Food policies put E.E.C. in crisis

Press, 15 December 1983, Page 12

Food policies put E.E.C. in crisis

By

MAUREEN JOHNSON

of the Associated Press, through N.Z.P.A.

London Dreams of West European unity, fired by Winston Churchill’s 1946 cry to the war-ravaged nations, “Let us build a United States of Europe,” are crumbling amid a long wrangle over the grocery bill. “We’re jolly near the brink,” said Britain’s Prime Minister, Margaret Thatcher, after the three-day summit in Athens of the 10-nation Common Market ended with no agreement on the fundamental problem of its expensive agricultural programme. Known as the Common Agricultural Policy, the programme boosts incomes of the community’s eight million farmers and, to the dismay of non-member states, subsidises exports of the resultant huge surpluses. It now swallows up two-thirds of the community’s $NZ31.92 billion budget. By this time next year, the money will have run out. In Athens, the Common Market leaders failed to find any compromise between two basic conflicting philosophies. The leaders are due to meet again in Brussels in March, in an atmosphere of crisis which, British officials say privately, will concentrate wonderfully the minds of the negotiators. Britain, which with West Germany is one of only two nations paying more into the budget than it gets back, demands that the 25-year-old Common Market solve its problems mainly by curbing spending. The other seven — France, Denmark, Greece, Ireland, Italy,

Belgium and Luxemburg — want to increase and redistribute revenue as the way out. Mrs Thatcher, backed by West Germany and the Netherlands, is in a powerful position. Each nation must agree to any increase in the community’s revenues, and Britain will veto’ it unless strict curbs are imposed on runaway agricultural spending, and unless there is a final solution to Britain’s high payments. Farm spending, which rose 30 per cent last year, is the price Europe pays to keep its powerful farm lobbies happy and overproducing. “It is quite extraordinary the extent to which Europe is held hostage by its yeomen and peasantry,” commented the conservative British weekly, the “Spectator.” The argument has semi-para-lysed the market, and undermined its ability to act as a political and economic unit. In Athens, the West European leaders, wearied by fruitless arguments over the housekeeping, failed to come up with a joint statement on the Middle East. “A Europe divided and exhausted by renewed nationalism will exert no influence in the world and can become a plaything of foreign interests,” the West German Chancellor, Dr Helmut Kohl, warned after the Athens debacle. Everyone, even France and Britain replaying historic animosities, agrees the community is in crisis, but none yet contemplates its demise. In the view of many observers, the very fact that things are so bad will force a solution.

“The long-term imperatives for the Common Market are such that it will be with us... I would not expect it to decline or break up,” the United States energy secretary, Donald Hodel, told reporters in London after the Athens summit. However, in the view of many, the Athens failure provided merely a breather before the raising of new trade barriers. No agreement on anything meant no decision on a proposal to put duties on SNZ7.6 billion worth of soya bean oil that now enters the Common Market duty-free. Another proposal would have put import quotas on SNZ4S6 million worth of United States non-grain feeds. United States diplomats argue that the American agricultural support programme, such as this year’s payment in kind, which paid farmers $28.88 billion not to produce, is the precise opposite of Common Market subsidies which encourage production. European bureaucrats respond that Washington subsidises its farm exports with attractive credit facilities. Washington also complains about European export subsidies. For example, the current world price of wheat is about $207 a tonne, but the Common Market’s guaranteed price to its farmers is $263.42. The agricultural budget picks up the difference for exports. “We’re not against the Common Agricultural Policy, we just want to see them reform it so they carry on business in a way that makes world trade freer,” said one U.S. diplomat.

“If they want to give each of their farmers a Rolls Royce that's up to them, as long as they pay for it. But what they’re doing now is saying, ‘you guys help us pay for our farm programme’." Surpluses that the Common Market cannot get rid of to anyone — including the Soviet Union — comprise vast stocks of butter, beef, wheat, barley, rye and skimmed milk powder, piled up in storage houses around Western Europe. Current surpluses include a 661,000-tonne butter mountain — which would take the Common Market's 252.5 million people 136 days to eat if all production ceased now — and 6455 tonnes of wheat, or two months supply. The Common Agricultural Policy was devised in the mid-60s when the alliance consisted of its founder members, France, West Germany, Italy, Belgium, the Netherlands and Luxemburg. It helped France’s small farmers, and in return opened the French market to West German industrial goods. Britain, Ireland and Denmark joined in 1973, and Greece in 1981. Applications by Spain and Portugal — like Greece, poorer nations — remain pending in the budgetary impasse. Britain’s payments are high because its farmers are few, and efficient. Only 633,000 Britons, or 2.8 per cent of the work-force, are engaged in agriculture. Britain gets little from the agricultural programme, and the sums it receives for such things as training programmes in depressed industrial areas do not compensate.

For four straight years Britain has wrested an average two-thirds of its contribution back, but has remained a net loser. The argument bedevils every summit, and underlines Britain's’ image among some of its Continental partners as money-grabbing and never truly Europe-oriented. In the 1983 budget. Britain, after being promised a $946.2 million rebate, winds up making an estimated net contribution of $1450.8 million. West Germany is in a similar situation. France comes out about equal, and everyone else gains — ranging from a handy $330.6 million for Luxemburg, which contributed $34.2 million to Italy's $1.98 billion net gain.

The Common Market has three sources of funds: customs dues on imports from non-member countries. agricultural levies, and the direct payments from member states. The direct payments, which accounted for 56 per cent of the 1983 revenue, will have to be raised for any budget increase. The size of direct payments is currently the equivalent of 1 per cent of sales taxes on a range of goods and services in each member state. Britain last June eased its initial flat rejection of a proposal made by the European Commission, the Common Market’s bureaucracy, to lift the sales tax ceiling to 1.4 per cent. In return it is demanding that farm spending be controlled, and that there be a permanent new basis for its own contributions.