EU urged to drop farming subsidies

Nicholas Schoon reports on the findings of a panel examining the Common Agricultural Policy

A high-powered panel of experts yesterday advocated a massive withdrawal of state support from Europe's heavily subsidised farmers and said they should become much more competitive.

The new Minister of Agriculture, Douglas Hogg, welcomed the 11-member panel's call for radical reform of the European Union's Common Agricultural Policy (CAP). The group was set up eight months ago by his predecessor, William Waldegrave, who chaired its meetings.

The panel, which includes farmers, academics, economists and environmentalists, said the CAP remained a failure despite the major reform of 1992. This brought in widespread "set-aside", in which farmers get paid for taking crop land out of production - a policy the panel condemns.

The CAP made Europe's consumers pay artificially high prices for food, cost taxpayers dearly, had failed to prevent a rapid decline in farming jobs and had damaged the environment by encouraging intensive farming with heavy use of pesticides and fertilisers, it said.

The panel's report cited one estimate that the resulting misallocation of investment led to a loss of Gross Domestic Product across Europe of up to 3.5 per cent. Only Ireland and Greece appeared to gain any significant benefit from the policy, while Germany, Britain and Italy were the biggest losers.

Much of the subsidies paid by taxpayers and consumers were of no benefit to farmers, ending up in the pockets of those they trade with instead. The support artificially raised the price of farming assets such as land and equipment, and inputs such as fertiliser and pesticides.

The core of the panel's recommendations is that Europe's farmers must compete globally. They should be paid the world market price for the food they grow, without price guarantees.

They could then seek potentially lucrative export markets such as Pacific Rim countries, where economic and population growth is leading to demand for more, and more varied, food.

In any case, the panel says, the CAP practice of dumping food at low prices on world markets must end, due to pressure from other food exporters under the GATT world trade treaty. This will lead to rising food prices internationally, which will be to the benefit of all farmers, including those in poor countries who have been impoverished by cheap European Union exports.

CAP reform was inevitable due to world trade liberalisation and the expansion of the European Union to include former Communist countries, so it should start now. Subsidising the exports of the Eastern bloc's inefficient farms would put intolerable financial strains on the union, and in any case be disallowed under GATT rules.

''Leaving reform until the CAP becomes unmanageable will result in panic measures designed to address immediate problems,'' the report says. Fiona Reynolds, a panel member and director of the Council for the Protection of Rural England, said Europe had ''to avoid the nightmare of a bad reform which we now see looming on the horizon".

The panel says the kind of reform it advocates would lead to a continued fall in the number of people working on the land and the amalgamation of small and medium-sized farms into larger holdings. It also predicts that the use of fertiliser and pesticides would fall.

The panel still says taxpayers should continue to support farmers in return for them looking after the rural environment and foregoing environmentally- unfriendly farming methods. In Britain, the green goals of farming would be preserving wildlife and habitats, soil, clean water and popular landscapes and features such as hedgerows.

Members also felt that there was a case for taxpayer support for the poor, remote rural regions heavily dependent on agriculture, which would be hardest hit by reform and where there might be large-scale abandonment of the land. But this should be in the form of help for new, non-farming employment or direct income support to poor farmers, the panel says.

Now it and Mr Hogg have the difficult job of winning over farmers and other EU states. ''There is a long and difficult path of negotiation ahead of us,'' he said.