Rhein on Energy and Climate

For the first time in decades, EU agricultural expenditures will fall in 2011. The three percent decline constitutes a European contribution to the national austerity regimes. Nevertheless, with € 56.4 billion CAP expenditures will still account for 41 percent of 2011 EU budget expenditures.

Fearing more cuts in the future, the French Agricultural Minister Bruno Lemaire has last week underlined the crucial importance of the CAP budget for maintaining cattle farming in mountainous regions pointing out that there will no longer be any Saint-Lazaire cheese without CAP support!

This complaint raises the issue what the CAP is good for. What should be its value added? What public goods should it help making available?

Belgian asparagus, French or Cypriot speciality cheeses, Maltese wine? Italian almonds, Greek tobacco? Where is the limit? Why this and not another speciality?

The plea made by the French agricultural minister for the CAP subsiding cheese specialities lacks justification. There are no stringent economic or ecological reasons for keeping cattle in mountainous areas and producing cheese there.

Mountainous regions should return to their natural state if farmers are no longer willing to operate there without hefty subsidies; and cheese gourmets should pay the price it costs to manufacture goat, sheep and other speciality cheeses, which they do incidentally.

The Franco-German plea that the new member states that have joined the EU in 2004 and 2007 should continue to receive lower CAP payments than the ”old” member states, because they benefit from lower production costs, is equally unacceptable.

It underlines the aberrations of 60 years subsidy mentality of European agricultural lobbies. But it also shows the absence of a convincing rationale for CAP financial support.

Europe needs a serious, comprehensive debate on the future of its agricultural support. It cannot continue making lavish direct income payments simply because it has done so for the past 20 years. European farmers must learn to stand on their feet, like any manufacturer or service provider.

Policy makers should facilitate the necessary changes to allow farmers to compete in the global environment. Increasing food scarcities and prices will make adjustments easier than during the last six decades. Price fluctuations will, of course, continue and may require hedging operations. There may be a case for supporting appropriate financial mechanisms.

There may also be a case for subsidising specific services farmers may fulfil for protecting the environment or preserving the climate. This being said, European agriculture is a major climate polluters, by the C02 emissions of the machinery used and methane emissions from digestive tracts of cattle and sheep. This is usually overlooked and, of course, minimised by the agricultural lobbies.

In conclusion, all EU policies need a constant review of the value added they contribute to European society. None of them must be granted a free cheque because it is “common “or has been in place for decades. This goes in particular for the two major policies benefiting from EU financing: agricultural and structural, which combined absorb almost three quarters of the EU budget: ten times the amount for research and development.

There is a final important remark to be made: The existence of the CAP serves the UK as a diabolic pretext for its 30 year old “budget rebate”, the abolition of which is long overdue.

Brussels 10.01.11 Eberhard Rhein

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