Bloomberg News

EU Farm Policy Debate Pits Top Receiver France Against U.K.

October 12, 2011

(Updates with farmer group comments in fifth paragraph.)

Oct. 12 (Bloomberg) -- European Union proposals on future farm spending signal the beginning of more than a year of debate among the bloc’s 27 member states on the scale and scope of agricultural subsidies.

EU Agriculture Commissioner Dacian Ciolos is seeking to cap payments to each farm, limit aid to those actually producing crops and livestock, tie payments to environmental targets and adjust how much money goes to each EU member state, according to a presentation he made in Brussels today.

The EU spent 58.2 billion euros ($79.4 billion) on agriculture and rural development in 2010, or 47 percent of the total budget. France, the biggest food producer in the bloc, has called for overall spending to be little changed when the Common Agricultural Policy is extended after 2013. The U.K. wants cuts in direct payments to farmers.

“Current policy is no longer effective” and has a “lack of credibility,” Ciolos said in his presentation of the proposals to the European Parliament in Brussels.

The EU proposal to limit aid to “active farmers” may be “a nightmare to enforce,” the U.K.’s National Farmers’ Union said in an e-mailed statement. The plan announced today to set aside land for environmental reasons “does not make sense,” European farmers’ lobby Copa-Cogeca said.

France got 10 billion euros from the European farm and rural development budget last year, or 17 percent of total spending. The country accounted for 19 percent of the EU’s agricultural output of 350.5 billion euros in 2010, based on producer prices, according to the bloc’s statistics department.

France ‘Happy’

“France is broadly happy with the status quo,” Mats Persson, the director of Open Europe, a U.K. business-funded policy group, said by phone from London. “They’re still doing very well out of the CAP budget.”

U.K. Environment Secretary Caroline Spelman in January called the EU’s farm policy “morally wrong” because it undercuts agriculture in developing countries.

French Agriculture Minister Bruno Le Maire has said the EU must maintain funding for the CAP to preserve the region’s farming tradition, including raising beef and dairy cattle in mountainous areas.

“Lower the budget of the CAP, and tomorrow there’ll be no cattle farming in the mountainous regions of France,” Le Maire said in January. “There will be no more Saint-Nectaire,” he said, referring to a cow’s-milk cheese produced in Auvergne in central France.

U.K.’s Share

The U.K. got 4.1 billion euros of farm aid last year, or 7.1 percent of the total agriculture budget. Its agriculture output was 6.7 percent of the EU’s farm production last year.

“It’s the same old classic divide,” Persson said. “France on the one side pitted against the U.K.”

Germany, Europe’s largest economy, joined the French position in September 2010 as the countries published a joint paper that stated the EU needs a “strong” common farm policy.

“Whoever can get Germany on board wins the battle,” Persson said. “Once you have the Franco-German bloc reaching a position, that tends to produce more or less the outcome for the EU as a whole.”

The commission’s presented in June its proposals for the EU budget for 2014 to 2020, including 382.9 billion euros for agriculture and rural development over the period. The CAP would get 57.4 billion euros in 2014, based on the proposal. The commission wants to abolish sugar production caps after 2015 as part of proposals announced today.

Euro Crisis

“With the euro-zone crisis, I wouldn’t like to bet on anything with respect to the budget,” said Alan Matthews, emeritus professor of European agricultural policy at Trinity College in Dublin. “There will be attempts to cut down the overall size of the budget.”

Countries that want to reform the farm policy include the U.K., the Netherlands, Denmark and Sweden, according to Persson and Jack Thurston, the co-founder of farmsubsidy.org, a budget- monitoring group.

“The reformist bloc is outgunned and outnumbered,” Persson said. “About 21 countries, which is obviously a strong negotiating block, are basically in favor of the status quo.”

Eastern Europe countries that joined the EU more recently have big rural communities that mean they benefit from the bloc’s farm policy, according to Persson.

“Poland is one of the biggest defenders of the CAP and money being spent on farmers, because they have such a large farming sector,” Persson said. “So therefore reform of the CAP has actually become a bit more difficult.”

More Money

Countries that now receive direct payments that are less than 90 percent of the EU average will get more money from 2014, based on the commission’s proposals.

The commission proposes to limit basic support to farmers who are active, with an annual cap of 300,000 euros per farm and cuts in aid to any farm getting more than 150,000 euros a year. The proposal is likely to be defeated by opposition from the U.K. and Germany, said Thurston at farmsubsidy.org.

“There will be a fight over the proposals for capping the very large payments,” Thurston said. “I don’t know how hard commissioner Ciolos will push on this. The commission has to make everybody happy with something in the final agreement.”

The proposals call for 30 percent of direct payments to be tied to farmers complying with environmental targets, according to the today’s proposal. That 30 percent would amount to about 12 billion euros a year, according to a report by Matthews.

High Barrier?

“Will it be a high barrier to jump?” said Thurston. “Reform-minded countries like Sweden, Denmark, the U.K. and the Netherlands will want to see a more onerous green-point system. The business-as-usual guys will want to keep it fairly accessible so all farmers can be included.”

Under the proposed rules, a farmer must cultivate at least three crops on his arable land, with none accounting for more than 70 percent of the area. Farmers would have to reserve at least 7 percent of their farmland for ecological measures such as field margins, hedges, trees and fallow land.

“It does not make sense to require every single farm to stop producing on a certain percentage of their land when world food demand is set to rise by 70 percent by 2050,” Brussels- based farm lobby Copa-Cogeca said in an e-mailed statement.

Tying part of the direct farm payments to environmental measures has allowed Ciolos to justify the future of such spending, said Matthews. The cost to farmers for environmental measures may be 5 billion euros, according to Matthews.

“This is the trump card the commissioner has played,” Matthews said. “Otherwise there was no legitimacy for these payments. To maintain the CAP budget more or less, in absolute terms, is rather an extraordinary achievement on his part.”

--With assistance from Jonathan Stearns in Brussels. Editors: Claudia Carpenter, John Deane

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.


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