Expanded European Union will Force Farm-Subsidy Reform
January 27, 2000
by Dennis T. Avery
January 21, 2000
CHURCHVILLE, Va. - The world's export farmers just got a terrific present for the 21st century: The 15-country European Union has decided to take in 13 new countries. This will make them the world's largest agricultural producer. Now they have no choice but to embrace farm trade reform.
The European Union made the fateful decision at a mid-December meeting in Helsinki, Finland. The EU was already negotiating to take in Poland, Hungary, the Czech Republic, Slovenia, Estonia and Cyprus.
However, they resolved to also admit Romania, Bulgaria, Latvia, Lithuania, Slovakia, Malta and now the huge agricultural nation of Turkey as well. The current 15 EU countries encompass 140 million hectares of farmland and just over 8 million farmers.
The 13 new-member countries will add another 100 million hectares of farmland and nearly 19 million farmers to the European Union.
This expansion means Western Europe is finally casting aside its Fortress Europe mentality and embracing globalization.
Now the new EU must also globalize its farm policy. The old EU wanted to block farm trade except among its own members. The new EU will have to aim for increased farm exports to the huge new consumer markets emerging in such countries as China, Iran and India.
Don't expect the EU negotiators at the World Trade Organization to admit this yet. They're afraid if EU expansion is publicly tied to farm subsidy reform, protesting farmers might block Europe's highways for the next two years.
However, the EU's big expansion clearly means their negotiating position at the World Trade Organization meetings is ludicrous.
The EU says it's already made modest cuts in some of its farmers' price support levels and no more changes can be made in the EU's antique Common Agricultural Policy.
But the fact is that the moment the decision was made to expand, it became inevitable the EU would have to end price supports and shift to direct income subsidies for its farmers.
Not only will the EU be unable to afford the additional subsidies, but the rest of the world would not tolerate that much extra food being dumped on their countries.
Romania has 10 million hectares of the world's finest cropland, much of it in the Danube River valley. It hasn't produced much under its past bad governments. But when Romania's farms get modern inputs and port capacity, they could add the equivalent of an Iowa to current EU farm output.
Nor can the EU ignore Romania's nearly 2 million small farmers as a political force. France has only 1.1 million. Poland has 19 million hectares of farmland and over 3 million farmers. The soils are light and somewhat acid, but the farmers are still using horses and saving their own seeds.
With the farm inputs available in the EU, they might add the farm output equivalent of two Minnesotas. Hungary has 6 million hectares of fine farmland, already assembled into commercial-size farms.
Think of adding the farm output of Georgia to the EU. Turkey is the real shocker. It has 40 million hectares of farmland, far more than France. Most of it is semi-arid like America's Great Plains, and presently farmed in primitive fashion by 11 million small farmers.
Conservation tillage and EU-financed infrastructure will produce dramatic yield gains. Extending the current EU farm subsidies to Turkey would be comparable with adding the farm output of Texas and Kansas.
Then there's Turkey's big new irrigation project in the Upper Euphrates Valley, where 21 newly built dams will irrigate 4 million acres of land.
Essentially, Turkey is creating a new California! The cropland totals and climate will be almost identical. And these are just the five biggest of the 13 incoming agricultures!
In effect, the European Union is already paying huge sums to dump most of the farm output of France into export markets.
With its expanded membership, the EU can look forward adding new surpluses equal to the annual farm output from Iowa, two Minnesotas, Georgia, Texas, Kansas and California.
That's roughly 150 million tons of wheat and feed grains, 2.5 million tons of rice, 7.5 million bales of cotton, 20 million tons of meat and 25 million tons of milk. The rest of the world won't tolerate such huge commodity totals being dumped into export markets.
Farmers in America and Argentina would like to imagine wide-open Asian markets without competition from Eastern Europe and Turkey.
Unfortunately, those countries will develop their agricultures whether they join the EU or not.
The real alternative to having the EU expand would be watching the Romanians and Turks triple their yields and seek export markets on their own while China and India kept their farm import gates tightly closed.
Getting access to 3 billion newly affluent consumers is Asia is the key to prosperity for all of the world's export farmers.
With the EU now committed to the big expansion, it should be possible to open up the WTO farm trade rules within the next three years, followed by perhaps a five-year phase-in.
That's pretty rapid action by international standards. What strategy should America and the other farm exporting nations follow? Make sure your farm organization and legislators understand what the EU is doing.
They should laugh politely at the EU's negotiators when they say they've made all the changes they can in the Common Agriculture Policy. It's now a corpse propped at the negotiating table.
They should put up big maps in WTO committee rooms, with the new EU member countries colored in vivid green. They should start working now with key delegations such as the Turks and Poles.
Above all, keep dangling little bits of information on the growing demand for meat and ice cream in China, pizza cheese in South Korea and broilers in India.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.