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EU's CAP reform? Let us not be fooled
(Thursday, June 26, 2003 -- CropChoice news) -- Aileen Kwa, Geneva: The EU decision on the CAP reformwas announced as
negotiators were convening yet another meeting in Geneva to try to break
the impasse of the agriculture negotiations in the WTO. But let us not be
fooled. The EU is not going to lower it subsidy levels. This deal is about
shifting between different support programmes. The French-German deal
struck in October 2002 freezes overall EU supports for 2007-2013 at the
2006 level. From now till 2006, the EU will have to deal with incorporating
10 new Members, thus support levels in all likelihood could increase
slightly between 2004-2006 from the present Euro 43 billion provided
annually.
The supposedly radical reformis to decouplea certain percentage of supports
i.e. provide supports which are not contingent on production levels. The
theory says that this will make trade less distorting. EU farmers will
receive direct payments based on a historical reference period, and
delinked from how much they currently produce, what or whether they even
produce.
Good theorizing, but does it actually work? Farmers are supposed to produce
less, or even not produce at all, since they will receive payments in any
case. Has it worked in the past? No. Since the 1990s, the EC has been
decoupling part of its subsidies in cereals. EC intervened at prices much
closer to the world price, and 50 per cent lower than the previous
intervention price, whilst channeling payments to farmers directly. If the
theory was right, cereals production should have fallen, since farmers
could have produced less (and distorted world prices less) yet received
their payments. The CTA (Technical Centre for Agricultural and Rural
Cooperation ACP-EU) instead found that EU cereals production increased by
25 per cent instead of contracting because overall subsidy levels had in
fact increased. The direct payments given were calculated to more than
adequately make up for losses experienced from a lower intervention price.
Why dont EU farmers follow the economic, price and subsidy signals which
the decoupling theory presumes they do? Probably because the theory is just
too simplistic. There are too many other factors involved. Farming is not
just a job, but a part of ones family history possibly for hundreds of
years. Producing drastically less, or eventually moving out of the farm
altogether is also likely to entail moving to the city and accepting a very
different culture and way of life. In reality therefore, most European
farmers stick to farming as long as they possibly can. It matters little to
the farmer then what labels the government supports come with.
But the implications of this reformhave grave consequences for the
developing world, firstly in the area of agriculture, and secondly, in
terms of the leverage the EC will make of this at the coming WTO
Ministerial Conference to ply open markets of the South not only in
agriculture, but also in other sectors.
This CAP reformwill make the price and trade effects of the CAP instruments
less transparent. Developing countries will witness more price competitive,
though no less subsidized, EU agricultural and processed products on their
markets. Compared to export subsidies, where the distortion is at least
transparent, it will be much more difficult for EUs trading developing
country partners to ascertain the level of supports (and dumping) that are
affecting their markets.
Countries which have liberal trade arrangements with the EU are
particularly vulnerable, for example, for the over 70 African Caribbean and
Pacific (ACP) countries where the EU is presently negotiating reciprocal
trade agreements. Competitivelypriced EU products will be flooding those
markets. The ACP countries will effectively become the Europes dumping
ground.
Furthermore, the reformwill jumpstart further agriculture liberalisation
talks in the WTO. An impressive public relations mechanism is now being set
into full gear. Developing country Ministers will be told that
liberalisation on the part of the Europe is underway and demands will be
made from developing countries to significantly lower their tariff levels.
The last round of WTO agricultural liberalisation already had detrimental
impacts. This round will further wipe out small farmers and exacerbate the
already acute crisis of rural poverty, unemployment and hunger. The
proportion of this silent human disaster cannot be underestimated. Whilst
only 5 per cent of the population are farmers in the EU, the majority still
depend on this sector for their livelihoods in the developing world - 75
per cent in China, 77 per cent in Kenya, 67 per cent in India, and 82 per
cent in Senegal.
ECs trade commissioner will also use this opportunity to press for
accelerated liberalisation in the services sectors as well as expand the
ambit of the WTO, in the interests of EUs corporations, and launch new
negotiations on investment, competition, transparency in government
procurement and trade facilitation. If the Ministers from the developing
world, under strong political and economic pressures cave in, eventually,
the South can kiss goodbye to its last bastion of domestic policy space.
Despite developing countriesenterprises standing no chance against the
multinational giants, eventually, the right to give local enterprises
preferential treatment at home over foreign corporations will be chipped
away, even on home ground.
Aileen Kwa is a policy analyst with Focus on the Global South based in
Geneva. She is author of Power Politics in the WTOand co-author of Behind
the Scenes at the WTO: The Real World of International Trade Negotiations.
She can be contacted at aileenkwa@yahoo.com | |
