Chickens have come home to roost

April 20, 2001 Financial Mail (South Africa) by David Lascelles

Europe's farming economy is driven by what must surely rank as one of the most misguided attempts ever made to do good: the Common Agricultural Policy

David Lascelles is co-director of the Centre for the Study of Financial Innovation, which can be reached on

This has been a miserable Easter, and I dont just mean the wettest spring in living memory. Everywhere in Britain, the fields are plastered with bright yellow signs warning people to stay away because of foot and mouth disease. Its a terrible blight for country communities, be they farmers who stand to lose millions, or ordinary folk who simply want to walk the dog.

Ironically, foot and mouth disease is not that dangerous. But so intense is farming these days that the temporary loss of appetite that accompanies the disease means the difference between an animal that can be slaughtered for profit, and a worthless carcass. Consequently, all the animals on infected farms and neighbouring ones have to be killed . Whether the epidemic warrants this mass slaughter is a question best left to the experts. More worrying is the state of farming that produces it.

Europes farming economy is driven by what must surely rank as one of the most misguided attempts ever made to do good: the Common Agricultural Policy.

The original intention back in 1962 was to subsidise farming so as to keep production going, while keeping food prices down. A worthy enough goal. But after nearly 40 years it has led to the steady ruination of Europes countryside, and its finances. Worse still, it has caused huge damage to Europes relations with other farm trading nations. Half-hearted attempts to do something about it have either made things worse or fizzled out.

There are two damaging aspects to the CAP.

One is the incentive it gives for bad farming practice. By providing subsidies, it spurs farmers to cut corners and overproduce on a large scale. This encourages virulent animal diseases. Farmers do not run their farms to proper standards, which lets in infection. Animals are then traded or slaughtered through increasingly centralised market and abattoir networks, allowing disease to spread much more rapidly than in the dispersed systems of old.

Intensification has also led to the exhaustion of land, excessive use of fertiliser, and the destruction of woodlands and hedgerows all of which have had a devastating effect on wildlife.

Quotas and other limits have also been imposed to stop farmers overproducing. One of the most valuable commodities a farmer can own these days is not land, buildings or even animals, but a European Union milk quota. There is even a market where farmers can trade surplus quotas. Yet Europe spends nearly US50bn/year to keep this system going.

The other damaging aspect is its effect on external trade relations. By subsidising production, the CAP has had a depressing effect on agricultural prices worldwide and harmed countries that rely heavily on commodity trade.

Furthermore, the CAP amounts to a huge barrier to trade in agricultural goods, shutting off the EU market to other producers. According to Organisation for Economic Co-operation & Development data for 1998, EU farm subsidies amounted to a tariff of 82% on world prices, versus 28% for the US and 1% for New Zealand. The CAP gives good cause to doubt the EUs claims to be an open and fair trading bloc.

In the Eighties and Nineties, various reforms were introduced to control overproduction and shift payments away from direct subsidies to income support for farmers. They were successfully resisted by Europes farm lobbies .

But now, the multiplying European farm scandals and food scares have begun to stoke pressure for reform. A couple of weeks ago, the French government said the CAP was jeopardising European agriculture, and that more effort should be put into raising the quality rather than the quantity of farm produce. The antireform Germans have also described European agriculture as unsustainable.

EU farm commissioner Franz Fischler has been indicating his support for a shift in resources away from subsidies towards improving the countryside and the farming environment. Such a shift is much to be applauded .

Europe must get rid of all its production subsidies and open farm products up to free trade. If that devastates European farmers incomes, then other measures will have to be introduced to support agricultural communities, though the outcome may well be shrinkage of the farming sector and farming employment.

Once the incentive to overproduce has gone, it should be easier to spur greener methods of farm production, which should lead to healthier farms and a more attractive countryside. The new round of World Trade Organisation negotiations, and the EUs own plans to include big farming nations like Poland, will greatly increase pressure over the next couple of years to get to grips with this dreadful problem.

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