As another farming row between EU and #Ukraine is rising,[^1] this time on the sugar-beet market, I think it’s important to clarify the core principles of EU farming policy to avoid disappointment over what is essentially misguided expectations. In both EU and Ukrainian discussions I see a lot of voices like “our grain is cheap, so what, that means cheaper sugar, bread, whatever, why they don’t want it?”
But that’s the core misunderstanding.
If you have an established market and you bring a cheaper product from outside at lower price, consumers will naturally buy it because it’s cheaper. And if they buy the imported one, they naturally won’t buy it from the local supplier. If they do that long enough, the local supplier goes out of business. Dead simple.
Free market? Well, that’s largely what happened on EU energy market. And EU photovolatics market. And EU steel market, and a dozen of others that I don’t even know about. Local producers went out of the market, unable to compete with much cheaper imported goods… which ultimately led to a situation where #Russia happily bullied everyone with arbitrarily set gas prices and #China is now happily “selling us the rope with which it will hang us” (paraphrasing Lenin). Free market isn’t, when you compete against lower wages, poor labour protection and environmental standards, not to mention state subsidies and exports used as economical weapon.
EU farmers weren’t as dumb or weak as EU industry and energy producers. This is why EU has Common Agricultural Policy:
The CAP is a partnership between society and agriculture that ensures a stable supply of food, safeguards farmers’ income, protects the environment and keeps rural areas vibrant.[^2]
It’s not merely a nice-sounding mission statement, it’s a carefully crafted, literal list of CAP stakeholders: consumers, farmers, environment, rural areas. There’s millions of actual working people behind each of these words.
The problem which CAP solves is extremely complex, because EU farming production had been already too cheap for decades due to progress in technology. When farmers produce too much of food, but have constant costs driven by strict requirements (e.g. labour and environmental protection), it creates an economic imbalance. Here’s the paradox: the food sold to consumers not only doesn’t have to be as cheap as possible, it cannot be as cheap as possible because it would kill the farming - but it has to be affordable. It would be very cheap, for a while, and then it would get very expensive, as Russian gas in 2022.
EU has a number of very non-intuitive instruments to deal with it.
One is of course to allow farming industry follow the steps of energy industry and disappear, getting replaced by imports. That means unemployment and reliance on external actors as it comes to the most basic human need: food.
Another one is protectionism, so basically keeping your production shielded from imports by high import tariffs. Then there’s subsidies so basically paying farmers so that they don’t go out of the business. This includes land subsidies so paying people to maintain land as arable or meadow or forest. And there’s self-limiting production so that the prices don’t go down too much. Some are proposing return to pre-industrial methods (for marketing purposes called “organic farming”). Sometimes this includes proposals to explicitly ban them (the anti-GMO campaign).
CAP does all of these, in a dynamic manner, setting production quotas for EU producers and limiting imports, flexibly responding to changing market and climate situation year by year. That’s an extremely complex mechanism, involving negotiations between all Member States happening all the time, which however does deliver: EU hasn’t faced any major food crisis for decades while maintaining a competitive farming industry.
As I said before, if you want to see how it could have looked otherwise, look at EU energy sector and what happened with energy prices in 2021-2022. Now imagine the same happened if EU food was mostly imported.
Now, reading about Ukraine’s sugar beet exports to EU, I have a déjà vu… but I also need to start a new post due to character limit :)
[^1]: https://www.bloomberg.com/news/articles/2023-11-28/eu-tensions-over-ukraine-crop-imports-spreads-to-sugar-market
[^2]: https://agriculture.ec.europa.eu/common-agricultural-policy_en
kravietz 🦇 /
npub1vz…rqdta
2023-12-02 10:27:02
Author Public Key
npub1vz555w0w7pdy3l9skg202lkdnjqll4ct67l25f68x2h84e7u7r4qmrqdtaSeen on
wss://relay.noswhere.comPublished at
2023-12-02 10:27:02Event JSON
{
"id": "76e4d435b74e07f4d53a50d8a658ff37b7a58b3cd2f8ecd575effd7bc76425e1",
"pubkey": "60a94a39eef05a48fcb0b214f57ecd9c81ffd70bd7beaa274732ae7ae7dcf0ea",
"created_at": 1701512822,
"kind": 1,
"tags": [
[
"t",
"china"
],
[
"t",
"russia"
],
[
"t",
"ukraine"
],
[
"proxy",
"https://agora.echelon.pl/objects/8ceb5f88-7fb6-40e0-b326-cd013cfe85e1",
"activitypub"
]
],
"content": "As another farming row between EU and #Ukraine is rising,[^1] this time on the sugar-beet market, I think it’s important to clarify the core principles of EU farming policy to avoid disappointment over what is essentially misguided expectations. In both EU and Ukrainian discussions I see a lot of voices like “our grain is cheap, so what, that means cheaper sugar, bread, whatever, why they don’t want it?” \n\nBut that’s the core misunderstanding.\n\nIf you have an established market and you bring a cheaper product from outside at lower price, consumers will naturally buy it because it’s cheaper. And if they buy the imported one, they naturally won’t buy it from the local supplier. If they do that long enough, the local supplier goes out of business. Dead simple.\n\nFree market? Well, that’s largely what happened on EU energy market. And EU photovolatics market. And EU steel market, and a dozen of others that I don’t even know about. Local producers went out of the market, unable to compete with much cheaper imported goods… which ultimately led to a situation where #Russia happily bullied everyone with arbitrarily set gas prices and #China is now happily “selling us the rope with which it will hang us” (paraphrasing Lenin). Free market isn’t, when you compete against lower wages, poor labour protection and environmental standards, not to mention state subsidies and exports used as economical weapon.\n\nEU farmers weren’t as dumb or weak as EU industry and energy producers. This is why EU has Common Agricultural Policy:\n\nThe CAP is a partnership between society and agriculture that ensures a stable supply of food, safeguards farmers’ income, protects the environment and keeps rural areas vibrant.[^2]\n\nIt’s not merely a nice-sounding mission statement, it’s a carefully crafted, literal list of CAP stakeholders: consumers, farmers, environment, rural areas. There’s millions of actual working people behind each of these words.\n\nThe problem which CAP solves is extremely complex, because EU farming production had been already too cheap for decades due to progress in technology. When farmers produce too much of food, but have constant costs driven by strict requirements (e.g. labour and environmental protection), it creates an economic imbalance. Here’s the paradox: the food sold to consumers not only doesn’t have to be as cheap as possible, it cannot be as cheap as possible because it would kill the farming - but it has to be affordable. It would be very cheap, for a while, and then it would get very expensive, as Russian gas in 2022.\n\nEU has a number of very non-intuitive instruments to deal with it.\n\nOne is of course to allow farming industry follow the steps of energy industry and disappear, getting replaced by imports. That means unemployment and reliance on external actors as it comes to the most basic human need: food.\n\nAnother one is protectionism, so basically keeping your production shielded from imports by high import tariffs. Then there’s subsidies so basically paying farmers so that they don’t go out of the business. This includes land subsidies so paying people to maintain land as arable or meadow or forest. And there’s self-limiting production so that the prices don’t go down too much. Some are proposing return to pre-industrial methods (for marketing purposes called “organic farming”). Sometimes this includes proposals to explicitly ban them (the anti-GMO campaign).\n\nCAP does all of these, in a dynamic manner, setting production quotas for EU producers and limiting imports, flexibly responding to changing market and climate situation year by year. That’s an extremely complex mechanism, involving negotiations between all Member States happening all the time, which however does deliver: EU hasn’t faced any major food crisis for decades while maintaining a competitive farming industry.\n\nAs I said before, if you want to see how it could have looked otherwise, look at EU energy sector and what happened with energy prices in 2021-2022. Now imagine the same happened if EU food was mostly imported.\n\nNow, reading about Ukraine’s sugar beet exports to EU, I have a déjà vu… but I also need to start a new post due to character limit :)\n\n[^1]: https://www.bloomberg.com/news/articles/2023-11-28/eu-tensions-over-ukraine-crop-imports-spreads-to-sugar-market\n\n[^2]: https://agriculture.ec.europa.eu/common-agricultural-policy_en",
"sig": "41d9e52eb38167e76424d9ebb7ef65f629173e818d133a810f4378a28b720b803361e989a5ed6c47663277fd67f40ed0344abdc291b23965a4f1cf19685ee9a3"
}