Why CAP Doesn't Kill

Africa's development is often obstructed by poor infrastructure

It is an extremely disturbing fact that over 70% of the world’s poor live in rural areas and most of them depend upon agriculture for their livelihood.  How is it that, more often than not, farmers themselves are the hungry of this world?

Sometimes we in Europe are accused of playing a part by protecting our agricultural sector, through the Common Agricultural Policy (CAP), and preventing developing countries from exporting to Europe.

The facts simply do not bear this out.

The average tariff applied to agricultural imports into the EU from all countries of the world, developed and developing, is 11.8%.  However, right from the start of the CAP, EU policy has been to give preference to imports from developing countries.  The rules have changed over the years to meet WTO rules, as in the case of preferences for ACP countries, but the preferences have by no means disappeared.

Today, 176 developing countries of the world have preferential access to the EU market.  But, on top of this, all 50 of the least developed countries (LDCs) have totally free access to the EU market.  No tariffs at all and no quotas limiting the amounts that they can export to the EU.  In addition, the EU gives about €750 million in trade development assistance to help developing countries benefit from the opportunities provided by trade.

As a result, over 2/3 of the EU’s agricultural imports come from developing countries, amounting to some 60 billion a year.  In fact the EU imports more from developing countries than the following five major developed countries put together: the US, Canada, Australia, Japan and New Zealand.

Take Brazil for example.  Its agricultural exports to the EU have grown nearly threefold since 1995 and it now ranks first as the EU’s largest supplier of agricultural products.  Yet, as pointed out by OECD, small-scale farmers there are still not benefiting: more than 60% of its rural population still live below the poverty line.

The other accusation made at the CAP is that it has undermined farmers in developing countries by subsidising its agricultural exports.  Export subsidies certainly have a bad name despite the fact that in some cases they can be beneficial to developing countries: enabling them to import food they cannot themselves produce more cheaply.  And a few more export subsidies during the food crisis of 2007/8, when food prices hit the roof, could have helped to alleviate some of the hardship.

But the idea that export subsidies are a major plank of the CAP is completely outdated.

The CAP has changed radically from what it was in the 1980s and export subsidies now play a very small part. In 2008 EU export subsidies accounted for less than 2% of the CAP budget.

In the current Doha Round of WTO negotiations the EU has offered to eliminate export subsidies for good and is calling for other developed countries to make the same commitment.

So all in all, the CAP cannot be accused of harming the agricultural interests of developing countries.

Then how can farmers in developing countries be helped?  Is greater trade, after all, the answer to their problems?

General analyses show that greater trade liberalisation tends to lead to increased overall welfare.  However, this conclusion hides disparities between countries and between stakeholders within each country, the most vulnerable of them having more difficulty to cope with the adjustment costs of trade liberalisation.  This is borne out by a study carried out by the World Bank.  This showed that even if all agricultural tariffs and subsidies were removed, nearly 80% of the welfare benefits would accrue to high income and transition economies.  And, of the remaining 20% accruing to developing countries, half would accrue to Brazil and Argentina which already have a very highly developed commercial agricultural sector.

Lack of credit, insecure land rights, lack of inputs, lack of storage facilities – all of these are problems faced by the world’s poorest farmers.  And even when farmers are able to produce for the market their produce is rotten before it gets there because of bad roads and transport.  One of the positive outcomes of the recent food crisis was to draw attention to the appalling lack of development aid which has been targeted to agriculture over the last twenty years or so: less than 4%.

But more aid is not enough.

As Olivier de Schutter, the UN special rapporteur on the right to food, said when speaking of the hungry: “The first vulnerable group, smallholder farmers, is made up of approximately 500 million households (over 2 billion individuals). Reinvestment in agriculture has been on all lips since the food price crisis. But it is the need to protect their livelihoods that should inform our approaches to supporting agricultural production.”

The short-term interest may be in developing a few export crops for cash.  But the longer-term interest must surely be a national strategy, geared to the most vulnerable and assisted by development aid, to build a robust, sustainable and diversified agricultural sector which is capable of providing their own population with food security.