Friday, October 14, 2005

The Bush Administration - saviour of the EU?

It's not often you'll find a Frenchman slagging off EU farm subsidies, but that's precisely what World Trade Organisation Director General (and Peter Mandelson's predecessor as European Commissioner for Trade) Pascal Lamy is doing. Is international pressure to scrap the God-awful Common Agricultural Policy finally going to see some progress in the EU's internal deadlock on reform/abolition of this outdated, unfair and - frankly - stupid system of subsidies and protectionism? We can but hope.

The Bush administration's offer to cut US farm subsidies by 60% was at first met with incredulity - largely because it's precisely the sort of deal which could at one stroke undermine the limited justification for the CAP and allow the global market finally to adjust itself sensibly to changing times - it seemed too good to be true. Now it has been met by Mandelson offering to cut EU subsidies by 70% in return. Something France is not at all happy about, what with being the biggest recipient and having a powerful farming lobby and all - hence accusations the other day that he exceeded his mandate in initial negotiations.

In the unlikely event that France is eventually made to bow to global pressure to cut farm subsidies - and assuming we don't all die from Bird Flu in the meantime - this joint US/WTO pressure could be precisely what is needed to solve many of the EU's current woes.

The CAP sucks up half the EU's budget. Even if the end result of these current negotiations is only a compromise, any reduction in CAP spending would greatly aid the rethinking of the EU budget, still stuck in deadlock despite the high-profile pronouncements from the Blair government in the early stages of the current UK EU presidency, and still desperately in need of a complete overhaul since enlargement to 25 member states last year. To top it all, better economic minds than mine would argue that the reduction in subsidies would open up fairer/more free competition in the global market, bolstering third world economies and various other Good Things.

Of course, the difficulty is - as pretty much always - France. Last night she called for an emergency meeting of EU foreign ministers ahead of next week's WTO talks in Geneva, and has managed to get 12 other member states to support her - most of which could almost certainly be talked around if they thought there was any chance of a sensible reform actually taking place. But with a French veto, that's decidedly unlikely...

Mandelson's response to all this is typically vacuous - "We are rapidly approaching the choke point where the different pieces either fall together or fall apart" - but he may well be right. This US offer will not remain on the table for ever, not least because once Bush ends up in the second half of his second term, he won't be as willing to risk pissing off the midwest farming belt in what is sure to be a hard-fought and close-run 2008 presidential election, and it's highly unlikely that any first term President would try anything as potenially alienating to domestically-obsessed voters. Already the midterms are beginning to loom - another month or two, if not sooner, the offer is likely to be withdrawn.

If the US and EU could drop their farm subsidies then many of their farmers will end up screwed - after all, stopping them from being screwed is precisely what the subsidies are all about. But there surely must come a point when propping up failing industries is no longer viable. Whether that time is now or not is hard to tell - but the current US offer is an opportunity the EU would be stupid to pass up.

At some point CAP spending will simply have to be reduced. Especially since expansion it is unsustainable at its current levels, and unfair in its current workings. The longer it drags on, the more the resentment will build. The CAP is the festering sore at the heart of the EU - the longer it stays the more irritation with it will spread, causing divisions and factional splintering throughout the EU, weakening the union from its core. At some point it will have to be either severely reformed or utterly abolished - that much is certain. So why not take the chance to get the US to drop its subsidies at the same time? The offer may not be there again for years...

4 Comments:

Anonymous Anonymous said...

Not going to happen.

French agricultural subsidies are the "crown jewels" of what they get out of the EU. Without them, membership looks too like giving power and money to Brussels. Funny that.

Not to mention the French farmers who make the Fleet street printers look like Thatcherites.

10/14/2005 01:44:00 pm  
Anonymous john said...

im pretty sure CAP change has been, ahem, capped until 2013 under some recent agreement - not sure how much change there will be until then. agree with anon that the french farming lobby exerts massive power in paris for some reason.
the US offer on doha is at least a start, whilst not amazing it should at the very least get a dialogue going. there are some strong industry forces and govts themselves in the EU camp that are for the greater reduction of subsidies. quite how it will play out is interesting but if they manage to fuck up doha, particularly the fkin french, then it will be a ridiculous tbh

10/14/2005 03:27:00 pm  
Blogger Nosemonkey said...

Wishful thinking, I know - if France were to be pursuaded of the benefits I'm sure it would be possible to overturn the current CAP agreements, whether they're meant to be in place until 2013 or not. Surely there's got to be a procedure for a unanimous vote of all member states overturning prior agreements?

Yeah, it's never going to happen, but wouldn't it be nice?

10/14/2005 03:41:00 pm  
Anonymous Anonymous said...

The US offer is unprecedented that I know of. Argiculture is probably the last major industry other than defence where old style protectionism is still solidly in place. In the others, such as textiles, there are some rearguard attempts to slow down the pace of globalisation - however even this is seen as a figleaf. Think Chinese textile imports.

One world, one market.

Geroge Orwell wrote that the major evil of colonialism was not that Europeans had replaced the existing despots, but that they prevented their colonies from accessing the wealth that trade had to offer.

10/14/2005 04:13:00 pm  

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