Thursday, December 22, 2011

The Farm Subsidies Are “Too Damn High”


The current agricultural policies of the European Union are a vast improvement over the failed initiatives of the 70’s and 80’s. In the 90’s the EU wisely began to move away from meddling with market prices and consequently began to chip away at the mountains of butter and lakes of milk which had come to characterize its agricultural policy. In the 2000’s the EU took further positive steps by replacing price supports with direct payments, and later introducing decoupled single farm payments. These reforms have been instrumental in minimizing the harm done by the Common Agricultural Policy (CAP). However, while the mechanism of the subsidies has improved, the sheer size of the subsidies remains far too great for an organization that claims to stand for free trade principles. In recent years, annual CAP expenditures have hovered around €50 billion (more than five times the amount spent by the US) and constitute around 50% of the EU budget. A typical European farm receives €15,000 a year in direct payments. How can the EU justify such excessive subsidies while claiming to stand for trade liberalization in international trade negotiations?

What would Jimmy McMillan say about EU farm subsidies? They’re “too damn high!”

The most obvious and commonly cited argument in favor of European agricultural subsidies is that they are necessary to protect Europe’s farming sector from global competition. The problem with this claim is that there are many successful farms in Europe, which—due to their high degree of mechanization and capital-intensive production methods—are perfectly capable of fending off competition from the developing world without the help of subsidies. The farms that are really propped up by CAP are the ones which are least mechanized, least capital-intensive and least efficient. In these cases, all that subsidies accomplish is to reward and perpetuate inefficiency, while punishing more competitive farmers in the developing world. These generous subsidies further tarnish the EU’s image and undermine its credibility in international trade negotiations, ultimately hurting European consumers and producers alike.

In recent years, some have argued for the need to support European agriculture on grounds of its “multifunctionality.” The argument is that a robust agricultural sector offers a number of positive externalities—it provides environmental stewardship, slows social change and preserves cultural identities. However, there is little evidence that European farms are playing a significant role in environmental stewardship. Further, it is difficult to see why the EU would want to slow social change or preserve the cultural identities of its member states. In fact, just the opposite ought to be the case—if the EU wants to promote a common European identity, then it ought to support the transition to a more urban and cosmopolitan European society. Whichever way one looks at it, excessive EU agricultural subsidies benefit neither Europeans, nor the EU.

Dan Koev is a fourth-year Ph.D. student in the Department of Political Science and an EU Center FLAS fellow. His research interests have a regional focus in Europe and include ethnic politics, Euroskepticism and human rights. He is currently working on his dissertation, which deals with ethnic political mobilization in Europe.

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