Prior to the upcoming CAP reform, European Commissioner for Agriculture, Dacian Ciolos, launched a public debate on Monday, April 12th on the place of agriculture in society to get the opinions of civil society and the agricultural sector. He highlighted during the press conference that the CAP must be legitimate for farmers, who represent 5% of the active population, but also for taxpayers as far as possible.
In light of the criticisms leveled against the CAP, and as the decisive 2013 threshold draws near, Mr. Ciolos highlighted his desire to implement the necessary reforms not to “weaken or dismantle the CAP, but to ensure it continues to be a powerful instrument for the farmers of the EU of today.” He added that within the context of market failures, we must have the means to intervene and not regret a lack of intervention later on. He said, "A lack of intervention could cost much more in the medium-term” than what a reasoned, and exceptional intervention at a given time could.
This is a strong argument in favor of the CAP: while its detractors highlight the size of the annual budget that is allocated to it, the reasoning must be reversed, taking into account the cost of inaction and the resulting risks. Within the context of structurally volatile markets, there is a risk that there will be an increasing number of crises due to deregulation; but, do we really know how much a crisis costs? Concerning the crises that have regularly affected the dairy sector, as momagri outlined1, following deregulation of the dairy market, which began with the 1984 and 2003 reforms, expenditures to support the dairy industry soared by 64 percent between 2005 and 20072, to outweigh disparities generated by the hyper-volatility of milk prices in agricultural markets. This occurred before the current crisis, the return of export subsidies, the purchasing of surplus by the European Union and the freeing up of 300 million euros in emergency aid to producers.
The cost of managing the crises is, therefore, not insignificant for the taxpayer. Is this the benefit of liberalization?
1 "The example of the dairy industry: Between the drawbacks of liberalization and the benefits of regulation" , Paul-Florent Montfort, Analyst, momagri, 07/12/2009 http://www.momagri.org/UK/focus-on-issues/The-example-of-the-dairy-industry-Between-the-drawbacks-of-liberalization-and-the-benefits-of-regulation_590.html
2 European Court of Auditors, Special Report no. 14/2009, "‘Have the management instruments applied to the market in milk and milk products achieved their main objectives?" 15 October 2009.