Sunday, May 11, 2008

EU rejects French call to limit food imports

France and the European Commission have clashed over the future of farming with the European Commission dismissing French calls to curtail food imports as self-defeating and backward-looking. 'Autarky is not the future. We are not aiming at a closed market where we are self-sufficient,' a spokesman for farm commissioner Mariann Fischer Boel stated.

French farm minister Michel Barnier favours domestic production and requiring imports to match EU welfare needs - moves the spokesman said would invite retaliation: 'It is not in our interests to become a fortress. If we erect new barriers, so will our trade partners,' he said. 'We are a major trader in agricultural products. We are the biggest exporter and importer of farm products in the world. What we believe in is trade. We are seeing increasing exports of our high-quality food products.'

In 2007, the EU exported €75bn of produce and imported €77.3bn. France's trade surplus with non-EU members was €8.3bn.

New protectionism

Imports had to meet basic health and safety standards, said Ms Ficsher Boel's spolesman, adding 'That does not mean we can impose on our trading partners to put in place exactly the same legislation we have.'

However, French proposals on 'European preference' that are expected to be circulated to agriculture ministers next month were gaining support. 'There is a growing feeling it is only fair and reasonable that imports are subjected to the same technical standards as our own producers,' an EU official said. The point is, of course, that it would be difficult for developing countries to meet these standards, and for many of them agricultural exports offer the best route to prosperity which would then enable them to import more manufactured goods.

EU farmers complain that their costs are rising because of increased environmental and animal welfare rules that the rest of the world do not have to meet. After a recent vocal campaign by cattle farmers, the Commission restricted imports of beef from Brazil, where foot-and-mouth disease is rampant.

The Barnier interview

The present debate was started by an interview with Michel Barnier in the Financial Times. He recommended that Africa and Latin America should adopt their own version of the CAP which would be the first time a policy disaster has been exported. However, Mr Barnier believes that the developing world should form self-sufficient regional blocs with a redirection of development aid.

Mr Barnier claimed, 'What we are now witnessing in the world is the consequence of too much free-market liberalism. We can't leave feeding people to the mercy of the market. We need a public policy, a means of stabilisation and intervention.'

This reveals the fundamental difference between British and French perspectives. Britain has a history of liberalism, France one of state intervention and protectionism. From a British perspective, the market is an effective way of transmitting consumer preferences through the price mechanism. The market should be able to supply food like any commodity. The only qualification is the effect that weather fluctuations have on production. But this does not justify an elaborate apparatus of subsidy and protection, rather the development of new and innovative mechanisms for offsetting risk.

Predictably, Mr Barnier criticised the WTO, stating that he was 'not sure' that it was 'the right place to discuss the relationship between food and agriculture.' He noted that the agriculture budget would be 37 per cent of the EU's budget, down from 81 per cent in 1985. However, that is still a considerable multiple of the sector's contribution, even if one adds in food processing which uses some imported ingredients anyway.

Farmers are already responding to high prices and strong demand for grain. According to the US Department of Agriculture, the world will produce a record 656m tonnes of wheat in the year starting in July, up 8.2 per cent on the previous year. However, this may not be enough to restore a comfortable supply buffer to the world market given that global wheat stocks have shrunk to their lowest level since 1978.

However, the report did project that global soyabean stocks would decline. There has been a large increase in US land devoted to soyabean production, but global demand is rising even faster. Moreover, corn (maize) output is expected to fall 7.3 per cent this year while demand for ethanol use is expected to rise by one-third. Ethanol will eat up 33 per cent of next year's US corn harvest, up from 22.9 per cent in 2007-8. All this suggests continuing upward pressure on prices.

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