Questioning whether it is wise to continue to treat EU agriculture as sacrosanct and not like any other sector
 Having been damaged by the Americans in the new NAFTA trade deal, the demise of Canada's highly protectionist "supply management" of its dairy and poultry sectors, then resulted in a Canadian assault on Europe's near sacred Common Agricultural Policy.
If the US showed its impatient with agriculture protectionism on Canada's part, so too did Canada fail to appreciate European Union's exceptionalism when it came to protecting its farmers from more efficient competition from Canadian producers.
So it was with some relief for Europeans that harsher terms in the bloc’s free-trade accord with Canada passed its last hurdle in the Dutch lower house by a mere three votes - 72 to 69 - in the latest blow in a continuing series to reduce agriculture's status on national subsidy lists worldwide.
The near miss highlights the persistent political clout of Europe’s farmers as EU leaders gather in Brussels to haggle over a new bloc-wide spending plan that would cut agricultural outlays in order to ramp up research and security expenditure.
Long a sacred cow, farm aid soaks up almost 40 per cent of the EU’s overall budget even though agriculture accounts for only about one per cent of the bloc’s gross domestic product.
The Dutch drama also serves as a warning for the EU as it prepares to ratify a free-trade agreement with the Mercosur group of Brazil, Argentina, Paraguay and Uruguay and pursues similar deals with Australia and New Zealand.
In each case, the EU agricultural lobby will pose serious obstacles because of the farm-export prowess of these commercial partners.
The Netherlands, traditionally one of Europe’s staunchest supporters of free trade and home of the continent’s busiest port, struggled to win lower-house backing for the EU-Canada pact in no small part because of concerns about greater import competition for Dutch farmers.
The reason for the decline in political status is reflected in the reduction in the number of people involved in agriculture today. In Canada, for instance, 70 per cent of Canadians lived on farms in 1870. By 1970, 70 per cent lived in cities and towns. It's been much the same in much of the world, particularly in developed countries.
While even a rejection by the lower house wouldn’t have derailed the deal. For that to happen, the Dutch government - or any capital in the EU still going through national approval procedures - would have to send a formal notice terminating the accord and the ratification process would have to be deemed by the bloc to have failed “permanently and definitively”.
Nonetheless Spanish farmers have taken to streets to demand higher food prices and the main lobby group for EU agriculture as a whole fighting a proposed 15 per cent cut in European agricultural spending in 2021-2027, the bloc faces domestic headwinds as it expands its global market-opening drive.
Farmers in Europe have lashed out at the draft EU-Mercosur trade deal, which negotiators reached in mid-2019 after two decades of deliberations and which will start going through the European approval process in around a year. And anybody doubting the difficulties in the EU’s continuing negotiations with Australia and New Zealand need only to hear European trade chief Phil Hogan all but rule out the prospect of a deal this year with Canberra.
“We are certainly on the defensive in relation to some sensitive issues here,” Mr Hogan told a Brussels conference. He cited Australia’s strength as an exporter of beef, sheep, rice, sugar and dairy.
In that context, it may be fitting that the Dutch drama over the ratification of the EU-Canada trade agreement isn’t actually over. A verdict is still due from the country’s upper house, where the government lacks a majority.
American farmers are set see higher incomes again - in part due to their breaching Canada's protectionist walls. Much credit must be given to the Sino-US trade deal, potentially shoring up economic confidence for a key Trump constituency going into the November election.
Profits will climb 3.3 per cent from 2019 and depend less on government aid following President Donald Trump’s initial trade deal with China, according to a projection from the US Department of Agriculture presented this month. Meanwhile, China is back in the market for American agricultural commodities after issuing a list of products that will be eligible for tariff waivers, according to people familiar with the matter.
At a time of low economic low visibility, there is some clarity coming to the future clout of the agricultural sector. Like auto making, it has become far more capital intensive than it once was. Family farms are not what they once were. One just as to understand the new ways of the poultry sector to appreciate what would appear to be out-and-out examples of "Freakenomics". For instance, it may surprise some to learn that the chicken feet, more politely known as "dragon's claws" in Hong Kong where they are a hugely popular dish, mostly come from Georgia, Alabama and Arkansas, as indeed does much of the imported chicken that is eaten worldwide.
One might be surprised that the largely meatless chicken wings fetch the highest prices for no other reason than they are much in demand by bars as pub grub popularly known as "Buffalo Wings", because of marketing concept first conceived in Buffalo, New York - the name. And that the meatiest part of the chicken is sold for the lowest price to Russia and Eastern Europe.
It is enough to say that food production in these days of near universal refinement of tastes, except in the shrinking number of the poorest countries, means that food production is becoming more and more like other industries, no longer subject to special treatment and subsidies as in days of yore - certainly not 40 per cent of the EU's entitlement budget. |
