Even in Hard Times, E.U. Farm Subsidies Roll On

This Times article asserts that the EU “mammoth” agricultural subsidy system needs reform. In 2009, the EU distributed $70 billion in agricultural subsidies to recipients ranging from a Danish billiards club to the Queen of England. In 2003, the EU tried to discourage corporations from profiting off of EU subsidies, by stipulating that individuals who owned agricultural land could receive financial assistance.  However, these reforms have clearly failed to prevent superfluous subsidies and greater change is needed. Agricultural producers argue that the EU’s agricultural subsidies unfairly skew world markets, disadvantage local producers, and drive up the price of land, forcing farmers to buy land at inflated prices and keeping them dependent. The upcoming planned reassessment of agricultural policy in 2013 must lead to subsidy reform.

By Vivienne Walt

Time Business
May 14, 2010

Greece seemed to be a deserving recipient of the E.U.'s $1 trillion Europe-wide bailout package announced on May 10. After all, the country's dire straits threatened to cause global economic havoc. But how about two dead Swedes, an ice-skating club in the Netherlands and a billiards club in Denmark? All of those received money from Brussels last year under the E.U.'s mammoth agricultural subsidy system, according to data released by E.U. governments.

With the ink barely dry on the rescue plan for Europe's troubled economies, details have begun filtering out over the Internet about the $70 billion in agricultural subsidies that E.U. officials doled out last year, much as they do every year as part of Europe's Common Agricultural Policy. Under E.U. rules, the 27 governments are required to disclose details of the subsidies by April 30 each year, outlining how the money was distributed the year before. Since 2008, a Brussels NGO called FarmSubsidy.org has been analyzing the figures to discover how the money — which comprises about 40% of the E.U.'s budget — is spent.

The list of recipients, published May 4, contains some eye-popping revelations. One of the biggest subsidies was $223 million, given to the French sugar conglomerate Tereos, one of whose subsidiaries produces rum on France's Indian Ocean territory of Réunion. France's Saint Louis Sucre also received multimillion-dollar subsidies and the British sugar giant Tate & Lyle received hundreds of thousands of dollars.

Those bumper payouts are part of an E.U. plan to overhaul its sugar industry, after the World Trade Organization accused Europe in 2004 of violating global trade rules with its huge export subsidies. But while aid to the sugar industry is due to be phased out eventually, there is no end point for the help most of the E.U.'s other recipients are getting. Last year, more than 1,200 of the recipients received more than $1 million each — a sharp increase from the approximately 900 such recipients in 2008. "The bigger you are, the more subsidies you get," says Jack Thurston, co-founder of FarmSubsidy.org. "It is the reverse of what you think a subsidy is."

Europe's generous aid to farmers is hardly new. For years they have been grist for complaints from major agricultural competitors — including the U.S. — who argue that they unfairly skew world markets and squeeze out producers who do not pay their local companies to grow crops. Under pressure from agricultural lobbyists and farm unions, European officials have so far resisted calls to overhaul the system, including those from critics within Europe. Indeed, the subsidies have become so politically sensitive that Britain refused to release its 2009 figures until five days of wrangling over the nation's new government finally ended on May 11. When the list of recipients was released on Wednesday, it included the Queen, who FarmSubsidy.org says received $695,000 for the royal-owned Sandringham Farms.

"There are people in Brussels who want to spend this money on something else, like bailing out the banks or climate change," says Thurston. He argues that the subsidies have helped drive up the price of agricultural land in Europe, which forces new farmers to buy their farms at inflated prices — and hence keeps them dependent on help from Brussels. "New farmers have to buy into the system because the land comes with all these entitlements," he says.

But those pushing to reform the system sense that Europe's deep current economic crisis could be jolting officials into considering ways to overhaul subsidies. After all, with their huge debts, most E.U. governments are strapped for money. A formal E.U. reassessment of agricultural subsidies is due in 2013, but Europe's slow crawl out of recession could pressure leaders to rethink the system before then. "The economic crisis will have a strong impact," says Valentin Zahrnt, a research associate at the European Center for International Political Economy in Brussels. "With the budget crisis, governments are happy to save on subsidies."

Reeling from record-high deficits, the E.U. has already begun debating the issue of subsidies. In April, E.U. Agricultural Minister Dacian Ciolos told European parliamentarians that he was keen to limit the amount of subsidies given to big companies and to strengthen the links between farm production and local, regional and international markets.

The reformers' cause might be helped by the details emerging this week. According to FarmSubsidy.org, about $1 million was paid to the 27-year-old daughter of Bulgaria's former Deputy Agriculture Minister Dimitar Peichev, who until July 2009 was in charge of distributing E.U. subsidies in his country. Bulgaria's new Agricultural Minister said on May 10 that the government could not claim the money back from Peichev because its new anticorruption laws cannot be backdated.

Similarly, it's unlikely anyone will ask for the money back from the Dutch ice-skating club, which received about $204,000 last year in the form of E.U. farm subsidies, or the Danish billiards club, which received about $40,000. Another $124,000 went to Schiphol Airport outside Amsterdam. Subsidies were paid to a 14-year-old, as well as two 100-year-olds — both dead (although researchers don't know whether their relatives claimed the subsidies on their behalf or if they died after getting their money). Recipients like these earned millions from Brussels thanks to the E.U.'s most recent reform of its agricultural subsidies, in 2003, which required only that recipients owned agricultural land. The change was supposed to discourage large corporations from benefiting too heavily. "It's a perverse result of an intelligent move," says Zahrnt. "The real problem is that we have free handouts. They should be removed, rather than redistributed." Just don't tell that to the Swedish accordion club.