EU Ag Policy

Now we have a farm bill, we can pay a little attention to what the EU is going through. Here's a link to a summary.

It must be nice to have 27 bureaucrats (the ag ministers of the countries) be able to set policy.
And from a summary of the EU Commissions proposals:

Abolition of set-aside: The Commission proposes abolishing the requirement for arable farmers to leave 10 percent of their land fallow. This will allow them to maximise their production potential.

Phasing out milk quotas: Milk quotas will be phased out by April 2015. To ensure a ’soft landing’, the Commission proposes five annual quota increases of one percent between 2009/10 and 2013/14.

Decoupling of support: The CAP reform “decoupled” direct aid to farmers i.e. payments were no longer linked to the production of a specific product. However, some Member States chose to maintain some “coupled” – i.e. production-linked - payments. The Commission now proposes to remove the remaining coupled payments and shift them to the Single Payment Scheme, with the exception of suckler cow, goat and sheep premia, where Member States may maintain current levels of coupled support.

Moving away from historical payments: Farmers in some Member States receive aid based on what they received in a reference period. In others, payments are on a regional, per hectare basis. As time moves on, the historical model becomes harder to justify, so the Commission is proposing to allow Member States to move to a flatter rate system.

Extending SAPS: Ten of the 12 newest EU members apply the simplified Single Area Payment Scheme. This is supposed to expire in 2010, but the Commission proposes extending it to 2013.

Cross Compliance: Aid to farmers is linked to the respect of environmental, animal welfare and food quality standards. Farmers who do not respect the rules face cuts in their support. This so-called Cross Compliance will be simplified, by withdrawing standards that are not relevant or linked to farmer responsibility. New requirements will be added to retain the environmental benefits of set-aside and improve water management.

Pricey Farm Programs

The U.S. has fallen way behind. With the weakening of the dollar, the Europeans farm programs are way ahead of ours. 34 billion euros works out to $55 billion a year or so at current exchange rates. And their tariffs add a whole lot more. See this letter from GBritain's Chancellor of the Exchequer.

French Farmers Again

I'm not sure a British teacher of English to the French is an expert on French agriculture, but Dirk Beauregard reports French farmers are doing well. But he also says:

So, French farmers have never had it so good, however roughly 70% of the income of French farmers comes from European subsidies. In 2007, the nation’s farmers received 10 billion Euros in European money, from a total European agricultural subsidy budget of 41 billion Euros."

That's amazing and a far greater proportion than US farmers ever get from subsidies. Of course, it's the sort of factoid that could be retained in memory, even though it's not true, or a one-year phenomena. Not quite an urban legend, but the same sort of thing.

Definition of a Farmer, En Francais

Dirk Beauregard posts on the definition of a french farmer. Contrary to the title, the post is in English. Some interesting statistics included as part of the definition--income from agricultural produce must be at least 25 percent of the value of the farm. (I wonder whether that works for the U.S.--let's say an acre of Iowa land produces 150 bushels times $3 = $450 but it's worth $4500??) Interesting issue for an economist.

The existence of an official definition fits the conception of France as a very bureaucratized country, but they have more agriculture in proportion than the U.S.

Closer to a bureaucrat's heart--the French ag ministry has 40,000 employees for maybe 400,000 official farmers. USDA has maybe 100,000 for 1-2 million farmers (depending on the definition). That's misleading, because each ministry would have different responsibilities, etc.

Also interesting--apparent French farmers are members of a corporation that provides social security and health insurance?

Those Damnable Advisers

One of the things that happens with complex government programs is that people set up businesses acting as advisers or intermediaries between the citizen and government. (Think H&R Block, etc.) That's true with US farm programs--I remember visiting the Fresno County FSA office in 1991 and finding one cotton/rice outfit had a person whose whole job was working with the FSA and Reclamation offices (water rights, supposedly limited to 960 acres were big, as well as the cotton and rice payments).

So too overseas, as described in this blog post at the CAP Health Check ("CAP" being the EU's farm program). The lesson being--when there's money to gain, people will work to gain it.

Payments to Dukes and Princes? Not Us

This story hasn't appeared on the EU farm program blog, but apparently the EU has its own entrenched recipients of farm subsidy payments, including the odd duke and prince (read Mark Twain for a take on dukes and princes--he thought they were odd). They've dropped the plan to cap payments.

And EU Considers Progressive Reductions in Payments

From a long post at farm policy:

Mr. Matthews noted that, “Agriculture Ministers had their first discussion of the Commission’s Health Check proposals at the first Council meeting under the Slovenian Presidency yesterday. It appears that the two issues causing the most fuss are the Commission’s suggestions to introduce a progressive reduction in single farm payments to larger farms (inaccurately referred to as capping) and to increase the rate of compulsory modulation (which again would only affect larger farms), in both cases with the additional funds going to Pillar 2 rural development measures. At the same time, Ministers were clearly taken by the emphasis on risk management and safety nets in the Commission Communication and called for more specific proposals in this area.

"Progressive reductions" is a good name for my hobby-horse.

The British Version of FSA Is Improving

I've posted before noting the problems the British "Rural Payments Agency" has had making payments under their farm program. It appears they are making progress, at least from this article.

I find the reference to the change in software systems particularly interesting. It almost sounds as if they have moved to an integrated system more like the one that FSA uses. It's the only way to go, if you can.

Graduated Payment Limitation in Europe

Mulch notes the discussion in the EU of instituting graduated payment limitations (taking some credit because the EU has started opening up the data on who gets how much to the public, much as the EWG has done for the last 13+ years).

I made a similar proposal several months ago.

EU Set-Aside

In a blast from the past, this agweb article referred to a proposal to reduce the EU set-aside from 10 percent to 0. This was new to me--I thought the EU and the US had done away with production adjustment. On doing a very little research it looks as if it was a cross between the US "Conservation reserve Program" and the annual set-aside programs we had at times in the 1970's-1990's. Like CRP in that the 10 percent level was "permanent" (as of 1999) and not changeable from year to year. Except now it's proposed to be changed. $8 wheat futures will do that to you.

British Bureaucrats Screw Up Farm Payments

To the best of my knowledge, FSA has done better than the Brits:

The handling of a £1.5bn computerised farm payments scheme by two senior civil servants is condemned by MPs today as "a masterclass in bad decision-making" which could land taxpayers with a £500m extra bill. A highly critical report from the Commons public accounts committee accuses Sir Brian Bender, then permanent secretary at the Department for Environment, Food and Rural Affairs, of being "largely responsible" for the fiasco, which left tens of thousands of farmers without any cash from the European Union.

Some interesting points that pop up as sidenotes--apparently the EU has a small payment cutoff--like $100 or so, which the Brits didn't use, giving them lots of small claims to pay. And the EU is able to fine the British over their failures of administration. The British fired some of the people responsible, but had to pay compensation for not fully following the rules (sounds familiar). And most familiar of all--a top guy is criticized for not having the nerve to stand up to the leaders and give them the bad news.

The View from Europe

This is late, but here's an excerpt from a post on the blog of the EU's secretary of agriculture (that's how I interpret her role). It relates to a visit in February that she made to DC. (Her blog is interesting--she responds to the questions/comments of some of the farmers who write in.)

"I’ve just come back from almost three days in a freezing cold Washington DC.
It was an extremely educational visit – hopefully for my hosts as much as for me.
But it was also a reality check.
We have talked at length in Brussels about the importance of farm subsidy reform in the US for the future prospects of the Doha trade round.
We have looked to the new US Farm Bill proposals to give a clear signal that reform is on the horizon.
My discussions in Washington showed that the Farm Bill will be written very much with domestic concerns in mind.
DOHA does not seem to be high on the agenda in farm bill discussions.
This is a very different approach to ours, where we reform first and then look to lock these reforms into a WTO agreement.
I was also struck by the fact that many of the forces that today shape European agriculture policy – consumer interest, environmental considerations, budgetary pressure, development policy - seems strangely absent from the American debate. It’s farming interest – and increasingly also energy (biofuels) that is shaping policy. Could you imagine that in Europe?
I like the straight talking you hear on Capitol Hill. But it brings home to me clearly how different the political process in Washington is to that I know so well in Brussels.
Of course there were bright spots.
Crucially, my visit was an important exercise in confidence-building.
Deal-making is so much easier if the people facing each other across the table know and like one another.

European Subsidy Payments

Our friends in the EU (both "Old Europe" and "New Europe") have the same controversies over payments to corporations and large payments as we do. See here for their equivalent of the EWG payment database. ($20,000 per acre payment!!) One of the problems of going to a historical basis for payments is the development of discrepancies between acreages. (There's always a trade-off.)