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!
Friday, June 15, 2007
Reciprocate this Peter Mandelson!
Saturday, March 10, 2007
Stop this madness...right now!
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!
