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Tobacco farming has become a forgotten sector of the EU's
Common Agricultural Policy (CAP)
The sector is rarely discussed in EU agri-food policy circles
and there is little information available on the farming subsidies
paid to the industry
But IHS Markit found that the next CAP could keep handing out
€100 million to tobacco growers between 2023 and 2027
This expenditure seems to conflict with the EU's anti-cancer
plans and its aim to create a "tobaccofree generation" by
2040
The case for ending these subsidies is stronger than ever as EU
farming policies are increasingly linked with health and
environmental goals
But scrapping the funds is not a panacea and could risk higher
imports of less sustainable tobacco
EU tobacco producers benefit from the same subsidy support
system as any other farmer in the bloc, but the subsidies for this
controversial crop are rarely being discussed in agri-food policy
circles in Brussels. It's as if European tobacco production has
become a forgotten sector of the EU's Common Agricultural Policy
(CAP).
However, a new IHS Markit analysis found that EU tobacco farmers
could keep receiving around €100 million from the next CAP, which
seems to contradict the European Commission's anti-cancer plans to
drastically reduce smoking and other forms of tobacco consumption
across the bloc.
This political misalignment did not raise any uproar when
members of the European Parliament and EU farming ministers decided
to keep providing area-based direct payments to producers of raw
tobacco in June, as part of their deal on the new CAP for
2023-27.
But this situation may change as IHS Markit reveals that the
sector will keep profiting from a considerable amount of EU money,
even though tobacco is not an edible food crop and the subsidies
therefore have no impact on food supplies or security.
This subsidy amount can only be calculated based on estimates
because the Commission gives no real information on these payments
- possibly to avoid public criticism for supporting such a highly
controversial sector.
The latest data from the EU's statistical body Eurostat only
show that there were around 26,000 producers of raw tobacco in 2018
cultivating a total of 66,000 hectares. Italy, Greece and Poland
were the main producing countries with around 14,000 hectares,
followed by Spain with 8,000 hectares.
Based on the expected average direct payment amounts per hectare
(which are regardless of the specific crop grown), IHS Markit found
that the next CAP is expected to pay around €20 million to raw
tobacco growers every year (see table below). This will add up to
around €100 million in total for the complete five-year period of
the next EU farming policy (2023-27).
Conflicts with cancer plan
Spending such huge sums to subsidize tobacco growth seems
hypocritical when the EU aims to drastically reduce the consumption
of tobacco through its 'Europe's Beating Cancer Plan'.
The European Commission presented this strategy in February this
year and set out a new EU approach to help member states reduce the
human suffering caused by cancer. The strategy hopes to trigger
more decisive actions to prevent a projected 24% in cancer deaths
by 2035 by tackling the entire disease pathway-from prevention to
diagnosis, treatment and follow-up care.
One of the plan's most ambitious objectives is creating a
"tobacco-free generation" in the EU, with less than 5% of the
population using tobacco by 2040. This would require a decrease of
20 percentage points over the next two decades as around a quarter
of EU citizens still use tobacco now.
Commission officials explained that they are targeting tobacco
use because it is one of the leading causes of preventable cancers
and can be attributed to 27% of all cancers and 90% of lung
cancers. The EU executive also pledged to take a range of measures
to achieve this tobacco-free objective, including by reducing the
attractiveness of smoking through plans for plain packaging, a ban
on flavors, curbs on cigarette advertisements and possibly higher
national taxation.
These efforts will span across several policy areas, including
education and social policies but also environmental, climate and
agricultural policies. Yet the Commission failed to make any
mention of the future CAP and its role in supporting tobacco
production in its 31-page-long plan.
Better than before
It should be noted that the CAP's role used to be much worse in the
past. Until the early 1990s, tobacco was the most highly subsidized
crop per hectare and received around 3-4% of the CAP's budget,
leading to total annual expenditure of more than €1 billion ECUs
-the predecessor of the euro.
This support was implemented through a complex system of
production subsidies, quotas, price-setting and the buying of
excess product for storage, with the key purpose of maintaining the
incomes of tobacco farmers. But the policy failed miserably in this
objective and expenditure spiraled out of control, while the EU
lost out on the market and remained the largest importer of raw
tobacco in the world.
EU policymakers eventually abolished this system in the early
1990s, but decided to maintain some of the support in the form of
direct payments to farmers and rural development measures for
tobacco-growing regions, which proved to be a much cheaper way to
support the industry. The main objective of these subsidies stayed
the same-ensuring better incomes for EU farmers growing the
crop-but it was clear that this was done far more efficiently by
offering payments decoupled from production.
This shift in design silenced the biggest public criticisms of
the CAP's tobacco support, and the public debate about these
subsidies died out. Not too long after that, the Commission no
longer organized a working group to discuss the CAP's policies for
tobacco and now it struggles to maintain a well-developed portal
for the crop on its website.
Trade impact
It is also unlikely that removing the remaining CAP subsidies for
tobacco would have a big impact on EU consumption, since
manufacturers are likely to keep buying raw tobacco from wherever
they can get it cheaper-whether this is inside or outside the
EU.
In fact, the EU currently produces less than 2% of the world's
raw tobacco and has been increasing its net purchases of the
commodity in recent years-with imports reaching 420,000 tonnes and
exports at just 120,000 tonnes in 2018.
However, it can be argued that any EU financial support for
tobacco seems inappropriate given the health risks associated with
tobacco consumption and the contradictions with the Commission's
own anti-cancer plans.
For instance, the €100 million could be used to help prevent
chronic diseases by addressing poor diets, such as through the
promotion of fruit and vegetable consumption, or even be deployed
for other policy initiatives that could help tackle cancer, such as
smoking prevention campaigns.
The F2F ambitions mean that the case for ending the remaining
subsidies for tobacco now seems better than ever before, as EU
policymakers have been increasingly linking the bloc's farming
policies with health and environmental objectives. From this
perspective, cutting off the farming subsidy stream to tobacco
production could be a logical next step for EU policymakers.
But the best argument to uphold these payments could echo trade
concerns from the European farming groups opposing the F2F plans-
where the narrative follows a tried-and-tested format: scrapping
CAP funds could reduce the EU's own production and make the bloc
even more dependent on less sustainably produced imports.
Regardless, a public debate on ending tobacco subsidies is
unlikely to materialize any time soon, given the silence from EU
policymakers on this topic in recent years, suggesting they may be
hoping that the CAP's support for tobacco stays forgotten.
Posted 14 September 2021 by Pieter Devuyst, News Analyst, IHS Markit