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World Poverty - 19 June 2002

Mr. David Curry (Skipton and Ripon): I shall concentrate on the agricultural aspects of trade because they have featured heavily in our debate.

When people returned from Doha eight months ago after reaching what was an unexpected agreement, a great deal of optimism was in the air. After all, we had pulled it off. The French had had difficulties but they finally produced acceptable phraseology, although subsequently it was slightly disputed, and the Commission said that we had agreed to achieve an accord on the modalities of common agricultural policy reform. Modality does not mean the framework but the detail—the nitty-gritty—of CAP reform, which is to be achieved by May 2003. It is important to realise that we are talking about trade-distorting subsidies. No one is talking about eliminating agricultural subsidies. The Government are talking about transferring subsidies to achieve other public good purposes, however they are defined, away from trade-distorting or production-related subsidies. It is important to be precise about that. We then had the body blow of what happened in the United States. There is no point in blaming President Bush; the initiative was started by Democrats in Congress. Republicans ran with it and the President did not want to argue against it. Given the characteristic honesty of the Secretary of State, I am surprised that the Government motion does not mention the American Farm Bill. After all, it has been the villain of the piece throughout this afternoon's discussions, and rightly so.

It is envisaged that the Bill will give $190 billion over 10 years to 2 million American farmers. The interesting thing is how the Americans chose to defend it, because Ann Veneman, the Secretary for Agriculture, effectively said, "Over the past four years, we have piled additional appropriations into agriculture year after year. This is not a unique example of sin. We have been doing it all along and we have put in some $30 billion—you just didn't notice it." Now that the big numbers are there, we have suddenly noticed the context, which is the impact on the world trade round.

It is true that the so-called American "cap" in the WTO is just over $19 billion, so the American expenditure falls below that. However the problem is that the Americans seem to be moving towards that almost as if it were a target, whereas other major regimes have made an effort to wind down some forms of support and change their purpose. The Europeans were dragged kicking and screaming into the Uruguay round, but in fact the greatest influence on reform of the CAP has been the restrictions that are in place, which still persist in the Uruguay round, and the demands of retailers and consumers.

What is happening in America is horribly counterproductive. The measure represents a deficiency payment, so increases will go straight through into land prices, and it will provide production incentives, which will keep world prices low. The Bill will not have a long-term benefit for American farmers; I think that it may be of greater benefit to the competitive position of south American farmers. However, it will have a much wider consequence for the rest of the world because the low level of world prices is one reason for the amount of competition on the world markets. That is why it is so easy to export to developing countries and to shut them out of some marketplaces.

The second wider consequence is that President Bush's action in signing the Bill was manna for every protectionist throughout the world, as we can see from the speed and alacrity with which some of the farm lobbies jumped on it. Their dexterity was amazing to behold. The politicians have piled in on top. The odds of reaching agreement on CAP reform and in the WTO round seem to be much longer, and one reason is that the pretext has been broadcast from Washington. Its action seemed to be so much at odds with the philosophy so habitually espoused by the Americans.

I venture to say that there is a real challenge for those of us who are strongly pro-American and who instinctively think of America as our partner to persuade that great country to re-engage in collective action in all sorts of spheres across the globe. We have seen the United States apparently refusing that collective action—in discussions on climate change, on the alleviation of poverty, on mechanisms for international justice, on steel and then on the Farm Bill. There is a serious concern that, when we all accept the need for collective action to combat terrorism, such action should spread more widely throughout what we call the international community.

I said that the American action would promote protectionism, so step forward, right stage, Jacques Chirac, who has just been re-elected President of France with an enormous majority. I am sure that the Prime Minister will welcome the defeat of a Socialist Government who were so resistant to liberal economic reforms, but I hope that he has no great faith in President Chirac's conversion to the liberal economic model, which has yet to be espoused with great enthusiasm by any French politician brought up in the Napoleonic tradition.

The real significance is that we are facing the mid-term review of the CAP. Commissioner Franz Fischler is due shortly to produce his proposals. Those who say that the CAP does not change and that it is still a desperate aberration have not noticed what has happened over the years. I have spent almost all my political life fighting for reform of the CAP, and I continue to do so, but it has shifted enormously. It is moving away from production-related subsidies and towards the espousal of rural development more widely, which makes a great deal of sense, and that is one of the purposes of Mr. Fischler's reform.

The Europeans are retreating from production-led subsidies just as the Americans seem to have reverted to production-promoting subsidies. It is extremely important that Mr. Fischler wins his battle with the Council of Ministers, but it now looks like a harder battle to win. President Chirac was a farms Minister, and his main complaint about the CAP is probably that there is not enough of it. It will be a difficult argument to get consensus and build a majority in the Council of Ministers in favour of promoting liberalisation.

Liberalisation is in our interests. Some hon. Members might enjoy eating Polo mints. The sugar-free Polo mints are made by Nestlé Rowntree at York; the fruit-flavoured Polos are made in eastern Europe, because thus they escape the sugar regime and the costs it imposes on business. If hon. Members look at some of the oils produced by Cargill, they will find that investment is now going to Turkey or Ukraine, even though European prices in the grain and oilseed sector are now much closer to world prices and have become manageable.

We have to face the fact that it is entirely possible that in Germany Mr. Schroder will be defeated, if there is indeed a rightward swing taking place across Europe. Edmund Stoiber is promising to liberalise, despite the tradition of Bavarian-run agriculture in Germany, and I doubt that he would be dragged along on French coat tails, as has too often been the story of German policy. However, the Germans want enlargement, and they cannot afford enlargement unless there is reform of the CAP and their contribution decreases. There will therefore be pressure on Mr. Stoiber to maintain some form of liberal agenda.

All those factors come together. CAP reform has implications for enlargement, and those two factors combined play into Doha. The important thing for all of us is to maintain that movement for reform so that we are able to benefit developing countries, which stand to gain from trade. The victim concept of world trade is incorrect and misguided. Liberalisation, domestic and international, has benefited developing countries and has reduced poverty. A 2002 World Bank study called "Globalisation, Growth and Poverty" has shown that most effectively.

We need to reassert the WTO agenda. The Prime Minister is dining with Mr. Chirac tonight, and he is shortly to visit north America to discuss the broader issues. It is important that we make the point that liberalisation works. Whether we prefer to describe the case for helping developing countries as philanthropic or self-interested, all of us have a self-interest in ensuring the promotion of liberalisation, so that the world can continue to grow richer through the spread of liberal political philosophy.

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David Curry MP | House of Commons, London SW1A 0AA | tel: 020 7219 6202