It’s time to love the common agricultural policy.
Maybe the time has come to love the common agricultural policy. The world is short of food. In consequence we see an explosion in agricultural commodity prices and a drive to expand production.
The grain and butter mountains which shamed the C.A.P. have disappeared. Europe has become a net importer of cereals for the first time. Prices of wheat have almost doubled in a year; world stocks of soya, which is essential for animal feed, are headed for zero, with China importing 40 per cent of world tradable supplies; food prices are rising and the impact is being felt in the shops – Germany now has 3 per cent retail price inflation for the first time since 1995.
Things have got so tense that the Commission proposes suspending import duties on cereals to ease the pressure a bit. See this Commission press release for details. Without a strong euro prices would be even higher.
The talk now is of food security. I’m reminded of the early 70s, when the Club of Rome, led by European Commissioner Sicco Mansholt, warned of a Malthusian world shortage of commodities – too many mouths, too little production. Yet in following years the food surpluses returned. Will it be different this time?
It does seem likely. Rising populations and greater prosperity are boosting global food demand from people who this time can pay for it.
At least Europe has the capacity to increase food production after some indifferent harvests and has a policy structure in the c.a.p. which can provide some confidence and continuity for producers, although a shift away from price support to more direct assistance will no doubt be a theme of the review of EU farm policy which has just been launched and will give more scope for producers to respond more quickly to market signals.
But what irony! Just as our farmers were being encouraged and applauded as protectors of Europe’s natural environment, paid to be custodians of the countryside as much as producers of food, the market is taking over.
A farming friend of mine has been maintaining the farm hedges, providing runways for birds such as skylarks (yes, they are called runways) and leaving a good headland of uncultivated land around his arable fields to help wildlife, but now the EU set-aside scheme which kept farmland out of production and encouraged wildlife is being abandoned for the 2008 season. Britain’s Royal Society for the Protection of Birds is seriously worried about this threat to these new habitats.
Over the years since it was created the common agricultural policy has built one complexity on another, just as all farm policies tend to do, often with quite unforeseen consequences. The latest manifestation is the subsidisation of biofuels.
Of course arresting climate change is an absolute priority, but I do wonder if policy makers take full account of what they do. Take this example of screwed-up policy: the United States gives big subsidies for production of biodiesel, so palm oil is imported to the US from Latin America, processed by the addition of 1 per cent diesel oil and then exported to the EU as biodiesel, where of course it undercuts European prices.
In Europe too we are subsidising ethanol, producing it mainly from rapeseed oil, yet the production of ethanol in this way is reckoned to produce more CO2 than it saves. It is the consequence of setting arbitrary targets such as the 5.75 per cent of transport fuels from biofuels by 2010. I wonder how much impact assessment has been done to look at the whole picture in Europe and beyond.
It’s the knock-on effects which matter. Diversion of land from food to biofuel can pose some real threats. Worse, maybe, from a climate change point of view is the destruction of forest to grow fuel crops.
Even in Europe there is diversion of land from food to fuel production. Commissioner Mariann Fischer Boel says it only amounts to 2 per cent of EU cereal production, but marginal changes can have a major impact on commodity prices and this is presumably only the beginning.
A UN adviser has called the rush for biofuels a “crime against humanity”. These are strong words indeed and I note that it has become a real cause celebre among NGOs, maybe eclipsing the GMO issue.
But surely everything depends on the raw material and the technology used. Sugar cane is apparently four times as efficient as maize as a biofuel feedstock and there is a lot of research and development into alternative crops and by-products which may provide real benefits without the accompanying negatives.
The surge in agricultural prices has meant big savings for the EU budget, so unspent agricultural commitments are being transferred to fund Galileo in a deal approved by ministers on November 30. The Portuguese presidency seems to have used some nimble footwork switching from a budget decision (unanimity required) to a transport vote (qualified majority) in order to isolate the Spanish, who were holding out for their own Galileo ground station. See the Council conclusions here.
Following the Council decision the Commission will now be fully responsible for Galileo, using the European Space Agency as the procurement agent. Let’s hope the project can at last get on track for the stars.
Competition policy has become another impressive contributor to the EU budget. Fines of €490m have just been imposed on the European flat glass manufacturers for price fixing.
This brings EU anti-trust fines imposed so far this year to €3,000m – an extraordinary figure which partly reflects the success of the leniency regime, which offers reprieve or mitigation for any company which blows the whistle on a cartel in which it participated. A favourite question among law firms is: how do you advise your client when he tells you that the CEO of competitor company X failed to turn up to the annual informal golf weekend in Portugal last week?
