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CAP And Food Prices
Europe's Common Agricultural Policy sees farmers subsidised to the tune of €45-55 billion per year, a whopping 40 percent of the EU's total budget (France alone gets €9 billion from CAP). Despite endless calls for reform from governments with smaller agricultural sectors, including Britain, and criticism from NGOs that CAP subsidies harm developing world farmers, there is little chance that the system is likely to change soon.
Indeed, when Britain's Chancellor of the Exchequer Alistair Darling went to Brussels' last round of CAP talks in May, delivering Britain's annual demand that the money be spent on more deserving matters, he was rewarded with a public rebuke by the European Commission.
Supporters of the policy have always argued that CAP safeguards Europe's food supplies. Who knows what sort of catastrophe could affect the African farms critics hope will provide grain for Europe, they claim; rising demand from China and India (for example) could mean developing-world exports could work out just as expensive as produce farmed in Europe.
France's agriculture minister Michel Barnier crowed last month of the necessity of keeping CAP in the face of food riots in the developing world. CAP provides the continent with "food security" he added, and the issue is too imortant to be left to the free market: Europe should be self sufficient.
Barnier's vision of post-war central management is said to have the benefit of keeping prices under control. However, this argument no longer washes with consumers. The Guardian features a British couple who claim their household food bills have soared in the past year: Bread and milk alone, they report, cost 25 percent more than 2007. Rice is up 60 percent; pasta (and you can't get more European than pasta) is up between 82 and 112 percent!
Increasingly, shoppers are buying fewer "organic" products and switching back to the products of industrial agriculture, reversing the recent trend for eco-friendly food. Downmarket supermarkets are enjoying a surge in business; stores which made a virtue of their pricier quality are changing tack and stressing their egalitarianism. M Barnier said he would like to see CAP directed away from industrial agribusiness and towards smaller farmers producing regional specialities - precisely the kind of luxury consumers are no longer able to afford, even if the trend among middle-class shoppers up to now has been towards artisanal foods.
The story is the same in France, where a magazine lists how household necessities have risen more that 10 percent since 2007. A kilo of flour now costs 42 percent more than last year, it is reported.
So how is the Common Agricultural Policy helping shoppers? M Barnier says that CAP can sustain or boost European production while keeping prices down. The CAP, he says, is not responsible for high food prices - "What we are witnessing in the world is the consequence of too much free-market liberalism."
Blogger Jon Worth notes that the centre-right Gaullist Barnier is joined in his condemnation of the market by German Socialist (and head of the EU parliament's Socialist Bloc) Martin Schultz.
EURSOC readers with long memories will recall that the absurd Schultz led a rabble which shouted down a speech Silvio Berlusconi delivered to the parliament in 2003. Berlusconi responded by describing the Socialist as a likely concentration camp capo; Schultz got his own back by leading another anti-Berlusconi attack, this time to prevent his choice of justice commissioner from being voted onto the EU commission.
Now he has turned his attention to the markets. In what the Economist is calling "populist, opportunist rot" Schultz complained of "casino capitalism" causing food prices to rise:
"It is shocking that people are now speculating on increases in food prices. Banks are telling their clients to bet on soaring prices. The result is that there is now an incentive for speculators to create food shortages," he said,
"Casino capitalism has taken a seat at the table of the poor. This is immorality carried to the extreme. This is why we need international controls on financial markets."
But what has CAP to offer as an alternative? Worth is surely right to say that "unchecked market forces can lead to unintended consequences, but planned markets like that for agricultural products in the EU can have very dire consequences indeed."
Britain's finance minister Alistair Darling told the CAP meeting that there must be an end to "all elements of the CAP that are designed to keep EU agriculture prices above world market levels," saying it was "unacceptable that at a time of significant food price inflation, the EU continues to apply very high import tariffs to many agricultural commodities". As we reported, he was sternly rebuked by the EU Commission, and by European government ministers who argue that there is little or even nothing wrong with CAP.
Others, including Tim Lang, professor of food policy at City University, argue that the "real" cost of food has been masked by Britain's "wasteful, inappropriate, uneconomic food system". Like falling house prices, rising food costs represent a long-overdue market correction and should encourage more sensible policies.
Barnier's defence of the Common Agricultural Policy was attacked by liberal think tanks in Brussels (yes there are some). One claimed to have "almost had a heart attack" on reading the minister's proposals; another said she saw no sense in consumers supporting farmers when farm earnings were high and food prices higher.
Europe is used to debates between supporters of subsidy and planning and those who call for freer trade and liberalism. The latter win the intellectual arguments, but Commissioners and governments have been willing to take on obstructionist blocs either at national level or in powerful interest groups and lobbies. Moreover, and despite the presence of charities and NGOs on the anti-CAP side, it has to be admitted that subsidising farmers remains popular with many Europeans, who see stewardship of the countryside as part of Europe's heritage. While the post WW2 generation which remembers the hunger that drove the CAP into being in the first place is retiring, its influence remains: Few Europeans seem to want to rely solely on the developing world for what ends up on their table.
But still - no-one on the pro-CAP side has been able to explain clearly how it can help Europeans at this time of rising food prices. And for €50 billion a year, that doesn't sound like a good deal.
