The EU should significantly reduce the amount it spends on agricultural production subsidies
At its peak, the European Union spent around two thirds of the EU budget on agricultural production. Today spending on the Common Agricultural Policy (CAP) accounts for 40% of EU budgetary expenditure.
The European Commission estimates that each citizen contributes approximately two Euros per week on financing the CAP. In today's globalised market, EU farmers should be able to compete without the benefit of subsidies and guaranteed prices for their products, freeing up more EU funding for other spending priorities.
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Developing countries can't compete
Because of subsidies to EU farmers, farmers in developing countries such as in Africa are unable to sell their products to EU countries at competitive prices. The WTO has reported that developing countries complain about the high tariffs they face when exporting to developed countries, which prevents the expansion of production, which would lead to an increase in prosperity for much larger rural populations in African countries. EU farmers, whose agricultural products are subsidised, are protected from this outside competition. This represents a major setback for the developing world. Liberalisation of trade between the EU and developing countries could arguably be more valuable than western aid to the developing world.
The money could be spent elsewhere
The EU also commits a large proportion of its budget to structural funding, which is given to the poorer regions of the EU, whose GDP is more than 75% below the EU average. EU money could be used more effectively in these areas, as more citizens would benefit than benefit from agricultural spending. The EU also needs to commit a larger proportion of its budget to meeting the goals of the Lisbon agenda, which aims to make the EU the most competitive knowledge economy in the world. Both of these uses would benefit more citizens than the relative minority who receive agricultural funding. In addition, during the global recession, it is likely that EU member states will not wish to commit more of their own GDPs to the EU budget, so available funds must be used more creatively.
There are now two pillars to the cap. Yes, the first pillar concentrates its resources into an agricultural direct payment plan whereby farmers are paid on the basis of past years payments in order to stabilise our self sufficiency in agricultural produce. But the second pillar is focused on rural development. After the Agenda 2000 agreement, Member States were to produce a 7 year rural development plan whereby money from the Common Agricultural Policy was be spent in rural area economies. This is a social welfare benefit and it ploughs money into rural economies which are normally segregated from city societies. Such benefit reduces the risk of over population in cities, people who live in rural areas will be able to make in living in the rural areas rather than feeling the need to relocate to a city. This helps the whole of society, not just farmers.
Market flexibility is stifled
The Common Agricultural Policy discourages farmers from responding flexibly to consumer demand by growing produce which is more profitable. Farmers are still subsidised for producing some agricultural goods, such as sugar and dairy produce, so that they have no incentive to diversify their production. This results in artificially high food prices. An unsubsidised, free market, would allocate resources to the most profitable produce, and would also allow farmers to focus on other aspects of the rural economy, such as environmental protection, agricultural and eco tourism, and production of biofuels.
Since the 2003 reforms of the Common Agricultural Policy, farmers' payments have been decoupled from production and now are based on past payments. This is no way should stifle the diversity of what they produce.
The price support system has been gradually faded out over the last 10 years and Direct Payments have taken their place. Direct Payments are down to Member State competence and it is for them to decide how much to pay. They are to decide this depending on the level of gross compliance with environmental standards. This means that the CAP is now actually funding farmers to make their farms more environmentally friendly, not less.
As discussed previously, rural economy development is sustained via the second CAP of the pillar.
The purpose of the original CAP has been achieved and is now redundant.
In the 40's there was a major depression and many European countries relied on their agricultural income and produce to achieve self sufficiency. For that reason in 1962 the CAP was introduced. Levies were put on exporters from countries outside the EC and farmers were encouraged to produce as much as they possibly could. In return, the CAP paid for any products which were not able to sell at the 'Intervention Price'; this was a politically set price which farmers would be compensated for if products were selling below this level. This lead to the EC being self sufficient in agricultural produce. However, the EU is now producing so much surplus that food is being dumped on world economy markets, or stored until the prices rise. Now we are self sufficient, there is no need for the CAP.
The CAP promotes divergence not solidarity
It may be seen as a positive that payments have shifted from the price support mechanism to the direct payment system, but this is causes trouble between Member States. Member States are being given increasing discretion over what requirements farmers need to comply with in order to potentially gain the 20% bonus on their previous years earnings. Some Member States may be more interested in animal welfare, some may be more interested in the environment and some may have a particular dislike for biological processes. This leads to varying levels of reimbursement among farmers in different countries and it creates hostility between Member States who are advocating for different purposes of the CAP. France and Ireland would be strong advocators of the CAP since they have a large agricultural sector whilst the UK would rather the system be scrapped as they, and other countries, pay more towards the CAP than they get out of it. Such divergent interests weakens the collective.
The current distribution is unfair.
The current distribution of CAP funds is unfair and unbalanced. Big farms get the bulk of the money, with the smaller farmers who are probably more in need of it getting comparatively little. For example 74% of CAP funds go to just 20% of European farmers while 70% of farmers share only 8% of the fund between them [[Q&A: Common Agricultural Policy, BBC News, 20 November 2008, http://news.bbc.co.uk/2/hi/europe/4407792.stm%5D%5D
It is also unfairly distributed between countries, for example Britain only gets 60% of the grants of Germany despite having similar levels of farm land and received a fifth less that Italy despite having a seventh more farmland. [[EU's Common Agricultural Policy costs British families £400, The Daily Record, 1st April 2009, http://www.dailyrecord.co.uk/news/business-news/2009/04/01/eu-s-common-agricultural-policy-costs-british-families-400-86908-21244648/%5D%5D
Farmers can’t survive
Almost 75% of EU farmers run small farms with a turnover of less than £5,000 per year [[www.civitas.org.uk]]. Without agricultural subsidies, many of these farms would cease to be profitable, and the rural communities they support would struggle to survive. Most farms are small businesses, with time consuming and labour intensive operations, which return very small profits. Taking away EU agricultural subsidies, which are reliable source of finance, could prove to be the final nail in the coffin for many farms, especially those in remote areas..
This is not a reason to keep the C.A.P. but to once again reform it. It is estimated that 80% of the CAP goes to the largest and richest farmers. After the Agenda 2000 Reform, direct payments to farmers were made based on what they had received in previous years. This means that the CAP is in a vicious cycle of paying out to large farmers and giving a pittance to smaller farmers.
The market needs stability
Without subsidies for products such as sugar, dairy produce, and wine, farmers would be exposed to the price volatility of a global market. This could interfere with their ability to plan ahead and respond to consumer demand in the long term. In addition, with the average age of farmers in the EU increasing all the time, and numbers of new younger farmers entering the industry decreasing, the provision of EU subsidies is an attractive incentive. Farmers also have to deal with large and powerful supermarkets who can dictate lower prices, thereby forcing farmers to price their goods lower than is profitable.
It’s not just about farming
Farmers have a vital and increasing role to play in protection of the rural environment, and preservation of the countryside. This is a very important function of the Common Agricultural Policy, as over half the EU population lives in rural areas. Since 1995 the EU has provided rural development aid, to encourage farmers to diversify their activities, and become more competitive. Maintaining the biodiversity and traditional image of the countryside which citizens have come to expect, especially in more remote parts of the UK, is a worthwhile endeavour, but one that requires funding if it is to be carried out to high environmental standards. Farmers also make an important contribution to addressing the challenges of climate change and through their agricultural activity.
Future EU Enlargement
The enlargement of the EU that is impending will result in more Baltic countries joining the EU. As their economy is largely based on agriculture we need to protect and sustain their interests, not lower the level of protection we give to EU farmers. It seems absurd to lower the budget to be spent on the CAP when more countries are entering the EU. If we keep the budget as it is, farmers will receive less anyway due to the same pot having to be shared between many more farmers.
What do you think?