Praise for farm export subsidies U-turn – but Chirac may stay a weasel to some

Date: 06/03/03

By David Cronin

The US jury is still out on President Chirac's support for an end to EU farm export subsidies

NEVER underestimate Jacques Chirac's ability to surprise. The French president did the political equivalent of changing religion on 21 February, when he advocated that rich nations should impose a moratorium on subsidies for farm exports.

Tabled during a France-Africa summit, the plan's purpose would be to cease undermining the livelihoods of producers in poor countries by flooding their markets with cheap European foodstuffs.

The idea was hailed as an advance by left-leaning daily Le Monde. Its editorial accused Chirac of being "in total contradiction" until now "by pleading in Europe for keeping the supports to the agricultural world and for a relaunch of development aid to poor countries".

The same Jacques Chirac has been a resolute defender of his country's farmers, the main beneficiaries of the EU's 40 billion euro-per-year Common Agricultural Policy (CAP). He succeeded in thwarting efforts by the European Commission to start a major overhaul of the CAP in 2004 during last October's EU summit in Brussels, securing an agreement from the Union's leaders that this should only commence in 2006. So, has wily old Jacques had a "Road-to-Damascus" conversion?

No, say French diplomats. One argued there is "no link" between the proposal for freezing export subsidies and Chirac's criticisms of the 2002 CAP reform blueprint published by Franz Fischler, the EU's agriculture commissioner. "Our main problem with the Fischler proposal concerned the "decoupling" of direct aid to farmers and production," the diplomat explained.

"What Chirac was saying on 21 February is that we want to see an end to the marginalisation of Africa in world trade. This hasn't benefited development much in recent years. We want to reverse that trend but France cannot do it all alone, so we will be trying to get the support of all the developed countries."

Trade Commissioner Pascal Lamy, another Frenchman, has applauded Chirac's latest move. He hailed it as "a sign that the potential contradiction between the French position on agriculture and the French position on development is being addressed".

France is due shortly to send a memorandum fleshing out its proposal to the main EU institutions. Chirac intends that it will kick-start a debate at June's G8 summit of top industrial nations in Evian, France. In 2001, the rich world spent €288 billion on supporting its farmers, seven times more than it donated in aid to the developing world. The World Bank has calculated that large-scale reduction of subsidies in rich countries could enable developing countries to raise exports by 24%, gaining extra annual revenues of €55.6 billion.

"Obviously this [Chirac's plan] would not be a unilateral measure by the EU," says Gregor Kreuzhuber, the Commission's farm spokesman. "In order to be effective, it would have to be endorsed by all rich countries. It's not only the EU that needs to suspend export refunds; the Americans need to suspend export credits and the abuse of food aid to create a level playing field."

But the Commission feels the World Trade Organization (WTO) isn't tackling all these related issues in an even-handed way. Last month Fischler slammed as "unbalanced" a key paper by Stuart Harbinson, chairman of the WTO's talks on farm trade. According to Fischler, the paper requires the EU to honour its pledge to phase out its 5 billion euro-per-year export refunds, designed to compensate farmers for differences between prices within the Union and world markets.

But it doesn't grapple sufficiently with many of America's trade-distorting measures, including its use of food aid to deal with surpluses in production. "Everything is being required of us and nothing is being required of anyone else," Fischler declared.

Like a raft of other issues, farm support has become a considerable irritant in transatlantic relations. The Bush administration decided last year to increase aid to its farmers by about €167 billion, much to Europe's chagrin.

At this stage, then, the possibility that the US will rally around Chirac, considered a weasel in Washington for his efforts to avert war in Iraq, seems remote.

Anti-poverty and green campaigners have given a generally positive response to Chirac's proposal. Oxfam's EU spokeswoman Jo Leadbetter described his ideas as "an overdue recognition of the damage caused to poor Africans by rich countries' food dumping and the gyration of the world commodity markets. They are all the more welcome from the leader of a major agricultural nation, which is widely seen as one of the most guilty of dumping its food on poor people".

A recent Oxfam paper stated that France, Germany, Britain, the Netherlands, Italy and Ireland account for three-quarters of the Union's milk production. As a result, these six gain most from the €16 billion in taxpayers' money spent on EU dairy subsidies per annum.

The payments have been blamed for falling prices of milk in poor countries - and the falling incomes of their dairy farmers. The dumping of European milk powder on Jamaica is cited as a key reason why its milk production has declined by one-third since 1995. Processors based in the country are reported to be shunning locally produced milk for cheaper, imported powder. The Swiss food giant Nestlé, for example, buys one-third less Jamaican milk than before.

"The first people to suffer are small farmers," says Fiona Black, a Caribbean researcher on the CAP's impact. Visiting Brussels last week, she cited examples of farmers who are struggling in Jamaica because their earnings have fallen drastically in the past few years. "Europe speaks loudly about poor countries but protects itself to the point that world market prices are deflated," she added.

Friends of the Earth wants the French to state the precise time frame they envisage for imposing the moratorium on export subsidies. At present, Chirac is simply talking about the step being taken during the so-called Doha round of world trade talks, due to culminate with an agreement in January 2005.

"France has always been defending the idea about maintaining export subsidies," said Joanna Dober, Friends of the Earth's campaigner on CAP reform. "It has huge tracts of grain farms. So if Chirac really means he wants a moratorium on export subsidies, and in a time frame that's reasonable, that's fantastic news. We want to see the fundamental principles of the CAP changed, so that it moves from export-driven overproduction to more sustainable, environmentally friendly types of agriculture."

However, the main group for EU farm lobbies sees things differently. Risto Volanen, secretary-general with the Committee of Agricultural Organisations in the European Union (COPA), said: "We take it [Chirac's proposal] as a political message to African countries. We must understand that developing countries are in the position which we were in with farming in the 19th century. They need a policy that maybe includes protection but they must understand we also need a policy."

Volanen argues that Fischler should have waited longer before notifying the WTO that the EU supports the gradual elimination of export subsidies.

"We appreciate that the Commission is now critical of the Harbinson paper. But the Commission is itself guilty. It started the reform process much too early. This was not very good tactics."

He notes that the EU and the US are at odds over "decoupling", breaking the link between the amount of aid farmers get and the amount of food they produce. "The Fischler proposals are talking about decoupling, whereas the Americans are talking about recoupling. The Americans are right to support their farmers and we expect the EU to also defend its farmers."

The US jury is still out on French President Chirac's support for an end to EU farm export subsidies.