Sunday, December 04, 2005

CAP WARS The Trade Wars

(This follows up this post) A not so long long ago in a not so much of a far far away galaxy. The regions of the small planet on outer spiral arm of the Milky Way which the inhabitants call Earth are trying to negotiate a trade package to benefit all. However the talks are stalling….

Trade makes the world go round. Since the beginning of time trade has been an integral part of society. Where before it was barter trade nowadays works on the basics of the Market. With each product having a price dictated by demand and availability. However this is not a free-market. Countries and regions place traffics to give their own people an advantage over foreigners. However the latest trade talks are trying to change that. The 3 major objectives are

• market access: substantial reductions • exports subsidies: reductions of, with a view to phasing out, all forms of these • domestic support: substantial reductions for supports that distort trade

Developing countries want access to Europe’s agricultural markets. As they can produce at lower costs then European farmers they will dominate the market. However the tariff walls and the subsidised European farmers mean that developing countries cannot compete. Also many European companies would want greater access to developing countries markets. This maybe called by neo-colonialism but it can benefit the local economics by providing jobs and credit much in the same way American investment benefited Ireland.

Europe accounts for the 20% of world trade. But Europe’s economy is poor. The Euro is performing poorly. The French and German economies two of the powerhouses of Europe are performing poorly with high unemployment. It is estimated that that Europe GDP could increase by €20bn a year if there is a successful negotiation of Doha. So it is clearly in the broader European interest to have a successful outcome of these talks. The opening up of trade could solve many of Germanys and Frances unemployment problems. However all is not going well.

The talks are stalled and it is clear to see who the other countries blame. While no official statements of blame have been made. Australia and Canada wanted to release a statement blaming the EU. Philippine foreign secretary Alberto Romulo told the Associated Press “You don’t have to name names, it’s quite obvious who are the people”. So it now goes to Hong Kong next week and Europe’s representative Peter Mandelson to make the world hunky doory again. But even Europe is not united France has threatened to veto any moves made to reform Agriculture.

At the Doha summit the leaders realised a statement it said that the process “must be carried to a successful conclusion ... by the end of 2006”. The main stumbling block is agriculture. “Unless progress is made in this area, we cannot make progress in the round as a whole,” the statement said. “Avoiding or compromising our ambition on this issue would mean that we would lower expectations for the round as a whole.”

With the rejection of the EU constitution by France and Netherlands and since the expanding of the EU there is a rising nationalism in the EU. Many people are beginning to resent the level of control that they have relinquished to the EU. So the EU needs to show people that it can deliver coherent and beneficial policy. The world trade talks give them the opportunity to do this. Also if they fail to do a deal Europe loses much of it power in the world. Europe might even come isolated. This would be a disaster for the EU so something has to be sacrificed. Sugar framers in Europe are the pawns being offered up.

On the 16 September Australia, Brazil and Thailand sent a communication to the chairman of the dispute settlement body of the WTO. It was in connection to European export subsidies on sugar. Their complaint was that Europe was

“contemplating action to declassify quota sugar to C sugar in the near future which would serve to increase its subsidised exports of sugar to a level of some 6 million tonnes in excess of the EC’s WTO export subsidy commitments for sugar (i.e. the EC’s subsidised exports of sugar would total approximately 7.2 million tonnes).”

This has lead to the price of beet been cut to €25 a ton. This is going to cause the vast majority of beet farmers in Europe to go out of business. It is unclear if these farmers will move out of agriculture or whether they will be given sufficient grants so as to invest in machinery etc and thus allow them to change into other fields (pardon the pun) of agriculture.

Europe has been taking a lot of flak over these trade talks and it wants some kind of leverage to get some good will, to allow it to negotiate more favourable terms for the European market. The sugar industry is that leverage. It will remain to be seen if it will be enough.

Most countries still want more cuts in CAP while Europe has said that what is on the table is as much as is socially acceptable in Europe. Peter Mandelson Europe trade commissioner is in charge of the negotiation. His labour party are beginning to see the Conservatives anti-Europe stance beginning to garner support in a country already lukewarm on Europe. So he does not want jeopardise Labour and his close friend Blair in Britain.

Mandelson has a tricky line to walk. Go to far one side and he will suffer the wrath of the French and framers to far the other side and he could alienate the rest of the world. So it is not yet clear if the beet framers well be enough of a sacrifice to allow Mandelson to pacify both sides by opening trade and keeping the majority of CAP.

CAP WARS The Return from Hong Kong Will be written whenever the trade talks finish. Edit: I don't think I will actually do this.

1 comment:

Zeeshan Suhail said...

nice blog! keep it up!