The ugliest EU policy is the CAP and associated policies for rural development. Not only does it absorb 39% of the EU’s budget. It is also responsible for keeping food prices higher than they would otherwise be.
Mind you, even the CAP isn’t nearly as ugly as it used to be. When Britain joined the then EEC in 1973, agriculture accounted for over three quarters of an admittedly far smaller budget. What’s more, the CAP didn’t just keep food prices high. The way it did this was by buying up lots of agricultural products at artificially high prices and then storing them. Hence, the grotesque wine lakes and butter mountains of the 1980s. Now that the Commission no longer buys up products and stores them, these have vanished.
The main purpose of today’s CAP is to support rural incomes. Other goals are to ensure the EU has enough food to feed itself and to protect the environment. Though these are legitimate objectives, the CAP goes about achieving them in an inefficient way.
The first problem is that the CAP gives hand-outs which depend largely on the size of farms. This means that the biggest grants are typically given to the richest farmers, such as the Queen. One can argue that some of this money will trickle down to poor farm labourers. But the system is an indirect way of helping workers who, in any case, are already protected by the minimum wage.
The CAP does help the rural environment. But only 14% of the UK’s subsidies were directed to green objectives such as biodiversity in 2010, so it is only helping a bit. One might also ask why farmers need to be bribed to protect the environment. Other industries are told what to do to keep the environment clean and then fined, or otherwise punished, if they don’t.
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Finally, the EU’s tariffs on imported agricultural produce, which range from 18%-28%, inflate prices. This costs British consumers €3.7 billion (£2.9 billion) in 2008, or 0.2% of GDP, according to the OECD.
Ideally, the whole system would be scrapped. That, though, is not politically possible. Probably the best we can do is keep chipping away at the cost of the subsidies, direct as big a proportion of the spending as possible to the environment and push for external tariffs to be cut. The next opportunity to make progress could be in 2016 when the EU’s seven-year budget has a mid-term review.
If we quit the EU, we wouldn’t be bound by the CAP. But things might not be a lot better. Our own farming lobby is strong, so the government would be under pressure to put in place some new agricultural policy that continued subsidising farmers. The cost might be lower than what we now pay but perhaps not by a lot.
What’s more, the single market would be partly shut for our exports – unless we did a special deal with the EU. This is because our farmers would have to pay the EU’s high agricultural tariffs. Dairy exports would incur especially punitive taxes of 55%, according to The Economist. Cheddar cheese would face a tariff of €167/100 kilograms; while the mark-up on Stilton would be €141.
Our farmers’ exports to the Continent would also still have to conform to EU food regulations. Meanwhile, we would have to decide whether to allow EU farm products unfettered access to the UK. If we did that without a reciprocal deal, our farmers would scream blue murder. So quitting the EU wouldn’t be a complete solution for even the ugliest of its policies.
This is an excerpt from “The In/Out Question: Why Britain should stay in the EU and fight to make it better” by Hugo Dixon.
Factchecking by Sam Ashworth-Hayes