New Estimates of EU Agricultural Support: An “Un-Common” Agricultural Policy

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.