The fact that Ireland celebrates 50 years of membership of the European Union (EU), having joined in 1973, gives pause for thought as to what the future of our membership of the EU might hold in terms of policy.
For agriculture and the food industry, EU policy in 1973 focused largely on price supports through intervention mechanisms – public intervention purchasing, as well as internal subsidies and export refunds.
EU target prices were set, and the combination of buying surplus production into intervention plus export subsidies, was intended to ensure that producer prices were as near as possible to the target price.
This was meant to be the case even when overall EU production was in surplus or out of balance because of a surge in imports, as occurred in 1974 in the beef sector.
1984 saw the first amendment to this broad system with the introduction of milk quotas.
Policy drivers
However, price support was still the core policy driver with the quid pro quo for production quotas being a ‘relatively’ high and stable internal EU price that was maintained by continuing intervention, internal market subsidies and export subsidies.
Indeed, it seems to be forgotten when there is talk again of the reintroduction of EU quotas that supply constraint did not necessarily deliver stable/high prices.
Stability in EU dairy markets was underpinned by internal and external subsidies of €6 billion per annum.
The EU in the late 1980s was awash with butter and beef mountains and wine lakes.
In 1992, fundamental reform was introduced with the key emphasis being a switch away from price support to direct income supports, with a phasing out of intervention in markets.
The dairy sector stayed out of this system until quotas were abolished in 2015.
This direct income support system was then impacted by the need, under the EU commitment to World Trade Organisation (WTO) rules, to decouple direct payments from production.
Commitments to WTO also saw export refunds abolished in 2006 as part of the ‘Doha Round’ of trade negotiations.
A further challenge to direct income supports was the requirement to equalise supports following the expansion of the EU from 15 to 27 member states.
However, largely due to very clever positioning by Ireland’s Department of Agriculture negotiators, ‘Ireland.inc’ held on to a very high percentage of the original 1992 direct payments allocation in the 2010 Common Agricultural Policy (CAP) reforms.
CAP funding
The next wave of policy pressure has seen a requirement that an increasing amount of the now decoupled payments should have a greening/sustainability element.
There have been two other key drivers of CAP reform, I would suggest.
The first is the ideological view that the agri sector should become increasingly more market driven and less support led.
The second being the constant assertion that EU CAP expenditure constitutes around 35% of the total EU budget, omitting the fact that unlike in agriculture, the EU does not have a common budget for a whole range of expenditures like on health, social welfare, defence, education, etc.
Other external pressures on the CAP came from repeated assertions that the very existence of the CAP was directly resulting in the destruction of food-producing capability in lower income countries across the globe.
Assertions that were not borne out when EU exporters withdrew from these markets and were replaced, not by local production, but by other global exporters.
The impact of these continuing pressures has been that the CAP budget, while still substantial, is constantly under pressure.
Pressure came from the UK prior to its 2016 exit, regularly calling for its abolition and many pro-CAP member states wanting the CAP to do more with the same or slightly less resources.
2023
In ideological terms, it seems that the notion that free markets, if allowed to function, could provide the answer to all economic and societal challenges was blown out of the water by the deep recession caused by the collapse of the global financial sector in 2008.
The dramatic failure of meaningful market-led responses to the challenges of climate change also plays a part in this regard.
Indeed, even the OECD, which for many years waxed lyrical about the inherent misguidedness of the CAP, has recently produced a review suggesting that the CAP funds should be very specifically targeted at sustainable food systems.
This sea change in the ideological approach to real economy challenges, which the sustainable future of EU food supply surely constitutes, is to be welcomed.
However, a concern, in reflecting on EU policy in the agri sector over the last number of years, has been that while CAP is at best standing still because of resource limits, EU regulation on production standards or use of inputs etc., is increasing food production costs.
Thus far, there is absolutely no appetite at EU or local Irish level to ensure that increased costs of production are matched by increased prices paid.
The EU approach to energy supply and demand shows that a realistic reality-based approach to markets and prices can be meaningfully delivered.
The next phase of the CAP must see this addressed for the agri-food sector.