Leading article: Soaring food prices should lead to the end of subsidies

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The Independent Online

Traditionally, one of the infuriating habits of the agricultural protectionist lobby has been its willingness to seize upon any economic trend to justify its position. When world food prices are low, we are told that poor farmers need subsidies to guarantee their income. When prices are high, this is apparently a sign that subsidies are needed to expand production.

So it should be no surprise to hear the global shortage of grain and other commodities being used to defend the Common Agricultural Policy. The French Agriculture Minister, Michael Barnier, even suggests that exporting the CAP model around the world, would promote global "food security".

In fact, the reverse is true. Reinforcing the CAP will only make the global food crisis worse. While subsidies will boost production in the immediate term, only free trade will ensure that global production rises to the appropriate level in the long term. As usual, the protectionists ignore the distorting affects of subsidies. African agriculture has failed to expand over the past half century in large part because it has been unable to compete with subsidised and protected EU farmers. This lack of domestic production capacity and a reliance on imports is one of the reasons why a surge in demand for food from Asia and a series of droughts have hit Africa so hard.

Thankfully, yesterday's draft policy paper released by the European Commission on further reform of the CAP seems, in the main, to have resisted the influence of the farming lobby. The paper talks of capping subsidies for major landowners, phasing out milk quotas and diverting a greater share of the agriculture budget to rural development and environmental protection programmes. There is a case for public money to pay farmers to improve water management, boost ecology and build dry stone walls; these are social goods that benefit everyone. Public money should not be used to reward farmers for producing surplus. To this extent, this document aims to continue the dismantling of the CAP set in motion five years ago.

But there is also a clause which suggests allowing national governments to use more CAP money at their discretion. There is a danger this could be used by some member states, notably France, to renew the link between subsidy and production. Any move in this direction must be fiercely resisted.

Actually, high global food prices provide a golden opportunity to demolish the protectionist CAP if European leaders have the imagination to grasp it. Farmers cannot plead poverty when their produce is fetching record prices. And the malign global consequences of protectionism have never been more obvious as food riots break out in developing countries.

High demand will not be a passing trend either, so arguments about the need for the CAP to boost European production will progressively lose their force. Global supply will certainly increase, but the extra demand from Asia looks likely to remain. This will ensure that an incentive remains for European farmers to maintain production.

There are other benefits. If Europe makes a serious move to curtail subsidies it will exert pressure on the United States to dismantle its own protectionist architecture. Washington has long argued that it will end its agricultural subsidies when Brussels does the same. Last but not least, there is the affect of recent food inflation on the European consumer to consider. Scrapping import tariffs on agricultural commodities should, in time, mean some relief for shoppers (although the era of very cheap food is surely over).

The political circumstances for killing off the CAP have rarely been more promising. It is time for a concerted push to force Europe's farming sector to stand on its own two feet.