By Sam Vaknin
Author of "Malignant Self Love - Narcissism Revisited"
According to a June 2005 OECD report, and contrary to popular, media- fostered impressions, farm subsidies are being phased out almost
everywhere. Turkey is an exception. It spent in 2002-4 (wasted, more
like it) more than 4% of its Gross Domestic Product (GDP) on aiding
and abetting its inefficient agricultural sector (compared to 4.3%
in 1986-8).
Other figures: Switzerland almost 2% (4%), Japan - 1.5% (2.2%),
European Union - 1.2% (2.8%), Mexico - 1.2% (3%), USA - 0.9% (1.3%),
Canada - 0.8% (1.8%), Australia - 0.3% (0.8%), Poland - 1.2% in 2001- 3 (2.2% in 1991-3). On average, farm subsidies declined from 2.3% of
GDP in 1986-8 to less than 1.2% of GDP in 2002-4.
Farm protection in OECD countries fell from 37% of farm receipts
(1986-8) to 30% (2002-4) - still around $279 billion. This statistic
masks yawning disparities between countries. In New Zealand and
Australia, producer support amounts to less than 5% of farm
receipts. It stands at 20% in North America and climbs to 34% in the
EU and 60% in Japan.
Virtually all subsidies linked to production levels are being phased
out everywhere, albeit glacially. Their distorting and pernicious
effects on the allocation of scarce economic resources in the farm
sector is widely recognized. They now comprise less than 75% of all
compensation in the EU (compared to 90% in 1986-8) and 90% in Japan
and Korea (compared to 100%). Compensation is now more commonly
linked to acreage, number of cattle heads, and average historical
prices.
Still, the farm lobby in rich countries is formidable. In the USA,
for instance, Bill Clinton's 1996 farm bill which meant to gradually
eliminate farm protections was all but reversed by George Bush's
2002 package of laws that nearly doubled agricultural subsidies.
The WTO has recently taken a more active role in fighting
discriminatory practices. Brazil won cases against American cotton
subventions and EU sugar protections. The EU reacted by announcing a
cut of 39% in its average sugar subsidy.
Yet, nothing much has changed in the last three years (2002-5). It
is instructive to study a speech given in January 2003 by Herve
Gaymard, then French Minister for Agriculture, Food, Fisheries and
Rural Affairs to the misnamed "Real Solutions for the Future" Oxford
Farming Conference. Gaymard drew the battle lines and made clear
that the French resistance is alive and kicking - at least with
regards to the European Commission's proposed reforms of the
European Union's Common Agricultural Policy (CAP). , in a speech
France - and six other EU countries - intend to stick religiously to
a deal struck, tête-à-tête, between the French president and the
German chancellor in 2002. The CAP - which now consumes close to
half of the EU's budget - will not be revamped until 2013 at the
earliest, though outlays will be frozen in real terms and, starting
in 2006, gradually diverted from subsidizing production to
environmental and other good causes ("decoupling" and "modulation"
in EU jargon).
This upset the EU's ten new members, which joined it in May 2004.
With spending capped, they are unlikely to enjoy the same pecuniary
support bestowed on the veterans, even after 2013. As it is, their
agricultural benefits are phased over ten years and face an
uncertain future when the CAP is, inevitably and finally, scrapped.
Moreover, France's recalcitrance imperils the crucial Doha round of
trade talks. Both the EU and the USA revealed their hands by March
2003. The USA called for a total elimination of all manner of farm
subsidies. The EU fudged. The developing countries are already up in
arms over promises made by the richer polities in the protracted
Uruguay round and then promptly ignored by them.
Agriculture is arguably the poorer members' highest priority. They
demand the opening of the rich world's markets, whittling down
export and production subsidies and the abrogation of non-tariff
trade barriers and practices, such as the profuse application of
anti-dumping quotas and duties.
Gaymard proffered the usual woolly mantras of "farm products are
more than marketable goods", "France, and Europe in general, need
security of food supply", "food cannot be left to the mercy of
market forces". Farmers, unlike industrialists - insisted the
Minister counterfactually - cannot simply relocate and agrarian
pursuits are a pillar of the nation's culture and its attachment to
the land.
Yet, it cannot be denied that Gaymard advanced in his speech a few
thought-provoking and oft-overlooked points.
He convincingly argued that farm products covered by EU subsidies
are rarely in direct competition with the crops of the poor in
Africa and Asia. The cotton, rice and groundnut oil subventions
generously doled out to growers in the United States - the EU's most
vocal critic - harm the third world smallholders and sharecroppers
it purports to defend. The IMF - perceived in Europe as the long and
heartless arm of the Americans - has dismantled the coffee regime
and marketing structures causing irreparable damage to its indigent
growers, Gaymard said.
The CAP, insists Gaymard, does not encourage environmental ills. The
policy does not subsidize the husbandry of disease-prone poultry and
pigs, nor does it support genetically modified crops. The CAP is
also way cheaper than portrayed by its detractors. Food constitutes
only 16 percent of the family budget - one third of its share when
the CAP was instituted, four decades ago. The CAP amounts to a mere
1 percent of the combined public spending of all EU members. The
comparable figure in America is 1.5 percent.
This last argument is, of course, spurious. It ignores the
distorting effects of the CAP: exorbitant food prices in the EU,
double payments by EU denizens, once as taxpayers and then as
consumers, mountains of butter and rivers of milk produced solely
for the sake of finagling subsidies out of an inert and bloated
bureaucracy and deteriorating relationships with irate trade
partners.
Gaymard is no less parsimonious with the full truth elsewhere in his
counterattack.
He claims that the EU provides tariff-free and quota-free access to
farm products from the world's 49 Highly Indebted Poor Countries
(HIPCs). This is partly untrue and partly misleading. Important
commodities - such as sugar, rice and bananas - are virtually
excluded by long phase-in periods. Non-tariff and non-quota barriers
abound. Macedonian lamb is regularly barred on sanitary grounds, for
instance. Health, sanitary, standards-related and quality
regulations render a lot of the supposed access theoretical.
Still, it is true that the EU's larger economies are more open to
international trade than the United States. Gaymard flaunted a
telling statistic: the EU absorbs well over two fifths of Brazil's
farm exports. The USA - in geographical proximity to Brazil and a
self-described ardent champion of free trade - takes in less than 15
percent.
The problem with farming in the developing world is its
concentration on cash crops, whose prices are volatile. This
subverts traditional agriculture. Gaymard implied that the destitute
would do well to introduce a CAP all their own and thus underwrite a
thriving indigenous sector for internal consumption and more stable
export revenues.
They can expect no help from the industrialized nations, he made
crystal clear:
"(The rich countries) are not ready to eliminate their support for
agriculture. They have not committed themselves to doing so in
international forums and do not believe that, as far as they Are
concerned, it would be to the developing countries' advantage.
Therefore," - he concluded soberly - "let us stop dreaming." This
was received with a standing ovation of the 500 conference delegates.
The conspiracy minded stipulate that France was actually merely
seeking to strengthen its bargaining chips. Finally, they go, it
will accept decoupling and modulation. But recent policy initiatives
do not point this way. France all but renationalized its beef
markets, proposed to continue dairy quotas till 2013, sought to
index milk prices and defended the much-reviled current sugar regime.
These are bad news, indeed. Agriculture is a thorny issue within the
EU no less than outside it. A recessionary Germany (and a more
dynamic UK) have been bankrolling sated and affluent French and
Spanish farmers for decades now. This has got to stop and will -
whether amicably, or acrimoniously.
The new members - most of them from heavily agrarian central and
east Europe - will demand equality sooner, or later. Poor nations
will give up on the entire trade architecture so laboriously erected
in the last 20 years - if they become convinced, as they should,
that it is all prestidigitation and a rich boys' club. It is a
precipice and France has just taken us all one step forward.
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AUTHOR BIO (must be included with the article)
Sam Vaknin ( http://samvak.tripod.com ) 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