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EU reported farm support in 2008 and 2009 down to record low

09 July 2012

According to ICTSD analysis of data circulated by the WTO on behalf of the EU, ‘the EU’s trade-distorting farm subsidies dropped to record lows during marketing year 2008-09’, while ‘total farm support levels dropped to just over €81 billion, after reaching a historic peak of €91 billion in 2006.’ ICTSD’s analysis noted that:

  • there was a fall in ‘amber box’ payments to €11.8 billion (under half of 2006-07 levels);
  • ‘green box’ payments ‘remained steady at €63 billion’;
  • ‘blue box’ payments consisting of ‘production-limiting payments to farmers’, remained at around €5.4 billion;
  • ‘a small amount of trade-distorting “de minimis” payments’ of just over €1 billion was also provided.

ICTSD notes that decoupled income support payments ‘continue[d] to account for the lion’s share of green box payments, at €32 billion’, but also that ‘the single area payment scheme, which also provides direct payments to farmers, was reported under a separate category labelled “other”.’

Furthermore, ‘overall trade-distorting support - a category including amber, blue, and de minimis support - reportedly fell to €18.3 billion, a figure that is below the €22 billion cap that would be established under the draft Doha agriculture accord.’

The article also notes that ‘products that continue to benefit from trade-distorting support, despite successive rounds of reforms, include butter, barley, wheat, sugar, skimmed milk powder, and maize, as well as tobacco and wine.’

Editorial comment

The process of CAP reform initiated in 1992 is approaching its final stages, whereby the vast majority of EU agricultural assistance will be decoupled from the production of individual agricultural commodities. Under this process of reform the policy focus has been shifted from support through public subsidies for specific agricultural products to public support for investment in quality‐differentiated, high‐value food and agricultural production and marketing, backed up by targeted ‘safety nets’. This safety-net policy is intended to insulate EU producers from the worst production consequences of price volatility, while enabling EU agro-processors and traders to capitalise on expanding and shifting evolving patterns of global demand for food and drink products.

Thus, in the same season as EU farm subsidies reached a record low, targeted EU safety-net measures in the dairy sector were to result in additional EU expenditures of €600 million and national expenditures of over €1 billion (on top of the estimated €5 billion per annum in direct aid payments paid to dairy farmers). These safety-net measures, which saw the lifting of the ceiling on intervention buying, gave rise to an expansion of intervention stocks of milk powder that are still being disposed of on EU and international markets.

Thus, while overall levels of EU trade-distorting support may be on the decline, EU assistance is being deployed in a more targeted manner, which still can carry important production and trade consequences (sustaining production during periods of cyclical price downturns, while equipping EU agro-processors to capitalise on price increases during the up-cycle).

It seems that a far greater understanding is required of the consequences for specific ACP agricultural sectors of the production and trade effects of the evolving use of EU policy tools.

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