Zoonotic diseases that transmit from animals to humans are nothing new. Viruses have been jumping the species barrier through history, but modern industrial farming practices could increase the risk.
Given the widespread use of industrial farming in the EU, the potential for the emergence of new zoonotic diseases would appear to be high. Intensified animal production is creating a narrowing genetic base, particularly in dairy animals, poultry and pigs.
The economic imperative to make more use of high-yielding breds favours the spread of recessive genes responsible for traits such as poor immunity. According to Tony Hart, co-director of the National Centre for Zoonosis Research at the University of Liverpool, 'Livestock are highly inbred to produce maximum yield in the shortest time. This creates animals which are prone to become carriers of disease.'
Conditions on farms can promote the development of highly resistant strains of bateria, turning crowded pens into areas where there is a high risk of disease and increasing the risk of transmission to humans. There have been some positive developments such as the outright ban in January of the routine use of antibiotics in feed for growth promotion purposes.
Nevertheless, Dil Peeling, senior officer at the Eurogroup for Animal Welfare says, 'We expect to see an increase in the use of antibiotics on farms. The routine use of antibiotics may be banned. But, in the same system, animals are kept in stressful conditions that reduce immunity. In some cases, genetically they have less immunity, so we are forced to rely more on biosecurity [antibiotics] when minor diseases come up.'
According to Peeling, CAP with its historical emphasis on quantity rather than quality continues to drive harmful industrial practices. It could be argued that the reformed CAP is trying to place a great emphasis on quality, including animal welfare. Fischler was the first farm commissioner to introduce this theme into the debate, but Peeling believes that the CAP has gone backwards since then.
Certainly there is a risk of accession states learning bad lessons. 'New accession states believe that the future of agriculture must be the same as that which they have seen in Western Europe. They are not learning from old mistakes, so we're seeing funds going towards intensification,' says Peeling.
The BSE scare shook up European agriculture and contributed substantially to the public resistance to GM crops. Another crisis could reinforce demands for higher standards of animal welfare, although farmers would argue that in the interests of a level playing field there should be some tightening of standards in relation to goods imported into the EU.
Monday, August 28, 2006
Thursday, July 27, 2006
Large farms benefit from direct aid
880 large farms or agri-businesses each received over €500,000 in the final year of the old pre-Single Farm Payment CAP regime according to draft Commission figures. This means that just 0.02 per cent of beneficiaries received 2.5 per cent of the total EU budget for direct aids (€700m out of €28.2 billion).
Germany once again had the largest number of farms receiving payments of over €0.5 million each, 620 farmers who received €0.5 billion between them. This is a reflection of the survival of large farms in the former East Germany.
However, France has its large farms as well. France was the largest overall recipient of direct aid in 2004, €6.9 billion, and of this €1.7 million was shared out between fewer than ten of the biggest farms.
Well over half the farms received CAP aid in 2004, just over 2.5 million, received annual aid cheques of less than €1250. Of these farms, 2.1 million were situated in either Italy, Greece or Spain. There has been speculation that these very small payments could be phased out because of the transaction costs involved in calculating and paying them. However, even very small sums can be important to marginal enterprises, e.g., where the farmer is past retirement age.
Germany once again had the largest number of farms receiving payments of over €0.5 million each, 620 farmers who received €0.5 billion between them. This is a reflection of the survival of large farms in the former East Germany.
However, France has its large farms as well. France was the largest overall recipient of direct aid in 2004, €6.9 billion, and of this €1.7 million was shared out between fewer than ten of the biggest farms.
Well over half the farms received CAP aid in 2004, just over 2.5 million, received annual aid cheques of less than €1250. Of these farms, 2.1 million were situated in either Italy, Greece or Spain. There has been speculation that these very small payments could be phased out because of the transaction costs involved in calculating and paying them. However, even very small sums can be important to marginal enterprises, e.g., where the farmer is past retirement age.
Wednesday, July 26, 2006
'Yo liars' claim as Doha blame game gets under way
Rookie US Trade Representative Susan Schawb has effectively accused the EU of lying as the blame game for the collapse of the Doha Round gets under way. The US has been taking a lot of the heat and no doubt the search for someone to blame makes the participants in the failed talks feel better but it does little for the future growth of the world economy or fairer trade.
Ms Schwab said that the US had so far 'refrained from responding to the finger-pointing by some' but she said the EU's claim that the US had doomed the talks by failing to show flexibility in negotiations was 'false and misleading' and made with the intention of 'attempting to divert blame for the stalemate.'
Attention is now focusing on the US farm bill due to expire next year which has provided considerable aid to large-scale farmers. Three-quarters of the subsidies have gone to growers of rice, corn, wheat, soyabeans and cotton. One idea that is being floated around Congress is to extend for one year both the current spending arrangements under the farm bill and fast-track authority.
The EU is certainly not blameless in all this as its stance was weakened by the rebellion of agrarian states led by France, leading to a relatively weak, if cleverly presented, tariff cutting offer. Emerging countries like India have also been running scared of the electoral damage that can be done by their poorer farmers.
As Susan Sechler, US director for trade and development at the German Marshall Fund of the United States (a think tank) commented, 'It used to be that first you got a deal at the WTO and then used it to discipline domestic agricultural spending. That doesn't work any more, partly because developing countries in the WTO won't accept a post-dated cheque.'
At the heart of all this is the changing economic structure of power in the world. Relations between the EU and the US have become increasingly tense over a range of issues, not just economic ones. But even if they wanted to function as a duopoly resolving their own disputes at the expense of others, they couldn't do so because too much influence has passed to the emerging countries. That is why the G7/8 is largely an irrelevance and we need a G4 of the US, EU, China and Japan, with some involvement from medium-sized powers like Brazil.
Ms Schwab said that the US had so far 'refrained from responding to the finger-pointing by some' but she said the EU's claim that the US had doomed the talks by failing to show flexibility in negotiations was 'false and misleading' and made with the intention of 'attempting to divert blame for the stalemate.'
Attention is now focusing on the US farm bill due to expire next year which has provided considerable aid to large-scale farmers. Three-quarters of the subsidies have gone to growers of rice, corn, wheat, soyabeans and cotton. One idea that is being floated around Congress is to extend for one year both the current spending arrangements under the farm bill and fast-track authority.
The EU is certainly not blameless in all this as its stance was weakened by the rebellion of agrarian states led by France, leading to a relatively weak, if cleverly presented, tariff cutting offer. Emerging countries like India have also been running scared of the electoral damage that can be done by their poorer farmers.
As Susan Sechler, US director for trade and development at the German Marshall Fund of the United States (a think tank) commented, 'It used to be that first you got a deal at the WTO and then used it to discipline domestic agricultural spending. That doesn't work any more, partly because developing countries in the WTO won't accept a post-dated cheque.'
At the heart of all this is the changing economic structure of power in the world. Relations between the EU and the US have become increasingly tense over a range of issues, not just economic ones. But even if they wanted to function as a duopoly resolving their own disputes at the expense of others, they couldn't do so because too much influence has passed to the emerging countries. That is why the G7/8 is largely an irrelevance and we need a G4 of the US, EU, China and Japan, with some involvement from medium-sized powers like Brazil.
Monday, July 24, 2006
Doha Round suspended
Given that the G8 summit failed to make any substantive progress on the Doha Round, it is no surprise that its attempts to kick start the Round have failed. Negotiators were going to given up their holidays to meet a new August target date, but Pascal Lamy has just announced that the round has been suspended. He commented that some countries clearly preferred a 'Doha Light'. Certainly there are many in the United States who think that the country's interests can best be served by bilateral deals.
The suspension followed a failure to make progress in Group of Six meetings on Sunday. Four of the six G6 participants blamed the US for the collapse of the talks. EU trade commissioner Peter Mandelson commented, 'If the US continues to demand dollar-for-dollar compensation for reducing domestic support, no one in the developing world will ever buy that, and the EU will not either.'
For its part the US has become increasingly frustrated by what it sees as the gutting of its proposals to cut farm tariffs which generated opposition from the EU, Japan and Switzerland. Susan Schwab, US trade representative, complained that some participants were more interested in loopholes than in market access.
The Uruguay Round was, of course, suspended in 1990 after the supposedly final talks in Brussels collapsed and was eventually revived. However, the political climate is not favourable. Mid-term elections are looming in the United States which seem to have affected President Bush's thinking. If the Democrats take either the House or the Senate, a renewal of authority to negotiate trade deals is even less likely.
The collapse of the talks is good news for heavily subsidised large-scale farmers in the US and the EU. Trade negotiations have been the most successful driver of CAP reform. Politicians in poor countries will get political points for protecting poor farmers against competitive imports. But it's bad news for agricultural exporting countries such as Australia and Brazil. And despite the celebratory noises emanating from some NGOs who argue that no deal is better than a bad deal this is not good news for farmers in least developed countries, for example cotton producers in West Africa who have been hit hard by US subsidies.
What of the WTO itself? The suspension of the Round does not mean the end of the Disputes Settlement Mechanism. Former EU commissioner and WTO head Sir Peter Sutherland commented, 'The WTO is so crucial, it will survive, but it will be damaged. The collapse of the talks leave global multilateralism in a parlous state.'
The WTO is regarded by many of its members as the last multilateral organisation by whose decisions the US agrees to be bound. In truth this is another victory for US unilateralism and any bilateral deals that are forged in the future will benefit the US more than the other participant. As Michael Cox of LSE warned in the March issue of European Political Science, the bridge across the Atlantic can no longer bear any heavy traffic and there is a widening gulf on issues and values between the EU and the United States. As an Atlanticist, this is something I regret, but it is difficult to see what remedies there are to hand.
The suspension followed a failure to make progress in Group of Six meetings on Sunday. Four of the six G6 participants blamed the US for the collapse of the talks. EU trade commissioner Peter Mandelson commented, 'If the US continues to demand dollar-for-dollar compensation for reducing domestic support, no one in the developing world will ever buy that, and the EU will not either.'
For its part the US has become increasingly frustrated by what it sees as the gutting of its proposals to cut farm tariffs which generated opposition from the EU, Japan and Switzerland. Susan Schwab, US trade representative, complained that some participants were more interested in loopholes than in market access.
The Uruguay Round was, of course, suspended in 1990 after the supposedly final talks in Brussels collapsed and was eventually revived. However, the political climate is not favourable. Mid-term elections are looming in the United States which seem to have affected President Bush's thinking. If the Democrats take either the House or the Senate, a renewal of authority to negotiate trade deals is even less likely.
The collapse of the talks is good news for heavily subsidised large-scale farmers in the US and the EU. Trade negotiations have been the most successful driver of CAP reform. Politicians in poor countries will get political points for protecting poor farmers against competitive imports. But it's bad news for agricultural exporting countries such as Australia and Brazil. And despite the celebratory noises emanating from some NGOs who argue that no deal is better than a bad deal this is not good news for farmers in least developed countries, for example cotton producers in West Africa who have been hit hard by US subsidies.
What of the WTO itself? The suspension of the Round does not mean the end of the Disputes Settlement Mechanism. Former EU commissioner and WTO head Sir Peter Sutherland commented, 'The WTO is so crucial, it will survive, but it will be damaged. The collapse of the talks leave global multilateralism in a parlous state.'
The WTO is regarded by many of its members as the last multilateral organisation by whose decisions the US agrees to be bound. In truth this is another victory for US unilateralism and any bilateral deals that are forged in the future will benefit the US more than the other participant. As Michael Cox of LSE warned in the March issue of European Political Science, the bridge across the Atlantic can no longer bear any heavy traffic and there is a widening gulf on issues and values between the EU and the United States. As an Atlanticist, this is something I regret, but it is difficult to see what remedies there are to hand.
Sunday, July 23, 2006
Rising grain prices may push up cost of bread
Record summer temperatures, low global grain stocks and the expected growth in biofuels, have seen wheat prices rise to ten year highs and may lead to big increases in the cost of bread and pasta. Corn [maize] and barley prices are also likely to raise which may affect the cost of beer and breakfast cereals. For the fifth year in six global production is expected to fall short of demand. Hedge funds have been active in wheat futures, with a sharp increase in the number of contracts bought in the US, UK and elsewhere in Europe.
Both the US and Northern Europe have experienced record temperatures, which some see as evidence of the reality of global warming. Some wheat farmers in the UK are harvesting a month early for the first time since the 1979 heatwave. In Northern Italy, the hot, dry weather is estimated to have caused €100 of damage to crops with yields forecast to fall by 9 per cent.
Ethanol plants using wheat as an ingredient will open in Europe in the next two years. Christopher Brodie, a partner at hedge fund Krom River, commented, 'Once the ethanol plants open, we will link the price of petrol to the price of bread, because the price of wheat will be settled by who pays more, the oil industry or the food industry.'
Shroud wavers among the farming community will no doubt see these developments as supportive of their food security arguments for continuing subsidies. Alternatively, one could see it as market forces of supply and demand generating a better rate of compensation for farmers, ultimately leading, if the trends are sustained, to a rise in supply.
Both the US and Northern Europe have experienced record temperatures, which some see as evidence of the reality of global warming. Some wheat farmers in the UK are harvesting a month early for the first time since the 1979 heatwave. In Northern Italy, the hot, dry weather is estimated to have caused €100 of damage to crops with yields forecast to fall by 9 per cent.
Ethanol plants using wheat as an ingredient will open in Europe in the next two years. Christopher Brodie, a partner at hedge fund Krom River, commented, 'Once the ethanol plants open, we will link the price of petrol to the price of bread, because the price of wheat will be settled by who pays more, the oil industry or the food industry.'
Shroud wavers among the farming community will no doubt see these developments as supportive of their food security arguments for continuing subsidies. Alternatively, one could see it as market forces of supply and demand generating a better rate of compensation for farmers, ultimately leading, if the trends are sustained, to a rise in supply.
In the land of fresh rice ears of many autumns
I recently returned from my first visit to Japan, a country about which I have read extensively over the years. It was therefore no surprise to see paddy fields located in the middle of the urban sprawl of the Osaka area, one of them being tended by a presumably part-time farmer. Japan, I was told, has something like 2.2 times the population of the UK but half the useable land area. In the area where I spent most of my time, Fukuoka prefecture, there was more emphasis on value added niche crops like strawberries.
In the 8th century Nihon shoki [Chronicle of Japan] there is a famous passage that refers to Japan as 'the land of fresh rice ears of fifteen hundred autumns.' This is seen as example of the deep roots of agriculture among the Japanese. A former PhD student, now teaching in Japan, had negotiated with a farmer to obtain a supply of brown rice in return for helping with the planting.
Rice production in Japan and the Republic of Korea remains highly protected. Although the high tariff barriers will have to be reduced, I have some sympathy with demands to maintain them on cultural grounds. Japan is a unique blend of tradition and modernity and certainly the most distinctive place I have ever visited (and that includes remote ethnic minority areas of China).
There is an inconsistency in calling for the maintenance of some protection in Japan and pressing for its elimination in France. In both cases the attachment to a particular form of agriculture might seem to be sentimental, even though both countries have distinctive and much admired food cultures. I would maintain that the French way of life is less tied up with a particular pattern of agriculture than is often believed, particularly given that many French farms are large scale. But perhaps I feel an affinity with another island kingdom that I do not feel with France, a country I have never visited.
In the 8th century Nihon shoki [Chronicle of Japan] there is a famous passage that refers to Japan as 'the land of fresh rice ears of fifteen hundred autumns.' This is seen as example of the deep roots of agriculture among the Japanese. A former PhD student, now teaching in Japan, had negotiated with a farmer to obtain a supply of brown rice in return for helping with the planting.
Rice production in Japan and the Republic of Korea remains highly protected. Although the high tariff barriers will have to be reduced, I have some sympathy with demands to maintain them on cultural grounds. Japan is a unique blend of tradition and modernity and certainly the most distinctive place I have ever visited (and that includes remote ethnic minority areas of China).
There is an inconsistency in calling for the maintenance of some protection in Japan and pressing for its elimination in France. In both cases the attachment to a particular form of agriculture might seem to be sentimental, even though both countries have distinctive and much admired food cultures. I would maintain that the French way of life is less tied up with a particular pattern of agriculture than is often believed, particularly given that many French farms are large scale. But perhaps I feel an affinity with another island kingdom that I do not feel with France, a country I have never visited.
UK farmers slow to respond to reform
A survey of farmers carried out by HSBC Bank shows that most farmers are aware of the need to adapt their businesses as production support declines, but few have a clear vision of how to achieve this.
The survey found that 64 per cent of farmers have done the calculations to find the level of their likely Single Farm Payment over the next three to five years. However, 87 per cent of the sample intended to either maintain their set aside at the same rate as last year or ro reduce it, indicating that the cropped area for the 2007 harvest is likely to remain at a similar level to that of recent years. Surprisingly, only 52 per cent of the farmers questioned know the cost of producing a tonne of wheat on their units which is the key of basic information that one would think that any business needed to make commercial decisions.
Few farmers are planning ahaead to replace the state support or reduce their costs in line with its withdrawal. Stuart Ellwood, head of agriculture at HSBC, is surprised that the rate of change is not faster and is urging producers to move away from the traditional cropping patterns dictated by CAP payments to growing for other food and feed markets, and alternative land uses such as biofuels, pharmaceuticals and textiles.
The survey found that 64 per cent of farmers have done the calculations to find the level of their likely Single Farm Payment over the next three to five years. However, 87 per cent of the sample intended to either maintain their set aside at the same rate as last year or ro reduce it, indicating that the cropped area for the 2007 harvest is likely to remain at a similar level to that of recent years. Surprisingly, only 52 per cent of the farmers questioned know the cost of producing a tonne of wheat on their units which is the key of basic information that one would think that any business needed to make commercial decisions.
Few farmers are planning ahaead to replace the state support or reduce their costs in line with its withdrawal. Stuart Ellwood, head of agriculture at HSBC, is surprised that the rate of change is not faster and is urging producers to move away from the traditional cropping patterns dictated by CAP payments to growing for other food and feed markets, and alternative land uses such as biofuels, pharmaceuticals and textiles.
Friday, July 21, 2006
Blame game on Doha Round
Unless there is some sudden and unanticipated breakthrough, the Doha Round trade talks look increasingly likely to fail over agricultural trade. It has to be remembered that under US trade law the schedules must be handed to the US Congress at least 180 days before Trade Promotion Authority expires on 1 June. It is unlikely to be renewed and it would be impossible to get any deal through the inward looking Congress without it.
So the blame game is now on with many fingers pointing at Uncle Sam. One view is that the US remained particularly intransigent, refusing to give ground on domestic farm support until it was assured significant market access to emerging economies. The US was pressing for a 90% cut in tariff rates compared with the 75% sought by the G-20. Moreover, Oxfam argued that the US's offer on farm support would actually allow it to increase farm payments compared to present levels.
US negotiators argued that developing nations would only reap real benefits from trade if there was significant market liberalisation. This neo-liberal vision did not appeal to the developing countries who argued that substantial opening of markets should be not be forced on their fragile economies.
The US is perhaps on stronger ground when it criticises the stance of emerging countries, arguing that richer developing countries such as Brazil, India and China should stop hiding behind poor nations in the trade talks and start to open up their own markets. This overlooks the fact that Brazil, where the agriculture minister has recently resigned, has a big problem with the army of landless labourers belonging to the radical MST movement. The large peasant populations in India and China (where there have been a number of disturbances surrounding the seizure of farm land for development) could easily be radicalised or could flood into the cities looking for work.
US ag policy is in a mess
The fact remains that US ag poicy is in a mess. As the authoritative Agra Europe has commented, 'What stands out a mile on the farm support issue is that successive US Administrations have got themselves into an unholy mess on agricultural support from which the current Administration will have to extricate itself both to be able to move on Doha and, eventually, to conciliate its own taxpayers.'
At the root of the problem is electoral politics in the US. As Graham Wilson has shown, the farm vote can still be decisive in tight contests for the Senate in interior states. But, above all, the cost of getting re-elected, not least in the House, means that even urban Congress members are willing to take donations from farm lobbies.
The FAIR act of 1994 appeared to open up a whole new era in US farm policies, including the introduction of totally decoupled income payments to replace production subsidies. However, once commodity prices started to fall in the late 1990s, the farm lobby successfully pressured for more handouts, initially on an 'emergency' basis and later consolidated in the 2002 Farm Bill which was a backward step. In particular, the introduction of counter cyclical payments was particularly damaging from a world market perspective as they maintain US production at high levels even when market prices are falling.
The US also hands out $1.5 billion in government-financed crop insurance. This is treated as non-product specific under the 'de minimis' rule. However, the EU and others argue that almost all US crop insurance is product specific.
The EU does appear to be prepared to give ground on senistive products, lowering them from 8% to about 5% of all tariff lines, although that would still be far too high as far as almost all other participants in the trade talks are concerned.
So the blame game is now on with many fingers pointing at Uncle Sam. One view is that the US remained particularly intransigent, refusing to give ground on domestic farm support until it was assured significant market access to emerging economies. The US was pressing for a 90% cut in tariff rates compared with the 75% sought by the G-20. Moreover, Oxfam argued that the US's offer on farm support would actually allow it to increase farm payments compared to present levels.
US negotiators argued that developing nations would only reap real benefits from trade if there was significant market liberalisation. This neo-liberal vision did not appeal to the developing countries who argued that substantial opening of markets should be not be forced on their fragile economies.
The US is perhaps on stronger ground when it criticises the stance of emerging countries, arguing that richer developing countries such as Brazil, India and China should stop hiding behind poor nations in the trade talks and start to open up their own markets. This overlooks the fact that Brazil, where the agriculture minister has recently resigned, has a big problem with the army of landless labourers belonging to the radical MST movement. The large peasant populations in India and China (where there have been a number of disturbances surrounding the seizure of farm land for development) could easily be radicalised or could flood into the cities looking for work.
US ag policy is in a mess
The fact remains that US ag poicy is in a mess. As the authoritative Agra Europe has commented, 'What stands out a mile on the farm support issue is that successive US Administrations have got themselves into an unholy mess on agricultural support from which the current Administration will have to extricate itself both to be able to move on Doha and, eventually, to conciliate its own taxpayers.'
At the root of the problem is electoral politics in the US. As Graham Wilson has shown, the farm vote can still be decisive in tight contests for the Senate in interior states. But, above all, the cost of getting re-elected, not least in the House, means that even urban Congress members are willing to take donations from farm lobbies.
The FAIR act of 1994 appeared to open up a whole new era in US farm policies, including the introduction of totally decoupled income payments to replace production subsidies. However, once commodity prices started to fall in the late 1990s, the farm lobby successfully pressured for more handouts, initially on an 'emergency' basis and later consolidated in the 2002 Farm Bill which was a backward step. In particular, the introduction of counter cyclical payments was particularly damaging from a world market perspective as they maintain US production at high levels even when market prices are falling.
The US also hands out $1.5 billion in government-financed crop insurance. This is treated as non-product specific under the 'de minimis' rule. However, the EU and others argue that almost all US crop insurance is product specific.
The EU does appear to be prepared to give ground on senistive products, lowering them from 8% to about 5% of all tariff lines, although that would still be far too high as far as almost all other participants in the trade talks are concerned.
Tuesday, July 04, 2006
Doha Round in crisis
'Crisis' is an overworked word in relation to trade talks, but the Doha Round now appears to be in serious trouble after a failure to make any progress on agriculture in Geneva at the end of last week. The talks petered out on Saturday, having reached no conclusion on modalities,the next step towards an actual agreement.
The Group of Six (the US, EU, Japan, Brazil and Australia) have asked WTO director-general Pascal Lamy if he can mediate between them and he will report back in two weeks, but is unlikely to produce his own text which would serve as the equivalent of the Dunkel draft in the Uruguay Round.
The EU was prepared to give some ground on tariffs, moving its position closer to that of the G-20 group of emerging countries. They were privately indicating that they would prepared to cut tariffs by an average 51 per cent compared with their original offer of 39 per cent. This is very close to the 54 per cent cut asked for by G-20 which the EU calculates as actually nearer 52 per cent.
Much of their G-20's fire is now concentrated on what they see as the intransigence of the United States with a new rift appearing between Brazil and the States. For the United States, new trade supremo Susan Schwab said that the problem was the three S's, not the two in her name, but the 'sensitive' and 'special' products which would enjoy lower tariff cuts and the 'special safeguard mechanism' that allows poor countries to block sudden surges in imports.
The fact is that ministers or other representatives, whether they are from India or the United States, get few domestic points for pushing for trade liberalisation which can disadvantage politically influential groups in their societies. India's trade minister Kamal Nath turned up late for a green room discussion on Friday evening. His excuse was the Argentina v. Germany match in the World Cup which had not delayed the Argentine delegation. Nath's problem is that he and his prime minister are under pressure from Sonia Gandhi to protect poor farmers. The agri-business interests, principally based in the US, that pushed for liberalisation in the 1990s are more divided or less effective a decade later.
It might be possible for the G-8 and national political leaders to intervene, but these 'deus ex machina' interventions have had little lasting impact in the past. Moreover, leaders from most G-8 countries at the moment are either coming towards the end of their tenures (France, Japan, the UK and the US) or lead governments that are coalitions or have fragile political majorities (Canada, Italy, Germany), while Russia can hardly sort out the problems even if it was that much interested in them.
Does it matter? For two reasons it does. First, an agreement in the Round would bring some advances for developing countries, although far short of what they could hope for. Second, a failure of the Round would remove the key exogenous pressure that has led the EU in particular to at least start down the road of dismantling the CAP in its present form.
The Group of Six (the US, EU, Japan, Brazil and Australia) have asked WTO director-general Pascal Lamy if he can mediate between them and he will report back in two weeks, but is unlikely to produce his own text which would serve as the equivalent of the Dunkel draft in the Uruguay Round.
The EU was prepared to give some ground on tariffs, moving its position closer to that of the G-20 group of emerging countries. They were privately indicating that they would prepared to cut tariffs by an average 51 per cent compared with their original offer of 39 per cent. This is very close to the 54 per cent cut asked for by G-20 which the EU calculates as actually nearer 52 per cent.
Much of their G-20's fire is now concentrated on what they see as the intransigence of the United States with a new rift appearing between Brazil and the States. For the United States, new trade supremo Susan Schwab said that the problem was the three S's, not the two in her name, but the 'sensitive' and 'special' products which would enjoy lower tariff cuts and the 'special safeguard mechanism' that allows poor countries to block sudden surges in imports.
The fact is that ministers or other representatives, whether they are from India or the United States, get few domestic points for pushing for trade liberalisation which can disadvantage politically influential groups in their societies. India's trade minister Kamal Nath turned up late for a green room discussion on Friday evening. His excuse was the Argentina v. Germany match in the World Cup which had not delayed the Argentine delegation. Nath's problem is that he and his prime minister are under pressure from Sonia Gandhi to protect poor farmers. The agri-business interests, principally based in the US, that pushed for liberalisation in the 1990s are more divided or less effective a decade later.
It might be possible for the G-8 and national political leaders to intervene, but these 'deus ex machina' interventions have had little lasting impact in the past. Moreover, leaders from most G-8 countries at the moment are either coming towards the end of their tenures (France, Japan, the UK and the US) or lead governments that are coalitions or have fragile political majorities (Canada, Italy, Germany), while Russia can hardly sort out the problems even if it was that much interested in them.
Does it matter? For two reasons it does. First, an agreement in the Round would bring some advances for developing countries, although far short of what they could hope for. Second, a failure of the Round would remove the key exogenous pressure that has led the EU in particular to at least start down the road of dismantling the CAP in its present form.
Sunday, June 25, 2006
Farm subsidies remain at high level in OECD
The latest figures from the OECD show that the amount its thirty members spent on domestic agriculture in 2005 was almost unchanged from 2004 at $279.8bn (€221bn, £152bn). Subsidies accounted for almost one-third of farm incomes across the rich world.
EU aid to its farmers fell marginally from $136.1bn to $133.8bn while Japanese and Swiss farmers remained among the most protected. The producer subsidy equivalent, which measures the cost to taxpayers of subsidies and consumers of tariff barriers, was 32 per cent in the EU, 56 per cent in Japan and 68 per cent in Switzerland. The $42.7bn US support represented 16 per cent of receipts.
In very simple terms, a concentrated interest deriving benefits from intervention prevails over the diffuse interests of consumers and taxpayers.
EU aid to its farmers fell marginally from $136.1bn to $133.8bn while Japanese and Swiss farmers remained among the most protected. The producer subsidy equivalent, which measures the cost to taxpayers of subsidies and consumers of tariff barriers, was 32 per cent in the EU, 56 per cent in Japan and 68 per cent in Switzerland. The $42.7bn US support represented 16 per cent of receipts.
In very simple terms, a concentrated interest deriving benefits from intervention prevails over the diffuse interests of consumers and taxpayers.
Saturday, June 24, 2006
In the land of the square bracket
Just how far apart the leading participants in the Doha Round are on farm trade issues is revealed in a draft paper on modalities published by the chair of the agricultural negotiations, Kiwi Crawford Falconer.
Falconer was obliged to admit that his document is 'inelegant' and it contains no less than 760 pairs of square brackets, indicating a lack of agreement, in a document of 74 pages. This beats the current world record of 402 square brackets in the Seattle draft in 1999.
It is difficult to see any progress on the key issues. For example, there is no narrowing of positions on sensitive products with the text stating that 'each member shall have the right to designate up to [1-15] per cent of dutiable tariff lines as "sensitive products"'.
It is difficult to escape the conclusion that the ministerial meeting in Geneva expected for June 28 - July 3 will fail to make the badly needed significant progress. There is, however, an increasing realisation that the whole Doha Round is in jeopardy given the need for a timetable that will allow for American approval under fast track negotiations.
High level political leaders need to intervene effectively to ensure a renewed focus on the broad picture rather than the ad valorem tariff for butter. That is not an easy task, however, given that many (from American politicians to NGOs, not to mention the French) are arguing that no agreement is better than a bad agreement. What is increasingly likely is that this will be the last omnibus trade round as they hinder as much as help progress towards fairer world trade.
Falconer was obliged to admit that his document is 'inelegant' and it contains no less than 760 pairs of square brackets, indicating a lack of agreement, in a document of 74 pages. This beats the current world record of 402 square brackets in the Seattle draft in 1999.
It is difficult to see any progress on the key issues. For example, there is no narrowing of positions on sensitive products with the text stating that 'each member shall have the right to designate up to [1-15] per cent of dutiable tariff lines as "sensitive products"'.
It is difficult to escape the conclusion that the ministerial meeting in Geneva expected for June 28 - July 3 will fail to make the badly needed significant progress. There is, however, an increasing realisation that the whole Doha Round is in jeopardy given the need for a timetable that will allow for American approval under fast track negotiations.
High level political leaders need to intervene effectively to ensure a renewed focus on the broad picture rather than the ad valorem tariff for butter. That is not an easy task, however, given that many (from American politicians to NGOs, not to mention the French) are arguing that no agreement is better than a bad agreement. What is increasingly likely is that this will be the last omnibus trade round as they hinder as much as help progress towards fairer world trade.
Friday, June 23, 2006
Dubya is cone sharing fave
President George W. Bush may have had bad poll figures recently, but they are starting to recover, and now Americans have chosen him as the No.1 VIP they would like to share an ice cream cone with.
In a survey by Ben and Jerry's, Bush received 21 per cent of the vote, followed by Bill Clinton with 20 per cent, Angelina Jolie with 19 per cent, Jennifer Aniston with 19 per cent and Kelly Rippa with nine per cent. The survey was conducted to mark the launch of the first packaged super-premium ice cream cone which is available in Chocolate Chip Cookie Dough and Cherry Garcia flavours.
Now back to the Doha Round.
In a survey by Ben and Jerry's, Bush received 21 per cent of the vote, followed by Bill Clinton with 20 per cent, Angelina Jolie with 19 per cent, Jennifer Aniston with 19 per cent and Kelly Rippa with nine per cent. The survey was conducted to mark the launch of the first packaged super-premium ice cream cone which is available in Chocolate Chip Cookie Dough and Cherry Garcia flavours.
Now back to the Doha Round.
Tuesday, June 20, 2006
New bid to drain wine lake
Wine is the next sector to be targeted for reform in the CAP with proposals to be unveiled in the next couple of days. Farm Commissioner Mariann Fischer Boel seems to be hoping that a successful wine reform will reinforce her credibility as someone who can bring about meaningful change. But she is well aware of the challenge ahead. She told the informal meeting of farm ministers at the end of May, 'There are so many cultural feelings on wine, I would consider [the reform] is going to be even more difficult than the sugar discussions.'
Whatever shape the reform takes the EU is still going to spend €1.2 billion a year on wine subsidies, but the aim is to spend less of the money on the wine that no one is going to drink and is distilled into industrial alcohol or bioethanol. As wine drinkers, especially those looking for a reasonably priced but drinkable wine, turn to 'new world' wines such as those from Australia and Chile, European wines need to become more competitive. My own consumption pattern is probably not unusual in the UK - Australian or Chilean wines for everyday drinking, and more expensive German, Alsatian or Italian wines for more special occasions.
The EU has been considering four broad options: keeping the status quo, carrying out a fundamental reform, implementing the 2003 CAP changes in the sector, or endorsing a complete deregulation of the market. Because this is the CAP we are talking about, the two more radical options are not really on the table.
The most likely mix is temporarily encouraging wine producers to 'grub up' their vines in return for funding, although such policies have not always been cost effective in the past, and extending the current restrictions on planting rights until 2013. Many of the existing cash subsidies would be cut back and overall EU production would be reduced. This would not be welcome news for traditional wine producing nations like France, Italy and Spain.
Incidentally, England does not yet produce enough wine to come within the EU regime but could do in the future if the area occupied by vineyards continues to grow, encouraged by the prospect of global warming. Many of the existing vineyards are boutique wineries, often appealing to a tourist market. English wines can be of good quality, but often cost more than a comparable wine from the continent.
For good reasons, Fischer Boel has particularly targeted crisis distillation. She stated, 'Crisis distillation is becoming a depressingly regular feature of our common organisation for wine. While it offers temporary assistance to producers, it does not deal with the core of the problem - that Europe is producing too much wine for which there is no market.'
The problems the EU faces in this area is shown by the news that French wine growers will receive extra money from their own government to supplement the crisis distillation cash awarded to them recently by the Commission. The EU Wine Management Committee agreed to allow France to convert up to 1.5 million hectolitres of table wine and 1.5 million hl of quality wine into bioethanol. Unpopular French prime minister Dominique de Villepin is calling for 'exceptional national measures' to supplement the Commission's subsidy, a move that is probaby illegal.
I have just got hold of an interesting book on The World's Wine Markets: Globalization at Work edited by Kym Anderson and published by Edward Elgar and I will report any interesting points made when I have read it.
Whatever shape the reform takes the EU is still going to spend €1.2 billion a year on wine subsidies, but the aim is to spend less of the money on the wine that no one is going to drink and is distilled into industrial alcohol or bioethanol. As wine drinkers, especially those looking for a reasonably priced but drinkable wine, turn to 'new world' wines such as those from Australia and Chile, European wines need to become more competitive. My own consumption pattern is probably not unusual in the UK - Australian or Chilean wines for everyday drinking, and more expensive German, Alsatian or Italian wines for more special occasions.
The EU has been considering four broad options: keeping the status quo, carrying out a fundamental reform, implementing the 2003 CAP changes in the sector, or endorsing a complete deregulation of the market. Because this is the CAP we are talking about, the two more radical options are not really on the table.
The most likely mix is temporarily encouraging wine producers to 'grub up' their vines in return for funding, although such policies have not always been cost effective in the past, and extending the current restrictions on planting rights until 2013. Many of the existing cash subsidies would be cut back and overall EU production would be reduced. This would not be welcome news for traditional wine producing nations like France, Italy and Spain.
Incidentally, England does not yet produce enough wine to come within the EU regime but could do in the future if the area occupied by vineyards continues to grow, encouraged by the prospect of global warming. Many of the existing vineyards are boutique wineries, often appealing to a tourist market. English wines can be of good quality, but often cost more than a comparable wine from the continent.
For good reasons, Fischer Boel has particularly targeted crisis distillation. She stated, 'Crisis distillation is becoming a depressingly regular feature of our common organisation for wine. While it offers temporary assistance to producers, it does not deal with the core of the problem - that Europe is producing too much wine for which there is no market.'
The problems the EU faces in this area is shown by the news that French wine growers will receive extra money from their own government to supplement the crisis distillation cash awarded to them recently by the Commission. The EU Wine Management Committee agreed to allow France to convert up to 1.5 million hectolitres of table wine and 1.5 million hl of quality wine into bioethanol. Unpopular French prime minister Dominique de Villepin is calling for 'exceptional national measures' to supplement the Commission's subsidy, a move that is probaby illegal.
I have just got hold of an interesting book on The World's Wine Markets: Globalization at Work edited by Kym Anderson and published by Edward Elgar and I will report any interesting points made when I have read it.
Doha Round crisis
Crawford Falconer, chairman of the Doha agricultural trade negotiations, is to present a paper on Wednesday June 21st in an attempt to get a basis for agreement in the troubled Round. Apparently Falconer's proposals will be close to the compromise model put forward by the Brazilian-led G-20 group. On the biggest tariffs, their compromise proposal of 75% cuts is halfway between the EU offer of 60% and the US demand for 90%. G-20 also proposes a maximum tariff of 100% whereas the EU has ad valorem tariff rates substantially over 100% in several sectors.
However, it will be far from a conclusive document with options and lots of brackets. Nevertheless, his efforts and those of Canada, which has cast itself in the role of mediator, may not be enough. The ministerial meeting at the end of the month may not produce the hoped for outline settlement. The parties are digging their heels in and taking quite entrenched positions.
EU Farm Commissioner Mariann Fischer Boel has refused to confirm or deny rumours that the paper will be based on new figures given to Falconer by the Commission that go further than the EU's October proposal. Falconer's paper is, however, likely to be closer to the G-20 proposal than Brussels would want.
Opposition to what they would see as a sell out is buiilding among member states with the usual suspects involved. France, Italy, Greece, Poland, Ireland and Hungary are the countries most worried that the Commission is ready to sacrifice European agriculture for limited gains in areas such as services and industry. The UK and its liberal allies (Sweden, Denmark, Lithuania and Estonia) is backing the Commission's aim to get a deal in Geneva before the summer break.
Fischer Boel faces a real dilemma. She thinks that the EU still has 'some slight room for manoeuvre' within the negotiating mandate given it by the Council of Ministers, but an EU spokesperson admitted that the room for manoeuvre was 'not very large'.
It should also be remembered that there is a group of countries in which Japan and Switzerland are prominent that take an even harder line on market access issues. The Swiss have argued that if the idea of a tariff cap was dropped, there could be more flexibility in other areas of the negotiations. Canada has suggested that a cap could exist, but countries facing the biggest difficulty in complying could be given some leeway. This is a well intentioned idea but it is very vague in its present form and could drive a coach and horses through parts of any agreement.
Georgaphical indications
This remains a key issue for the EU because of its relationship to the strategy of developing high value added niche products in Europe. The EU and Switzerland, backed by accession states Bulgaria, Romania and Turkey, together with Kenya (with its horticulture sector), Morocco and Thailand, argue that the higher level of protection awarded to wines and spirits should, in the future, be extended to all agricultural products.
The EU has already won the battle to stop marketers using terms such as 'champagne' or 'port' for products which are not made in the specific region to which they relate, although success there was partly the consequence of direct agreement between wine producers in the EU and US. However, products such as 'Parma ham' can still use the name provided that their packaging states they are produced outside of the EU.
Little progress is being made on the issue with opposition to the EU's stance coming from countries as diverse as the US, Brazil and Taiwan.
However, it will be far from a conclusive document with options and lots of brackets. Nevertheless, his efforts and those of Canada, which has cast itself in the role of mediator, may not be enough. The ministerial meeting at the end of the month may not produce the hoped for outline settlement. The parties are digging their heels in and taking quite entrenched positions.
EU Farm Commissioner Mariann Fischer Boel has refused to confirm or deny rumours that the paper will be based on new figures given to Falconer by the Commission that go further than the EU's October proposal. Falconer's paper is, however, likely to be closer to the G-20 proposal than Brussels would want.
Opposition to what they would see as a sell out is buiilding among member states with the usual suspects involved. France, Italy, Greece, Poland, Ireland and Hungary are the countries most worried that the Commission is ready to sacrifice European agriculture for limited gains in areas such as services and industry. The UK and its liberal allies (Sweden, Denmark, Lithuania and Estonia) is backing the Commission's aim to get a deal in Geneva before the summer break.
Fischer Boel faces a real dilemma. She thinks that the EU still has 'some slight room for manoeuvre' within the negotiating mandate given it by the Council of Ministers, but an EU spokesperson admitted that the room for manoeuvre was 'not very large'.
It should also be remembered that there is a group of countries in which Japan and Switzerland are prominent that take an even harder line on market access issues. The Swiss have argued that if the idea of a tariff cap was dropped, there could be more flexibility in other areas of the negotiations. Canada has suggested that a cap could exist, but countries facing the biggest difficulty in complying could be given some leeway. This is a well intentioned idea but it is very vague in its present form and could drive a coach and horses through parts of any agreement.
Georgaphical indications
This remains a key issue for the EU because of its relationship to the strategy of developing high value added niche products in Europe. The EU and Switzerland, backed by accession states Bulgaria, Romania and Turkey, together with Kenya (with its horticulture sector), Morocco and Thailand, argue that the higher level of protection awarded to wines and spirits should, in the future, be extended to all agricultural products.
The EU has already won the battle to stop marketers using terms such as 'champagne' or 'port' for products which are not made in the specific region to which they relate, although success there was partly the consequence of direct agreement between wine producers in the EU and US. However, products such as 'Parma ham' can still use the name provided that their packaging states they are produced outside of the EU.
Little progress is being made on the issue with opposition to the EU's stance coming from countries as diverse as the US, Brazil and Taiwan.
Wednesday, June 07, 2006
Toffs would be hit by farm subsidy cap
Some of Britain's wealthiest aristocrats would be hit by a plan to revive caps on farm subsidies, a proposal fought off by Britain and Germany in 2002. However, farm commissioner Mariann Fischer Boel is proposing to revive the plan next year.
Farmsubsidy.org, a group that monitors CAP payments, calculated that the Commission's original proposal for a €300,000 (£207,000) cap would have hit 1,880 farms in the old EU 15. 1,430 were actually in Germany, many of them former collective farms in East Germany. There were 330 farms in Britain and just 30 in France. British landowners that would be hit include the Duke of Westminster and Duke of Marlborough.
The British government hit back at the proposal, claiming that blue blooded gentry were exponents of modern, large-scale efficient agriculture. A Defra spokesman said that the main objective of CAP reform was to make the EU more competitive in world agricultural markets. 'To achieve that it needs to reward farmers who are the most efficient', he said. 'There is no point in CAP subsidies propping up a failing market.'
Others would argue that the CAP is not there to help farms that are capable of being internationally competitive without large subsidies, but rather to promote rural development and help more marginal, peripheral farmers survive. One solution might be to taper subsidies above the €300,000 level.
In any case the policy might be difficult to implement. The legal definition of a 'farm' is far from clear. Jack Thurston of farmsubsidy.org warned that large farms might simply split up ownership to get round a cap.
Farmsubsidy.org, a group that monitors CAP payments, calculated that the Commission's original proposal for a €300,000 (£207,000) cap would have hit 1,880 farms in the old EU 15. 1,430 were actually in Germany, many of them former collective farms in East Germany. There were 330 farms in Britain and just 30 in France. British landowners that would be hit include the Duke of Westminster and Duke of Marlborough.
The British government hit back at the proposal, claiming that blue blooded gentry were exponents of modern, large-scale efficient agriculture. A Defra spokesman said that the main objective of CAP reform was to make the EU more competitive in world agricultural markets. 'To achieve that it needs to reward farmers who are the most efficient', he said. 'There is no point in CAP subsidies propping up a failing market.'
Others would argue that the CAP is not there to help farms that are capable of being internationally competitive without large subsidies, but rather to promote rural development and help more marginal, peripheral farmers survive. One solution might be to taper subsidies above the €300,000 level.
In any case the policy might be difficult to implement. The legal definition of a 'farm' is far from clear. Jack Thurston of farmsubsidy.org warned that large farms might simply split up ownership to get round a cap.
Sunday, May 28, 2006
Prices rise as demand for food for fuel grows
Earlier this week I gave evidence to an informal session of the House of Commons Environment, Food and Rural Affairs Committee. One issue that was raised was likely future trends in food prices, particularly after a further reform of the CAP.
However, long before that happens, mounting competition between fuel and food could drive up the cost of food. It would be a nasty shock for western consumers who have been used to falling real food prices for a long time, but the real hit would be on poorer people living in developing countries.
The US, the world's largest exporter of corn (maize) will convert as much or more of the grain into ethanol next year than it will sell abroad according to the United States Department of Agriculture. As petrol (gas) prices climb, farmers are diverting more of their harvest towards producing fuel rather than food or feedstock for animals.
Prices of corn have risen by close to 20 per cent as world grain stocks have fallen to their lowest level since the early 1970s. There has also been a substantial impact on world sugar prices which have doubled over the past year to a 25-year high. About 10 per cent of world sugar output is now used to produce ethanol. The figure is just 3 per cent for corn but it is rising fast.
Good world harvests over the past few years have concealed the impact of rising demand for ethanol. US energy legislation requires ethanol production to increase to 7.5bn gallons by 2012, requiring about 68 million tonnes of grain, more than the total grain harvest of Canada. Keith Colins, chief economist at USDA, noted, 'We are embarking on a profound change in our agricultural economy.'
However, long before that happens, mounting competition between fuel and food could drive up the cost of food. It would be a nasty shock for western consumers who have been used to falling real food prices for a long time, but the real hit would be on poorer people living in developing countries.
The US, the world's largest exporter of corn (maize) will convert as much or more of the grain into ethanol next year than it will sell abroad according to the United States Department of Agriculture. As petrol (gas) prices climb, farmers are diverting more of their harvest towards producing fuel rather than food or feedstock for animals.
Prices of corn have risen by close to 20 per cent as world grain stocks have fallen to their lowest level since the early 1970s. There has also been a substantial impact on world sugar prices which have doubled over the past year to a 25-year high. About 10 per cent of world sugar output is now used to produce ethanol. The figure is just 3 per cent for corn but it is rising fast.
Good world harvests over the past few years have concealed the impact of rising demand for ethanol. US energy legislation requires ethanol production to increase to 7.5bn gallons by 2012, requiring about 68 million tonnes of grain, more than the total grain harvest of Canada. Keith Colins, chief economist at USDA, noted, 'We are embarking on a profound change in our agricultural economy.'
Thursday, May 25, 2006
Milk quota rules may face court challenge
Given that there's an internal market, it's always been a mystery why milk quota can't be traded across national borders (although some member states restrict trading within their own borders). Some farmers don't have enough quota, others have quota they would like to sell at a decent price and use the capital for other activities. Above all, trading quota would prevent the structure of the dairy industry in the EU ossifying in a way that made it even less internationally competitive than it is already.
Now the milk quota rules may be subject to a case in the European Court of Justice based on the principle of the free movement and trade of people, goods and services across EU borders. In February British milk quota trader Ian Potter managed to transfer several million litres of quota from Britain to Italy. Italy is only 56 per cent self-sufficient in milk production and the high price of quota is forcing dairy farmers out of business. The British farmers got more than they would have done in the depressed British market.
Potter was encouraged in this course of action by the sale of 200,000 litres of quota from Hungary to Italy last year. Following the signing of the quota transfer contracts in the Potter deal, forms were lodged with the Italian authorities and the English Rural Payments Agency. The RPA duly rejected the transfers, but the Italian authorities were less definite, saying that they did not believe that the transfer requests that were being used quite conformed to the current EU law.
While the self-styled Italian Milk Warriors wait for their day in court, the Italian authorities appear to be prepared to recognise the transfers for the time being and will not seek to collect superlevy from the fifteen Italian farms involved.
Now the milk quota rules may be subject to a case in the European Court of Justice based on the principle of the free movement and trade of people, goods and services across EU borders. In February British milk quota trader Ian Potter managed to transfer several million litres of quota from Britain to Italy. Italy is only 56 per cent self-sufficient in milk production and the high price of quota is forcing dairy farmers out of business. The British farmers got more than they would have done in the depressed British market.
Potter was encouraged in this course of action by the sale of 200,000 litres of quota from Hungary to Italy last year. Following the signing of the quota transfer contracts in the Potter deal, forms were lodged with the Italian authorities and the English Rural Payments Agency. The RPA duly rejected the transfers, but the Italian authorities were less definite, saying that they did not believe that the transfer requests that were being used quite conformed to the current EU law.
While the self-styled Italian Milk Warriors wait for their day in court, the Italian authorities appear to be prepared to recognise the transfers for the time being and will not seek to collect superlevy from the fifteen Italian farms involved.
Sunday, May 21, 2006
EU may give ground on tariffs in Doha Round
The EU has indicated that it may give further ground on the crucial issue of tariffs in the Doha Round of trade negotiations which are at increasing risk of collapsing altogether. However, by doing so, they have encountered resistance from some member states, while American sources think that the likely offer is insufficient. Hence the EU finds itself caught between a rock and a hard place.
The EU's current offer is to cut farm tariffs by an average of 39 per cent, an offer substantially diluted by its insistence that 8 per cent of tariff lines should be designated as sensitive and hence exempted from the cuts. The G20 group of emerging countries led by Brazil has asked for a 54 per cent overall cut, while the US is holding out for 66 per cent.
Press reports in Brussels suggest that the EU might increase its average cut to around 50 per cent. A spokesman for EU trade commissioner Peter Mandelson said that a 54 per cent cut was out of the question, but did not deny the possibility of an offer in the region of 50 per cent. There has, however, been no indication of a reduction in the percentage of tariff lines to be designated as sensitive.
The EU is also insisting on a quid pro quo, in particular a much lower ceiling for industrial good tariffs than the 30 per cent proposed by India and Brazil. The EU and US have previously asked for 15 per cent, but may be prepared to raise that figure by a few percentage points.
However, France has made it clear that it does not want further reductions in farm tariffs or subsidies without substantial concessions elsewhere. Moreover, a spokesman for the Austrian agriculture ministry (Austria is the current president) declared that 'Member states would be very surprised should there be a new EU offer on the table. A majority of member states have grave concerns.'
The office of the USTR confirmed that the EU proposal would fall well short of American demands. The US view that the EU should agree cuts of between 54 and 66 per cent and designate just 1 per cent of tariff lines as sensitive. It is this latter issue that is the difficult one as the EU could make quite substantial cuts in high tariffs and still maintain effective protection. Charles Grassley, the Iowa senator who chairs the finance committee which has lead responsibility for trade policy in the Senate, has stated, 'If Plan B is a minimalist approach, then don't bring Plan B to me.'
There's a long way to go and time is slipping away.
The EU's current offer is to cut farm tariffs by an average of 39 per cent, an offer substantially diluted by its insistence that 8 per cent of tariff lines should be designated as sensitive and hence exempted from the cuts. The G20 group of emerging countries led by Brazil has asked for a 54 per cent overall cut, while the US is holding out for 66 per cent.
Press reports in Brussels suggest that the EU might increase its average cut to around 50 per cent. A spokesman for EU trade commissioner Peter Mandelson said that a 54 per cent cut was out of the question, but did not deny the possibility of an offer in the region of 50 per cent. There has, however, been no indication of a reduction in the percentage of tariff lines to be designated as sensitive.
The EU is also insisting on a quid pro quo, in particular a much lower ceiling for industrial good tariffs than the 30 per cent proposed by India and Brazil. The EU and US have previously asked for 15 per cent, but may be prepared to raise that figure by a few percentage points.
However, France has made it clear that it does not want further reductions in farm tariffs or subsidies without substantial concessions elsewhere. Moreover, a spokesman for the Austrian agriculture ministry (Austria is the current president) declared that 'Member states would be very surprised should there be a new EU offer on the table. A majority of member states have grave concerns.'
The office of the USTR confirmed that the EU proposal would fall well short of American demands. The US view that the EU should agree cuts of between 54 and 66 per cent and designate just 1 per cent of tariff lines as sensitive. It is this latter issue that is the difficult one as the EU could make quite substantial cuts in high tariffs and still maintain effective protection. Charles Grassley, the Iowa senator who chairs the finance committee which has lead responsibility for trade policy in the Senate, has stated, 'If Plan B is a minimalist approach, then don't bring Plan B to me.'
There's a long way to go and time is slipping away.
Saturday, May 06, 2006
Grain mountain problem grows
The arable sector was the first commodity regime within the CAP to be reformed and it is often assumed that all the major problems are behind us, particularly with the abolition of rye intervention in the Fischler reforms, a product often grown just to sell into intervention.
Unfortunately, not all the problems have been solved. Support prices have been cut by around 45 per cent, but intervention stocks at the end of the last buying season were at their highest level for twelve years, 15,482 million tonnes and they look likely to rise again this year.
Much of current grain production in Eastern Europe is being grown with intervention in mind and doing anything about it is seen as a political hot potato as there is a reluctance to cause trouble with the new member states who are already feeling sore about other issues. Hungary has invested considerable sums of money in increasing grain storage capacity in anticipation of the increase in intervention stocks.
Franz Fischler was the first major figure to question whether one can really have a common policy in such a diverse agricultural region as Europe. A recent study for the Commission by consultants LMC argues that a single intervention price is a barrier to the flow of cereal from surplus regions, particularly landlocked regions like East-Central Europe, to the main grain deficit area, the Iberian peninsula.
The report also criticises set aside (the rate is 10 per cent in western Europe) as a blunt policy instrument which mainly benefits the United States. Set aside land is generally 30 per cent less productive than land not set aside (our local farmer has chosen his worst drained and smallest field) and producers in East-Central Europe are exempt until at least 2009. The US goverment gains because set aside pushes up world prices and hence cuts their outlays on deficiency payments.
The report has some sensible but radical solutions such as having only one intervention price based on common wheat, getting rid of set aside, limiting support payments to the grain barons and purchasing only breadmaking wheat and then just in Spain and Portugal.
Unfortunately these ideas would upset the powerful big grain producers in the EU and are hence unlikely to be adopted, so the grain mountain will just keep on growing.
Unfortunately, not all the problems have been solved. Support prices have been cut by around 45 per cent, but intervention stocks at the end of the last buying season were at their highest level for twelve years, 15,482 million tonnes and they look likely to rise again this year.
Much of current grain production in Eastern Europe is being grown with intervention in mind and doing anything about it is seen as a political hot potato as there is a reluctance to cause trouble with the new member states who are already feeling sore about other issues. Hungary has invested considerable sums of money in increasing grain storage capacity in anticipation of the increase in intervention stocks.
Franz Fischler was the first major figure to question whether one can really have a common policy in such a diverse agricultural region as Europe. A recent study for the Commission by consultants LMC argues that a single intervention price is a barrier to the flow of cereal from surplus regions, particularly landlocked regions like East-Central Europe, to the main grain deficit area, the Iberian peninsula.
The report also criticises set aside (the rate is 10 per cent in western Europe) as a blunt policy instrument which mainly benefits the United States. Set aside land is generally 30 per cent less productive than land not set aside (our local farmer has chosen his worst drained and smallest field) and producers in East-Central Europe are exempt until at least 2009. The US goverment gains because set aside pushes up world prices and hence cuts their outlays on deficiency payments.
The report has some sensible but radical solutions such as having only one intervention price based on common wheat, getting rid of set aside, limiting support payments to the grain barons and purchasing only breadmaking wheat and then just in Spain and Portugal.
Unfortunately these ideas would upset the powerful big grain producers in the EU and are hence unlikely to be adopted, so the grain mountain will just keep on growing.
EU isolated on sensitive products
The EU is looking increasingly isolated over the question of 'sensitive' products in the stuttering Doha Round, even though it may be prepared to give ground on its insistence that eight per cent of product lines should be deemed 'sensitive' and given special levels of protection. However, it is now the only major player insisting that tariff quota increases for such products be calculated as a percentage of imports rather than a percentage of domestic consumption.
The World Bank has pointed out that the designation of only 2 per cent of products in developed countries and 4 per cent in developing countries as sensitive would 'virtually eliminate the poverty impacts of a Doha agreement.'
Of course, what 'sensitive' means is 'politically sensitive in the EU and in particular in key member states'. Sugar is a very likely candidate for this treatment. However, the EU confectionery industry is arguing against further protection, pointing out that it is being undermined by imports of cheap confectionery from Asia. They argue that if sugar became a sensitive product it could cost them €1.2bn a year which would go into the pockets of the sugar industry.
As it so happens, the world price sugar is increasing anyway because of rising oil prices and the consequent diversion of greater quantities of sugar, in particular in major producer Brazil, for ethanol production.
The World Bank has pointed out that the designation of only 2 per cent of products in developed countries and 4 per cent in developing countries as sensitive would 'virtually eliminate the poverty impacts of a Doha agreement.'
Of course, what 'sensitive' means is 'politically sensitive in the EU and in particular in key member states'. Sugar is a very likely candidate for this treatment. However, the EU confectionery industry is arguing against further protection, pointing out that it is being undermined by imports of cheap confectionery from Asia. They argue that if sugar became a sensitive product it could cost them €1.2bn a year which would go into the pockets of the sugar industry.
As it so happens, the world price sugar is increasing anyway because of rising oil prices and the consequent diversion of greater quantities of sugar, in particular in major producer Brazil, for ethanol production.
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