A CAP on the price of milk?

How much does a pint of milk actually cost? You may think the answer is about seventy pence but actually this isn’t true. Dairy farming is subsidised like most other forms of farming. And it’s subsidised by Europe under the Common Agricultural Policy. Since the moment the CAP was put into place people have been saying that it needs reform and yet there it is still unreformed.

The point of the CAP is to make European farmer’s products cheap enough to compete with foreign products. Generally these products are cheaper to produce abroad because of weather, efficiencies and cheaper labour.

It’s generally been seen a cheaper to subsidise farmers than it is to put tarrifs on things that you are importing. This is largely based on the idea that people will generally get in touch with you to claim free money but might not mention the fact that they need to pay you some tax.

But perhaps now is the time to consider a switch to tariffs? One of the reasons that milk produced in Australia and New Zealand is cheaper than milk produced in the UK is that shipping goods across the world doesn’t cost very much. In fact the main problem is that it doesn’t cost enough. If you are running a tariff based system normally there is a large transaction cost. You have to go through a massive mixed shipment and say, “right how many bananas have you got”? And so on.

But imagine we had discovered that there was suddenly a non selfish reason to support our local farmers. Imagine it wasn’t just the old arguments about protecting local jobs and protecting food supplies during times of war. What if we suddenly discovered a reason that belching out gallons and gallons of oil transporting fruit and veg across the world was bad. What if suddenly the transportation was the issue? I am of course talking about global warming.
If all you had to do when a ship arrived was ask it for its port of origin, which already happens, and then apply a levy based on the number of miles traveled and the weight of the ship it would make things very simple.
Making this change would be a massive shift in the economy because instead of just protecting farmers it would also protect manufacturing and all manner of other jobs that have been moved to where the wages are cheaper.
The one problem is that goods would become more expensive. But on the other hand because we wouldn’t be funding CAP any more we would pay less money in tax.

The biggest problem does come back to the issue of the pint of milk. If the price goes up then for people who pay tax there will be relief based on the lack of tax they have to pay. But what about people who pay no tax?
There are clearly some issues to work out but I think that the farmers will prefer working in a situation where there is actual money to be made farming. And that their goods aren’t just going into a milk lake.
You never know. It could work.

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