The Latest EU Crisis

Hi Everyone,

Following closely on the heals of the French and Dutch rejections of the EU Constitution, the EU is "crisis" again. This time the issue is the EU budget specifically the amount of money contributed to it by each of the member states (especially the United Kingdom).

The big fight is over the so called British rebate. This is a reduction in the amount of the U.K.'s contribution to the EU budget meant to compensate the U.K. for the fact that they don't benefit at all from Common Agricultural Policy (CAP) subsidies (which are by far the largest single budget item in the EU budget). The U.K. wisely abolished its agriculture subsidies (the infamous "Corn Laws") in the 19th century and since has transformed almost entirely into an industrial/service sector economy. Less than 1% of the British labor force are engaged in agriculture. The French want the British rebate reduced or removed entirely. The British and the Dutch want the CAP subsidies reduced first. The French refuse to even consider reducing CAP subsidies. And since unanimity is the rule of the day...stalemate.

To give you an idea of how grasping the French government is being over this issue take a look at the table in this BBC article. The table shows net contributions to the EU budget. That is, the amount each member state contributes minus the amount they get back in CAP subsidies, structural funds and - in the case of the U.K. - rebates. Notice that France (pop = 60.68 million) contributes less to the EU budget than either the U.K. (pop = 60.14 million) or the Netherlands (pop = 16.4 million!). Why? Because the CAP is set up to allow the French government to continue subsidizing its grossly inefficient (but politically powerful) agricultural sector without having to pay the bill themselves! The EU has an average of 2.2% of its labor force employed in agriculture (and that includes the newest 10 member states in Eastern Europe!). France has 4.6% of its labor force "employed" in agriculture.

I would like to propose a solution that is easy to present as "fair" and would actually be good policy (a rare combination!). Abolish the CAP and give all the member states a rebate (that is reduce their overall contributions to the EU budget)! That would allow countries like Poland to take advantage of their own economic strengths on a level playing field (the CAP rigs the competition in favor of less efficient French farmers!). Abolishing the CAP would also decrease the budgetary burden on the EU as a whole reducing the need for contributions from all the member states. And it would open the European agriculture and food market to imports from developing countries that need the new opportunities. Finally, it would reduce food prices for the urban poor in Europe. The big losers would be 4.6% of the French population. But 95.4% of the French population would benefit! 97.8% of the population of the EU overall would benefit! (I got the figures from the CIA world fact book - see link to the right)

Oh, and by the way, the French farmers were the ones who really drove the "non" vote on the constitution referendum - this despite the fact they are essentially making their livings from EU handouts. How do you say "bite the hand that feeds you" in French?

Perhaps our recently returned "Correspondent in France" could give us the local view. Why do French farmers hate the EU cash cow?