The World Trade Jigsaw

From Our Common Market Correspondent

lip: sometimes talk as if the discussion in Brussels was merely a question of fixing a bunch of Commonwealth farmers. Nothing Lild be further from the truth. What is at issue the entire structure of world trade in food.

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Everyone is agreed that the present situation is a mess. Conflicting systems have grown up haphazard. The British urban populace swelled early to enormous proportions and has been kept quiet ever since with, cheap food. The British fanner can seldom produce food at the price the British working man is accustomed to pay. The government subsidises the farmer directly from taxes and fills the mouth of the industrial worker With cheap food from abroad. The Continent, with its huge agricultural population, has not been able to afford this sys- tem. (There are 4.6 million agricultural holdings in Italy, 2.2. million in France, 1.8 million in Germany and only 490,000 in Britain.) The tax- bill and the political unpopularity would be pro- hibitive. Thus in ,Europe the consumer has had to pay the full cost of food produced in uneco- nomic farming units and cheap foreign f° xl has been kept out by high tariffs.

Neither system, however, can really withstand

• the pressure of chaos in the world food markets I. and that is something which appears with increas- ing frequency. The primary producers of temperate food— the Argentine, Australia, Canada, New Zealand a° I the United States—have had their ups and clowns depending on the state of their outlets to industrial markets but by and large improvement in modern farming methods and protectionism in some of the world's biggest consumer markets have resulted in huge over-production. Cut- throat competition has followed, often forcing World prices down to an uneconomic level with a consequent rash of dumping and other sharp trade practices. The final paradox has, of course, been that a third of the world is underfed and another third cannot sell its food.

From the negotiating point of view Britain's ditlficulties are the most acute simply because she is in the position of suppliant. If she tries to ensure high prices for her farmers at home she WUI find herself in agreement with the Germans aril to some extent the French producers. But the , Only result of such a policy is to encourage overproduction in Europe and therefore reduce the

possibilities of imports from third countries.

on the other hand, we demand and get low prices in Europe, thus discouraging production andleaving room for Commonwealth imports, the farmers will be marching on half the capitals of Europe (not excluding Westminster). It is conceded by all parties that the obvious Wa Y out of all these difficulties is to reach world e(Unniodity agreements, and a considerable amount of time has been spent in Brussels trying

to decide what these might be. The problems are legion—and not only because a discussion on commodities is to some extent empty without the presence of the producing countries. The main trouble is that the only blueprint for world agree- ments seriously put forward on the Community side has been the one floated this year by M. Baumgartner, then French Finance Minister, and since amplified with characteristic arrogance by M. Pisani, the French Minister of Agriculture.

The essence of the Baumgartner Plan (seen at its simplest in the case of wheat) is that Euro- pean countries (being the largest importing area) could force up the world price to about the present French price. This would obviously pro- duce large world surpluses, but these would be cleared by large-scale give-away programmes to underdeveloped countries, the cost being borne by levies from the main industrial importing countries.

The British negotiators see in this scheme the realisation of their worst fears about French in- tentions. There are basic difficulties such as try- ing to induce underfed Asians to eat wheat and so on. But the main issue is that if, as the British suspect, France intends to increase her wheat production by enormous quantities the Baum- gartner Plan will allow her to do so. French wheat-growers will grab the entire European market and everyone else will be fobbed off with a give-away scheme which will be financed primarily by the biggest importing countries— notably Britain.

It is argued that if the world price were set low enough the plan would work, but the British reply that it is unrealistic to expect that the world is ever going to agree on a price low enough to prevent overproduction and that any scheme which leaves out the classic formula for a commodity agreement—restriction on produc- tion—is bound to be unsatisfactory.

The vast gap between the two sides on this question of world agreements is important to understand, for it explains much of the argument about the way in which the British and con- tinental systems should be reconciled during the period before world agreements are reached. Not only does the British side foresee endless difficul- ties and delays in negotiating a world-wide net- work of commodity agreements, they also believe that the Baumgartner Plan is the extension of French thinking about the common agricultural policy of the Common Market.

The basis of the common agricultural policy is by now fairly well known. Taking its best- developed section—cereals—one can say that it depends on setting a price within the Community which will guarantee the livelihood of Com- munity farmers and making those who import grain at the far lower world price pay the difference by means of a levy. For instance, the present price of soft wheat in Germany is about £42 per ton and the French price £32 per ton. The present world price being about £24 per ton, German importers of grain from outside Europa will pay roughly £18 per ton in levies and French importers £8 per ton, when the system comes into effect at the end of this month. By 1970, when the policy is supposed to be fully in effect and all European prices harmonised, all importers might be paying £13 per ton.

Theoretically this system need not be too disastrous either for Britain or the Common- Ixealth. The price of food in Britain would cer- tainly go up but, at least during the transitional period, the British Government would get a large amount of levies raised on imports from the Commonwealth. To the Commonwealth pro- ducer it ought to make little difference either. For the British importer does not in theory mind much whether he pays the world price plus a levy or whether he pays the Community price, and is therefore as likely to buy Australian wheat as French (there is in fact a minute Community preference against third ct-intries during the transitional period but it is insignificant).

This argument does not safeguard the Com- monwealth against other producers such as America or the Argentine. But, far more im- portant, it does not still the persistent fear that France intends to hog the European market for herself and that she will at a certain moment persuade her partners to impose restrictions on quantities of grain imported from the Common- wealth. That is why the British negotiators are sticking with the utmost persistence to their point that guarantees of revenue to Commonwealth producers are not enough, for there is no gain is getting in theory the relatively high ComMunity price if there is no market for your goodS. Be- sides this, British demand for preference for the Commonwealth is relatively unimportant.

The basis of an agreement is there, but only if all sides are prepared to make concessions: the French will have to set a limit to their ambitions in the European food markets; the British will have eventually to accept a world system which will cost them a lot of money; the Common- wealth will have to give up the idea of exclusive preference in the British and European market.

Whether these prices are going to be paid the next two or three crucial weeks will show.