Dutch Minister of Agriculture Martijn van Dam (center) chats with former French Minister for Agriculture Stephane Le Foll (second left) during a European Agriculture Ministers' council meeting, in Brussels on March 14, 2016 | EPA/Olivier Hoslet Dutch take aim at sacred cow subsidies Brexit is set to overturn one of Europe’s oldest and most cherished policies, the Netherlands’ farm minister said.

THE HAGUE — Europe's agriculture ministers will normally never even whisper the slightest suggestion that the EU's lavish farm subsidies could have to fall.

The Netherlands' Martijn van Dam is now breaking that taboo. In an interview, the Dutch Labor politician said it was inevitable that the €58-billion-per-year Common Agricultural Policy would be slashed because of a shortfall of British budget contributions.

Dating from 1962, the CAP is often perceived as a cornerstone of the whole European project. Today, it remains of the bloc's only fully harmonized policies, with technocrats in Brussels setting rules that apply as equally to shepherds on Ireland's rugged Atlantic coast as they do to halloumi makers in Cyprus. The CAP has also handed out to money to farmers since the outset.

Brexit changes the game, Van Dam said, sitting below an original masterpiece by M.C. Escher in the Dutch government's modernist economic affairs ministry. Farmers should have to run more hoops for their cash, he argued. Less money should be paid simply based on acreage and farmers should meet more green targets to secure their payments too.

"It’s inevitable that we have to cut spending on the budget of the Common Agricultural Policy" — Martijn van Dam

"It’s inevitable that we have to cut spending on the budget of the Common Agricultural Policy," Van Dam said. "I know not all of my colleagues as ministers for agriculture will probably say that, but I think they all know that it’s inevitable," added Van Dam, who is due to leave his position once the Netherlands forms a government.

The EU faces an annual funding shortfall of some €12 billion once the U.K. leaves the bloc in 2019, a sudden loss that worries farmers. As the CAP represents almost 40 percent of the EU budget, they know they are prime targets for the chop.

Sensitive discussions on the new budget are already afoot: European Parliament President Antonio Tajani has drawn up plans that would involve slicing the CAP budget by more than half, provoking a backlash from farmers' groups and their many allies. Farm lobby Copa & Cogeca has recommended that Brussels increase agricultural spending in order to protect the Continent's gastronomic heritage and its roughly 10 million farming jobs.

Europe doles out lumps of money to farmers based on how much land they own. Moving away from that system toward a performance-based model where farmers receive cash in exchange for meeting certain goals is the way forward, according to Van Dam, who added that such a changed CAP needed to tackle environmental problems and better protect biodiversity.

Brexit and a lower budget mean that the only way to cope is to overhaul the decades-old system, Van Dam said. "You cannot reform the CAP without reforming direct payments," he said.

From farm policy to food policy

The Netherlands is the second-largest food exporter on the planet, selling some €94-billion worth of goods on world markets last year. The small country's remarkable food and farming prowess is due to its fertile soil and its highly performing — and often highly intensive — agricultural sector.

However, the Netherlands also bucks the trend on farm policy. The Hague has urged Brussels to broaden the scope of the CAP to include the wider food business, not just farming. Van Dam argued that regulating the farm-to-fork chain under one roof makes better sense.

Van Dam's comments on the role of direct payments are unusual. Farmers across much of Europe, who are struggling with depressed commodity prices and ever-increasing competition, consider these subsidies to be sacrosanct.

In some cases, farmers rely almost entirely on the subsidies to stay in business. Agricultural industry groups in Brussels and national capitals, as well as sympathetic politicians, are often militant about protecting these pay packets in the coming CAP reform, arguing that they provide much-needed stability as well as support to poorer and smaller farms.

"What we’re saying is, the money we use from the CAP, the goal should not be to provide farmers with income," Van Dam said. "We think that the market should provide farmers with income."

Subsidies slugfest

Van Dam pointed to three fundamental problems in the direct payments system.

First, he said awarding money based on land-ownership stymies innovation, since the market tends not to reward those who try a new approach and end up performing better.

Doling out money based on acreage artificially inflates the price of land, he added, which then makes it difficult for young farmers to enter the profession.

"I think the third thing is, we notice that it’s very difficult also to explain to the rest of the population that farmers are receiving an income from the EU," Van Dam said.

"If we reform those payments to more performance-related payments, you can explain to the rest of the population exactly what you’re doing, and you can say we have ambition on the field of climate change, and we have ambitions to strengthen biodiversity," he added, alluding to anger in some quarters that farmers receive so much support in comparison to other industries.

Persuading the European Commission — not to mention the other European governments who fear a backlash at the ballot box — to eliminate direct payments will be fiendishly difficult: Intense lobbying in Brussels swamps even anodyne agricultural policy proposals.

Still, the minister said he thought last week's Commission briefing paper on the future budget showed that it was considering slashing direct subsidies. He added that he had received indications from other governments that they are also mulling deeper change.

"It will probably be a tough debate the upcoming one-and-a-half to two years in Europe, because you have to make choices and the choices mean change," Van Dam said.

"It won’t be easy."

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