Budget cuts, new “strategic” reserves, the official abolition of imposed fallow land, a likely suspension of grain import taxes… the Common Agricultural Policy (CAP) is at the heart of current debate.
On September 19, the European Commission made a proposal whereby the greater part of the funding needed to launch Galileo – the European satellite positioning system intended to compete with American GPS – would be drawn from the budget allocated to the CAP for the 2007-2013 period. Although the Commission will not present the final version of the European budget until 2009, the announcement was highly symbolic, going back on the guarantee obtained by Jacques Chirac, then President of France, that CAP allocations would be maintained until 2013. The Commission believes that it can collect over two billion euros from the first pillar (direct aid) in 2007 and 2008, inasmuch as these sums fall within the budgetary margins that are generally not spent. This is all the more so given that the “favorable market conditions in the agricultural sector” reinforced its choice, which incidentally inspired very few reactions. Times have thus substantially changed, for just a few months ago merely mentioning a funds transfer such as this would have immediately caused an outcry.
While the recent rise in prices has been cause for rejoicing when justifying budget cuts, concerns have also been raised regarding the growing shortage of supply and the decrease in inventories at the root of this price climb. “Shouldn’t we think about building up strategic reserves” at the European level? This question was posed before the press by Portuguese Minister of Agriculture Jaime Silva as the Council of Ministers that opened on September 26.
With a view to tempering the price increase and boosting production throughout Europe, the Ministers of Agriculture, upon a proposal by the Commission, ended up abolishing the 10 percent imposed portion of fallow land for the fall 2007 and spring 2008 planting seasons. With these 3.8 million hectares of European farmland now available, a ten million ton increase in grain production is expected, equivalent to the volume of Europe’s imports last year.
At the same time, and to widespread surprise, European Commissioner for Agriculture Mariann Fisher Boel made a proposal to suspend customs duties on imports of wheat, corn and other grains. This again had the aim of curbing price hikes in grains and decreasing the risks of repercussions on food products. Despite Spain’s show of support, the logic behind this proposal appears to have been lost on many observers, particularly in France; how can one want to boost E.U. production on one hand while subjecting it to increased competition by allowing low-priced grain imports on the other? “This is a political disaster,” states Philippe Pinta, President of Groupe Céréaliers de France. “You would have to be crazy to put forward such an idea right in the middle of negotiations with the World Trade Organization.” Michel Barnier, French Minister of Agriculture, adds, “If we eliminate these customs duties, it is very difficult to imagine that we would be able to reintroduce them at a later date, should the market turn around.”1 A lifting of European dairy quotas is still under consideration as well, while in France dairy producers have already been authorized to increase their individual production levels by ten percent to help reach the national quota.
With the CAP health check underway, let’s hope that the present circumstances will not cause the need for market management tools to be forgotten. The new agricultural context (decreasing worldwide production, increased demand, rock-bottom worldwide inventories) has caught actors and observers unprepared and has proven that, on the contrary, there is an urgent need for analysis and regulatory instruments, along with new reforms.