US faces challenge in shifting food mountain

We all know that government policies often have unintended consequences. So it has proved in the United States with President Trump's trade war leading to a mountain of food that hunger charities are finding it hard to cope with.

The US administration intends to buy up $1.2bn of foodstuffs over the next year to help out farmers suffering from new tariffs on their produce in China and elsewhere. Sales of US soyabeans to China have been badly hit while pork, a staple product in many mid-western states, faces a 60 per cent tariff in China and 20 per cent in Mexico. Indeed, nearly half the purchases to be made will be of pork.

The purchases will increase by more than 50 per cent the amount that USDA purchases for donation. It is estimated that 40 million households in one of the richest countries in the world are 'food insecure'. However, the challenge is to find enough trucks and drivers to mood the before it spoils. Milk may be the biggest difficulty because of its short shelf life and one is often talking about distances between the producing and recipient areas.

With the average farm business earning 20 per cent less this year, if nothing else it shows the continuing political clout of farmers. There are mid-term elections coming up and although farmers are not numerous, the votes of them and their families can be crucial in tight Senate races, of which there are a number this year. Moreover, many farmers are bedrock Trump supporters.

Brexit report out

The report from a working party set up by the Farmer-Scientist Network of the Yorkshire Agriculture Society on Brexit and agriculture is now out: Brexit

The working party was made up of academic specialists from the fields of law, agricultural economics and political science, as well as farmer members.

The report highlights the complexities and uncertainties associated with Brexit, particularly given the absence of any Plan B for agriculture produced by the UK Government.

Among the topics covered are the future of farm subsidies, international trade, the devolved administrations, plant protection, animal health and welfare, GM crops, geographical indications and migrant labour.

Transatlantic trade talks hit trouble over agriculture

The US-EU trade talks are running into trouble on a number of fronts, but predictably agriculture is proving to be a particularly difficult issue. The farm lobbies on both sides of the Atlantic are active and influential and the EU feels a need to respond to the concerns of its citizens on such subjects as GM crops and hormone-raised beef. For its part, the US sees this as protectionism under another guise.

Food safety is an area where there is a particular gap with the EU sticking to the 'precautionary principle' which can justify intervention in the absence of much in the way of hard scientific evidence while the US has a more lenient 'risk assessment model' which only bans products if there is a known risk. The EU is about to approve a GM strain of corn/maize, but that is after a decade of debate and six scientific studies. It remains to be seen how much is actually planted.

The fundamental problem is that the public in the two entities have different attitudes on issues of this kind and these are difficult to overcome, particularly when the EU is engaged in a constant search for democratic legitimacy and popular support. Standing up to big US corporations marketing allegedly dangerous products and processes is one way of doing that.

Trade-distorting subsidies fall

Trade-distorting farm subsidies in the EU fell in the last year for which figures are available (2009-10) to a mere €15.5bn. This puts them well within limits proposed in the Doha Round: Trade

The same source contains a useful summary of the agricultural dimension of the recent EU budget negotiations: Budget

Irish farmers have been worried enough by the threat to farm subsidies to occupy Commission offices in Dublin: Protest

US-EU trade pact could be sunk by farm wars

Following the US elections, EU trade commissioner Karel De Gucht has sought to revitalise talks on a comprehensive bilateral trade deal between Europe and the EU. It reflects a growing recognition that nothing is going to come out of the Doha Round.

However, there is a long history of 'farm wars' between the EU and the US on everything ranging from chickens through pasta to beef hormones. The dispute on GM crops has been particularly troublesome as it is a subject of concern to many EU citizens.

The EU would like to eliminate agricultural tariffs as part of any deal, but Mr De Gucht admitted, 'Access to our agricultural markets will be one of the bones of contention.'

Although US trade supremeo Ron Kirk appears to take the idea seriously, and it has the backing of business interests in the States, it is less clear whether it has the high level political backing necessary for success. President Obama is not known for his interest in relations with Europe and did not give a lot of impetus to trade policy in his first term.

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Doha lite?

The recent G-20 summit was understandably dominated by the eurozone crisis so little attention was paid to the fact that leaders decided to effectively abandon all hopes of achieving a full blown Doha Round settlement and instead see if they could achieve a 'Doha lite'.

Many analysts think that they will achieve nothing. Either way this effectively means the end of 'Rounds' as a way of progressing international trade negotiations. Given the economic backdrop, it also means the end of further breakthroughs towards liberalisation, although the dispute settlement process could still spring some surprises, particularly in relation to agriculture.

The trend towards bilateral deals will be reinforced. Compared with a multilateral framework, such deals tend to be more asymmetrical, so this is not really a gain for the Global South, not that least developed countries got that much outof multilateral negotiations. It was agricultural exporters like Brazil that stood to benefit.

The global financial crisis has obviously shifted priorities over this issue. However, at the very least a ‘Doha-lite’ deal for developing nations will be discussed at a World Trade Organisation meeting in December this year, with an aim of reaching a consensus in time for the 2012 G20 summit in Mexico.

Will progress be possible in agriculture? The EU may stick to its promise to phase out export subsidies, although possibly later than planned given that CAP reform is likely to be delayed. However, EU is unlikely to give much more ground on market access and the US will defend politically sensitive subsidies for crops such as cotton.

It may be that a shortage of government money will now drive reform, but budgetary changes are open to fudging and they never provided as sure a pressure for reform as international trade negotiations. At the end of the day, manufacturing and service industry interests did not want to see potentially lucrative deals derailed by agriculture. These trade offs were one of the benefits of a multilateral negotiating framework.

Grain supply deficit by 2009-10

Grain stocks are projected to rise by 39 per cent this year to 160m tonnes after Russian and the Ukraine planted large crops in response to rising global prices. But, according to Societé Generale, the global wheat crop could shrink to around 642 million tonnes in 2009-10.

This still a bumper harvest by historical standards but significantly lower than last year. With consumption expected to increase to 657m tonnes, the market could see a supply deficit by the end of 2009-10. This could contribute to what is expected to be an era of volatile prices.

An important factor in the situation is the disapperarance of Argentina as a reliable exporter. Farmers there are due to start planting the 2009-10 crop in less than a month and there could be a fall of some 30 per cent on the 2008-9 season and the lowest since 1902-03 when Argentina was starting to earn a reputation as the bread basket of the world.

The decline stems from three years of misguided government intervention in wheat trading in which farmers are periodically banned from selling overseas; a 23 per cent tariff on exports; and a serious drought that has slashed exports. A long-running conflict between the government and soyabean farmers will slash export income this year. Lower wheat planting levels will lead to a bigger shift to soya, though, which is Argentina's biggest cash crop.

El Tejar, one of Argentina's leading agricultural groups, has frozen investments at home and is looking elsewhere in the region, such as neighbouring Uruguay and Brazil, where the regulatory hurdles that plague Argentina are absent.

The whole history of Argentina over the last hundred years is an object lesson in how political meddling can undermine a country's propserity. As far as farm trade is concerned, export taxes are just as much a distorting mechanism as import barriers.