This week’s Economist takes a comprehensive look at the European Union’s “strange fondness for agricultural subsidies,” reaching the conclusion that the Continent’s farmers would do just fine if the flow of government largesse were stanched a bit. With agricultural policy the key sticking point at this week’s World Trade Organization talks in Hong Kong, the article could not have come at a more opportune time.
Agricultural policy might seem esoteric, but it is hugely important — and not only to people in Iowa and the Korean farmers who are practically storming the gates at the Hong Kong convention center. The current Doha round of international trade talks was launched after the 2001 attacks on the World Trade Center largely as an attempt to foster good will by lowering barriers to farm exports from developing nations. But with only a year left to reach an agreement, both Europe and the United States are obstinately refusing to lower their tariffs and subsidies.
The American media has not helped us understand this issue, so with tails between our legs we are forced to turn to a magazine run by people with funny accents. The Economist reports that the EU’s common agricultural policy (CAP) “costs European taxpayers over €40 billion ($47 billion) a year, or around 40 percent of the total EU budget. That is a huge sum, given that farming accounts for less than 2 percent of the EU’s workforce.” And far from protecting the small-time farmers who need it, “the biggest single recipients of CAP payments tend to be giant agribusinesses and big, wealthy landowners.”
What would happen if the subsidies were slashed? The Economist answers the question by zeroing in on France, the largest recipient of CAP funds and the policy’s most vociferous defender. The number of French farmers has already fallen to a quarter of what it was in 1950, the magazine notes. But if all subsidies and external tariffs were “drastically cut,” France would probably lose “between a third and two-thirds” of its farms.
This is not as bad as it sounds. As the Economist explains, “nobody is seriously proposing the abolition of farm protection altogether.” Moreover, reducing the overall number of farms would boost the efficiency and profitability of the remaining enterprises. This transition would be smooth, “as long as it is managed carefully for the most vulnerable small farmers.” And, “[a]t the very least, there is a strong case for putting a ceiling on payments made to individual big farmers.”
But with the French governing class firmly “wedded to farm protection” and the British (the current holders of the EU presidency) proposing only a token cut in CAP spending, don’t expect much change soon. As the Economist notes, even though agriculture now claims only a small share of France’s workforce or GDP, farming still holds a “special place … in the French imagination,” with the French infatuated by farming due to “a mix of tradition, nostalgia and Gaullist politics. Food in France is not just a way to fill the belly: it is part of the national identity.”
All in all, this is a thorough description of the current situation in Europe and a convincing argument for reform. Wondering how things are in the U.S., which is regularly haranguing the EU over its farm protections, we turned to the American press. Despite the hoopla surrounding the WTO meetings in Hong Kong, there were few mentions of agricultural policy.
One exception was yesterday’s Washington Post, which published an editorial that gave a good overview of what is at stake in Hong Kong. It noted that the Doha round was launched to help “poor and potentially resentful nations” by cutting farm tariffs and “other obstacles to poor countries’ progress.” It also explained that the collapse of a 2003 summit and slow progress since means that time is running out before the expiration in 2007 of a rare trade promotion authority granted to the president by Congress. The negotiations are enormously complex, the Post wrote, but they have stalled largely because the EU has offered “a loophole-ridden proposal that would barely reduce its farm protectionism.” Without at least a modest deal this week, “[a] collapse could destabilize the global trading system.”