CAP FLAP

France's Sacred Cow: How one French farmer lives and thrives--thanks to EU taxpayers. (Richard Tomlinson, May 29, 2003, FORTUNE)

Taxpayers in Spain, Portugal, southern Italy, Ireland, and Greece--countries with large agricultural sectors--tend to back Europe's farm-support program because they get more from the Common Agricultural Policy (CAP) than they give. But the rest of the EU, led by Britain and Germany, which pay in more than they take out, are clamoring for change. So are farmers from the orchards of New Zealand to the cattle ranches of Argentina who want greater access to Europe's heavily protected markets. And poor countries complain that subsidies for products like sugar help keep them poor.

Total agricultural support as a percent of GDP, 2001
Country %
Australia 0.3%
Canada 0.7%
U.S. 0.9%
Japan 1.4%
European Union 1.4%
Source: OECD; Christophe Hochede

All told, EU taxpayers spent $135 billion--in CAP funds, price supports, and other forms of assistance--aiding the region's farmers in 2001. That equals 1.4% of Europe's GDP, a substantially larger proportion than in the U.S. or Australia, and more than a third of the world's agricultural subsidies. Next year the program will be expanded even further to embrace the first wave of new members from former Warsaw Pact countries. But, Hochede's rationale notwithstanding, it still doesn't add up to self-sufficiency: Europe pays farmers $1.7 billion not to farm, in order to avoid surpluses, at the same time it imports all kinds of agricultural goods.

In April, the U.S. and the Cairns Group of Asian and Latin American farming nations blamed EU intransigence for the collapse of WTO negotiations that were supposed to settle on guidelines for cuts in agricultural tariffs and subsidies. One can gasp at the hypocrisy of the Bush administration's lecturing about agricultural protectionism less than a year after approving a $190 billion support bill for U.S. farmers. But most neutral observers agree that the EU was the principal villain for failing to offer significant tariff reductions. "At the moment there's nothing on the table from the Europeans that provides a basis for negotiation," says Mark Vaile, Trade Minister of Australia, which heads the Cairns Group and which has gone a long way toward a free-market agricultural policy.

It's understandable that President Bush wants the political cover of a universal trade deal before he tackles our own farm subsidies, but he ought to just suck it up and do it regardless of Europe. They're already going to fund our recovery by keeping the euro too high, let's see how long they can afford to help pay for our groceries. Posted by Orrin Judd at June 5, 2003 8:35 AM