Towards successful Malta-EU negotiations on agriculture

The Herculean task of Malta`s agriculture negotiations with the European Union can only succeed if it is backed by an informed public opinion.

Brussels must realise that opinion leaders in these islands are becoming fully conversant with the highly controversial standing of the integrity of its agricultural policy.

Malta cannot ignore the criticism directed at the EU`s common agricultural policy (CAP) by the world`s most authoritative economic publications, The Economist and The Financial Times.

This is not to say that the EU has not achieved wonders on the road to the continent`s prosperity by eliminating the possibility of war. Malta might be arguing with Brussels about subsidies which are to be paid to farmers, but at least Europe is enjoying peace.

Malta has had more than it`s fair share of Europe`s wars. It feels thankful that for the first time in a thousand years of its often bloody history that Europe is endeavouring to win the adherence of the Maltese people not by the force of arms but by economic co-operation.

It would be wrong for Malta`s negotiators with the E.U to be overwhelmed by the trauma of the island`s historical past. This outlook is definitely poisoning the attitude of the socialist opposition to Malta`s negotiations with the EU.

Malta`s strategic importance is much less than it was in 1971, let alone in 1942 or 1978. One has to witness the present utter collapse in the strategic value of Gibraltar. Malta has a strong negotiating position with the EU, not because of its strategic value, but because it is a successful economy. It exhibits not much greater economic weakness than Italy before it joined the euro.

To join the euro Italy performed a state accountancy exercise not far removed in its technique and integrity from the disastrous corporate accountancy exercise of Enron. It is not only in agriculture that Brussels is exhibiting two weights and two measures in dealing with the member states.

Here I intend to deal with the well explored contradictions in the EU`s agricultural policy to make the Maltese public realise what a hard task our negotiators face in wringing out a satisfactory agreement.

This does not mean however that Malta is oblivious of the fact that countries with negotiating clout such as Italy can gain approval from their negotiating position, which a small country like Malta finds it difficult to gain. The more Malta`s negotiations in Brussels are supported by an informed public opinion the more will be their success in gaining concessions. Negotiations must be made from a position of strength.

CAP described

During the past 40 years about half of the EU`s budget has been taken up by agricultural subsidies. This has been the controversial CAP.

The past is not necessarily a guide to the future in EU agricultural policy. The controversy on CAP, especially as it will apply to the EU candidate countries after their accession, started immediately in the Financial Times after the March Barcelona summit; when an important report was leaked to that paper.

The FT on March 18 carried an article entitled "Boost foreseen for EU applicants` farmers", which sparked off a vigorous controversy in that newspaper.

The Brussels agricultural report and the subsequent correspondence sheds full light on the meaningfulness of EU agricultural policy and to which Maltese public opinion must adjust itself.

It must seek alignment with a policy which is in a maelstrom.

The Brussels agricultural report referred especially to the position of farmers in EU applicant countries. The agricultural problem in these countries is far greater than that of Malta, for the proportion of GNP devoted to agriculture in their economies is not comparable to that of Malta.

Agriculture in Malta cannot be said to be a very important part of the economy, but if it suffers a disastrous decline the island will undergo a process of desertification. Maltese agriculture must be preserved at all costs.

The Brussels report, according to the Financial Times, states: "Farmers in European Union candidate countries would see their incomes rise by 30% after joining the EU even if they received no direct aid payments, according to a study".

Brussels can be asked by Malta`s negotiating team whether such a sweeping statement applies also to this archipelago.

The above statement receives further support from the following words: "The study concludes that if the Hungarian and Czech farmers were paid the full EU payments from day one of membership they would receive more than double the average national wage, which would cause social distortion and remove incentives modernise the farming industry."

It is impossible here to give Brussels` agricultural policy position in detail. One point is clear - Malta`s agricultural sector stands to gain much more from direct EU aid than its industrial sector; the EU is prepared to accept subsidies in agriculture but not in industry.

The controversy

The EU`s propensity to subsidise agriculture will probably not last forever, as it is subject to the well justified hostility of the United Kingdom, as shown in the high level controversy which appeared in the Financial Times, and the praise lavished by The Economist on Renate Künast, the German agriculture minister, who is making sure that her country`s farmers can no longer "rely" on their minister for protection.

Writing to the Financial Times, Sheila McKechnie, director of the Consumers Association, London, stated that CAP has no place in the Europe we want: "I can well understand the anger of the candidate countries for European Union membership at being treated as second class citizens on the common agricultural policy. However the real problem is the CAP itself.

"Currently the EU is dumping surpluses on them. They in turn cannot export because of high CAP import tariff barriers. So what are they doing? To get into the EU Poland has started to subsidise its agriculture and to consolidate it. Polish farmers are now dependent on their taxpayers to compete with EU farmers who are dependent on theirs.

"Consolidation could cut employment in agriculture from the current 27% to 5%. The social dislocation would be considerable. It will have to happen in the longer term but to create a small percentage of rich farmers and make most farmers unemployed is madness".

Ms McKechnie was answered officially by Josè Manuel Silva Rodriguez, director-general of Agriculture of the European Commission. He stated: "Ms McKechnie`s criticism concerning enlargement and the impact of the CAP on developing countries also seem wide of the mark. First, the candidate countries applied for membership of the European Union with a view to joining the existing CAP and we are now assisting them in the necessary restructuring of their rural areas through a number of schemes.

"Second, with regard to the developing countries our export subsidies are strictly limited and we have no interest in undercutting world prices. Moreover we are the largest import market in the world for products coming from developing countries."

These two letters were both commented upon by Professor Jim Rollo, director, Centre on European Political Economy of the University of Sussex. He expressed himself in board agreement with McKechnie, and his scathing letter received no further answer from Brussels.

Rollo referred specifically to the EU`s enlargement, stating: "On enlargement, the governments in candidate states may well want the CAP but it is clearly not good for their economies or consumers. It is hence doubly ironic that Mr Silva Rodriguez defends the application of the CAP in the candidates while the Commission proposes that farmers in the new members do not get full access to the compensatory payments and so be at a competitive disadvantage."

Rollo`s words make Maltese taxpayers jump. They need to be clarified in the context of Malta`s current agriculture negotiations with the EU. Malta`s economy is successful, but it can hardly be called a very strong one, while the considerable budget deficit lasts. Malta is fighting for its survival.

The maelstrom

EU agricultural policy may be in a maelstrom, but there are strong hands who will be forging new acceptable policies for our continent. The EU, like Malta, is facing its difficulties. Previous governments just pushed agricultural problems under the carpet.

A good example of an EU agriculture minister who is performing an excellent job is Germany`s Renate Künast, who received high praise in the `Charlemagne` page of The Economist. If there are more ministers like Künast, Brussels would have to express its agricultural policies with more logic and effectiveness than we find in the letters of Rodriguez.

The Economist stated: "The European Union`s agriculture ministers could not quite believe what had hit them when the diminutive, spiky-haired woman from the reputedly anti-farmer German Greens first burst into their easy club just a year ago.

"In Germany, the EU`s second-biggest agricultural producer, farmers were no less shocked. They were getting a woman minister for the first time, and a Green one, at the head of a disturbingly revamped ministry for `consumer protection, food and agriculture` - in that order,

"Henceforth Chancellor Gerhard Schröder proclaimed consumers` interests, not those of farmers, would come first. Germany`s entire farm system was to be restructured. Any `howls of protest` from the powerful farming lobby would be ignored, he added.

"Industrial farming was out; environment-friendly farming in billions of D-Marks in subsidies were to be redirected accordingly or so it was believed."

Malta has had its "howls of protest" coming from its agricultural lobby. These are to be judged by the island`s opinion-makers against the background of what is happening in the EU. There should be no lobby, whether it is the agricultural or the industrial lobby, which should have the power to overcome the overriding interest of the consumer.

Malta is trying to join the EU in the interest of its consuming public, and not to make any section of its population rich. The biggest mistake would be to seek to simplify the problem of agricultural negotiation, ignoring EU complexities and even contradictions.

This is a deception which intelligent opinion in Malta will not accept, the EU will be more coherent in its approach if it were to realise that in Malta authoritative financial journalism is read widely.

Mr Azzopardi Vella is an adviser to business and has been the promoter of the Malta Development Fund. E-mail johnazzopardivella@hotmail.com.