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Farm Policies—Worldwide
European Union and Agriculture
Europe's Agricultural Revolution
By Sam Vaknin
Author of "Malignant Self Love - Narcissism Revisited"
The June 2005 budget summit in Brussels foundered on the issue of
farm support and subsidies which now consume directly 46.2% of the
European Union's (EU) funds. Tony Blair refused to let go of
Britain's infamous rebate (amounting to two thirds of its net
contributions to the community's coffers) unless and until these
handouts (which Britain's dilapidated agriculture does not enjoy)
are slashed. This followed close on the hills of the rejection of
the proposed EU constitution in French and the Dutch referenda in
May-June 2005.
One of the undeniable benefits of the enlargement of the European
Union (EU) accrues to its veteran members rather than to the
acceding countries. The EU is forced to revamp its costly
agricultural policies and attendant bloated bureaucracy. This,
undoubtedly, will lead, albeit glacially, to the demise of Europe's
farming sector as we know it.
Contrary to public misperceptions, Europe is far more open to trade
than the United States. According to the United Nations (UN), the
International Monetary Fund (IMF) and the Organization of Economic
Cooperation and Development (OECD), its exports amount to 14 percent
of gross domestic product (GDP) compared to America's 11.5 percent.
It is also the world's second largest importer. In constant dollar
terms, it is the world's largest trader.
A Trade Policy Review released in 2002 by the World Trade
Organization (WTO) mentions two notable exceptions: farm products
and textiles. Europe's average tariff on agricultural produce is
four times those levied on non-agricultural goods. Yet, a number of
trends conspire to break the eerie stranglehold of 3-4 percent of
Europe's population - its farmers - on its budget and political
process.
The introduction of the euro rendered prices transparent across
borders and revealed to the European consumer how expensive his food
is. Scares like the mishandled mad cow disease dented consumer
confidence in both politicians and bureaucrats. But, most crucially,
the integration of the countries of east and central Europe with
their massive agricultural sectors makes the EU's Common
Agricultural Policy (CAP) untenable.
The CAP guzzles close to half of the EU's $98 billion budget.
Recent, controversial reforms, introduced by the European
Commission, call for a gradual reduction and diversion of CAP
outlays from directly subsidizing production to WTO-compatible
investments in agricultural employment, regional development,
environment and training and research. Unnoticed, support to farmers
by both the EU and member governments has already declined from $120
billion in 1999 to $110 billion in 2000. This decrease has since
continued unabated.
Still, the EU is unable to provide the new members with the same
level of farm subsidies it doles out to the current 15 members.
Close to one quarter of Poland's population is directly or
indirectly involved in agriculture - ten times the European average.
The agreement struck between Germany and France in September 2002
and adopted in a summit Brussels in October freezes CAP spending in
its 2006 level until 2013.
This may further postpone the identical treatment much coveted by
the applicants. Theoretically, subsidies for the farm sectors of the
new members will increase and subsidies flowing to veteran members
will decrease until they are equalized at around 80 percent of
present levels throughout the EU by the end of the next budget
period in 2013.
But, in reality, the entire CAP stands to be renegotiated in 2005-6.
No one can guarantee the outcome of this process, especially when
coupled with the Doha round of trade liberalization. The offers made
now to the candidate countries are not only mean but also
meaningless.
A tweak by Denmark, the president of the EU in the second half of
2002, to peg support for farmers in the new members at two fifths
the going rate, won a cautious welcome by the then candidate
countries. Some of this novel subventionary largesse will be
deducted from a fund for rural development in the new members.
Additionally, national governments will be allowed to top up
inadequate EU dollops with governmental budget funds.
Even this parsimonious offer - still disputed by the majority of
contemporary EU members - will cost the Union an extra $500 million
a year. It also fails to tackle equally weighty wrangles about
production quotas, EU protectionist "safeguard" measures, import
tariffs imposed by the new members against heavily subsidized
European farm products, reduced value added taxes on agricultural
produce and referential periods and yields - the bases for
calculating EU transfers.
It also ignores the distinct - and thorny - possibility that the new
members will end up as net contributors to the budget.
Quoted by Radio Free Europe/Radio Liberty, Sandor Richter, a senior
researcher with the Vienna Institute for International Economic
Studies, concluded that the first intake of ten new members,
concluded in May 2004, will end up underwriting at least $410
million of the EU's budget in the first year of membership alone.
With the GDP per capita of most candidates at one fifth the EU's,
this would be a perverse, socially unsettling and politically
explosive outcome.
Aware of this, the European Commission denies any intention to
actually accept cash from the New Europe. Their net contributions
would remain theoretical, it pledges implausibly. Yet, as long as a
country such as Poland is incapable of absorbing - disseminating and
utilizing - more than 28 percent of the aid it is currently entitled
to - veteran EU members rightly question its administrative ability
to tackle much larger provisions - c. $20 billion in the first three
years after accession.
The prolonged and irascible debate has taken its toll. In some new
member countries, pro-EU sentiment is on the wane. Leszek Miller,
then Poland's prime minister, told the PAP news agency in late 2002
that Poland should contribute to the EU less than it receives in
agricultural subsidies. And what if not? "Nobody would be overly
concerned if Poland did not enter the EU together with the first
group of new members."
Hungary echoes this argument. Almost two thirds of respondents in
surveys conducted by the EU in Estonia, Latvia, Slovenia and
Lithuania are undecided about EU membership or opposed to it
altogether. The situation in the Czech Republic is not much
improved. Only Hungary stalwartly supports the EU's eastern tilt.
Opinion polls periodically conducted by GfK Hungaria, a market
research group owned by GfK Germany, paint a more mixed picture. On
the one hand, even in countries with a devout following of EU
accession, such as Romania, support for integration has declined
this year. Support in Hungary and Poland, on the other hand, picked
up.
Yet, the EU can't seem to get its act together. According to the
Danish paper, Berlingske Tidende, Danish prime minister in 2002,
Anders Fogh Rasmussen, ruled out a "take it or leave it" ultimatum
to the new members. There will be "real negotiations", he insisted.
Not so, says Anders Fogh Rasmussen, the Danish president of the EU
until Dec 31, 2002: "The room for maneuver in negotiations will be
very limited ... We have a certain framework, and we stick to it."
Yet, disenchantment should not be exaggerated. Naturally, flood-
affected farmers throughout the region - from the Czech Republic to
Poland - are vigorously protesting their unequal treatment and the
compromises their governments were arm-twisted into making. Still,
according to a survey released in December 2001 by the European
Commission, 60 percent of the denizens of the accession countries
supported it.
As the endgame nears, the parties to the negotiations are posturing,
though. EU enlargement commissioner, Gunter Verheugen, argued in
November 2002 against equalizing support for Poland's 6 million
farmers with the subsidies given to the EU's 8 million smallholders.
In a typical feat of incongruity he said it will prevent them from
modernizing and alienate other professions.
Franz Fischler, the Austrian EU's agriculture commissioner, hinted
that miserly production quotas for cereals, meat and dairy products,
offered by the EU to the new members, can be augmented. The EU
presently provides the new members with funding, within the Special
Accession Programme for Agriculture and Rural Development (SAPARD)
to support farm investments, to boost processing and marketing of
farm and fishery products and to bankroll infrastructure
improvements. Hungarian farmers, for instance, are entitled to up to
$38 million of SAPARD money annually.
In a thinly veiled threat, Fischler included this in a speech he
made in an official visit to Estonia in late 2002:
"The EU enlargement countries should be pleased with the 25 per cent
agriculture subsidies, as the member states have not agreed even on
that yet, therefore this should be the first goal and only after
that can further subsidies be discussed ... It would not be very
wise to tell the EU member states that accession countries are not
pleased, that would not be positive for the whole process."
Small wonder he was whistled down by irate Polish parliamentarians
in an address to a joint session of the parliamentary committees for
agriculture and European integration in the Sejm. Poland's fractured
farm sector is notoriously inefficient. With one quarter of the
labor force it produces less than 4 percent of GDP. But the peasants
are well represented in the legislature and soaring unemployment -
almost one fifth of all adults - makes every workplace count.
In the meantime, the ten new members of the EU have teamed up to
present their case in Brussels. Their ministers of finance, foreign
affairs and of agriculture, parliamentary deputies in their finance
and farm committees - all issued and issue common statements,
position papers, briefings and memoranda of understanding. But no
one is inclined to take such ad-hoc alliances among the candidate
countries seriously. The disparity between their farm sectors is
such that it rules out a single voice.
Moreover, the EU is strained to the limit of its habitual consensus-
driven decision making. The breakdown of the European mechanism of
deliberation was brought into sharp relief by the way in which the
future of the CAP was decided in a series of chats between the
leaders of France and Germany in a hotel in Brussels in 2002 . Their
deal was later rubber stamped, unaltered, in a summit of all EU
members in October 2002.
The Union is in constitutional and institutional flux. Small and
even medium sized members - such as the United Kingdom - are
marginalized. As the EU bloated to 25 countries, a core of
leadership failed to emerge. Germany, France, the UK, and Italy -
the industrial locomotives of Europe - are at odds and (with the
exception of the UK) sputtering.
Decision-making has been reduced to the Council of Ministers handing
down blueprints to be fleshed out by the less significant states and
by an increasingly sidelined European Commission and a make-believe
European Parliament. The constitution which was supposed to restore
central authority and participatory democracy is dead in the water.
The countries of central and eastern Europe are and will, for a long
time, be second class citizens, tolerated merely because they
provide cheap, youthful, labor, raw materials and close-by markets
for finished goods. The new members are strategically located
between the old continent and booming Asia.
EU enlargement is a thinly disguised exercise in mercantilism tinged
with the maudlin ideology of embracing revenant brothers long lost
to communism. But beneath the veneer of civility and kultur lurk the
cold calculations of realpolitik. The New Europe - the EU's
hinterland - would do well to remember this.
==============================================================
Sam Vaknin is the author of Malignant
Self Love - Narcissism Revisited and After the Rain - How the West
Lost the East. He served as a columnist for Central Europe Review,
PopMatters, Bellaonline, and eBookWeb, a United Press International
(UPI) Senior Business Correspondent, and the editor of mental health
and Central East Europe categories in The Open Directory and
Suite101. Until recently, he served as the Economic Advisor to the Government
of Macedonia.
Visit Sam's Web site at
http://samvak.tripod.com
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