EU agriculture & budget

9:46, 15 March 2010

When member states (finally) released detailed data on the individual recipients of its € 55 billion annual farm subsidies, they unleashed a flurry of media reporting. Public anger on big business and rich (possibly aristocratic) landowners swallowing big chunks of the subsidy pie was rampant. By contrast, knowledge of the distribution of public subsidies across member states has always been in the public domain. Regrettably, the inequities manifest in this distribution appear to interest only the farmers in the disadvantaged member states. But citizens should be concerned.

How to explain that farmers in Greece receive three times more income and production support per hectare than their colleagues in Portugal? And why does a hectare of agricultural land in Malta get five times more support than in Latvia? Even more troubling is the question of why other EU member states obtain five or ten times more subsidies per hectare to promote rural development and environmental protection than the UK. Are their birds more beautiful?

The reality is that the distribution of subsidies can only be explained by EU power politics – and rigidity. Nowadays, the EU’s Common Agricultural Policy (CAP) supports farmers’ income independent of their current production. But how much CAP money a member state gets for its farmers depends on how much it has got in the past when payments were coupled with production. Countries that produced a lot of highly-subsidized crops or meat therefore reaped – and still reap – the lion’s share of the CAP budget. Countries with an agricultural sector that is less productive or specializes in products that were less subsidized, such as fruits and vegetables, are the losers of this system.

A look at the CAP payments for rural development and environmental protection reveals the same picture. Member states’ subsidy levels are again strongly determined by how much they received in the past. Entitlements up to 2013 are based on payments dating back as far as 1994. It is embarrassing that the EU’s distribution of more than 40% of its budget to the member states has nothing to do with policy objectives.

In the future, member states should be rewarded for sustainable farming practices. How much money each member state receives should depend on its Natura 2000 areas (in which stricter environmental standards apply), its organic farming areas (which have positive effects on biodiversity, water quality, flood prevention …) and its forest areas (to support biodiversity-and-climate-friendly forest management). Further criteria for distributing payments could be devised, such as high-nature-value or extensive grazing areas. Whatever the best distribution key, it should not be past agricultural production or past payment levels.

This article is based on the ECIPE working paper ‘Public Money for Public Goods: Winners and Losers from CAP Reform’

Further information can be found at www.reformthecap.eu.