C€AS€ - Campaign for the Eradication of Agricultural Subsidies in Europe

A child that dies from famine is murder...

2007-08-06T19:42:00.000+01:00

...not my words but those of of Jean Ziegler, U.N. special rapporteur on the right to food. I couldn't help but agree more with his analysis of the problem which he provided in a heated debate discussing progress towards the U.N.'s Millenium Development Goals in Geneva last month. The first of these goals is to halve the number of people living in poverty and hunger by 2015 but, what a surprise, things aren't going too well. The excesses of the rich, subsidised north were again brought to light: the world produced enough food to feed 12 billion people last year (twice the world's population) but 854 million people still go hungry every day.

I urge those concerned to particpate in a new campaign recently launched by ActionAid, HungerFREE.

Reciprocate this Peter Mandelson!

2007-06-15T14:49:00.000+01:00

Firstly, in the unlikely event that anyone has been wondering why this blog hasn’t been updated since March, well, I have no better excuse than to say “I’ve been very busy!”

Since my last post, I have been involved in campaigning against the Economic Partnership Agreements (EPAs) that the EU Commission is currently negotiating with the African, Caribbean and Pacific (ACP) states. The 76 ACP-countries include some of the world’s poorest. The current trade agreements they enjoy with the EU are not WTO compatible due to the fact that they are non-reciprocal. That is to say, ACP-exporters are currently granted more favourable access to EU member countries’ markets (in the form of lower tariffs) than European exporters get to ACP-markets.

From a development perspective this would seem like a fair deal. The EU is giving an economic leg up to developing country exporters (albeit a much smaller leg up than the one given to EU farmers by CAP subsidies). However, the WTO-waiver allowing these trade relations to continue expires at the end of 2007 and hence new agreements must be signed giving reciprocal market access before the end of the year. This means that ACP-countries will have to open up their markets by the same amount or face less favourable market access for their products in the EU, an option that most agree would be devastating for their development.

It is highly questionable whether demanding that ACP-countries open up their markets by an equivalent amount (even if done over a period of 10-12 years as will probably be the case) will be of any benefit whatsoever to their economic development. Many argue that the reverse is far more likely. A critical look at Europe’s economic history suggests that protective tariffs played a vital role in many member states’ industrial development (contrary to the arguments of many modern day proponents of free trade). One thing is for sure, the EU Commission under the leadership of Trade Commissioner Peter Mandelson is doing everything in its power to squeeze as many concessions as it can out of the ACP-states and generally breaking the spirit of ‘partnership’ under which negotiations were supposed to take place. A lack of impact assessments mean that nobody really knows what to expect if the EPAs go through. The end of year deadline is rapidly approaching and the ACP-states are presented with a serious dilemma. They either sign and hope for the best or refuse and watch their export revenues plummet!

On 29th May, as part of the campaign against EPAs, I attended a meeting with the Swedish Trade Minister’s Political Secretary, Hans Jeppson, together with other NGOs to quiz him and other people from the Ministry of Trade about the current state of affairs, both in the WTO Doha Round and the EPA negotiations. Given that the EPAs are seeking to significantly decrease the use of tariffs as a means of market protection by ACP-states I asked whether the infamous green box (i.e. domestic support for farms, see my previous post) was being discussed at all at the WTO. I was informed that thus far it was off the negotiating table. This means that domestic budget support for farms will continue to be kosher as far as the WTO is concerned whereas other forms of protection such as import tariffs are on the way out. I was informed however that there was some kind of vague plan to allow other countries (i.e. developing ones) to use the same type of domestic support in the future.

In my opinion however, this amounts to absolutely no concession whatsoever on the part of industrialised countries. Returning to the EPAs again, the notion of reciprocity is central i.e. assuming the EU phases out all forms of protective import tariffs on agricultural products coming from ACP-exporters, the ACP-countries will also be required to do the same. However, the EU will be able to continue propping up its uncompetitive farms with domestic budget support without breaking the WTO’s rules. “That’s OK” EU trade negotiators say “because ACP-countries will be able to do the same in the future (maybe)”. Well, given that we’re talking about some of the poorest countries on the planet here, do Peter Mandelson and his army of negotiators really think that this will be a viable option for ACP-countries? Will they really be able to afford the same level of domestic support that the EU currently doles out every year? I think not.

According to the Cotonou Agreement, which set the negotiations in motion in 2000, one of the key goals of the EPAs is to “promote sustainable development and contribute to poverty eradication” in ACP-countries. However, this will be impossible to achieve by merely focusing on import tariffs without also including all the other forms of support given to agricultural exporters in the EU. As well as the massive domestic support payments there are a plethora of other man-made advantages EU farms have over their ACP counterparts such as better technology and infrastructure. The odds are quite simply stacked against ACP farmers if their governments sign the EPAs (even more so than they currently are). Reciprocal trade agreements, the creation of which is the raison d’être of the WTO, should be between countries at similar stages of their economic development. It is nonsensical to believe that forcing open ACP-markets will lead to better conditions for the enormous numbers of people within their borders who depend on small-scale agriculture for their survival.

Stick that in your agreement and reciprocate it Peter Mandelson!

Happy 50th Birthday EU!

2007-03-26T17:04:00.000+01:00

Joyeux Anniversaire! Alles Gute zum Geburtstag! Buon Compleanno! Hartelijk gefeliciteerd! Feliz Cumpleaños! Nifrahlek ghal gheluq sninek! (The last one is Maltese - I don't want to be accused of ignoring the smaller countries now do I!)

Just a quick post to congratulate the EU on 50 years of existence. I know there are many who would rather see the back of it but I am proud to say I am not one of them. I sincerely believe the EU has, overall, had an extremely positive effect on our continent. Long may it continue!

That said, it seems as if our union may be going through something of a mid-life crisis. The CAP once served a purpose in times of food shortages but it is long past its sell-by date. If you're thinking the same as me then might I suggest you send the EU a little birthday greeting? Post a comment on the EU Commissioner for Agriculture's blog. Tell her that we're proud of our union as it passes the half century mark but that we want the madness of subsidised agriculture to CEASE! (If enough of us mention the campaign then maybe she'll even put in an appearance here at a later date!)

Stop, Look and Listen! – Farm Subsidies and the WTO Traffic Lights

2007-03-16T18:49:00.000+01:00

Before trying to make this debate slightly more intelligible to those not familiar with the vast jungle of terminology that is often used (myself included), I thought I’d lighten the mood with a short joke:

Q: Why did the farm subsidy cross the road?
A: Because the WTO’s red light didn’t work.

OK, I know it’s not a very funny joke so what the hell am I getting at? Whenever I read any document on the subject of farm subsidies the writers always seem to refer to a curious array of different coloured boxes. Here’s a little something I found on the WTO’s website:

“In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down — i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated.”

You’re damned right they are! For a start, when it comes to agricultural subsidies, there is no red box, i.e. no type of subsidy that is entirely prohibited. What’s more, there’s a blue box under which subsidies can also be classified. Wait a second, that doesn’t sound like any traffic light I’ve ever seen! The blue box is an exception to the normal rules and allows subsidies that are not de-coupled from production (and as I mentioned in my last post this type of support normally leads to over production and ‘dumping’). Countries are supposedly phasing out subsidies in the amber box which are generally accepted to be ‘trade distorting’ such as price supports. However, unlimited amounts of green box subsidies are currently allowed. In order to qualify for the green box, subsidies “must not distort trade, or at most cause minimal distortion.”

The terminology above is used to classify domestic support for farmers. A further cause of trade distortion has been the use of export subsidies which enable producers in the EU, as well as other rich countries, to continue ‘dumping’ i.e. exporting excess output at below cost price. As noted in my previous post, this puts downward pressure on international prices for agricultural goods that many developing countries rely on as their main source of income. Negotiations to end this practice started over 20 years ago with the Uruguay Round of WTO negotiations. However, it wasn’t until the WTO’s Hong Kong Ministerial in December 2005 that a commitment was finally made by all members to completely remove export subsidies. The date set for this reform to be fully enacted is 2013.

So, at least on paper, it would seem that progress is being made. Export subsidies are on the way out (albeit at a snail’s pace) as well as other forms of trade-distorting domestic support (from the amber box). That just leaves the green and blue boxes to worry about then.

A recent report by the international NGOs ActionAid and Cafod argues that even if export subsidies are completely abolished and the EU continues to phase out support from the amber box, the practice of dumping by EU producers is almost certain to continue. First of all, that grand declaration that came from the Hong Kong meeting is mostly symbolic. Even without the pressure of WTO legislation, export subsidies as a proportion of total EU agricultural spending fell from 50% in 1980 to just 5% in 2006. That said, complete elimination of export subsidies should still be a high priority. As the report shows, one of the greatest injustices of the Uruguay Round was not only that it allowed developed countries to maintain around two thirds of their export subsidies for agricultural products but that in also allowed them to negotiate very favourable reference years in which to frame future cuts. In other words, they chose years when export subsidies were even higher than normal and then said “we’ll reduce from those levels”. As well as promising a total reduction by 2013 the declaration promised to bring about substantial reductions before 2010. However, they’re still using these inflated levels in their calculations which means that, in practice, there is unlikely to be any change in the real levels of export subsidies before 2010. This doesn’t sound much like progress to me.

What about the supposedly kosher domestic support (the green and blue boxes)? Since the other types of subsidies are being phased out this is increasingly where the money is being channelled. The reforms to the CAP in 2003 introduced decoupled direct payments which qualify for the green box and are hence not subject to any of the reduction commitments. However, in response to protests from many member states (mentioning no names) some direct payments are still allowed to be coupled (i.e. farms get more money if they produce more) and hence fall into the blue box. So far only the UK, Ireland, Germany and Luxembourg have introduced full decoupling. The report estimates that about €30 billion of direct payments will be made in 2013, of which €25 billion will be in the green box and €5 billion in the blue box.

So what’s the punch line? First of all, even without embroiling ourselves in the finite details of what it means for payments to be ‘coupled’ or ‘decoupled’, it should be noted that dumping from the US market has been ongoing even though decoupling was introduced over 10 years ago, in 1996. The UK introduced decoupled payments last year but export prices for goods like wheat and barley were, respectively, still about 30% and 45% below the cost of production. Secondly, since world prices are not expected to rise significantly over the period 2006-2014 EU producers are likely to continue producing at a loss. They are able to do this by using the single (decoupled) payment to cover their losses. As long as this system is in place we shouldn’t expect any significant changes in production levels. This means that goods from the EU will continue to flood international markets and destroy possibilities for more efficient producers in developing countries. The EU commission itself does not predict any significant reduction in exports for many major farm products. Where reductions do occur they are more than offset by increases in other goods.

In conclusion then, “to decouple or not to decouple?” does not seem to be a very significant question. We need to give the CAP the red light. The only solution is to CEASE subsidy payments completely!

Stop this madness...right now!

2007-03-10T15:11:00.000+01:00

The purpose of the Campaign for the Eradication of Agricultural Subsidies in Europe, (CEASE) is to provide a platform upon which to bring together and organise voices opposed to the EU’s Common Agricultural Policy (CAP).

What exactly is the problem with the CAP? Under the current system European farmers are subsidised with EU taxpayers' money to the tune of €45.5 billion per year (2005 figure). This represents over 40% of the EU's total annual budget and amounts to about €100 per EU citizen. The system started as a way of ending food shortages after WWII, a problem that does not seem particularly acute in the EU today. Today, subsidy payments are distributed on an increasingly unequal basis, with more and more of the money landing in the hands of large multinational companies, rather than small family farmers as people often assume.

The system works by guaranteeing producers a minimum price for agricultural goods like milk, butter and sugar. This price is normally significantly above the world market price. Farmers also receive subsidies depending on the amount they produce, although this system is currently being replaced with single payments that are 'decoupled' from production. However you look at it though, the fact is that EU producers receive unfair support meaning they enjoy lower production costs than their competitors in other parts of the world.

So what is the result of all this? The system is quite simply an example of terrible economics. We support farms (often large multinational companies) that would be unable to turn a profit if it wasn't for generous subsidy payments. EU governments keep prices within the member states up by buying large amounts of the products themselves. This results in the over-production of goods since producers don't have to play by the normal market rules. These surpluses (of e.g. milk and sugar) are then 'dumped' on foreign markets at below cost price (by means of export subsidies). This floods those markets with cheap subsidised goods causing local producers to go out of business. When you think that the markets in question are mostly those in poor, developing countries, where a large proportion of the population depends on agriculture to make a living, the consequences of this madness are devastating and can even lead to starvation.

All very well you might say, why don't we simply buy more goods from outside the EU? The increased competition is sure to eventually force prices within the EU down as well as help poor farmers in developing countries, right? Think again. Not only does the EU dole out unfair subsidies to its farmers with one hand, it uses the other to close the door on products from outside the EU. Agricultural goods from other countries are subjet to import tariffs. What this basically boils down to is that, when imported, agricultural goods are subject to a duty which ensures that they will not be competitive against our domestic (subsidised) produce. This is, to a large extent, the sticking point in the ongoing Doha Round of WTO negotiations. A further consequence is of course that consumers inside the EU have to pay higher prices. Yes, you heard correctly, EU producers are subsidised with our money and we have to pay higher prices! That's a two-handed economic slap in the face for every EU man, woman and child!

What can we do about this? Just like beating alcoholism, the first step is to recognise that we have problem. This blog is obviously not the first place the problem has been recognised. NGOs like ActionAid and Oxfam have, for a long time, campaigned on the issue. Guardian columnist Victor Keegan has also been drawing attention to what is happening with his blog KickAAS and, more recently, the sterling work of farmsubsidy.org has been lifting the veil of secrecy surrounding CAP payments and shedding light on exactly who gets what. So why are subsidies still being payed out? It's time to take a stand and unite on a single platform with one voice, reach out to citizens across Europe and target the campaign at those who make the decisions. This won't be easy. Although only a very small minority benefit under the current system, the farming lobby is a formidable force. It is hoped that CEASE will do to agricultural subsidies something like what the Jubilee movement has done for third world debt. I promise to come back shortly with a 'to do list' to this effect. In the meantime I am hoping this blog will act as a portal to engage with other interested people, stimulate the debate and (hopefully) lead to the formation of a trans-European army of anti-CAP activists!

Although the winds of change are starting to blow through the corridors of Brussels (with a total decoupling of payments promised by 2013) it is the opinion of this blog, as the name suggests, that the system of farm subsidies should CEASE completely. "That's imposible" you might exclaim "surely our countryside will go to ruin and there will be millions out of work". Well, here's some food for thought (excuse the pun); there is already one developed country that has totally abolished farm payments, namely New Zealand. Considering one of the first things one associates with the Kiwis is their lamb, as well as the fact that there are colossal distances between their producers and foreign markets, I think it's fair to say that if they can do it, so can we!