KEY POINTS:
Europe's £30 billion ($82 billion) a year support system for farmers, the Common Agricultural Policy (CAP), is now half a century old. Conceived in the aftermath of World War II, it was intended to secure food supplies for the battered continent and shore up the livelihoods of farmers. Fifty years on, it's better known for enriching agribusiness millionaires, and stifling farmers in developing countries.
Yet, as Christine Lagarde, the new French agriculture minister, made clear this month when she promised not to "sell off French agriculture in return for a handful of customs tariffs", the CAP is still a political hot potato.
Kym Anderson, a World Bank economist leading a research project studying the impact of the CAP on the rest of the world over the past half century, said that it gave Europe a bad name among its international trading partners. "Abroad, a generation of politicians have been thinking of the EU as highly protectionist, when in fact it's only this tiny proportion of the European economy that's protected."
Repeated conflicts between member governments and Peter Mandelson, the EU trade commissioner, over his negotiating position in trade talks, show that the existence of the CAP tends to force Europe into a protectionist corner. The Organisation for Economic Co-operation and Development (OECD) calculates that the total cost of the CAP to European taxpayers, when higher food prices are included, is more than ¬100 billion ($183 billion) a year - to support food production of ¬250 billion.
But with the CAP budget fixed until 2013, and little sign that the new French President Nicolas Sarkozy is spoiling for a fight with the powerful farm lobby, creating a pro-reform coalition could be tough.
Under a policy called "modulation", cash is slowly being shifted towards "second pillar" payments, rewarding farmers for preserving the environment, or starting a new business, rather than growing crops. And EU farm commissioner Mariann Fischer Boel is trying to reform the regimes supporting wine producers and vegetable growers.
"The EU's being quite clever with the rules, and flowing with the political tide; but in terms of what our farmers are doing, it hasn't made much difference," says Amy Barry, trade campaigner at Oxfam.
Much of the cash still gets swallowed up by large agribusinesses, rather than small-scale farmers. In Britain, Tate and Lyle, Nestle and DairyCrest are among the top recipients. The website farmsubsidy.org reports that 85 per cent of CAP payments in 2005 went to just 18 per cent of farms, with 2790 receiving more than EUR300,000 each.
"The problem with the CAP is that it's propping up people who are making hundreds of thousands of euros a year," says Barry. "There are Welsh hill farmers and southern Spanish peasants who don't see a drop of it."
In fact, research suggests the CAP isn't successful at underpinning the incomes of farmers, many of whom still struggle to make a living. "Under the CAP, farmers' incomes have suffered extreme volatility. Income per person employed in farming fell 70 per cent between 1995 and 2000," the think-tank Open Europe reported recently.
Paul Goodison, of the European Research Office, says the latest round of reforms, which have helped EU food prices to adjust down to world levels, are sensible from a European point of view - but have a devastating impact on developing countries. "As EU prices have fallen, exports of simple products have expanded; and they've expanded most to Africa," he says.
Friends of the Earth trade campaigner Joe Zacune says that chimes with experience on the ground. "Our partners in Ghana have seen their local markets flooded with cheap subsidised rice and frozen chicken from the EU. Rice farmers have had their livelihoods destroyed and the poultry industry is on the brink of collapse." Goodison argues that developing countries should be able to protect their markets.
The CAP's raison d'etre, as described on the EC's website, seems perfectly sensible - "to provide farmers with a reasonable standard of living, consumers with quality food at fair prices and to preserve our rural heritage" - but in reality, it means spending 40 per cent of the EU budget to protect 5 per cent of its workforce. And the unintended consequences in some of the world's poorest countries are hard to ignore. "If Europe wants to spend money on its farmers, go for it," says Barry. "There's no reason it can't be a policy priority - as long as it's not having a negative impact on other people."
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