Apparently, the heavy defeat in the regional elections has convinced the President of the French Republic he must step up the rhetoric on agriculture policy. Whereas in the beginning of the month, in his speech at the “Salon de l’Agriculture” he was ready for a compromise trading less farming budget for more protectionism, he announced yesterday he is prepared to go to war with Europe to defend the CAP.

Trading farm subsidies for ‘community preference’ was quite a bad idea, to declare a farming war on Europe might be an even worse one. Commodity markets – in certain respects like financial ones – tend to be volatile, and, as in many other economic areas, competition in agricultural products tends to be harsh. Agriculture, an activity largely based on family structures, suffers heavily from this situation. If the modern welfare state devised employment benefits and a large set of social mechanisms to address negative market outcomes, policy interventions in farming communities use different instruments, but aim at similar objectives.

To insulate agriculture from international trade is the oldest and still the most common way to face these situations, an instrument whose scope was slowly but substantially diminished since the end of last century.

The present economic crisis led many in the Western World to have second thoughts on the liberalisation they promoted.
Can we really allow financial institutions to act as they wish only for the tax-payer to pay the bill when their decisions prove to have been reckless? Does it really make sense to exclude currency policy from the framework of trade negotiations? Can we consider the Asian economic giants as least developed countries exempted from trade liberalisation in food products and in assuming full environmental and other responsibilities at World level?

Personally, I am far from convinced that our Western leaders gave full attention to these problems or found the best way to address them. In my opinion, we need to consider stricter regulatory frameworks in some cases and more balanced approaches to trade, currency and financial matters in other cases.

However, it does not mean that going backwards is a possible outcome or that it might be conceived as a solution to our problems. When Mr. Sarkozy despises any new deals at the WTO level and demands protectionism in agriculture he comforts Asian agricultural protectionism and refuses to consider changes to the current, flawed system of international trade.

A couple years ago, while in Taiwan, I was amazed at the impressive increase in the demand of dairy products. At the time the existing statistics revealed that the Taiwanese per-capita consumption of dairy products was something like 50 times the figure for mainland China.

Did Mr. Sarkozy ever thought what could this mean for the famous hundreds of different French cheeses to have a real opening into the Chinese market? And what does Mr. Sarkozy expect to keep out of the French territory by his closed borders policy? Brazilian soya beans and Argentinian beef? Shouldn’t it be obvious that the more the French agriculture will be turned to the rest of the World, the more it can take advantage of its quality products with high value added?

Who, more than the French food industry, will be hurt by a closed borders policy? Not by chance, in the same speech where Mr. Sarkozy announced his will to trade a diminishing European budget for a fortress Europe, he announced another handout of 50 million euros to French farmers.

What is quite obvious in Mr. Sarkozy’s intentions is the will to renationalize ever more the European agricultural policy, replacing the European budget – that is increasingly being fully shared with twenty six other EU member states – by the French national budget.

Yesterday, Mr. Sarkozy recalled last year’s dramatic decrease in French farm revenue to conclude that he would wage a war in Europe rather than allow to a dismembering of existing Common Agricultural Policy. The undoing of the oldest and more common European policy would be another blow not only to Europe but also to its agriculture, but does that mean we should leave it unchanged? After all, wasn’t it under the existing CAP that farm incomes tumbled last year in France? Doesn’t it mean we really need to think it over again?

David Cameron, leader of a British Conservative Party that is well ahead in the opinion polls just weeks ahead of a General Election, has already ruffled feathers across La Manche, with reported jibes about the diminutive stature of French President Nicolas Sarkozy, who is reeling from personal life scandals and a drubbing in regional elections. The remarks provoked a reaction from Paris, which accused the British Opposion leader of lacking respect for the French Head of State.

Such a trifling spat may be just the start of a tricky Anglo-French relationship over the future of EU budget, in particular the €60 billion common agricultural policy and Britain’s special budget rebate. The rebate or “chèque Britannique”, as it is sometimes known, rankles with France, which feels Britain is too often a semi-detatched member of the European club: free riding on the benefits of the common market while resisting ‘ever deeper union’ and refusing to pay its way. The rebate was won in 1984 by Margaret Thatcher who swung her handback and demanded ‘my money back’. It has since entered into Conservative Party political iconography of a by-gone ‘golden age’ when Mrs T. defeated Argentina in a war over the Falklands, stood shoulder-to-shoulder with Ronald Reagan against the Soviet ‘Evil Empire’, took on striking coal miners and unleashed a wave of privatisation and deregulation that transformed the British economy. It is hard to imagine a Conservative government ever agreeing to give up such a totemic symbol as the EU budget rebate, the effect of which is to ensure Britain gets almost the same from the EU budget as it puts in.

In policy terms, the rebate is only really necessary because the EU budget is dominated by agricultural spending (nearly half of the budget goes on the CAP) and Britain is a relatively wealthy country with a relatively small farm sector. This gives rise to the structural budget imbalance that Mrs Thatcher sought to address with the rebate. If the CAP were scaled back then Britain would not need a rebate. Or so the argument goes. This was the case made by former British Prime Minister Tony Blair during the EU budget negotiations of 2005 and 2006. In the end he was comprehensively outmanoeuvred by President Sarkozy’s predecessor, Jacques Chirac, giving up a portion of the rebate in exchange for a ‘budget review’ that has yet to bear any fruit.

There is irony in the fact that that Nicolas Sarkozy, the man who most wants to see the end to the British rebate, has only this week declared himself to be a powerful opponent of downsizing the CAP, the most natural way of achieving that goal. Earlier today, in his first public comments after his UMP party’s defeat in regional elections, President Sarkozy declared:

“I am ready to confront a crisis on a European level, rather than to accept the dismantlement of the Common Agricultural Policy… I will not let our agriculture die.”

Could this put Nicolas Sarkozy, defending the CAP, on collision course with David Cameron, defending the British rebate? Perhaps, but there is an important twist and a possible solution. British farmers and landowners, who get around €4 billion a year from the CAP, largely vote Conservative. At heart they’re anti-EU but when they think with their heads they don’t want to see an end to the EU subsidies that they would be very unlikely to win from the British Treasury. Conservative politicians find it easy to talk tough on the CAP but there would be political hell to pay if they actually succeeded in abolishing subsidies for British agriculture.

Meanwhile, as President Sarkozy talks tough on preserving the CAP, the enlargement of the EU to 27 member states means France is on course to become a net payer into the CAP, rather than a net beneficiary. This will not have gone unnoticed in the French Ministry of Finance which has traditionally formed a strong alliance with the Agriculture Ministry and French farming, regarding the CAP as bringing ‘good German money to rural France’. When he sees the turning of the fiscal tide, and French taxpayers start paying to support Polish, Romanian and Bulgarian farmers, President Sarkozy may revise his view. There is a single solution to both dilemmas: cofinancing of the CAP. Rather than a CAP funded from a common European pot, with all that means for politically difficult budget imbalances, each country will meet a much larger share of its own farm subsidy bill. Of course this will go down very badly with the new member states, who will have to fund their own farm subsidies, but in the face of an Anglo-French alliance, with large net payers Germany and the Netherlands also likely to lend their support, they may have no choice. One man who may find himself in a rather tricky position is Agriculture Commissioner Dacian Ciolos, who will find it difficult to sell such a policy to his Romanian countrymen.

It’s been a turbulent few weeks for French President Nicolas Sarkozy and voters expressed their dissatisfaction with his centre-right UMP party in regional elections yesterday. A resurgent Socialist-led opposition alliance took 52% of the vote and the UMP just 35%, squeezed in sevearl contests by the far-right National Front, which scored 9.4% of the national vote but took more than 22% in its two core regions in the north and south. Opposition candidates won in 21 of France’s 22 mainland regions.

Among the losers was French Agriculture Minister Bruno Le Maire (pictured, right), who was rejected by voters of Normandy, where he was standing for election as Regional President. Had he been succesful he would have stepped down as national farms minister. It now means he’s likely to stay on in the post and continue as France’s main man in the negotiations on the reform of the CAP.

Photo credit: Bruno Le Maire / flickr.com / creative commons

President Sarkozy took farmers into his confidence in a recent speech at the Salon d’agriculture where he proposed a new direction in France’s position on CAP reform post 2013. Noting that there were farms in France where the share of subsidies equals the value of production, he declared that this does not make sense if the farmer is a producer. He criticised the policy approach of accepting compensation for reductions in prices because, some day, there is no longer sufficient funds to continue to pay for the subsidies.

Instead, he proposed to the other EU partners a deal whereby France would be flexible on the share of the next financial perspective going to agriculture provided that this was balanced by more rigorous Community preference which, implicitly would lead to a higher market return. His argument is that if third country producers had to respect the high environmental, traceability and animal welfare rules which must be respected by European producers, then European farmers would be able to compete on price alone.

There are two issues with this argument. The first is whether the argument itself holds up. We can observe that controlling imports is only effective as a way of raising the EU price where the EU is a deficit importer; for those products where the EU is a net exporter, the EU price (assuming the absence of export subsidies) is determined on world markets where the EU cannot enforce its own standards.

Even in the case of a product like beef, where the EU is now a deficit importer, it is questionable how significant the price effect of demanding higher standards of imports would be. Only twelve countries are allowed to export beef to the EU at present in any case under existing rules. Of course, some of these, such as Brazil, have major export capacity. Already in Brazil, individual farms are registered and can comply with EU internal standards in order to gain access to the lucrative EU market. While it would be costly to meet the additional EU standards, the additional cost would not be a major disadvantage

The second issue with the Sarkozy approach is that it would fall foul of WTO trade rules. These rules allow the EU to take steps to control imports for health and safety reasons, and the EU makes clear that its existing rules do this more than adequately. Requiring a particular approach to animal welfare, or requiring observance of environmental standards, might improve things in Brazil, but WTO rules do not give one country a right to dictate non-essential standards in another country. This is, of course, also a protection for EU exporters against arbitrary demands from other importing countries.

While France has long sought stricter standards on imports, this is the first time it has indicated that it might be willing to trade off expenditure on agricultural subsidies for such higher standards. Does this represent a sign of some new flexibility in French thinking? What do French farm organisations think of the proposal?

The president of the main farmers’ union, the Fedération Nationale des Syndicats d’Exploitants Agricoles (FNSEA) Jean Michel Le Metayer called for “a pause in agri-environmental measures” and the suspension of new measures. For French speaking readers, the (short) video is here.

The Ministry of agriculture seems sympathetic with this position, even though Nicolas Sarkozy has recently positioned himself as greener than his predecessors, with initiatives under a framework law called the “Grenelle of the environment” and a carbon tax (it turns out that farmers should be exempted from paying this tax, eventually). The French minister Bruno Le Maire apparently said a few days after that, indeed, a revision of the agri-environmental measures (AEM) was necessary and that it should start with an inventory of the provisions adopted throughout the Union according to the newspaper Le Figaro. On January 13 Le Maire unveiled a proposal for a new agricultural law to be discussed by the Parliament with little apparent concern for the protection of the environment.

The idea of suspending agri-environmental measures is bizarre, given that they are voluntary measures that are highly appreciated by farmers in some regions, providing often a third or more of the farm incomes in mountainous regions for example. So what did the FNSEA president actually mean? After some inquiry, it seems that he actually used the term “agri-environmental measures” for CAP jargon ignorant journalists. He was not in fact targeting the AEMs, i.e. second pillar measures, but rather the GAECs (Good Agri-Environmental Conditions, i.e. a set of technical constraints that farmers needed to respect in order to receive the Single Farm Payments, under Pillar 1, part of what is sometimes known as cross-compliance), as well as “any element of regulation that imposes environmental constraints such as the Nitrate Directive, or national measures under the new Grenelle law framewok” (FNSEA sources). Le Metayer argued in the interview that because of low prices and low incomes, farmers could not afford the ever growing stream of environmental regulations.

To FNSEA’s defense, some of the constraints imposed in 2009 turned out to be ill-designed in some regions. For example, farmers had to plant intermediate crops between harvests so as to keep soil covered and reduce nitrate leaching. In some areas, the lack of rain when these crops were planted resulted in extra costs without any environmental benefit. However, the FNSEA position sends an awkward signal regarding farmers’ image in the public opinion, while water pollution with nitrates makes headlines every summer. More worryingly, Le Metayer’s demand shows how much the the anti-environmental stance is widespread among the mainstream French farm lobby (another farmer’s union, the Coordination Rurale runs perhaps an even more anti-environmental program than the FNSEA). The FNSEA is highly representative and about to win again a majority in one of the main instances that co-manage the agricultural sector with the government in France. Only a minority of farmers belonging to the left wing Conféderation Paysanne seems in favour of a greener CAP, but their position regarding market regulation makes them hardly credible in the European debate (they favour a system of generalized quotas and a complex set of coupled payments restricted to small farms). A fringe of enlightened entrepreneurial farmers, the Société des Agriculteurs de France is open to produce public goods as much as wheat if the CAP pays them for that, but this is more a think tank than a powerful union.

It is hard to make predictions regarding the future behaviour of France as far as the coming debate on the CAP is concerned. With France becoming a net contributor to the CAP, the unholy alliance between the ministry and agriculture and the ministry of finance to defend large CAP budget is about to end. The former minister, Michel Barnier, used Health Check flexibility to reallocate 1.4 billion euro of Single Farm Payments towards the extensive grass-fed livestock sector. This has turned the powerful cereal producers against the government. Given that farm incomes have decreased much more than the EU average in 2009, the Ministry of agriculture can hardly afford more radicalization of the farmers, and his apparent scorn for environmental causes is perhaps tactic. However the historical aversion of the FNSEA for the environment has been particularly effective in the past. France will certainly resist any greening of the CAP in the future.

You can read here the agreed communiqué from the 22 countries which were invited by France to discuss the future of the CAP in Paris yesterday. The meeting itself was surrounded by some controversy given that 5 member states (UK, Sweden, Denmark, Netherlands and Malta) were not originally invited, although the UK did send along a civil servant as an observer. The French Agriculture Minister Bruno Le Maire talked at length about the objectives of the meeting in an extensive interview with Le Monde.

The countries attending were those which had supported the call by France and Germany for stronger measures to support dairy farmers in October this year. The meeting took place in the shadow of the start of the debate on the next financial perspective, and was in part a reaction to the leaked Commission reflections in October on the parameters for the next financial perspective, which foresaw a substantial reduction in the CAP budget.

However, the Declaration itself is merely a restatement of well-known views on the role played by European agriculture in Europe’s economy and society and adds nothing to the debate. As Ministers departed, it was clear that they were unable to draw up any list of concrete conclusions and demands. As Minister Le Maire ruefully noted: “It’s not easy to reach an accord within 22 states that defend their different options”

The Spanish Presidency which begins on 1 January has announced that it will hold two councils devoted to reflections on the future of the CAP which may give more opportunity for all member states to set out their views.

France is Europe’s agricultural powerhouse and when it comes to the CAP, it is probably the single most influential member state. So what France thinks is of central importance to the future of EU farm policy. It is therefore good to see the publication of the latest of the national reform profile series at the CAP2020 website, run by the respected Institute for European Environment Policy. [...]

Today’s meeting of the Agriculture Council witnessed the frequently irrestistable force of French attachment to the Common Agricultural Policy run into the occasionally immovable object of UK, Swedish and new member state desire for change. The result was that a much-trumpeted French vision paper for the future of the CAP beyond 2013 was roundly rejected. In the end France used it’s presidential prerogative to adopt the paper as ‘Presidency conclusions’ but as such it has no political weight whatsoever. Some will remember that UK vision paper for the CAP lauched in the final weeks of its own EU presidency at the end of 2005 met a similar fate. [...]

France has produced a paper on the future of the CAP which is designed to stimulate discussion at the informal farm council to be held there in the Rhone-Alps region on 21-23 September. The paper is very vague, no doubt deliberately so, and interpreting has to be an exercise in decoding. [...]

French farm leaders have asked President Sarkozy to organise a Special Summit of EU heads of government on ‘EU ambitions for the agriculture and agri-food sectors.’ Perhaps the word ‘EU’ should be replaced by ‘French’. [...]

The French government has launched a new website as part of the run-up to a conference it will hold on 3 July, at the very beginning of France’s 6-month EU Presidency, to discuss the future of European and global agriculture. Entitled “Qui va nourrir le monde?” (Who will feed the world), the debate is being organised around six questions, divided into two groups. Find out more after the jump… [...]

Paris accueille son salon international de l’agriculture où 600,000 visiteurs sont attendus. Durant 9 jours, professionnels et particuliers vont admirer ou découvrir la richesse et la diversité des filières agricoles et agroalimentaires. Le défilé des politiques caressant maladroitement un agneau du Poitou-Charentes ou savourant du Roquefort va être quotidien. Jacques Chirac dont la popularité en milieu rural a toujours été notable est attendu dans les allées de la Porte de Versailles, non plus en tant que président -défendeur inconditionnel de la PAC -mais en ami fidèle. [...]

Showing soon at a screen near you….

Launched in September 2007 by Michel Barnier, the Assises de l’Agriculture aim to set up the French position during the CAP health and prepare a “new” policy beyond 2013. It involves all stakeholders from French administration, farm and agribusiness sector, environmental, consumers and land owners organizations. [...]

As Jack Thurston has well exposed in his recent entry, the “food security” argument seems to be the new rally call for those trying to justify continuation of untargetted payments to farmers, or even a return to production support (albeit disguised as “risk management”, “income insurance” and the like). At a recent debate I was struck by the fact that the “food security” threat, and hence the need to support further agriculture intensification was almost universally endorsed, including by “CAP reformers”. While Jack has given a powerful argument for refuting the neo-Malthusian scaremongering about looming food shortage, you don’t actually need to believe in a future of plenty to call the bluff on this line of reasoning. [...]

Earlier this week, BBC Radio 4 broadcast Churchill Confidential, a dramatisation of British cabinet meetings chaired by Prime Minister Winston Churchill, records of which have only recently been released into the public domain. In this week’s episode, looking at Churchill’s second term of office (1951-55), we get an overview of the pressing issues of state at that time: the impending conflict with Egypt over the Suez Canal, the development of the British atom bomb, balancing Britain’s relationships with its European neighbours and the United States of America, immigration and race relations, the coronation of Queen Elizabeth II, the devaluation of the pound and, somewhat incongruously… a decision on whether to reduce the meat ration. Why is this relevant to the CAP? Find out after the jump… [...]

With the Slovenian Presidency of the EU barely a month old, the French government is already limbering up for its defense of the CAP during the Health Check and the budget review when France takes the helm of the EU in the second half of 2008. Farms minister Michel Barnier is here in Brussels all this week along with his ‘B-Team’: a 22-strong crack unit of Paris-based diplomats and civil servants on a mission to familiarize themselves with EU institutions, places and faces and to plot with old allies in the battle against reform such as those reactionary dinosaurs at COPA-COGECA and their more youthful offspring. [...]

Agriculture Ministers had their first discussion of the Commission’s Health Check proposals at the first Council meeting under the Slovenian Presidency yesterday. It appears that the two issues causing the most fuss are the Commission’s suggestions to introduce a progressive reduction in single farm payments to larger farms (inaccurately referred to as capping) and to increase the rate of compulsory modulation (which again would only affect larger farms), in both cases with the additional funds going to Pillar 2 rural development measures. At the same time, Ministers were clearly taken by the emphasis on risk management and safety nets in the Commission Communication and called for more specific proposals in this area.
[...]

A new survey of public opinion released today by the German Marshall Fund of the United States shows strong support for ‘consumer agenda’ in EU and US agriculture policies focused on food safety, the environment and the food supply. There was significantly less support for producer-oriented priorities like providing emergency financial relief to farmers, insuring farmers against unpredictable market conditions and preserving small family farms. [...]

Hyperactive French President Nicolas Sarkozy this week made a fundamental break with his predecessors, endorsing ‘radical reform’ of Europe’s Common Agricultural Policy, according to a report by Agence France Presse. [...]

The surprise parliamentary election defeat last Sunday of Alain Juppé, a leading member of newly-appointed French cabinet has forced President Nicolas Sarkozy into an unplanned cabinet reshuffle. Newly appointed Agriculture Minister Christine Lagarde has been promoted to the post of Finance Minister. The resulting gap at the Ministry of Agriculture and Fishing has been filled by Michel Barnier, who until 2005 served as European Commissioner for regional policy. [...]

The hard line being taken by France’s new president, Nicolas Sarkozy, on the future of the CAP could have a paradoxical outcome: further re-nationalisation of the policy once seen as the cornerstone of the European Union. [...]