Thursday, 15 March 2007

And to CAP it all…

Is there anything worse than subsidising First World farmers to produce crops so that they can undercut the prices that Third World farmers would charge, were they not also excluded from our markets by tariffs? The European Union found a way a couple of years ago when it decoupled subsidies from production. Farmers are now paid whether or not they produce food. Nothing could be more execrable than paying farmers not to farm, surely.

Well, the EU has found a way. Not content with paying farmers not to farm, it now transpires that the EU is paying non-farmers not to farm.

As Richard Howard at the Globalisation Institute notes, “Technically, the subsidies can only go to farmers, however, the definition of farmer has been relaxed so greatly over the years that to be classified as one, you now only need to own 1.7 hectares of land for a ten month period and you never even need to visit it.” Clever speculators that own a few acres of land are buying the rights to receive payments under the Common Agricultural Policy, which are tradable and which can yield returns ten times as great as a bank deposit.

As regular readers will have guessed, I admire speculation – taking a punt in the hope that it may prove profitable. But I abhor rent-seeking, exploiting the legal and regulatory system to extract money that is not earned and would not exist if bureaucrats were not meddling. The bad-guys in this scenario are not the speculators, however: they are making a perfectly legal and sensible investment. Nor is it the farmers, who are often selling their rights to fund their retirement or even to invest in their farms (thus, presumably, boosting production – the opposite of what was intended). It is the Eurocrats and their political masters in the European capitals that have enabled this ridiculous system to develop.

The CAP is an inexcusable misuse of billions of Euros of taxpayers money. It keeps in business farmers that should not still be trading; it excludes Third World farmers from access to markets that would lift them out of poverty; it milks First World consumers by forcing them to pay over the odds for basic commodities; and it feeds a massive, pointless bureaucracy. Now it is paying non-farmers not to farm. As Neil O'Brien, the director of Open Europe, told the Times, “This is the final reduction to absurdity of the Common Agricultural Policy.”

A spokesman for the National Farmers’ Union told the Times “Farmers couldn’t survive without subsidies.” The same could be said for the Coal Miners or the workers at MG Rover, but nobody bailed them out to the tune of billions. There was a time when Britain’s farmers were some of the most efficient in the world. Without the molly-coddling of the CAP, many of them could be again, and so would thrive in a market where local produce and niche production is ever-more popular. Meanwhile, producers in Africa and consumers in Britain would benefit from free trade in agriculture, across Europe tax burdens would fall, and urbanites like me would have to not farm on our own time.

It is high time the CAP was dismantled. In the meantime, I wonder if my wife’s allotment covers 1.7 hectares!


Kit said...

Since you have mentioned the EU. Which part of it could be defended by a liberal?

Open Europe blog team said...

Amusing reaction to our story from the NFU:

"The EU Single Payment Scheme is not a subsidy; it is a payment made to farmers to reward them for keeping land in good agricultural and environmental condition, in the public interest.”"

Yeah - the money I get every month isn't a salary... its more of a "reward for turning up at work"...

Tom Papworth said...

Which parts of the EU can be defended by a liberal?

Free movement of goods, services, labour and capital for a start. Some bits need to be improved (services have been woefully left behind), and in the long run it should be superceded by global free trade, but for now I'd rather have no tarriff barriers between here and Tallinn than maintain them until I can go all the way to Taipai