Mention Common Agricultural Policy to anyone in the European Union and the most likely response is one defending current caps on agricultural spending and various other market access initiatives as steps in the right direction.
The Common Agricultural Policy remains a “very sensitive” issue, according to senior EU trade directorate officials, who also warn “not to expect miracles in agriculture” as much “internal massaging” was still required. Instead, officials defend their agricultural export and production subsidies vis-a-vis market access by developing countries by countering that 70% of developing countries exports into the EU are non-agricultural.
Agricultural export subsidies are widely regarded as trade distorting — enabling European producers to export their products at an unnaturally competitive price, while also receiving production support at home. Many critics say production surpluses are then dumped under the guise of food aid to developing countries.
The policy was created in 1958 when food was far from abundant in post-World War II Europe. Decades later the domestic production subsidies led to mountains of butter and seas of milk, although these are now said to have disappeared.
But many within the EU point to a variety of initiatives, such as the Everything but Arms programme to enable developing countries improved access to European markets.
Perhaps one insight into the political hot potato is that European farmers are not just regarded as producers of food, but also a crucial sector of society. In return for the current “adjustments” by farmers, the EU may ask for the extension of geographic specific goods. Champagne already falls into this category — meaning no other producer may use that name on its products — and soon goods like mozzarella, feta or Parma ham may also be protected.
Political trade-offs within Europe appear to be the reason for EU’s tardiness in putting forward its agricultural policies to the World Trade Organisation after the Doha negotiations last year — other proposals on, for example, access to cheaper medicines by developing countries have already been made.
The EU agricultural proposals are unlikely to be made public before March 2003 — in time for a meeting ahead of the next trade negotiations in Mexico in September that year.
Under pressure to abolish all export subsidies from the 18-strong Cairns Group of developing countries — including South Africa, Brazil, Australia and Malaysia — and others, the EU continues to highlight several reforms that its officials say stand in stark contrast to the United States Farm Bill’s proposed 80% increase in agricultural spending.
Despite pending enlargement of the EU from 15 to 25 member states the agricultural budget will be fixed at approximately EUR48-billion a year, with a 1% inflation adjustment, until 2013. Agricultural spending accounts for half of the EU budget.
The reduction of export subsidies, which started in 1992, will continue. “Export subsidies are on the way to the top shelf, the very top shelf,” says one EU trade official. And there has a move away from production subsidies dependent on volumes to a grant of up EUR300 000.