Agricultural Policy in Europe

Another year, another bumper subsidy for European farmers, yet this time it is different.

The European Union (EU) subsidizes it's farmers to the tune of around �70 billion a year and has been a key part of the European Union for as long as the organization has existed. It is the one truly common European policy, and it has been the butt of endless criticisms over the last 50 years for it's propensity to create butter mountains and milk lakes, to undercut farmers in the developing world and for it's ability to shield farmers from taking the tough decisions that market forces normally demand.

Yet times are changing. Since the late 1990's, encouraged by the Word Trade Organization (WTO), the EU has gradually been moving towards a more liberal and cheaper policy. In the 1970's Agriculture accounted for 70% of the EU budget, now it is down to around 38%. The butter mountains and milk lakes are gone (although the wine lake remains!), quotas are disappearing in the milk and sugar sectors and farmers are no longer paid a subsidy for what they produce, they are now generally paid for keeping their land in good agricultural condition and encouraged to make money directly from the market.

EU Ag policy is becoming much more liberal, or at least it was under last year. Sensing the direction that the Common Agricultural Policy (CAP) was travelling, farm organizations and the European Commission realised that they needed a new justification for paying subsidies to farmers as the market was clearly winning the propaganda war. They came up with the environmental protection argument and have devised a new policy, known as "greening" which will now pay farmers the same subsidy as before, but now they have to carry out three environmental measures on their farm. The three measures are to keep 5% of the land in set aside, to grow at least three different crops at the same time and to not convert permanent grassland on the farm into arable land.

This year these new reforms will be implemented in farms across Europe and very little good will come of it. Small European farms, who already struggle to be economically viable due to their size, are now faced with reducing their production in order to ensure that they continue to get their subsidy (a subsidy that accounts for half of farm income on average).

The end result will be a policy which is not green, as farmers will be encouraged to overproduce on the parts of the farm they can use, an increase in the already high food prices in Europe and an increased reliance on the subsidy as farm income drops.

For the first time in a decade the CAP is going backwards. Europe has some of the most productive agricultural land in the world and a well funded industry. Yet it is hampered by an agricultural policy which actively tries to stop the necessary rationalization of the industry into bigger farms and a scientific policy which blocks farmers from using most of the modern technology available to farmers in the rest of the world. At some stage in the future this will change, but for now European farmers will continue to face these challenges and European consumers will continue to pay over the odds for the food they buy.