guarantee of food supplies, rural economic development and protection of the environment.

The ag ecnomists argue that the overall agricultural policy problem for the EU is the preoccupation with farm incomes which dates back to the formation of the CAP in the 1950s. The bulk of an expanding budget is still spent on that objective. Despite this expenditure, average farm incomes remain below the national average income in almost all member states (which, of course, could be seized on as an argument for not making things worse by removing farm support). The economists argue that whatever governments do, they are not going to substantially improve the incomes of the less efficient and marginal farm holders.

The economists note that these payments were originally meant to be transitional. Of course, following Mancur Olson, the politics of subsidies which have concentrated effects but diffuse costs means that they are often converted from temporary to permanent payments.

Harvey revives the idea of a bond scheme to buy out these payments as first suggested by Professor John Marsh more than twenty years ago and subsequently developed by Alan Swinbank and his colleagues. Uncertainty for farmers would be reduced and they would have time to adjust to liberalised markets.

I have always found such a scheme attractive in principle, but the Commission view is that it is not compatible with cross-compliance.

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