By stimulating the production (and consumption) of foods that are high in fat and cholesterol, researchers based at Liverpool University in the UK have concluded that “The cardiovascular disease burden attributable to CAP appears substantial”. The research focusses on subsidies for full fat milk and butter and use the hypothesis that without CAP subsidies for dairy products, per capita saturated fat consumption would be 1 per cent lower and that consumption of poly- and monounsaturated fats would be 0.5 per cent higher. The results show that there are approximately 9800 additional deaths by coronary heart disease and 3000 additional deaths by stroke each year because of the CAP in the EU-15. The researchers stress that this was a very conservative estimate. The countries worst affected are France, Germany, Italy, Spain and the UK.

The research points to the case study of Poland in the years 1990 to 2002 where farm subsidies that stimulated the production of fatty and high cholesterol foods were reduced:

“Recent evidence of the potentially powerful impact of reducing dietary saturated fats is graphically illustrated by the recent large falls in CHD mortality in Poland, between 1990 and 2002 (by 38% in men and 42% in women). This reduction across socioeconomic groups was attributed to the abolition of national food subsidies for saturated fats and the emergence of new, competitive markets, greatly increasing consumption of polyunsaturated vegetable oils. Ironically, this beneficial decline could now be threatened as Poland implements CAP after joining the EU in 2004.”

There can be no doubt that the CAP directs its support to exactly the wrong kinds of food for a healthy diet – milk, butter, cheese and red meat. Support for arable crops also benefits the livestock sector, by making feed cheaper and let’s not mention the EU’s substantial subsidies for ‘booze and fags’. The Single Farm Payment specifically excludes land used to cultivate fruit and vegetables. Until recently the EU was spending hundreds of millions on the disposal of surplus fruit and vegetables in landfill as a way of keeping prices high.

Estimating the cardiovascular mortality burden attributable to the European Common Agricultural Policy on dietary saturated fats. Ffion Lloyd-Williams, Martin O’Flaherty, Modi Mwatsama, Christopher Birt, Robin Ireland, Simon Capewell. Bulletin of the World Health Organization. Volume 86, Number 7, July 2008, 497-576

While the objectives of the scheme are entirely laudable and should be supported, I strongly question what business the EU has getting involved in promoting a School Fruit Scheme (although the scheme also covers vegetables, it seems to be referred to as a fruit scheme – vegetables were always the poor relation!). It simply does not pass the subsidiarity test without stretching the parameters of that test to meaningless levels.

One of the rationales for the scheme is that it would help to bring the EU closer to its citizens. But it could end up having the opposite effect. If citizens cannot be certain where the competences of the member states end and those of the EU begins, then the EU becomes a threatening competitor to national sovereignties rather than a constructive vehicle for collective action. Alienation of this kind was one of the reasons for the defeat of the Lisbon Treaty in the recent Irish referendum.

The School Fruit Scheme proposal

The proposal is part of the new Common Market Organisation for fruit and vegetables in place since 1 January 2008. When approving the Fruit and Vegetables CMO reform, the Council made the following declaration: “In light of the dramatic increase in obesity amongst schoolchildren, which has been highlighted in the recently published Commission White Paper … the Council invites the Commission to come forward with a proposal for a school fruit scheme as soon as possible based on an impact assessment of the benefits, practicability and administrative costs involved.”

Under the proposal, European funds worth €90 million every year would pay for the purchase and distribution of fresh fruit and vegetables to schools, and this money would be matched by national funds in those Member States which chose to make use of the programme.

Different school fruit schemes already exist in some European countries, but according to the Commission proposal “much more” can be done and the EU scheme will help to upgrade existing initiatives as well as “get new programmes off the ground”. The Commission suggests funding 50% of the national initiatives and 75% of the programmes in the convergence regions where GDP per capita is lower.

If the proposal is adopted, EU co-funded distribution of fruit and vegetables would begin at the start of the 2009/2010 school year.

The need for increased fruit and vegetable consumption among children

There is no doubt about the desirability of encouraging increased fruit and vegetable consumption among children.

Consumption of fruit and vegetables in Europe is at best stagnating and, in most cases, is at a level well below the WHO minimum recommendation of 400 gr/day. Among the youngest, the level of consumption is even more worrying.

The rise in childhood obesity is now reaching an epidemic level in Europe. In the EU, nearly a quarter of overweight children are obese, around 3 million, and medically at risk of several diseases.

A balanced diet, rich in fruit and vegetables, combined with increased physical activity are the two recognised and undisputed steps to rectify obesity. A causal relationship between obesity and lack of fresh fruit and vegetables consumption is well-established.

The importance of subsidiarity

The presentation of a School Fruit Scheme proposal was conditional on the conclusions of an assessment demonstrating its value added at European level and analysing the advantages and drawbacks of different options. The two questions posed in the public consultation were:

What are the strengths and weaknesses as well as necessary conditions for successful implementation of such programs?

What is the added-value by European action to existing programs in the Member states and regions?

The second question raises the subsidiarity test. No matter how valuable the initiative, if there is no value added at the EU level, it should be left to the member states. The two instances where value added can be clearly established are the existence of trans-boundary externalities and the existence of economies of scale in undertaking the action at the EU level.

In fact, the consultation process focused on the first of these two questions but ignored the second, so the relevance of the subsidiarity test was never aired. However, in the Commission impact assessment of the School Fruit Scheme proposal, an attempt is made to justify the value added at the European level the proposal would have.

Treaty basis

Before looking at the arguments put forward, it is interesting to examine the Treaty basis for the proposal. Two alternatives were considered in the impact assessment.

Article 37 gives the Commission authority to submit proposals necessary to achieve the objectives of the Common Agricultural Policy set out in Article 33. Article 152 requires that a high level of human health protection shall be ensured both in the definition and implementation of all Community policies and activities (which includes the CAP).

The impact assessment concludes that the latter article would be too thin a justification for introducing the School Fruit Scheme measure, making clear that despite the high-flown rhetoric about saving our children from obesity, the scheme is basically about contributing to stabilising and enhancing the market for fruit and vegetables in support of the objectives of the CAP. It contributes to one of the objectives of the reformed CMO by helping to reverse the declining consumption of fruit and vegetables.

The arguments for EU value added

To pass the subsidiarity test, a proposal must be shown to be necessary and to add value in a way which would not be possible by member state actions alone. A problem clearly exists so there is no difficulty in passing the necessity test by pointing to the low consumption of fruit and vegetables and the growing problem of obesity.

The impact assessment admits that “these problems could be dealt with to some extent at national level but a number of transnational elements imply that action at EU level would be appropriate and desirable.” Four arguments are advanced to show how the EU would add value over and above member state action in the case of the School Fruit Scheme.

A significant EU budget allocation would allow the extension of existing SFS in several Member States, while encouraging those that are not yet active, often due to limited budgetary means, to start schemes;

A lack of EU action and the continuation of activities exclusively at Member States level would create the risk of discrimination between producers in those countries that do have no access to an SFS as a market outlet and the resulting incentive for innovative products. This could have an effect on their competitive position;

An exchange of experience and transfer of know-how between project promoters in Member States foster the development of best-practice models and supports the creation of schemes in Member States that are not yet active;

Health costs of obesity related diseases, especially diabetes and cardio-vascular diseases (CDV). This is not only an individual Member State responsibility, as crossborder healthcare has been reinforced by European Court of Justice case law.

The impact assessment concludes by stating that a School Fruit Scheme would not be a panacea for the problems described but would produce clear benefits compared with action at Member States level.

Critique

Of these four arguments, only the last has a genuinely transnational element. The first argument may make sense as a covert way of redistributing resources from richer to poorer member states, getting round the 4% cap on transfers under the cohesion policy. The second argument makes no sense at all, as under the internal market access to a school fruit scheme cannot be confined to one’s own producers. The third argument makes perfect sense, but does not require the EU to get directly involved in providing free fruit and vegetables to make it happen.

The fourth argument is the only one to really address the subsidiarity issue, and runs as follows. If I take a short-sighted view as a country and allow my citizens to get fat and lazy, ultimately my health service will collapse under the strain of diet- and obesity-related illnesses and other member states will be left to pick up the cost of treatment. Its a classic case of a transboundary externality – in theory. The question is how important this is likely to be in practice, as here the third leg of subsidiarity comes in, proportionality. Are there other mechanisms which could achieve the same objective at less cost?

One of the weaknesses of the impact assessment process is that it doesn’t really consider a range of alternative policies which might address the same objective. If the Commission’s aim is really to increase fruit and vegetable consumption, then why not simply remove the tariffs which keep the prices of fruits and vegetables high. Bananas, for example, must pay a tax of €176 per tonne on entering the Union, or an ad valorem rate of around 25%.

Is the purpose of the School Fruit Scheme really to address childhood obesity, or is it to create a market for EU fruit and vegetable producers?

Despite fears of a marthon session, agreement was reached by 5 p.m. in the afternoon. This was done by conversations in the corridor rather than in plenary session of the Council. This reflects the way in which deals are increasingly being reached in the Special Committee on Agriculture or in the margins of the Council itself – over lunch or in the corridor. This has always happened to some extent, but it is more necessary in a much enlarged EU.

The existing system of processing aids for tomatoes (€329m), citrus fruit (€241m) and peaches/pears/prunes/figs (€76m) based on production and an area based scheme for dried grapes (€115m) will cease this year. The funds received by each member state will be added to the national envelope for the SFP. However, a ‘coupled’ aid for tomatoes can be retained by member states for four years.

Various side payments had to be made to secure the deal. Spain and Italy will get a one-off national aid of €15m in 2007/8 to help the tomato processing sector. The reference period for Greece was adjusted because of a poor peach crop in 2004, effectively giving Greece an extra €3.1m in its envelope. There will be some transitional direct payments for soft fruit on new member states, although in the case of Latvia this amounts to just €92,000. But by such adjustments deals are made.

Land covered by fruit and vegetables will be eligible for payment entitlements under the decoupled aid scheme which applies in other farm sectors. All existing support for processed F&V will be decoupled and the national budgetary ceilings for the SPS will be increased. The proposal could cause problems in Member States that adopted the historic model of allocating SFP entitlements and are therefore not paying support payments on land used to grow fruit and vegetables, at the same time other countries, such as England, are already paying support to the fruit and vegetable sectors as their scheme is area-based and not only targeted at farmers who traditionally operated in subsidised sectors.

One of the main concerns is also the insufficient rate of the Community financial assistance, which according to the Commission paper shall be capped at 4,1% of the value of the marketed production of each producer organisation. European Parliament’s rapporteur Salinas Garcia proposes to increase funding to 6% since, according to the Commission proposal, Producer Organisations (PO) are being obliged to do more with the same money. In this respect, the rapporteur also suggests extending to other scenarios the increase to 60% of the reserved bonus for specific cases. It is impossible to maintain the aids of 4.1% of the commercialized production and simultaneously apply bonus of 60%, it appears as a false approach which can be an obstacle for a great number of POs.

On the other hand, there is a clear need for a greater protection of the sector from products imported from third countries, like reciprocity and other instruments, for example price monitoring by competent authorities.

Looking objectively it seems that these proposed measures position CAP more in line with a health perspective. However, these proposals cannot work properly without an increase in the budget allocated for the F&V sector, which currently receives the smallest portion of the whole budget set aside for the CAP. And given that the European Commission is planning to reduce the cost of the whole CAP, the only one solution might be reducing other sector’s subsidies.

Fruit and vegetable markets are very susceptible to short-term supply and demand crises. These result from both the perishable nature of the product and the susceptibility of both production and consumption to weather conditions. It is hard to underestimate how weather sensitive demand for these product is.

The Commission favours ‘Producer Organisations’ operating their own ‘crisis management’ schemes. This is a rather old style ‘corporatist’ solution which is handicapped by the fact that such organisations do not exist in all member states. In the Netherlands with its extensive glasshouse production sector, 79 per cent of growers are in such organisations. Membership in some accession states is particularly low: 1 per cent in Poland, 3 per cent in Cyprus and 4 per cent in Hungary.

However, some member states have still been upset by the Commission’s far from radical proposals. They are particularly opposed to the idea that 20 per cent of an organisation’s budget should go on environmental measures and that no more than 30 per cent should be spent on crisis management.

The UK uses a retailer led system of category management with a limited number of suppliers to each retailer, although a supplier may organise several growers. I am currently engaged in two research projects related to the horticulture sector and it has to be admitted that this system does produce greater concentration of ownership and production with retailers able to delist suppliers with little warning. However, the solution to those problems might lie in a more robust application of competition policy, something to be discussed in a future post on the dairy sector.