[Marxism] Re: Agricultural subsidies

Calvin Broadbent calvinbroadbent at hotmail.com
Wed Nov 23 07:27:46 MST 2005

Well, I'm not sure about European food prices being 'artificially' 
depressed. But the European Union definitely protects the profitability of 
its own farm produce by giving preferential treatment under the Lomé 
convention to only a few agricultural products from the African and 
Caribbean countries, particularly those that require mimimal refinement. The 
Common Agricultural Policy is an imperialist tool of the European Union. 
Protectionism is a privilege and not a right when it is denied to the ACP 
countries subject to the Lomé convention.

Here is a section of an essay by Guglielmo and Bruno Carchedi on Europe's 
Common Agricultural Policy:

'Contradictions of European Integration' in *Capital and Class*, no. 67, 
Summer 1999:


'The Common Agricultural Policy (CAP)

It is usually claimed that the 1958 Rome Treaty was a delicate balance 
between the contrasting national interests of the contracting parties. More 
specifically, the following points are emphasised. First, while Germany 
would have profited from free trade in industrial goods because of her 
higher industrial efficiency, France would have profited from free trade in 
agricultural goods due to her more productive agricultural sector. To level 
their respective competitive positions, free trade in both categories of 
goods had to be introduced. Second, in 1958 agriculture was a low 
productivity, low income occupation which employed 20% of the working 
population. Governments had to aim at maintaining a certain level of stable 
prices while at the same time stimulating production and productivity 
growth. Finally, memories of the famines of the Second World War played a 
great role in creating the perception that Europe had to become 
self-sufficient in food production.

Here too a different reading, based on class analysis, helps reveal the true 
nature of the project. As for the first point, the introduction of 
agriculture in the common economic policy had nothing to do with reasons of 
equity but was a necessary step for the achievement of an integrated 
economy.11 Secondly, the wish to provide a minimum income for European 
farmers was certainly not motivated by reasons of social justice. Rather, 
the farming community formed a formidable lobby upon which rested the power 
of the European governing parties, especially the Christian Democratic and 
other conservative parties. A certain measure of guaranteed income (price 
support) for farmers was a very sensitive and important political issue in a 
political and ideological climate dominated by the Cold War. Finally, the 
real aim of self- sufficiency in food production was not so much the 
prevention of famines (an objective valid in exceptional circumstances, like 
a war). Rather, an adequate supply of food, while in itself not a feature of 
imperialism, was and is an absolute precondition for an imperialist policy.

These interests shaped the aims of the CAP as set out in article 39 of the 
EC Treaty. They are: (1) to increase agricultural productivity, (2) to 
ensure a fair standard of living for farmers, (3) to stabilise markets, (4) 
to provide certainty of supplies, (5) and, to ensure supplies to consumers 
at reasonable prices. But the Rome Treaty gave little indication as to how 
to achieve these

Contradictions of European Integration


aims. It was only in 1962, when the market organisation for cereals was 
introduced, that the CAP was started.

As of now, price intervention has the following characteristics. Given that 
the low level (relative to the European level) of the world market prices, 
the income of European farmers would be too low if they sold their products 
at world prices. This requires an intervention price. This is the price 
which is guaranteed to farmers. That is, the EU commits itself to buying 
(through its intervention offices) the farmers' products if farmers cannot 
sell them at a higher price. It is thus the lowest limit at which farmers 
can sell their produce and therefore it corresponds to a guaranteed income. 
Farmers can sell at a higher price, if demand is sufficiently strong.

Given that intervention prices are higher than the world market prices, 
traders could buy at world market prices and sell within the EU at the 
intervention prices, thus making an unlimited and certain profit at the cost 
of the agricultural budget. To avoid this, a threshold price, higher than 
the intervention price is needed. This is the price at which goods can be 
imported into the EU and is equal to the world market price plus a levy. In 
this way, EU farmers are protected against foreign competition.

The surplus bought by the intervention offices of the EU is stored and 
eventually sold on the world market. In this case, the EU incurs a loss 
equal to the difference between the intervention price (which it pays the 
farmers) and the world market price (at which it sells these products). This 
is broadly equal to the import levy. Alternatively, the surplus can be sold 
abroad by the farmers (traders) themselves. In this case the EU pays them an 
export refund equal to the difference between the internal market price 
(which in this case coincides broadly with the intervention price) and the 
world market price. Given that, in 1996, 48% of the total EU budget went to 
agricultural price support, one wonders how the official literature can 
argue with a straight face that the EU is an anti-protectionist 

In and of itself, protectionism is not an element of an imperialist policy. 
It can indeed be a dependent country's defence instrument against 
imperialist relations. The case of the EU, however, is different. In this 
case, agricultural protectionism dictates both the type and the quantities 
of the agricultural products which can enter the EU. In this way, it is the 
agricultural sectors of the dominated countries which adapt to the EU 
economy rather than the other way around. As for the USA, the

Capital & Class #67

most powerful critic of the CAP (as revealed by an analysis of the Kennedy, 
Tokyo, and Uruguay Rounds), protectionism is an element of the 
intra-imperialist rivalry within an imperialist centre structured in a 
hierarchy of imperialist powers (see especially section 4 below).

In the course of the years the CAP has gone through different changes. These 
changes have been fuelled basically by four reasons. First, the costs of 
financing it have increased over the years and would become too onerous with 
the accession of the CEEC. Second, since 1989, the 'communist threat' has 
receded, so that agricultural votes, while still important, have lost their 
centrality for conservative parties. Third, the protectionist nature of the 
CAP, while the lesser of two evils in the first years of the European Common 
Market (see endnote 2 on the interests of the USA in re-building Europe's 
economic power), has become too much of an hindrance for foreign 
competitors, especially for the USA, now that the EU has become a formidable 
competitor. And fourth, due to the numerous modifications to the original 
price support and the introduction of experimental and ad hoc schemes, the 
administration of the CAP has become increasingly complex and fraud-ridden.

Due to these reasons, starting from 1992, the intervention prices have been 
subjected to reductions. However, in order not to indent farmers' incomes 
too drastically, these price reductions are offset by direct income payments 
to farmers. For cereals, these payments are made conditional upon the 
farmers agreeing to set aside a certain percentage of the land on which they 
would otherwise cultivate their arable crops.13 Set-aside areas may not be 
used for the production of either human or animal food. However, other uses 
are allowed. It has been estimated that by
1994-95, 12.25% of useful acreage was purposely not cultivated (Tracy, 1996: 
20) and that production had fallen by 6% to 7% relative to the average of 
the three years prior to the reform.

We can now assess briefly the 'rationality' of the CAP. A first advantage of 
the system, its supporters argue, is that it has greatly stimulated food 
production and consumption. In the last twenty years, the percentage of 
household expenditure on foodstuffs has fallen from 28% to 20% (European 
Commission, 1996: 7). This might be the case, but it should be put in its 
proper perspective. A first counter-argument is that the lower percentage is 
due to the higher level of living in Europe.14 This, in turn, is partly due 
to the importation of cheap food products made possible by the

Contradictions of European Integration


imperialist nature of the relations between the EU and other (dominated) 
food producers. Without high threshold prices that percentage would have 
fallen even more.

A second counter-argument is that the importation of food by the EU from the 
dominated countries implies the use of those countries' soil for EU food 
consumption. Conversely, the exportation of food by the EU to the dominated 
countries implies the use of EU soil for those countries. If we consider the 
trade in grain, rice, potatoes, sugar, and vegetables (EU products) and in 
citrus fruits, bananas, soya beans, tapioca, molasses, coffee beans, cocoa 
beans, sunflower seeds, palm oil, cotton, tea, tobacco, groundnuts, and 
natural rubber (the products of the dominated countries), then it has been 
estimated that the EU uses 228,000 km2 of the dominated countries' soil for 
EU food production and that those countries use 97,000 km2 of EU soil for 
their food production (Friends of the Earth Europe, 1995, table 3.13 of 
Supplement). The EU on the one hand produces agricultural surpluses (a part 
of which goes to the dominated countries) while on the other hand uses a net 
130,000 km2 of the dominated countries' soil (the size of Greece) for the 
production of food for its own consumption. This soil could be (and mostly 
was, previously) used for food production in the dominated countries.

Second, it is held by the CAP supporters that the CAP has fostered the 
rationalisation of agriculture, i.e., bigger farm sizes and thus greater 
productivity. Moreover, productivity has also increased by 5% to 7% due to 
the setting aside of the less productive land. Again this might be the case. 
However, inasmuch as the CAP raises prices, it favours the more productive, 
i.e., usually the larger, farmers, due to their larger output per unit of 
capital invested. Inasmuch as it lowers prices, it hits the low productivity 
farmers more than the more efficient ones, due to the former's reduced 
profit margins and thus due to the meagre finances they can draw upon in 
case of economic difficulties. Thus, positive price movements favour larger 
producers more than smaller ones and negative price movements hit smaller 
producers more than larger ones. This results in concentration and 
centralisation which is also fostered by the CAP's conscious income 
transfers. 'One estimate (CEC, July 1991) is that 80% of the CAP spending 
goes to only 20% of farmers, overwhelmingly the bigger and richer ones.' 
(European Commission, 1994: 27). Consequently, there has been a decline in 
the number of small

Capital & Class #67

farms (1 to 10 ha) and of middle-sized farms (10 to 50 ha) accompanied by a 
growth in the number of large farms (larger than 50 ha). As a result, '75 
per cent of all European agricultural produce now comes from 25 per cent of 
its farms' (Middleton, O'Keefe, and Moyo, 1993: 127). Rationalisation and 
high internal food prices are thus two sides of the same coin.

Third, as a result of the 1992 reforms, the supporters of the system argue, 
surpluses have been substantially reduced: in 1995 agricultural stocks were 
28,000 tons, less than a week's production, wheat stocks had dropped from 25 
million tons in 1990 to 5 million tons, and beef stocks had fallen to less 
than 5% of production (European Commission, 1996: 10). The point which is 
usually forgotten is that EU farmers are being paid in order not to produce 
food within the context of growing poverty within the EU and growing hunger 
in the world.15

What would be more obvious than distributing the surpluses to the poor? Yet, 
this is hardly an option within the capitalist institutional context. If 
surpluses (either actually produced or potential) were to be distributed 
freely to the needy within the EU, the demand for these products would 
decrease thus causing increasing surpluses and intervention costs. For this 
reason, only a minimal part of agricultural surpluses can be disposed of in 
this way. Two figures help put the question in its proper perspective. In 
the nine years since 1987, almost Ecu 1bn worth of foodstuffs has been 
distributed to the poor of the EU (European Commission, 1996: 9). This is 
less than 2.5% of the Guarantee section of the EAGGF (more than Ecu 40 
billion) for only one year, 1996. Such small quantities do not affect demand 
significantly and have no effect on intervention costs.

Surpluses cannot be given to the poor of the world either. It could be 
argued that inasmuch as these food staples were given for free to the 
poorest of the world, who have no purchasing power anyway, world market 
prices would not, or would only minimally, be affected. Why, then, is this 
option not pursued? The reason is that it is economically less convenient to 
give surpluses away than to sell them on the world market. This loss would 
be compounded by transport and distribution costs in the receiving countries 
if these were to be borne by the donor countries. For this reason, food aid 
is compatible with the CAP only on a very limited scale (either for 
so-called humanitarian purposes or as a means of political leverage) and is 
more often than not spurred by the need to save on storage costs.

Contradictions of European Integration


Moreover, one has to ask the question of who bears the costs of food aid. 
These are financed through appropriation of value from the EU's citizens, 
for example through taxation. Thus, to come to the rescue of millions of 
starving people would require active pursuance of the principle of equitable 
distribution and solidarity among the world's peoples: the EU would support 
its farmers in order for them to produce for the dominated countries, the 
costs of this operation being borne by the EU taxpayers. But this would be 
contrary both to the way the capitalist system works, which is based on 
competition rather than cooperation, and to the nature of the relations 
between the imperialist centre and the dominated bloc. Within these 
relations, the centre appropriates value (including food) from the dominated 
countries obviously not in order to give it back to them. If value flows the 
other way, it is because it is either invested or loaned, not given away. 
Within these relations, the centre can give back only a minimal part of what 
it takes away from the dominated bloc (e.g. development aid). Only a major 
change in the European labouring classes' consciousness would make a massive 
program of food aid possible.

The CAP is a true child of capitalist rationality. On the one hand it 
rationalises European agriculture, thus leading to higher productivity, 
greater concentration and centralisation (i.e., larger farm holdings), and 
higher profits for the larger production units. On the other hand, it 
creates abundance amidst poverty and opulence amidst starvation both within 
itself and, much more so, vis-à-vis the dominated countries. But, more 
importantly for the present discussion, the CAP is a instrument of EU 
imperialism in that it forces the food producing countries not only to lose 
a part of the value of those products in the process of exchange but also to 
adapt their agricultural production to the EU internal market rather than to 
their own internal needs.



The actual market price is neither artificially depressed or inflated by
these subsidies.


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