Analysis: Winning the European CAP

By SAM VAKNIN, UPI Senior Business Correspondent

SKOPJE, Macedonia, Jan. 16 (UPI) -- According to Herve Gaymard, the French resistance is alive and kicking -- at least with regards to the European Commission's proposed reforms of the EU's Common Agricultural Policy.

The French Minister for Agriculture, Food, Fisheries and Rural Affairs, in a speech to the misnamed "Real Solutions for the Future" Oxford Farming Conference last week, drew the battle lines.


France and six other EU countries intend to stick religiously to a deal struck, tête-à-tête, between the French president and the German chancellor last year. The CAP -- which consumes close to half of the EU's budget -- will not be revamped until 2013 at the earliest, though outlays will be frozen in real terms and, starting in 2006, gradually diverted from subsidizing production to environmental and other good causes ("decoupling" and "modulation" in EU jargon).


This upset the EU's 10 new members, slated to join as early as May 2004. With spending capped, they are unlikely to enjoy the same pecuniary support bestowed on the veterans, even after 2013. As it is, their agricultural benefits are phased over 10 years and face an uncertain future when the CAP is, inevitably and finally, revamped.

Moreover, France's recalcitrance imperils the crucial Doha round of trade talks. Both the European Union and the United States are supposed to reveal their hands by March. The developing countries are already up in arms over promises made by the richer polities in the protracted Uruguay round and then promptly ignored by them.

Agriculture is arguably the poorer members' highest priority. They demand the opening of the rich world's markets, whittling down export and production subsidies and the abrogation of non-tariff trade barriers and practices, such as the profuse application of anti-dumping quotas and duties.

Gaymard proffered the usual woolly mantras of "farm products are more than marketable goods," "France, and Europe in general, need security of food supply," "food cannot be left to the mercy of market forces." Farmers, unlike industrialists -- insisted the minister counterfactually -- cannot simply relocate and agrarian pursuits are a pillar of the nation's culture and its attachment to the land.


Yet, it cannot be denied that Gaymard advanced in his speech a few thought-provoking and oft-overlooked points.

He convincingly argued that farm products covered by EU subsidies are rarely in direct competition with the crops of the poor in Africa and Asia. The cotton, rice and groundnut oil subventions generously doled out to growers in the United States -- the EU's most vocal critic -- harm the third world smallholders and sharecroppers it purports to defend. The IMF -- perceived in Europe as the long and heartless arm of the Americans -- has dismantled the world's coffee price support regime and marketing structures causing irreparable damage to its indigent growers, Gaymard said.

The CAP, insists Gaymard, does not encourage environmental ills. The policy does not subsidize the husbandry of disease-prone poultry and pigs, nor does it support genetically modified crops. The CAP is also way cheaper than portrayed by its detractors. Food constitutes only 16 percent of the family budget, one third of its share when the CAP was instituted, four decades ago. The CAP amounts to a mere 1 percent of the combined public spending of all EU members. The comparable figure in America is 1.5 percent.

This last argument is, of course, spurious. It ignores the distorting effects of the CAP: exorbitant food prices in the European Union, double payments by EU denizens, once as taxpayers and then as consumers, mountains of butter and rivers of milk produced solely for the sake of finagling subsidies out of an inert and bloated bureaucracy and deteriorating relationships with irate trade partners.


Gaymard is no less parsimonious with the full truth elsewhere in his counterattack.

He claims that the European Union provides tariff-free and quota-free access to farm products from the world's 49 Highly Indebted Poor Countries. This is partly untrue and partly misleading. Important commodities -- such as sugar, rice and bananas -- are virtually excluded by long phase-in periods. Non-tariff and non-quota barriers abound. Macedonian lamb is regularly barred on sanitary grounds, for instance. Health, sanitary, standards-related and quality regulations render a lot of the supposed access theoretical.

Still, it is true that the EU's larger economies are more open to international trade than the United States. Gaymard flaunted a telling statistic: the European Union absorbs well more than two-fifths of Brazil's farm exports. The United States -- in geographical proximity to Brazil and a self-described ardent champion of free trade -- takes in less than 15 percent.

The problem with farming in the developing world is its concentration on cash crops, whose prices are volatile. This subverts traditional agriculture. Gaymard implied that the destitute would do well to introduce a CAP all their own and thus underwrite a thriving indigenous sector for internal consumption and more stable export revenues.


They can expect no help from the industrialized nations, he made crystal clear: "(The rich countries) are not ready to eliminate their support for agriculture. They have not committed themselves to doing so in international forums and do not believe that, as far as they are concerned, it would be to the developing countries' advantage. Therefore," -- he concluded soberly -- "let us stop dreaming." This was received with a standing ovation of the 500 conference delegates.

The conspiracy-minded stipulate that France was actually merely seeking to strengthen its bargaining chips. Finally, they go, it will accept decoupling

and modulation. But recent policy initiatives do not point this way. France all but renationalized its beef markets, proposed to continue dairy quotas until 2013, sought to index milk prices and defended the much-reviled current sugar regime

These are bad news, indeed. Agriculture is a thorny issue within the European Union no less than outside it. A recessionary Germany has been bankrolling sated and affluent French farmers for decades now. This has got to stop and will -- whether amicably, or acrimoniously.

The new EU members -- most of them from heavily agrarian central and east Europe -- will demand equality sooner, or later. Poor nations will give up on the entire trade architecture so laboriously erected in the last 20 years, if they become convinced, as they should, that it is all prestidigitation and a rich boys' club. It is a precipice and France has just taken us all one step forward.


(Send your comments to: [email protected].)

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