Dear European Commissioner Phil Hogan...
Collective open letter1, June 21st, 2017
June 26, 2017
Because food security and the stability of international markets are a common good, it is incumbent on both exporting and importing countries to have rights but also the duty to avoid opportunistic strategies. We recommend reading this open letter in response to an article by Commissioner Phil Hogan entitled “debunking the myths about the CAP and the developing world” recently published on his blog.
Once again the signatories denounce the main myth of the decoupling of aid whereby this type of payment has no effect on markets or trade, their non-“distortive” character on trade. This myth is the basis of the agricultural discipline of the WTO, who at the same time forbids policies for the stabilization of domestic markets.
As pointed out by the signatories, African farmers are the first victims of this myth by seeing their stalls full of produce paid for below their production costs. But the situation of European farmers is no better insofar as these subsidies are captured by their economic environment, where the principle of decoupling is the first bolt for justifying the EU's inaction on stabilizing incomes and markets.
How long will the European Union still be able to hide from the facts? The conversion of CAP aid into green boxes was intended as a bargaining chip in international negotiations, by permitting the EU to lower the threshold for other subsidies. It must be recognized that this bargaining chip is worth nothing, particularly in a context where the credibility of WTO rules was shattered with the food crisis of 2007/08.
Hence, if the European Union wants to face reality and build a third pathway between free trade and protectionism, as the Commission recently announced, it must resolutely turn the page from decoupling to give itself the chance to participate in the definition of a future multilateral framework for agriculture.
Momagri Editorial Board
Dear EU Commissioner Phil Hogan,
On June 2nd 2017, you posted on your blog an article entitled “Debunking Myths that the Common agriculture policy discriminates against farmers in the developing world”2.
The rhetoric of the Commission seems to not have moved on this issue since 1992. The green box of the World trade organization (WTO) – which allows the European Union (EU) and other major rich countries to support without limit their farmers through subsidies that are decoupled from the production –-allows these countries to export agricultural products at prices below their average production costs. As a result, developing countries, which cannot subsidize their numerous farmers, suffer from the negative impacts of cheap imports from the EU and other countries.
This unfair practice is made possible by the biased definition of dumping provided by the GATT3 and later confirmed by the OECD4 and WTO, which consider that there is no dumping as long as exports are made at the same prices paid to producers on the domestic market, even if those prices are below the average production cost of the exporting country.
The following objectives have been at the heart of CAP reforms since 1992: to reduce agricultural prices on the EU market, and bring these prices closer to international market levels, so that the EU would no longer need to resort to export subsidies, and its agro-industries would have less need to import. Decoupled direct payments to EU farmers have allowed them to export at prices below the European average production costs, thereby offsetting these lower prices, with the exact same dumping effects as export subsidies on farmers in developing countries.
Commissioner Phil Hogan should be well aware that dairy farmers in Africa cannot compete with the cheap milk powder surpluses exported by the EU’s big companies or cooperatives. The figures are clear. Total direct and indirect subsidies to EU dairy products exported to West Africa in 2016 reached 169 million Euros, with an average subsidy of 67.4 Euros per ton of milk equivalent, and an average dumping rate of 21% in relation to the EU value of exports, for a total milk equivalent of 2.5 million tons, of which 2.1 million tons of milk powder.
In short, for African producers, it makes little difference whether cheap imports are rendered possible because of the red, amber, blue or green box in which EU subsidies are notified at the WTO. What matters to them is that they cannot make a living when forced to compete with highly subsidized imported products.
To guarantee European and African farmers a fair and decent income and stable access to their domestic markets, international agriculture trade rules (WTO, 1994) must be changed, and grounded on the principle of food sovereignty5). This means that the DUTY not to export at prices below the average production costs of the exporting country should go hand in hand with the RIGHT to set tariffs for products that are imported at too low prices (even in the absence of dumping of the exporting country). In our view, the priority of the EU common agriculture policy should not be to export cheap products, but to feed its domestic population.
1 Jacques Berthelot, économiste agricole (F), Gérard Choplin, analyste indépendant, politiques agricoles et commerciales (B), Priscilla Claeys, Senior Research Fellow, Centre for Agroecology, Water and Resilience, Coventry University (UK), Guillaume Cros, Vice-Président du Conseil régional d’Occitanie, Rapporteur du Comité européen des régions pour son avis sur la PAC après 2020, Thierry Kesteloot, Policy advisor, Oxfam-Solidarité (B), Niek Koning, économiste agricole (NL), Jean-Christophe Kroll, professeur émérite, économie agricole, AgroSupDijon, (F), Virginie Pissoort, Policy officer, SOS Faim (B), Aurélie Trouvé, Professeur-chercheur à AgroParisTech (F)
3 General Agreement on Tariffs and Trade (GATT)
4 Organisation de Coopération et de développement économiques (OCDE)
5 See the Nyeleni forum declaration