Jun 14, 2013
Will the rising cost of food lead to meaningful reform of CAP this year?
Article by: Sam Logan
The escalating cost of food looks set to be a major bone of contention around the world in 2011. In the past week, riots have broken out in Algeria, triggered by a sudden steep increase in the price of basic foodstuffs, and the U.N.’s Food and Agriculture Organization published figures which show that the price of basic food commodities hit record highs in December, rocketing above the levels which triggered widespread social unrest in a number of countries in 2008. Reasons cited for increased prices include speculators buying up large quantities of commodities, the booming biofuels market, the rising global population and rising purchasing power in much of the developing world. In a world where millions of people in China, India and elsewhere (laudably) escape poverty every year, and can afford to eat higher quality meals (which typically means more meat), this naturally means an ever increasing strain on resources.
The combination of these factors has prompted the FAO to warn that higher prices are here to stay. Fear of widespread hunger triggered by increasingly unaffordable basic food commodities has led the governments of China and India to impose export bans on certain foods. Fortunately, the price of rice has remained relatively stable, ensuring that the world’s poor have not (yet) been as badly hit as in 2008.
France, which currently leads the G20, will make the topic of food prices a priority at a summit in Paris on the 27th and 28th of January, and representatives will look at ways to keep the price of food down.
Aside from the likelihood that Europe’s working poor will have to shell out a higher proportion of their incomes on food, (while worrying about stagnant or declining wages and a bleak job market), the supply and price of food (specifically, how the E.U. intervenes to influence them) will be topical for another reason this year, as the future direction of the Common Agricultural Policy is due to be determined in the middle of the year. The likely context of rising prices may make it harder for policymakers to justify the subsidy of the agricultural sector taking up 43% of the E.U.s budget.
Caroline Spellman, the UK Environment Secretary, last week, came out in favour of a drastic overhaul of the CAP, telling farmers attending a major industry conference that “Now is the time to make very significant progress towards reducing our reliance on direct payments,” , and that “Rising global demand for food and rising food prices make it possible to reduce subsidies and plan for their abolition.”
According to many analysts, the CAP now looks distinctly out-dated. Neil Thurnock, a journalist who is involved in the Farm Subsidy project argues that the CAP arose out of special circumstances in the early post-war era, when there was a severe shortage of food production in Europe. Since the policy was first implemented, farming has become massively mechanised, people continued to leave the countryside for urban areas, the supply of food significantly exceeds demand, and far fewer livelihoods are supported by the CAP, despite its continuing to take up nearly half of the E.U. Budget. Research done by farmsubsidy.org suggests that the majority of CAP subsidies ends up in the hands of wealthy landowners, with members of the British royal family among recipients.
In a world in which the number of people who are underfed has doubled in a decade, (according to…), despite the increased living standards for millions of others, achieving global food security should be a central tenet of the reform of Europe’s food policy, and the CAP should contribute towards it.
Whether or not the CAP in its current form contributes to rising food prices is a moot point. The Commission argues that it is far less market distorting than American subsidies, and doesn’t affect global prices.
However, it is arguable that by keeping prices for consumers artificially low in Europe, the policy promotes overconsumption leading to massive wastage. Furthermore, if livestock is fed on imported soy and grain, the price of these commodities is higher in the developing world, and much of this meat is then wasted.
It is clear however, that EU food policy doesn’t adequately control food wastage, and doesn’t help achieve global food security. According to some estimates, as much as half of the food produced in Europe every year is thrown away (ZeroWasteEurope have some particularly shocking statistics on their site).
Perhaps, among the solutions could be a culture shift in the West away from the tolerance of wasted food, and EU food policy should be capable of drastically reducing food wastage.
Aside from wastage, it makes little sense to subsidize meat and dairy production, which is farmore intensive than the cultivation of grains and vegetables, and pushes up the price of basic commodities. Furthermore, as dairy and meat are responsible for as much as 20% of Europe’s greenhouse gas emissions, cutting down their consumption could help to fulfil the EU’s commitments to carbon emissions reduction. Of course, cutting these subsidies would have the effect of making these products more expensive for consumers and thus would be politically difficult, but if the trade-off was a substantial reduction in the amount of money funnelled into the CAP, and cheaper basic commodities, much of the public might be in favour of it..
The potential severity of the international context may function as a reminder to European policymakers that the Common Agricultural Policy has significant ramifications beyond Europe, and that these ramifications cannot be swept under the carpet.
CAP was set up to solve a (then) critical issue of a food supply shortage (in Europe) and poor living conditions for Europe’s farmers. Hopefully reform will be tailored to solve the pressing problems of today. In 2011, when the availability and cost of food is likely to be a pressing issue globally, hopefully meeting the world’s food requirements will be a more important consideration than the perpetuation of the direct subsidy of landowners and farmers, which too often benefits the already wealthy, and guides production towards products that attract the biggest subsidies, rather than what consumers actually consume. Many within the Commission have expressed a desire to pursue this direction, and it is important that we don’t let vested interests derail reform.
When the farm lobby inevitably descends en masse on the streets of Brussels later this year, determined to block any move away from the status quo, it’s important that the European public and those in power remember that this policy is not just about Europe. If every cloud has a silver lining, perhaps the severe international context will ensure that we remember this fact.