NCPA - National Center for Policy Analysis

Is End Near For European Farm Subsidies?

November 5, 1999

U.S. Trade Representative Charlene Barshefshy has said of the European Union's Common Agriculture Policy (CAP) that it is "the largest single distortion of agricultural trade in the world and may well qualify as the largest distortion of any sort of trade." It amounts to an array of subsidies, price supports and high tariffs that keep U.S. farm products out of Europe and help European farmers compete against American growers in U.S. markets.

But relief may be on the way. The U.S. and other countries disadvantaged by the CAP intend to have a showdown with the EU when the World Trade Organization meets in Seattle at the end of the month.

  • EU agriculture tariffs average about 18 percent versus 8 percent in the U.S. -- but duties on major commodities such as grain can be double the average.
  • EU farmers enjoy a vast net of price guarantees, production subsidies, land set-aside allotments and other payments that can total more than half of farm income -- thereby encouraging farmers to overproduce.
  • To get rid of the surplus, exporters are plied with annual subsidies amounting to $5 billion to $10 billion, permitting them to buy high-cost European farm goods and peddle them cheaply on world markets -- undercutting farm products from the U.S. and other countries.

U.S. exports of farm products have tanked and world prices for corn, soybeans, wheat, pork and other products have plunged to their lowest levels in decades. As a result, Congress has passed several emergency bills to hand out funds to farmers. This year's package is the biggest ever -- with $8.7 billion in aid.

That sabotages the American case for weaning European farmers from government aid. "It's easy for them to criticize us," says a French farmer. "They know Congress will always be there to bail them out."

Source: James Cox, "Sowing Seeds of Bitterness," USA Today, November 5, 1999.


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