The EC 2020 European Agriculture

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The EC 2020 European Agriculture

• Patrick A. Messerlin
• Groupe dEconomie Mondiale
• Association of Swedish Chambers of Commerce
• The German Marshall Fund of the United States
• Groupe dEconomie Mondiale (GEM), Paris
• Brussels, 23 June 2009

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Overview

• The budgetary reform requires a long term view.
• Much bigger reliance on trade in the long term.
• Widespread view that trade is done.
• Newsurprisingallies for more trade in farm and
  food Climate change and Virtual water.
• Hence new raison dêtre of tariff cuts fighting
  climate change or water-driven hunger.
• Reliance on new CAP policies in the long term.
• Declining and emerging policies
• Words of caution bio-fuels and RD subsidies.
• Conclusion France, the CAP and a Doha failure.

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Climate change

• Increased frequency of droughts...
• ... but where and how severe???
• One constant in all the scenarios more
  international trade is needed to increase global
  resilience of agriculture.
• European history of the decades1770-90.
• Source Nelson (GEM)

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Sustainable development

• Two scenarios (source INRA and CIRAD 2009)
  Agrimonde GO (growth oriented) and Agrimonde 1
  (more sustainable development with more limited
  consumption, production and productivity
  increase).
• More trade that today in both scenarios, and more
  trade in the sustainable development scenario
  than in the growth scenario.

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Virtual water

• More farm and food trade crucial for solving
  water stresses (Le Vernoy 2009). Such stresses
  (will) exist within Europe as well (see slide on
  climate change).

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Declining and emerging policies

• Much less reliance of new CAP policies on EC
  budget (grey cells heavy reliance on budget,
  cells with underlined Yes limited reliance).

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Words of caution bio-fuels

• Benefits energy security, mitigate climate
  change, impact on food prices. All of them have
  turned to be inappropriate.
• Costs the effective rates of protection in EC
  bio-fuels, 2006 (Source Amaral) are huge

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Words of caution RD subsidies

• Farmers should join industrialists in their
  interest in RD.
• RD subsidies should be understood as
  investments.
• List (non-exhaustive) of key criteria ensuring
  the right approach when granting RD subsidies
• Stable commitments over a long period of time.
• Wide coverage including the fundamental capacity
  to perform research (education, laboratories).
• Tolerance of failures that could provide valuable
  information.
• Institutions minimizing the risk of capture
  independent agencies, peer reviews, multi-years
  appropriations, payments based on progress and
  output rather than on cost recovery.
• Avoidance of technology-forcing performance
  standards.
• Should cover developing countries the best way
  to repair the damage done by the old CAP.

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France and the CAP

• France is NOT the most protected EC Member State
  (see table based on production-weighted PSEs and
  tariff rates). Moreover, CAP subsidies
• Depress prices (sugar or milk by 20 to 40) while
  increasing costs,
• Increase the number of competitors in the EC
  itself (Italian sugar).
• Reduce artificially the vast ability of French
  farmers to produce farm-food varieties (climate,
  soils, etc.)
• Knowing that income share spent in food decreases
  when income increases, advocating for
  self-sufficiency means self-destruction of French
  farm and food growth because
• Rest of the world food demand is expected to
  double by 2050.
• China 450 millions of Chinese have a GDP per
  capita (PPP) comprised between Bulgarian and
  Czech GDP per capita gt huge demand of varieties
  of food products.
• Hence, some French farmers are among the
  beneficiaries of trade liberalization and would
  loose from a Doha failure (see next slide).

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French farmers and the Doha Round

• There would be more French farmers who will loose
  from a failure of the Doha Round than French
  farmers who will benefit from such a failure.
• Source Francois, van Meijl van Tongeren
  (2002). Assumption 50 cut of protection.

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Thank You for Your Attention