2 February 1996

USABill bodes ill for Europe

By Tony McDougal

EUROPE will have to reform its common agricultural policy to stem a decline in its share of world trade if the US Farm Bill receives the green light in Washington.

For even though the Farm Bill is currently being held up by political wranglings, it contains a number of radical proposals which would make the US a more aggressive competitor. These include:

&#8226 An end to annual set-aside (currently 7.5%).

&#8226 An end to voluntary set-aside (up to 100%).

&#8226 An end to the long-term set-aside (conservation reserve programme), releasing 6.5m ha (16m acres) by 2002.

&#8226 Replace deficiency payments with fixed annual payments, which reduce over time.

&#8226 Reduce the total cost of commodity support from $9bn in 1993 to $4bn by 2002.

&#8226 Reduce export subsidies from $800m in 1995 to $478m by 2002.

According to a new report from Newbury-based consultants, Produce Studies, the combination of increased area and higher yields will lead to a 30% growth in wheat production by 2002, and a 26% increase in exports.

This will lead to a rise in the US share of world wheat trade from 34% to 36%, and for coarse grains from 27% to 34%, over the same period the report predicts.

Dr Martin Abel, Produce Studies senior economist, says the changes forecast for meat are even more dramatic. The US share of world beef trade is expected to rise in the same period from 17% to 25%; pork from 10% to 33%; and poultry from 47% to 66%.

Dr Abel said it was time for the EU to re-think its set-aside and direct payments policies, adding that unless European agri-business appreciated the changes resulting from the US Farm Bill, it would be left out in the cold.

Stay competitive

And though he recognised that budgetary constraints in the Clinton administration might force the Bill to be rolled over until next year, he argued that it was time to start moving internal EU prices to world levels in order to be fully competitive.

"In advance of further CAP reforms, cooperatives and food processing companies are urged to form alliances and joint ventures in order to gain the scale required to compete with the US companies."

Martin Haworth, NFU head of international affairs, admitted that the change in US policy would allow them to take a greater share of trade in the expanding world market.

Set-aside was a significant restraint in the EU, he added, and there would be pressure to cut the rate well below 10% for 1997.

But the prospect of zero set-aside in the EU is unlikely due to commission concerns about a return of grain mountains.