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European Affairs
A Need for Better Transatlantic Understanding
by Jean Glavany
Although we tend to highlight our differences on agriculture, there are, nevertheless, prospects for improved understanding between Europe and the United States. The forthcoming WTO negotiations on agriculture are part of a fundamental change in the way we discuss agricultural issues.
In Europe, reform of the Common Agricultural Policy (CAP) forms part of a major shift in our conception of the role of agriculture. Since the Second World War, the emphasis has been on increasing productivity, which has been quite successful. Our agriculture has developed in international markets; it is based on traditions of high quality and impressive achievements in research and training. France has become the world's second agricultural producer after the United States.
But this system had to change. Simplifying a little, we could say that we are increasingly shifting our emphasis from quantity to quality. The opening up of trade pushes us in this direction, as companies seek to enhance their competitiveness, and consumers pay increasing attention to product quality. On the other hand, competition between the major exporting nations has led to undesirable effects which are particularly worrying for developing countries, who fear that excessive turbulence in world prices may harm their economic progress.
All these concerns have led to reforms in the CAP. Adding together the latest changes and those made in 1992, beef prices have been cut by 35 percent, grain by 50 percent and milk by 15 percent. Those reductions have had automatic secondary effects on pork and poultry production.
These reforms have also had the effect of reducing export refunds sharply. They will account for no more than 7 percent of the total budget, against one-third in 1991. At the same time, production controls have been strengthened, with set-aside increased to 10 percent, compared with 5 percent in the years 1995/96 and 1996/97.
Equally, we can see ever more clearly today the specific role - or roles - of agriculture in influencing the environment, employment in rural areas, regional planning, and the quality of the food we provide to our consumers. In all these fields, European agriculture provides, as a secondary effect of the economic activity involved in commercial production, a number of services which are often not remunerated by the market. Agriculture is also subject to increasingly stringent demands from society at large, in terms of food safety, or ethical rules governing production (animal "welfare").
It is just this role which we wish to see acknowledged for our farmers in France and in Europe. If our territory, or our social fabric, were different, our reasoning might also be different. I fully understand that a nation such as Australia has adopted a different approach to the occupation of its rural hinterland, or that Argentina has chosen to provide no state support at all for its agricultural sector. These are decisions to be freely taken by each sovereign nation.
And in fact, where the poorest nations are concerned, the development of agriculture, food safety, and the decisions required in the face of population drain from rural areas, are influenced by quite different factors. Nobody, however, contests the assertion that governments and international bodies have a role to play. It would be absurd to claim that the right answer is to eliminate all official aid.
Contrary to what might have been the case a few years ago, the American government now ack-nowledges, as we do, the necessary - and therefore legitimate - character of state intervention in the agricultural sphere. Defending the "family farm" is the choice of a whole society. Left to the tender mercies of the market, a small milk producer in Vermont or a livestock breeder in Montana is not much better off than a farmer in the Loz&eagrave;re region of France.
The figures for government support approved in the United States in recent years demonstrate that these concerns have clear budgetary consequences. Direct subsidies, I understand, have risen from $7 billion dollars in 1997 to $22 billion in 1999, while food aid multiplied five-fold between 1997 and 1999 - I doubt that world poverty, although naturally a major concern, grew at quite this rate - and export guarantees have been quite generous. The Administration and Congress have not hesitated to respond to farmers' requests. American farmers are statistically the most assisted farmers in the world: on average, each farmer receives approximately $9,500 every year, compared with $5,300 for each European farmer. I am not saying that is either desirable or undesirable - it is a political choice which the American authorities are entitled to make and which I respect. But it does demonstrate, I feel, that our concern to avoid a situation in which our farming community goes under as a result of market movements is shared on this side of the Atlantic.
We must also consider conclusions drawn from our bilateral disputes in the light of the WTO negotiations. I am aware that Europe is criticized in the United States for not implementing panel decisions, and that some people deduce from this that we are reticent in our commitments to the WTO. But there is a major misunderstanding here on the manner in which we meet our international commitments. There are also lessons to be learned for the forthcoming negotiations from these bilateral disagreements.
We have been found at fault on two occasions on issues which directly affect agriculture - bananas, and beef containing growth hormones. In both cases, we have said that we will comply with our international obligations - and we will do so.
On bananas, we are currently in the process of changing European Union rules to comply with panel decisions. This is no easy task, because we must find an arrangement which does not prejudice EU producers and which enables us to meet both our commitments to the African, Caribbean and Pacific countries - commitments entered into under a treaty, the Lomé Convention - and to the WTO. Such an arrangement must be acceptable both to producing countries in Latin America and to the United States, which tends to represent the interests of the distributors, which differ from those of the producers. But given the discussions underway, I have high hopes that we will succeed in finding a solution that will allow US sanctions to be lifted.
On beef hormones, the present situation is highly regrettable. American sanctions affecting French products like foie gras and Roquefort cheese are difficult for the producers to understand, and for us to explain. We have not, however, challenged the right of the WTO to authorize the United States to take these steps. Europe is, indeed, responsible to a large extent for this situation, given that it delayed too long in initiating the studies currently being conducted. These studies will show that our purpose was not protectionism, but food safety. But I admit that as long as one cannot prove what one says, one risks being accused of protectionism.
We shall continue these studies, and we will need, we and everybody else (including the FDA, although that is up to the American authorities), to reflect on the steps which need to be taken in light of the results. Let us assume that the results may not come down firmly on one side or the other: in the case of certain hormones, they may bring to light risks that would justify keeping the ban; in the case of others, they may be less definite. Finally, we may be led to put in place a policy that would include options ranging from bans to labelling - on the understanding that no labelling is worthwhile unless it is precise - in order to allow our consumers to make their own decisions on the basis of full information.
Finally, on genetically modified organisms (GMOs), we do not have an open conflict at the present time. From our point of view, we wish both to expand the research effort and put in place procedures that will ensure transparency and the protection of consumers and the environment. This approach is not very different from yours, but we are, generally speaking, a little more prudent. We are working bilaterally to achieve better mutual understanding. But our approaches will continue to be different and I can see that we have work to do if we wish to prevent mutual incomprehension setting in.
Nothing in these disputes casts doubt on our support for the multilateral process and for the WTO. But uncritical support will not permit progress to be made. It is clear that the present situation is not entirely satisfactory. The GMO and beef hormone issues are just two instances of a more general problem related to the application of the precautionary principle internationally. At the European level, we shall be strengthening our organizational response by probably creating a European Food Safety Agency - a French proposal that the President of the Commission, Romano Prodi, has endorsed.
Internationally, the WTO is poorly equipped to respond to the new concerns we have in this area, and that is an issue that will need some attention. We are not starting out from zero: the FAO, and the Codex Alimentarius, for example, already offer very major contributions. The work we have undertaken in the OECD must help us answer these questions: how can we strengthen the international system? What does it need today to make it complete and coherent? At the WTO itself, it will be necessary to clarify application of the precautionary principle and to reflect upon how our rules for trade must interface with the work of agencies entrusted with the task of promulgating public health standards. We must, of course, seek to integrate these considerations into the forthcoming negotiations.
The other lesson we can draw from the beef and bananas issues is that there is a major defect in the dispute settlement process which needs correcting. Under the former GATT system, panel decisions could not constrain the parties, and the question of sanctions did not arise. Today, we must be able to make the dispute settlement system operate on a consistent basis by equipping it with a system of sanctions which does not affect the legitimacy of the entire system every time it is used. A system of time-based penalties, for example, would preserve the incentive to comply with WTO rules and would be preferable to the current system, under which an innocent company can be penalized, without the victim being compensated.
Meanwhile, we see the WTO negotiations on agriculture as an important and necessary stage. Our objectives derive quite logically from the long-term changes we have initiated. We look forward to these negotiations all the more positively because we are quite confident that our European model for agriculture is compatible with better-organized international markets. The EU budget is 40 billion euros or dollars, and the budget of USDA is 60 billion. These figures cover very different forms of subsidy. Comparison is often difficult, especially given the inventiveness of governments in this domain.
So, how should we proceed? All cards must be on the table, and the focus must be on the subsidies that interfere most with international markets. In this connection, European subsidies were at the center of the discussions in the Uruguay Round, and we have said that we are ready to continue to negotiate their reduction in the negotiations that are now commencing.
But the other issues should also be discussed, failing which, the rules we lay down will be all too easily circumvented. Food aid should also be more effectively controlled - it is not right that this should be a tool for the penetration of foreign markets. Export credits have been extensively employed by the United States since 1997. This is very much aid for exports, since it allows products to be sold below market prices. There must be discipline on this, too. Compensation schemes relating to marketing loans, when applied to exports, also act as export refunds. We must add this to the list of issues we should address.
One final example, but this time not in the United States, is marketing monopolies. I note in fact that on this issue we will find it easy to come together to ask for more transparency from our Australian and Canadian friends. But to find a fair agreement, everything will have to be put on the table and the strictest transparency will be required.
Where questions of market access are concerned, we approach the discussion with confidence: the European market is very much an open one, as our import figures testify. Conversely, I also note - all being fair in love and war, and when entering a negotiation - that the American market is very open to all products in which American farmers are competitive, or totally absent. But the remaining products benefit from significant protection: a 170 percent duty on cheese, 137 percent on butter, 32 percent on milk powder, 130 percent on sugar (a major sector for the developing world, and in which high quotas are in place in Europe for ACP exports), 350 percent on tobacco, and 155 percent on peanuts. We all have a mix of offensive and defensive interests which we will need to balance.
Where internal subsidies are concerned, the international system must adapt to new demands from consumers and public opinion regarding the environment, food safety and social concerns, issues which we group together in Europe under the label "multifunctionality."
And there is one last issue - the protection of intellectual property rights and "appellations contrôlées" or origin names. Although our approaches are different, our producers all have an interest in improving the current system. It is an issue of substance. I suppose that in the United States, as in Europe, globalization is understood as an opportunity so long as it does not threaten to bring uniformity and to standardize everybody's life. To resist this threat, diversity must be promoted in culture as well as in agriculture and food. For the sake of diversity, intellectual property rights must be strengthened. The purpose here is not to slow trade, but rather to base it on consumers' right to choose and producers' ability to create added value.
Agriculture is an issue with which our negotiators are very familiar, which is both an advantage and a disadvantage. We tend to allow ourselves to get too carried away by the rhetoric of the past, according to which nations fell into two categories, those that subsidized their agriculture and those that did not. This perception, which pits Argentina against the rest of the world, is absurd. Today, this is not what is really important. Of course, one could imagine French and European agriculture without subsidies. But it is not the agriculture that I want. I reject the picture of France with 150,000 farmers, against more than 700,000 today. I oppose the idea of vast empty tracts of land. Public opinion in our countries has new expectations, to which we must respond, demonstrating that we are seeking genuine answers to public worries on globalization.
It is for this reason that we need all-inclusive negotiation. Indeed, where this approach is concerned, the European view is not far from that of Washington. The development of international trade must be compatible with the promotion of improved social and environmental standards. We must reinforce the framework that will allow international trade to develop because international trade is an issue not only for corporations, but also for consumers and for the employees of those same corporations.
If we insist too much on short-term results, we run the risk of spoiling a unique opportunity to consolidate once and for all the international organization we all need to provide a solid foundation for international trade.
These concerns are valid also for the negotiations on agriculture: we are seeking to strengthen the WTO, but we will not succeed in that endeavor without demonstrating that it will make a positive contribution beyond helping large corporations and major international operators. Consumers, small family farms, developing nations - all must be convinced that it is also on their behalf that our negotiators will be working in the years to come.