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By Shadaba Islam AS world food prices continue to soar and developing countries’ struggle to feed their hungry and angry populations, the European Union has become entangled in yet another acrimonious internal debate on the future of its heavily subsidised farm sector.
Significantly, the discussions, likely to last for several months, could well have a negative impact on efforts to revitalise the efforts of the World Trade Organisation to clinch a much-sought-after deal on global trade liberalisation.
The EU quarrel pits France and Germany, the EU’s most powerful nations, which want to safeguard — and reinforce — the bloc’s controversial Common Agricultural Policy (CAP) against Britain which is demanding a dismantling of CAP. The debate, coming only days ahead of the Irish referendum on the EU reform treaty on June 12, has assumed controversial political overtones, with many fearing that influential Irish farmers, angered by attacks on CAP, will vote against the EU treaty, plunging the bloc into another damaging political crisis.
Asian governments, focused on their own food policies, must also pay some attention to the EU wrangling over farm practices. For one, given its protectionist bias based on high tariffs and quotas, the death or survival of CAP will have an impact on future food exports from developing countries. Also, as poor nations strive to put their agriculture sector in order, it is worth spotlighting that despite recent reforms, CAP continues to encourage an over-production of food which, once it is dumped on world markets, damages the interests of farmers in developing nations.
Even more significantly, any EU move to suspend further CAP reform will slow down the current WTO attempt to further liberalise world trade in agriculture goods, a key focus of the current Doha trade round.
The coming weeks in Brussels look set to be dominated by the debate over agriculture. Mariann Fischer Boel, the European farm commissioner, will formally announce her proposals to overhaul CAP on May 20 in the face of a Franco-German alliance to defend the status quo against reform attempts.
Fischer Boel calls her package a ‘health check’ for CAP, rather than a fully fledged reform. The proposals aim to trim subsidies to farmers, divert more money to rural development, and get rid of a range of market intervention measures, which, she says, should be used only as a ‘genuine safety net’.
But even before the proposals have been announced, Horst Seehofer and Michel Barnier, the German and French farm ministers, have indicated their opposition to any radical changes to the EU’s farm support system. Barnier’s recent remarks indicate strong support for the EU’s farm subsidies and market-support mechanisms. The French farm chief has even recommended that countries in Africa and Latin America should adopt a version of CAP to curb the escalating problems of food supply and price rises.
The developing world should draw inspiration from Europe and form self-sufficient regional agricultural blocs funded with a redirection of development aid, Barnier said, adding that he would not allow Europe’s system of subsidies and barriers to trade to take the blame for ‘disorder’ surrounding the commodities spike in prices and associated unrest in some countries.
“What we are now witnessing in the world is the consequence of too much free-market liberalism,” he said. “We can’t leave feeding people to the mercy of the market. We need a public policy, a means of intervention and stabilisation”. France wants to use its rotating presidency of the EU, which starts in July, to kickstart a debate about the future of CAP after 2013, when the current funding regime runs out.
Germany’s Seehofer has sided with Barnier and argues that subsidies should be sustained for European farmers and that China, India and the US must adopt higher environmental and health standards if they want to export food products to the EU.
Both Barnier and Seehofer are on tricky ground, however. Their calls to toughen up food safety controls are likely to be disputed by the WTO and could also prompt retaliation from trading partners. EU efforts to block approval for genetically modified crop varieties, for instance, are a major transatlantic trade irritant.
In stark contrast, Alistair Darling, the UK’s finance minister, has urged EU finance ministers to support the dismantling of CAP because it keeps EU food prices above world market levels. Darling also wants to end direct payments to farmers and has denounced the fact that the EU continues to apply very high import tariffs to many agricultural commodities at a time of significant food price inflation.
The chancellor has called on the European commission to give urgent consideration to extending the suspension of import tariffs on grains and to reduce or suspend import tariffs that apply to other agricultural commodities.
EU states are also struggling to justify their efforts to promote biofuels in the face of critics who say such policies are worsening the global food crisis. Fischer Boel recently rejected allegations that EU policies to promote biofuels — by a commitment to raise the share of biofuels in transport from current levels of around two per cent to 10 per cent by 2020 — are to blame for rising food prices.
“Those who see biofuels as the driving force behind recent food price increases have overlooked not just one elephant standing right in front of them, but two,” she said recently, adding that the rising food demand and dietary shift towards meat in emerging countries like China and India, and the bad weather that hit the EU, US, Canada, Russia, Ukraine and Australia in 2006 and 2007, have each had ‘an enormous impact on commodity markets’. Other ‘influences’ include increasing speculation on food commodities, she said.
Her remarks came one day after Jeffrey Sachs, special advisor to the United Nations secretary general, told members of the European Parliament that EU and US policies to promote biofuels ought to be rethought. “These programmes were understandable at a time of much lower food prices and larger food stocks, but do not make sense now in a global food scarcity condition,” he insisted.
Sachs said one third of the US maize crop in 2008 will be used to fill petrol tanks — representing a ‘huge blow to the world food supply’. But Fischer Boel insisted that the contribution of EU biofuels policy to the current global food crisis is a mere ‘drop in the ocean’.
The debate is likely to get fiercer during the year. No EU deal on CAP reform is likely until at least November when France, by far the largest beneficiary of EU farm subsidies, will be in charge of EU policymaking.
The writer is Dawn’s correspondent in Brussels.
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