The resort to intervention buying and export refunds in the dairy sector has been predictably bad PR for the EU, especially in the southern hemisphere. But a more fundamental question is, can these tired old policy instruments work any magic in a deep economic crisis?
There is an excellent piece of analysis from Roger Waite, editor of Agra Facts, on the final health check legal texts and the current situation in commodity markets. Falling prices are worrying farmers and piling the pressure on policy makers to turn the clock back on the CAP, with the ink barely dry on the health check.
Read Roger’s insights over at farmpolicy.com.
It was the recession of the 1930s that ushered in agricultural protectionism and subsidies, not least in the United States. Now the European Union has reverted to two of its old favourite policy instruments: intervention buying and export subsidies in the dairy sector just when we thought we had seen the last of them. Stocks of butter disappeared completely in 2007.
Faced with a drastic drop in dairy prices, the EU is to buy 30,000 tons of butter at a guaranteed price. Over three times as much skimmed milk powder is to be purchased – 109,000 tons. In addition, export subsidies will be given to skimmed milk powder, butter, butter oil and cheese.
After the forceful and successful management of the agricultural dossier by the French Presidency in the second half of 2008, it was inevitable that the agenda for the Czech Presidency would be a light one, and this is also reflected in the activity level for this blog since the beginning of this year.
Nonetheless, even in a context where most attention is focused on dealing with the financial crisis and the strengthening recession hitting Europe, Europe’s agricultural and food industries continue to be required to address regulatory issues affecting the governance of the sector. One of these issues concerns the regulatory environment for genetically modified products (GMPs), and I am indebted to EurActiv for drawing my attention to the outcome of a meeting of the Environmental Council in early December which gave a series of political directions to the Commission on this issue.
With the Health Check out of the way, it looks as if the medium-term future of the CAP is going to be strongly influenced by discussions of how the EU budget should be spent. This always raises the awkward question of the opportunity cost of spending large sums of money on subsidising farmers.