§ Lynne JonesTo ask the Secretary of State for Environment, Food and Rural Affairs pursuant to her answer of 9 December,Official Report, column 449W, on international trade, if she will make a statement on the impact of the Commons Agricultural Policy on the competitiveness of products from developing countries. [144808]
§ Mr. BradshawThe Common Agricultural Policy (CAP) supports farmers' incomes via a number of methods—direct payments, export subsidies, intervention buying and tariffs—which ensure that EU farmers receive higher prices for their goods. These measures increase the level of production and therefore result in lower imports and / or higher exports than would otherwise he the case. This can have the effect of depressing world prices for certain commodities. Developing country producers who would otherwise be competitive on world markets may find themselves unable to compete. This could distort the allocation of resources in a particular country away from those in which it has a comparative advantage towards less competitive sectors.
The CAP reforms agreed in June 2003 will help to break the link between income support and production in the EU and will reconnect farmers to their markets. Production occurring as a result of loss-making activities should cease as farmers decisions are increasingly determined by market forces rather than subsidies. This production response will reduce EU production and net exports and, where this results in a higher world price, it should have a beneficial impact on developing country producers.
Further reform of the domestic support regime is necessary and the Commission have recently produced proposals for reform covering the cotton, tobacco, olive oil and hops sectors and proposals for reform of the sugar regime are expected next year.