The momagri SGPA indicator has come to expose a little known fact: Agricultural subsidies in the U.S. are quite higher than the figures usually given, and very largely exceed those granted by the European Union (EU) and its member-states.

In fact, over $172 billion were appropriated in the U.S. in 2010, against €76 billion in the E.U., or €422 per capita in the U.S. against €151 per capita in the E.U., i.e. close to three times more. This observation goes against stereotypes claiming that European farmers are the most assisted. And the gap continues to increase since 2008.

On the other side of the Atlantic, policies aim to stimulate and secure agricultural output, from farmers to consumers, in a counter-cyclical manner, i.e. in taking market conditions into account. One other specific feature is domestic food aid (54 percent of SGPA in 2010), generally considered as a social subsidy, which in fact represents an active subsidy to the American agricultural and agro-food sector, and is assessed at more than $94 billion. The ongoing reform––the Agriculture Reform, Food and Jobs Act of 2012––is considering changing income protection mechanisms, but is maintaining the strength of an arsenal of subsidies.

In the E.U., farm support mostly includes direct subsidies for farmers’ living standards (64 percent of SGPA in 2010), especially incorporating the Single Payment Schemes (SPSs), which account for 47 percent of all farm support paid in 2010. The support rationale is geared to farmers, but is decoupled from production and market prices. The European policy thus does not have the tools to react efficiently to price instability. And the post-2013 CAP reform proposed by the European Commission makes matters worse, without meeting the challenges of European farmers.
In the light of this study, momagri calls on European leaders to incorporate in the future CAP genuine regulatory mechanisms that stabilize prices and agricultural incomes, while introducing more efficiency in E.U. spending.

Otherwise? The E.U. must take on increased food dependence and all its consequences in social, financial and political terms. The process has already begun, since the European Union has by now doubled imports during the past decade, and seems to import the equivalent of the production of 87 million acres of farmland, i.e. the size of Germany .

Farm subsidies are higher and grow faster in the United States than in the European Union

The SGPA is a unique analytical framework based on an international nomenclature to compare amounts and purposes of public, budgetary, extra-budgetary and financial support earmarked for agriculture.

In a spirit of transparency and comprehensiveness, momagri conducted a comparative study that shows that the very configuration and foundations of agricultural subsidies greatly vary in the United States and in the European Union (see chart below).

Configuration of the SGPA 2010 indicator
EU-27, United States (in € and $ billions)

Monetary policies and exchange rates also played an important role on the situation of American farmers by:

• Basing their economic competitiveness on relatively less costly debt, compared with their European counterparts (monetary policy);
• Compelling European agricultural imports, and stimulating American exports and production (exchange rates).

The SGPA surge between 2005 and 2010 was 51 percent in the United States, against only 8.5 percent in the European Union.