David Goddard has written to point out this BBC simplification of the "issues at stake".  We share his interest in who wrote this BBC page and their qualifications for doing so. 

The BBC is believed by many to be beyond reproach  simply because it is the BBC.

 

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What is wrong with the CAP?

 
I found this on the BBC Web site and I am not impressed with the view it is putting over.  I do not know who the BBC employ to answer very complicated questions about the CAP or what qualifications they have but I feel this is a very biased opinion based on just one Government's (UK) policy.  The majority of Governments do not want change and some say it is premature and unnecessary to talk about reform until the current scheme runs out in 2006.   I have added my comments within the text. My comments are those starting with *
 
http://news.bbc.co.uk/1/hi/business/2119792.stm
 
Wednesday, 10 July, 2002, 11:39 GMT 12:39 UK
Q&A: EU farm reform
 
The European Commission has proposed major reform of the Common Agricultural Policy.

BBC News Online looks at the issues at stake for consumers and producers.

What is wrong with the CAP?

The Common Agricultural Policy is a vast system of subsidies for European farmers.

* Over exaggeration - it used to be 1.5% of the VAT and most European countries have accepted the cost because it ensures a constant supply of cheap food.

It is designed to ensure food security by paying high prices to farmers for their crops.

*  It is a big lie to suggest farmers are being paid high prices.  UK farming is in crisis!  - in all the other EU countries, local Governments pay additional (discretionary) subsidies to their farmers but these subsidies are not received by the British farmer to the same degree.  Consequently the UK farmer is under funded compared to his EU counterpart.  Ask any farmer if he is receiving a high price for his crops!  Farmers in the UK are making less than £10,000 profit - many are not making a profit at all.  Since 1996 farm incomes have fallen by 70%.  In any event the CAP does NOT buy the crops from the farmers - they are sold locally and on the world market where they have to compete with crops from countries around the world with much lower costs and far less bureaucracy -including subsidised crops from the USA.   

But it has led to over-production and food mountains as surpluses have grown.

* Surpluses are now being caused by excessive importing of unwanted food from outside the EU (and from within) rather than any subsidy being paid to any EU farmer. We are all trying to dump our produce on each other.  It is a strange policy that brings more food in, if it means making a mountain with the home produced food - especially when you find we have exported a similar amount out of the country.  This policy has caused a collapse in farm prices as farmers struggle to compete.  It has not led to over production in the UK in all commodities because we seem to import about 50% of our food.  Take milk - pre 1982 the UK produced 87% of the UK market but has been cut back by 11% through the introduction of EU milk quotas.  It is a strange policy that forces a country that has the resources and the market for a product, to make cutbacks whilst giving more quota to a country that did not have a market for what it had previously produced.  Effectively this took a portion of the UK milk market and gave it to other countries within the EU.  

And it has hurt developing countries whose own farmers cannot compete with subsidised products from Europe.

*  Since when have developing countries been in the EU?  Why do we need to import food from developing countries who more often than not do not live up to our standards?   Is it not the truth that these countries often need the food for themselves or they are selling it in order to repay debts caused by trade deals where they bought arms, fighter jets, aircraft and other manufactured goods from the western world?  Is it not the truth that these countries are being ripped off by multi national companies who pay abysmal prices for food in order to enhance their own profits?

It has made food more expensive, and might have caused environmental damage by encouraging over-farming.

* The fact that farmers are receiving subsidies means that they can sell their produce cheaper than it would otherwise be possible to sell it.  It is, therefore, the consumer that benefits.  Those farmers producing for the supermarket trade have found their prices cut time and time again to the extent that the price they receive today barely covers their costs.  Consequently food should be cheaper today than it has been for many years.  If food is more expensive now than it was five years ago it is because:  

  • the food processors and supermarkets are making excessive profits
  • people are buying ready prepared food rather than individual items that go to make up a meal.  
  • distribution costs have gone up 

What does Europe want to do about it?

The European Commission is proposing that agricultural subsidies - based on the amount of crops a farmer grows - should be replaced by a different system of aid for agriculture.

* It is the UK and Germany, only, that are keen on reform because these are the only two countries that are significantly funding the CAP.  With the political aspirations of the EU to enlarge, it would be impossible for the same two countries to fund 10 more countries at the same rate of subsidy.  

Small farmers would get more - because payments would be capped for big farms - and farmers would be encouraged to make environmental improvements in return for aid.

* If small farmers get more it will favour "inefficiency".  Certainly it would be detrimental to the UK which has better structured, larger farms than the rest of the EU.

And eventually the huge amount of money spent on agriculture would be cut by 20%, with savings going to fund rural development.

What is not explained here is that any savings made in the UK (or any other country) will go back to the EU and will be spent in any of the EU countries.  Most probably this money will be spent on the new countries which are about to join the EU so it could be used as a method of funding enlargement. 

How would consumers benefit?

European consumers currently spend an estimated £300 a year each on subsidies to agriculture, as well as paying prices above world levels.

IIf this figure is true, it would mean that the CAP is costing £300 x 360m people = £180,000,000,000 which is £180bn I think.  Can someone check this out because I thought the CAP budget was about £24bn

If there were lower subsidies, those costs could come down - although the EU might well find other ways to use the spare cash.

Yes - on enlargement.  What then would be the cost of maintaining the Environment?  We are already seeing CAP money being diverted away from production subsidies to the environment.  Hitherto farmers have maintained the environment at their own expense and could continue to do so under grant aided schemes, if their farms were profitable.  I know one farmer who has planted over 3000 trees and another who has opened up old ponds.

If EU markets were opened up to more foreign competition, that should mean more choice and lower prices.

*  We are already finding more and more foreign food in our supermarkets and consumers are complaining about the lack of quality and are worried about where it has come from.  Food is already coming in from Eastern Europe, Africa, New Zealand, Australia and the Americas.  It is travelling half way round the world using subsidised fuel (there is no tax on aircraft and shipping fuel).  If the EU farmer has received subsidies and is not making a profit,  the question has to be asked "how can it get to our supermarket shelves cheaper than home grown food"?  

* More imports of meat will increase the risk of importing diseases which affect public health as well as animals diseases such as FMD.  Any savings on food cost could be offset by the cost of eradicating another disease from our own animals within the EU.  There will also be less choice of buying fresh home produced food as EU farmers are put out of business. 

But that is a long-term prospect, which depends on marketing improvements by developing countries.

Which EU farmers will win or lose?

The plans could hit UK farmers particularly hard, as they are generally among the largest in the EU.

*  At last we agree on something!  It will wipe out UK farmers if other EU countries continue to give advantage to their farmers with discretionary subsidies.  These need to be stopped or granted to UK farmers!

In contrast, some of the smaller farms in Italy, France and Portugal will still receive the same amount of subsidy, and some types of production will still receive direct subsidies for some time to come.

* And many other EU countries will continue to support their farmers with discretionary and match funding subsidies thereby disadvantaging the UK farmer who's Government will not pay these subsidies.  Indeed, what we need is a COMMON AGRICULTURAL POLICY where all farmers in the EU are funded (or not funded) to the same amount. 

This reflects the political reality that the UK is committed to agricultural reform, while there is strong resistance to reform in Mediterranean countries with a bigger rural population.

* Agreed!

What about Eastern European farmers?

The EU is facing a big expansion to the East, with 10 countries, including Poland, Hungary and the Czech Republic, expected to join in 2004.

Agriculture is particularly important in these countries - especially Poland - because a much higher percentage of the population lives in rural areas and Eastern European farmers would like to export more to the EU.

One of the most contentious issues is whether - and how - the Common Agricultural Policy will be extended to these countries when they join the EU.

The EU has said it will impose a ten-year transition period, and start by offering the new countries subsidies of only 25% of existing levels.

Reform of the CAP is vital if the EU is to avoid eventually incurring huge new costs in subsidies to farmers in Eastern Europe.

What about farmers in developing countries?

Developing country farmers could be big winners in any CAP reform.

At the Doha trade talks, developing countries persuaded the EU agreed to negotiations "aimed at eliminating" production subsidies.

Overall, agricultural subsidies are worth £300bn ($465.6bn), six times the amount of foreign aid to poor countries.

The US, however, has recently increased its farm subsidies, which could undermine progress in the trade negotiations.

But if agreement can be reached on across-the-board reductions in rich country subsidies then developing country exports could increase dramatically.

What chance do the reforms have of success?

Like all previous reforms of CAP, these radical proposals still have to be approved by the member states, based on a complicated voting system that takes into account the different size of each EU member state.

While Germany, Britain and the Netherlands want reform, France is likely to be joined by Italy, Ireland, Portugal and Austria in resisting major changes.

With talks likely to be delayed until the German elections in September, there is very little time to reach agreement before the enlargement negotiations that are planned to conclude at the end of the year.

But it is likely that member states will be forced to agree some reforms so that the enlargement of the European Union can go ahead.

*  As I said above it is political.  In order to enlarge the EU wants to change the rules.  The joining countries "will not be amused" and European Agriculture will once again fall into decline headed by the UK which has a Government which does not understand agriculture until there is a war.

* The EU and the CAP has been an unsuccessful experiment.  By joining,  the UK turned its back on the developing countries (many of whom were in the Commonwealth).  They were our trading partners but they wanted independence.  We could have continued trading with them but we opted for the undemocratic EU which was a self contained trading bloc.  This upset the rest of the world and through WTO, GATT, NAFTA etc these trade barriers have largely been broken down - to the extent that there is now no need to be a member to trade with it.  

* The downside is that we have given away almost all our sovereignty - all except our currency which is the last bit of control we have left.  If we give that away as well we will be subservient to the European Central Bank in Frankfort.  There is also the huge cost of EU administration and the estimated £4bn to £8bn administration fraud that goes with it.  Apparently  it seems they do not have an accounting system to sort it out and the auditors are still refusing to sign the accounts.

*  The EU seems to have gone much further than we first envisaged when we voted to become a member of the EEC - a self contained trading bloc but with concessions for NZ butter (for which UK farmers had to be cut an extra 3% more than any other EU country to accommodate - we do not here of Spain being told to cut beef production because they want to trade with Argentina).  We did not vote for an EU - a centrally controlled political organisation.  Even Hitler did not aspire to that - he wanted a joining together of Sovereign Nation States with Treaties. 

David Goddard