CAFOD Trade Justice Campaign

Duncan Green and Matthew Griffith
CAFOD
September 2002

The EU’s Common Agriculture Policy is enormously expensive and enormously damaging. A typical family of four currently pays £16 a week in taxes and higher food prices to prop up a regime with a disastrous track record of overproduction, environmental degradation, and food safety scares. If the CAP only affected Europeans, international aid agencies like CAFOD would leave the debate to others, but the CAP also undermines the livelihoods of millions of farmers in developing countries by dumping cheap produce in their markets and denying them export opportunities to the largest single market in the world.

Agriculture is central to developing countries’ economies and their people, half of whom make their living from farming. In some countries this figure rises to over 80 per cent. Agriculture also plays a central part in reducing poverty, since three quarters of the world’s 1.2 billion extremely poor people live and work in rural areas.

The CAP, and the subsidies and protectionism employed by the other major economic powers, constitute a roadblock on the path to development for dozens of the world’s poorest nations. They are preventing them building on their agricultural potential to improve the lives of their poorest people and communities. Today, reports from CAFOD partners from Chile to Kenya say that subsidized products such as milk and sugar are causing serious damage to agricultural producers. When developing country farmers do achieve the capacity to export, they frequently find that the markets of European countries are closed to them by high tariffs and other obstacles, while in other markets they face competition from subsidized European exports.

CAFOD research in Jamaica and South Africa illustrates the two issues. In Jamaica, the CAP’s dairy regime has had a devastating impact on local farmers. A combination of trade liberalisation, and the dumping of EU skimmed milk powder has led to a collapse in local dairy production, while yielding few benefits to Jamaican consumers. Ironically, UK dairy farmers have largely failed to benefit from the EU’s largesse, which is paid directly to large food-processing companies, rather than to the farmers themselves.

In South Africa, CAFOD research shows that the EU’s sugar regime has enabled high-cost European farmers to benefit at the expense of much more efficient South African producers, with a toll in terms of lost jobs and export revenue in a country grappling with HIV/AIDS and the legacy of apartheid.

Dairy and sugar are "old CAP" sectors, which have yet to see significant reforms, but CAFOD’s research suggests that even in the reformed sectors, such as wheat (which began its reform process in 1992), EU subsidies enable EU producers to sell at below the cost of production, leading to the dumping of artificially cheap wheat in developing country markets.

Developing country farmers and governments see the CAP, along with the US farm bill, as the worst example of northern double standards - summed up as a "you liberalize, we subsidize" attitude. Despite their WTO commitments, total OECD support to agriculture rose from US$302 billion in the late 1980s to an average annual expenditure of US$330 billion in 1999-2001. This was five times the global aid budget. In the EU, the average cow now receives total support of US$2.20 a day, more than the income of half the world’s population.

CAFOD believes that, while this level of subsidy persists, poor countries should not be obliged to open up their food markets to artificially cheap, subsidized food imports from the North. A number of developing countries, backed by CAFOD and other NGOs, have put forward a proposal for a "development box" in the WTO’s Agreement on Agriculture, which would change the rules to allow governments the right to protect small-scale farmers from such influxes. The EU should support this proposal.

Not only does the CAP damage the livelihoods of countless poor farmers in developing countries, but it also fails to deliver the promised benefits to taxpayers, consumers and small-scale farmers in the EU.

CAFOD has no objection to European governments using subsidies, provided that such public money is used to achieve ends the public actually wants, and that the result is not prejudicial to some of the most vulnerable communities in developing countries. The CAP as currently constituted passes neither of these tests.

In July 2002, Agriculture Commissioner Franz Fischler issued a "Mid-Term Review" of the CAP, kicking off a period of debate about its future direction. Once again, the CAP’s impact on developing countries was largely ignored, meriting only one mention in the text, and not figuring at all in the objectives set out for the reform process. In CAFOD’s view, this oversight is unpardonable, given the CAP’s severe impact on developing country farmers, and its central role in the round of global trade negotiations initiated in Doha in November 2001.

After the foot and mouth crisis, the British Government decided to scrap the Ministry for Agriculture, Fisheries and Food, partly because it had been captured by the farm lobby and was failing consumers. It was replaced with a Department for Environment, Food and Rural Affairs. A similar rethink is now required at the European level. DG Agriculture and the CAP should be wound up; the CAP should be replaced with a new Rural Development Policy, and its functions divided up among the relevant Commission Directorate Generals.

Meanwhile, a number of steps forward can be taken through the Mid-Term Review process. Those of greatest importance to development include:

• The total volume of EU subsidies should be substantially reduced.
• Remaining subsidies be redirected on the basis that "public money should only be used for public goods that the public wants and needs."
• All production-linked measures should be removed.
• All tariff escalation should be eliminated and all tariff peaks reduced below a maximum level of 10 per cent by 2005 for imports from all developing countries.
• Current and future CAP reform processes should include an assessment of the likely impact of any proposed reforms on poverty reduction and food security in developing countries, and should have as an explicit objective, ensuring that CAP reform works in the interests of poverty reduction and food security in developing countries.
• Require that current and future CAP reform processes should be designed so as to minimise the transition costs for developing countries currently benefiting from preferential access to the EU market. This should involve substantial transitional aid for those worst hit by the changes.

• Fulfil their pledge in the Doha declaration for "reductions of, with a view to phasing out, all forms of export subsidies" and "substantial reductions in trade distorting domestic support". Binding calendars for both these should be agreed before the 5^th WTO Ministerial in Cancún, Mexico in 2003.
• Overhaul and make operational the Marrakech Decision of 1994, which promised transitional support to compensate food importing developing countries for any rise in food prices.
• Agree new WTO rules on domestic support by rich countries to outlaw the dumping of agricultural goods at below the costs of production.
• Support the introduction of a development box in the Agreement on Agriculture, providing developing country governments with the flexibility to protect their small-scale farmers from dumping.
• Oppose the extension of the so-called "peace clause" that exempts agriculture from challenge under WTO disciplines on subsidies. The peace clause is set to expire at the end of 2003.

• Call on the OECD to publish each year a full cost-of-production estimate for different crops, including all producer-paid costs, government-paid costs, marketing costs, and a reasonable profit, at least for all OECD member countries. Importing countries could use these figures as a reference for establishing minimum import prices. Imports at prices below these levels would be subject to countervailing duties in an amount equal to the level of dumping.
• Call on the OECD to put all information on subsidies (export refunds, export credits, direct payments, market price support etc) into the public domain.
• Press for an OECD-wide agreement to give tariff-and quota-free access to developed country markets to all products (except arms) from the least developed countries by 2005.

The EU’s Common Agriculture Policy is enormously expensive and enormously damaging. A typical family of four currently pays £16 a week in taxes and higher food prices to prop up a regime with a disastrous track record of overproduction, environmental degradation, and food safety scares.¹ If the CAP only affected Europeans, international aid agencies like CAFOD would leave the debate to others, but the CAP also undermines the livelihoods of millions of farmers in developing countries by dumping cheap produce in their markets and denying them export opportunities to the largest single market in the world.

Agriculture is overwhelmingly important for the economies and livelihoods of developing countries. For millions of families in the developing world, farming is not an occupational choice; it is the sole available means of survival. A sustainable, fair system of farming and farm labour can feed poor families, generate income and put children through school, laying the foundations for a better future for a large proportion of the world’s poor. If there is one sector in which developing countries ought to have an edge, it is agriculture. In practice, however, this is not so. As long as developing country farmers have to contend with cheap imports produced by heavily subsidized agriculture in rich countries, they have little hope of making a decent living or contributing to their countries’ development.

The CAP, and the subsidies and protectionism employed by the other major economic powers,² constitute a roadblock on the path to development for dozens of the world’s poorest nations. They are preventing them building on their agricultural potential to improve the lives of their poorest people and communities. Today, reports from CAFOD partners from Chile to Kenya say that subsidized products such as milk and sugar are causing serious damage to agricultural producers. When developing country farmers do achieve the capacity to export and can meet the stringent health and safety standards of the EU and the quality demanded by importers, they frequently find that the markets of European countries are closed to them by high tariffs.

This was never the intention. When the CAP was originally designed in the 1950s, Europe was a very different place. Still emerging from the trauma and hunger of war, the CAP was supposed to make Europe self sufficient in food, guarantee a decent standard of living for farmers, and ensure reasonable prices for consumers. But from the mid-1970s, the CAP has created agricultural surpluses, which were often dumped on the world market. The high CAP support prices distorted the economics of food production, encouraging farmers to produce quantity rather than quality.

"The other issue, also very sensitive, is the removal of subsidies to farming in northern countries, free trade for all or for none. Can CAFOD campaign on this?"

Partner quote: Roxana Liendo, CIPCA, Bolivia

Amid media scandals of wine lakes and butter mountains, the calls for CAP reform began. The first were the "MacSharry reforms" of 1992, which reduced prices of some agricultural products, which had been previously guaranteed. This decline in guaranteed prices for farmers was compensated by direct payments in a shift in focus "from product to producer". The last round of CAP reform was agreed in 1999 under the title "Agenda 2000". Covering the years 2000-2006, the main outcomes were a cut in prices for certain commodities with compensatory direct payments, and the creation of a new Rural Development Regulation ("Pillar 2" of the CAP). Pillar 2 supports rural development and agri-environment schemes designed to diversify rural economies, to encourage farmers to look to markets and diversified forms of income to reduce their dependence on food production and the subsidies it attracts, and enhance the environment.

In July 2002, Agriculture Commissioner Franz Fischler issued a "Mid-Term Review" of the CAP,³ kicking off a period of debate about its future direction. Once again, the CAP’s impact on developing countries was largely ignored, meriting only one mention in the text, and not figuring at all in the objectives set out for the reform process. In CAFOD’s view, this oversight is unpardonable, given the CAP’s severe impact on developing country farmers, and its central role in the round of global trade negotiations initiated in Doha in November 2001.

"The CAP is a crime against humanity"

Professor Lord Meghnad Desai, 2001⁴

In the days after the review was launched, agricultural lobbies swung into action all over Europe to oppose Fischler’s modest proposals. As the special pleading begins, civil society organisations must make their voice heard. Powerful agricultural interests should not be allowed to dominate the debate over the Common Agricultural Policy, to the exclusion of other groups, notably poor people in developing countries. This paper is a contribution to righting that imbalance.

Agriculture plays a central part in the well being of developing countries’ economies and their people. In the developing world an average of 50 per cent of people make their living from farming and agriculture, and in some countries this figure rises to over 80 per cent.⁵ Moreover, agriculture particularly affects women, accounting for the vast majority of women’s employment in developing countries.⁶ Agriculture also plays a central part in reducing poverty. Three quarters of the world’s 1.2 billion extremely poor people live and work in rural areas.⁷

In contrast, agriculture plays a much less important - even marginal - role in developed countries’ economies. In the EU just over 4 per cent of people work in agriculture, while in the UK, agriculture accounted for around 1 per cent of the workforce in 2000.⁸ With strong developed industry and good forms of social protection, the ups and downs of agriculture are simply not as crucial as in developing countries, where they are matters of life and death. The contrast is also stark in terms of the contribution of agriculture to the overall economy: On average agriculture contributed over a quarter of the value of low income countries’ GDP,⁹ compared to just 2.1 per cent for the rich club of OECD countries.¹⁰

For poor countries, agriculture should provide the first rung on the ladder of development. Agriculture is one of the most important elements of successful development and poverty reduction. Agricultural growth increases agricultural incomes and wages, stimulates local economies and non-agricultural sectors and can reduce food prices (which decreases poor people’s expenditure).

The development of a healthy agricultural sector can generate capital that is used for wider investment and diversification within both rural and urban economies. It generates local demand for the products of nascent industries and services suppliers.

Agricultural exports also generate vital foreign exchange. Nearly 40 developing countries depended on agriculture for over 50 per cent of their export earnings in 1998-2000.¹¹ In countries such as India, Bangladesh, Indonesia and China there has been a strong connection between poverty reduction and agricultural growth. No equivalent relationship, on this scale, could be found for manufacturing and services, in either rural or urban areas.

Yet developing countries are failing to make the most of their agricultural potential. Something has gone terribly wrong. According to one UN study, "Developing country shares of agricultural commodity exports have slumped, from 31.7 per cent in 1970-1972 to 26.4 per cent in 1998-1999; and the Least Developed Countries’ share dropped from 3.5 per cent to 1.0 per cent during the same period. Moreover, due to extensive trade liberalization by developing countries, producers are experiencing increasing import penetration in their own markets."¹²

Rural poverty in developing countries has become a critical problem. The gap between rural and urban development is real and increasing. A recent World Bank study found that rural poverty and slow rural growth were the major factors behind growing global inequality.¹³

Hunger and undernourishment are declining at a rate so slow that the UN’s goal of halving world hunger by 2015 looks increasingly unobtainable.

This decline is itself mainly due to achievements in a handful of large states, with the FAO noting in 2001 that "the number of undernourished has increased considerably in the majority of developing countries."¹⁶

Far from moving out of agriculture as they develop (as they have in low-tech clothes and shoe manufacturing), the rich countries and their powerful agribusiness lobbies have maintained their grip on world agricultural production and trade, using subsidies and tariff barriers to stifle developing countries’ potential. In economic terms, the rich countries have shifted the world market in agriculture away from a system based on comparative advantage in production to one of comparative advantage in subsidies. Despite the recent controversy over the US Farm Bill, the CAP remains one of the worst offenders among the larger economies.

The debate on CAP reform excites both interest and anger among developing country farmers and governments. It is seen, along with the US farm bill, as the worst example of northern double standards - summed up as a "you liberalize, we subsidize" attitude. In the Uruguay Round of talks, which led to the formation of the WTO, and included agriculture in global trade rules for the first time, the rich countries promised to reduce their subsidies. In fact they have done the opposite. Skillful trade negotiators twisted the rules by redefining what was meant by the word "subsidy" in order to exempt large chunks of US and European farm support from WTO reduction commitments. Despite their WTO commitments, total OECD support to agriculture rose from US$302 billion in the late 1980s to an average annual expenditure of US$330 billion in 1999-2001.¹⁹ This represented five times the global aid budget.²⁰

In November 2001, WTO member states agreed in Doha to launch a new round of global talks, with agriculture at their heart. The Doha declaration commits member states to "comprehensive negotiations aimed at substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support."

For the European Commission, which negotiates on behalf of the EU, the CAP is a major headache. It must juggle its Doha commitments with the domestic pressures of farm lobbies, and the impending enlargement of the EU to include a large number of Eastern European countries and their farmers.

The main way both the EU and the US (which also heavily subsidies its agriculture), get round this problem is by arguing that some kinds of subsidy are more "trade distorting" than others, and by offering to shift payments from one category to the other. So for example, the EU has agreed to negotiation on reductions to the most damaging form of subsidy - export subsidies. However, it has not agreed to cut the overall level of subsidy.

In CAFOD’s view, no amount of sophistry in Geneva can provide convincing evidence that the current annual EU support of US$16,000 per farmer²² is not trade distorting. It allows farmers to sell their crops at lower prices than they otherwise would have done, thereby leading to the dumping of EU produce at artificially cheap prices on the world market. If the EU is serious about making the current round of negotiations a "development round", it has to make the impact of the CAP on developing countries a central part of the CAP reform debate. A number of recommendations regarding how to do this are included at the end of this report.

CAFOD believes that, while this level of subsidy persists, poor countries should not be obliged to open up their food markets to artificially cheap, subsidized food imports from the North. This dumping endangers the livelihoods of hundreds of millions of food-growing small-scale farmers and their employees who cannot compete for their local markets with such unfair competition from the North. A number of developing countries, backed by CAFOD and other NGOs, have put forward a proposal for a "development box" in the Agreement on Agriculture, which would change the rules to allow governments the right to protect small-scale farmers from such influxes.²³ The EU should support this proposal.

"Without doubt, the level of subsidies of northern products is clear, and has been having a serious impact on traditional crops and cattle farming. Examples include sugar, rice and milk, among others. Tariff reductions are producing unfair competition, since many imported products enjoy heavy subsidies that distort prices and undermine local small-scale production. In Chile, tariff reduction has already occurred, with the above-mentioned effects, including on larger scale producers."

Partner quote: Jorge Brito Obreque, CRATE, Chile

The CAP hurts developing countries and their poor rural population in two ways: it undermines local producers within developing countries by dumping subsidized goods on their local markets, and it reduces the potential for developing country farm exports both to the European and third country markets.

Table 1 shows the share of the European Union in world markets in selected commodities, compared to an estimate of producer support that European Union producers get in subsidies and other forms of protection. As can be seen, in both reformed and unreformed sectors, export producers depend for up to 75 per cent of their income on the CAP, rather than the market. In CAFOD’s view, there are strong grounds for believing this level of support leads to dumping. At the very least, it is incumbent on those who claim that direct payments are not trade-distorting to present evidence for their view - CAFOD is not aware of any such evidence to date.

These findings are backed up by work commissioned by Oxfam, comparing the costs of production for EU producers with the price at which goods are sold on the world market.²⁶

• The EU’s wheat export prices are 34 per cent below costs of production
• The export price of EU skimmed-milk powder is around one-half of the costs of production.
• EU export prices of white sugar are only one quarter of production costs.

So despite being plainly uncompetitive in terms of costs of production, subsidies allow the EU to be a major player on world markets. The EU is the world’s largest exporter of both skimmed milk powder and white sugar. Subsidies allow the EU to dump its produce on world markets at below the costs of production on a massive scale.

There are a variety of ways in which the CAP exports subsidized products onto the world market. This is due to different "regimes" for different crops and also due to the changing nature of the CAP caused by recent reform. The most notorious, in terms of its development impact, is the use of export subsidies.

Before its recent reforms, the CAP was based largely on "price support" mechanisms that fixed a minimum guaranteed market prices for EU farmers. This paid farmers a high price for the products they produced. If EU-based companies wanted to sell these products on the world market (where prices were lower than EU prices) they could only do so if the EU refunded the difference to companies in the form of export subsidies equal to the difference between world and EU prices.

Export subsidies give EU-based companies a grossly unfair advantage on world markets, allowing them to sell goods at levels way below the cost of producing them and unfairly undermining developing country producers. The 1990s saw a number of scandals, such as damage caused to West African cattle farmers by the dumping of subsidized EU beef, at the same time as EU aid was being given to the same farmers!

Despite the current CAP reform process, the EU still accounts for 90 per cent of export subsidies used globally.²⁷ Although the amount used by the EU has been declining, US$3 billion was spent on export subsidies in 2000.²⁸ One sector still relying on export subsidies is the dairy industry. CAFOD’s research shows that dumped EU powdered milk has wrought havoc among small-scale dairy farmers in countries such as Brazil, India and Jamaica (see case study). Unfortunately, the CAP Mid-Term Review had no firm proposals about reform of the dairy sector, merely offering a series of alternatives for discussion.

"Agricultural products from countries like Bolivia cannot compete with Northern subsidies. A clear example in our case is milk. Despite several years of incentives to the dairy sector, dairy farmers are vulnerable not just to low prices and more processed imports from countries like Argentina and Brazil (due to their greater economies of scale), but even more fundamentally, to imports of European dairy products. In the last few years, as a result of the sale of the national dairy company to a Peruvian subsidiary of the Nestlé corporation, costs have been transferred to small-scale farmers in the Andean region, through more stringent controls and falling milk prices. In many places these producers have given up producing milk and moved into meat and other products. This will have a negative impact on food security and sovereignty."

Partner quote: Roxana Liendo, CIPCA, Bolivia

Because of the way these subsidies facilitate EU exports it is relatively clear to see and measure their impact on distorting trade and development. They have come in for a great deal of criticism at the WTO and the EU has been forced to reduce their use. Recent reform of the CAP has seen a move away from this form of support towards what are called "direct payments".

Failing farmers everywhere: How the EU dairy regime harms Jamaica, and bypasses UK farmers²⁹

CAFOD partners in several countries see the EU’s dairy regime, and in particular the dumping of skimmed milk powder, as particularly damaging. One disturbing example is provided by Jamaica. In 1992, Jamaican import tariffs on milk powder were reduced and the parallel subsidy for local dairy farming was abolished as a result of conditions attached to a structural adjustment loan, negotiated with the World Bank. This has resulted in a huge surge of milk powder imports into Jamaica - primarily from the EU.

Imports from the EU have almost quadrupled during the past 10 years. In 1992, the amount of milk solids imported from the EU was 1,200 tonnes. This rose to an average of 4,600 tonnes over the last 3 years, peaking at 6,300 tonnes in 2000.

The EU is the major source of imports of milk powder to Jamaica - accounting for 67 per cent of milk powder imports in 2000. It is estimated that the EU annually spends € 4 million on subsidizing milk powder to Jamaica.³⁰

The total market for liquid milk consumption in Jamaica is estimated at 150 million litres. Of this, Jamaican milk producers now account for only approximately 18 million litres - or 12 per cent of the domestic milk market. In the last two years alone production of local milk by farmers has fallen by 35 per cent.³²

With cheap imported milk powder easily available, Jamaican food companies have been turning their backs on Jamaican fresh milk. In particular they have been cutting back on purchasing from the smallest farmers based in rural areas.

Small-scale farmers based in remote rural areas depend upon their ability to transport their produce to markets. Previously in Jamaica a substantial infrastructure existed which enabled the milk companies, with the support of government, to collect, process and sell milk. This formed the basis of the Jamaican national dairy industry - linking poor rural producers with urban consumers - and allowed small-scale farmers to participate and benefit from the dairy market.

Cheap subsidized milk powder has helped destroy this infrastructure, and the ability of small-scale farmers to maintain their livelihoods.

Nestlé - a traditional, and major, purchaser of fresh milk from local farmers - has steadily reduced its purchases of fresh milk. As recently as 2001, Nestlé purchased 10 million of the 25 million litres of milk produced by Jamaican dairy farmers. This was reduced to 6 million litres in 2002. In the last five years, the smallest farmers have dwindled from producing 2.5 million litres to just over 300,000 litres.³⁴

The problem has been compounded by the purchasing influence of large milk processors and wholesalers in Jamaica. By buying cheap subsidized milk powder from the EU and USA, companies have been using the lower prices to drive down the price it pays local farmers for their milk. In some cases wholesalers and retailers are imposing a 150 per cent mark-up on consumers.

The Jamaican government has made attempts to address the problems of cheap imports, after pressure from the Jamaican dairy industry. In 1996 the Jamaican government raised tariffs on milk powder from 30 per cent to 50 per cent. However this has proved largely ineffective in combating the problem. The reason is that a tariff of only 5 per cent exists for importers who classify themselves as "manufacturers". A manufacturer can be, and is, loosely interpreted to mean any company "adding value" to the imported milk powder product which may involve simple processes such as repackaging, flavouring and so on.

As described above, this category covers not only the major milk companies in Jamaica, but also a series of new importers who have been set up purely to capitalise on the profits to be made from selling on imported milk powder. In effect, therefore the import duties on most milk powder in Jamaica are only 5 per cent - a nominal and ineffectual tariff. As early as 1994, a study by the international accountants KPMG for the Jamaican Anti-Dumping Advisory Board concluded that the EU and USA were dumping milk products on the Jamaican market and recommended that an anti-dumping duty of 137 per cent be imposed.³⁵

In reality, increased tariffs are the only short-term action available to the Government to level the playing field and help local farmers in their competition with cheap imports. However, the Jamaican Government appears powerless to implement increased tariffs given IMF and World Bank insistence on trade liberalisation - the government depends on these institutions for further loans.

The possibility of recourse to the WTO is also limited. Owing to WTO fine print, Jamaica is unable to use the simplest mechanism (the Special Safeguard Provision of the Agreement on Agriculture) available to protect itself from floods of cheap imports.³⁶ It cannot impose an anti-dumping duty on dairy products as Jamaica’s internal procedures have been found to be inconsistent with WTO anti-dumping rules. Jamaica would also face further barriers imposed by the high costs and complex procedures of bringing such actions within the WTO. Jamaica is also reluctant to take trade remedy measures against the EU, because it depends on Europe for preferential access for its banana and sugar exports.

The EU dairy sector is one of the most heavily supported agricultural regimes in the world. The Common Agricultural Policy spent € 2,510 million in 1999 on the dairy regime. The OECD estimates (through their Producer Support Estimate [PSE]) that EU governments provided the equivalent of US$17.384 billion to the dairy sector in 1999. PSE is a broader measure of agricultural support, including subsidies and higher prices due to import tariffs and quotas.

Yet despite this massive level of support, and the damage it does to farmers in developing countries, the CAP has also been failing dairy farmers within the UK.

UK dairy farmers are currently being paid less than their costs of production for their milk. In June 2002, the price of milk at the UK farm gate was 15 pence a litre; down 3.5 pence per litre from June 2001. For some farmers this is five pence below the cost of production.³⁷ According to the National Farmers’ Union, in the six years to June 2000 the number of UK dairy herds shrank by 21 per cent. In 2000 alone an estimated 8 per cent of UK dairy farmers quit the industry.³⁸

The CAP dairy regime is a "lose-lose" arrangement for farmers everywhere. The benefits are captured by the more powerful components of the supply chain: processors, exporters and agribusiness.

The striking thing about the current dairy regime of the Common Agricultural Policy is that no subsidies are paid to dairy farmers directly. Instead subsidies are paid only to processors and exporters.

Subsidies within the dairy regime of the CAP are paid to processors of Skimmed Milk Powder (SMP) and butter. This is called "intervention buying", and it pays processors a guaranteed minimum price for the SMP and butter they produce. Subsidies are not paid to processors of other milk products, such as cheese.³⁹

"Export subsidies" are paid to exporters of a few dairy products (SMP, butter, whole milk powder and cheeses to certain destinations) to enable them to sell onto the world market. This is needed because internal dairy prices within the EU are generally much higher than the world price. Export subsidies act as a "refund" from the EU to exporters to make up the difference.

"Many milk plants have been closed so the actual production of milk is greater than the possibility of processing it, so thousands of litres of milk get spoiled and the farmers cannot find enough money to feed their cows. At the same time "cheap imports" - powdered milk - have been imported in the country, increasing the problem of the excess of milk!!! Something similar happens with the sugar. Some [sugar] mills are closing because they cannot compete with the imported sugar, which is much cheaper than the one produced in our country - other countries, which did not cultivate sugar till now, have started to do so."

Partner Quote: Begona Inarra, Msola, Kenya

However, dairy farmers still benefit by proxy from the EU dairy regime, because the support provided to processors and exporters underpins the whole of the dairy market. This means that prices within the EU for dairy products are higher than they otherwise would be without the CAP. Dairy farmers also benefit from high levels of tariff protection against potential competition from outside the EU.

Nonetheless the prime beneficiaries of the CAP are processors and exporters. Although dairy farmers often benefit from the level of support given, the lions share of benefits are captured higher up the supply chain. And because support for the dairy farmers themselves is not emphasised, in certain circumstances they are actually losing out.

As the use of export subsidies and price supports have fallen, farmers have been compensated through the "direct payment" system. Direct payments do not pay producers a higher price for their products. Instead they pay subsidies to producers directly, based either on "area payments" (the area cultivated by the farmer) or on "headage payments" (the number of livestock produced by the farmers). Rather than reform creating a reduction in total support, reform has instead involved a shift from one form of support to another. By 2001, 67 per cent of the CAP budget - some € 28 billion - was spent on direct payments.⁴⁰

Direct payments keep intact the fundamentals that allow EU producers to compete unfairly on international markets. Supporters of direct payments argue that paying by head of cattle or by hectare reduces the incentives to go for the highest possible yields, because a low input farmer receives the same as a high input farmer. But by continuing to subsidize the producer, direct payments continue to allow the sale of goods at below the costs of production. EU producers can then export at lower subsidized prices - which is often lower than the world market price. Whether a European farmer is paid € 1000 for their product or is paid € 1000 directly into their bank account makes little practical difference to their ability to compete unfairly.

Direct payments also give cause for concern in the way they change the relationship between subsidies and the ability of European farmers to export. Because direct payments are no longer keeping EU internal agricultural prices as high, prices can fall to the level of world prices or even lower. This allows EU exporters to export without having to resort to the bureaucracy of export subsidies.

CAFOD’s research into the wheat sector shows that the direct payments to farmers promoted by the current CAP reform process is still leading to dumping. Since 1992 CAP reform in the wheat sector has moved from payments per bushel towards a system of direct payments to farmers. However, EU farmers were still able to sell cheap wheat onto the world market.

The OECD estimates that in the six years after the last phase of wheat reform in 1999, the EU will substantially increase production, exports (by nearly 40 per cent more than previously) and their share of the world market in wheat. One expert has described the difference to developing countries of the shift from export subsidies to direct payments as being "pick-pocketed instead of mugged".⁴¹

Politically, direct payments have the benefit for the EU of avoiding WTO restrictions imposed on export subsidies. The EU has used direct payments as a way to "fulfil" its WTO commitments on export subsidies, while increasing its total level of subsidies.

CAFOD believes that the debate around current subsidies has been more about political sleight of hand than a real examination of how subsidies affect developing countries. A false dichotomy has been set up around "export subsidies" and "direct payments" - there is need for a real debate about the nature of subsidies, the links with producer and production, how they are implemented, and the implications this has for EU exports and developing countries. The Mid-Term Review goes some way to address these issues, but much more needs to be done.

A world market based on comparative advantage in subsidies (rather than in production) has ensured that the richest nations dominate, stealing the benefits of agriculture away from the poorest.

There is, unsurprisingly, a strong relationship between levels of EU subsidies and levels of EU exports. Since 1970, the EU has shifted from being a net importer to one of the world’s largest net exporters of wheat, sugar, beef, and dairy products. The transformation has been so dramatic that the EU is now the world’s second largest exporter of agricultural products. One academic study⁴² estimated that the CAP increases EU exports of meat products onto the world market by nearly fifty times and increases EU exports of grains, other crops and milk products onto the world market by nearly a hundred times.

This switch has caused massive distortions in international agricultural trade, exerting a profound influence on the production and trade of agricultural products in many countries.

For the many developing countries that rely on agricultural exports as a key source of earnings this has been devastating. Acting as the cuckoo in the nest of world trade, the EU has unfairly pushed developing countries out of third country markets. South Africa, one of the most efficient sugar producers in the world is being denied a chance to grow by the EU - one of the most inefficient and heavily subsidized. According to one estimate, as a result of the CAP developing countries (excluding Latin America) have decreased production of milk products by nearly 50 per cent and foregone exports of milk products by over 90 per cent, livestock by nearly 70 per cent, meat by nearly 60 per cent and grains by over 40 per cent.⁴⁴

The consequences for development are serious. Because of the CAP, agriculture as a driver for growth in developing countries has been stunted. Deprived of export earnings from agriculture, developing country governments struggle to repay debts or find money for schools and hospitals, and rural economies and communities stagnate.

Increased levels of EU production reduces Europe’s demand for imports, while high tariff barriers mean that many developing countries are unable to export to the EU and lose a valuable source of potential income. However, a number of poor ex-colonies of EU member states, known as the ACP (Africa, Caribbean and Pacific) countries, have some degree of preferential access to the EU market under the Cotonou Agreement, allowing them to benefit from high internal EU prices.

In 2001, the EU took a welcome step with the Everything But Arms initiative. Although this was originally intended to open EU markets to the products of all Least Developed Countries (LDCs) with immediate effect, fierce lobbying by the EU sugar industry, backed by Caribbean producers who feared losing their preferential access, seriously diluted key aspects of the proposal, delaying access for sugar, rice and bananas for up to a further eight years.

The Everything But Arms initiative will help poor farmers and farm labourers in several countries.

According to Alexandre Muguambe, a leader of Mozambique’s national sugar workers’ union, sugar is a labour intensive crop, so increased exports should lead to more jobs and better conditions for the workers, "Trade is an important way to eradicate poverty", he says, "we are a totally agricultural country and if we had the market, we could triple production and improve conditions." At the moment trade barriers mean that Mozambique exports less than ten per cent of its production to the EU and US.⁴⁵

In general, however, developing countries face huge obstacles when trying to sell their produce into the EU market. Developing countries find EU tariffs horrendously complex, varying from month to month for each product. They also contain "tariff peaks" - high tariffs on particular products, often those of most interest to developing country exporters, and "tariff escalation" - tariffs that rise with the level of processing, in an effort to ensure that developing countries stick to exporting raw materials, and European companies (and workers) keep the more lucrative parts of the production chain within the EU. Developing country agro-exporters also face unfair competition with dumped EU products in other markets.

The barriers to developing countries are effective. One study by the UK Government’s Department for International Development found that, while poultry exports from least developed countries to the rest of the world rose 87 per cent from 1996-2001, their exports to the EU failed to increase at all. The comparable figures for poultry exports from "other developing countries" (i.e. not the poorest) were 80 per cent and 25 per cent respectively.⁴⁶

There are numerous studies, largely based on economic modelling of arguable value and accuracy,⁴⁷ of the potential gains to developing countries from improved market access and an end to EU subsidies. The World Bank calculates that OECD policies in agriculture cost the developing world annual welfare losses of US$20 billion per year, or 40 per cent of the value of aid flows.⁴⁸ The OECD estimates that a reduction of agricultural support levels by rich countries by 10 per cent would lead to an average increase of 2.2 per cent in the international price of crops, benefiting exporting countries.⁴⁹

Even if such modelling is accurate, however, such studies fail to explore the distribution of costs and benefits within developing countries. Agro-exports have a mixed record: in some sectors and countries, they have led to improved income for small-scale farmers and improved wages and conditions for rural labourers. Elsewhere, however, (e.g. horticulture in East Africa) the ever-rising quality and health and safety standards required by northern supermarkets and consumers effectively prevent small-scale producers from breaking into the export business.

In other countries, (e.g. soyabean production in Brazil), export agriculture is highly capital intensive, creates few jobs and can even lead to expulsion of small-scale farmers, either directly or through increased land prices. In such circumstances, the poor may, however, benefit from improved government revenue, (which can then be spent on schools and hospitals). Moreover, there are questions surrounding the environmental sustainability of some agro-export industries, which often rely on high levels of chemical inputs. Many CAFOD partners argue that the industrial model of agriculture promoted by the WTO and the export industry is often neither sustainable nor suitable for small-scale farmers in developing countries.

Above all, countries and farmers in general do not trade - companies do. A small number of giant transnational companies dominate world trade in grains, meat and other products. Often it is these companies that benefit from trade liberalization, using their market power to squeeze both producers and consumers, capturing an ever-larger slice of the final value of a product for themselves.⁵⁰

Agro-exports thus bring a mixture of costs and benefits to the poor, the balance of which will vary according to product and the specific circumstances in each country. There is still a worrying lack of research and understanding of the conditions in which export promotion in developing countries and/or improved market access in the North produce concrete gains in terms of poverty reduction. Until such issues are better understood, the benefits to be gained from improved market access must be regarded as uncertain and unquantifiable. In contrast, dumping on developing country markets is a proven and highly damaging direct consequence of the CAP that, CAFOD believes, must be addressed in the Mid-Term Review.

"Not only do these subsidies make it impossible for developing countries to compete. They also do great damage to the rich countries themselves, by perpetuating unsustainable practices in farming, transport and energy use. Powerful interest groups within rich countries will try hard to block meaningful concessions to the developing world. They will argue that the interests of workers and farmers are being sacrificed. But there are other ways to help those groups that really need help - ways less costly to consumers and taxpayers in rich countries, and less harmful to producers in poor ones."

Kofi Annan, 25 February 2002⁶²

Not only does the CAP damage the livelihoods of countless poor farmers in developing countries, but it also fails to deliver the promised benefits to taxpayers, consumers and small-scale farmers in the EU.⁵² Table 4 shows figures provided to CAFOD by the UK government. These show that with the exception of a few very large-scale landowners, who receive high levels of support when they scarcely need it (see box, page 16), high subsidies do not translate into high incomes. For small-scale farms, the picture is particularly stark - on average, small-scale farms in the UK receive £10,000 per year in grants and subsidies, on top of a net income of less than £2,000. So even though they receive subsidies equal to five times their income from the farm, they still earn only half the UK average male wage. Instead, the benefits accrue to food processing companies and supermarkets, which are able to beat down farmgate prices still further thanks to the cushion of subsidies received by the farmer. CAP support enters through one farm gate and leaves by another.

• The CAP costs an average family of four in Europe £16 per week in taxes and higher food prices.⁵³
• Of this, in the UK approximately £5 per week comes as increased taxes - the equivalent of 2p on the standard rate of income tax.
• Food in Europe is more expensive than almost anywhere else in the world.

The CAP’s focus on increasing productivity has resulted in degradation of the environment:

• In the UK alone 300,000 miles of hedgerows have been lost since the 1950s.⁵⁴
• In the UK the populations of nine key species of Farmland birds fell by more than half between 1970-1995.⁵⁵
• In the UK between 1975 and 1995 the area of grassland fell by 12 per cent.⁵⁶

Rural development⁵⁷

• Over the past 25 years the European farm labour force has fallen from 13 million to just 7 million today.
• In most European countries where rural land accounts for the majority of the territory, such as Italy, Spain and Greece, the active rural population has been reduced to one-fifth of its number since the 1950s.
• In Spain, 1131 small villages have disappeared in the second half of the 20^th century.

• About 70 per cent of CAP money goes to 20 per cent of the largest farms in Europe.⁵⁸
• 70 per cent of farmers in the EU receive less than € 5000 annually.⁵⁹
• Small-scale farmers account for nearly 40 per cent of EU farms, yet only receive 8 per cent of subsidies.⁶⁰
• Figures released in 2001 by the Ministry of Agriculture, Fisheries and Food revealed that five UK farms are each receiving over £1m a year in European subsidies.⁶¹

The CAP is often justified in terms of supporting small-scale farmers, but in practice, they receive only a small slice of the pie. All too often, large-scale farmers and agribusiness interests manipulate the public’s concern for the plight of small-scale farmers to keep their own subsidies flowing. Since the 40 per cent of Europe’s farmers working small plots only receive 8 per cent of the total CAP expenditure, there is ample room both to cut the overall size of the CAP (thereby reducing dumping on developing countries) and to improve the level of support to small-scale farmers. However, European governments and the European Commission must be prepared to face down the farm lobby of large-scale farmers, while small-scale farmers must realise that their interests do not necessarily coincide with those of their larger rivals.

The CAP has far-reaching consequences for developing countries and for the future of the international trading system. Reform is an imperative, and this reform must take into account, and work to prevent, the negative effects that European subsidies and other CAP policies are having upon the livelihoods of some of the world’s poorest people.

In July 2002, the European Commission initiated a "Mid-Term Review" of the current phase of CAP reform. The major proposals included:

• Continuing the process of reform from Agenda 2000 in the cereals and rice sector
• "Decoupling" subsidies from production
• Requiring farmers to fulfil stricter environmental and quality criteria in return for CAP benefits ("cross compliance")
• Redirecting a proportion of spending away from all but the smallest farms into rural development schemes targeted at the most needy
• Limiting subsidy payments to individual farmers to a maximum of € 300,000 a year⁶⁸
• Keeping the overall annual budget at € 40 billion⁶⁹

CAFOD welcomes the proposals for decoupling payments from production, the move towards more money for rural development and the measures that will favour small-scale farmers. The language on the environment is also encouraging. However, CAFOD believes that the MTR’s treatment of development and developing countries is grossly inadequate.

The Mid-Term Review largely ignores the CAP’s impact on developing countries. It merits only one mention in the text - a mere assertion that the reforms proposed by the MTR are "expected to improve market opportunities for developing countries" - and does not figure at all in the objectives set out for the reform process.

CAFOD has also been dismayed to learn that at the meeting of the European Development Council (made up of EU member state development ministers) in May 2002, efforts made by some EU governments to ensure that CAP reform should be consistent with EU goals of poverty reduction and sustainable development were blocked.

CAP reform should include an assessment of the likely impact of any proposed reforms on poverty reduction and food security in developing countries, and at the very least, EU governments should ensure that CAP reform is consistent with EU goals of global poverty reduction and sustainable development. To ensure this happens, CAP reform should have as an explicit objective that it works in the interests of poverty reduction and food security in developing countries.

CAFOD has several other concerns with the Proposals

"Decoupling". The proposals take a substantial step in moving away from the link between subsidies and production. But CAFOD is concerned that, given the high level of support that EU producers currently receive, even these proposals will still lead to the "dumping" of goods at below the costs of production. This applies particularly to the cereals sector, where such subsidies make up nearly all of current support to producers.

The MTR proposes that payments will continue to be given to farmers, but these payments will be based on "historical" data on the area and yields of farms. There will be no obligation upon producers to produce;⁷⁰ the amount given will be progressively cut by a fifth from current levels, with the savings redirected to rural development; and farmers will be required to comply with a series of regulations on the environment, food safety and animal welfare.

CAFOD is concerned that in practice this will mean that money will continue to be used to subsidize production. As price support has fallen, farmers have been compensated through the direct payment system. Given the weight of the EU on world markets this cannot fail to translate into an unfair advantage against developing countries. Given the level of current subsidies it is also fair to assume that a reduction of total payments by only a fifth will not correct current imbalances. The language on the environment and "cross compliance" is welcome - but there is a world of difference between using public money for positive spending on environmental goods, and merely giving public money to producers on condition that they need only comply with a few weak environmental regulations.

CAFOD awaits with interest more details as to how the Commission would implement such a scheme. There are two areas where it is important that the Commission delivers:

a) The Commission needs to give over-riding priority to development concerns in the ways that these proposals are implemented so as to ensure that dumping at below the costs of production is prevented.

b) It is important that the decoupling proposals are implemented in a way that prioritises public goods. Any "cross compliance" criteria need to be sufficiently rigorous in terms of the environmental, rural development and animal welfare standards to produce genuine public goods.

Rural Development. The move of payments towards rural development is welcome, but far too slow. The MTR plans to have 20 per cent of the CAP devoted to rural development within seven years.

Small-scale Farmers. Given the size of current imbalances the proposals for the MTR are timid. The distorting effect of basing payments on historic levels will reinforce the inequities in the current system - for example the imbalance between large-scale arable farmers and small-scale livestock producers. Subsidies so heavily weighted to benefit large-scale farmers over small-scale farmers skew the agricultural support system away from the achievement of social goals within the EU in favour of subsidizing production. From both a developing country and a taxpayer’s perspective this is neither just nor justifiable. CAFOD believes that the Commission’s proposal to "cap" the level of subsidy to any one farm at € 300,000 (above an initial "allowance" determined by the number of workers employed) is far too high and should be reduced further.

Failure to address key sectors for development. For developing countries it is bitterly disappointing that the MTR fails to mention reform for the two largest offenders within the CAP - the sugar and dairy regimes. Both these current systems are causing grave damage to developing country agriculture, yet no concrete proposals have been put forward for change. The sugar regime is up for review in 2003, and development concerns should play a central part in guiding reform proposals.

Failure to reduce the CAP budget. The MTR will not change the total budget of the CAP. This is still a tremendously large amount of money. CAFOD finds it highly implausible that this level of spending will not distort trade and harm developing countries.

Much will depend upon the extent to which these proposals are watered down, as the initial paper is discussed, amended and agreed by member states. The danger is that politics will once again sink hopes for a new deal on the CAP.

"Food is not the right only of those who have purchasing power, or those who produce - it is the right of every human being ... The right to life requires distributive justice and it stands above the criteria of the market. Nobody should be fearful of falling into poverty or of going hungry. Food is not to be treated as one form of merchandise among others, which is produced and accumulated according to the interests of its owners."

CNBB, Brazilian Bishops conference, April 2002.

The CAP fails Europe and hurts the world’s poor. After the foot and mouth crisis, the British Government decided to scrap the Ministry for Agriculture, Fisheries and Food, partly because it had been captured by the farm lobby and was failing consumers. It was replaced with a Department for Environment, Food and Rural Affairs. A similar rethink is now required at the European level. DG Agriculture and the CAP, which is increasingly not about agriculture, but about rural development and environment, should be wound up; the CAP should be replaced with a new Rural Development Policy, and its functions divided up among the relevant Commission Directorate Generals (e.g. Employment and Social Affairs, Environment or Regional Policy).

Meanwhile, a number of steps forward can be taken through the Mid-Term Review process⁷¹ and at WTO and OECD levels. Consumer and environmental NGOs have made a number of excellent proposals, so CAFOD has confined its recommendations to those of greatest importance to development.

• The total volume of EU subsidies should be substantially reduced.
• Remaining subsidies be redirected on the basis that public money should only be used for public goods that the public wants and needs.
• All production-linked measures should be removed.
• All tariff escalation to be eliminated and all tariff peaks reduced below a maximum level of 10 per cent by 2005 for imports from all developing countries.
• Current and future CAP reform processes should include an assessment of the likely impact of any proposed reforms on poverty reduction and food security in developing countries, and should have as an explicit objective that CAP reform should work in the interests of poverty reduction and food security in developing countries.
• Require that current and future CAP reform processes should be designed so as to minimise the transition costs for developing countries currently benefiting from preferential access to the EU market. This should involve substantial transitional aid for those worst hit by the changes.

• Fulfil their pledge in the Doha declaration for "reductions of, with a view to phasing out, all forms of export subsidies" and "substantial reductions in trade distorting domestic support". Binding calendars for both these should be agreed before the 5^th WTO Ministerial in Cancún, Mexico in 2003.
• Overhaul and make operational the Marrakech Decision of 1994, which promised transitional support to compensate food importing developing countries for any rise in food prices.
• Agree new WTO rules on domestic support by rich countries to outlaw the dumping of agricultural goods at below the costs of production.
• Support the introduction of a development box in the Agreement on Agriculture, providing developing country governments with the flexibility to protect their small-scale farmers from dumping.
• Oppose the extension of the so-called "peace clause" that exempts agriculture from challenge under WTO disciplines on subsidies. The peace clause is set to expire at the end of 2003.

• Call on the OECD to publish each year a full cost-of-production estimate for different crops, including all producer-paid costs, government-paid costs, marketing costs, and a reasonable profit, at least for all OECD member countries. Importing countries could use these figures as a reference for establishing minimum import prices. Imports at prices below these levels would be subject to countervailing duties in an amount equal to the level of dumping.
• Call on the OECD to put all information on subsidies (export refunds, export credits, direct payments, market price support etc.) into the public domain.
• Press for an OECD-wide agreement to give tariff- and quota-free access to developed country markets to all products (except arms) from the least developed countries by 2005.

1 | Based on OECD’s Total Support Estimate for 2001 (OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2002, Paris, 2002) and EU population figures from Eurostat in January 2000 (latest available)

2 | The most notorious recent example has been the 2002 US farm bill, which increased support for US farmers budget to US$180 billion over ten years. This represents a 70% increase (some calculations put the spending higher at an 80% increase) on the amount foreseen at the end of the FAIR Act (the previous US farm bill).

3 | European Commission, Communication From the Commission to the Council and the European Parliament: Mid-Term Review of the Common Agricultural Policy, COM (2002) 394, Brussels, 10 July 2002

4 | Presentation at ODI Seminar, ‘Who rules? The future of global governance’, London, 7 November 2001

5 | FAOSTAT database, August 2001

6 | United Nations Population Fund, http://www.unfpa.org/modules/intercenter/cycle/labour.htm

7 | International Fund for Agricultural Development (IFAD), Rural Poverty Report 2001, Rome, 2001

8 | OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2001, Paris, 2001

9 | World Bank, World Development Indicators 2001, Washington, 2001

10 | 1997-99 OECD Average, from OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2001, Paris, 2001

11 | Speech by Mike Moore, Director General of the WTO, 21 March 2002

12 | UNCTAD, Agricultural Exports of Developing Countries: Unlocking Potential, Geneva, July 2001

13 | Branko Milanovic, True world income distribution, 1988 and 1993: first calculations based on household surveys alone, World Bank, Washington, 2002

14 | International Fund for Agricultural Development, (IFAD), Rural Poverty Report 2001, Rome, 2001

15 | FAO, Gender and Food Security, FAO Website, http://www.fao.org/Gender/

16 | FAO, The State of Food and Agriculture 2000, FAO, Rome, 2001

17 | OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2002, Paris, 2002

18 | Producer Support Estimate (PSE) is an indicator of the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, arising from all policy measures that support agriculture. It includes, among other things, both subsidies and higher prices due to tariff protection or import quotas. Source: OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2002, Paris, 2002

19 | OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2002, Paris, 2002

20 | OECD figures, from http://www.oecd.org/

21 | Calculation based on total EU Producer Support Estimate (PSE) for dairy from both the CAP and individual government spending in 1999 (US$17.384 billion) - OECD figures. EU had 21.5 million dairy cows in 1997, Source: Commission of the European Communities, 2001. This gives US$809 per cow per year, or US$2.20 per day.

22 | OECD, Agricultural Policies in OECD Countries, Paris, 2001

23 | For more information on the development box proposal, see http://www.iatp.org/tradeobservatory/library/index.cfm?c_id=42

24 | Chris Horseman, Agra Europe Ltd, A Brief Overview of the CAP, Presentation at DFID seminar, 5 July 2002, based on European Commission figures

25 | OECD, Agricultural Support Estimates - Database 1986-2000, Paris, 2001

26 | Oxfam, Rigged Rules and Double Standards, Oxford, 2002

27 | US Department of Agriculture, http://www.ers.usda.gov/

28 | OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation 2002, Paris, 2002

29 | This section is based on two background papers. Both available on the CAFOD website: Failing Farmers Everywhere (www.cafod.org.uk/policy/ukdairyfarmers200208.shtml), and EU Dairy Dumping in Jamaica: CAFOD case study (www.cafod.org.uk/policy/jamaicadairydumping200208.shtml)

30 | EuroStep, Dumping in Jamaica: Dairy Farming undermined by subsidized EU exports, Brussels, 1999

31 | Eurostat 2002

32 | Jamaican Dairy Board

33 | Interview by Fiona Watson

34 | Jamaica Dairy Farmers Federation Grade "B" milk statistics

35 | Commonwealth Secretariat, A Milk Production Strategy for Jamaica, London, 1996

36 | Jamaica under WTO rules is not allowed to have recourse to the Special Safeguard provision of the Agreement on Agriculture because it did not undertake ‘tariffication’ in the Uruguay Round. For more information see FAO, Agriculture, trade and food security issues and options in the WTO negotiations from the perspective of developing countries - Vol. II country case studies, Rome, 2000

37 | ActionAid, Farmgate: The Development Impact of Agricultural Subsidies, London, 2002 and NFU

38 | NFU Press Release, London, 12 August 2002

39 | The minor exception to this is private storage aid paid for three type of cheese (Grano Padano, Parmigiano Reggiano & Provolone)

40 | Based on Preliminary Draft Budget of the European Commission for the Financial Year 2003, Annex 7

41 | Paul Goodison, How does the CAP work in relation to the Cotonou Agreement?, Brussels, 2001

42 | Borrell & Hubbard, ‘Global Economic Effects of the EU Common Agricultural Policy’, in Economic Affairs, London, June 2000

43 | Source for CAP spending figures: European Commission, The Community Budget: The Facts in Figures - 2000 edition, Brussels, 2001 Figures for EU Agricultural Exports only available from 1976. Source: Eurostat 2002

44 | Borrell & Hubbard, ‘Global Economic Effects of the EU Common Agricultural Policy’, in Economic Affairs, London, June 2000

45 | ‘Sweet Dreams go sour across culture divide’, The Guardian, London, 23 August 2002

46 | Presentation by Susan Matheson, DFID, at DFID workshop, ‘The Impact of the CAP on Developing Countries’, London, 5 July 2002

47 | For an analysis of the failures of attempts to model the impact of the Uruguay Round, see Sophia Murphy, Managing the Invisible Hand: Markets, Farmers and International Trade, IATP, Minneapolis, April 2002

48 | World Bank, Attacking Poverty - World Bank Development Report 2000/2001, Washington, 2001

49 | OECD, Agricultural Policy Reform: The Need for Further Progress, Paris, 2001

50 | For a fuller discussion of this issue see Sophia Murphy, Managing the Invisible Hand: Markets, Farmers and International Trade, IATP, Minneapolis, April 2002

51 | Adapted from Stevens, Keenan and Yates, Levelling the Field - will CAP reform provide a fair deal for developing countries?, CIIR, London, 1998

52 | For a broader analysis of the social and environmental impact of the CAP, see UK Food Group and Sustain, The Common Agricultural Policy, London, 2002

53 | Consumers Association, Setting Aside the CAP, London, 2001

54 | RSPB website, http://www.rspb.org.uk/

55 | Friends of the Earth UK, Food and Farming: Time to Choose! - Call for a new CAP: Sustainability, Quality and Local Diversity, London, 2002

56 | Friends of the Earth UK, Food and Farming: Time to Choose! - Call for a new CAP: Sustainability, Quality and Local Diversity, London, 2002

57 | Friends of the Earth UK, Food and Farming: Time to Choose! - Call for a new CAP: Sustainability, Quality and Local Diversity, London, 2002

58 | "European Agriculture: aims, function and future developments", Speech by Commissioner Franz Fischler at the European Voice Conference on "Farm to fork: the future of food policy", Brussels, 22 November 2001

59 | Presentation by Chris Horseman, AgraEurope, DFID seminar , London, 5 July 2002

60 | ABARE, US and EU Agricultural Support: Who does it benefit?, Canberra, 2000

61 | Barnett, ‘Revealed: How Britain’s richest man takes a £3 million tax handout’, The Observer, London, 20 May 2001

62 | Speech at the London School of Economics, London, 25 February 2002

63 | ActionAid, ‘Farmgate: The developmental impact of agricultural subsidies’, London, 2002

64 | Barnett, ‘Revealed: How Britain’s richest man takes a £3 million tax handout’, The Observer, London, 20 May 2001

65 | Companies House, Company Returns on Yattendon Estates Ltd, London, 2002

66 | Cahill, Who Owns Britain, London, 2001

67 | Companies House, Company Returns on Abbots Ripton Farming Co. Ltd, Lavenham Fen Farms Ltd, and Worlick Farm Ltd, London, 2002

68 | The € 300,000 ceiling is calculated above a floor determined by the number of farm workers employed. All farms receive an initial ‘allowance’ of € 5000, and a further € 3000 per additional full time employee

69 | Constant 1999 prices

70 | With the exception of the beef sector

71 | CAFOD’s full submission on the Mid-Term Review is available on www.cafod.org.uk/policy/defrasubmission200209.shtml, or by email from dgreen@cafod.org.uk.