Doffing a cap to agriculture reform
On agriculture, Poland and the EU are caught between a rock and a hard place. The EU knows that CAP payments encouraging greater production at a time of a huge food surplus is nonsense. However, it realizes that the farming lobbies in Southern Europe will make their governments' lives absolute hell if the subsidies are reduced. This is why the EU has come up with a curious plan. It is proposing that Poland should accept a 25% starting level and a transition period of 10 years for achieving full direct payments together with tight production quotas in the first year of membership while having to open its borders to subsidized products from Western farmers. This is like beginning the process of making the British drive on the same side of the road as Europeans by first allowing 25% of traffic to drive on the right hand side of the road! Poland is right to reject such an absurd notion violating the spirit of the single market.
Is there a way out of the impasse? The solution the Germans together with the Scandinavians and the British are proposing is to reduce support for all farmers, East and West, to create a level playing field and maintain a balanced EU budget. The problem with this approach is that it upsets the Southern Europeans who do not want to see any reduction in support. They want an easy settlement that would give Central and Eastern Europeans access to large-scale direct payments to ensure that these new beneficiaries become staunch defenders of the CAP status quo.
The compromise of taking direct payments out of the EU accession equation altogether to facilitate speedy accession is now very unlikely. This could have been implemented if the EU could agree on Poland maintaining tariffs for a number of years while receiving additional funds to modernize its rural economy while the CAP is reformed in the rest of Europe. The problem here is that this was deeply unattractive to Poles who would in return have been denied full access to EU markets and whose capacity for absorbing assistance funding is notoriously low. It was also unattractive to the EU because it meant limiting the scope of the single market and maintaining the border between Germany and Poland.
The Southern Europeans are now likely to pursue a different strategy: To argue for Poland to receive slightly higher direct payments for its farmers while waving its right to benefit from a large proportion of other types of accession funding. This is an attractive option politically for the Polish government as it can say to its farmers that it is making their plight its top priority. It also means that Poland would be more likely to join the Southern Europeans in protecting the CAP.
Is this solution good for Poland and will it buy the Polish farmers for the "Yes" camp in the referendum? Negotiating say 50% of direct payments instead of the 25% currently on offer may in any case fail to persuade farmers to support accession. Polling research shows that this is a euro-skeptic social group because it resents open competition and is suspicious of foreigners coming over and buying up Polish land.
If implemented, direct payments for all would certainly boost farmers' incomes. They would reduce the incentive for restructuring in the rural sector. This lack of reform could then hold Poland back once the World Trade Organization wins its way and the EU is forced to reform the CAP. The evil day of closing down unprofitable farms will be postponed - but not forever. This is why the Northern European approach, which ties any transitional access to direct payments to CAP reform, is in the longer term in Poland's interest. A reformed CAP that lays greater stress on ecological production and environmental concerns could do much to relieve Poland's distressed rural areas.
Chris Mularczyk is a Warsaw-based consultant. He can be e-mailed at cmularczyk@wbj.pl
