United Press International | By ANNA K. HUTCHINSON, Special to UPI
Franz Fishler, Austrian-born EU agriculture commissioner, is on a five-day visit to the United States to further negotiations between the EU and United States on agriculture as part of the current round of talks in respect of a further World Trade Organization (WTO) trade liberalization round.
Fishler met Friday with Agriculture Secretary Ann Veneman, and in the course of his visit Fishler will meet members of the Senate and House Agriculture Committees, state representatives, farmers and agri-businessmen in Iowa and Missouri.
According to Fishler, speaking at the National Press Club on Friday, the EU and the United States have a lot in common in the area of agriculture. Despite the attention that bilateral trade disputes receive, they are but a drop in the ocean of mutually beneficial and balanced trade relations. It is true that the two sides are major competitors, but it is equally true that they are also major partners. The WTO agriculture negotiations are a top priority on both sides of the Atlantic. Both the EU and the United States face similar challenges in securing the future of farmers and the rural areas.
EU farm production in 2000 was the equivalent of $197 billion, while U.S. farms produced $190 billion worth of goods. The European Union and the United States are the world's two greatest exporters and importers of agricultural products. In 2000, the EU was the world's greatest importer (euro 60 billion, $53 billion) and No. 2 exporter (euro 58 billion, $51 billion), while the United States was the world's No. 1 one exporter ($53 billion) and a major world importer ($35 billion).
The agricultural policy objectives of both are also similar, including: quality, sustainability, income preservation, food safety, and animal welfare, among others.
On both sides of the Atlantic agriculture is considered special and different from any other sector, and both political systems are keen on providing support for it, with particular concern for the family farm, albeit in different ways.
The differences, according to Fishler, are to be found in policy approach. He proceeded to outline the major achievements of European agricultural policy and to make his points in relation to the current round of WTO talks.
The EU Common Agricultural Policy (CAP) underwent a radical transformation in the past few years. When it had first been set up, its emphasis was placed on increasing agricultural productivity. Shortly after achieving this goal the CAP had to handle overproduction and to manage a farm surplus. The first response was to clamp down on supply by means of quantitative restrictions.
In the past 10 years CAP has taken a different approach based on two elements: lowering guaranteed prices for key products and offsetting the impact of these cuts on producer income by means of direct payments. The price cuts resulting from a decade of reforms are of the order of 45 percent in the arable crops sector and 35 percent in the beef and veal sector. The increases in direct payments do not fully compensate for these price cuts; the compensation percentages range from 50 percent in the arable crops sector to some 80 percent in the beef and veal sector. Taken together, those two sectors account for one-fifth of EU farm production. The direct payments are decoupled from price and volume of output, and are tied to production limiting programs.
In the arable crop sector, under set-aside arrangements, 10 percent of the land devoted to arable crops is taken out of production every year, reducing supply, and thus contributing to stabilizing the world market.
In the past 10 years the EU has effected a major turnaround in its farm policy. By reducing guaranteed prices and putting farmers in closer touch with world market prices EU policies have improved the competitiveness of European agricultural products while ensuring a fair standard of living for the farming community. Whereas market price support and export refunds accounted for more than 90 percent of the EU farm budget in 1989-1991, by 2006 it is estimated that they will be around 20 percent of it -- currently the figure is close to 30 percent.
In line with the timetable agreed at the end of the Uruguay Round in 1994, in March last year multilateral talks on further liberalization in agricultural trade started at WTO in Geneva. The aim of the current round of talks is to establish a fair and market-oriented agricultural trading system, which Fishler said will be reached "by the negotiation of commitments on support and protection and through the establishment of strengthened and more operationally effective rules and disciplines."
Non-trade issues, such as regeneration of rural areas and protection of the landscape heritage, are increasingly important to the Europeans as part of their rising environmental concerns. Export performance is important and must be played by the rules of the market, but the EU farm sector also has an important environmental mission, according to Fishler. With 7.3 million farms, compared with 2 million in the United States, Europe's farming occupies almost half of the EU land area.
To answer American accusations of excessive EU subsidies for agriculture, Fischler pointed out that the EU's overall budget is only a fraction of total public spending and it is equivalent to only 4.5 percent of the U.S. federal budget. As far as taxpayer transfers to agriculture are concerned, the U.S. transfers $76 billion, compared to about $55 billion in the EU. Agricultural subsidies thus represent about 2.9 percent of total U.S. federal, state and local public spending, compared to 1.5 percent in the case of the EU and its Member States. Thus last year each U.S. farms received more than three times the level of direct payments of its EU counterpart.
European farmers are very critical of the ceiling on EU agriculture expenditure imposed by the European Heads of Government and point with envy at the United States' annual ad hoc emergency packages, which have now become so routine that farmers are basing their production decisions on the assumption that they will continue from one year to the next. EU farmers are also expressing interest in the generously subsidized U.S. crop insurance, which many wish was replicated in the EU.
Negotiating an agreement on agriculture is more difficult in the absence of a broad round of negotiations on issues of general interest to WTO members. A broad round of trade talks would give participants more room for maneuvering and reduce the risk of any member being perceived as having lost out in the negotiations and blocking an agreement. The 44 proposals presented by WTO members in the past 12 months give ample material for discussions to continue even after the pending Fair Act review in the United States.
Fischler is determined to continue to negotiate the so-called built-in agenda for agriculture, which prepares the next step in market liberalization, whether or not there is a global round of trade talks. He believes that far from being adversaries in the WTO negotiations, the EU and the United States will inevitably have to work together, supporting each other to achieve common objectives.
Copyright 2001 U.P.I.United Press International:
