Beyond Cancun

Researcher, Paul Goodison with Deirdre O'Connor

There is an ideologically driven insistence within certain sections of the European
Commission that the new forms of CAP support are less-trade-distorting or even non-trade distorting. While in narrow econometric modelling terms this may be correct, this assertion
is highly misleading. In many respects, the new forms of agricultural support are simply more efficient in influencing production and trade outcomes. This may in some instance reduce the extent of trade distortions arising from EU agricultural-support programmes. However, it cannot be doubted that production and trade outcomes will be materially affected by the new systems of agricultural support (de-coupled single-farm-payments) being set in place under a reformed CAP. With a policy commitment to ensuring the avoidance of land abandonment in a context of increasing annual yields, the net effect of reform across a number of sectors will be an increase in total EU production above that currently prevailing. A production outcome which would not in the context of price reductions if the new form of direct-aid-payments were not being introduced. The net overall effect on production depends, of course, on the level at which the new forms of direct farm-aid payments are set.
In this context, it is difficult to see how the European Commission can sustain the argument that the new forms of farm support are non-trade-distorting. At Cancun, most developing countries did not share the European Commission's view on the extent to which the agreed CAP-reform measures were genuinely reducing trade distortions. They largely felt that the reform measures were simply freezing in place existing distortions and increasing the efficiency with which EU farm support attains its underlying policy objective of increasing the competitiveness of EU agriculture and the EU value-added food products industry. Thus, when the EU tried to play ‘hard ball' on Singapore Issues in order to extract concessions in exchange for what it saw as a profound transformation in EU agricultural policy, few developing countries were inclined to buy into the implicit trade-off the EU was offering, believing that the EU was largely seeking to have it all its own way. As a consequence, many developing countries refused to budge on Singapore Issues until such time as the EU introduces genuine reforms to eliminate the legacy of past distortions and to create genuine free trade in agricultural products (i.e. through eliminating both tariff protection and the market distortions arising from publicly financed aid programmes).

Against this background if the EU starts to get to grips with the real external effects of CAP reform, this will go some way towards changing the climate for WTO agricultural negotiations.