Select Committee on Environment, Food and Rural Affairs Written Evidence


Memorandum submitted by Professor W Grant (CAP 29)

  1.  Underlying the debate about the future of the CAP are two different perspectives. There are those who think that there should only be intervention by government and the EU where there are identifiable market failures that are remediable by government action. Others consider that agriculture is a sector that is different from other parts of the economy and requires special treatment.

  2.  It is all worth bearing in mind that an implicit premise of much of Commission policy is that two types of agriculture can co-exist in Europe. One is a competitive international agriculture that should be able to compete on international markets without subsidy and with reduced levels of protection. Parts of the arable sector would conform to this model. Then there is a more peripheral, marginalised agriculture that is nevertheless important because of its contribution to the maintenance of remote communities and cherished landscapes. This is often, although not always, livestock farming. The best economic way forward for this form of agriculture, apart from diversification, is through high value added, niche production.

  3.  Food security. There are two broad issues that need to be tackled here, one about how important food security concerns are and one about the balance between the production of food and fuel. In his recent speech to the National Farmers' Union, Commissioner Mandelson argued that food security is one reason that agriculture as an economic sector had to be treated differently. Food security is being pushed as a justification for continued intervention by some farmers. The difficulty is that it can be used as a portmanteau justification that could permit unlimited subsidies. It was certainly a key factor when the CAP was devised against the background of the Cold War and memories of post-war food shortages in Europe. One has to be careful about the scenarios that are envisaged when one thinks about food security. It is difficult to think of a terrorist action that would lead to a major and prolonged disruption of the supply chain. What might be a longer-term issue is a change in the world supply and demand balance, but this is difficult to forecast accurately.

  4.  A related issue is the likely increase in the agricultural production of bio fuels and whether any view should be taken on the balance between food and fuel production on UK land. Issues about energy security might become relevant here.

  5.  The National Farmers' Union is concerned that its members in the UK might be disadvantaged in relation to others elsewhere in Europe given the Government's vision. One might well see a creeping re-nationalisation of policy and indeed to some extent that is embedded in the most recent reforms. This could raise the issue of whether state aids to agriculture should be reviewed as part of competition policy.

  6.  If current or future policies led to the abandonment of land, this could have adverse environmental effects, particularly in terms of biodiversity. Land that reverts to scrub is generally less supportive of biodiversity and also restricts access for recreational uses such as walking. Certain types of plants can only be sustained in a landscape if the land is grazed.

  7.  One has to be cautious about how far proposed changes to the CAP would lower food prices. Any policy that led to a significant reduction in the area farmed in the EU would affect the global supply/demand balance and hence "world prices" for agricultural commodities. Reduced public spending on the CAP would probably be transferred to other forms of spending so reductions in taxation as a result would probably be small.

  8.  How far a revised CAP would enable EU farmers to be more competitive depends in part on what happens in the Doha Round and subsequent international trade negotiations. Brazil would be the major beneficiary of substantial liberalisation. The Geographical Indications issue is more important for Europe than is generally recognised because it is tied to the success of a strategy that emphasises products that sell on quality rather than price.

  9.  In broad brush terms, what the new member states need to do is to reduce the number of very small farmers in their countries and to modernise and improve their rural infrastructure. Progressive farmers will use enhanced income streams to invest in their enterprises, but their efforts may be offset by deficiencies in the infrastructure, eg, legal framework, communications, credit systems. This would imply a greater increase in Pillar 2 spending than is projected at present.

  10.  The UK's rural economy is not monolithic, but what is evident is that more remote and higher areas are more reliant on subsidy for survival. Within the peripheral areas, some locations are more able than others to take advantage of diversification opportunities made available by rural tourism.

  11.  In his recent speech Commissioner Mandelson disputed the argument that the CAP was a significant stumbling block for the economic development of poorer countries. He stated, "I am not going to be swayed by a lazy political correctness into giving ground in agriculture simply because this will please a vociferous lobby that has misunderstood what is really needed to tackle global poverty." It could be argued that global south NGOs have well researched arguments to suggest that CAP has disadvantaged farmers in developing countries, particularly in terms of export subsidies and restrictions to market access. However, the picture is quite complex and, depending on how it is undertaken, it is possible for liberalisation to benefit emerging countries but not to help least developed countries, eg, the case of sugar.

  12.  I am broadly in support of the Vision document. However, we must remember that we do not start with a blank sheet of paper. Farming has grown used to high levels of subsidy and protection. This has produced a mindset in which new initiatives, eg, on bio-fuels, are responded to by questions about the availability of subsidies or tax breaks. Nevertheless, any too rapid reduction in subsidy and protection could undermine economic, social and environmental sustainability in rural areas. This is why there has always been a strong case for replacing subsidies by a bond that would serve as a capital asset or could be retained to generate an income stream. In reviewing the future of the CAP, analysing the problems is in some ways the easier part. Devising a strategy for building a broad based coalition across the EU for reform has been a problem for over 40 years and is not one that can be easily resolved.

March 2006





 
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