Agricultural subsidies

I refer to Noel Farrugia's letter U-Turn On Subsidies (February 20). Rather than highlighting the government's "incompetence", Mr Farrugia is clearly underlining his own incompetence by confusing subsidies with import levies. The former are a form of financial aid to agricultural producers, while the latter were a tax imposed on importers of agricultural products in order to protect local producers. It was the system of import levies which the European Commission insisted should be terminated on accession and not subsidies. So much so that in order to mitigate the effects of such removal (which would eventually have been inevitable even without EU membership because of the developing WTO scenario) Malta managed to negotiate a State Aid programme, the SMPPMA quoted by Mr Farrugia, which would provide financial aid to agricultural producers to act as an income supplement and to help in the restructuring of their operations. Such payments are not allowed in other member states under the EU's State Aid regulations.

As far as the subsidy on tomatoes for processing is concerned, this was made up of an EU component, paid to producers in all member states where tomatoes for processing are produced under the Common Market Organisation, and a State Aid component under the SMPPMA. One of the aims of this subsidy is to reduce cost of production by the tomato processors so that they can compete with imported products by lowering their prices. In fact prices of both imported and locally produced tomato-based products have seen marked price reduction following accession. So much for the subsidy being "an additional indirect burden on the cost of food to the consumer"! The Prime Minister's efforts to reduce the budget deficit are certainly not being sabotaged because of the readoption of the "previously despised subsidy policy", because this policy was introduced as part of the SMPPMA as far back as July 2002.

Regarding the level of production of tomatoes for processing, it is true that there was a drop in production, and the Ministry for Rural Affairs and the Environment is doing its utmost to address this. In fact only recently a scheme to aid local processing plants was announced through which the costs of promotion of local products would be partly met by special grants related to an undertaking to increase contracts with farmers this year by 20 per cent. It is when an industry is facing hard times that it requires increased assistance. On the contrary, Mr Farrugia is suggesting that all aid to tomato producers should be stopped because it is a "subsidy wasted on a failing project". Does this conform to his party's policy which he quotes is that of supporting farmers?

As for the effects of the SMPPMA in other sectors of Malta's agriculture, I suggest to Mr Farrugia to ask producers of milk, pork, eggs, fruit, vegetables and potatoes where they would be today without the support given them by the SMPPMA. Even in the case of broiler production which suffered setbacks and is now under the threat of avian flu repercussions, the Ministry for Rural Affairs and the Environment, has taken steps to offer additional support in the form of a scheme to grant financial aid to processing firms for upgrading their operations and promoting local poultry meat. Again this scheme is tied to an undertaking to increase production during the current year. But of course all this amounts to sabotage of the country's economy as far as Mr Farrugia is concerned!