Rational Agriculture

The current crisis in the EU has one apparent root cause: the failure of the British government to compromise over its budget rebate, extracted by Margaret Thatcher amongst much acrimony back in the early 80's. This issue has been raised right now because President Chirac wanted to deflect blame from himself for the resounding "non" in the French referendum on the EU constitution, at the same time making Tony Blair's upcoming European presidency as uncomfortable as possible (there's no love lost between these two leaders).

However, with the next EU budget (running from 2007) due to be formally tabled next year, this row would have happened then if not now. The crux of the matter is that, although the budget is small as a percentage of GDP (1%) it is large in absolute terms (€100 billion), and there is plenty of concern about how it is spent, particularly on agriculture. The Common Agricultural Policy, accounting for nearly half of the total budget, is heavily skewed in favour of the rather inefficient French farming sector.

This has for long been a bone of contention between France and countries such as the UK which have previously gone through painful, but necessary, restructuring of their agricultural sectors. Last year's EU expansion has brought many other inefficient farmers into the fold, particularly in Poland. However, they are not going to receive the same benefits as their pampered French cousins, which may increase the pressure for change.

But, although there is plenty of argument locally about this €40 billion or so subsiding European farmers, the real sufferers are farmers in the developing world. Subsidising inefficient production and selling surpluses on the world market, so depressing prices, has a real negative impact on poor Third World farmers who may want to export cash crops to Europe. The most egregious example is surely sugar: in a rational world Europe wouldn't have its own sugar industry but would instead import cane sugar from the sub-tropics. Forget debt relief: opening up agricultural markets would give many poor countries the real boost they need.

Surely, in our prosperous continent, we can bite the bullet and phase out the CAP sooner rather than later. In the long run, such protection does no-one any good. Irrational agriculture is bad agriculture.