May, 2003: Cover Story

By Greg Rushford

Published in the Rushford Report

PARIS—Last month, I took the Eurostar from London’s Waterloo Station to the Gare du Nord here, a pleasant three-hour journey thanks to the “Chunnel” that connects England to Europe. But as veteran trade lawyer David Palmeter had reminded me back in Washington before I made the trip, “the philosophical distance across the English Channel is wider than that across the Atlantic .”

            Indeed, the different visions that separate the United Kingdom and the United States from France and other parts of — forgive this, for I am a Francophile — Old Europe, sometimes appear to be light years apart. The most recent illustration of this, of course, has involved an emotional issue of national security: Tony Blair’s decision to split with France and Germany and side with America on what to do about Iraq ’s Saddam Hussein. And on international trade, the Brits and the Americans traditionally share a free-trade vision, while France traditionally espouses a distinctly different international economic vision.

            I came here to try and get a feel for how the French vision might play out in the World Trade Organization’s ongoing Doha Round of trade liberalizing negotiations. As everyone knows, the puzzle is how to get the European Union to agree to reform its notorious farm program. And three of the most important keys to unlocking the puzzle of reforming the Common Agricultural Program are in the hands of Britain ’s Blair , U.S. President George W. Bush, and French President Jacques Chirac. Without a deal on agriculture, forget Doha . But how is this difficult clash of visions going to happen — especially now that emotions in the White House, 10 Downing Street , and the Elysee have been rubbed raw over Iraq ?

France loves its farm

subsidies

            To be sure, the CAP is not notorious here in France ; it is beloved. The newspapers don’t rail against it much. Farmers regularly vow to go to the barricades to defend their interests. Politicians say that they love the farmers. Overall, the French view their farm subsidies as part of their cherished way of life. Get rid of CAP? Might as well expect us to abandon our wine, cheese, and baguettes, they shrug.

             Sure, we could be competitive in world markets without export subsidies, the French acknowledge. But zut alors, we don’t want to get rid of our charming little farms for those awful, super-efficient, super-scale farms like the Americans have, the French will tell you. And if you think that our farm program is bad, just look at the American subsidies that generate skyrocketing land prices that drive small farmers out of business, they say. We don’t want your system, French hosts are fond of telling visitors about the time the second or third glass of Bordeaux is poured. It’s the cultural difference between the café Les Deux Magots and McDonald’s. 

            The French certainly have a point about the connection between the American farm program and high land prices. And it is difficult to argue that the French don’t have the right to subsidize their farmers, hoping to preserve joie de vivre in the land. Who wouldn’t be willing to pay more for French wine and cheese, if that would preserve much of which is most charming about life here? The problem that France faces, of course, is that there is more to it.

            Hard economic lesson number one: export subsidies really do distort markets in other countries. Is it right to ask farmers in world-class farm countries like New Zealand and Australia to pay to support the French way of life? Moreover, the EU’s subsidies are particularly cruel to poor people in impoverished parts of the world.

            And although it is a bit awkward for a visiting Yank to point this out, there is a McDonald’s on St-Germain-des-Pres, just a few blocks from Les Deux Magots. The famous, leisurely French café and the symbol of America ’s fascination for fast food actually co-exist quite peaceably. 

The choice: kill Doha or reform the CAP

            While they don’t want to abandon CAP, French officials also signed off on the Doha negotiations when they were launched in November 2001. By so doing, France fully understood that reform of CAP would be critical.

            While few here would say so openly, it quickly becomes apparent talking to people in Paris that they understand that the CAP is difficult to defend in an economic sense. Much has changed since the subsidies were launched in 1958 as part of the Common Market’s quest for food security in the aftermath of World War II. And the French also know that — thanks to the ongoing process of EU enlargement that will bring in agricultural producers like Poland — the CAP is headed in the direction of becoming unaffordable anyway. Economically France would be better off by helping ensure that the  Doha process is successfully concluded in 2004, instead of waiting until at least 2006.

            Moreover, there would be political benefits to France ’s international prestige by cooperating on CAP in the Doha talks. I’m referring to the growing bitterness directed toward the CAP in the Third World . Nobody here really tries to deny a recent well-documented report by Oxfam with an apt title that says it all: The Great EU Sugar Scam: How Europe’s sugar regime is devastating livelihoods in the developing world. Of course, in Paris it is easier to strike up an enthusiastic discussion of a related Oxfam report on U.S. common subsidies, Cultivating Poverty. The Oxfam document notes that America ’s 25,000 cotton farmers receive more in subsidies than the GDP of Burkina Faso, a country where two million people depend on cotton.

            The upshot is that France is being pressed hard on economic and political grounds to get back on the right moral side of the global agricultural debate. 

The Doha Round faces crisis

            President Chirac has the political power to let CAP reform proceed. But does he have the political desire to do so? Or will the French leader — currently performing on the world’s stage in full Gaullist, protectionist coloration — do to the WTO’s Doha negotiations what George W. Bush did to the U.N.’s Security Council over Iraq ?

            There is, of course, ample reason for pessimism, even if Chirac and Bush were on good speaking terms, which they are definitely not (for details on Bush’s attitude, see the Publius column at page two). As the Financial Times rightly noted on March 31, the day that the European Union failed to meet an important WTO deadline to agree on a negotiating formula to reduce global barriers to agricultural trade, the Doha negotiations are “facing crisis.” That’s certainly true.

            Still, this is the way major international-trade negotiations always work — gloom-and-doom until the final deal is struck in the late hours, moments before disaster strikes. The smart money holds that those late hours will come for the Doha Round, but not by the end of 2004, which is the current official schedule. Look for a deal at least two years later, perhaps in 2006.

Jacques Chirac: agriculture reformer?

            One thing is certain. If Chirac decides to take on the political challenge of trading away his farmers’ subsidies in the Doha Round, it won’t just be announced as a fait accompli one morning in the newspapers. And certainly, the French agriculture ministry isn’t going to announce that CAP is being abandoned. So, we are left to look for subtle signs that a possible political shift in the French landscape could, in fact, be underway.

            Turns out that some experienced trade observers think that they might be beginning to see such signs.

            “I am optimistic with a question mark,” says Patrick Messerlin of the Institut d’Etudes Politiques de Paris, who is curiously both French and an advocate of free trade. Messerlin relates that he has been scenting the winds of possible change in private meetings with some influential French politicians. “All three senators with whom I have had a long discussion fully recognize the need to change the CAP,” Messerlin says. “They are working with their electors to begin to change the mood of their electorate, and they were telling me that farmers realize that it is the end of the CAP as it is.”

            Messerlin says that he has also heard suggestions “from other well-informed circles” that some in the government are changing their minds on agriculture.

            Messerlin’s question mark concerns the attitude of the man in the Eleysee. Will Chirac move on agriculture, or won’t he? “In fact, I don’t know,” admits one well-connected French official. 

            What subtle signs of flexibility should Chirac-watchers look for?

Watch for the body language at the Evian G8 summit

            The leaders of the G8 industrial nations will meet in the French resort of Evian from June 1-3. This could be the first possible sign of French flexibility on agricultural reform, if indeed there is any. As the summit’s host, Chirac’s vision of how the rich countries can work together to foster a global economic upturn will be watched closely — as will, of course, the body chemistry between the French leader and George W. Bush. 

            The G8 summit is not going to focus exclusively, or even chiefly, on trade issues. U.S. Trade Representative Robert Zoellick won’t even be in Evian, although presumably he will prepare talking points for Bush. But still, the topic of agricultural reform will come up formally. And there is always the opportunity on the sidelines of such international meetings for leaders to reach delicate private understandings. Bush and Chirac could agree on a general formula on agriculture for their respective trade negotiators to wrap up this summer — if they really wanted to.

            The international financial community will be watching for signs that the Evian summit will give a much-needed boost to the prospects that WTO ministers will be able to make real progress when they meet in Cancun this September.

Chirac’s plan on agriculture

            Chirac, it turns out, has a plan to take to Evian. He outlined his thinking in a speech on agricultural development that was delivered here in Paris on February 21 to an audience of African leaders who had come to discuss French-African “partnership.”

            Perhaps the most interesting part of the speech was an admission — unprecedented, to the best of my knowledge — by the French president that export subsidies can harm poor countries. “France is already prepared, in liaison with our European Union and G8 partners, to look into eliminating the elements of our action that create instability and precariousness for the most modest agricultural producers in Africa,” Chirac said. By “elements of our action that create instability” he was referring to the EU’s farm program. Farmers in the poorest parts of Africa , “can be destabilized by extremely sudden and massive inflows of cheap imported products such as meat, dried milk, poultry and rice,” Chirac acknowledged. “The developed countries, in particular, all have a responsibility in this from the point of view of their export subsidies, their food aid, their export credits and even their sale of surplus stock policies.”

            In Evian, Chirac will propose that the G8 developed countries place a moratorium “on destabilizing aid for agricultural exports to Africa for the duration of the WTO negotiations.” He also said that in the G8 summit, France will issue a call to “defend special and privileged trade treatment for Africa .” Africans, Chirac said, need “guaranteed markets protected from excessive competition and price volatility.”

Claiming the high moral ground on agriculture

            In Evian, Chirac has astutely positioned himself to attempt to claim the moral high ground on agricultural reform. Cleverly, he will press his vision about how best to help poor countries, while leaving issues like the EU’s sugar regime and America ’s cotton program for another day. Both controversial farm programs are being challenged legally in the WTO by Australia and Brazil . Chirac’s obvious, and smart, calculation is that President Bush will also be happy not to talk about cotton and sugar.

            There are two different interpretations of where the Chirac vision is headed.

            The optimistic view is that Chirac’s willingness to admit that export subsidies are harmful for Africans is a significant step forward. Logically, it follows that if those subsidies harm Africans, they also harm farmers in poorer parts of Asia and Latin America . This new French position could open the door to a deal on multilateral CAP reform in the Doha negotiations. Chric seems to have opened that door, even if just a crack.

            The more pessimistic view would focus on the French president’s call for preferential trade deals for former African colonies. The reason for the pessimism is that the French view of colonial trade preferences is a highly contentious one. In the WTO, these preferential deals are (rightly) resented by the majority of developing countries who are left on the outside. They are not WTO-compatible, and it is difficult to imagine many WTO members agreeing to waive their rights to equal treatment. And in the G8 summit in Evian, it is difficult to imagine leaders with a different vision — notably, Tony Blair and George W. Bush — making common ground with Chirac on a matter that smacks of 19th century economic imperialism.

            Chirac said in his February speech to African leaders that he recognized that there would be problems in gaining widespread approval in the WTO for his preferential-trade vision.  But still, the French president said that he would press his plan to help the poorest of the poor in Africa in the G8 Evian meetings. Then, “ Africa will see who its real friends are,” Chirac declared.

            A cynic would suspect that Chirac is just posturing, calculating that he can advance a vision to advance France ’s political influence in parts of the Third World , while at the same time diminishing the more free-trade vision from Washington and London . Will the Evian summit highlight a clash of these opposing visions, and thus offer more evidence of a struggle for leadership between Blair, Bush, and Chirac? Will the clash of visions ruin hopes for progress in the WTO arena in Cancun this September?           Stay tuned.

            While trying to think these questions through here last month, I saw a plaque that is displayed near the front altar of the Notre-Dame Cathedral. It reads: “To the Glory of God and to the memory of one million dead of the British Empire who fell in the Great War 1914-1918 and of whom the Greater Part Rest in France .” Chirac and Blair, who have at least been trying to heal their recent wounds, remember this shared history.

            And while he is still deeply hurt over his fight with Chirac over Iraq , perhaps in Evian this June President Bush will remember his visit to Colleville-Sur-Mer in May 2002. There, walking in a cemetery that overlooks Omaha Beach , the president was visibly moved when he saw the graves of more than 9,000 Americans who participated in the Normandy invasion 59 years ago, in June 1944. Chirac remembers, too. 

            Perhaps the distance across the English Channel and the Atlantic is not as great as today’s current headlines suggest.

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