Businesses as Allies for CAP reform
The environmentalists are spearheading the movement for CAP reform. But who else could be able and willing to throw in significant political weight?
Third-world campaigners will play a much smaller role than in the past. The CAP no longer exerts significant pressure on world agricultural prices. Furthermore, the recent price hikes have shown that many of the poorest in developing countries consume more food than they produce. So it’s not straightforward whether high or low prices are desirable. The remaining rallying cry of third-world campaigners to discard export subsidies will not be at the heart of the debate on the CAP’s future – this is a minimal reform requirement that must not become a benchmark for success. And the auxiliary argument that paying less money to European farmers enables more development aid (to be invested notably in agricultural research and extension in developing countries) is too indirect to elicit a strong response.
All the more important is the challenge to create new alliances. One very powerful candidate that is generally disposed towards reform is the business community. But the CAP is outside their radar screen (unless they are in the food sector, and then they tend to be far more divided about CAP reform). So reformers need to spell out why industrial and service sectors should care about a leaner and greener CAP – and to convince them that, this time, reform is really on the menu.
Here is a list of advantages that CAP reform could bring to businesses.
- There are just not that many public goods of genuinely European rather than local or national interest. And the delivery mechanisms for promoting these goods could be much enhanced to root out current inefficiencies. This would free up funds for objectives that are more relevant to the business community, such as research and development or energy security.
- Ecological trends require that additional money be spent to make agriculture more environmentally friendly. If EU money is wasted on farm income support instead of being invested in such programs, more national money will have to be used for agri-environmental purposes. That could mean higher taxes and less business-oriented spending at national level.
- Agriculture is a key producer of greenhouse emissions. The less agriculture contributes to meeting EU reduction targets, the more industry will have to curb its emissions. Using EU money to shrink the ecological footprint of agriculture makes sense for industry.
- The business community has been historically attached to the single market and European integration. The repeated difficulties encountered in advancing the EU treaties have revealed the lack of commitment of many leaders and citizens to the EU project. Fundamental CAP reform is the precondition for an EU financial framework that gives new momentum to European integration and instills a sense of purpose.
- The CAP is the very symbol of bureaucratic state intervention in the European economy. Transforming it into a lean policy that efficiently targets public goods – without distorting competition and inhibiting structural change – would be a signal for a more liberal approach to all areas of the economy.
- A reformed CAP would facilitate structural change in agriculture and help policymakers to recognise that agriculture can flourish under free competition. This would, in turn, prepare the reduction or removal of excessively high EU agricultural tariffs. The benefits would go not only to users of agricultural inputs – the entire economy would profit from greater international specialisation according to comparative advantage.
- EU agricultural policy is routinely lambasted as hypocrisy by developing countries. It discredits the free-trade argument and serves as a pretext for maintaining barriers to trade in all kinds of goods and services. If the EU takes the lead and dismantles its protectionism in agriculture, this will lend lasting support to free-traders around the world.
Reformers should use such arguments to reach out and get the business community more involved.
07 May 2009
Valentin Zahrnt, ECIPE
Valentin Zahrnt is a Research Associate and Resident Scholar at the European Center for International Political Economy based in Brussels.