Wednesday, May 28, 2008

CAP will get its promised talks on reforms

Proposals for market-oriented farm reforms

Based on a leaked document from the European institutions, New Europe reported last week prior to the Agricultural Council meeting that there will be no concrete results about the CAP (Common Agricultural Policy) of the EU in the near future.

Wedged between beneficiaries and opponents of the CAP, European Agricultural Commissioner Mariann Fischer Boel took the golden path of “proposals” for discussions which aim to appease “for the CAP” member states while not completely blocking the demands of “against the CAP” nations.

European Union member states should allow their farmers to respond to market conditions and stop paying them to produce unwanted goods, the commissioner recommended last week.
“This is not the time to scrap the CAP, as some have proposed,” Boel said in a comment aimed at Britain’s Finance Minister Alistair Darling, who made that call in mid-May.

The so-called “CAP health check” is “all about freeing our farmers to meet growing demand and respond quickly to what the market is telling them,” Fischer Boel said. “It also aims to simplify, streamline and modernise the CAP and give our farmers the tools to handle the new challenges they face, such as climate change,” she said.

Check only for 2003

Launched as a follow-up to a major reform of the CAP in 2003, the “health check” focuses on streamlining existing policies, rather than bringing in new ones. For example, it recommends finally getting rid of the rule that farmers must leave 10 percent of their arable land untouched - a rule brought in during the 1980s to avoid the problem of over- production, and suspended in 2007. “We simply couldn’t defend a situation in which 10 percent of our arable land is out of production when there is a cry for food from all over the world,” Fischer Boel said. However, the Commission also hopes to preserve the environmental benefits of “set-aside” by linking farm payments to enforcement of environmental standards, she said.

Since the EU has also decided to scrap all milk quotas in 2015, it proposes raising the quotas every year until 2014 in an effort to provide a “soft landing” for milk farmers. It further proposes stopping practically all payments to farmers which are made in return for producing a specific foodstuff - a practice which was largely abolished in 2003.

And it proposes shifting an ever-increasing amount of money from farm support into rural development projects aimed at strengthening environmental and business projects in rural areas.

In order to sweeten the pill for both farmers and member states with large rural populations, it also proposes allowing member states more freedom in how they give aid to the most vulnerable farming sectors, and giving new members an extra three years - until 2013 - to use a simplified system for claiming EU funds.

The CAP has long been the EU’s most costly and controversial policy. In its heyday in the 1980s it took up some 60 percent of the EU’s budget, and even after the 2003 reforms it takes up more than a third, or some 43 billion Euro per year.

However, the proposals, which have to be approved by EU member states, are likely to face a heated debate. Older EU member states such as France and Germany are opposed to reforms which they see as leaving their farmers vulnerable to market forces, while new states such as Latvia say that the CAP should be reformed to transfer money from richer members to poorer ones.

Fischer Boel has agreed in principle with France, which is to chair EU meetings in the second half of the year, that member states should reach agreement on the proposals by November, she said.

Price rise measures

Earlier, meeting on soaring food prices across the continent, the bloc’s agriculture ministers reached no consensus on the key question of how to do it, with member states still far apart on how the EU’s Common Agricultural Policy (CAP) should be adapted to current events.

“We should adopt measures which could stabilize the market... If you had some stocks and if you have in mind that with stocks you could intervene in the market, perhaps the situation would be better,” said Slovenian Agriculture Minister Iztok Jarc, who chaired the meeting.

Other countries farmers

The European Union should consider paying money left over from its massive farming- support budget to small farmers in developing countries rather than returning it to member states, Fischer Boel said. “We will probably, within the agricultural section, not spend our total budget for 2008 ... so we will have funding available,” she explained.

“Some micro-loans to small producers in developing countries to help them to buy seeds and fertiliser could be not only a short-term, but also a long-term solution that could improve their capability to feed themselves and to start trading,” she said.

Such a measure would be a “very efficient way to help improve capacity in the agricultural sector in the developing countries,” she said. It could become possible because soaring food prices mean that EU farmers need less support from EU coffers than usual. However, she acknowledged that any such proposal would have to be approved by EU member states, since normally any money left over from the bloc’s massive farming budget - 43 billion Euro in 2009 - is paid back to member states.

Leaked documents suggest CAP reform just a whitewash

Big farms get taken care of, dairy farmers unhappy

European Union agriculture ministers meeting this week in Brussels are set to rubber stamp a middle path of not antagonising major beneficiaries like Germany and France while keeping the hopes of free market advocates like United Kingdom alive with cosmetic reform proposals to the EU’s Common Agricultural Policy (CAP).

The alarm for urgent need for CAP modification was sounded earlier last week when Joaquin Almunia, European Commissioner for Economic and Monetary Affairs said prior to a meeting of Eurozone finance ministers: “For the weakest sector of our society, inflation is the main problem. They are suffering a loss of purchasing power, and must pay more for food and other necessary goods.”

Among the measures that governments can take to help their poorest citizens is an improvement to “the functioning of our common agricultural policy (CAP),” he told journalists, adding that the EU should also promote measures aimed at tackling “tension” on the international commodity markets.

The CAP, one of the most hotly-debated policies in the EU, is going to pay out nearly 43 billion Euro in 2009, which amounts to more than one-third of all payments going out of EU coffers. Although there was a CAP reform in 2003 to slash subsidies, but with food prices in the 15-member Eurozone now rising at an annual rate of six percent, market analysts predict dire straits ahead.

According to leaked documents ready for presentation at the “Health Check” of CAP on May 20, “First indications from the assessment of the 2003 reform are in general positive, and indicate that a fundamental reform of the CAP for the remaining horizon of the present financial perspectives (until 2013) is neither necessary nor desirable.”

Another two major areas of concern directly affecting farmers are “set-aside obligation” and “milk quotas.”

The document states: “Removal of the set-aside obligation would likely bring back into production an area corresponding to roughly half the area currently under mandatory set-aside. It has been suggested that the environmental benefits of set aside could be retained by introducing a fixed percentage of total area as an “environmental compensation/priority” area, containing certain landscape features.

According to a reliable source who wanted to remain anonymous, there is allegedly a compromise on the ceiling of individual farmers earning more than 300,000 Euro where the beneficiary stands to lose 70 percent of the subsidies while those earning lower amounts will lose far less.

The earlier proposal was to drastically cut the subsidies to big farms but the pressure from lobby groups seems to have paid off, the source pointed out.

On the subject of milk quotas, the document is more critical saying, “Milk quotas hold back the sector from achieving the objectives of CAP reform since they still reflect concerns of two decades back, instead of responding to present opportunities.” “In terms of agricultural markets, the phasing out of milk quotas and removal of set-aside will allow the farmers to better respond to market situations.”

The milk farmers claim that they will lose up to 300 million Euro from these cuts and they want the system to continue, but there is also friction between old 15 and new 10 farmer lobbies and that is affecting the proposals.

Moreover, on the subject of disposal of pesticides to farmers, the European farmers are facing tough challenges as the number of active substances is going down with the new REACH regulations coming in whereby companies are reluctant to do the necessary tests for all pesticides as its cost and time consuming.

The agriculture insiders predicted that even with compromises already agreed, the ministers are set to have a bitter political battle as each side tries to prove that the food crisis makes its preferred policy the only safe one to adopt.

The two divergent view point were crystal clear as the British Finance Minister Alistair Darling wrote to EU counterparts saying it is “unacceptable that, at a time of significant food price inflation, the EU continues to apply very high import tariffs to many agricultural commodities,” while Germany’s Agriculture Minister, Horst Seehofer, argued that “we have to make sure that we can provide this continent with food sustainability. This cannot be done by taking away subsidies from European farmers.”

The CAP, a complex and expensive system of subsidies designed to protect European farmers’ interests, has often been blamed for keeping European food prices artificially high.

With world markets booming, it is time for Europe to remove quota system and go for liberalisation of the European markets which in turn will help bring down the prices but the documents said, “The continuation of present CAP policies shows that the current policy framework, as reformed in 2003, contributes positively to fulfilling the principal CAP objectives.”

EU confirms FTA with India on a fast-track

The European Union has confirmed that it had received from the Indian government the draft documents pertaining to the ongoing negotiations on a Free Trade Agreement (FTA) with India.

“I can confirm that we have received the document from India. I can confirm that it is certainly a useful and worthwhile opening bid for negotiations will have to go further and deeper,” Peter Power, spokesperson for EU trade commissioner Peter Mandelson told journalists in Brussels.

Replying to a question from New Europe, Power lamented that the time-frame for the talks to conclude is “not solely in our hands.”

“We would like to see this particular negotiation making progress as rapidly as possible. I think the opening bid is not bad, but a lot of work remains to be done to have an agreement that would be worthy of support by both sides,” he noted.

“I think at this stage it would be unwise of me to put a timetable, but certainly we should hope to see substantial movement in the next year to 18 months,” added Power.

India formally launched negotiations in June 2007 with the EU for a comprehensive FTA aimed at removing barriers across all sectors including investment and services.

A decade of the Euro

Financial pundits want one Euro voice internationally

With the launch of Euro a decade ago, much was written in the pro-dollar media and the EMU, as the Eurozone is called, was compared with “EMU,” the bird that cannot fly. But then compared to the launch and subsequent drop as the nascent currency took baby steps, the Euro has come of age today gaining nearly 50 percent against the American dollar, the so-called Universal currency.

Financial pundits participating in the annual Brussels Economic Forum conference unanimously voiced the opinion that the Euro, the single European currency, is proving to be a blessing for the Eurozone during the rough turbulent times in the international financial scenario. Pointing out the benefits, European Economic and Monetary Affairs Commissioner Joaquin Almunia told the audience last week, “EMU has created a zone of macroeconomic stability in Europe.

From day one, the Euro put an end to traumatising exchange rate realignments. Were we without the single currency today, the present dollar weakness would be placing enormous strains on the Euro area economies- for some more than others- and would be having a serious impact on trade and investment. We ought to recall this simple fact, for those who forget our past monetary turbulences.”

Going down memory lane, the Commissioner highlighted how the unifying force of the Euro was helping the Eurozone weather the financial storms, “Indeed, we are much more resilient to external shocks thanks to EMU. This has enabled us to withstand the economic consequences of, among other events, the 9/11 terrorist attacks and the bursting of the dotcom bubble. And let there be no doubt that without the shielding effect of the single currency, we would be feeling much more strongly the impact of the current financial turmoil and soaring energy and food prices.”

“And EMU’s successes extend beyond the Euro area. We can be proud to share a currency that is now the second most important in the world. This international status, plus the economic weight of the Euro area, with its credible macroeconomic framework, has allowed EMU to become a pole of stability in the global economy, particularly during the recent period of turbulences.”

In addition to tightening the internal system by reforms, the Commissioner called for “a strong case for the Euro area to increase” its presence in the global arena.

“Our currency is the second most important in the world. Our policy decisions have a global impact and increasingly the Euro area is helping to support the stability of the global economy and financial system. This role brings undoubted advantages, ranging from seniorage revenues and a capacity to place securities among foreign investors at lower interest rates, to certain competitive advantages for Euro area exporters and financial institutions.”

Warning about “risks and responsibilities,” that come with “the exposure of the Euro area – including its financial system – to shocks originating in other parts of the world and to disruptive portfolio shifts between key international currencies,” the Commissioner said, “the Euro area must build an international strategy so that it can play a full part in pursuing global stability and project and defend its interests in the world.”

Urging the Eurozone nations to join hands to put a unified front on the international financial scenario, Almunia said, “This means first developing common positions on international issues so that we can speak with a strong single voice. Once accomplished, the logical next step will be to consolidate our representation and obtain a single seat in international fora.”

At the conference, Almunia was joined by the head of the International Monetary Fund, Dominique Strauss-Kahn, in these calls for unifying Eurozone voices in the international arena. “While the ECB has established itself in a number of international fora, Euro area member states have not yet made as much progress in developing and articulating a common view on broader macroeconomic issues. As a result, too little attention is paid at the global level to the Euro area’s economic challenges.”

Strauss-Kahn told the select gathering of financial experts. “At 10 years old, the Euro area is still a club that people want to join. This is perhaps the strongest indication of its continued success and good prospects,” Strauss-Kahn added, appealing to the EU member states to overcome their political and economic differences and added that the Eurozone lacks the political clout that it should have had by now.

Jean-Claude Juncker, the Prime Minister of Luxembourg and the voice of the 15-member Eurogroup voiced optimism at the Forum saying, “In the long term, the Eurozone will be represented in the IMF by one single seat.”

Lamenting the fact that incoming Eurozone finance ministers talk of a single representation at the IMF but forget all about it once in office, Eurozone Chairman Juncker challenged the French President to keep his word, “Mr (Nicolas) Sarkozy, also talked about a single representation in the IMF before he became president (of France). He still has four years (in office). I would encourage him to come back to this soon.”

Today, each of the 15 Eurousing European countries has individual representations at the IMF, an international organisation overseeing the global financial system with a key role in the global economic arena.

On the sidelines of the Forum, political pundits told New Europe, “Let us not forget that Euro has replaced 15 European currencies and some of them like the German mark, French franc and Italian lira were backed by strong economic and industrial giants of the world.

“With the Euro surging not only in value but also as a dependable currency, the world commodity markets, especially relating to oil, will start contemplating a switch to Euro to protect themselves against instable or falling dollar,” they said, and that a strong political will is needed to give the required unified voice to the Eurozone, argued some of the best visionaries in the field.

Almunia aptly concluded with the call for a broad debate to chart out a more unifying fiscal policy to guard interests of ordinary European citizens saying, “EU citizens face a future of rapid changes and greater uncertainty. Economic and Monetary Union must provide stability, prosperity and a platform to represent their interests in the wider world. In the next years we must update our vision of EMU and re-focus the policy framework to achieve this goal.”

Kosovo figures as Sweden takes over the reins

Cyprus, Turkey, Russia also on the agenda

Kosovo and other European flashpoints figured prominently in the informal luncheon of the 118th session of the Committee of Ministers in Strasbourg on May 7.

On Kosovo, Carl Bildt, the Swedish Foreign Minister, told journalists: “There was an informal discussion and there were different views and those views will remain for some time to come without putting any time perspective to it. There were certain agreements like rights for each and everyone in Kosovo, economic and social development of each and everyone in Kosovo, rule of law for each and everyone in Kosovo and hopefully also strong support expressed for the European direction for the policies of Serbia.”

Leaving the ball in the court of Belgrade, Bildt said, “Although that is not for us to decide and that is up to the electorate of Serbia. If Serbia does not want to cooperate with the European Union that is a decision for the Serbia.”

Earlier in the day, Sweden took over from Slovakia the reins of the Council of Europe’s decision-making body as Jan Kubis, Minister for Foreign Affairs of the Slovak Republic, took stock of the country’s chairmanship before passing the chairmanship to Bildt.

During its mandate, Slovakia said it respected its priorities by working to strengthen and promote a citizens´ Europe and a transparent and efficient Council of Europe, as well as respect for the organisation’s core values.

Through special conferences planned for its chairmanship (May- November 2008), Sweden vowed to take initiatives aimed at the stronger implementation of the European Convention on Human Rights at the national level, work systematically for the promotion of human rights, develop a new strategy for the rights of the child and strengthen the realisation of the rights of disabled persons. Congratulating Slovakia for a very successful presidency, Bildt outlined the priorities of the Swedish presidency to the journalists.

“We will continue to focus on the core values of the Council of Europe - human rights, democracy and the rule of law,” he said. With the new Russian President Dimitry Medvedev taking over in Moscow, Bildt expressed optimism that the rule of law will prevail and that “he will live up to the words he has spoken and ratification or trying to ensure ratification by Duma for Protocol 14 might be an extremely good way of demonstrating that commitment to the rule of law that President Medvedev has earlier committed himself to so explicitly.”

On the question of the Turkish situation, Bildt told journalists, “One of the difficulties that Turkey is facing is terrorist activities of PKK and the fact that we had acceleration in last two years is an expression of the fact that they see the ground slipping under them to certain extent.”

“On the subject of unification of Cyprus, it’s very important for stability of the region, for respect of human rights in all parts of Cyprus and also for the international organisations for cooperating in resolution of conflicts in other parts of the world,” Bildt added.

Sweden also started a new format where there is a formal session of a few hours and then a brainstorming “luncheon with a very open discussion on South Eastern Europe and tasks ahead of us and the important role that Council of Europe has there, touching regions of Southern Caucasus and other regions of Europe where we face somewhat bigger challenges,” in the words of Bildt. CoE head Terry Davis called the Swedish chairmanship “one of the best prepared chairmanships I have seen in all the time I have been involved in the Council of Europe.”

Sweden earlier issued a statement looking forward to co-operate closely with all member states of the CoE as well as with other actors in order to advance the work of the organisation and thus the realisation of its core objective.

India, EU at crossroads

Common values can play catalyst for compatible views

Rising from the ashes of two World Wars and expanding to include 27 Member States with more in the waiting, the European Union today is a bastion of peace, harmony and prosperity. On the other hand, India, with 28 States and seven Union Territories, has emerged over last six decades in a buoyant mood thanks to its democratic principles, freedom of speech and its new found economic strengths.

At The Hague Summit 2004, India and the EU agreed to forge a “Strategic Partnership,” which was a result of an earlier EU publication in December 2003 when the EU published its first-ever security strategy identifying India along with the US, Russia, Japan, China and Canada, as the ones with whom it should develop a “Strategic Partnership,” in order to build an “effective multilateral system leading to a fairer, safer and more United World.”

India, riding on its financial success story, is focusing on greater worldwide visibility, prestige and political clout with a demand for a UN Security Council seat and favourable visa exchange partnerships. In the same vein, the EU wants to use its Strategic Partnership with India, the world’s largest democracy, to meet 21st Century challenges like terrorism, proliferation of Weapons of Mass Destruction (WMDs), failed states and regional conflicts.

For example, the EU expected Delhi with its growing economic ties, to stand up for democracy and human rights during Burma’s military crackdown on dissidents, but Delhi responded saying it does not believe sanctions work. There will always be differences but those as such need not become insurmountable obstacles to building a deeper and wider relationship.

Political ties can not go far without financial bonds and a look at the trade figures from recent past show that its time to inject much needed momentum into an uninspiring trade relationship. The trade statistics shifted a gear from a meagre less than five billion Euro in 1980 to a respectable more than 45 billion Euro in 2006. Although trade with the EU is 20 percent of India’s import-export business, making the EU India’s largest trading partner in 2006, India’s share is only 1.8 percent of total EU trade.

In the context of the ongoing negotiations in the EU-India Free Trade Agreement, there are some stumbling blocks that need to be addressed on both sides. According to reliable sources, the major hurdle is in the fields of agriculture which is a protected sector in the EU which earmarks 40 percent of its total budget to this sector where there are subsidies galore.

The EU has, in recent times, accepted the fact that Indian import tariffs have been substantially reduced but it complains they are still high by international standards. The EU calls it a “complex and non-transparent” system as it points at additional duties, taxes, and charges that are levied on top of the basic customs duties.

Pointing to the “non-tariff” barriers, the EU lists quantitative restrictions, mandatory testing, import licensing, certification for a large number of products and a complicated procedural modus operandi as the major speed breakers for a smooth trade relationship. With Indians finding the EU institutions bewildering and complex, India has its own set of complaints, foremost being in recent times the frequent use of anti-dumping duties on its exports including footwear.

The OECD (Organization for Economic Cooperation and Development) in a recent report highlighted the need for India to go for tough and bold reforms in opening its economy more rapidly to international trade and FDI (Foreign Direct Investment) by loosening service sectors like insurance and retailing, while India argues it has liberalised the FDI regime considerably.

The figures are still disappointing, as in recent years the FDI flow to India from the EU has been a paltry less than two percent of the total FDI outflow from the EU.Climate Change is another major sticking factor in the relationship equation, as India negates EU calls for a stricter binding commitments to reduce greenhouse gas emission, while Delhi argues that as a developing country it can not be expected to slow down its pace of industrialisation.

The EU has allotted 470 million Euro between 2007-2013 to tackle cooperation in the energy sector and environmental concerns while making efforts to reach its Millennium Development Goals.Doha is another word that sends alarm bells ringing in Delhi and Brussels as the former has failed to soften tough line in the WTO (World Trade Organization) Doha round negotiations refusing to cut industrial tariffs and demanding the EU comes clear on agricultural subsidies.

The global disparity between the South and the North seems to be playing a pivotal role here also. India, along with Brazil and others, has emerged as the leader of the equatorial hunger belt with billions of people and still counting, while the EU with an overaging and ever-decreasing population of the North highlights the threat of this growing southern human avalanche.

With the present stalemate at the Doha Round consultations, it is a miracle of sorts that can revive the Doha Round to the fullest potential as it’s already surviving on life-support devices of optimistic political statements.

The EU and India are together in many global projects, like the European Satellite project “Galileo” which got a goahead last week from the European Parliament, International Thermonuclear Experimental Reactor (ITER) to produce electricity using nuclear fusion, Indian space agency ISRO with its European counterpart ESA.

With the EU-India Free Trade Agreement in the pipeline along with other fields of cooperation being explored, both India and the EU are ready for taking a qualitative leap forward in relations, but the political leaderships on both sides have to transform all the talk of shared values of democracy, diversity and multilateralism into concrete pragmatic actions, thus making an effective and cohesive EU-India Strategic Partnership out of the present patchwork of sectoral cooperation.