Monday, August 23, 2004

The Dinosaur's tail

For decades now, the EU has been devoting considerable energies and political capital to reducing food production in an attempt at cutting back the embarrassing surpluses that have characterisied the CAP. With the latest "reforms" about to come into effect, the link between farm subsidies and production is to be almost completely broken, with the expectation that EU production of most commodities will fall.

However, just as these "reforms" are kicking in, there is disturbing evidence that the world may be entering a period of serious food shortages, partly due to the increase in the world population but mainly because China no longer able to feed itself. And yesterday, it was reported that it had become a net importer of grain for the first time in its history.

The Chinese problems stem mainly from an increase in population and the rapid pace of industrialisation. The combined effect has been to increase demand for food and water, and it is the latter which is proving critical. Water has been drawn away from agriculture and extensive pollution has rendered huge volumes unusable – in a country where 70 percent of crop production relies on irrigation.

With a few years, China might be importing 50m tons of grain annually, more than any other country in the world, putting massive strains on the supply systems. These are already under stress, with harvests for the last five years having failed to match consumption and world grain stocks having fallen from a peak of 104 days supply in 1997-8 to a worrying low in 2003-4 of 60 days – coincidentally, the minimum safe level, according to the UN's FAO.

Yet, as all this has been happening – and widely predicted for many years by global experts - the EU in its own little world has been focused on cutting its production. These cuts may have been valid when the process started in the early 1980s, after farming subsidies dispensed by the notorious CAP had produced huge butter mountains, grain mountains and wine lakes, and global grain stocks for 1985-86 stood at a record 123 days.

But so glacial has been the process of change that it took until 1991 before the then agricultural commissioner Ray MacSharry had succeeded in introducing the first, partial CAP reforms aimed at cutting production.

By then, however, world food stocks had already started falling – and the trend was clearly downwards. But so inflexible has been the EU political system that, despite this, the process of cutting production has continued, through the Agenda 2000 "reforms" agreed in Berlin in 1999, to the so-called "mid-term review" completed last year. Now farmers will be receiving what is known as the "single farm payment" even if they produce no food at all, giving rise to the expected cuts in production.

Yet, if the China situation is part of a continuing trend – and there is every reason to believe that it is - the EU should be thinking not of cutting back food production, but increasing it. But, having spent decades gearing itself up to cut production, it will undoubtedly take as many decades before it can turn round and being to consider reversing the process.

One is reminded of the apocryphal story of the giant dinosaurs which grew so big that it is said of them that tweaking their tails produced a delayed reaction because the signal took so long to reach the brain. In agricultural policy terms – to say nothing of other policy areas - the EU is already exhibiting similar behaviour. And we all know what happened to the dinosaurs.

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