TCS Daily

A Lose-Lose Compromise

By Kamila Pajer - January 5, 2006 12:00 AM

Polish Prime Minister Kazimierz Marcinkiewicz returned from the EU budget negotiations in Brussels at the end of December a proud and happy man, certain that he had worked out the best possible compromise and that the EU budget for the years 2007-2013 will be good for his country. He came home with a bottle of champagne given to him by the French delegation and another, somewhat more substantial gift from the German Chancellor: €100 million in special assistance for the poorest regions in Europe. These, it should be noted, all happen to be in Poland.

Once back in Warsaw, however, Marcinkiewicz not surprisingly came under attack from opposition political parties, which claimed he should have negotiated better and been more willing to use his national veto power (EU budget decisions require the unanimous consent of all member states) to get a better deal. Funny, however, these opponents do not criticize the goal of Poland's European policy nor even the methods the prime minister used in achieving them; they only attack the extent to which he exercised them. They don't attack Marcinkiewicz for not supporting Tony Blair's proposal to reform the EU's antiquated and costly Common Agricultural Policy (CAP). They simply don't like the fact that he did not try even harder to take more from the rich to give to the poor -- in other words, that he did not fight to make the European budget even more bloated.

France's unwavering opposition to any change of the CAP, and Poland's short-sighted insistence on receiving EU structural funds it had been promised as part of last year's accession to the bloc, essentially worked in tandem to scuttle British efforts to reform EU spending policies.

In Poland the prime minister can see for himself the damage done by the CAP. One of the policy's key elements is the centrally decided "quotas" for various goods that each member country can produce. The politicians decide each year how much milk, fish, cereals, etc. can be produced. Earlier this year Polish fishermen protested against EU "fishing quotas"; today farmers protest because they are able to produce and sell more milk than is allowed by their appointed quota (especially after they received financial help from the EU to modernize their operations). Those who exceed the quotas will have to pay a fine. Farmers and producers do not understand why those who work harder and more efficiently than others must be punished for it.

But the farmers clearly do understand how the CAP works, and are adjusting to its distorted reality. They propose establishing a special public fund to cover the fines producers must pay for exceeding quotas. In other words, taxpayers would have to pay twice: once for the program itself and then again for a measure to compensate for it. And, they will pay yet again every time they buy milk at an inflated price. Whenever the state intervenes in the market this way the customer is worse off.

Another distorting aspect of the CAP is that many of its direct subsidies go to rich and influential producers, not the mythical small farmer. In Poland the most financial help goes to politicians who own a lot of land. According to the French organization "Agir ici", in France -- which receives over 20 percent of the total European agricultural budget - the money goes mainly to the big cereals producers. An Oxfam report -- which unfortunately also includes some socialist propaganda -- highlights similar CAP consequences for Great Britain.

European agricultural policy quite obviously hurts poor countries around the world that have to compete against heavily subsidized European producers. But it also hurts Europeans themselves -- not only by distorting the free market and restricting human creativity and efficiency but also by creating a Europe with a 1 percent growth rate and a 10 percent unemployment rate. So while it might seem like the long and bitter battle over the EU budget was won by the leaders of France, Germany and Poland, it certainly was lost by the French, German and Polish people.


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