European Commission proposes reduction in farm subsidies

July 25, 2002

Free Market Foundation

The European Union wants to reduce farm subsidies of some $43 billion annually and refocus attention on food safety and rural economic development. The current subsidies which are responsible for massive food surpluses that have depressed world agricultural prices have long been criticised by the U.S. and other countries.

But the U.S. stand in that debate has been greatly tarnished by new, gigantic, market-distorting farm subsidies in the recently enacted agriculture bill, according to observers.

The reform proposed by the European Commission, the EU’s executive arm, initially amounts to a 3 percent drop in subsidies to farmers and will save roughly $200 million by 2006.

But it also calls for additional cuts of as much as 50 percent in price supports for soybeans, rice, maize and wheat.

The commission also wants to replace its milk-quota system with quotas based on world market prices.

The coming admission to the EU of up to 10 new member tates from Eastern Europe countries that include many poor farmers helped set the reform proposals in motion.

The EU farm lobby denounced the plan as a betrayal of promises to leave farm subsidies untouched until 2006. France and Spain immediately opposed the plan.

Source: News Roundup, EU Seeks to Reshape Its Massive Farm Subsidies, Wall Street Journal, July 11, 2002.

For text http://online.wsj.com/article/0,,SB1026322907139315960,00.htm
For more on Agriculture http://www.ncpa.org/iss/bud

FMF Policy Bulletin\16 July 2002