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Can You Believe It? The CAP at its Worst

One must not generalize from single inadequacies and condemn and entire policy. Even the best program will produce some failures. Accordingly, criticism of the CAP should not primarily be based on egregious cases of policy failure but on scientific studies of much broader reach. This being said, it is also necessary to give concrete examples of CAP malfunction so as not to get lost in abstract analysis. Here are three of them.

Dairy market intervention

The European Commission’s reaction to low prices of milk and milk products is an example of how minor progress towards a political goal – helping small-scale milk farmers – is bought at great expense in the EU and abroad. The Commission (see its report on 'Dairy Market Situation 2009') pays a private storage aid for butter and buys butter and skimmed milk powder into public stocks. It also subsidizes exports of dairy products. The benefits for small-scale milk farmers whose existence is threatened by the low dairy prices are small. Highly productive large-scale farmers, companies that process raw milk into marketable dairy products, and companies that stock or export dairy products receive a large share of the benefits.

While little money reaches the intended beneficiaries, the negative side effects of market intervention are vast. The Commission wastes tax money on contracting companies for storage and export and on monitoring compliance with these contracts. Administrative costs also arise in the running of the public storage system (buying, storing, selling dairy products). The subsequent disposal on the market of the reserves held under private and public storage delays the recovery of dairy prices.

In the meantime, export refunds hurt poor farmers in developing countries who have to compete against the subsidized products dumped on their markets. The return to export refunds in the dairy sector also causes outrage among the EU’s trading partners. The EU sends a counterproductive signal that further complicates the conclusion of the WTO’s Doha round – to the detriment of the EU’s most competitive companies in manufacturing and services.

Environmentally harmful second pillar programs

BirdLife (Could do better: How is EU Rural Development policy delivering for biodiversity?) lists numerous cases where EU payments harm the environment.

The EU subsidizes

  • the restoration and expansion of drainage (Poland, Romania, Latvia) though wetlands have multiple ecological functions (wildlife habitat, water management, carbon storage)
  • the expansion of irrigation destroying EU priority steppe habitats and aggravating excessive water abstraction (Portugal)
  • the consolidation of mosaic-type landscapes into larger units with removal of long-standing networks of ditches (Finland)
  • the renovation of traditional buildings in rural areas which are important nesting sites for endangered species without environmental safeguards (Spain)

Wasteful second pillar payments for economic diversification

Sky News reports that ‘the European Union has given £79,000 to a Danish businessman to build a ski slope - on an island where snow rarely falls and there are no high hills. Ole Harild lives on the island of Bornholm, in the Baltic Sea, which is known for its sunny climate and lack of snow. Mr Harild had been unable to go skiing abroad one year with his wife because of work and came up with the idea of building his own Alpine ski run for the island.

Not thinking it would come to anything, Harild put in a request for an EU subsidy in the winter of 2006. "I never thought they (the EU experts) were going to back something so crazy," Ole Harild said. "But since the money had been released there was no reason not to go ahead with the plan."

With the money made available Mr Harild bought a machine to mark out the run, a snow blower and 80 pairs of skis and boots for hire. Unfortunately, the run was open only for one day last winter but Harild said that in spite of predictions of global warming he lives in hope that one day cold weather will return.’