Accidental Farmer's Remarks Bulletin (IV) Controlling Markets

Accidental Farmer’s Remarks Bulletin
(IV) Controlling Markets

This morning, the European Ministers for Agriculture will gather in Brussels mainly for “an exchange of views on the future of the Common Agricultural Policy as regards market management measures in the years after 2013.” As last week press agenda also informs “The Presidency will present a paper on this issue.”
The subject has been hotly discussed in and out of the official corridors of the European institutions and now Ministers will be called into expressing their views on whether they think the future CAP should be more or less driven by the market.

It has been my view that instead of a debate based in these terms – that only invites for the repetition of the tiresome ideological discussion opposing the “Invisible Hand” worshipers to the Colbert followers – we should focus on more intelligent, rational and lighter ways of intervening on markets.
The fact that we just assisted to the worse volatility in world raw material markets in the last forty years – including the main food staples – does not tell us much on what shall we expect for the next forty years.
Otherwise, FAO prediction of a need of a minimum 70% increase food production to match the World in 2050 is as important as to notice that this FAO projection accompanies another where a sharp increase of land use in developing and least developed countries is matched by a small decrease of land use in the developed world.
The reasonable way to prepare the future is to expect for the better while preparing for the worse.
Raw material markets – and as we have dramatically experienced, financial markets as well – can experience unacceptable volatility due to market mechanisms, but it is no less true that volatility has been often provoked by erroneous market interventions.
We should bear in mind that the decoupling of European subventions from market intervention, unanimously demanded by the agricultural economist’s community and first implemented in the context of the so-called McSharry reform, was done because of the destabilising effect of these subventions on the market.
Rather than deciding on a priori basis if we want more or less intervention (and for many projections we produce, we cannot guarantee the future) it would be wiser to decide if we want intervention to be decided on an ad hoc basis – as were the recent cases of interventions on milk and olive-oil markets – or on the basis of more predictable mechanisms.
If we choose the second option, there is much to be discussed. Should we have an insurance system financed more or less by public and private, more or less by European or national layers of administration, or should we couple it with an EAF (European Agricultural Fund) that would be a last resort market intervention mechanism?
Otherwise, the Council should also aim at some clarity regarding the present state of remaining market mechanisms.
Is there a firm commitment to abolish export subventions or are these commitments conditional on the dismantling of export credit mechanisms from our partners?
Does the Council aim at dismantling quantity restriction mechanisms for the milk, but keeping them on sugar, wine or potato starch? And, other than the relative forces of the lobbies behind each of these sectors, what is the logic behind these decisions?
Does the Council consider more market intervention mechanisms devolution to private or lower layers of administration, as is the case with fruit and vegetables and fish (oddly enough, classified as an agricultural product since the beginning of CAP)? And what about remaining coupled measures (that is, linked with production)?
The European Parliament has shown a remarkable capacity to intervene in this discussion with coherence, moderation and insight, as the recent book of its President of the Agriculture Committee has shown (Paolo de Castro, European Agriculture and Global Challenges, published in Italian , an English version will be soon presented).
It certainly would be a good idea for the Council of the European Union on Agriculture and Fisheries to invite the parliamentary committee leader – a former Minister of Agriculture and Academic at the University of Bologna – to share his views with the Ministers in its next session, and I am sure a lot would be gained from such invitation.
Otherwise, and after the “mid-term review” fiasco, little has come out of the European Commission. To a large extent this is only normal, as a new Commission just passed its examination at the Parliament.
However, it certainly is uncanny that both the Council and the Parliament are going ahead with deep-breath discussion papers or even books without any intervention or public document of the Commission.
It is not reasonable to wait till the end of the year for a position paper of the Commission on the CAP reform, while the other two institutions are completely involved in the process and the Commission officials also accept to debate the issues behind closed doors with third parties.
The European Commission should exercise its power of initiative, especially in an issue like agriculture.

Brussels, 2010-02-22

(Paulo Casaca)