EU's CAP Threatens Global Tariff Reductions

by Jeremy Hetherington-Gore, Tax-News.com, Davos

27 January 2003

Things are not looking good for the WTO's Doha Round, which will supposedly reach its conclusion at a summit in Cancun, Mexico, this autumn. The objective of the Round (a set of international negotiations over trade and tariffs) is to continue the progression towards global free trade achieved in earlier rounds. The previous Uruguay Round was particularly successful, and set up the WTO's credentials to be the acknowledged arbiter of world trade, at a level above the petty insularities of nations.

Doha got off to a good start, but is now running aground on the rocks of the EU's dreaded Common Agricultural Policy, which has resisted all attempts at reform for more than ten years, largely due to the tenacity of the French (the main, but far from only beneficiaries).

EU Agriculture Commissioner Franz Fischler has done much more than was initially expected of him towards dismantling the CAP, but even he may find it impossible to chivvy the French towards a Doha-friendly result when their President himself has spent a lifetime supporting his farmers.

Last week saw France and Ireland ( the latter normally the most communautaire of EU member states) standing out against a Commission proposal for Doha, leaving the EU temporarily without a negotiating position. Then a more wide-ranging Commission proposal driven by the EU's forthcoming enlargement rather than by the needs of the Doha Round, and made necessary by a Franco/German agreement to water down the Commission's first attempt at a new system, was launched mid-week to a chorus of silence on the part of key countries such as France.

"Dear farmers, we are not going to abandon you. Nobody is going to abandon you," said Franz Fischler, rather disappointingly for reformers.

The EU likes to pretend that it is committed to breaking the link between subsidy and over-production (what creates unfair competition for farmers in third-world countries), but as long as more than half of the EU's budget is devoted to subsidising farmers, it's hard to see how the results can be anything but bad for a free market in agriculture. The truth is that a high-cost, climatically-challenged region like the EU would hardly engage in agriculture at all if there was a true global market. But try explaining that in a cafe in the French countryside, or the Bavarian countryside, come to that, and you'll soon find out how far the WTO's writ runs outside its debating chamber in Geneva.

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