Deep Divisions in EU Agricultural Policy

Sharp differences within Europe on how far Brussels should go in cutting subsidies means the modest proposals may not please anyone

The European Commission is due to present proposals to shake up its controversial agricultural policy on Tuesday, attempting to make farming in the European Union more efficient and environmentally friendly while increasing food production to meet growing global demand.

However, the proposals could well provoke something of a food fight within the EU, pitting those who advocate further liberalizing the Common Agricultural Policy (CAP) against those who argue that now is not the time to be undermining it.

The draft policy is expected to propose cutting subsidies to big farms, and redistributing some of those funds to protect smaller traditional family farms. It will also recommend phasing out quotas on milk production and stopping the current policy of paying farmers not to use a proportion of their land. This fallow land policy, which was originally designed to tackle overproduction, now seems counter-productive given rising global demand for food. The commission is also proposing abolishing subsidies currently given to farmers to grow crops for biofuels.

Europe's Agricultural and Development Commissioner Mariann Fischer Boel briefed EU agriculture ministers in Brussels on Monday about the so-called CAP "health check." The CAP is a complex and expensive system designed to protect farmer's interests but it has been criticized for the burden it places on taxpayers and for its role in keeping food prices high. Farm handouts account for 40 percent of the entire EU budget — in 2009, Brussels will pay out €42.9 billion ($66.4 billion) in subsidies to farmers. While France is the main beneficiary, many new EU members such as Poland also have huge rural populations. Even in industrialized Germany, agriculture plays a significant role in the south and the east of the country.

The new proposals, which will be presented to the European Parliament in Strasbourg on Tuesday afternoon, would seem designed to leave most parties feeling dissatisfied. Many northern European countries, with the United Kingdom leading the charge, want to see the EU scrap subsidies to farmers altogether and allow the market to prevail. Meanwhile France and Germany have voiced concerns about how the proposals will affect their own farmers.

Britain's finance minister, Alistair Darling, has called for Europe to fundamentally reform the way it regulates agriculture. Last week he wrote to his EU counterparts to call for an end to many CAP polices: "Barriers and distortions in the global food market increase volatility and stifle the incentives to increase supply to match demand."

However, Germany has drawn almost exactly the opposite conclusion from the food price crisis. Its agriculture minister, Horst Seehofer, argues that: "We have to make sure that we can provide this continent with food sustainability. This cannot be done by taking away subsidies from farmers."

Meanwhile, referring to the recent sharp rise in food prices, French Agriculture Minister Michel Barnier insisted: "The solution …. is not, first of all, through free trade." He told the other ministers on Monday that the food crisis highlighted the need for the CAP, which he described as the cornerstone of the continent's food security.

"The problem with the food debate is that most member states will conclude that it supports their current position on the CAP," one Brussels diplomat told the news agency DPA last week.

Moreover the current European reluctance to overhaul the CAP system too much has to been seen in a wider context. It is linked to current stalled global trade talks at the World Trade Organization. As long as the United States keeps farm support in place, the EU is unlikely to tinker with its own system too much.

Tuesday's agricultural blueprint has to be approved by all 27 EU member states and the European Parliament before it can take effect. This vital phase will take place during the French presidency of the EU, in the second half of 2008.

One of the key parts of the proposal is the shifting of money from big farms to smaller ones, as well as allowing farmers to choose what and how much they grow and encouraging rural development. Currently 20 percent of farmers receive 80 percent of subsidies. From 2009, farms currently receiving up to €99,999 ($155,000) a year would see their subsidies cut by 7 percent. Subsidy cuts would rise to 16 percent for those farms being given over €300,000 ($465,000) annually. Last November Fischer-Boel had proposed much more sweeping cuts, but countries with large farms, particularly Germany, lobbied hard to have them watered down.

After Monday's meeting, Seehofer said that he would consult with the individual German states and carefully analyse the plan before Berlin would agree to back it. However there is already opposition emerging from Germany's eastern states, where many larger farms are located.

On Tuesday, Germany's minister responsible for developing the former East Germany, Wolfgang Tiefensee, said that big farms in Germany, 90 percent of which are in the east, could expect to lose one-fifth of their subsidies. On Tuesday Dietmar Woidke, the agricultural minister in the eastern state of Brandenburg, told the Berliner Zeitung newspaper that the "disproportionate burden on eastern farms is not acceptable." He demanded that the federal government "fight for the eastern farms in Brussels."

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