"EU agriculture in a globalised world" - Speech by EU Commissioner Fischer Boel

Speech by Mariann Fischer Boel, Member of the European Commission responsible for Agriculture and Rural Development, "EU agriculture in a globalised world", at an event hosted by the Carnegie Endowment for International Peace, Washington, DC

Ladies and gentlemen,

It's great to be back in the US!

This is my second official visit to your country in my current job as European Commissioner for Agriculture and Rural Development. And the welcome which I have received has been just as warm as last time.

I would like to thank the Carnegie Endowment very sincerely for organising today's event about this important issue.

When I was last in the US, I spent a lot of time with US politicians and experts making sure that we were speaking the same language on farm policy.

I'm back here partly to make sure that this is still the case.

Just now, this is as important as it ever was, as we make another push for success in the Doha Round of WTO talks.

All too often, the big players in these talks misunderstand each other so badly with regard to agriculture that I am reminded of the famous song by George and Ira Gershwin:

"You like po-tay-to and I like po-tah-to,

You like to-may-to and I like to-mah-to…"

As you know, the songwriters conclude: "Let's call the whole thing off!".

This is not the conclusion that we want for the Doha Round! We have come too far together for that, and the stakes are much too high.

The Doha Round is a tremendous opportunity to reap a better harvest from globalisation. Not only that - but also to distribute a larger portion of that harvest to the world's poor.

Globalisation will make further progress even without a deal in the Doha Round. But in that scenario, one of the main vehicles for that progress would be bilateral trade deals.

These have their place. But the poorer developing countries will never be able to stand their ground as firmly in one-to-one talks as they can around the table in Geneva.

Also, bilateral deals cannot address the issues of domestic support and export competition, which will have a strong bearing on future trade.

If we want to put globalisation at the service of the poor, addressing all relevant areas of concern, the right multilateral framework must be the bedrock of our approach.

In view of this, I'm a little surprised that we are not seeing more work on the possible cost of a failure in the Doha Round.

So I come back to my initial question: are the two biggest players in the Round - the European Union and the United States of America -still speaking the same language in terms of farm policy?

Farm policy is a domestic issue, but it is hard for me to speak in Washington in a Farm Bill year without saying few words about this policy-making process.

When it comes to developing a sustainable agricultural policy, Europe and America can learn from one another.

From my conversations on Capitol Hill yesterday, I understand that there is an increased recognition of the various functions agriculture plays in our modern societies, and consequently the language used in the US is evolving.

To the traditional list of "food, feed, and fiber," new items are being added: "fuel".

On the specific issue of fuel, I will say at this point that the European Union is also pushing ahead with policies to raise its use of bioenergy, including biofuels. But we are advancing carefully. We do not see bioenergy as a zero-risk goldmine for European agriculture. Also, we will not reserve our growing biofuel market for ourselves: we recognise that we must import reasonable quantities in order to hit our mandatory usage targets.

But let's come back to your Farm Bill.

I understand that sugar and dairy policies are two challenging issues in the US. This is also the case in the European Union - and we have tackled challenges in these sectors head-on. More on this later.

Secretary Johanns calls for a "market-oriented reform" in the US - to a system which currently gives farmers "belt and braces".

We all know that it's hard to deliver reform in practice. It has taken us time to do so in the European Union. There is always a political price to pay, and strong resistance to change can be expected here in the US. But as the American saying goes: "You don't ask the turkey to vote for Thanksgiving!"

I can only urge the US Congress not to write a Farm Bill that would be detrimental to the Doha Round. The 2002 Farm Bill rightly faced worldwide criticism when it was passed, as a move away from market-oriented farm policy. The 2007 Farm Bill should correct mistakes made in 2002, not reinforce them. The world is looking to the US for a clear signal here.

But what about the European Union side? What sort of language to we speak these days when talking about agricultural trade and policy?

European agriculture does indeed operate in a "globalised world" - to use the words from my title for today.

We in the European Union are very clear about that. We could hardly fail to recognise it, given that we import agricultural goods worth almost 80 billion dollars a year - more than anyone else in the world.

By the way, we also import more agricultural goods from developing countries than do the US, Japan, Canada, Australia and New Zealand combined.

We are also very active on the export side, with especially strong figures in high-value products.

And we know that, to be realistic, we have to expect agricultural markets to move still further with the tide of globalisation.

This is one of the shaping forces to which our Common Agricultural Policy (CAP) has had to respond in recent years. Others include public expectations about food safety and quality, the environment and the health of rural society.

Our response to these forces has been decisive.

Following a series of reforms, the old image of the CAP as a motor of over-production is long out of date.

The most recent cycle of reforms began in 2003. This was when we introduced the Single Farm Payment, which we are phasing in to replace about 90 per cent of direct support payments to European farmers.

The Single Farm Payment is not linked to current production of any kind. Instead, it is based on past subsidy receipts and current land area. To receive it, farmers must respect strict standards of environmental care, animal welfare and public health.

This gives farmers a new focus when making production decisions. The new policy gives them freedom to follow market signals, instead of checking with officials to see what combination of subsidies will pay the best.

The system also gives farmers a strong extra incentive to provide the public goods that we want - pleasant fields, clean air and water, a reliable level of food safety.

So no one could now claim that productivity at any price is king in European farm policy. Quality, Food Safety, Environmental Protection take top priority.

When we launched the system, it applied straight away to a large number of sectors. Since then, we have widened its scope - to absorb elements of our previous sugar market system, for example.

The example of sugar underlines our tough determination to reform. We are stripping 6 million tonnes out of domestic production, which will take us from being a net exporter to a net importer. This has meant that sugar beet production has completely disappeared from a number of Member States, of which Ireland is one.

We have done this because we are deadly serious about having a CAP which can face up to the discipline of the international market and the expectations of the public. Uncompetitive industry shielded by high level of internal subsidies and protection has no place in the future CAP.

I intend in principle to continue the process of separating support payments from production in the years ahead - applying the principle more fully where it is already in force, and extending it to other agricultural sectors. Fruit and vegetables and wine is next in line.

At the same time, we are placing greater emphasis on what we call the "second pillar" of the CAP - rural development policy.

We know that the European Union's diverse rural areas have needs which are only partly met by agriculture. So we use a wide range of policy measures to assist the restructuring of the farm sector, encourage environmentally friendly land management, diversify rural economies and raise the quality of life in rural areas.

Following all these developments in the CAP, some of our farmers think we should say: "Stop. We have done enough." They would be pleased if we did indeed "call the whole thing off" in the Doha Round.

But this is absolutely not my view, nor that of Trade Commissioner Peter Mandelson. Calling a halt would not serve the interests of the European Union or of the wider world.

As I have already said, we want the Doha Round to bring greater wealth to the world's poor. We also want it to open up new opportunities for the European Union - for agriculture, for services, for industry. We also want it to give us a sure framework for trade and policy over the next few years and we want a strong international trading system where policy is determined through agreement reached in negotiations between its members rather than through litigation.

So we have a firm political will. And because we have also done our homework in terms of reforming the CAP, we have been able to make a very bold and ambitious offer in the Doha Round agricultural talks.

In respect of domestic support, we have proposed a huge cut of 70 per cent to trade-distorting subsidy.

This has been possible because the Single Farm Payment fits into the Green Box of least-trade-distorting support.

With regard to export competition, the European Union has offered to phase out its export refunds by 2013. Once again, this has been possible because we have done our homework - by moving away over the years from a CAP based on price support.

That offer of a phase-out goes far beyond what we have seen on export support from any of our trade partners. It gave a fresh push to the Doha negotiations in Hong Kong in December 2005. And it was still one of the most substantial concessions on the table last summer.

Now we wait for our partners to respond - elimination of the trade disturbing elements of State Trading Enterprises, restoring free market rules for export credits and providing food aid as genuine support in emergency situations and not as an outlet for overproduction.

On market access, we have also been ambitious with our proposals. According to the offer which is formally on the table at this time, we would halve our average agricultural import tariff from 23 per cent to 12 per cent.

A number of our trade partners have picked out our market access proposals as a target for attack, so I would like to spend a few minutes clearing up some misunderstandings.

First, it's true that we, like all other partners, have asked to treat a number of agricultural products as "sensitive". Our request with regard to numbers is in the middle of the range and we have signalled flexibility for the final deal. Furthermore let us not forget that status as sensitive products in the DOHA round does not exclude them from commitments to extra market access. In fact I get the impression that people are starting to realise the value of what could be on offer here.

Secondly, the criticism that our offer on tariffs is weak lacks any sense of perspective and proportion.

What we have put on the table with regard to agricultural tariffs is two to three times more ambitious than what was on offer in the Uruguay Round.

And let's compare agriculture with industry. It has taken 50 years to bring industrial tariffs down to their current level. The Doha Round is only the second trade round which has addressed agriculture; but if it succeeds, cuts to agricultural tariffs will be catching up very quickly with those to industrial tariffs.

So let us not throw the baby out with the bath water.

Also, please! - there needs to be a dash of realism about what is politically possible. It's one thing to ask us for deep cuts to farm tariffs - to which we have agreed. It's quite another thing to ask us more or less to end border protection, in such a way that large sections of our valued diverse farm sector would be swept away overnight.

Farmers are resilient, but they have their limits. They need a certain stability to make sensible long-term investments. We can require them to embrace reform and face up to the challenge of globalisation, as we have done in the European Union. But we cannot ask them on one day to stand up stronger, then pull the rug out from under their feet the next.

We have built certain assumptions about the Doha Round into our current cycle of CAP reforms. We cannot accept a result to the Round that would require us to go back to the drawing-board on domestic reform.

My third point about tariffs concerns the emphasis which some commentators place on them. Essentially, I strongly challenge the idea, as for instance expressed by the World Bank, that tariff cuts primarily deliver most of the possible gains. In my view the reduction or elimination of domestic support and export subsidies also contribute to a large extent to those gains. We therefore have to look at all three pillars together.

Accordingly, the value of our offer rests on the strength of all three agricultural "pillars" in the talks - not only market access, but also domestic support and export competition.

If the European Union cuts trade-distorting support, there will be some shrinkage in domestic production. And the abolition of export refunds will reduce exports. Between them, these two developments will make space for our competitors on our markets and on third-country markets.

The gain will in some cases be a double gain, because as we retreat somewhat from the global market, world prices will rise. So others will be exporting more, at higher prices.

On the other hand, in sectors in which the European Union exports less or imports more, our domestic prices will fall, adding to pressure on our farmers.

Overall, then, our current formal offer would slice many billions of euros off our farm sector receipts, handing corresponding gains to others.

As I have signalled, we are prepared to accept this - but only as part of a balanced agreement in the Doha Round.

A balanced agreement means, first, balance in terms of agriculture. All the big players must get serious about cutting trade-distorting domestic support. And there must be real disciplines - disciplines that bite.

The world is looking to the US to give the right signals on this crucial issue.

A balanced agreement also means balance between agriculture and the other sections of the Doha Round talks.

It is not acceptable that we simply brush market access for services and industrial goods to one side. The framework agreement for this Round clearly commits us to showing the same ambition in these sectors as in agriculture. No one can seriously expect the European Union to make valuable concessions in the farm sector and come away from the table with nothing at all to show for them.

We can still get such a balanced deal.

The technical homework is largely done. The sense of urgency is there. And although the US and the European Union may not always talk exactly the same language on farm policy, we do at least talk.

What we need now is leadership, and a sense of realism in what each party asks for and offers.

The European Union is poised to push ahead in this spirit. I hope the US is too.

Let's contradict the Gershwins: let's not "call the whole thing off".

In fact, given that the WTO Director-General says that the "mood music" in Geneva is now much better, I would rather take up the suggestion of a different song - by Irving Berlin:

"Let's face the music and dance!"

Thank you for listening.

| Arriba |

• "The challenges and opportunities of globalisation: a European Policy response" - Speech by EU Commissioner Almunia (13/4/2007)
• "Europe and Globalisation" - Speech by EU Commissioner Mandelson (2/2/2007)
• Speech by EU Trade Commissioner Mandelson: Progressive liberalisation in a globalised world (15/5/2006)
• Speech by EU Commissioner Fischer Boel- European Agricultural Policy in a Changing Environment (6/3/2006)