Europe needs competitive agriculture

Nikolay Valkanov

The debate on the new EU Multiannual Financial Framework 2014-2020 has developed into a debate for the future of the Union. We are at an important crossroad when we have to decide what kind of community we would like to have. One in which we continue to erect ivory towers for the eurocrats creating a supra national elite, where we burden the taxpayer with new taxes that are supposed to pay for the bureaucratic elite and where we come up with more and more rules and regulations that burden business. Or we go back to the four freedoms around which Europe was united more than 50 years ago and which it has gradually abandoned – freedom of movement of people, goods, services and capital.

In this context the debate on the future of the Common Agricultural Policy which constitutes 40% of the EU budget and which is the most competition-averse program ran by the Union is moving in another direction. This system that favors certain industries before others, which subsidizes large business, which puts farmers in different countries on unequal footing, which distorts markets and supports an expensive and cumbersome bureaucratic structure will be more and more difficult to defend before taxpayers. Because on the one hand we are faced with a long term trend of growing food prices which makes agriculture an even more lucrative line of work and on the other the pressure for reduction in government spending and cutting tax burden. One new CAP that would be universally beneficial looks like this:

• Gradual decrease in direct payments for countries in the EU to the level of the country with  lowest payments (in 2013 this will be Latvia – 83 euro/ha or unit); no subsidies after 2020
• Annual transfer of part of the saved funds from the first pillar to the second pillar for modernization, innovation, investment and scientific research;
• Liberalization of trade between EU and third countries in agricultural produce – removal of import tariffs;
• Preservation of II pillar after 2020 with emphasis on technological innovation and scientific research in agriculture;

This will allow farmers to specialize according to their comparative advantages and will potentially lead to bigger and cheaper produce. Only in this way will Europe will be able to simultaneously provide competitive agriculture, lower prices for consumers and, agriculture which is environmentally friendly and brings reasonable profits to producers.