Development & Aid, Europe, Headlines

DEVELOPMENT: EU Reforms Improve Little

Julio Godoy

PARIS, Jun 14 2004 (IPS) - The reforms to the agriculture policy of the European Union have done little to change its distorting effects, OECD experts say.

In their ‘Analysis of the 2003 CAP (common agriculture policy) reform’ the experts from the Organisation for Economic Cooperation and Development (OECD) say the new agricultural policy only changed the basis for calculating subsidies for farmers.

The OECD is a group of 30 industrialised countries committed to the market economy, liberalisation of international trade and deregulation

CAP continued to have a negative influence on farming markets around the world despite the reforms in the policy in June last year, the experts said.

“A preliminary evaluation of the reform of CAP suggests that the role of markets forces will augment, increasing the efficacy of income aid for farmers,” Catherine Moreddu, a French economist with the OECD and co-author of the report told IPS. “The reform will allow a better focusing and a better repartition of EU aid.”

But Moreddu added that the reform of the CAP has not changed the total amount of the 50 billion dollars in subsidies the European Union (EU) pays its farmers every year.

OECD countries pay out about 260 billion dollars a year in agriculture subsidies to their farmers. This represents 32 percent of the farmers’ yearly income, up from 27 percent in 1990. CAP is also the most costly EU programme, taking about 50 percent of its total budget.

“The reform has also failed to improve access of foreign agricultural producers to the EU market,” the OECD report says.

Leaders of the group of eight (G8) most industrialised countries who met last week at Sea Island in Georgia in the United States declared there would be an agreement on agriculture by the end of next month. The massive financial support for farmers in OECD countries, particularly in the United States and the EU, has been the main obstacle to such an agreement.

The World Trade Organisation summit in Cancun, Mexico, last year ended in a deadlock over these subsidies. It is unlikely that developing countries will back a new agreement without a substantial reduction in subsidies.

Critics say CAP affects the agricultural capacities of other regions, especially Latin America and Africa. They say the subsidies support rich farmers and encourage mass agricultural production regardless of market needs and of the quality of production.

“Latin America has been the worst-affected region, losing four billion dollars annually from EU farm policies,” the British non-governmental organisation Oxfam had warned ahead of the reforms of last year.

“Half of the EU spending goes to the biggest 17 percent of farm enterprises, belying the manufactured myth that the CAP is all about keeping small farmers in jobs,” the Oxfam report said.

Following years of discussions and in view of the accession of ten new members with heavy farming sectors in May 2004, the EU only froze the subsidies at 50 billion dollars a year.

The CAP reform also failed to revise European subsidies for agricultural products that specifically threaten poor developing countries.

“The reform delayed revising subsidies for cotton, where EU subsidies are already the highest in the world, and for sugar, and tobacco,” Christel Fiebiger, German member of the European Parliament told IPS.

The CAP reform exists only in words, she said. “In reality, the CAP continues as in the past, with some cosmetic changes.”