Why the CAP is in need of radical reform

Date: 30/11/1995

By Jim Murray

The Common Agricultural Policy (CAP) cannot survive in anything like its present form.

There will continue to be an EU agricultural policy. There will always be some need for agricultural supports and, at least for a long time to come, public money will be needed for rural development. However, the combination of inherent weaknesses in the CAP, plus a number of external factors, will force radical change so as to amount to abolition of the CAP in its present form. We need a new Common Agricultural Policy.

The CAP has helped to bring about an astonishing rise in productivity on Europe's farms, in terms of output per hectare. Not surprisingly, there were large gains in productivity in the first decades from a relatively low base in the Fifties, but productivity has continued to increase dramatically, even in the last 25 years.

In France and the Netherlands, for example, cereal yields have practically doubled - farmers can now produce twice the amount of cereals from the same hectare. Sugar farmers can now produce up to 50&percent; more sugar from the same area of land. In some member states, dairy farmers get 60&percent; more milk from each cow, as compared to 25 years ago.

This productivity may seem like a success story but it is not, because it ignores the question of consumption. Farmers may produce more food, but (apart from those on low incomes) European consumers cannot eat more food. An increase in the demand for food in Europe largely depends on population growth.

One response to the imbalance between production and consumption in Europe was to export the surplus or, more correctly, to dump it on the world market because it could not be sold at the cost of production. We, therefore, have an elaborate and expensive scheme of export subsidies under which consumers and taxpayers have to pay to dispose of surpluses they never wanted in the first place.

Worse, this dumping of western European surpluses on the world market damages the Third World and blocks the potential for economic development in Central and Eastern Europe.

When consumption is more or less static, productivity increases have another consequence - the number of producers must fall. One farmer can now feed many more consumers than before, so less farmers are needed.

In addition, larger farmers are the main beneficiaries of the CAP, so there is tendency towards larger holdings. Productivity gains and greater concentration have led to huge reductions in the number of farmers.

Between 1970 and 1993, the number of people engaged in agriculture more than halved. In 1993, agriculture accounted for 5.6&percent; of total civilian employment, as against 13.4&percent; in 1970 for the same 12 member states.

By linking support to production, the CAP helps to increase concentration, intensification and rural depopulation (although there are other factors at work here also).

The McSharry reforms and the Uruguay Round are bringing some changes. There is a partial shift towards income support, and away from price support, and there will be reduction in the subsidy for certain exports.

Overall, however, the reforms do not go nearly far enough. Surpluses have been reduced, dramatically in some cases, but the reductions seem due, to a large extent, to cyclical factors (including the weather) rather than to any underlying reform.

Consumers and taxpayers pay for agricultural supports - to the equivalent of about 25 ecu a week for a family of four, or about 16,000 ecu per full-time farmer equivalent.

For sugar, the CAP costs the equivalent of 2,500 ecu for every hectare of land under sugar in the EU. In 1994, the EU spent 1.06 billion ecu on the tobacco regime, equivalent to 5,300 ecu for every tobacco farmer in the Union.

Of course, the average farmer does not receive anything like these figures. Big farmers receive the main bulk of price supports and much CAP money goes towards storage costs, export subsidies, administration, and such like.

It is argued that the total cost of the CAP is a relatively small proportion of total consumer and taxpayer spending, but that is not the point. We need to ask whether this money could be spent in a better or more efficient way to promote long-term employment and rural development.

Nowadays, there are strong public pressures on public spending and a corresponding desire to ensure that public money is spent in the most effective way to tackle the many grave social, political and economic problems which we face. This is one of the factors bringing pressure for further radical reform of the CAP.

There are other factors at work also, including consumer preferences and environmental concerns.

Many consumers are moving away from beef and dairy products, for example, and are linking their consumption with concerns about the environment, animal welfare and the overall safety/purity of food.

On the safety/purity point, there is almost a crisis of confidence. Although food in Europe is generally safe, there are legitimate concerns about such issues as hormones in beef, nitrates in vegetables, and agricultural pollution, which puts pressure on water standards and purification costs for example.

The CAP is not, of course, all bad for the environment, but the substantial environmental costs of intensive production and agricultural pollution must be included in any balance sheet for the CAP.

Central and Eastern Europe is another source of pressure for CAP reform. It is in the interest of every man, woman and child in the EU that there should be peace, stability, and economic and political progress in Central and Eastern Europe.

There will not be economic development in Central and Eastern Europe without agricultural development and there will not be agricultural development unless we are prepared to buy their agricultural products and stop blocking their access to world markets by unfair subsidies on EU exports.

Whether or not the EU is enlarged, and whether or not the CAP is extended to the countries of Central and Eastern Europe, we will have to increase our trade with them. They have an immense potential to supply us with food such as beef, dairy products and cereals which are already in over-supply at higher prices in the EU.

Peace, stability and economic development in Central and Eastern Europe implies, inter alia, the development of a new balance in production of primary food products within the whole of Europe. We must not obstruct progress in Central and Eastern Europe for the sake of preserving an outdated and over-expensive CAP.

On the wider world level, there will be further pressures for reform of the CAP.

The Uruguay Round has already included a clause recognising that reduction of agricultural support is an ongoing process. The pressure for change will intensify. Because of the various internal and external pressures which I have described, we need a fundamental reorganisation of the CAP towards the achievement of social, regional and environmental objectives.

Such a reorientation would include, inter alia, the phasing out of export subsidies, a fundamental rethink of land-use policy and rural development policy, the use of income supports instead of production supports, plus the setting of clear environmental goals.

In many ways, the issues of land use and rural development are the most important. Rural life, rural development and the rural environment will not be helped by a policy which reduces the numbers of farmers by encouraging them to squeeze more and more output from their land, animals and plants.

For the founding fathers of the CAP, the system of protected markets and administered prices was seen, in large measure, as a temporary expedient to increase productivity.

The system has outlived its usefulness and must be replaced by a new CAP orientated directly towards the achievement of social, regional and environmental objectives.

Jim Murray is director of BEUC, the Bureau Européen des Unions de Consommateurs, which represents consumer organisations across the EU.