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| Irish Taoiseach Bertie Ahern and UK Prime Minister Tony Blair |
In a broadcast interview, the Taoiseach, Bertie Ahern, has accused UK Prime Minister Tony Blair of brazen deception, self-interest and dishonesty, for demanding cuts in EU farm spending.
Mr Ahern made a defence of the Common Agricultural Policy (CAP) at an agricultural show in Piltown, Co Kilkenny, today. He made no reference to Ireland as the richest country in the EU (Luxembourg has nominally the highest per capita income because many people who work there live outside its borders), having its agricultural industry paid for by Dutch taxpayers among others.
Last September, the EU published data, which shows that in 2003, the Dutch paid the highest per capita income to the EU Budget while Ireland was the highest per capita beneficiary.
Mr Ahern said today that he was personally annoyed at the Prime Minister's presentation which was neither true nor factual. He also criticised Mr Blair for seeking to re-open a reform agreement that was made in 2002.
However, Mr. Ahern made no reference to the fact that it was President Chirac of France who had demanded an end to the UK CAP refund system that had been agreed in 1984 as a way of compensating the UK for the lion's share of CAP that France had.
Ireland heading the per capita beneficiary rankings at €391.7
Ahern said that given the diversity of climate and soil types in the EU, from the North of Finland to the Mediterranean islands, from the Baltic States to the Iberian Peninsula, the construction and management of a common agricultural policy which embraces such diversity is truly remarkable. This achievement is due to a belief in European integration and a desire to compromise for the sake of that integration. The CAP is, indeed, a truly European policy.
"To abolish or undermine it would weaken the entire European project at a time when Europe needs strengthening, not weakening," he said.
RESEARCH STUDY CONTRADICTS AHERN'S EU COHESION CASE
New research has provided further support for UK Prime Minister Tony Blair’s call for Europe’s Common Agricultural Policy (CAP) to be reformed. It concludes that the current distribution of over €90 billion in farming subsidies will lead to even greater inequalities between rich and poor regions of Europe.
In the first comprehensive study of the effect of CAP on Europe’s regions, a team from the Universities of Aberdeen and Newcastle upon Tyne has found that, even after the CAP reforms agreed in 2003-04, rich, core regions in Germany, the UK, France and the Netherlands are collectively taking a greater slice than poorer, peripheral regions in Spain, Italy, Poland and southern and central Europe.
These outcomes work against the European Union’s cohesion objectives which seek to reduce inequalities between richer and poorer regions, say the study authors, who publish the findings from their two-year study in a new book.
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| Source: Future Financing of the European Union report, UK House of Lords European Union Committee |
Tony Blair is urging EU member states to reform the CAP, saying that more money needs to be directed away from farming production towards technology and research to boost Europe’s economy. He also says that the EU must act before 2013 - the end-year of the current CAP deal.
In the new book, CAP and the Regions: The Territorial Impact of the Common Agricultural Policy, Professor Mark Shucksmith (now at Newcastle University’s School of Architecture, Planning and Landscape), Emeritus Professor Ken Thomson, College of Physical Sciences and Dr Deb Roberts of Aberdeen University’s Business School, base their conclusions on various official data sources on EU funding.
The authors criticise the CAP and its recent reforms, which they say do not go far enough to redress the balance between rich and poor. They also make a number of recommendations for changes that they say could better achieve the EU’s cohesion objectives.
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| Source: Future Financing of the European Union report, UK House of Lords European Union Committee |
Currently, CAP subsidies are awarded from two pots, called Pillar One and Pillar Two. Pillar One, worth €90bn per year (€191 per man, woman and child), is made up of direct subsidies paid to farmers and the economic cost of ‘market price support’ - consumers paying higher prices for farm products. This overwhelmingly favours the prosperous, core regions, with large farms producing grain, milk and beef, rather than poorer, peripheral regions with smaller farms and products such as olive oil and wine.
Perhaps more surprisingly, the newer and much smaller rural development measures, Pillar Two, worth €4.6bn per year (or €13 per head), and offering support for environmental farming and ‘Less Favoured Areas’ such as hills and mountains, also go predominantly to the richer nations of the EU.
This is mainly because these measures are more used by the rich countries of North West Europe, who are more able to exploit the relevant Regulation.
Professor Shucksmith and his team call for money to be redistributed gradually but more quickly from Pillar One into Pillar Two. This would mean reducing the amount of direct subsidies for farmers, decreasing market protection over time, and increasing the amount of money available for environmentally friendly farming, and rural development measures generally.
They continue by saying that the distribution criteria for Pillar Two funds should be changed so that poorer nations have a bigger slice of the money to boost their rural economies.
Key recommendations include the distribution of Pillar Two funds according to relative need, and the expansion of schemes such as the European Union’s LEADER programme, which funds rural communities to come up with their own solutions to economic problems. The researchers also suggest that, where initiatives require match funding from a member state, poorer nations should only have to provide a reduced percentage.
Professor Thomson urges that society-wide - and not simply agricultural - arguments should be used to decide and promote the best ways of using available EU funds. “EU funds should be used in ways that address EU-wide problems”, he said, “and this includes encouraging many of the member states in the south and east of the enlarged Community to address problems of agricultural and rural development in their regions. The CAP should not simply try to prop up traditional agricultural structures where these are no longer viable due to demographic and economic changes, including wider markets. We need to develop new elements of the rural economy that people will want to continue paying for in the long run, such as environmental projects and community action.”
Professor Shucksmith added: “Tony Blair is right in saying that the CAP money should be redirected towards other areas and that this needs to begin before 2013. In our book, we are not talking about a sudden change, but a gradual and preferably well-planned move towards measures that will provide a sustainable future for our rural areas. The EU’s regional policy is intended to build up the poorest regions but the CAP is doing the opposite, not only through its still-substantial expenditures but also through much less transparent import barriers.”
The authors believe that their proposals would also help the EU to meet pressure through the World Trade Organisation for EU food prices to be realigned with world levels, and thus give all poorer nations a fairer chance to trade within the global economy.
FOOD SECURITY
Ahern put a lot of focus on food security in his speec. He said that it would be grossly irresponsible if the European Union with its 450 million inhabitants, the vast majority of whom live in urban areas, did not place food security at the heart of its agricultural policy.
If food security is such an important issue for Ireland, then why shouldn't we pay for it?
AHERN'S CASE THAT CAP HELPS DEVELOPING COUNTRIES
Ahern says that charges that the CAP is damaging developing countries’ ability to trade are not correct. The EU is by far the largest importer of agricultural products from developing countries, importing about €35 billion at zero or very low tariff, compared to €18 billion for the US. The EU imports more from developing countries than the US, Canada, Australia and New Zealand together. It absorbs about 85% of Africa’s agricultural exports and 45% of Latin America’s.
Ahern also notes that "we have the benefit of the work of a respected international body - the OECD."
Global competition between exporters of wheat, rice, oilseeds, sugar and livestock is expected to intensify over the next ten years in both developed and developing countries, according to the OECD’s latest Agricultural Outlook – produced for first time in collaboration with the UN Food and Agriculture Organization (FAO).
Stiffer competition, combined with higher productivity, will result in a further drop in real prices for most basic food commodities. Farmers will thus have to make continued efforts to improve efficiency. Policy reforms could help improve agricultural markets, the Outlook adds.
With increasing export supplies by low cost non-OECD countries and a continued high degree of protection in many of the OECD markets, rising demand growth in developing countries will result in an increase in their share of the global trade in farm products.
THE SAPIR REFORM PROPOSALS
A 2003 report to the European Commission by a group of experts led by André Sapir, a Belgian economist, argued that the only justification for EU level spending is genuine and demonstrable added value. Therefore the Budget should focus on those areas where it is best able to make a contribution to growth and solidarity in Europe. The report proposed a budget based on three funds which would each contribute to growth:
Professor Sapir told the UK House of Lords European Union Committee that the current structure of budgetary allocation defeated the purpose of a Community budget:
"At the moment, in many areas this EU budget is not properly an EU budget; it is simply a way to transfer money from citizens…to other citizens…I do not think that is the purpose of an EU budget."
He concluded that from an economist’s perspective the current budget structure was "a mismatch between the objectives that have been put forward and the instruments". Professor Helen Wallace, a member of the Group of Advisors chaired by Professor Sapir, made the case for the budget to be spent on policies which were recognised as "collective" goods, in the common interest of all members of the European Union. This is where the current budgetary allocation to the Common Agricultural Policy was regarded as deficient, since "expenditure on French agriculture is not widely understood outside France as a collective good."
FINALLY...
Surely it's Bertie Ahern who is the brazen one, arguing that EU funds should provide 65%-80% of a farmer's income?
It is certainly brazen indeed when there hasn't been one year since 1973, when Ireland has not been a net recepient of funds from the EU Budget, paid for by the likes of Dutch and German taxpayers.
France, Europe's largest country by territory and its top farm producer, is the biggest beneficiary of what is called the Common Agricultural Policy, which was introduced in 1960. In 2003, France's 613,000 farmers received €9.2 billion, or 21 percent of all EU farm aid. Spain was next with 14.1 percent, and the U.K. received 8.9 percent.
European farmers enjoy some of the most generous subsidies in the world, according to the Organization for Economic Cooperation and Development. Subsidies represent 34 percent of EU farmers' revenue/turnover (as distinct from income), compared with 20 percent in the U.S., 60 percent in Japan and South Korea and 5 percent in Australia and New Zealand.
The EU and European governments spent a total of €81 billion on agriculture in 2004, compared with €38 billion in the US.
Some 3,000 Irish farmers receive more than €40,000 a year in direct payments from the EU - in effect farm dole. The top of the pile is one of Ireland's richest men, beef baron Larry Gooodman on €508,390.
Fierce lobbying from member states had resulted in a proposal to cap EU farm subsidies at €300,000 being rejected.
Bertie Ahern has presented a menu without prices with a self-serving selection of statistics. Others are oblidged to pay for the menu. Thirty years ago, Irish politicians used to talk about the obligations of the rich countries to support the poor on the "western periphery of Europe." That tune has changed and if Bertie Ahern had to fund his food security argument, then his tune might well change too.
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01/09/05 Speech by the Taoiseach, Mr. Bertie Ahern T.D. at the offical opening of the Iverk Agricultural Show, Piltown, Co. Kilkenny
Following the defeat of the French and Dutch referendums on the European Constitution, across the European Union and in each of the Member States a period of reflection has begun. Indeed, already a wide range of contributions have been made to the debate on the way forward for Europe.
Many of these contributions have been overly pessimistic. Yes, the European Union has suffered a setback. Yes, there is clearly a disconnect between the EU and many of its citizens. Yes, there is a real risk that the EU will suffer from a period of drift and a loss of momentum.
However, predictions of imminent collapse, disintegration or permanent crisis are a long way off the mark. The European Union is one of the most successful political entities in history. It has bridged national divisions which existed for centuries. It has, through a successful enlargement, ensured that the artificial division of Europe imposed by totalitarian tyranny has been overcome. It has created a stable and successful single currency. The European Union has been, is, and will continue to be a success. This should be the cornerstone of any debate on the Union’s future.
Today, I want to focus on one particular aspect of the EU’s policy – the Common Agricultural Policy. This policy has in recent months been the subject of much criticism, criticism which has largely been unfair, or misinformed, or both. Not a day passes without a call for the abolition or reform of the CAP. Those who defend the CAP are accused of protecting vested interests or of being prisoners of outdated policies.
References to the reform of the CAP remind me of what Oscar Wilde once said about the truth – “The truth is rarely pure and never simple”. The truth about the CAP is certainly not simple. Yet simplistic and negative statements about the CAP, many of which are themselves driven by self-interest, are continually being made. These have become lodged in the public consciousness largely because those of us who believe in the merits of the CAP have maintained a relative silence on the subject. I would like, therefore, to set out the truth, as I see it, about the CAP.
Let me start by going back in time briefly – to the beginning in fact. The objectives of the CAP were set down in 1957 in the Treaty of Rome. These objectives are
- to ensure a fair standard of living for the agricultural community
- to stabilise markets
- to assure the availability of supplies
- to ensure that supplies reach consumers at reasonable prices.
More than forty years later, these objectives, like all provisions of all previous European Treaties, were reviewed during the negotiations on the new Treaty on the Constitution for Europe. Both the Convention and the Inter-Governmental Conference, where the negotiations were conducted, agreed to retain these objectives intact. I think it is reasonable therefore to conclude that the original objectives are still valid.
I believe that the most important of the objectives is to ensure the availability of supplies since, after all, food is the second necessity of life after the air we breathe. All communities and nations must have at least a reasonable measure of food security. Europe has that measure of security now. It did not always have it. When the CAP was established, Europe was a deficit area for many basic food products. It was the CAP which corrected that situation. Its price support mechanisms offset the diseconomies of small-scale production on European farms and made it profitable for Europe’s small farmers to produce more.
Farm size is crucial to farm profitability. Here Europe was - and still is – at a major competitive disadvantage. The average size of farm in the EU 15 is only 18 hectares. The comparable figure for the US is ten times bigger, at 178 hectares. Canada is at 422 hectares, Australia at 3243 hectares and Brazil has 273,000 farms which average 916 hectares. In this situation, it is abundantly clear that if the EU eliminated, or significantly reduced, support for agriculture, then European farms on the margins of commerciality would go out of business and European agricultural production would fall. The food supply gap would be filled by imports from, for example, countries in South America and Australasia which can produce at prices below European levels.
So, should we worry about food security since these countries are not just abundant sources of food but can produce it cheaper than Europe can? I believe that we should, for a number of reasons. First, it is obvious that, as soon as Europe would start to buy in quantity from the world market the basic commodities that it currently produces, world market prices would rise. Second, the relative price stability that the market mechanisms of the CAP have provided would vanish as commodity prices oscillate in response to world supply, which in turn varies with weather conditions. Third, and perhaps most importantly, we can never be sure that supplies would not be disrupted by political instability, or even war, in a supplier country – and we have had examples of the consequences of such disruption in the case of oil supplies.
Food security can be too easily taken for granted. Let us not forget that just over half a century ago, much of Europe was still subject to food rationing. Indeed in the late 1940s hunger stalked many European countries. It would be grossly irresponsible if the European Union with its 450 million inhabitants, the vast majority of whom live in urban areas, did not place food security at the heart of its agricultural policy.
Vulnerability of food supplies would not be the only negative result of a significant cutback in the CAP. There would also be a serious outflow of labour from the land of Europe. This would add to pressure on non-agricultural labour markets and on urban housing markets. Farm size in the more fertile areas would increase and land in the marginal areas would be abandoned. The social and economic fabric of rural areas would be damaged, and the contribution of rural life to the cultural diversity of Europe would be weakened. The physical environment would also be adversely affected as the management of landscape features such as hedges, stone walls, wetlands and woodlands breaks down.
It also needs to be kept in mind that the CAP has been the subject of ongoing and broad-based reform for over two decades now. From the time in the 1980s when the CAP’s success in increasing European food production became a problem in the form of food surpluses, there have been continual reforms like the milk production quotas introduced in 1984 and the budgetary stabilisers introduced in the late 1980s. And over the past fifteen years, the CAP has been subjected to three major broad-based reforms – in 1992, 1999 and 2003. Meanwhile sectoral reforms continue, with sugar at present and with wine and fruit and vegetables next on the list. The mechanisms of the CAP have not been set in stone; they have been made responsive to evolving societal needs. A point that those who are advocating another reform are missing is that CAP reform is a continual process rather that a single event.
Indeed many commentators ignore the fact that the CAP has just been reformed – in fact, in June 2003 the Council of Agriculture Ministers agreed the most fundamental reform of the CAP since it was established. That reform is now being implemented by the Member States. I hold that it is simply not credible to call for reform of a policy the most recent reform of which is only now being implemented.
The 2003 reform was the most radical of all in that it also decoupled subsidies from production. This change, which as I have said, is only now being implemented, will have three major effects:
- first, farmers will now produce in response to market signals alone; they will not produce simply to receive a subsidy; this will further improve both competitiveness and quality
- second, since these subsidies are no longer conditional on either production or export, they do not distort production or international trade and are perfectly aligned with the direction of international trade liberalisation taking place in the WTO context
- third, it ensures that the European Union retains the necessary capacity to rapidly increase production, should there be a disruption of external supply.
The reforms of the CAP over the last two decades have brought the CAP into line with present-day realities. The 2003 reform was the most radical in this respect also. It provides that decoupled payments may be reduced or eliminated if a farmer does not comply with eighteen different EU legal instruments governing food safety, the environment and animal health and welfare.
These reforms have made European agriculture more competitive, better prepared for globalisation, more compliant with food safety requirements, more environmentally sustainable and more conscious of animal welfare requirements.
It is difficult to see what other changes could be made to the CAP in the medium-term apart from the on-going sectoral reforms that are an integral part of the evolution of the CAP. Furthermore, the pace of reform should be in keeping with people’s ability to cope with it. Farmers are business people, and like all business people they need a reasonable degree of stability in the policy environment in which they operate.
It is possible, even likely, that those who call for CAP reform want merely to reduce its cost. Those calls are usually accompanied by the claim that the CAP absorbs an excessive proportion of the EU Budget. Cost-cutting is, of course, a desirable objective but it should also be a rational process and rationality requires that when we draw comparisons, the basis for comparison should be valid. It is not valid to claim that the cost of the CAP absorbs too high a percentage of the EU budget compared with other activities. That percentage is high only because agriculture is the only fully-funded EU policy and because the total EU budget is so low.
A more relevant comparison is that between supports for agriculture in the EU and the US. Here we have the benefit of the work of a respected international body - the OECD. The OECD has estimated that transfers to agriculture from both consumers and taxpayers amount to $103 billion in the EU and $92 billion in the US, or 1.32% of GDP for the EU and 0.92% for the US. This broad comparability of support exists despite the fact that the average farm in the US is almost ten times larger than the average farm in the EU.
In any event, the fact that expenditure on the CAP is falling, and falling significantly, seems to be ignored. The ceiling agreed in October 2002 for the EU25 for 2013 is less in real terms than the ceiling agreed for the EU15 for 2006.
Politically, too, there are strong reasons for continuing our current approach. To try to overturn an agreement reached unanimously by the European Council as recently as October 2002 would be to send the wrong signal to Europe’s people. The fact that the October 2002 agreement was a crucial element in the overall settlement which made possible the historical re-unification of Europe would make any breach of that agreement all the more unacceptable.
In terms of international developments, the thinking behind the calls for CAP reform seems to have been done in a vacuum – it ignores the fact that negotiations are continuing in the WTO on a new international trading framework and indeed are now reaching a crucial stage. The mandate for the conduct of these negotiations by the European Commission has been agreed by the EU Council of Ministers and endorsed by the European Council. Not only would a decision to reform the CAP breach those agreements at Council of Ministers and European Council levels, it would hand our WTO negotiating partners a major strategic advantage – if they know that the EU will change the CAP yet again, they will take full advantage of that knowledge in the negotiations.
The final point I want to make in defence of the CAP relates to developing countries. Charges that the CAP is damaging developing countries’ ability to trade are not correct. The EU is by far the largest importer of agricultural products from developing countries, importing about €35 billion at zero or very low tariff, compared to €18 billion for the US. The EU imports more from developing countries than the US, Canada, Australia and New Zealand together. It absorbs about 85% of Africa’s agricultural exports and 45% of Latin America’s. And these figures pre-date the Everything But Arms initiative, a unilateral gesture by the EU to allow into the EU market, duty free and quota free, all products except arms from the forty-nine least developed countries.
While the EU’s export subsidy scheme has been criticised, export subsidies have not been granted where a negative impact on a developing country has been identified. Moreover, subsidised exports from the EU have been an important source of food supplies for net food importing developing countries, a fact that is often overlooked. In any event, the EU’s export subsidies are becoming less and less significant. Indeed, under the new WTO round, the EU has offered to eliminate all export subsidies.
In summary, I believe that calls for CAP reform are misplaced; they are based on a misunderstanding of the role of the CAP in European society and the world economy; they are based on a false premise about the relative cost of the CAP; they ignore WTO realities, and were they to be acted on they would involve breaches of existing agreements.
To conclude, while the truth about the CAP is not simple, I hope it is clear that the CAP is not the costly administrative monstrosity that some would make it out to be. It is soundly based on values and objectives set out nearly half a century ago in the Treaty of Rome and reaffirmed unanimously by the European Council just over a year ago. Yes, it costs money but not disproportionately so. And there is a return on that money. It provides security of food supplies and reasonable confidence about the safety and quality of those supplies. It supports conservation of the environment and respect for the welfare of animals, as well as the preservation of the family farm and the social and cultural benefits that flow from vibrant rural communities.
Given the diversity of climate and soil types in the EU, from the North of Finland to the Mediterranean islands, from the Baltic States to the Iberian Peninsula, the construction and management of a common agricultural policy which embraces such diversity is truly remarkable. This achievement is due to a belief in European integration and a desire to compromise for the sake of that integration. The CAP is, indeed, a truly European policy. To abolish or undermine it would weaken the entire European project at a time when Europe needs strengthening, not weakening.
