CAP: A subsidy scandal or a rural lifeline?

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Indy Politics

The trade-off of interests at the heart of the original EEC demanded that France have a counter-balance to the single market for industrial goods, which hugely benefited Germany. It would have been in France's interest – as an exporter of farm produce – to have a low-ish system of farm support prices in the CAP. The Germans insisted on supporting prices at a high level to sustain their peasant-scale farmers. Since the Germans were prepared to pay the bill, the French shrugged and accepted in 1965. The original EU system of support for farmers was based on the pre-war Dutch model: intervention in the market to buy up surplus goods when prices fell below the agreed level. At first this worked wonders in boosting food production in hungry post-war Europe. But Brussels found it impossible to stop the machine; hence the food mountains of the 1970s and 1980s. Reforms have levelled the mountains and the new policy is to break the link between subsidy and high production.

What are some of the mad anachronisms it produces?

Well, nearly 3 billion people – half the world – live on less than $2 a day and aid charities argue this is less than the support received by the average European cow. The EU says this cannot be substantiated.

About 70 per cent of CAP money goes to 20 per cent of the largest farms in Europe. And small farmers account for nearly 40 per cent of EU farms yet receive only 8 per cent of subsidies.

And, while the EU discourages smoking, it subsidises tobacco production.

Who benefits most?

In 2004 the CAP budget was worth €44.76bn (£30bn). Of this France received 21 per cent, Spain, 14.1 per cent, Germany 13.5 per cent, Italy 11.2 per cent and the UK 8.9 per cent. The greatest absurdity is that 40 per cent or more of the whole budget goes on supporting farmers who have traditionally grown cereals and tend to be wealthy producers.

What's Gordon Brown up to? Is he just playing politics or is he right to want reform? Or both?

A bit of principle and a lot of politics. Mr Brown believes what he says on this. The UK has always pressed for reform but has been part of every negotiation and signed up to every deal which has shaped the CAP. Attacking it is popular with voters across the spectrum. It strikes a chord with development NGOs and Eurosceptics alike. It has also helped turn around the debate about the merits of Britain's annual €4.6bn budget rebate.

Can it be reformed?

The CAP has already been reformed three times, most recently in 2002. In 1989 agriculture took up 60 per cent of the EU budget, compared to 45 per cent now and 35 per cent in 2013 under the Commission's plans. Most importantly, farmers are no longer paid for what they produce, removing the incentive to make agriculture intensive. Other changes are inevitable in the years ahead. They include the total elimination of export subsidies (already much reduced), a shift of resources to rural development and the gradual transfer of farm subsidies back to national budgets.

Should farming be subsidised when others industries don't get such benefits?

An unprotected, subsidy-free agriculture is possible but only at huge cost to rural communities and the beauty and ecology of the countryside. The question should be: How do we support farmers and keep rural communities viable without producing chemical-soaked, GM ranches and without damaging the Third World?

What do European countries outside the EU, like Norway and Switzerland, do?

They subsidise much more than the EU. Eurosceptics see these countries as role models but, says the OECD, the level of support provided in Norway, Switzerland and Iceland is at least double that of the EU.

Does having the CAP mean we can all go to Tuscany for nice summer holidays?

The French argue that the CAP is the only way to ensure high-quality, "slow" food, from traditional small producers. This may be so and it is now official CAP policy – but no thanks to the French. Successive governments – with the exception of the Jospin administration of 1997-2002 – supported a high-production CAP, because the real agricultural power in France lies with the wheat and maize barons, not small farmers in the Auvergne. France has had to accept – and now boasts about – the change towards support for high quality, eco-friendly farming.

And, yes, it is true. Without targeted farm support, French producers of artisanal cheeses and Italian ham producers would not survive for long.

Should subsidies exist at all?

Australia and New Zealand have virtually eliminated farm subsidies. But the cost in Europe would be immense in terms of rural depopulation. The environment would also suffer if more cheap food were imported from abroad, and traceability of products would become almost impossible.

How does this all play into the G8 and trade in Africa?

Gordon Brown had made a direct call for the elimination of all export subsidies to stop the dumping of food on the Third World. That, in fact, is not such a radical demand since the EU has already scaled these back hugely and promised to phase them out – but only if others, like the US, follow suit.

Scrapping the CAP now would not save the world.