AGRICULTURAL POLICY: TRANSATLANTIC PEACE OR WAR?

  
On May 1, FIU’s Summit of the Americas Center (SOAC) and the consulates and binational chambers of commerce of several European countries co-sponsored a seminar on agricultural policy. This topic is a matter of perpetual controversy and friction in European Union trade relations with the US and an obstacle to progress in the EU’s negotiations with Latin America, in particular Mercosur. The guest speaker was Dr. Corrado Pirzio-Biroli, head of cabinet of the EU agriculture commissioner. Panelists included Shanker Singham, international trade attorney with Steele Hector & Davis; SOAC Director Carl A. Cira; and James Grueff of the US Department of Agriculture’s Foreign Agriculture Service. The discussion was moderated by Walter Loy of the German-American Chamber of Commerce.

A main topic of controversy was subsidies and other trade-distorting assistance to farmers. Pirzio-Biroli explained that under the EU’s Common Agriculture Policy (CAP), support per farmer has stabilized at about $5000, up from $2000 in 1997. In the US, he claimed, such support has risen from the same figure in 1997 to about $12,000. He criticized the US for not accepting disciplines for food aid and argued that loan rates—for example, for US military equipment, systems and hardware—are also a form of subsidy. He noted that the US has a lot of land and few farmers compared to the EU, and that in addition, the US sets aside the lowest percentage of its GDP as foreign assistance to developing nations.

Shanker Singham responded with a vigorous critique of the CAP. He focused on sugar policy, charging that subsidies in this area have caused overproduction and dumping on the world market. Without subsidies, he argued, domestic European production would decrease, raising the world price of sugar, which is now below the cost of production. In this way, he pointed out, EU sugar policy affects world prices and production, mainly in developing countries.

Singham also criticized the EU’s use of the “Precautionary Principle” for food safety. This mechanism, he argued, can easily be used as an excuse for stifling innovation in agriculture and food processing and be abused by local producers to prevent import competition. He argued that the less developed countries need the additional food production that can come from advances in biotechnology, and criticized the Precautionary Principle as an obstacle to this process. The cost, he predicted, will be paid mainly by the poor.

James Grueff shifted the discussion to the WTO, which he called a major step forward for the world trading system. The WTO, he said, provides a framework with rules and procedures to make the international trading system more efficient by reducing distortionary practices, increasing competition, improving market access, resolving disputes, etc. He cited the ongoing agricultural negotiations in Geneva, pointing out that the US and the EU are the two biggest exporters in the world and the most influential members of the WTO. Both want more market access and a reduction in export subsidies. In all, despite their continuing differences, Grueff noted, the EU and the US agree on more points than they dispute.

Carl Cira centered his comments on the Free Trade Area of the Americas, its recent progress in negotiations, and issues related to agriculture, sustainable development and the EU’s push to establish closer trade ties with the countries of Latin America and the Caribbean. He called the FTAA an important exercise that has forged new relationships, producing an attitudinal shift in favor of more open trade throughout the Western Hemisphere. On agriculture, he noted, the countries of the entire hemisphere hold a united position on the need to eliminate subsidies. This position was adopted officially at the Toronto Trade Ministerial and presented at the WTO meetings in Seattle.

Cira reminded the participants that enormous changes have taken place in the entire region over the last ten years involving the opening of economies and the embracing of free-market solutions. The collective improvement in regional stability, both economic and political, has been significant, despite tensions in the Andean countries. Cira cited major advances in the establishment or revitalization of subregional trading groups such as NAFTA, the Andean Pact and Mercosur, and the emergence of a whole range of bilateral FTA arrangements.

Furthermore, Cira noted that increasingly during the past decade, the countries of the hemisphere have not waited for the conclusion of reciprocal agreements with neighbors, but have unilaterally brought down tariffs and trade barriers. In this context, the FTAA’s prospects appear good. After the WTO setback in Seattle, Cira pointed out, the FTAA is the only major trade initiative in the hemisphere, if not the world. Without a new WTO round on the agenda, there is less incentive to hold back on concessions in the FTAA context. However, he acknowledged continuing uncertainty on the part of the major countries already benefiting from NAFTA and Mercosur. Will Mexico, Brazil and Argentina fully engage in the FTAA, or will their interest in consolidating subregional pacts take precedence? The Mercosur situation is particularly acute, as conflicts flare up between Argentina and Brazil and in sectors within these two countries.

Cira noted that while the EU has had difficulty forging direct links with Mercosur—due to areas of direct competition such as grain, meat and dairy exports and, as Singham detailed, sugar—it has successfully signed a free trade agreement with Mexico. Thanks to this agreement, and Mexico’s own bilateral FTAs in Central America, Chile and elsewhere, European companies have an effective side entry into US and Canadian markets.