Mandelson: we won’t take the farm-talk rap

Date: 08/12/05

In the run-up to Hong Kong, it seems that what one top EU trade official described as " the Fischler gamble" of 2003 may have backfired With the Doha talks deadlocked on the central issue of how to liberalise agricultural trade, the EU is getting the blame.

As Peter Mandelson, the European commissioner for trade, remarked last week: "It is fashionable to blame the EU for holding up this round by being reticent on agriculture."

Mandelson denied the charge, saying: "We have moved the round forward on agriculture not just once but three times in the past 18 months. The truth is that others have been holding back, not just because we have done or offered too little but because they have been demanding too much."

When the then agriculture commissioner Franz Fischler got his deal to reform the Common Agricultural Policy in ways which would reduce trade-distorting EU subsidies, it was hoped that this would put the EU in a strong position in the Doha trade talks - not least because the US Farm Bill of 2002 was doing exactly the opposite.

Instead, American promises to reform farm trade barriers announced at the beginning of October - in a newspaper article - have trumped EU decisions to cut trade-distorting farm subsidies in advance. "Developing countries have pocketed our reforms and are asking for more," says one EU trade official. "Why," responds a top official from a leading farm trading nation "should the EU expect to get credit in international trade talks for farm support cuts which it made primarily in its own domestic interests?"

Australia's Trade Minister Mark Vaile explained recently in some detail why the EU was on the back foot, as it still is, despite further changes. The tariff cuts that the EU has proposed are, in reality, only theoretical, they reduce the "bound" tariffs - the maximum which could be applied, not the actual levels at which tariffs are set. "Our assessment is that [EU] cuts would have to be 60-95% for key trade products to get tariffs down to a level at which trade would actually begin to flow," he said.

He pointed out, too, that the tariff on imported beef into the EU is 85%, which means that hardly any beef comes in.

If beef is, as expected, designated as a " sensitive" product, and allowed to retain most of its protective tariffs, then access to EU markets from foreign beef producers will be virtually unchanged - at present the import quota for the EU15 is set at only around 2% of the 7.7 million tonnes a year consumed each year.

The EU says that only 8% of its agricultural tariff lines would be designated as "sensitive " products. The World Bank says these include some of the most important products and that continuing to protect them greatly diminishes the gains EU trading partners hope for from the Doha Round.

Another complication is that while cutting tariffs helps some countries, others, especially poorer countries, who currently benefit from trade preferences granted by the EU, see their advantages diminished. At least in the short term, trade liberalisation is bad news for them as it reduces the benefits of their preferences - the EU's newly promised sugar reform is a good example.

European farmers get a third of their income from government subsidies. In the case of beef and veal producers it is more than 70% according to the OECD. No wonder that they do not want to see subsidies cut. And no wonder, either, that it is proving so hard to break the armlock farm trade has on the Doha Round, since unless they are cut, many of our trading partners are left asking why they should move either.

Article takes a look at recent reforms of the EU's Common Agricultural Policy in the light of the forthcoming WTO trade talks in Hong Kong, December 2005. Article is part of a European Voice Special Report: 'WTO negotiations'.

WTO: The WTO: Ministerial Conferences: The Sixth WTO Ministerial Conference, Hong Kong, China, 13-18 December 2005 http://www.wto.org/english/thewto_e/minist_e/min05_e/min05_e.htm

---