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EU Farm Talks in Crisis As France Takes on the European Commission

20 Oct 05

by Rachna Uppal

It started off as a small, yet significant rumour in the corridors of the French foreign ministry, that European Commission (EC) trade commissioner, Peter Mandelson, had made sweeping proposals to cut farm subsidies by up to 70% in an attempt to reinvigorate discussions in the latest round of the World Trade Organisation's (WTO) trade talks. Then those rumours were confirmed—Mandelson had indeed proposed the cuts, and then some. The French response has been ferocious, but is revealing an increasingly sharp divide between member states over the future of agricultural subsidies and the Common Agricultural Policy (CAP) itself.

On 10 October, the United States surprised many by suggesting that rich nations could eliminate farm subsidies by 2023, after a phase-out starting in 2008. As part of this, U.S. trade representative Rob Portman said that his country could cut agricultural subsidies by 60% over five years from 2008. Crucially, however, this would only occur if there were even deeper 80% reciprocal cuts by the European Union (EU) and Japan. Unsurprisingly, Japan wasted no time in rejecting the proposal, saying that the proposed U.S. cuts did not go far enough. By contrast, the European Commission interpreted the U.S. proposal more positively and Mandelson added his proposed concessions to the pot the following day. Finally, it seemed the EU and U.S. policymakers were more enthusiastic to broach the acutely sensitive issue of subsidy cuts and give the WTO's Doha Round talks a fighting chance. It quickly became clear, however, that Mandelson was not speaking on behalf of all the member states.

The French are most opposed to cuts in agricultural funding to EU member states, long criticised by the bloc's trading partners for distorting trade. Mandelson’s proposals would signal a reduction of up to 70% of the assistance currently benefiting EU farmers, as well as a 65% cut in tariffs, to allow increased agricultural competition in the bloc. The proposals put forth by the commissioner would require nothing less than a major overhaul of the CAP, a feat that many have attempted, but none have managed to achieve.

In many ways, Mandelson chose an opportune time to broach the thorny CAP reform question, as reform is becoming inevitable. Until now, the rationale behind the fierce protectionism held sway—that the bloc's farmers could not survive the competition from developing countries without guaranteed fixed prices and protective subsidies. There are also arguments that CAP carries key social and countryside management benefits, an argument romanticised by France 's militant agricultural lobby. However, following the EU's eastward enlargement in 2004, some measure of reform is unavoidable if the more agrarian economies of Eastern Europe are not to consume huge agricultural funds.

France is in no mood to agree to sweeping agricultural concessions, however, and has reacted angrily to Mandelson's provocative move. It has argued that the EU already implemented significant agricultural reforms in 2003, as well as promising to abolish all export subsidies last year. The government denounced the EC proposals as ludicrous, and immediately called for an emergency meeting of EU foreign and agricultural ministers to discuss how best to proceed. The main argument put forward by France was that Mandelson's plans did not have the approval of EU members. To prove their point, French officials duly produced a letter signed by 13 other member states, stating that any action on agricultural subsidies would have to be put to the EU's members before being presented at the WTO.

Alas, the emergency meeting did not have the desired effect for the French. EU member states did not accede to French demands that Mandelson's negotiating be overseen by a supervisory committee, although they did agree that ministers should be continually informed of what was happening. Germany proposed cuts in tariffs of between 20% and 50%, but was prepared to accept cuts in subsidies of 70%. Member states are well aware of the looming WTO summit to be held in Hong Kong this December, and are keen to make progress and reach agreement with the bloc's trading partners before the summit.

Hardly one to back down easily, France demonstrated its disappointment with the result of the emergency meeting by declaring that its own experts would now examine the EU's position. Speaking in the French National Assembly this week, Trade Minister Christine Lagarde underlined that France would not support the agriculture proposals while Mandelson continued his present negotiating stance, and demanded that agricultural concessions be taken off the WTO agenda for the time being.

Despite the European Commission having gained the support of member states to continue negotiating on their behalf at the WTO talks, it would seem that France’s tough stance has paid off for the time being. Peter Mandelson refused to discuss the potentially explosive aspects of agricultural concessions with his trading partners at a WTO meeting in Geneva this week, much to the chagrin of the U.S. trade representative, who accused the EU of caving in to French pressure. Indeed, the Americans were reported to be unimpressed, yet unsurprised at the French stance, and had hoped that Mandelson would be strong enough to continue despite predictable French opposition.

The explicit opposition of France has cast a shadow over the bloc's ability to present a united front at the WTO summit in December. Both Spain and Poland have also expressed their reservations about the proposals for more cuts in subsidies and tariffs. But the Doha Round talks and other international development initiatives have powerfully highlighted the problems that the CAP and other Western subsidies cause for farmers in the developing world. They not only find access to European markets severely limited, but even have to compete in their domestic markets with heavily subsidised Western exports. France is not ignorant of such powerful arguments for reform, and neither is it in the strongest position to oppose it. For these reasons, it is most probable that an agreement acceptable to all member states will be reached, albeit a watered down version of what has been proposed by Commissioner Mandelson. At least the EC has fired the starting gun, and member states are being forced to state their positions.

 
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