Leaked documents suggest CAP reform just a whitewash

Big farms get taken care of, dairy farmers unhappy


European Union agriculture ministers meeting this week in Brussels are set to rubber stamp a middle path of not antagonising major beneficiaries like Germany and France while keeping the hopes of free market advocates like United Kingdom alive with cosmetic reform proposals to the EU’s Common Agricultural Policy (CAP).

The alarm for urgent need for CAP modification was sounded earlier last week when Joaquin Almunia, European Commissioner for Economic and Monetary Affairs said prior to a meeting of Eurozone finance ministers: “For the weakest sector of our society, inflation is the main problem. They are suffering a loss of purchasing power, and must pay more for food and other necessary goods.”

Among the measures that governments can take to help their poorest citizens is an improvement to “the functioning of our common agricultural policy (CAP),” he told journalists, adding that the EU should also promote measures aimed at tackling “tension” on the international commodity markets.

The CAP, one of the most hotly-debated policies in the EU, is going to pay out nearly 43 billion Euro in 2009, which amounts to more than one-third of all payments going out of EU coffers. Although there was a CAP reform in 2003 to slash subsidies, but with food prices in the 15-member Eurozone now rising at an annual rate of six percent, market analysts predict dire straits ahead.

According to leaked documents ready for presentation at the “Health Check” of CAP on May 20, “First indications from the assessment of the 2003 reform are in general positive, and indicate that a fundamental reform of the CAP for the remaining horizon of the present financial perspectives (until 2013) is neither necessary nor desirable.”

Another two major areas of concern directly affecting farmers are “set-aside obligation” and “milk quotas.”

The document states: “Removal of the set-aside obligation would likely bring back into production an area corresponding to roughly half the area currently under mandatory set-aside. It has been suggested that the environmental benefits of set aside could be retained by introducing a fixed percentage of total area as an “environmental compensation/priority” area, containing certain landscape features.

According to a reliable source who wanted to remain anonymous, there is allegedly a compromise on the ceiling of individual farmers earning more than 300,000 Euro where the beneficiary stands to lose 70 percent of the subsidies while those earning lower amounts will lose far less.

The earlier proposal was to drastically cut the subsidies to big farms but the pressure from lobby groups seems to have paid off, the source pointed out.

On the subject of milk quotas, the document is more critical saying, “Milk quotas hold back the sector from achieving the objectives of CAP reform since they still reflect concerns of two decades back, instead of responding to present opportunities.” “In terms of agricultural markets, the phasing out of milk quotas and removal of set-aside will allow the farmers to better respond to market situations.”

The milk farmers claim that they will lose up to 300 million Euro from these cuts and they want the system to continue, but there is also friction between old 15 and new 10 farmer lobbies and that is affecting the proposals.

Moreover, on the subject of disposal of pesticides to farmers, the European farmers are facing tough challenges as the number of active substances is going down with the new REACH regulations coming in whereby companies are reluctant to do the necessary tests for all pesticides as its cost and time consuming.

The agriculture insiders predicted that even with compromises already agreed, the ministers are set to have a bitter political battle as each side tries to prove that the food crisis makes its preferred policy the only safe one to adopt.

The two divergent view point were crystal clear as the British Finance Minister Alistair Darling wrote to EU counterparts saying it is “unacceptable that, at a time of significant food price inflation, the EU continues to apply very high import tariffs to many agricultural commodities,” while Germany’s Agriculture Minister, Horst Seehofer, argued that “we have to make sure that we can provide this continent with food sustainability. This cannot be done by taking away subsidies from European farmers.”

The CAP, a complex and expensive system of subsidies designed to protect European farmers’ interests, has often been blamed for keeping European food prices artificially high.

With world markets booming, it is time for Europe to remove quota system and go for liberalisation of the European markets which in turn will help bring down the prices but the documents said, “The continuation of present CAP policies shows that the current policy framework, as reformed in 2003, contributes positively to fulfilling the principal CAP objectives.”