Rhein on Energy and Climate

For the past 50 years European farmers have benefited from an exceptional set of protection and subsidies. No other group of society, with the exception of coal miners, has ever been so pampered through guaranteed prices and, in the last 15 years, direct subsidies from the EU budget. From 1995 to 2010, the cumulative budget expenditures for European farmers have been of the order of € 600 billion, quite an impressive figure.

On September 20, 2010, the 27 EU agricultural ministers have started what will be a protracted and controversial debate on the nature and the level of subsidies European farmers should obtain from the EU budget during 2014-20.

So far there seems to be agreement only on one point: the expenditures for agriculture must not rise. This is in line with the principle agreed upon seven years ago, to keep them constant in real terms, which might imply a nominal rise of 10 percent until 2020, from € 45 to 50 billion, of which one third for structural programmes, leaving € 30-33 for direct payments to the 13 million European farmers.

The structural payments are unlikely to be touched, as they help farmers boost their competitiveness and make agriculture more environmentally friendly. The real battle will therefore centre on the € 30 billion of direct payments.

One point should be very clear: All farmers should be treated equally wherever they operate. The differentiation between “old and “new” member states has to disappear by 2014! The Commission should make this crystal-clear in its forthcoming proposals.

But the Commission should also have the courage to propose phasing out of all direct income payments by 2020, even if such a proposal will be coolly received by most member states.

Five main arguments plead for such a phasing out:

Subsidies are never meant to last forever. Their purpose is to facilitate adjustment processes. Thanks to the massive support it has received European agriculture has successfully adapted to international competition. It is no longer shielded off against imports from third countries, and is able to export significant volumes of agricultural and processed products without relying on export subsidies, as it had to until about 2000.

Direct income payments benefit above all the big farmers who need them least: three quarters of the payments go to one fifth of the farmers. This is the result of the allocation per hectare, in the order of € 300 per hectare. Big farmers are sufficiently well-off to get on without any subsidies.

The world is likely to move towards an era of scarce agricultural resources. Food prices are expected to be high; some experts envisage a doubling of world market prices by 2020. Due to increasing world population by at least 500 million people and accelerating climate change, the era of food surpluses belongs to the past. European farmers can therefore look forward to favourable market conditions, far better than anything they have known in the second half of the 20th century.

In the coming years, Europe will be confronted with new pressing challenges: it has to invest massively in renewable energies scientific research to stay at the cutting edge of technological and environmental progress. The EU will therefore have to re-assess its spending priorities for 2014-20 and beyond. It would be detrimental to its long-term economic development if agricultural and regional policies continued to absorb three quarters of the EU budget.

Last not least, a radical cutting of agricultural expenditure will facilitate the phasing out the British budget rebate, this absurd budget anomaly the EU has had to support for almost three decades.

These will be hard choices to make. They transcend purely budgetary concerns. They are a matter of consistency between political targets and the means to implement them. It is therefore urgent to launch a wide public debate on these issues.

Brussels 28.09 10 Eberhard Rhein

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  1. This is not a simple problem, while America still has a system requiring a subsidy on production to farmers who are producing crops at a loss, not due to their inefficiency but to the fact that they are being squeezed by the purchasers and by the seed, pesticide and fertilizer producers, European farmers will still be at a competitive disadvantage.
    I agree a means testing to restrict subsidies to the farmers that require it most, namely the small family farms that are under most pressure, would mean that protection of traditional farming values and the flexibility that this represents would be a valuable security to us all in a very uncertain future.
    This would be a protection for biodiversity and the preservation of vanishing varieties that the major seed companies no longer consider worth preserving. Also it maintains a mixed rural society of more self sufficient communities with other benefits in tourism etc.

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