Putting the Cap on Farming Subsidies

EU enlargement offers a rare chance to reform a policy that has long outlived its usefulness: the common agricultural policy (CAP).

The CAP was introduced in 1960 with the intent of providing a reasonable standard of living for farmers and reasonably priced food for all. But the CAP has failed. Larger farms are paid not to produce, while smaller ones have come to heavily rely on subsidies.

Reform of the common agricultural policy has become urgent, because the accession of Central European countries threatens to break the bank. Farming subsidies in the European Union already account for about half of the EU’s entire budget – not including the new members. European farming receives a staggering $39 billion a year in direct subsidies - more than the rest of industry combined.

Franz Fischler, the EU's agriculture minister, outlined proposals for CAP reform, according to which farmers would no longer be paid to over-produce. Instead, they would get flat payments, which would be progressively cut back. The money saved would instead be redirected towards rural development.

Predictably, the plan met with opposition from the big beneficiaries of the CAP: France, Spain, Greece and Ireland. Farm lobbies in those countries fear they would not be able to survive in an unprotected global market. They have made clear they would fight to prevent a reform that might cost them money.

On the other side are countries like Germany and the Netherlands, which recently argued that if the CAP was not reformed before the EU expands eastwards, farm spending would swell by a further $20 billion a year in a few years’ time. They are determined to keep pressing. But the other members in favor of reform simply do not have enough votes between them to push it through. They fear that if they insist now, they may delay the EU's enlargement.

Illustration Raimo Bergt