Salocin

Tobacco farmers in Europe

Recently, the tobacco farmers in Europe have been burning tobacco leaves outside the European Commission in protest at the proposed removal of the subsidies that maintain their industry. Over half the paid price of tobacco is currently subsidy, so the end of this aspect of the Common Agricultural Policy is likely to cause a significant reduction in the amount of tobacco produced in Europe - especially in southern parts.

But is this a bad thing? As with all subsidy-based systems, they are easy to set up and hard to take away. When you propose to prop up a failing industry with funds rediustributed from other people's taxes, that industry is unlikely to resist. But what happens when you propose to remove the crutch that keeps a fundamentally non-profitable business in existence? Protests: tobacco smoke over Brussels.

I'm an economist first and foremost, and the support of an industry that would otherwise have moved abroad has to be justified on grounds somewhat stronger than the maintenance of an industry for the sake of that industry. This is not job-creating, it's job-redistributing: for every farmer that has a job in Europe thanks to the subsidies, you can bet there's a dozen farmers in a third world country that are out of a job because they can't compete with a world market drowning in foreign subsidies. The CAP was always a nightmare, and this is no exception.

According to the BBC, tobacco subsidies make up 3 euros of the total 4.5 euro price. In case that number doesn't quite register with people, take a look at the graphic to the right. The big block is the amount of money redistributed from European Union funds to support a non-competitive industry. Tobacco production in Europe is incapable of producing efficiently enough to support itself. This is not a reflection on the producers themselves, but on the fact that this can be done cheaper elsewhere, and therefore the resources in Europe (including the manpower and the money spend subsidising it) are best used in other endeavours. What is more - where's the sense in subsidising tobacco one the one hand when you're taxing tobacco consumption on the other in order to reduce what you perceive as a health hazard?

The removal of the tobacco subsidies is the right thing to do. It is just one of many steps the CAP has to go through on it's way to extinction so that we can finally be rid of the most distortionary and inefficient use of EU funds currently on the books. Let us all hope that our leaders have the courage and strength to stand up to whatever bullying tactics the protesters choose to employ.