New Zealand has long fought the policy, which tops up the incomes of millions of European farmers.
For decades, NZ has argued the policy keeps European production higher than justified by market prices, and supply on global markets out of kilter with demand.
Last year the European Union dished out €58 billion, or nearly 40% of its total budget, in payments to farmers under the Common Agricultural Policy (CAP).
But subsidies on such a large scale could be a thing of the past as bureaucrats in Brussels struggle to bring the 28-country bloc’s finances under control.
The European Commission (EC) is searching for ways to plug a €12b shortfall created by Britain’s exit in 2019.
It recently published five scenarios for the EU budget after 2020, four of which included cuts to the CAP.
In a further sign European subsidisation in its current form may not survive, the agricultural minister of dairying powerhouse the Netherlands, Martijn van Dam, said cuts were now “inevitable”.
“I know not all of my colleagues as ministers for agriculture will probably say that, but I think they all know that it’s inevitable,” he said.
The executive director of the NZ Dairy Companies Association, Kimberly Crewther, said there had been false dawns before when it came to further reform to the taxpayer support received by European farmers.
But the pressures coming on the EU budget both from the United Kingdom’s exit, and meeting new spending demands created by a huge influx of immigrants, meant the latest proposals had a better chance of survival.
“It definitely has some new dynamics in it that we have not seen in the past – there is a new level of pressure,” she said.
The NZ Government’s agricultural trade envoy Mike Petersen, who has travelled to Europe several times in the past couple of years ahead of talks for a possible free-trade deal with the EU, said the reforms could still be shot down by EU politicians.
“It is not there yet – the European Parliament may still bow to pressure from their members to reinstate some of that.”
Lifting its quotas limiting milk production in 2015, the EU had pledged to put its farming sector on a more “market-orientated” footing that would have seen support payments directly linked to production replaced and payments for storage of surplus dairy products scrapped.
However, a dip in international dairy prices soon after saw the EU largely reinstate production-linked subsidies and subsidise the private storage of surplus milk powder to the tune of hundreds of millions of euros.
European production continued to record double-digit increases while NZ milk flows fell.
The EC’s latest proposals have already provoked a response from European farming lobby Copa & Cogeca, which said that any cuts to the CAP would “jeopardise the delivery of the EU’s environmental and social goals”.
The lobby group called for higher spending to protect the EU’s “gastronomic heritage” and 10 million farming jobs.
Petersen said the European farming groups were “masters at lobbying” but he detected a waning appetite for the continued subsidising of farmers when other professions didn’t get the same treatment and public finances were tight.
“The farmers, of course, would argue they are doing God’s work, and the environment is kept in a pristine condition and they are providing the European population with cheap food.
“And all of that is true, but I do not think they are going to be able to continue getting the sort of support that they have had in the past.”
Taxpayers in the UK will pay their farmers the £3b they currently receive annually from the EU until 2022.
Petersen said it was likely that amount would reduce after that time.
“The politicians and the farmer leaders are looking really seriously at where they want that money directed.
“The general feeling is they want to look at how they can incentivise the industry to get on the innovative bandwagon like NZ has.”
