Archive for January, 2010

EU:the world’s sleeping trade giant

Barroso II showing lack of ambition on agri-trade agenda

Those having observed EU trade policy over the last five years will have been left in little doubt over the bloc’s commitment to a free trade agenda. The EU has been the proponent of the WTO’s Doha Round, and has recently accelerated a raft of free trade pacts with developing and developed economies, while sending out feelers to other potential partners in all four corners of the globe.

With the political balance in member states and in the European Parliament having shifted significantly to the right over the last five years, a continuation and strengthening of the liberal trade agenda would seem inevitable. But few would have predicted the ease with which Barroso and his designate-team are steering their ideas through the Brussels filter.

The worry is that the EU could be sleepwalking into an unambitious, unquestioning agri-trade policy, at a time when the challenges have never been greater.

Who holds the reins?

With so much at stake, the identity of Europe’s agri-trade policy-makers takes on added importance. Barroso has assigned the trade role to Belgian Liberal Karel de Gucht, the agiculture portfolio to Romanian ex-farm minister Dacian Ciolos, and the food safety dossier (under Health and Consumer Policy) to Maltese centre-right politican John Dalli.

Last week’s hearings saw all three come through relatively unscathed, despite failing to spell out an answer to one of the key conundrums Europe faces: how can trade policy facilitate/regulate the flow of foodstuffs in and out of Europe in a way that helps secure European and global farm livelihoods, while bolstering the global food supply against a backdrop of growing climate and resource constraints. The question is by no means a simple one, but the smooth ride given to the new team raises questions about the ambition of MEPs.

Ciolos set out his stall as a “reformer”, but left most of the detail at home. Not that he needed it: by the sound of their questions, MEPs were just relieved to hear someone defend a strong CAP budget after circulation of a recent Commission ‘non-paper’ suggesting that plans are already in motion for scaling it back.

While he took a cautious line on trade deals that could pose a threat to European farmers, his two wingmen – De Gucht and Dalli – came across as liberal free-marketeers to the core.

De Gucht was unabashed in his defence of a free trade agenda, declaring that the only way for the world’s poorest countries to drag themselves out of poverty is to open themselves up to the global economy.

Dalli meanwhile painted himself as a consumer champion, vowing to fight misinformation. However, when pressed he implied that he would do so by facilitating more information and letting the consumer choose, rather than raising the bar on health, hygiene and welfare standards.

The three appear to complement each other: De Gucht will endeavour to push a Doha deal through with a “development outcome” (trade liberalisation as a spark to development), while Ciolos will ensure that the EU offers no more agricultural concessions than it already has. Dalli’s information onslaught will meanwhile help to steer European consumers towards ‘sustainable’ home-grown produce as the continent seeks to compete with increasing food imports in a low tariff environment.

Carbon tariffs: ducking the big questions

They have the makings of a successful partnership, but only if success is measured in terms of getting the greatest European value out of a flawed global system.

What was lacking was an ambitious long-term vision placing trade alongside the major climate and demographic challenges, an exercise that would necessarily call into question the core principles of trade liberalisation, either to endorse them radically, to suggest adaptations to new circumstances, or to erect the right protective barriers.

In some of their most penetrating questions, MEPs asked De Gucht to consider carbon tariffs at the EU border as a means of incentivising stronger environmental regulation in countries which wish to continue trading with the EU.

The manner of his response was telling. The Belgian rejected the idea as “unfeasible”, warning that it would risk sparking a tit-for-tat trade war. His replies may have come across as seasoned realpolitik, but they also displayed a worrying lack of ambition. The underlying message was that a policy is not worth pursuing if it could anger the EU’s trading partners.

Ciolos was equally unambitious when it came to joining up his visions of European food safety, food security and trade policy. He vowed to “stick to the science” on GMO approvals, but hinted that GMO soya imports should probably be allowed into the EU because we are heavily dependent on them for animal feed.

Coupled with Dalli’s ‘information not regulation’ stance, the prevailing feeling was that the new team will not be courageous enough to make a clear judgement call on what is safe and what is not. Nor will they be willing to use border adjustments to encourage what production methods are seen as desirable.

Price to pay for raising the baseline?

The pragmatist vision played well with MEPs, but ultimately did not answer their own recurrent questions (in both the agriculture and trade hearings) about how the EU can strive for high environmental, animal welfare and food safety standards, while competing with lower cost foreign produce in a liberalised trade environment.

Carbon tariffs may be untested and prone to challenge from other WTO members , but few other ideas offer as comprehensive a means of compensating producers (agricultural or otherwise) for raising the environmental baseline.

They at least represent a way of making EU trade policy more honest with itself; if food imports are to be taxed heavily in any case (pending a Doha deal), why not spell out the real – and perhaps valid – reasons why, by drawing a clearer link between EU import duties and the price of meeting stringent production rules.

Can EU wield its trade power for good?

The basic principle of using trade policy as a lever for non-economic goals should at least have merited a fuller response from De Gucht. Or is the EU content to drop any ethical aspirations from its trade agenda?

This would surely be a mistake. While Europe continues to grapple with the question of how to wield its power (hard, soft or otherwise) on the world stage, it has quietly developed into the world’s biggest market, giving it huge leverage on trade issues.

The EU’s subsidy and tariff regimes have a major impact not only on its own farmers but on global agricultural livelihoods. With this economic power comes the ability to project standards. The EU’s food safety rules are a key piece in the puzzle: the core standards imposed are – at least in principle – applied to all non-EU produce entering that market. EU rules on pesticides and GMOs therefore reverberate far beyond European borders. The EU’s scepticism towards biotech crops is arguably one of the last remaining shackles on the global advance of genetically modified crop production.

If the EU does hold aspirations such as fighting climate change or alleviating world hunger, then trade is surely the arena where it can set the agenda.

MEPs fail to press nominees

The hearings saw weak and disparate questioning from all parties, and failed to challenge the Barroso II team to go beyond a basic support for the status quo and its worrying imbalances. Ciolos ventured the idea of a trading system based on “balanced multipolarity”, but MEPs failed to push him on the nitty-gritty, and what this would mean in real terms (rule harmonisation, tariffs, local preference).

Instead, piecemeal issues reigned supreme: MEPs exacted vague commitments from De Gucht over Geographical Indications (the labels which act like copyright for local wines, hams and cheeses), while Ciolos – at the request of Agriculture Committee bad-boy José Bové – vowed to fight for a reduction in America’s punitive tariffs on Roquefort cheese.

The parliamentary hearings are of course only the first insight into the new Commissioners, and can be misleading.

The Doha Round will no doubt rumble on in the coming months and the EU’s position is almost certain to remain static. The WTO is nonetheless likely to see some form of debate on carbon tariffs in the near future, whether the issue is initiated by the EU, the US or others. And feed constraints will continue to cast a spotlight on the EU’s GMO import policy, perhaps eventually prompting a clear response on where the EU stands more generally on biotech crops, and the role they should play in the global food security equation.

Meanwhile, the advance of bilateral negotiations with India will be an interesting litmus test; moves towards an FTA (Free Trade Agreement) with the Asian giant have previously threatened to run aground on issues such as child labour. The recent EU-Korea deal is thought to be pioneering in regard to labour standards, and could be built on in the Indian context. Or will the EU drop its social concerns and bag a crucial chunk of market access in a growing economy?

A chance to see the true colours of the De Gucht-Ciolos-Dalli team will be eagerly awaited.

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French resistance

CAP defenders have the numbers but not necessarily the initiative

Last month 22 member states met in Paris to discuss the future of the Common Agricultural Policy (CAP). Only the UK, Sweden, Denmark, the Netherlands and Malta were left out.

On first glance it looks like a cast-iron case of Franco-German CAP manoeuvring: a deal being stitched up before the debate on the future of farm policy has even got going. However, there is much more to it than meets the eye.

Contrary to what the Paris summit looked like to the outside world, the liberal bloc is by no means out in the cold. Neither is the debate on the future of the CAP anywhere near being stitched up by the traditional recipients of CAP largesse.

The resolution that arose from the meeting was not only short on detail, but also heavy on defensive rhetoric.

“Only an ambitious public policy, applied across the continent and with adequate resources, can guarantee Europe’s independence,” according to the Appel de Paris.

Wind blowing in the opposite direction?

It is interesting to cast an eye over the last decade of CAP evolution.

Wholesale changes have occurred as the EU has moved from open-ended farm subsidies and generous market support to a more accountable system: basic food safety and environmental conditions are now attached to the bulk of payments (termed ‘cross-compliance’), while additional payments for ‘beyond the baseline’ eco-system services are available and increasingly well budgeted in the Rural Development remit.

The country which will have been the most pleased with these changes is surely France’s arch-rival on the CAP: the UK.

The wind is increasingly blowing in this direction. Outgoing Farm Commissioner Mariann Fischer Boel has even talked about “a strong political consensus” for cutting payments free of their historical anchor and embedding environmental concerns and ‘public goods’ more deeply into the whole CAP framework.

“Some politicians say this loudly and some just admit it quietly under their breath,” according to the Dane.

Safety in numbers?

The UK is nowhere near achieving its overarching goal of dramatic cuts in the overall CAP budget, but neither is the French bloc, despite its 22 strong hymn sheet.

Was the Paris meeting an occasion for CAP stalwarts to admit the need for change “under their breath”? And perhaps to forge a common front on what core principles must remain, when the winds of change inevitably blow through the CAP corridors?

22 might seem like a big number, but these are only farm ministers, addressing their message at least partially to agricultural lobbies; back in national capitals their cash-strapped finance departments may be starting to line up alongside the Commission, and large swathes of the general public, in demanding a more streamlined system.

Even within the 22 there are major lines of conflict which will surely prevent the Paris declaration developing into anything more concrete: big Eastern European countries such as Poland are dead set on levelling CAP subsidies between old and new member states, an idea which would erode the windfall payments received in France and other EU15 states due to prior production patterns.

The new Agriculture Commissioner Dacian Ciolos will be key in how this debate develops, should the Romanian survive January’s parliament hearings. Much has been made of his ties to France, but this could count for little once he is staring budget constraints in the face.

Food security at stake

One strength of the Paris resolution appears to be its focus on ‘food security’, an increasingly important buzzword in the resource-centric politics of the 21st century.

The G22 format was initially cobbled together to force the Commission’s hand on dairy policy as prices slumped this year. The spectre of European milk farmers going out of business served their cause well, and key concessions were drawn from the Commission.

The risks of European land abandonment and concentration of food production in low-cost countries have been clearly spelled out.

But will these suffice to justify big CAP payments in the long term? Despite its food security focus, the Paris paper does little to explain the global perspective; the case is still to be made for how we can overcome the historic contradictions of European surpluses coexisting with (and in some people’s eyes contributing to) third world hunger.

Out of their hands?

What is clear is that CAP reforms will not take place in a vacuum, and other policy challenges appear increasingly inter-connected.

The outcome of post-Copenhagen talks on climate change, and the ongoing Doha Round discussions at the World Trade Organisation, will feed directly into the CAP debate. These multilateral talks have the potential to dramatically change the backdrop against which the EU is planning its next round of CAP reforms: greater environmental imperatives and tougher Doha obligations could shift the balance considerably. And who would bet against the two issues coming together, and carbon tariffs eventually being factored into WTO agreements?

It quickly appears that the CAP discussions are so full of variables – internal and external — that any combination of member states would have their work cut out trying to short-circuit the debate at this stage.

Paris will need all of the friends it has, and even its ‘enemies’. Within a fortnight of Michel Barnier securing the EU internal market and financial services dossier, Brown and Sarkozy were able to team up to co-author fundamental policy proposals on bank regulations and climate change. And while the ‘UK excluded from Paris talks’ line was conducive to media coverage, British diplomats were nonetheless present at the G22 CAP talks in ’observer capacity’.

Maybe, once the initial posturing fades, the traditional antagonists will need to find some common ground to avoid having their destiny decided for them.

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