TRADE-ASIA: EU Farm Reforms Get Feeble Cheers

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Jul 3 2003 (IPS) - A European Union (EU) attempt to sound magnanimous over its recent reforms in agricultural policy has still to draw loud cheers across Asia, whose activists say they know a charade when they see one.

The early bursts of opinion across the region suggest that only feeble cheers are appropriate for what is perceived in Asia as a ”small start” or a ”first step” at best in making the playing field in international trade a fairer one.

For change to be meaningful, say critics, Asian farmers need the EU to go the whole hog.

The EU’s reforms of its Common Agriculture Policy (CAP) on Jun. 26 are very limited, since they do not accelerate the phasing out of export subsidies, Walden Bello, head of the Bangkok-based think-tank Focus on the Global South, told IPS. ”In fact, I wonder if they can be considered reforms at all.”

Bello views the reforms by the EU as an exercise in diplomatic sophistry due to the way the contentious issue of subsidies was overcome. Under the new arrangement, the EU will, from 2005, shift to spooning out a fixed subsidy to farmers based on the size of their farms than the quantity of their produce, which was the case before.

What it achieved ”does not substantially bring down the levels of subsidisation (of agriculture products in Europe) while demanding greater market access from Asian and other developing countries,” added Bello.

In Australia, a country that has been among the leaders pressing the EU to slash its agriculture subsidies, the reactions to the CAP reforms were far from robust. ”It is only a small step, (yet) it is a positive step,” Peter Corish, president of the National Farmers Federation, told the Australian Broadcasting Corp.

A spokesman for Australian Trade Minister Mark Vaile was quoted in the press as having said: ”This is not the full reform wanted. To that extent we’re disappointed.”

In Thailand, which has been hit by the effects of CAP, newspaper editorials commented that the EU’s change of heart brings little gain to Asia’s poor farmers.

”The news is not joyous for Third World farmers. The reforms do nothing to change the EU practise of subsidising the sale of food on world markets. That means farmers in poor countries will still find it difficult competing with cheap sugar, wheat and cotton from Europe,” argued the ‘Bangkok Post’ in an editorial this week.

This lukewarm response to measures that the Europeans were trumpeting as a major breakthrough stems from the burden the Asian agriculture sector has had to shoulder due to the farm subsidies of the EU, the United States and fellow Asian nation Japan.

The subsidies made it ”next to impossible” for Asia’s developing countries to compete in the agricultural sector, said Santosh Mehrotra, a senior policy adviser at the United Nations Development Programme. ”The subsides reduced the incentive to invest in the Asian farming sector, consequently lowering the total output.”

Recent research bears that out: the EU, the U.S. government and Japan spends 300 billion U.S. dollars annually to subsidise their agricultural sectors. That, U.N. officials point out, is three times the total amount spent annually by developed nations on overseas development assistance for all developing countries.

The dairy industry in India and Vietnam are typical victims of the EU’s subsidy policy.

”India’s dairy industry – the world’s largest – is badly hit by EU dumping of milk products,” Alex Renton, spokesman for the British development agency Oxfam’s East Asia office, said in an interview.

”Subsidised EU milk is sold in some of the world’s poorest countries at 25 percent less than the production cost of local farmers,” he added. ”Powdered milk will be partially addressed under this reform, though subsidy of the dairy industry will generally continue in Europe.”

Thailand, on the other hand, has felt the weight of EU subsides on sugar. Studies done by Oxfam reveal that EU taxpayers pump close to 1.7 billion dollars every year to subsidies the EU sugar industry.

”EU subsidies on sugar are among the most absurd – not only do they subsidise the production of sugar in Britain, Scandinavia and Germany, where costs are three times the market price, they also subsidise its export,” said Renton.

Consequently, countries like Thailand, one of the leading sugar exporters, have been forced to find ways of pushing up the price of sugar on the global market to ensure that local sugar farmers are not reduced to destitution.

EU sugar subsidies have artificially depressed the price of sugar by about 17 percent, according to the World Bank. The current price of sugar on the international market is eight U.S. cents per pound.

The new reform of the CAP ”does not address sugar, (and) we’re told that that reform has been put off to a later date,” added Renton.

The EU, however, sees the reforms of CAP in different light, arguing that its new policies are trade friendly and marks an end to a subsidy system that distorted international trade and harmed developing countries.

Development and economic analysts say that they realise that the changes in the EU’s farm policy will give it some width against the U.S. government and Japan when agriculture and free trade issues are taken up at World Trade Organisation’s (WTO) ministerial conference in Cancun, Mexico, in September.

But as a Bangkok-based newspaper asserted in an editorial this week, more pressure should be applied on EU members that are resisting reforms in subsidies if the promise of agriculture reform is to become a reality at the Cancun conference. ”The battle must continue,” declared ‘The Nation’ newspaper.