Sunday, 7 November 2010

Is the EU really Father Christmas for the most deprived EU citizens?

This article stems from a recent discussion in the House of Lords on the European Union (EU) expanding a scheme that was initiated to stabilise market prices for certain food products but which has also been used to distribute food to the most deprived persons in the EU.

Lord Roper (Liberal Democrat) submitted the motion on 3 November to move that the House of Lords take note of the Report of the European Union Committee on the amended Commission proposal for a Regulation of the European Parliament and of the Council amending:

Council Regulation (EC) No 1290/2005 on the financing of the common agricultural policy (CAP) and

Council Regulation (EC) No 1234/2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation) as regards distribution of food products to the most deprived persons in the Union (hereinafter referred to as "the 2007 Regulation")

Amended Commission Proposal:
COM (2010) 486, Council Document 13435/10 (2nd Report, Session 2010-11, HL Paper 44)

The House of Lords voted in favour of the UK Parliament submitting a reasoned opinion on the Commission proposal to the Presidents of the European Union Parliament, Commission, and Council. The opinion will focus on a subsidiarity assessment as set out in the Report prepared by the European Union Committee.

Lord Henley (Parliamentary Under Secretary of State, Environment, Food and Rural Affairs; Conservative) summarised the UK’s position as follows:

"In accordance with the principle of subsidiarity, a longstanding element of European treaties that is currently enshrined in Article 5 of the Treaty on the European Union, the Government consider that the EU should act collectively only where there are clear additional benefits, or EU added value, compared with action by member states either individually or in co-operation."

The consensus in the House of Lords was that each Member State (MS) would be better placed than the EU to ensure a food supply to the most deprived citizens in the EU. It was further agreed that the EU should only be allowed to act in matters of shared competence, when the objectives of the proposal cannot be met otherwise. Further, the UK has not participated in this voluntary programme since 1998 because of high administrative costs. It was submitted that the UK will, therefore, pursue a ‘yellow card’ on this EU proposal in order to block it. But with the Swedish parliament apparently being the only other one filing an opinion against it, the proposed Regulation looks likely to proceed.  I continue with a legal analysis to see what is at stake.

The original programme under the EU legislation that the EU is proposing to amend was designed to help distribute intervention stocks which are defined by the Organisation for Economic Cooperation and Development (OECD) as follows:

"Stocks held by national intervention agencies in the European Union as a result of intervention buying of commodities subject to market price support. Intervention stocks may be released onto the internal markets if internal prices exceed intervention prices; otherwise, they may be sold on the world market with the aid of export restitutions."

Para 10 of the 2007 Regulation further clarifies that the intervention stock scheme includes: "payment of aid for the private storage of products of the cereals, rice, sugar, olive oil and table olives, beef and veal, milk and milk products, pigmeat and sheepmeat and goatmeat sectors."

Par 18 of the 2007 Regulation clarifies that the primary goal of the programme for deprived citizens was to exploit the potential of the intervention stocks “on a durable basis until the stocks have been run down to a normal level.”

This brings me to Article 27 of the 2007 Regulation which sets out the details for this programme. An annual plan was provided for in subpara 1 to provide for the 'durable basis'. Later in Art 43, the Commission is given the power to adopt the detailed rules for the annual plan implementation. But this plan would at any rate have to include the further provisions of Article 27:

"2. A product may be mobilised on the Community market where:

(a) it is temporarily unavailable in Community intervention stocks during implementation of the annual plan referred to in paragraph 1, to the extent necessary to allow implementation of the plan in one or more Member States, and provided that the costs remain within the limits of the costs provided for in the Community budget for that purpose, or

(b) implementation of the plan would involve the transfer between Member States of small quantities of products in intervention in a Member State other than that or those in which the product is required."

So when the market dictated it was needed, instead of buying the products from producers to put into intervention stocks and then distribute food to the poor, the Commission was to spend the money on buying the products on the market to fulfil the annual plan requirements. This shows that the products that could be purchased on the market were limited to the products that were part of the intervention scheme.

In the UK, these stocks are held by the Rural Payment Agency (RPA) which is an Executive arm of the Department for Environment, Food and Rural Affairs. The key services provided by the RPA are making rural payments, carrying out rural inspections, and livestock tracing. But they also manage intervention stocks which mostly consist of butter and skimmed milk powder.

According to the September 2009 Court of Auditors Report on the EU Business website, distribution of intervention stocks to deprived persons began in 1986/1987 in ‘the wake of an exceptionally cold winter’. This distribution has since been referred to as the EC's Most Deprived Persons programme. The Auditors Report states that the “programme has two main objectives: a social one (to make a significant contribution towards the well-being of most deprived citizens) and a market one (to stabilize the markets of agricultural products through the reduction of intervention stocks).” From the 1987 EU Regulation which was replaced by the 2007 Regulation and simply based on market issues, the EU has extended what started out as a humanitarian by-product of a market scheme to creating a primary social purpose. One may ask whether or not this is the beginning of a new European welfare system.

According to Figure 8.3 taken from the book EU policy for agriculture, food and rural areas, it is clear that intervention stocks have decreased significantly since 1990 (as was pointed out in the House of Lords). The EU claims that the need for food distribution has grown because of the enlargement of the EU and that the scheme's reliance on market purchases for the provision of food has increased significantly over the years. This is quite likely given the data in Figure 8.3. But the scheme is pushing the boundaries of the legal mandate for its actions with this scheme as it stands.

As set out in the new Council Document 13435/10, the objectives of the Common Agriculture Policy (CAP) as defined in Article 39(1) of the Treaty of Rome are twofold. The first objective is to stabilise the market. One can easily see that this is a relevant matter for the EU to be concerned with. The other objective was that supplies should reach consumers at reasonable prices. Again, this has to do with the market. After all, if prices are unreasonable, trade will inevitably suffer. I would point out that reasonable prices for consumers is not in any way related to free food for deprived persons.  I would also point out that EU policy appears to have strayed somewhat from the Treaty of Rome, at least with reference to Article 39(1), and is showing signs of fuzzy logic.

Objectives were reached with the intervention stock program. The market was stabilised and consumers were able to buy food at reasonable prices. The food distribution programme conveniently underpinned the intervention stock scheme. However, it is now claimed that intervention stocks have proven to be a reliable supply of food for the most deprived, that is, the stocks have come to be relied upon by deprived people as a source of food. The risk of the market was passed on to deprived people, and now, when intervention stocks are low, the EU is seeking to ameliorate this short sightedness with another short-sighted proposal.

One potential problem with the new scheme is the suggestion that Member States may decide to give preference to food produced in the EU. How will this sit with the World Trade Organization? Since the food is to be purchased on the open market, it would follow that under the global free trade rules anyone in the world should have an equal right to supply it.

Also, food being purchased on the open market under this proposal will involve a multitudinous choice where the only guidance is that the food should be nutritious and suitable for distribution. Nutrition in food is a contentious area. For instance, some say butter is good and others claim it is bad. And what food is not suitable for distribution? Does this refer to perishability or does it refer to food such as ready meals? Considering that sugar and butter are intervention stock products, I really cannot imagine what the EU is proposing.

Another sticking point I can foresee is that the people who are to benefit from this additional food distribution are the needy as designated by each MS. What if the MSs have widely divergent criteria for this?

Finally, I would point out that the 13 million people who have benefitted from this free food constitute a large number of people. When the focus changes from using stocks acquired to protect market prices to purchasing products on the open market on a permanent basis, it will clearly make a difference to the market. Who will end up benefitting from this the most? I wonder if any corporate lobbying has taken place to get this Regulation on the books. I say this partly because of the new ‘partners in the market’ which has apparently replaced traditional EU policy. And although this aspect of the scheme is market based, it stems from the provision of social welfare which brings us back to the subsidiarity argument.

So many questions and so many issues. Why are the UK and Sweden the only Member States out of 27 showing concern about this proposal? Is it because giving food to the poor sounds like a good idea especially at this time of the year? Unfortunately, the reality may be that the gift will be value added food products of dubious nutritional benefit with the real benefit going to transnational food producers and/or retailers. And although the matter only concerns food to the less fortunate which is a vitally important issue, this further extension of the EU domain over our food supply would be unfortunate for all in the EU.

Photo credit and article about the release of cereal intervention stocks this month.