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Crystal ball gazing: Scenar II study on the effects of CAP reform

A new economic modelling study commissioned by DG Agriculture shows that many of the core claims made for the CAP are highly misleading, or downright wrong. The Scenar 2020 II study shows that if the subsidies, tariffs, intervention prices and quotas of the CAP were abolished and replaced with a free market, European overall agri-food production would be almost unchanged. This finding directly contradicts the argument that the CAP is an essential policy for ensuring that Europe remains a global agricultural powerhouse and ensuring European citizens have access to a reliable supply of affordable food.

The big picture message is that farming is subject to a range of economic, technological and demographic pressures that far outweigh the effects of agriculture policy, athough there are some exceptions. The economic story of farming over the past half century is of productivity increases (due higher yield varieties of crops & different farm management practices), declining employment (due to mechanisation) and a relative loss of income in agriculture compared to other parts of the economy.

The study predicts that the the European agri-food sector will see a 4 per cent increase in production between 2007 and 2020 if the current policy trajectory is maintained (including a cut in direct payments and an increase in rural development spending). Scrapping the CAP would reduce the increase to 3 per cent over the same period.

Looking beyond the aggregate production levels, the study finds that the effect of liberalisation would be to concentrate food production in regions that are best-suited to farming. More marginal areas (e.g. cold, arid, remote and mountainous regions) would be farmed more extensively, and in some places land would be taken out of production altogether. The study predicts full liberalisation would see a 6 per cent fall in land area devoted to farming, with the current policy resulting in a fall of around 1 per cent.

The likely intensification of production in the places best suited to farming shows the need for effective regulatory policies to reduce the harm that has been observed in the past, such as the leaching of chemical fertlisers and manure into rivers and seas, soil eroision, the unsustainable use of water, the destruction of wildlife habitats and the reduction in natural species caused by pesticides and herbicides.

Scenar 2020 II thus shows that the CAP is not a food security policy but a policy which maintains farmland prices at 30 per cent above their rightful level and bolstering agricultural wages by a much smaller amount. The policy also maintains some farming activity in remote and unfavourable areas where it is not economically viable without public support. It is overwhelmingly a redistributional policy – transferring benefits from one section of society to another.

Looking at different farm sectors, the study finds that the EU’s tariffs (and to a much lesser extent direct aid subsidies) ensure European beef, dairy and sugar production at greater levels than they would be in an open market, which would see a much greater share of European consumption met by imports from overseas. The study finds that scrapping the CAP would mean EU beef production would fall from 8 million tonnes in 2005 to 5 million tonnes in 2020. If more or less the current CAP were maintained the fall in beef production over the same period (as a result of macro factors unrelated to policy) would be less than a third of this. The fall in production would be greater in the EU-15 than the NMS, where beef production is much less anyway. The study also singles out dairy and sugar production as the two other sectors most sensitive to changes in the levels of border protection (and to a lesser extent, subsidies).

For dairy, the study shows that under the current CAP, dairy production is on course to increase by around 5 per cent, driven entirely by positive macroeconomic factors such as the growing world economy and changing diets in developing countries. Without the CAP, the increase would be less, just under 2 per cent. In a more open market, a decrease in EU beef production would be partially offset by an increase in pork production.

For cereals, the story is rather different. The study predicts that cereals output will increase with or without the CAP, and the effect of the CAP on cereals production is rather small. It also suggests that the area under cereals cultivation will fall slightly, suggesting that production gains are the result of intensification and better yields rather than putting more land to the plough.

The study shows that without the CAP, food prices paid by European shoppers would fall on account of increased imports from overseas and the competitive pressure on EU producers. If shoppers would gain from scrapping the CAP, the study offers some reveailing insights on who would stand to lose.

It finds that without the CAP, European land prices would fall by nearly 30 per cent. As Valentin Zarhnt argues in his post on the same report,

“This is nothing the public need worry about – but it explains the heavy lobbying of landowners for the preservation of a ‘strong’ CAP.”

As the chart below shows, the study predicts that scrapping the CAP would hit agricultural wages, though the impact would be less than the impact already mentioned on land prices.

For years farm incomes have been falling behind wages in the rest of the economy, and according to the study, without the CAP agricultural wages would fall further behind.

The study finds that many will see no alternative to accepting lower wages as it is difficult to find jobs outside agriculture. This speaks to the need for more imaginative policy interventions to offer alternatives to regions that are especially dependent on declining agricultural economies.

The study was carreid out by ECNC-European Centre for Nature Conservation, Landbouw-Economisch Instituut (LEI) and Leibniz-Zentrum für Agrarlandschaftsforschung e.V. (ZALF). It will provide interesting reading for DG Agriculture’s in-house sage Tassos Haniotis (artists impression, right, with turban and fake beard). Read the study in full, it’s well worth it:

Scenar 2020 II.

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22 March: Hey, big spender

Greece’s woe continues.

On Tuesday last week, the European Commission said 20 member states must pay back a total of €346.5 million in “unduly spent” farm subsidies. Member states failed to apply proper financial controls and permitted ineligible expenditures.

Greece and Poland account for more than half that sum.

Cash-strapped Athens must pay back €132.6 million – most of which went to cotton farmers who were “overshooting” quotas. Brussels also identified “severe and persistent weaknesses” in Greece’s rural development measures.

Meanwhile, the commission will seek to claw back €92 million from Poland for “acceptance of ineligible land for payments” and “insufficient” checks in regions with high error rates.

Spain took bronze. Madrid must pay back €47.5 million, mostly for including an “ineligible cost of environmental management of packaging” to subsidies given in the fruit and vegetable sector.

Other big beasts of European farming had their knuckles wrapped too.

France is also guilty of ineligible costs, as well as “weak controls” in the environmental standards for animal farms. Paris must return €19.5 million.

And Britain was asked to return €14.2 million for failing to meet statutory deadlines for direct payments and €3.5 million for failing to run the rural development scheme properly.

This week also saw the European Parliament’s Agriculture Committee launch a debate on CAP reform.

At a public hearing of experts, the MEP drafting the EP’s resolution on the future of the CAP, George Lyon, said the CAP “is part of the solution of new challenges”, which has “some of the answers to the questions set out in the EU 2020 strategy.”

He also said the CAP needs to be “fairer, greener and more sustainable”

Most speakers at Wednesday’s public hearing – including MEPs, farmers’ representatives and academics – reportedly advocated keeping the policy at EU level, on the grounds that introducing co-financing could spell the end of the CAP.

Speakers also advocated introducing tools to restrain price volatility, stressing agriculture’s benefits for society as a whole. The majority also agreed that the Single Payment Scheme is unfair in distributing funds, among both member states and farmers.

The eve of the EP debate saw the launch of the “European food declaration” signed by almost 200 European, national & local organizations from 24 member states. They are “concerned with the future of food and agriculture in Europe” and are “actively engaged in building a viable alternative to the current food production, distribution and consumption – from the bottom up.”

Wednesday last week also saw Europe’s environment commissioner, Janez Potocnik, call for a “profound greening” of the CAP. Addressing the third Forum for the Future of Agriculture in Brussels, Potocnik said “we need nothing less than a CAP that respects [soil and water] and promotes practices that use them in a sustainable and resource-efficient way. We also need a CAP that can invest in protecting and restoring them when they have been degraded, contaminated or polluted.”

Moreover, Potocnik sees the existence “somewhere in the future” of a ‘Common Agricultural and Environmental Policy’.

On the capreform.eu blog this week, Valentin Zahrnt discusses the wide range of CAP-related research published by the OECD. After last month’s meeting of OECD agricultural ministers – the first since 1998 – the OECD “issued a communiqué that touches on everything and says close to nothing,” Valentin says.

No matter. For crunchy analysis, just look at its output, like its regular report on the Environmental Performance of Agriculture in OECD countries, its “flagship” country-level analysis of agricultural policies, or its thematic pieces, like a 2009 report that compares the liberalization experience in various OECD countries.

Meanwhile, on his CAP blog, Wyn Grant notes that brokered trade of single farm payment entitlements is almost double that of a year ago with prices noticeably higher than in 2009. English flat area or area-only entitlements are changing hands at about £185 a hectare while a full entitlement is worth £225 a hectare.

Elsewhere this week, ICTSD reported that EU agriculture policies came under scrutiny at the year’s first meeting of the WTO’s regular committee on agriculture, as exporting countries quizzed the EU on its subsidy spending.

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DG Agri study: Don’t be afraid of liberalization

Farm interests routinely threaten that any reduction in support will provoke a slump in production, endangering EU food security, and threatening massive land abandonment to the detriment of rural life and biodiversity. The findings of the Scenar 2020-II – Update of scenario study on agriculture and the rural world, commissioned by DG Agri, strongly contradict such panicmongering about the looming end of EU agriculture.

The study looks at three scenarios. The reference case assumes a 20% (nominal) CAP budget reduction, reduced intervention stocks, full decoupling, a 30% direct payment reduction, a 105% increase for the second pillar, and a moderate Doha agreement (based on the Falconer paper, including the elimination of export subsidies). The conservative scenario presumes that the Health Check results are largely maintained, direct payments reduced by only 15% and second pillar payments raised by 45%. The liberal scenario is very liberal indeed, with a 55% CAP budget reduction, no intervention stocks, no direct payments, a 100% increase for the second pillar and no tariffs.

Among the most interesting results is that the volume of crop production will grow slowly in all scenarios (around 0.25% per year). Even the vulnerable livestock sector loses only 4% in the liberal scenario over the entire 2007-2020 period. Agricultural land use remains roughly unchanged in the reference and conservative scenarios, and declines by a mere 6% in the liberal scenario (due to the decline in the EU-15, driven mostly by the abolition of the Single Farm Payment).

More significant differences arise when it comes to land prices. These remain largely unchanged in the reference and conservative cases, but decrease by 30% in the liberal scenario. This is nothing the public need worry about – but it explains the heavy lobbying of landowners for the preservation of a ‘strong’ CAP.

The study also analyzes the situation of rural regions. It concludes that strong rurality is not synonymous with negative economic or demographic trends. 422 regions have a negative and 435 regions a positive demographic trend (with negative developments in the eastern Member States and at the southern and northern borders of the EU). The study also finds that ‘There is no evidence that the EU-27 regions with an above average agricultural employment are generally showing negative reactions. Hence, it shall be emphasised that rurality and agricultural vocation are not a sign of weak development perspectives.’ This further undermines the rural development approach of the CAP that spreads money to all rural regions, often in positive correlation with their agricultural production.

A last point to consider: surveys of life satisfaction and happiness give very similar results for urban and rural areas. Since ‘happiness’ is in vogue (and heads of states from Bhutan to France argue for happiness accounting to complement GDP figures), why worry if rural regions have a lower GDP per capita, so long as people there are equally satisfied?

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OECD research on the CAP

Agricultural ministers of the OECD met in late February 2010 – the first time since 1998 – and issued a communiqué that touches on everything and says close to nothing. For once, such an empty statement is perfectly fine. The OECD Secretariat doesn’t need its ministers in order to do an excellent job in providing intellectual guidance and hard data.

The flagship of OECD research is certainly the country-level analysis of agricultural policies, based on Producer and Consumer Support Estimates and enriched by a brief description of recent policy developments in the report on Agricultural Policies in OECD Countries: Monitoring and Evaluation 2009.

New research on the CAP has been presented at an OECD Workshop on the Disaggregated Impacts of CAP Reform in March 2010.

The OECD also prepares a regular report on the Environmental Performance of Agriculture.

Equally important are the thematic research pieces. A 2009 piece on the ‘Adjustment Options and Strategies in the Context of Agricultural Policy Reform and Trade Liberalisation’ compares the liberalization experience in various OECD countries. It concludes that the agricultural sector frequently adapts better to liberalization than expected (greater efficiency, higher quality, different products), so that the need for adjustment policies is often overestimated. Policies to encourage exit from the agricultural sector are beset with the problem of windfall profits (payments for actors that would have left the sector anyway). Adjustment policies should rely, wherever possible, on generally available adjustment measures, including through the social security and tax system.

Especially interesting is the case of sectoral adjustment policies in Australia. The Farm Family Restart Scheme (FFRS) – now renamed into “AAA Farm Help – Supporting Families Through Change” – assists “low-income farmers who cannot borrow against their assets by giving them access to improved welfare support, as well as adjustment assistance for those who wish to leave the industry. It included income support for a maximum period of one year, grant of up to AUD 45 000 for those wishing to leave farming, access to professional advice on the future viability of the farm business, and other forms of counselling. The FFRS operates as a decision support system for farmers considering exiting the industry by giving them access to professional advice on the future viability of their business and on employment opportunities if they choose to exit the industry.“ Quite different from EU round-about handouts!

Another OECD work published in 2009, ‘Managing Risk in Agriculture: A Holistic Approach’, assesses the sources of risks, discusses private and public risk management tools and offers an overview of the implementation of risk management tools in OECD countries. It reveals the complexity of risk management and calls for prudence in designing governmental schemes (so as not to encourage risk-taking and replace private risk management mechanisms).

‘The Implementation Costs of Agricultural Policies’, published in 2007, finds that the advantages of targeting policies at desired outcomes outweigh the increased transaction costs of implementation for a very broad range of parameters. Furthermore, transaction costs can be much reduced through best practices (especially by the use of information technologies). This undermines the standard argument that the need to avoid excessive transaction costs makes a blunt policy like the Single Farm Payment inevitable.

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12 March: Sarko steals the headlines

Quite a week for Nicolas Sarkozy, then.

After skipping the opening ceremony of the Salon d’Agriculture, the French president wrapped up the show by announcing that France is ready to accept farm budget cuts – but only if EU farmers are given more protection against imports.

Speaking at a debate on Saturday, Sarkozy said Paris would be “supple” about the budget but “rigid” in its demand that agricultural imports be subject to the same standards of production as those adhered to by EU farmers.

“I am ready to accept reducing the share of agricultural spending in the EU budget provided that we use community preference,” Sarkozy said, a reference to the high standard of environmental rules followed by EU producers

This, then, indicates a significant shift in thinking. Only three months ago, Bruno Le Maire, Sarkozy’s agriculture minister, hosted a meeting of 21 other EU nations to defend the agricultural budget beyond 2013.

Even so, Sarkozy echoed calls by Le Maire that EU farm policy should include regulatory instruments to reduce price volatility, and allow farmers to negotiate collectively with retail customers.

He also said Paris would propose tougher regulation of agricultural markets when it takes over the presidency of the G-20 countries in November.

Alan Matthews discusses Sarkozy’s headline-making announcement on the capreform.eu blog this week.

“There are two issues with this argument. The first is whether the argument itself holds up,” Matthews says. “The second issue with the Sarkozy approach is that it would fall foul of WTO trade rules.”

Still, Alan wonders whether Sarkozy’s proposal is “a sign of some new flexibility in French thinking” – and what French farm organizations think of it, of course.

Also discussing Sarkozy’s proposal this week is Wyn Grant. He says the argument that “imported products should be produced to the same standard as in the EU … sounds reasonable enough but in fact is a way of excluding developing country exports altogether.”

Elsewhere on the capreform.eu blog this week, Valentin Zahrnt discusses a bold new declaration by the European Parliament’s Socialists & Democrats that the CAP should be “revolutionized”.

Though Valentin finds fault with the statement – not least its unqualified rejection of national co-financing of CAP subsidies – his overall assessment is “strongly positive”.

The level of change envisioned is “outstanding”, he says, and compared with “the stubborn defense of vested interests that is endemic in the EP Committee on Agriculture, the statement is “a great step forward.”

While Sarkozy was making headlines down at the farm show, the EU’s agriculture commissioner, Dacian Ciolo? announced that the “blueprint” for the future of the CAP post-2013 would be delivered slightly later than planned.

Speaking via a recorded message at the National Farmers Union conference in Britain, Ciolo? said it’s too early to say how the public debate on the future of the CAP will be “framed’.

Meanwhile, Spain’s farm minister, Elena Espinosa, at a seminar organized by the European Parliament Socialist Group, stressed that post-2013 the CAP should have a “sound budget” and be based on a system of direct payments to farmers, market instruments and crisis management, and rural development policy.

Finally, this week also saw a new report [sub. req’d] by the European Environment Agency, which argues that CAP payments could be used more effectively to support High Nature Value farmland and help halt biodiversity loss. The report includes five case studies which suggest fundamental differences in CAP implementation in EU-15 and EU-12.

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The Socialist Revolution

1789: the people of Paris take the Bastille. 1848: republican upheaval all across Europe. 1917: the Communists take power in Russia. 2010: the European Socialists & Democrats declare that the CAP needs to be revolutionized. Admittedly, the S&D do not pretend to lay claim to quite such daring historical parallels – but there is no doubt that they make bold claims: the ‘one step at a time while maintaining the original philosophy’ approach of the 1992, 2000, 2003 and 2008/09 reforms has been ‘overly timid’. Explaining that progressives are those who anticipate and guide ambitious reform processes, whereas conservatives only tackle the issues when forced to do so by the emergence of crises or external constraints, they conclude that, ‘the reform of the CAP over the last 15 years has generally followed this second path.’

The S&D give two reasons a ‘New Start’ (yes, in capital letters, just like the ‘New Deal’ they are calling for) is imperative. The first is the common environmental public goods rationality (climate change, water management, renewable energy, biodiversity, soil erosion). The second is a combination of social concerns: reducing regional disparities, redirecting subsidies from the most competitive to more needy farm holdings, and creating employment (‘the granting of aid must absolutely be linked to job creation in rural areas in order to maintain, bring to life and develop the agricultural area in all regions of Europe’).

Concerns about employment and vitality in rural regions seem to point towards the strengthening of the non-agricultural component in rural development (Axes 3 of Pillar 2). But the document takes a most interesting turn in the opposite direction: the ‘hotchpotch’ of Pillar 2 should be cleared up, all CAP subsidies should be merged into one pillar, and all current CAP instruments that no longer fit should be transferred to the regional and cohesion policy.

I have a number of problems with the document. I am concerned about the objective of stimulating agricultural employment through the CAP and do not see the need to have a generalized payment link to natural handicaps. Furthermore, I very much like the extension of national co-financing of CAP subsidies, which the document rejects without further explanation.

Nevertheless, my overall assessment is strongly positive. The level of change envisioned is outstanding, and the general tone is rational/progressive (‘instruments must be better focused on objectives; priority must be given to expenditure that is more socially useful, such as financing of public goods made available to society; and handouts (direct subsidies) must be replaced with measures encouraging those involved to take account of the new requirements (new contractual approaches). Public subsidies should be given to farmers in return for their provision of environmental services and landscape management.’)

Comparing this statement to the stubborn defense of vested interests that is endemic in the EP Committee on Agriculture, it is a great step forward. And this is all the more important since Paolo De Castro, the chairman of the EP Committee on Agriculture, is a Socialist.

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Sarkozy offers a deal on CAP reform

President Sarkozy took farmers into his confidence in a recent speech at the Salon d’agriculture where he proposed a new direction in France’s position on CAP reform post 2013. Noting that there were farms in France where the share of subsidies equals the value of production, he declared that this does not make sense if the farmer is a producer. He criticised the policy approach of accepting compensation for reductions in prices because, some day, there is no longer sufficient funds to continue to pay for the subsidies.

Instead, he proposed to the other EU partners a deal whereby France would be flexible on the share of the next financial perspective going to agriculture provided that this was balanced by more rigorous Community preference which, implicitly would lead to a higher market return. His argument is that if third country producers had to respect the high environmental, traceability and animal welfare rules which must be respected by European producers, then European farmers would be able to compete on price alone.

There are two issues with this argument. The first is whether the argument itself holds up. We can observe that controlling imports is only effective as a way of raising the EU price where the EU is a deficit importer; for those products where the EU is a net exporter, the EU price (assuming the absence of export subsidies) is determined on world markets where the EU cannot enforce its own standards.

Even in the case of a product like beef, where the EU is now a deficit importer, it is questionable how significant the price effect of demanding higher standards of imports would be. Only twelve countries are allowed to export beef to the EU at present in any case under existing rules. Of course, some of these, such as Brazil, have major export capacity. Already in Brazil, individual farms are registered and can comply with EU internal standards in order to gain access to the lucrative EU market. While it would be costly to meet the additional EU standards, the additional cost would not be a major disadvantage

The second issue with the Sarkozy approach is that it would fall foul of WTO trade rules. These rules allow the EU to take steps to control imports for health and safety reasons, and the EU makes clear that its existing rules do this more than adequately. Requiring a particular approach to animal welfare, or requiring observance of environmental standards, might improve things in Brazil, but WTO rules do not give one country a right to dictate non-essential standards in another country. This is, of course, also a protection for EU exporters against arbitrary demands from other importing countries.

While France has long sought stricter standards on imports, this is the first time it has indicated that it might be willing to trade off expenditure on agricultural subsidies for such higher standards. Does this represent a sign of some new flexibility in French thinking? What do French farm organisations think of the proposal?

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5 March: The circus comes to town

The world’s largest food and farm show, France’s Salon d’Agriculture, is taking place in Paris this week.

Europe’s new agriculture commissioner Dacian Ciolos cut the ribbon — a first for an EU commissioner — after President Nicolas Sarkozy broke with tradition and skipped the opening ceremony. The French premier will wrap up proceedings on Sunday instead.

The event comes after a year in which French farming has suffered its worst crisis in decades. According to Reuters, it is a “chance for Europe’s top agricultural producer to convince the visiting public and foreign officials it is worth safeguarding a sector undermined by declining revenues.”

Target number one is Commissioner Ciolos.

As the Financial Times put it, “the invitation comes as Europe begins a thorny debate over financing the CAP … France wants to lead the debate [and] believes it has an opportunity to push its view, and the invitation of Mr Ciolos is a sign of its confidence.”

Seizing his opportunity, French farming minister Bruno Le Maire reiterated his proposals — such as bolstering prices for farmers — at a joint press conference with Ciolos. “It is unacceptable that farmers have to sell their products below their cost price,” Le Maire said.

Ciolos was more equivocal. “I think it’s important to find the middle way. I don’t like extremes,” he said. Instead, he said he’d look to combine both market forces and support mechanisms for farmers.

Yet the commissioner fell short of making firm commitments, saying it’s too early to discuss specific measures. When can we expect to see any? By the end of the year, Ciolos said.

The FT also noted that “the proposals have quite sensibly shifted the early debate on the CAP away from the controversial issue of funding to the question of what its priorities should be.”

Ciolos echoed this sentiment. “What is important is not simply the budget … but how European agriculture as a whole can survive,” he told reporters.

Still, as the FT reminds us, if EU member states “agree to regulation à la francaise, they will have agreed implicitly to a big budget, as the measures would demand significant funding.”

Le Maire wasn’t the only farm minister getting face time with Ciolos this week. The commissioner pressed the flesh with Hilary Benn of the UK, his German counterpart Ilse Aigner, Spain’s farm minister Elena Espinosa, and Brendan Smith of Ireland.

According to the German food ministry, Ciolos and Aigner had “an open and intensive exchange of views” in Berlin. Ciolos said afterwards: “We need an open debate in the general public. We will listen very carefully in the weeks and months to come. It is no coincidence that I have chosen Berlin as the first stop in this consultation progress.”

This week also saw the publication of three papers.

First, agriculture ministers and policy-makers from the 30 OECD countries, as well as several observer countries (such as Brazil, Indonesia, and Russia), which together account for a huge proportion of the world’s production and consumption of food and agricultural products, met in Paris.

According to communique released after the meeting, the participants concluded that agriculture has an important role to play in the process of “green growth”.

They also discussed food security at length, called for frameworks to enable food and agricultural markets to function “efficiently, effectively, transparently, and fairly”, and proposed an analysis of the “functioning of markets and the extent to which the changing physical and market environment is generating new or increased risk and volatility affecting the agriculture and food system.”

Later in the week, the European Commission unveiled a long-awaited economic roadmap for Europe. The EU’s new strategy for sustainable growth and jobs — “Europe 2020” — replaces the Lisbon Agenda and puts innovation and green growth at the heart of its blueprint for competitiveness.

Yet agriculture was conspicuous by its absence from the text. According to AGRA FACTS (sub. req’d), commission officials said later that “even though agriculture is not mentioned so clearly, it is clear that agricultural policy is central to these issues”.

But conservation group WWF isn’t so sure. They say the strategy shows “little ambition” and “fails to give any clear direction on some of the biggest policy overhauls coming up in the next few years, including agriculture, fisheries and rural development, which are barely mentioned in the document”.

Finally, the Centre of European Policy Studies, a think tank, this week published a paper arguing that the EU budget should shift funds from the CAP to energy and climate change to reflect the bloc’s changing priorities. The paper says “tying up 40 percent of funds in the CAP restricts the manoeuvre of the budget” and that increased CAP co-financing would give the EU budget more flexibility.

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New Danish farms minister in subsidy storm

Yesterday’s reshuffle of the Danish government included the appointment of a new minister for agriculture: Henrik Høegh. Less than a day into his new job, he is becoming embroiled in a political row over a perceived conflict of interest. The reason? Mr Høegh is a farmer who receives more than sixty thousand euro a year in EU farm subsidies.

Data on farm subsidies shows that since 2000, Mr Høegh has benefited from the CAP to the tune of 604,787 euros over the nine years from 2000 to 2008. Farm subsidies appear to be something of a Høegh family business: it seems his son and daughter are also significant recipients. Mr Høegh is now responsible for signing his own subsidy cheques, but also, as a member of the EU’s Council of Agriculture Ministers, deciding on the future of the CAP.

Henrik Høegh - conflict of interest?

Høegh’s appointment to such a high profile and sensitive post came as something of a surprise since he’s only been a member of parliament for less than three years, before which time he was a Vice President of Danish Agriculture, the farmers union in Denmark, just the most recent position in a career spent in agricultural and farmer associations (read his CV in English here – PDF).

Of course we’ve been here before. Former Danish farms minister and EU Agriculture Commissioner Mariann Fischer Boel is married to a farmer, with a major business interest at stake in the future of the EU’s farm subsidies and tariff policies. Former Dutch farms minister Cees Veerman was nearly forced to resign when it was revealed that in addition to his farms in the Netherlands, he owned four farms in France, which he had failed to mention in his ministerial declaration of interests, and for which he received nearly two hundred thousand euros in subsidy a year. And the European Parliament’s agriculture committee has long been stuffed with farmers and farmer representatives. It just shows the extent to which the 55 billion euro a year common agricultural policy has been captured by those with a personal financial interest.

This latest row has made it onto Danish national television this evening with journalists, political commentators and opposition politicians questioning whether he can stay in post. With the long-term future of the CAP currently under debate, can the Danish people be confident that Mr Høegh will be pursuing the public interest rather than his own private profits?

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CAP Reform Conversations: Paolo De Castro MEP

In the first of a series of video conversations with leading figures in the debate over the future of the CAP, Jack Thurston talks to Paolo De Castro MEP, chair of the parliament’s Committee on Agriculture and Rural Development and a former two-term Italian agriculture minister and professor of agricultural economics.

De Castro explains that he has always regarded himself as a CAP reformer and sets out his vision for a reshaping of the EU’s farm subsidy system. He advocates a shift to a basic flat rate aid payment to farmers, plus additional funds to be allocated at the discretion of member states. He argues for introducing minimum and maximum thresholds for payments (a minimum around 300 euro and a maximum in the range 400,000-500,000 euro). He speaks in favour of co-financing of the CAP, so long as it’s not optional for member states. He explains his vision for the European Parliament’s role under the new Lisbon Treaty rules, including his idea of a permanent seat for the Agriculture Committee on the Agriculture Council and how he’d like COMAGRI to take part in CAP comitology.

CAP Reform Conversations: Paolo De Castro MEP from farmsubsidy.org on Vimeo.