This commentary was authored by Czech Deputy Agriculture Minister Juraj Chmiel.
"The issue of subsidies for large agricultural enterprises has become a rewarding theme for debate within the European Commission and the European press as well as the professional and lay public. Unfortunately, a simplified image has dominated, one of sizeable land holdings being a priori rich and thus having no need of supports. The press often speaks of millionaires receiving European subsidies, but the situation is very different in a number of countries.
To start with, we should remind ourselves of a few basic facts. Big farms are normal in just some of the EU countries, such as the Czech Republic, Slovakia or the eastern parts of Germany, and they arose due to the historical developments in post-war Europe.
The communist organisation led to forced collectivisation, in which small farmers had to put their land into the collective, which then farmed it. If they refused to do so, they and their families were persecuted.
This trend was maintained for the 40 years of socialism, giving rise to many large enterprises that farmed the majority of the agricultural land. These enterprises were then transformed and had to return the land to its owners or their descendants. Some returned to the farms and farmed independently.
The majority, however, either rent the land or have left it to the collective and joint stock companies and are now members or shareholders of them. Thus, it does not concern rich land-owning nobles that do nothing with it apart from cashing in the subsidies. These are real agricultural enterprises that produce raw materials for the processing industry and employ people in the countryside.
It is important to realise that individual large enterprises in the new member states did not arise to draw on the huge European agricultural subsidies; it is a part of a long-term tradition. Likewise, the majority are not rich enterprises, quite the opposite: they are still burdened by large debts that paid for the transformations.
Proof of this is that in the Czech Republic, there is little domestic capital and a high proportion of foreign capital as well as the low value of assets per hectare, which is much lower compared to the EU-15 enterprises.
In connection with the upcoming reform to the Common Agricultural Policy (CAP) and the European Commission proposals to cap direct payments for large agricultural enterprises, it is necessary to state that any discrimination on the basis of the agricultural enterprise's size is in contrast with the basic principles of the CAP reform, especially in connection with simplification, increasing the competitiveness of EU farmers and the endeavour to make the CAP fairer.
Introducing a cap would lead to an undesirable weakening of competitiveness and possibly even to the artificial splitting up of agricultural enterprises and the associated rise in the administrative burden. Therefore, a number of EU member states, including the Czech Republic, strongly disagree with the European Commission proposal and can see no relevant reasons for implementing such a measure.
As is clear from the above, capping payments would have very different impacts on each EU member state and some new members, including the Czech Republic, in which large enterprises have a historical onus, would lose out greatly with the introduction of such a measure.
For instance, depending on the proposed capping variants (EUR 300,000 or 100,000), Czech farmers would lose 26 to 59% of total direct payments, which, when converted, is CZK 6 to 13 billion annually. Thus, it would be an eliminative measure on the part of the EU with regards to Czech agriculture.
Likewise, in the context of the new member states, the equation: big farm=rich farm cannot be used. The competitiveness and economic value of the large enterprises arising from socialist collectivisation is generally smaller than the economic strength and competitiveness of the much smaller farms in the old member states.
Thus, they cannot be a priori 'punished' for their size by amputating part of the payments. It would be just as absurd as if the European Commission put forward caps for individual states because they receive larger sums of money than the other countries.
Likewise, it is also necessary to mention that it has not been proven that larger enterprises have not sufficiently replied to the higher requirements for environmental protection, have not contributed to public goods or were not able to face the challenges in the Commission Communication.
Thus it emerges from the above arguments that lowering the amount of direct payments for agricultural enterprises depending on their size would only lead to treating farmers differently within the CAP and the single market, an artificial splitting up of enterprises and the subsequent increase in the administrative burden, dissuading farmers from getting together to become more competitive and also to investing resources into administration and legal advice rather than into farming and environmental protection.
Recently a considerable number of member states, including the Czech Republic, have rejected the principle of such a reduction. They have initiated a joint declaration against introducing any cap whatsoever for direct payments to individual large agricultural enterprises. Apart from the Czech Republic, Germany, Italy, Slovakia, Romania and Great Britain have also signed the declaration. By so doing, they sent a clear signal of rejecting the breach of fair play with farmers across the European Union.
We hope that further debates in the EU will be based on facts and the issue of agricultural supports will be resolved by focusing them on active farmers rather than a blanket reduction depending on the size of the enterprise."
