Tuesday, August 30, 2005

Bird flu? No worries?

With avian influenza reaching Russia, the media has been talking up the inevitability of its reaching the EU. This has been linked with the suggestion that the virus will transmute into a form that will allow it to spread from human to human, creating a pandemic on the scale of the devastating influenz outbreak at the end of the First World War (which killed my grandmother while she was still a relatively young woman).

However, the European Commission has attempted to calm any incipient panic, arguing that the risk of bird 'flu reaching Europe via migratory birds is negligible. On the question of transmission to humans, a spokesman commebted, 'We are very far from a risk to humans from migrating birds.'

Veterinary experts concluded at a meeting in Brussels that the immediate risk of the disease spreading to the EU was probably 'remote' or 'low' depending on the area. There was no call to impose a general veto on keeping poulrtry outdoors, a measure imposed by the Dutch last week which would pose problems for free range egg producers.

However, the EU has suggested that member states step up surveillance of wild birds and their migratory movements as well as keeping a close eye on domestic birds.

CAP gets even more complex with SFP

The complexity of the CAP has always been one of its distinctive features and, many commentators have argued, has been used in effect as a political entry barrier to exclude outside critics and permit decision-making 'fudges' that protect the interests of farmers.

The way in which the new Single Farm Payment (SFP) system is being implemented has increased this complexity with no two member states applying the SFP in the same way. In particular, the various options for 'partial coupling' have been widely used, especially in the beef sector where there were fears of a big drop in production.

Only five member states have opted for the Commission's original vision of full decoupling: Germany, Ireland, Italy, Luxembourg and the UK. Most of the EU-15 member states have also opted for a historical basis for payments which tends to protect the interests of existing farmers. Only England (not Wales and Scotland) and Finland and Germany intend to make a transition to regional payments.

Five countries have chosen to use the national envelopes option (Finland, Italy, Scotland, Spain and Sweden). These are not stuffed with used euros but are used to make special aid payments to support environmental or product quality objectives.

Only the UK has chosen to supplement the recycling of money into the rural development budget with a modulation top up.

Tuesday, August 23, 2005

Subsidies favour rich regions

New research shows that even after the recent CAP reforms, rich regions in Germany, the UK, France and the Netherlands will take a greater slice of the €90bn farming subsidies than poorer regions in south-eastern and eastern Europe. The two-year study, one of the most comprehensive ever undertaken of the CAP by researchers at Newcastle and Aberdeen universities, is reported in a book on 'CAP and the Regions' edited by M Shucksmith, K Thomson and D Roberts.

About 80 per cent of the subsidies go towards supporting grain, beef and dairy products, the staple products of often large scale northern European farmers while less goes to products such as olive oil and wine which are predominantly grown in southern Europe. This in stark contrast to the objectives of EU 'cohesion' policy which seeks to reduce regional inequalities.

The authors see the principal problem as the emphasis placed on market support and direct subsidies in pillar 1 of the CAP compared with pillar 2 (rural development). Funds should be redistributed from pillar 1 to pillar 2.

However, pillar 2 did not escape criticism. Agri-environment schemes were less effective in the less prosperous regions of Europe and richer EU states tended to prioritise agri-environmental objectives more than poorer regions.

Austria was singled out as a country where agri-environment and Less Favoured Area payments had been put to good use and the money used intelligently to benefit those who needed it most. In contrast, Scotland had made a poor use of funds by adding national funding to LFA payments so that there were no losers, an approach often found in agricultural policy.

Tuesday, August 09, 2005

Big EU tariff barriers a big problem in trade talks

With WTO Doha Round talks on agriculture stalled, and fears growing about the Hong Kong ministerial in December, it is increasingly becoming clear how big a problem is posed by the EU's high tariff barriers.

Market access is turning out to be the key problem in the farm trade talks and the US is blaming the EU and the protectionist G-10 group (led by Japan and Switzerland) for failing to make any concessions on the tariff reduction formula. The G-20 has a proposal on the table for a maximum 100% tariff for developed countries.

In fact more that seven per cent of the fixed rate farm tariffs used by the EU are set at an equivalent level of 100% or more. The most protected product in he whole CAP is revealed to be fresh or chilled 'skirt' of beef, used for meat processing, which has an ad valorem equivalent of some 407%.

Almost a quarter of the fixed rate tariffs (38 out of 158) used to protect the European dairy sector are set at an equivalent level of 100% or more. Buttermilk has an ad valorem equivalent of some 264%, while butter has AVEs of between 82% and 135%.

Grain intervention soars

Buying grain into intervention may be intended to be a safety net under the new look CAP, but it is a safety net that has been much needed this summer. This in spite of the fact that much of Europe has been afflicted by a drought that is estimated to hit crop yields by seven per cent. In Spain and Portugal, where the drought is at its worst, the Commission has approved emergency aid to farmers.

As last year, the surplus production is mainly in central and eastern Europe. By the end of June, the EU had almost 12 million tonnes in intervention with another four and a half million tons under offer. Although it was possible to export some of the stockpiled grain, storage space is at a premium.

The total bill for cereals intervention this year could be almost €500m, almost eight times the original budget. Money has to be clawed back from other underspent parts of the CAP budget.

Incidentally, this page has just returned from a trip through five central and east European states, two already EU members, two candidates and one (Serbia-Montenegro) still in ill favour. Impressionistically, I thought that Bulgarian agriculture and infrastructure looked in far better shape than in Romania where the horse (or the mule) is still very much in use as a means of transport.