Freeing the reluctant farmer: The Gatt deal offers Europe the chance of radical agricultural policy reform, argues Simon Gourlay

IN THE home straight of the long-distance Gatt race, it was the French film industry that was unbeaten, sticking out to the bitter end for a better deal. French farmers, odds-on favourites as the wreckers, gave up in the final furlong and settled with scarcely a whimper.

Why the change of heart? Were they out-gunned by the rest of French industry, mollified by concessions wrung from the Americans by Leon Brittan, or were they finally just exhausted by the futility of trying to stop the tide coming in? Probably a bit of all three. But their tenacious rearguard action reminds us of the special dimension that farming has always had for France.

Although the numbers directly involved has dropped to 6 per cent of the French workforce, a vastly greater proportion still has some family tie with the land and more than a passing emotional interest in farmers being able to pay the rent. That alone is enough to ensure a sympathetic ear from any politician.

Then there are exports: France, after the United States, is the world's largest exporter of agricultural and food products. Food exports represent France's green oil and national pride is at stake. Any threat - especially from the dread Americans - provokes a vehement gut reaction. Indeed, the reforms of the Common Agricultural Policy introduced by Ray MacSharry, the Agriculture Commissioner, in 1991-92, aroused similar protests.

The MacSharry reforms, designed to help smaller and disadvantaged farmers, have, for most, proved an irrelevance. There is within EU agriculture today a great divide. Some sectors receive virtually no taxpayer or indirect consumer support. They include pigs, poultry and horticulture. The highly regulated, supported sectors include sugar, milk, beef, sheepmeat, cereals and oilseeds. These last three show how governments, national and Europe-wide, can send grossly misleading signals.

Given that one of the prime objects of MacSharry was to make farmers more market- oriented, it is ironic that most sheep farmers now get a higher proportion of their gross revenues direct from the taxpayer. It is crazy that the post-reform regime invites a farmer to keep a young breeding sheep non- productive by paying him a subsidy regardless of whether he makes the slightest effort to breed from the animal.

In an attempt to control an embarrassing surplus of cereals, the CAP reform package introduced a form of mandatory set- aside, coupled with a sharp drop in the guaranteed price. First-year results are hardly encouraging. While set-aside was fixed at a nominal 15 per cent, the drop in EU production was only around 2 per cent and some farmers have found themselves close to embarrassment at the size of the cheques they have banked as compensation.

With oilseeds, the problem is that the EU is a large net importer, hence supporting internal market prices has always required heavy subsidy. Encouraging farmers to grow oilseeds and pulses rather than the unwanted cereals has only increased that burden.

On the back of a rise in world market prices for vegetable oils, crops such as spring rape have achieved unprecedented levels of profitability. This unexpected bonus for Europe's farmers has only been gained through undiminished taxpayer support, amounting to about 50 per cent of the farmer's gross return.

No one is really happy. Small farmers see themselves continuing down the road to oblivion and feel more should be done to change their fate; large farmers know their present well-being is founded on an unsustainable base.

Gatt heralds a new era for farming and offers an opportunity for change which, while sympathetic to smaller farmers and our countryside, could eliminate the ludicrous anomalies of today's CAP. Over the next six years further significant changes to the CAP will be required to enable the EU to meet its Gatt obligations. The key person in determining whether that opportunity will be taken is the Agricultural Commissioner, Rene Steichen.

At its outset in 1956, the CAP included worthy objectives, never changed or seriously re-examined: ensuring Europe's food supplies; raising farmers' living standards to those of their urban counterparts; help for progressive restructuring of the industry; a fair deal for the consumer.

Modern technology and farmers' irrepressible quest for greater productivity have ensured the first; the second has never happened; efforts at the third have been ineffective and, if you assume the average consumer is a taxpayer, few would give the CAP a high value-for- money rating.

Before there can be meaningful CAP reform, new objectives must be set. Farmers should be enabled to produce what they think best, in the light of their assessment of the market's requirements. There must be an end to bureaucratic control. This would mean dismantling quotas, no more set-aside, no more stock density constraints (other than for environmental reasons - a separate policy issue). And agricultural budgetary expenditure must be initially contained, and ultimately virtually eliminated.

Achieving those objectives would substantially depoliticise agriculture and free it from bureaucracy. Any attempt at radical reform will undoubtedly produce a kneejerk reaction from many farmers. But there is a strong case for such a course of action by the introduction of a 'buy-out' scheme. Governments have subsidised farmers to increase production for the past 50 years, a policy which for the past 15 has looked increasingly anachronistic. Attempts to change the policy have been inadequate and the net result is irrational marketing by the majority of farmers and bad value for taxpayers.

The logical response is to devise a way of making farm subsidies redundant - an equivalent of miners' redundancy payments to close down the mines. The mechanics of the scheme could work in a variety of ways, but the basic principle is that farmers would exchange their right to production subsidies for the right to receive payments over a finite period.

But there is one big difference from the mining analogy: the farms would still exist. They would still be farmed - and very competitively. The CAP currently costs so much that it would be possible to devise a subsidy buy-out scheme that would be attractive to farmers and still represent better value for taxpayer and consumer than the present system.

The CAP should still cover the areas of environment and rural socio-economic affairs. Socio-economic payments (largely incentives to maintain farming in disadvantaged areas) could be redefined and would not conflict with the new objectives. And once the agricultural budget has been drastically reduced, environmental incentives could be substantially enhanced.

If farmers are to have confidence in such a package, it must be irrevocable, and if governments are to agree to it on behalf of their electorates, it must be finite. Being irrevocable it would be the equivalent of a government bond, thereby being transferable - and marketable. This would avoid any need for the public purse to front-load the package to help those (particularly the 75 per cent of EU farmers who are over 55) who may wish to leave the industry but are locked into it. Based on historical output, the bond would be the property of the individual farmer, wherever he went, whatever he did.

Is such an option pie in the sky? Two years ago I would have said yes, now I am not so sure. Almost universal government budget deficits, a growing reaction against complex bureaucratic regulation and signs of a sea change among farmers themselves give grounds for optimism that this time the decision-makers might bite the bullet.

Three weeks ago I went to a meeting of Burford Farming Club, attended by 42 of the locality's more progressive farmers. After a lengthy debate about which way farming should go in the post-Gatt era, there was a vote. A few could not make up their minds. But there was not a single vote for continuing with the present morass, and 22 voted for a clean break via a buy-out bond.

It is one thing for a handful of UK farmers to look relatively dispassionately at the options, very much another to convince a majority of EU farmers and their political masters. But, given the urgent need to do something, it would be wrong not to try.

Sir Simon Gourlay is former president of the National Farmers Union.

(Photographs omitted)