The only caveat is that there are dynamic effects; the existence of the subsidy keeps some farmers in business who would otherwise exit the farming industry; the EU pays them to reduce capacity for this reason, because we have decided for political reasons that we don’t want all the farmers to give up farming at once. But this isn’t “trade distorting”, because the period in which farmers enter and exit the industry is much longer than the period over which export and production decisions are made.

Your last post makes this even more explicit in that they wish to keep prices at a level greater than the natural market equilibrium, hence they pay a subsidy which is not tied to production of goods but is in fact tied to the non-production of goods. Why bother with this if the payment does not affect the market otherwise i.e. overproduction is not causing an issue?

I still think it is a flawed argument to contend that the CAP does have an effect on trade via price distortion – you can make your case as to why that is a good thing but the price effect must be present – much like how welfare payments create a de facto minimum wage for each recipient which is generally higher than the payment itself.

It’s not obvious that those European farmers who haven’t been to business school would behave the same way.

Some farmers might be more like the typical owner of a small record company or football club, who if given more money, would use that money to sign as many bands and players as possible while still avoiding bankruptcy.

Any studies on this?

Those developing countries that have a competitive advantage in the agricultural sector are harmed by the huge levels of support in developed countries because 1) this support depresses world market prices and 2) it takes away from them market share. However natural exporters like Brazil, Argentina, Malaysia, and Indonesia do not have the same food security concerns. For net-exporting developing countries it is more often an issue of lost income that the further loss of life.

This is how we get to the reasoning that we should keep the CAP for humanitarian reasons, but we should remember that domestic support in developed countries is an important part of the reason for why Africa’s least developed net food-importing countries find themselves vulnerable to global markets for their food supply. Over the last 45 years the production of food domestically in these countries has decreased significantly in part due to the fact that artificially depressed world market prices undermined domestic production and the strategic efforts of developed countries to gain market share in developing countries, sometime even using food aid for this purpose. Certainly the dependence of world markets for food would be much less if we had not spent huge amounts of money on agricultural support over a fifty year period. Thus, we in the rich parts of the world have played an important role in creating the conditions in which starving African countries are dependent on the CAP.

If we liberalise then Europe will be the biggest winner economically speaking and least-developed net food-importing countries will be the biggest losers. But when we say that this shows that we should not liberalise what we are really saying is that we know that Europeans will not take responsibility for the situation we have created over the past 50 years and take serious measures to address the food security problems in Africa given liberalisation. We will take the benefits and will not do nearly enough to address the costs to Africa of our policies over the past 50 years. It is an admittance of our own moral weakness that makes the ‘humanitarian CAP’ argument work.

First thoughts are often best. We don’t want CiF commenters coming over here! You think you’ve changed your mind: you’d better change it back, or we will both be sorry.

I may be less than totally sober, but that is f’n hilarious.

I’d argue that if Africa was feeding itself, or America making the things its citizens buy, the necessary investments would be made and the next generation schooled in how things can be accomplished. More people would have ownership in their futures and their countries would be less threatened by the vagaries of the market or the misfeasance of their governments.

Every country ought to be able to demonstrate the entire food chain to its citizens and its children, if only for educational purposes.

When DeLong blithely supposes that, as the dollar declines, American manufacturing exports will rise, I worry that too much of our capability has withered away in the meanwhile.

the CAP subsidy regime for milk and grain is not a volume subsidy; it’s a non-trade-distorting flat rate payment to the farmer

I can’t quite follow this. If the Government pays a farmer x to effectively reduce his cost of production to a level below the market cost in the absense of that payment, such that he can then sell his products for less that he would have been able to do so in otherwise, is this not a trade (market) distortion?

The farm subsidy regime is basically an inefficient way of sending money from us to the third world, with domestic producers taking a cut.

Thay may well be the case but it most certainly not why the CAP exists – at best what is described is a side effect of the EU’s policy to support agriculture internally. The lgoic of the statement also suggests we should stop doing this as it is an inefficient way of trasferring money.