The Apollo Project
Liberal Ideas for the 21st Century
Sunday, December 18, 2005
A busy week for the CAP
by Peter

We all dislike the CAP, but we are not all certain why. Rent-a-quotes who say this is because all money goes to "big farmers" or "inefficient continental farmers" should be treated with the same sort respect as those commentators who tell that rows int he Liberal Democrats are typically between ex-SDPers and ex-Liberals (by which I mean none).

The CAP supports farmers in about four principle ways I reckon:

most significantly it funds the direct payments to farmers based (since 1992 until now) on the number of cattle/sheep they keep, or the number of hectares they cultivate

second, it maintains prices above world market prices through import tariffs

third, it funds export refunds (allowing surplus production to be sold outside the EU and thus again keeping prices high)

fourth, it funds payments to farmers for "rural development" (wich can include "environmentally-friendly" but do not get excited dear reader, the condtions are not normally onerous and we don´t get a lot of enviromentalism for our bucks). (This is a semi-detached bit of the CAP).

All of these elements have been up for grabs this week. What has happened?

1. Direct aid is untouched. The EU budget deal did not touch the limits for direct aids, so farmers will continue to get the direct payments they have gown used to until at least 2013. (I believe that spending will hit those limits by around 2011, and at this stage farmers in the EU-15 will probably receive a little less than than in the past.)

2 Import tariffs are untouched by the partial agreement in Hong Kong.

3. But export refunds are to be phased out under the Hong Kong agreement

4. and rural development spending has been limited (at least in the old Member States - I haven´t found a clear expression of the impact of the budget deal to date).

The interesting point then is what will happen to farm prices. Direct payments are in the process of being "decoupled" (no longer linked to particular crops or animal numbers) and this is widely expected to reduce incentives to produce. If this is the case, export refunds would become unnecessary in any case. Against this, farmers in (for example) Poland may continue to expand production.

So the fight now should be to reduce guaranteed prices for farm products. This will restrain production (good for the envitronment), and thus ensure we are not faced with the problem of disposing, destroying or storing excess production. As a net food importer, this will be good for Britain. And as farmers have just had their direct support confirmed for the best part of a decade, they can hardly complain. Can they?
posted by Peter Pigeon @ 7:11 pm  
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"What is Liberalism?: I should say it means the acknowledgment in practical life of the truth that men are best governed who govern themselves; that the general sense of mankind, if left alone, will make for righteousness; that artificial privileges and restraints upon freedom, so far as they are not required in the interests of the community, are hurtful; and that the laws, while, of course, they cannot equalise conditions, can at least avoid aggravating inequalities, and ought to have for their object the securing to every man the best chance he can have of a good and useful life." C-B.


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