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EU agricultural support to member states is a barrier to development in Africa and elsewhere. Support levels vary by member, and remain high internationally, but neither the EU nor the OECD publish comparable figures on support levels in the 28 members. In this note, we publish the first estimates of agricultural support by EU members. We have assembled these estimates from various sources to enhance transparency and scrutiny of this spend.

With the EU 2021 to 2027 budget discussions about to enter a key phase, our estimates—using the OECD’s established measure—show that current subsidy levels are more than four times higher in several eastern European members than in the Netherlands, where subsidies are lowest. Ireland and Poland are mid-table, but support levels are around double those of Denmark. Countries with higher support are clearly at an advantage despite being part of the EU’s “Common Agricultural Policy” (CAP).

Our estimates also show France, Ireland, and Luxembourg—who support a high agriculture budget—are actually in the bottom half of EU members in terms of support levels. If these development leaders shifted their position to equalize subsidy levels in a reduced budget, this would even the EU playing field and also support an important reform for development.

Below we explain why EU agricultural spend matters, our approach, and—we think—the first-ever EU member producer support estimates. This is followed by a brief analysis and conclusions.

Does support to agriculture still matter to development?

There’s no doubt that agricultural support levels are lower than they were three decades ago. Last year, the EU spent over 37 percent of its budget on agriculture, although the EU’s Multiannual Financial Framework could reduce this to between 28 and 31 percent of the total between 2021 and 2027. At over 50 billion euros a year, this is around three times the EU’s aid budget, and many times each of migration and environment and climate action, where annual spend is under a billion.

The effect of agricultural support is largely pernicious: it increases EU production, lowers global agricultural prices, and makes it harder for importers. African agriculture—which accounts for over 15 percent of sub-Saharan Africa’s total GDP—is disadvantaged by lower international prices and because Africa does not have 50 billion euros per year to support it.

How high are EU subsidies?

The EU’s support levels are high by international standards.The OECD’s “producer support estimate” (PSE) calculates support as a share of total farm income. The latest figure for the EU is 20.0 percent (2018)—above the OECD average and well ahead of China, the US, Russia, Canada, Brazil, and Australia (see figure 1). The EU’s subsidies are not all linked to production levels, and so are likely to be less distortionary than some, though this is difficult to quantify.

Source: OECD Producer and Consumer Support Estimate Database. Link to data here.

These subsidies are known to vary by member state—but which EU members are receiving the highest and lowest subsidy levels? We have collated, combined, and analysed the latest available information (2017) on EU agricultural payments, and have allocated trade-related support by sector, to produce the first member-level estimates of producer support.

EU members support levels

Figure 2 sets out our estimates of producer support expressed as a proportion of farm income by EU member state. (Split into subsidy and market price support (MPS) elements.)

 
Source: Author’s analysis of data from OECD, Eurostat, and European Commission. The full calculations are here.

This highlights that, using the standard international measure (%PSE), there is wide variation in the support provided to agriculture within the “Common” agriculture policy:

  • Six EU members receive more than four times the support of the Netherlands
  • Traditional supporters of agriculture spend like Ireland, Luxembourg, Italy, and Poland are all below the EU average
  • Despite being a vocal critic of the CAP (and receiving a separate rebate) UK support is broadly the same as the EU average
  • France’s support is only just above average, while Germany’s is in the bottom quarter
  • In terms of the “market price support” element—which inflates EU food prices—Belgium, Hungary, Malta, Poland, and UK producers benefit most

The variation seen here reflects a combination of factors, few of which relate to a policy objective. Most payments are distributed on the basis of a farm’s size in hectares—though per hectare rates vary and were often based on the historical value of production. Other payments relate to sustainability of farming methods, numbers of young farmers, or how much farms produce.

Method and caveats

We have estimated the two main elements of the PSE: subsidies and market support. On the former, we look at the subsidies provided by the EU under its two European agricultural funds—the Guarantee Fund and the Fund for Rural Development. For rural spend, EU countries match funding, so we’ve added that. On the latter, market support, the estimate incorporates the benefits to producers from prices above (world) market levels. We’ve used the EU figure for market support and allocated it among member states according to their share in the sectors that benefit (for example, beef producers benefit from EU-level trade protection, and we’ve allocated that benefit according to each country’s share of EU beef production).

This is not as rigorous as the approach taken by the OECD in producing its estimates, and we reach a slightly different overall EU figure of 18.4 percent (the OECD calculates 19.1 percent for 2017). We’ve made some simplifying assumptions, in particular in allocating which sectors benefit from market support and assuming all rural spend is matched. Still, we think it is a good guide to what the OECD would estimate (if EU members would allow it to!). We’ve described our method in annex C,  and attached our calculations—we welcome feedback.

Conclusions for EU’s Common Agricultural Policy

Within the EU, our estimates suggest an “Un-common” rather than a “Common” agriculture policy which undermines the EU’s level playing field.

Countries with below-average subsidy levels like Denmark, Germany, the Netherlands, and Sweden should continue to push for lower subsidy levels overall.

Other development leaders, like France, Ireland, and Luxembourg, are defending agriculture subsidies as “friends of the farmers.” Our estimates show that their support levels are actually in the bottom half of members, and they could shift their position to suggest an alternative approach where producer support is equalised between members, and lowered overall—supporting development and levelling the EU playing field.

The EU’s next Financial Framework is being discussed and agreed over the coming months. In a world where the challenges are about fragility, climate, and migration, there are much better uses for the hundreds of billions of euros spent on agricultural subsidies which hold back development and accelerate climate change. We hope these new estimates improve understanding of EU agricultural spend and accelerate progress in reform.

We are very grateful for advice on our approach from Alan Matthews, Professor Emeritus, Trinity College Dublin. We’re also very grateful for advice, data manipulation, and QA from Lee Robinson; and for initial data collection from Hannah Timmis. All views and any errors are the authors.

Please see PDF for tabulated results and excel file for full calculations.

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