Germany Opposes Attempts to Reform EU Agricultural Subsidies

Germany Opposes Attempts to Reform EU Agricultural Subsidies

By Petra Bornhöft, Christoph Schult and Christian Schwägerl

The European Commission wants to reform the Common Agricultural Policy, which eats up almost half of the EU's budget and which primarily benefits large farms in "old" member states. But Germany and France are resisting moves to change the system so it favors smaller, organic farms. The status quo suits them very nicely.

An old cobblestone road leads to Carl-Albrecht Bartmer's property. Small, detached houses line Lindenstrasse in the village of Löbnitz an der Bode, near Magdeburg in eastern Germany. A light blue Trabi, the iconic East German car, sits parked by the side of the road.

Bartmer, 49, is an ardent marathon runner and has his hair parted meticulously to one side. After the collapse of Communism, he took over an agricultural cooperative formerly run by the East German government, on a piece of property that had belonged to his family before World War II. Bartmer, who has a degree in agricultural economics and is also president of the German Agricultural Society, cultivates nearly 1,000 hectares (2,500 acres) of land, work for which he requires no more than four employees. He doesn't like the word "farmer," however, preferring to be called an "entrepreneur." Bartmer believes that those who work in agriculture need to take advantage of technological progress to produce food for a "hungry world" under conditions of "fair competition" and with as little state aid as possible.

It's interesting that Bartmer argues in favor of independence from the state, since the landowner collects €300 ($400) in subsidies from the European Union for each hectare of his land. That adds up to a total of around €300,000 -- per year.

Exporting EU Carrots to Russia

The road that leads to Janusz Sakowicz's farm is also paved with cobblestones. The 60-year-old lives in an old house in the community of Choroszcz in northeastern Poland, near the Belarusian border. Sakowicz, a short man with blue eyes and large hands, inherited seven hectares of land from his father in 2002, but the soil was too poor to support crops and the local dairy paid only a pittance for milk from his cows. "We couldn't make a living from that," he says.

A German foundation helped Sakowicz and his wife Teresa set up a small organic cheese dairy. The couple produces a smoked cheese, a cheese with herbs and one with garlic. They sell their wares to gourmet shops in the nearby city of Bialystok and to private customers who come to buy from the farm directly.

The Sakowiczs receive aid from Brussels too, but Sakowicz considers the EU's agricultural policies unfair. He can't understand why farmers in neighboring Germany receive twice as much money as he does for every hectare of land they work. He's similarly amazed that his neighbors collect premiums for land they own but don't cultivate. And he watches Belgian trucks pass through Poland, on their way to deliver carrots to Russia with the help of EU export subsidies. "How can they compete with our cheap products?" Sakowicz wonders. "There's something completely out of balance here."

Few topics carry such a tradition of controversy within the EU as the Common Agricultural Policy (CAP). That's no surprise -- a lot of money is at stake. Around €56 billion -- nearly half the entire EU budget -- flowed from Brussels into European agriculture in 2009.

Inefficient and Unfair

Negotiations over agricultural policy reforms are scheduled to begin in the first quarter of 2011, and they're likely to involve tougher haggling than ever before. It's already apparent that there will be less money available in total starting in 2014, while the European Parliament will have an equal say in these negotiations for the first time, thanks to the implementation of the Lisbon Treaty.

Many, including Berlin and Paris, want things to remain as they are. Both governments are influenced by a powerful agricultural lobby. Others would rather do away with state aid entirely. Only one thing is certain: There hasn't been a convincing reason for the flood of subsidies from Brussels for a long time. The system is not only inefficient and unfair, but also has a dubious environmental impact.

Currently, farmers in the "old" EU member states receive, on average, three times as much in direct payments per hectare as their Eastern European neighbors. The amount in France is twice that in Hungary, while it's four times as much in the Netherlands as in Slovakia. The leader of the pack is Greece, where farmers collect more than 10 times as much per hectare as their counterparts in Romania. Additionally, the larger a farm is, the more subsidies it can pocket.

EU Agriculture Commissioner Dacian Ciolos from Romania has proposed an ambitious package of reforms. Ciolos wants to

redistribute funds from the old to the new EU member states,
slash subsidies for large-scale operations, instead supporting active farmers and small farms and
link direct payments more closely to environmental protection requirements.
Ciolos' opponents were lining up before the commissioner had even publicized his proposals. Germany and France issued a joint statement arguing for "European agricultural competitiveness" and against environmental requirements tied to subsidies. Both countries also insisted there should be no "redistribution between member states."

Like Paying Drivers for Stopping at Red Lights

Berlin and Paris want to "give up as little as possible" of their own windfalls from Brussels, says one government employee working under German Agriculture Minister Ilse Aigner of the center-right Christian Social Union (CSU). The minister knows the European Commission doesn't stand much of a chance against the combined weight of France and Germany, the two largest net contributors in the EU.
Ciolos is undeterred. "I didn't make these suggestions for one country, but for all 27 EU states," he counters. People often underestimate the short, 41-year-old Romanian politician. Many thought he wouldn't dare take on the French agricultural lobby simply due to his personal background -- Ciolos completed his doctorate at the French National Institute for Agricultural Research in Montpellier and is married to a Frenchwoman.

The day after presenting his plans, Ciolos stood in a barn belonging to a family named Groot, wearing a black suit and red tie and feeding hay to a cow. The commissioner deliberately chose to appear at this farm, a small organic operation in the Netherlands. "This farm works exactly the way we envision our future agricultural policy," he announced.

Until now, farmers could collect premiums from Brussels even if they only fulfilled the minimum standards for environmental protection. "That's like paying drivers just for stopping at red lights," an environmental strategist in the German government says.

Harming Ecosystems

The German government as a whole, however, is confident that subsidy practices as they stand do enough to protect the environment, pointing out that Germany will implement a regionally standardized subsidy of around €315 per hectare of farmland or permanent grassland in 2013. "Places with extensive grassland will benefit in particular," says Agriculture Minister Aigner. "Germany's pioneering role must be rewarded."

Conservationists disagree. In many parts of Europe, they say, agriculture has become so industrialized that humane conditions for farm animals are hardly even possible. They add that fields are over-fertilized and drinking water polluted with pesticides and nitrates. "The current system of agricultural subsidies encourages overexploitation of nature," says Lutz Ribbe, director of the Environmental Policy Department at a foundation known as the European Nature Heritage Fund.

This is especially clear when it comes to corn farming, a type of agriculture that is growing rapidly, made lucrative by the demand for cheap milk, meat and biogas.

Current subsidy practices also harm important ecosystems in other parts of the world. European farmers, for example, import soy on a large scale to use as animal feed, in order to satisfy the high demand for meat. Rainforests in South America are deforested for this soy production. In extreme cases, German farmers feed their animals soy protein fresh from those clear-cut forests as part of a government-supported "export push" to sell meat to China.

'Every Hectare Is the Same'

Still, neither Development Minister Dirk Niebel of the business-friendly Free Democratic Party (FDP) nor Environment Minister Norbert Röttgen of the center-right Christian Democratic Union (CDU) is putting pressure on their cabinet colleague Ilse Aigner, leaving the CSU politician free reign to criticize the European Commission's suggestions. "It doesn't help our environment if the only thing blossoming in the end is bureaucracy," she says.

Germany has also been forceful in fighting the suggestion to put a cap on subsidies for large agricultural operations. This affects primarily eastern German businesses such as Osterhuber Agrar GmbH (which receives €4 million in annual subsidies) and Gut Klein Wanzleben (€2.6 million). Aigner wants these pricy payments to remain in place. "Every hectare is the same," says a source within her ministry, "and we won't accept a guillotine for large companies." If worst comes to worst, they say, they will simply let the reforms fail. "In the end, we are the ones who determine what is acceptable and what isn't."

EU Commissioner Ciolos remains unruffled by these threats. "It's always the same drama," says one of the politician's confidants. Farmers also issued dire warnings about the consequences of the last round of agricultural reforms, he says, but once the reforms were implemented, everyone was able to come to terms with them. "Now, once again, the farmers' lobby wants to make us believe there's nothing better than the status quo."

Translated from the German by Ella Ornstein

The CAP is a bottomless pit of cash and the way most people here see it, is a subsidy for French farmers to do nothing. Tony Blair - in one of a handful of decent things he did - argued and succeeded in getting a substantial rebate a few years ago.

What is your take on it Bubbles?

Personally, and without being there and having a real familiarity of all the elements involved in this issue, my first instinct would be to cut CAP altogether and let the markets decide who the winners and losers should be, and not Brussels.

bottomless pit of cash

That's how many view the US gov't these days.

dblboggie wrote:What is your take on it Bubbles?

Personally, and without being there and having a real familiarity of all the elements involved in this issue, my first instinct would be to cut CAP altogether and let the markets decide who the winners and losers should be, and not Brussels.

I don't know too much about this subject, but I do believe certain subsidies should be cut. For example, Germany subsidises the tobacco farmers in Germany while at the same time spending money on anti-tobacco campaigns. On one hand, the tobacco farmers in Germany employ a lot of people but since it's a farm, it would not be the end of the world if they started growing other crops, especially with the high demand for ethanol nowadays.

BubbleBliss wrote:

dblboggie wrote:What is your take on it Bubbles?

Personally, and without being there and having a real familiarity of all the elements involved in this issue, my first instinct would be to cut CAP altogether and let the markets decide who the winners and losers should be, and not Brussels.

I don't know too much about this subject, but I do believe certain subsidies should be cut. For example, Germany subsidises the tobacco farmers in Germany while at the same time spending money on anti-tobacco campaigns. On one hand, the tobacco farmers in Germany employ a lot of people but since it's a farm, it would not be the end of the world if they started growing other crops, especially with the high demand for ethanol nowadays.

I can see your point there. One thing I didn't understand in the article is why there is a difference in the subsidies/hectare between the different countries. How is that fair? Do you know anything about that?

It isn't so much a case of supporting farmers so that they have an income, it is because of the problems of intensive farming. We wouldn't need to CAP if we weren't still clinging to intensive farming where some farmers produce too much and others are paid to do nothing because we don't have the capacity. Why not allow them to produce at under capacity to allow land to regenerate without nitrates?

The_Amber_Spyglass wrote:It isn't so much a case of supporting farmers so that they have an income, it is because of the problems of intensive farming. We wouldn't need to CAP if we weren't still clinging to intensive farming where some farmers produce too much and others are paid to do nothing because we don't have the capacity. Why not allow them to produce at under capacity to allow land to regenerate without nitrates?

Could farmers survive financially without CAP if they farmed under full capacity?

As for nitrates, I thought that was what crop rotation was about. Swap out the crops (i.e. corn then soybeans back and forth) every year or 2 to allow the land to recover and prevent the depletion of certain soil nutrients. Mind you, I could be wrong, I am far from being a farmer, that was just my understanding of it.

dblboggie wrote:As for nitrates, I thought that was what crop rotation was about. Swap out the crops (i.e. corn then soybeans back and forth) every year or 2 to allow the land to recover and prevent the depletion of certain soil nutrients. Mind you, I could be wrong, I am far from being a farmer, that was just my understanding of it.

That's what my uncle does to his land each year. One year it's wheat, then corn, then soybeans and then back to start again.

dblboggie wrote:

The_Amber_Spyglass wrote:It isn't so much a case of supporting farmers so that they have an income, it is because of the problems of intensive farming. We wouldn't need to CAP if we weren't still clinging to intensive farming where some farmers produce too much and others are paid to do nothing because we don't have the capacity. Why not allow them to produce at under capacity to allow land to regenerate without nitrates?

Could farmers survive financially without CAP if they farmed under full capacity?

I don't know enough about the problem but surely anything is better than producing more than we know what to do with. I'm no expert economist but overproduction is driving prices down. Arguably, they could make more money by reducing their capacity?

dblboggie wrote:As for nitrates, I thought that was what crop rotation was about. Swap out the crops (i.e. corn then soybeans back and forth) every year or 2 to allow the land to recover and prevent the depletion of certain soil nutrients. Mind you, I could be wrong, I am far from being a farmer, that was just my understanding of it.

Nitrates are a vital part of intensive farming. When crop rotation was instigated in the medieval period, livestock were moved onto the land to regenerate it. I'm just thinking out loud that, if we agree that intensive farming is leading to farmers being paid to produce nothing, and we are clearly producing too much, shouldn't we be looking at different methods of farming?

dblboggie wrote:

BubbleBliss wrote:

dblboggie wrote:What is your take on it Bubbles?

Personally, and without being there and having a real familiarity of all the elements involved in this issue, my first instinct would be to cut CAP altogether and let the markets decide who the winners and losers should be, and not Brussels.

I don't know too much about this subject, but I do believe certain subsidies should be cut. For example, Germany subsidises the tobacco farmers in Germany while at the same time spending money on anti-tobacco campaigns. On one hand, the tobacco farmers in Germany employ a lot of people but since it's a farm, it would not be the end of the world if they started growing other crops, especially with the high demand for ethanol nowadays.

I can see your point there. One thing I didn't understand in the article is why there is a difference in the subsidies/hectare between the different countries. How is that fair? Do you know anything about that?

I don't know much about that, but I'd guess that the more farming a country has the more subsidised it is. I would also guess that such things as amount of farmable land contribute to that.

And no, some farmers could not survive without the subsidies, for example the tobacco farmers in Germany.

The_Amber_Spyglass wrote:

dblboggie wrote:

The_Amber_Spyglass wrote:It isn't so much a case of supporting farmers so that they have an income, it is because of the problems of intensive farming. We wouldn't need to CAP if we weren't still clinging to intensive farming where some farmers produce too much and others are paid to do nothing because we don't have the capacity. Why not allow them to produce at under capacity to allow land to regenerate without nitrates?

Could farmers survive financially without CAP if they farmed under full capacity?

I don't know enough about the problem but surely anything is better than producing more than we know what to do with. I'm no expert economist but overproduction is driving prices down. Arguably, they could make more money by reducing their capacity?

Well presumably those overproducing do have a market to sell to, else why produce at those levels. But while that level of supply may be driving prices down, what would happen if they reduced production? Wouldn't another supplier see that reduction as an opportunity to increase their market share?

The_Amber_Spyglass wrote:

dblboggie wrote:As for nitrates, I thought that was what crop rotation was about. Swap out the crops (i.e. corn then soybeans back and forth) every year or 2 to allow the land to recover and prevent the depletion of certain soil nutrients. Mind you, I could be wrong, I am far from being a farmer, that was just my understanding of it.

Nitrates are a vital part of intensive farming. When crop rotation was instigated in the medieval period, livestock were moved onto the land to regenerate it.

I see, so the cattle were the source of the nitrates being depleted by crop growth? I'm no farmer, I've been a city boy all my life, so you could put what I know about farming on the head of a pin.

The_Amber_Spyglass wrote:I'm just thinking out loud that, if we agree that intensive farming is leading to farmers being paid to produce nothing, and we are clearly producing too much, shouldn't we be looking at different methods of farming?

Oh, okay, now I see where you're going. Yes, indeed... if intensive farming is the reason that some farmers and being paid to produce nothing and there truly is an unneeded surplus, then clearly someone needs to rethink the way farming is done.

Like you, I know very little about this issue - it's just not one that I've ever researched before. But just on a purely economic level, if farmers are having to be subsidized by governments, then clearly something is amiss on the supply side here.

dblboggie wrote:

The_Amber_Spyglass wrote:

dblboggie wrote:

The_Amber_Spyglass wrote:It isn't so much a case of supporting farmers so that they have an income, it is because of the problems of intensive farming. We wouldn't need to CAP if we weren't still clinging to intensive farming where some farmers produce too much and others are paid to do nothing because we don't have the capacity. Why not allow them to produce at under capacity to allow land to regenerate without nitrates?

Could farmers survive financially without CAP if they farmed under full capacity?

I don't know enough about the problem but surely anything is better than producing more than we know what to do with. I'm no expert economist but overproduction is driving prices down. Arguably, they could make more money by reducing their capacity?

Well presumably those overproducing do have a market to sell to, else why produce at those levels. But while that level of supply may be driving prices down, what would happen if they reduced production? Wouldn't another supplier see that reduction as an opportunity to increase their market share?

Simple economics dictates that overabundance of a thing brings price down, no? The problem I think is the supermarkets, desperate to keep prices not competitive, but cheap for cheap's sake. We pay too little for food, and we waste too much of it. So what we have is farmers being forced to reduce their prices to the supermarkets, producing more and more because they can no longer afford to live, further increasing availability and further reducing prices. The result? Farmers are paid a subsidy to sit on their hands while a lot of it goes into landfill unsold.

dblboggie wrote:I see, so the cattle were the source of the nitrates being depleted by crop growth? I'm no farmer, I've been a city boy all my life, so you could put what I know about farming on the head of a pin.

Yes, back then nitrates and nutrients being put into the soil were known as what they are "cow shit", "pig shit" and "sheep shit". These days we have chemical nitrates, which, though in all likelihood not damaging to the environment, are squeezing every last drop out of the soil in order to provide us with this unnecessary overabundance.

dblboggie wrote:Oh, okay, now I see where you're going. Yes, indeed... if intensive farming is the reason that some farmers and being paid to produce nothing and there truly is an unneeded surplus, then clearly someone needs to rethink the way farming is done.

Like you, I know very little about this issue - it's just not one that I've ever researched before. But just on a purely economic level, if farmers are having to be subsidized by governments, then clearly something is amiss on the supply side here.

We still use good ol' cow shit around here to feed the soils. Gotta love that country air when they do that.

Thats because your farmers have the space to keep enormous herds (and pasture to feed them) and equally enormous areas to grow crops. Buying nitrates would be expensive to buy in the volumes you would require them when your farmers own thousands of cows?

Yeah, we have thousands of acres around here. It still astounds me the space here in central Minnesota.... all the crops being grown and still massive acres for cattle to graze and hang out in.