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The Destructiveness Of The Cap

July 24, 2003

The Destructiveness Of The Cap

This summer saw a travesty in the liberal use of the word "reform" applied to the settlement agreed for the new European Common Agricultural Policy (CAP). Sitting here in a central London constituency it may be argued by some that this is not a relevant subject for me compared to a Member …

The Destructiveness Of The Cap

This summer saw a travesty in the liberal use of the word "reform" applied to the settlement agreed for the new European Common Agricultural Policy (CAP). Sitting here in a central London constituency it may be argued by some that this is not a relevant subject for me compared to a Member of Parliament whose constituency encompasses some of Britain’s farmland but the fact is that the failure of the reform will affect all of us in our food prices and our trade with the rest of the world.

As with many of the compromises in the European Union the CAP settlement as announced by the European Commission during June satisfied no one, least of all the poorest in the world’s developing countries, let alone our own farmers for whom CAP has long been seen as the rich farmers’ charter.

According to the European Agricultural Guidance and Guarantee Fund (EAGGF) agricultural farmers received 44.225 (£31 billion) billion euros in 2002 in an ever more expensive effort to support the illusion of the "small farmer". The issue here is not that the EU is supporting its farmers but rather the fact that it has chosen the most harmful and distorting manner to support the agricultural sector.

The CAP harms the UK and all other European economies on both a domestic and an international level and shreds the EU’s claim that it is a moral and value-based government.

The statistics given out by the EU on CAP expenditures are highly misleading to all. Even though the EU must publicly state that it is spending nearly 45 billion euros (31 billion pounds), or more than 46% of its entire 2002 budget, simply on CAP expenditures, this statistic hides the true cost of the CAP to consumers. Whereas the US subsidises its agriculture by giving money directly to the farmers, otherwise known as direct support, the European system covers more than half of its costs to the citizens of the EU through price supports, which raise the cost of food for every single person in Europe.

Most importantly, the most insidious effect of the CAP is that it acts as a regressive tax on society. Because food prices are higher for every citizen of the EU, proportionally the poor pay more of their incomes towards agricultural goods than the wealthy, resulting in a regressive tax. Moreover the tax the people on lower incomes must pay goes mostly towards larger agricultural conglomerates, effectively taking money away from the poor and giving it to the rich. The domestic effects of the CAP’s higher food prices are therefore subtle but pernicious.

As someone who is passionate about free trade it also galls me that CAP has been such a destructive force against free trade. While the developed world has a wide variety of products to choose from, developing countries often only have a few goods and these usually take the form of natural resources or agricultural goods. Britain has a long history of trading openly and its people have a long tradition of buying products willingly from all corners of the globe. However the CAP robs many developing nations of the ability to trade in the EU especially in the area of agricultural goods.

The EU is not an efficient producer of many agricultural goods but it nonetheless insists on producing these goods at a higher cost rather than importing them at a much lower one. For example, in the EU it costs 673 euros to produce one ton of sugar, while in a country like Malawi it only costs 286 euros. Thus the EU forces consumers to purchase from high-cost, inefficient domestic producers rather than buy from lower-cost, efficient foreign producers.

I like to think that this nation can remain at the forefront in building fair trade with the rest of the world but the recent decisions in the EU mean that free trade has again been damaged and the prospects for the reality of global Fair Trade remain some way off.