February 12th 2005

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Articles from this issue:

COVER STORY: Kim Beazley - Labor's only hope?

EDITORIAL: Barking up the wrong tree ...

NATIONAL AFFAIRS: Top free-market think-tank warns of 'banana republic'

SPECIAL FEATURE: Who speaks and acts for the communist dead?

BUSHFIRES: COAG inquiry skirts the real issues

VICTORIA: Judge links pornography and sexual assault

STRAWS IN THE WIND: Iraq election and the problem of Iran / Bushrangers hanging around the hospitals / Climbing the ladder to nowhere

INTERNATIONAL TRADE: US trade deals marginalise WTO

EAST ASIA: US's new strategy in the Far East

CHINA-TAIWAN RELATIONS: First direct flights from Taiwan to mainland

OPINION: Good riddance to compulsory student unionism

The slaughtered generation (letter)

The Governor-General and the Constitution (letter)

CINEMA: Quality French film wins following - Les Choristes


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Barking up the wrong tree ...

by Peter Westmore

News Weekly, February 12, 2005
At the recent World Economic Forum (WEF) in Davos, Switzerland, Prime Minister John Howard, was highly critical of the entrenched protectionist policies of the European Union (EU).

The WEF is a talk-fest, at which national leaders, businessmen, economists and representatives of non-government organisations (NGOs) swap ideas on encouraging world development. It provides a useful platform for politicians to make speeches and network on the international stage, but has no deliberative role.

The EU showed how seriously it treats such criticism by implementing new export subsidies for wheat, a move which will also encourage higher European production.

EU budget

Agricultural subsidies comprise around half the EU's annual budget of about $160 billion. Around $7 billion of this is allocated for export subsidies.

While there has been a good deal of talk about reducing the subsidies, they have a very powerful domestic constituency.

Denmark, one of the smaller countries in the European Union, recently made public a full list of its EU subsidies.

This country alone has around 100 separate subsidies, worth around $2 billion, covering a range of industries, including pork and bacon production, milk, potato starch and fishing, as well as the dairy and beef industries. Subsidies are also available to agricultural research institutes and young farmers.

The object of the EU programs was set down by EU Trade Commissioner Pascal Lamy in 1999.

He said, "My primary task is to defend European interests ... we in Europe have made a political choice to support our agriculture because it's not just another economic activity ... it plays a part in conserving the environment, in food safety and in animal welfare."

M. Lamy added, "In Europe we've got seven million farmers who, we believe, have another function other than just producing food. These people are useful for our environment. They're important for family structure, for our society. They're important for our landscape. We have to pay for that. Our taxpayers agree to pay for these extra functions which ... our farms bring to our society.

"We want to keep these farms by keeping the sort of protection, through subsidies, we give to our farmers. If we apply the market rules, they'll disappear and we would have problems which, in our view, would be more costly to society."

Like the Europeans, the US also has an extensive range of agricultural subsidy programs, documented in an official US Department of Agriculture publication, US-EU Food and Agricultural Comparisons (2004).

This shows that both the EU and the US provide income support in the form of direct payments, price supports for rural industries, tariffs on imports (some exceeding 100 per cent), subsidies on exports, import quotas on some agricultural commodities, and a range of other measures.

In the US, the average agricultural tariff is 12 per cent, while in the European Union it is 30 per cent.

The US Department of Agriculture document concluded: "The United States and European Union share many of the same goals for farm policy, and in some cases, have moved toward similar approaches to meeting those goals in recent years."

In all the circumstances, the expectation that these countries will suddenly reverse policy, either to accommodate Australia or to assist developing countries, is dangerously naive.

Yet this is the policy which the Australian Government continues to pursue, while it makes a virtue of abandoning supports for Australian agriculture, as part of Australia's commitment to so-called "free market" policies, when there is no such thing.

For almost 20 years, Australia has been a leading member of the Cairns Group of agricultural exporting countries.

They support the elimination of all forms of export subsidies, substantially improved market access, and a reduction in tariffs. They also support elimination of production-distorting domestic support programs and non-tariff trade barriers.

Interestingly, while the US states its support for the Cairns Group and free trade in agriculture - even attending Cairns Group meetings - its domestic policies are exactly the opposite.

Since the 1980s, successive governments have given Australia few - if any - bargaining chips in international negotiations, by abandoning most of its agricultural support programs.

Yet just last week, Australia's Trade Minister, Mark Vaile, reaffirmed Australia's commitment to the next round of multilateral trade negotiations, despite the fact that the last round of negotiations collapsed because of disagreements on agricultural subsidies.

He also reaffirmed the government's commitment to pursue its policies through the failed Cairns Group.

A more realistic approach would be to tell the Americans and Europeans that Australia will not continue to stand by while their subsidised exports eat into Australian markets, and flow into Australia.

  • Peter Westmore is president of the National Civic Council.

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