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From the outside, the European Union's Common Agricultural Policy (CAP) may look immutable. The only major effect of the reform passed by farm ministers in 2009, dubbed the ‘Health Check', was to dissipate more serious ambitions for change for the rest of the EU long-term budget (2007–2013). And the World Trade Organization (WTO), which provided the external stimulus influential in the landmark reforms of 1992 and 2003, will not do so again in the foreseeable future: if and when they are to be passed, the draft agreements in the Doha Round fall short of requiring fundamental CAP adaptations. The main change would be the eventual removal of export subsidies – an instrument used less and less by the EU in any case.

But a closer look at the debate in Brussels reveals that the CAP may be slated for its most radical reform ever. The Single Farm Payment, a subsidy that provides direct income support based on historic entitlements, and which represents by far the largest item of spending, has become less tenable as its original justification – compensating farmers for the removal of market price intervention and coupled subsidies – fades away. Moreover, CAP reform is negotiated in the context of the next long-term EU budget. This means that if agriculture ministers fail to come forward with ambitious reform proposals, finance ministers and heads of state will do the job for them. The pressure for reform is thus higher, the scope for interstate bargains across EU spending and financing broader, and the involvement of non-farm actors stronger than ever before.

Another factor is the current highly uneven distribution of agricultural subsidies that discriminates in particular against Eastern Europe, which simply cannot be maintained forever. Some countries that were previously net beneficiaries of the CAP will soon become net payers. France, which has been spear-heading resistance to agriculture reform for decades, is the most important of them. These countries are less likely to continue as cheerleaders of wasteful spending when their own taxpayers have to support production and farm incomes elsewhere in the Union.

This prospect of change has stimulated a rich political and academic debate. A host of studies have brought the message home: EU agricultural policies should not fiddle with prices, micromanage farm investments or support farm incomes; instead, their principal purpose should be to promote European public goods, such as clean water, biodiversity and the fight against climate change. Many of Europe's leading agricultural economists have expressed their commitment to this ‘public goods paradigm' in a declaration. In response, many lobbyists for the CAP have accepted the basic logic of the paradigm, but argue it is just another good reason for farm subsidies, as agriculture is a public good. What have we learned from this debate, and what are the implications of the paradigm for the CAP?

First, it is only a matter of ingenuity to construct a story that demonstrates why agriculture constitutes a European public good and therefore ‘deserves' policy support. Although food may look like a private good, given that rivalry in consumption is beyond doubt, there are certainly extreme situations that are in no-one's interests: it is best that our neighbors do not starve, and the collective interest in avoiding hunger riots is manifest. The essential issue, therefore, is not whether any European public interest can be identified, but the relative strength of public interest regarding a given issue and to extent to which that issue represents a serious risk. Analysis shows, for instance, that food security is not threatened in the short run and can be promoted via the wider policy objective of long-term preservation of natural resources. More generally, evidence suggests that the important European public interests that require decisive action are in fact ‘green', including climate change mitigation, the preservation of biodiversity, maintaining water quality and access and the preservation of landscapes.

Second, the extent to which a public good is cross-border differs from one issue to another. There is a significant European interest in reducing greenhouse gases, preserving habitats for migratory birds or protecting species that are endangered. The gains for Europe are much smaller when it comes to maintaining scenic landscapes and old farm buildings, or enhancing the vitality of rural areas, both of which tend to provide the largest benefits at a national level. A strong public interest in an issue does not automatically make it an EU priority. The right policy response is to demand differentiated co-financing from the member states: the greater the national compared with the EU benefits, the more the member states should pay for the good themselves.

Third, even if a clearly European interest is at stake, opening the subsidy purse should not be the invariable reflex of policymakers. Emission-trading schemes, taxes and regulation can be more efficient policies. Frequently, they are also fairer, as non-agricultural sectors of the economy are already subject to much more stringent application of the ‘polluter pays' principle. Especially with regard to water quality and climate change – two of the most important European concerns about agriculture – vast improvements could be obtained with measures that would cost taxpayers nothing, and may even create public revenue.

Finally, debate on this issue also shows that although an acceptance of the public goods paradigm would require a radical redistribution of payments across member states, this does not necessarily mean a move towards an adjusted flat(ter) rate for all agricultural areas in the EU. Instead, payments should go where the greatest return on investment can be expected (for example, in terms of greenhouse gas foregone per euro) and where member states incur the greatest costs in promoting European public goods (such as nature preservations that limit land-use, in schemes like Natura 2000). The result would be ‘uneven' but fair – contrary to the current uneven distribution, which is entirely arbitrary and unrelated to policy objectives.

On balance, the debate shows that the provision of public goods is neither an attractive nor a convincing tag with which to better sell the CAP to critical citizens of Member States. Quite the opposite: it means starting from scratch with new policy objectives and instruments and with new financing arrangements and payment allocations. Given the increasingly precarious justification for the existing regime, and the looming negotiations over the next long-term EU budget, the future CAP could be significantly leaner and greener.


Valentin Zahrnt holds a Ph.D. in economics and works as a Research Associate at the European Centre for International Political Economy (ECIPE). He also directs Zahrnt Consulting & Communication, a service specialized in trade, agriculture and sustainable development. The second half of this article draws on material originally published on The European Centre for International Political Economy's (ECIPE) blog, and is reprinted here with permission from the author.