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A Common Agricultural Policy for European Public Goods:
Declaration by a Group of Leading Agricultural Economists

Summary (drawing closely on the original text): Europe’s Common Agricultural Policy (CAP) is in need of reform. Past reforms have mitigated the CAP’s negative side effects – now the time has come to redesign the CAP to strengthen its positive effects.

Generally, well-functioning markets rather than state intervention are the best way to attain a demand-oriented, innovative and competitive farm sector. But the EU has a legitimate role to play in encouraging research and development in both public and private sectors.

Food security is not currently threatened in the EU. To prepare the EU against any future threats, targeted payments, for instance to preserve soil fertility and water resources, would be more effective than blanket subsidies that maintain existing levels of agricultural production or employment. Money intended to reduce hunger and poverty abroad would be better spent by investing in agricultural research and infrastructure in developing countries rather than by giving it to European farmers.

Agricultural subsidies are not an effective tool for social policy. If public aid is dependent on agricultural production or land ownership, non-poor farmers and landowners reap the bulk of the aid while poor non-farmers are disadvantaged. Instead, public aid should be targeted at households with low income and wealth regardless of the sector they work in. Also, social policies should be left to national and sub-national authorities that are better placed to pursue local preferences with financial responsibility.

The future role of the CAP should be to give farmers appropriate incentives to deliver European public goods demanded by society, particularly in the environmental realm. This includes the fight against climate change, the protection of biodiversity, and water management (avoiding pollution, scarcity and floods). By contrast, maintaining a diverse, traditional, well-kept landscape is primarily a national, not European, public good: most benefits will be reaped within the country – by direct enjoyment, as an advantage to attract qualified human resources or through tourism.

When a country wishes to subsidize a more decentralized settlement structure, this is a national choice rather than a European public good. Nonetheless, the principle of cohesion has given the EU a role to help lagging regions develop their full potential. This is best achieved through the EU’s regional policy, which is not limited to agriculture, and can adopt a more integrated approach to the rural economy.

A future CAP in line with these objectives would differ fundamentally from the current CAP. The first pillar should be progressively abolished and the Single Farm Payment phased out. Policies under the second pillar should be thoroughly reassessed. Only those policies that promote genuine European public goods, are efficiently targeted at their objectives, and avoid excessive payments, should be retained.

CAP reform in line with these recommendations will achieve a more reliable food supply, reduced greenhouse gas emissions, greater biodiversity, and more responsible soil and water management at lower costs. It will also help to ensure fair competition among farmers in the internal market, and facilitate responsible trade policies that enhance the legitimacy of the EU in the global community. Moreover, it would allow a re-orientation of spending across all budget headings on European public goods. CAP reform is therefore an important step in building a more effective European Union that wins and maintains the support of its citizens.