Is the European pie really that bitter?

19. February, 2002

Foto: A. Jansons

What kind of agriculture and what kinds of farmers do we want to see? According to provisional results of a study on agriculture, 68% of the farms surveyed do not produce anything for the market.

Latvia stated its desire to join the European Union in the very first foreign policy documents that were prepared after the restoration of independence. It affirmed this aim with an official application for EU membership in 1995. The programs of virtually all of Latvia’s political parties are dominated by the thesis that EU membership is the only proper model for Latvia’s future. Until 30 January 2002, we apparently were quietly hoping that the European Union is like a “mother hen” which wants to keep Latvia and all the other candidate countries under its comfortable and motherly wing, guaranteeing security and welfare and asking nothing but a bit of love and loyalty in return.

Then along came the European Commission, which on 30 January published a document about support that the future EU member states might receive in terms of agriculture. The situation has changed now. This is a fully businesslike proposal.

Since the document appeared, virtually everybody has criticized it – political parties, farmers, organizations of farmers, members of Parliament, ministers and, of course, the mass media. Lauku Avize (No. 23, 34, 2002) published the document in full, calling it a “the worst document that there will ever be”.

Is the document really all that bad? Perhaps those who are casting their stones at it haven’t even read it? We may find an answer to the first question through careful analysis of the document, but the answer to the second question is up to each person’s individual conscience.

Most of the critics of the document have focused largely on direct subsidies. If the EU really is going to pay only 25% of the subsidies which it pays to its own farmers (in 2004), even the most careless reader begins to think that we have to have the same subsidies as EU farmers, because only then will we have equal competition. If we step away from the arguments that are stated in the European Commission document in support of this level of subsidies (which many people may consider to be insufficient), then we have to say that there is something positive in the area of direct subsidies, too. The European Commission has, for the very first time, stated officially that farmers in the candidate countries can hope for subsidies of any kind. Remember the “Agenda 2000” document? Nobody was promising us direct subsidies in that report.

A second issue which was initially left on the back burner but has now moved into first place, perhaps due to a more careful perusal of the document as such, is the issue of quotas. “The milk quota will not allow Latvia’s dairy farmers to supply local products to local consumers” – that’s one of the central arguments. If we look at the present level of milk processing, however, we see that 398,100 tons of milk were bought for processing in 2000, and that is less than the 498,000 tons, which the European Commission has proposed as the quota.

If we abstract ourselves from emotions and look at some of the data which the Latvian National Institute of Agrarian Economics has collected, then we see that if the present level of proposed quotas and direct subsidies were to be implemented, then farmers would receive a bit less in terms of direct livestock breeding subsidies than they get right now, but in 2005 the number would increase by nearly 27% over the previous year (i.e., it would be higher than the present level of subsides). In 2006, the volume of direct subsidies would increase by 55% over 2004 (see Table 1). The total amount of money that livestock farmers would receive from the EU on the basis of the European Commission’s proposal would be 52% greater in 2006 than the amount of money which the Latvian government granted in subsidies in 2001.

In analyzing this document, we must not forget another instrument in the Common Agricultural Policy – intervention. Milk prices in the EU are, on average, 6 santims higher per liter than in Latvia, and that means that when we join the EU, our dairy producers will be able to receive European prices for their milk.

Undeniably, of course, this document, like any other matter, has two sides to it.

Even one who is not a professional in the field of agriculture will understand clearly upon reading the document that EU experts have counted up the areas in which Latvia might be competitive in the EU market (these include milk, sugar and potato starch). These are the areas in which the quotas are the harshest. In other areas the EU is offering quotas that are above current production levels. The production of mutton is just one example.

We have to remember, at the same time, that this European Commission proposal must be viewed in tandem with other EU policy instruments in the field of agriculture. When Latvia joins the Union, it will have access to its structural funds. European Council Regulation No. 1257/99, which addresses support for rural development from the European Agricultural Guidance and Guarantee Fund, speaks not only of the early retirement scheme for farmers which has already been discussed in the press, but also of support for agricultural production in areas which are less favorable for farming. In Latvia, this is something needs a great deal of attention, because “less favorable regions”, as defined in Latvia’s negotiating documents, include fully 90% and more of the country’s rural territory.

The scheme of allocation of structural funds also has negative aspects, of course. One is that all the programs offered require co- financing from the state at a level of 25%. If we accept these support schemes, then we will have problems in telling nurses and teachers that farmers need more. That’s a different subject, however.

In conclusion, I would like to add that we must come to a clear understanding about the kind of agriculture and the kinds of farmers that we want to see in this country. Provisional results of an agricultural study show that 68% of the farms that were surveyed do not produce anything for the market. Only once we have a clear vision of the future we can continue to debate over the European Commission document. raksts

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