Handouts to Europe's Farmers Slip Away

In a world economy, butter mountains just don't cut it anymore

Farmer Philippe de Guillebon stands tall in front his elegant manor home. A shiny new Nissan four-wheel-drive vehicle and an Audi sedan are parked in the courtyard.

Here in northern France, coal mines and steel mills lie shuttered. Unemployment runs at more than 20 percent.

And yet Mr. de Guillebon lives well farming.

Last winter, a little brown envelope arrived holding a check from the European Commission in Brussels. In 1996, the harvest of agricultural subsidies for his 750-acre farm totaled $120,000.

"Farmers are much better off than steelworkers," de Guillebon admits.

But this cosseted world of European farmers is about to receive a jolt. At $52 billion in 1996, farm subsidies soaked up more than a half of the European Union (EU) annual budget. Now European Agricultural Commissioner Franz Fischler wants guaranteed farm prices to be slashed by 30 percent for beef, 20 percent for grain, and 10 percent for dairy products.

The call for farm reform comes as the EU is beginning negotiations with Poland, Hungary, the Czech Republic, Estonia, and Slovenia for entry. If farmers from all these countries gain access to generous subsidies, they could overwhelm EU finances.

"Poland has more farmers than in Germany and France together," the bearded, avuncular Mr. Fischler says in an interview. "Farmers and their families should know that they have more opportunity in the future to find employment outside of agriculture."

Not unexpectedly, the reform plans do not go down well with the powerful European farming lobby. Risto Volanen, secretary general of the Brussels-based Committee of Agricultural Organizations, called the proposals "an act of aggression" that would force more and more farmers off the land. "We must preserve Europe's rich rural heritage," Mr. Volanen says.

When the Common Agricultural Policy was set up by a group of European governments in 1962, it was designed to ensure a stable supply of food and provide a fair standard of living for farmers. But the system was flawed: Farmers were paid high fixed prices for everything they produced, whether a market existed or not. The more farmers grew or the more animals they raised, the more money they received. The rich became richer while generating unwanted mountains of butter and lakes of milk.

But small farmers have struggled. In 1960, almost 1 in 6 Europeans worked the land. Today only about 1 in 20 remain, and the number is falling fast. "The big farmers have bought out the small," says Martin Weidemann, a farm official at the EU.

Poor Southern European peasants with a few olive trees or grapevines have fared worst of all. More than three-quarters of farm subsidies are spent on grain, milk, meat, and sugar.

"The program emphasizes basic foodstuffs, which happen to be produced most in the north," says Maria Carlsson, the former Swedish agricultural attach to the EU. "France and Germany set up the policy to benefit themselves."

In 1992, Ray MacSharry, then agricultural commissioner of the EU, conceded that 80 percent of Brussels funds went to 20 percent of all farmers. Under MacSharry's prodding, a partial reform was undertaken. Subsidized prices for some products were cut and landowners compensated with direct subsidies.

Farmers screamed murder. They drove tractors down Brussels's boulevards and burned effigies of MacSharry. "We were under siege," recalls Gerard Kieley, a chief MacSharry aide.

At one point in the negotiations, MacSharry proposed a limit on the size of farms receiving subsidies. But Britain moved to defend British landowners who, on average, own larger farms than their Continental colleagues.

"The British are as bad as anyone else," says Michael Mann, a reporter on agricultural issues based in Brussels. "When they come to Brussels, they fight to take away the most money."

The 1992 changes have resulted in few improvements and many new problems. In the past four years, EU agricultural spending has shot up. Commissioner Fischler concedes that about 20 percent of Europe's richest farmers still rake in 80 percent of the subsides. Brussels now pays grain farmers such as de Guillebon for setting aside and growing nothing on 15 percent of their land. The more land set aside, the bigger the check.

"I feared the reform," de Guillebon says. "But it's turned out better than I expected."

But even Europe's stubborn farm unions know they must adapt. Agriculture was excluded from the last round of world trade negotiations. But Europe has agreed to re-open the issue in the next round scheduled for 2000. "The present system is not sustainable," concedes Volanen, the European farm union's new leader. "We must work together to construct something better."

Ironically, de Guillebon and other large commercial farmers here in northern France say they can succeed without any public aid. Since the 1992 reform, de Guillebon has bought 100 more acres and invested in a more efficient John Deere tractor. His costs, he says, have come down by 35 percent.

"I don't want to stay on welfare," de Guillebon says. "I want to go out and fight on the world market."