The relevance of CAP reform for Cancun
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CTA. 2003. The relevance of CAP reform for Cancun. Agritrade, September 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52632
The issue of CAP reform and Cancun was the...
The issue of CAP reform and Cancun was the subject of an address by Agriculture Commissioner Franz Fischler to the Washington International Trade Association on July 28th 2003. He put forward three key propositions: that EU and US policies have more in common than is generally believed, with both being committed to the need for farm support; that the EU's June 26th 2003 reform package constituted a 'radical reform' since it decoupled a major part of farm payments from production through a substantial reduction in support prices linked to a new system of single farm payments (this will allow the EU to cut trade-distorting domestic support, export subsidies and import tariffs); that CAP reform was consistent with the needs of developing countries. With reference to the impact of CAP reform on developing countries, Commissioner Fischler denounced what he called the 'sloganised' critique of the impact of EU farm policy on developing countries, and asserted the need to pursue wider objectives through public support, since these services are not reflected in market prices. He maintained that this could be achieved in non-trade-distorting ways, and also argued that the EU's declining share of world commodity markets and the openness of the EU market to developing country products hardly marked the EU down as the 'international market predator it is sometimes painted as'. He argued strongly that the WTO has no competence to determine national agricultural policies and was merely a forum to 'reduce and even eliminate trade distortion via balanced negotiation'. In this context the Commissioner argued that the main issue was not how much money was spent but how it was spent. Comment: It is difficult to sustain the argument that the new EU system of farm payments is non-trade distorting when, in the face of price declines (sometimes as much as 40%), production is maintained and even expanded. Clearly normal market forces of supply and demand are not at work here. The supply response of farmers to price declines is distorted by the direct aid payments made to the farmers. Given that EU production of all major products is tending to increase despite much lower prices, it is implausible to claim that the new EU farm-support scheme is non-trade distorting. Furthermore, unfair competition is generated and trade flows are distorted when EU farmers receive public aid to help them to meet higher EU standards, while these standards are also applied to imports from third countries without their own farmers enjoying similar public assistance in meeting these standards. With regard to the EU's declining share of world commodity markets, this cannot be divorced form the massive expansion of EU value-added food-product exports. EU agricultural policy is increasingly about the promotion of EU value-added food-product export industries and less and less about exporting basic agricultural products. It is this phenomenon which accounts for the EU's declining share in world commodity markets and not the absence of distortions arising from the provision of a growing level of public aid to the EU agricultural sector.