World Food Crisis: The Health Check Catches A Wave

• June 1st, 2008
• Posted by 7thmin

Commentary:

Rising world food costs have had to be taken into account in the latest phase of building a new agriculture policy for Europe.

The long retreat from direct subsidies linked to farm production has seen elaborate and costly environmental and regional supports set up instead – better for the long-term on the land, less disruptive in world trade.

RE-ANGLING THE RULES
The outcome of the long-promised “Health Check” on European Union Agriculture has been announced (20.5.08), pushing on with the new forms of subsidy; edging out more of the old; maintaining a more “phasing-out” approach for some vulnerable industries in Eastern Europe – and seizing the moment with high food prices, to jettison rules that might spoil good market opportunities.

The last milk quotas are to be removed, meaning a long-standing prop for past over-production will go, while actually permitting more production to meet the current high demand.

Another famous feature of the old order, payment for “set asides” of arable farmland, is also dropped. Where in the past land set aside from production was seen as an environmental plus for regions such as densely populated Western Germany, today the European Commission is telling farmers they will be free of the requirement that 10% of arable land be left fallow – with encouragement to use it for market production.

If case this re-angling of rules is seen as too opportunistic, as a great diversion to catch the current economic tide, new plans have been elaborated for the longer-term.

In the EC analysis, high global demand has many causes and won’t last forever; European farmers being encouraged now to go out and trade on a level playing field are receiving definite guarantees of support for the future.

KEEPING THE EUROS FLOWING

The Agriculture Commissioner, Mariann Fischer-Bohl, this time reiterated assurances contained in earlier descriptions of the support structure, that money will go to new applications, rather than be reduced.

With direct links removed between subsidies and products, assistance would come with strings attached related to protection of the environment – called “cross compliance”.

“The Commission also proposes an increase in modulation, whereby direct payments to farmers are reduced and the money is transferred to the Rural Development Fund,” she said.

“This will allow a better response to the new challenges and opportunities faced by European agriculture, including climate change, the need for better water management, and the protection of biodiversity …

“The Health Check on European agriculture is to ensure the sector can keep up with growing demand in a sustainable way.”

ACTION STILL TO COME

The EC President, Jose Manuel Barroso, has been emphasising broader, more long-term initiatives, including more coordinated international cooperation and investment in agricultural research, and strict sustainability criteria for biofuels production, to keep it commercially viable and prevent it driving the price of food-products still higher.

“The European Union has reacted rapidly to the sudden surge in food prices.

“We are dealing with a problem that has many root causes and many consequences …”, he said.

Causes were seen to be “structural”, like the abiding lift in demand, not least from new markets in the Chinese and Indian economies, but also due to temporary factors such as the falling United States dollar and export restrictions in some countries.

The announcement of the Health Check decisions moves the Common Agricultural Policy of the EU another step closer to its promised full overhaul, though it will still take a protracted campaign to get them accepted by all of the European governments and EU institutions, to get them into law.

There are continuing rearguard actions within industry, and in member countries more dependent on the former agricultural order; and there are other interests, e.g. among more efficient farmers, in the United Kingdom, who never wanted the heavy expense of the CAP, and would want to see yet more agricultural business consigned to the mechanism of the market.

In the past, direct subsidies encouraged over-production in Europe, and so caused conflict and distortion in world trade. With more production now made viable through strong demand, there will still be large farm subsidies, but “decoupled” from production and less of a direct benefit growers. Advocates of the “new partnership” between Europe and Australia, and other agricultural producers, will need to determine whether that much of a change will permit the thorough-enough relaxation of restrictions to trade that they want. (See EUAustralia, 3.4.08; “Be partners and cut farm protection, says Rudd”).

The following is a summary of the Health Check provisions announced by the European Commission:

• Abolition of set-aside.

• Phasing out milk quotas.

• “Decoupling” of the link between payment and products, in favour of the new Single Payment program (with exceptions remaining for some pastoral products).

• Moving away from historical payments, where aid is based on what was paid previously over a set period of time, in certain regions.

• Extending a Single Area Payments Scheme developed in ten of the new member states, for three years, to 2013.

• Cross Compliance measures linking farm assistance to environmental, animal welfare and food quality standards.

• Assistance to sectors with special problems, a provision for member governments to help distressed industries; the EC wants this made flexible and extended to risk management like insurance schemes for natural disasters and mutual funds for animal diseases.

• Shifting money from direct aid to Rural Development; to date farmers receiving more than €5,000 in direct aid have their payments reduced by 5 percent and the money is transferred into the Rural Development budget; the EC wants the percentages extended, and the money used to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.

• Intervention by the Commission to make purchases to end, in a range of major products, e.g. rice, pork, feed grains; it will be scaled back further for bread wheat, butter and skimmed milk powder.

• Small support schemes will be modified, with minimum payments for very small farms and “decoupling” of production in small payments programs.

• The Commission wants to abolish a premium previously used to encourage growing of energy crops.

Reference:

“EU farming – remedies for new challenges”, European Union, 20.5.08.
http://ec.europa.eu/commission_barroso/president/focus/cap/index_en.htm, (1.6.08).

Mariann Fischer Boel, European Commissioner — Agriculture and Rural Development, “The CAP Health Check: straight ahead for responsive and sustainable farming”, Strasbourg, 20.5.08, SPEECH/08/255

“Food and farming: Health Check will modernise the CAP and free farmers to respond to growing demand”, European Commission, 20.5.08, IP/08/762.
http://ec.europa.eu/agriculture/healthcheck/index_en.htm, (1.6.08).

Picture:

Doctor gives the CAP its Health Check; European Commission

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