How Turkey could beat EU in farm subsidy game

An axiom in any explanation of Turkey’s success in skirting the worst of the 2007-08 global recession and its European overhang is that Turkey got a head start. The banking closures, consolidation and regulation embraced during the 2001 crisis inoculated Turkey against the contagion to come six years later. This is a simplified generalization, of course, but it’s certainly a big part of the story.

So how might Turkey get a similar head start in advance of the storm brewing in the European Union over agriculture subsidy reform: the taming of the beast known as “CAP,” for Common Agricultural Policy?

As it stands, the CAP is a political trough at which primarily the old “EU-15” states dine. Dating back to 1962, the CAP began life essentially as a bribe to France in exchange for liberalization of industrial trade. It has since grown into an unruly, 57 billion Euro boondoggle that comprises nearly half of the EU’s annual budget. Some reforms aimed at blunting the sharper edges of trade distortion were made in 2003, mainly turning on the then-in-vogue idea of converting production subsidies to direct farmer payments. Keep folks on the farm, preserve the rustic way of life was the essential argument.

The reforms may have helped on the margin. But absurdities abound: 80 percent of the money goes to 20 percent of the farmers, largely to those who least need it. Absentee landowners -- including the British royal family -- clean up. France does well, getting 17 percent of the total. The only two countries in the EU which still have sizeable populations of farmers, Bulgaria and Romania, get little. But with the EU broke, the heat is on this year for real reform before 2013 when another seven-year CAP law is due to kick in. The new in-vogue term is “cross-compliance,” the idea of tying subsidies to such virtues as environmental management and “green” practices. Let’s see.

Turkey meanwhile, in an effort to harmonize with EU norms, has in recent years mirrored the practice of direct income support, with the similar result of rewards to absentee owners. That, plus subventions to diesel costs for farmers, now adds up to about TL 3 billion a year.

But in stumbling through a maze of reform analyses, I happened on an essay touching on Turkey by Phillip Aerni at the World Trade Institute in Bern, Switzerland (www.wti.org). Produced with research by Turkish colleagues, the essay in effect calls for a leap-frog by Turkey over hide-bound EU policy that prevents intelligent farm policy.

“What Turkey needs is to activate the creative minds in rural regions through investments in human capital and improved access to business-relevant knowledge, capital and technology,” Aerni argues. His blueprint asks some provocative questions:

“Why not use a cross-compliance scheme that links direct payments to the condition that farmers send their children to school (especially the daughters)?

“Why not start an experiment in Turkey to convert idle teahouses in rural areas into busy local centers of prime access to business information that is relevant to local entrepreneurs?” he adds.
Good questions. In answering, Turkey could harmonize not with the past, but with the future. Just as she did in 2001.