Two-way deals lift pressure to cut farm handouts

For supporters of agricultural reform, the failure of world trade talks was a blow. Conventional wisdom has it that the collapse of the Doha Round has taken away one of the major forces pressing the EU to reform its Common Agricultural Policy (CAP).

Pressure to end export subsidies, so much maligned by developing countries and non-governmental lobbyists, has ebbed and the opening of EU markets to other agricultural producers is quietly slipping down the agenda.

According to Jack Thurston, a campaigner for CAP reform and a transatlantic fellow at the German Marshall Fund, the EU has been given some breathing space.

He said the regional trade agreements that the Commission wants to ­pursue in the absence of a World Trade Organization (WTO) deal are unlikely to create the same kind of pressure as a multilateral deal to cut export subsidies and reform other aspects of the CAP.

Of all the bilateral deals that are being planned, only an EU-Mercosur agreement would include a major agricultural ­player, Brazil. Other members of Mercosur, a grouping of South American states, are Argentina, Uruguay, Venezuela and Paraguay.

"Any free trade agreement will insulate European agricultural producers against the might of Brazil," he said. "Sensitive products like soya, beef, sugar or poultry will be boxed off."

Deals with China or India are likely to focus on services and industrially produced goods, rather than the agricultural sector where the two emerging giants still struggle to compete.

But, said Thurston, "the EU had made a decision to start CAP reform before the Doha Round was under way". "[Then European agriculture commissioner Franz] Fischler’s reforms were devised as a way of putting the EU on the front foot…to balance the CAP with being a proactive player in the round," he added.

In the view of some farming organisations and EU member states, it now appears that the EU gave something up without getting anything in return.

But external pressure on the EU to reform may not disappear completely.

Louis Bélanger of Oxfam International said that export subsidies in particular would continue to be questioned. "The EU could face litigation from Chile or Egypt on dumping, similar to Brazil’s challenge on sugar," he said.

In August 2004 the WTO ruled that €1.5 billion worth of EU subsidies given to sugar producers were illegal, prompting the EU to overhaul its sugar policy.

Brazil also successfully challenged US payments to cotton farmers, similar challenges could be on the way.

Bélanger said that even with such challenges the absence of a new agreement at the WTO would leave developing countries like Senegal or Ghana worse off, as the major trading countries rush to secure bilateral deals.

Most observers agree that one of the major reasons for the collapse of WTO talks was the lack of agreement between the EU and US over agricultural reform. The problem has not gone away.

The US’s current equivalent of CAP, the 2002 farm bill, has been described as the worst farm bill in ­history. Without pressure from the WTO, many fear that the next farm bill will be largely unchanged, ­particularly if the more protectionist Democratic Party increases its presence in Congress after November’s mid-term elections.

The EU’s farming lobbies will be unwilling to offer concessions again if others are unlikely to do the same.

For supporters of agricultural reform, the failure of world trade talks was a blow. Conventional wisdom has it that the collapse of the Doha Round has taken away one of the major forces pressing the EU to reform its Common Agricultural Policy (CAP).