The View from Europe
By David Jessop

For the last forty-five years Europe has subsidised
its farmers. It has done so through what is known as
the Common Agricultural Policy or the CAP for short.
This provides massive production subsidies to European
Farmers. It costs European taxpayers over Euro 40
Billion (US$ 39 billion) a year. 

The original intention was to encourage farmers to
produce more and have a Europe self- sufficient in
food. More recently, the CAP has become a mechanism to
adjust the structure of European agriculture. Either
way, it has led European farmers to create huge food
surpluses in order to obtain the subsidy and made
Europe a target for attack in world trade
negotiations.

The CAP has also had for the Caribbean as a part of
the African, Caribbean and Pacific (ACP) group, a
vital side effect. That is to ensure that the linked
price that is paid by Europe for agreed quantities of
sugar under special preferential arrangements has
remained artificially high.

In a matter of days Europe’s Agriculture Commissioner,
Franz Fischler, will set out an already widely trailed
proposal. He will recommend a move away from
production subsidies to a system that places emphasis
on rural agriculture, compliance with environmental
protection, food quality and animal welfare standards.
He will also announce stringent new financial
controls. His proposals, contained in a mid-term
review of the present four year CAP, involve
redistributing agricultural support to those farms
most in need and limiting the overall sum paid to any
farm so that Europe’s overall agriculture budget falls
by twenty per cent over the next seven years. 

If agreed, the new policy will facilitate the process
of EU enlargement that will see many 
agriculturally inefficient farms of Eastern Europe
benefiting from the CAP while enabling Europe to
contain agriculture subsidies, the single largest item
in Europe’s budget. 

CAP reform will also have the effect of putting blue
water between the US and EU at the World Trade
Organisation (WTO). There, any EU decision to
dismantle its complex direct agricultural support
scheme in favour of one that is indirect, no longer
linked to production and compatible with WTO rules
will be welcomed. This would contrast with the United
States recently introduced programme of agricultural
support which will provide US farmers with production
subsidies of around USS190billion over the next ten
years.

Despite this, changing the CAP will not be easy.
Nations such as France, Ireland, Italy, Spain and
Greece are heavily dependent on subsidised
agricultural production. They have effectively created
political systems in which the votes of subsidised
farmers and the support of their lobby groups win
elections. Consequently, these nations are arguing
that the mid-term review was never meant to be a
platform for fundamental reform of European
Agriculture. This was, they say, due to occur in 2004
and should be left to that time. 

What is the Caribbean to make of this? 

For the most part Caribbean nations are for obvious
financial reasons, unable to subsidise agricultural
production in any way at all. Despite this, most
regional nations are unwilling to argue at the WTO
against agricultural subsidies as they are perceived,
rightly or wrongly, to result in cheap imports of
foodstuffs. Moreover many Caribbean states continue to
rely on the artificially high prices paid for sugar
under the EU/ACP sugar protocol, while Guyana and
Suriname benefit from other European agricultural
arrangements that enable a relatively low but
important volumes of exports of ACP rice into Europe.

Irrespective of this, change will come. Europe has no
option other than to restructure its bloated
agriculture budget sooner or later, not least if it is
to make more secure its borders through the
incorporation of the nations of Eastern Europe.
Whether one likes it or not CAP reform will impact on
the Caribbean and there is nothing directly the region
can do about it. 

There is, however, an important message in this. Any
related trade decision taken now without knowing the
outcome of this or the next round of CAP reform may
foreclose some of the region's future negotiating
options with Europe or at the WTO. 

Put another way, agreeing now or too soon to a common
position on tariff reductions in the Free Trade Area
of the Americas (FTAA) process or in the first phase
of the EU/ACP negotiations for economic partnership
agreements may have unpredictable consequences

It is for this reason in particular that the recent
attack on the Caribbean Regional Negotiating Machinery
by the US Administration is to be deplored. Following
the most recent FTAA negotiating sessions in Panama
the US government circulated a note to Caribbean
governments. This attacked by the Head of the RNM for
having ‘generated substantial ill-will throughout the
room by engaging in five hours of unconstructive
debate, thereby jeopardising the overall outcome’ of
the negotiations. Washington also claimed that
Caribbean states played a ‘very unconstructive,
uncooperative role in the meeting’ and ‘generated
substantial resentment on the part of all other
delegations’. 

What the US and to a lesser extent Europe seems to
fail to understand that what is now happening in the
international trade arena is for the Caribbean final.
Once settled, the FTAA, EU/ACP and WTO negotiating
processes mean ultimately that more developed ACP
regions such as the Caribbean will cease to have any
preferential arrangements, will have nothing left to
trade away and no alternative trade options. All the
region will have is for the most part smallness,
vulnerability and fragile and in some cases
dangerously unstable economies with which to compete
with Brazil or India let alone the EU or US.

Whether Ambassador Bernal, or any other Caribbean
trade negotiator prevaricates, stalls or even walks
out of a meeting should be a matter for pride in the
region. It is a public manifestation of the sovereign
right of every country to protect its interests and to
decide how and when it wishes to involve itself in a
process, be it regional, hemispheric or multilateral. 

The future of the CAP is just the first of many
developments that will impact on the route out of
preference. Decisions taken too precipitately in one
trade negotiation may close off what small trade
advantage the region may still be able to achieve in
another.

David Jessop is the Executive Director of the
Caribbean Council and can be contacted at
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July 5th, 2002


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