Who can save the Market?

Gerald Segal

The question overhanging the last extraordinary meeting of the Council of Agricultural Ministers and this week's further meeting, and which neither meeting will entirely answer, no matter what compromise decisions are reached, is simply: can the Common Market be saved?

The matter has to be put thus starkly because it is not sufficiently widely understood just how far the Common Market has, in the past six months, simply collapsed, and this quite independently of Britain's request for renegotiation and any of the issues arising therefrom.

This may well turn out to be the week in which it will finally be made clear whether or not the EEC is going to survive, and if so, in what form. The prospects of those committed to the original EEC concept are not auspicious. The weekend Paris dinner party of the respective heads of state and prime ministers, with EEC Commission President Francis Xavier Ortoli attending silent and on sufferance, revealed at least three things apart from the continuing penchant for gimmickry which marks the current trend in European politics. First, that an informal summit was preferred to the formal variety mainly because the latter leads to grandiose and unrealisable communiques. Second, that the general feeling is, the objections of the Benelux countries not withstanding, that any attempt to re-launch the European idea will have to centre on the Council of Ministers which represents the nation states, not on the Commission which, strictly speaking, embodies 'Europe'. Third, that on such real issues as those which lead to the impasse in community operations — agricultural policy, energy policy, financial co-operation and the battle against inflation — there is still no unified European viewpoint. The Nine's foreign ministers, finance ministers, agricultural ministers, will all be having extensive meetings in Brussels this week to try to work out solutions. The background to their deliberations does not suggest that they are likely to meet with much success.

The easiest problem facing the EEC Agricultural Commissioner, Pierre Lardinois, and the Council is the future of the Common Agricultural Policy which, along with the Customs Union, is universally agreed to be the basis of the Common Market, and which has broken down. The issue centres on the beef mountain which now amounts to something like 150,000 tons: it is all piled up in stocks, rotting, while consuming valuable storage space, the attention of maintenance personnel and other services because, allegedly, the price of beef in Europe has fallen too low. This may come as a shock to the housewife or to anyone else who goes out shopping and finds the price of meat infernally high (and who would, of course, if the price were to drop still further as a result of an expansion of supply available in the shops by releasing the stocks contained in the beef mountains, readily purchase it at the lower price); but not to the canny authorities who contrived the system in the first place. The point is that when the authorities say 'price' they don't mean what we all mean by 'price', i.e. the consumer price; they mean, although they do not take too much care to say so, the wholesale price — paid by the wholesaler to the farmer, which is the only price which, under the Common Agricultural Policy, the Commission has any power to influence. And it appears that, while the price to the consumer is still far too high, the price the farmer is receiving is still too low to cover his production costs and yield him a fair return on his efforts.

Commissioner Lardinois was challenged on this discrepancy between the reality which faces the housewife in the form of higher prices and the farmers' complaint that they were not receiving sufficient income. He replied that he was aware of this situation and referred to Dutch housewives who go to the butcher's shop and then complain to the butcher of the rise in prices. He added that the Dutch housewife missed the point that the price rise was due to the rise not in the price of meat as such, but in the cost of packaging. The extraordinary thing about this contention of Larclinois's was that he really meant it. A moment's thought on the economics of the situation as described by Lardinois himself would in fact itself reveal, even if it were true, the ludicrousness of the Common Agricultural Policy. Thus even if it were true that packaging is increasing in price this would itself be the inevitable consequence of the need on the part of industrial workers to apply for a higher wage, which itself would raise industrial costs in order to meet the increasing costs of food in the weekly budget. Anyway, the result of the situation as it affected the farmers has been that over the past few months social unrest in the form of angry farmers parading their animals through the streets of French and Belgian towns and turning up at the Brussels Commission has emerged.

The Council of Agricultural Ministers took action in mid-July. They decided to close the EEC frontiers to beef imports until the end of October, and to introduce the system of premium payments to prevent the slaughtering of cattle and by this device they hoped to cut back on the supply which would come on the market but which in the nature of things, and the CAP, will go into the beef mountain. In this way the price will be maintained. However, closing the frontiers is not only contrary to CAP regulations, but, worse than that, it exposes the hypocrisy of much other EEC policy, for it immediately cuts the earnings of outside suppliers, for example such poorer and developing countries as Argentina and Yugoslavia.

Such a programme, painful to the European housewife though it is, at least paid the CAP. However no sooner had the French returned to Paris from Brussels than they set about betraying it. And the French were almost immediately followed by the Dutch, the Belgians and the Germans, who, with various modifications of the French procedures, also proceeded to break the rules. The point primarily to note is that these countries' policies make the CAP subordinate to national economic policies — which is precisely what, earlier in the year, the Italians got away with. And whilst on that subject, although it is argued that the Italians are now back in the common agricultural market, which is true to the extent that the policy has been stretched to meet Italian convenience, no one denies that the import deposit scheme which the Italians introduced and which breaks the elementary rules of the customs union still holds; for reasons of expediency no one is making too much fuss about that. What Lardinois is faced with effecting is the harmonisation of the national subsidies which have been granted in Holland, France and Belgium; in other words, to make them legal in terms of the CAP by making them mandatory across the entire community. But it is unlikely that he can succeed in converting the particular national subsidies into a Community measure because, on the one hand, the Irish simply could not enforce them and on the other the funds available to the Community are not sufficient to cope. The latest summation of the various moneys spent by the individual member Countries in breaking the CAP rules amounts to £312 million, broken down as follows: £200 million in France, £80 million in Belgium and £32 million in Holland.

The French have sought to answer the complaint of Commissioner Lardinois with the argument that the grants that they have given to their farmers are in fact grants to specially distressed areas. This argument is not meeting with much sympathy here in the Commission, and it is unlikely that it can carry much weight in the Court of Justice when the Commission s complaint, which is already embarked upon, comes up for hearing. There is however a further difficulty here in that no one really wants the Court of Justice to rule against France because, in fact, if it were to do so, there would still be the problem of getting not onlY the French to change their minds but also the Belgians, and in effect trying to get the French and Belgiaq farmers to repay the money they have already received. Ho yv can the Council of

Ministers find a way out or impasse?

This same four-month period which has seen the breakdown of the CAP has also witnessed the virtual failure of almost every Community endeavour. The old pathetic story has, however, been accompanied by loud off-stage noises which have called for a new attempt at building the Community — the relance of the European idea, which calls have frequentlY implied that relance is already under way, eci far it has amounted to gimmickry, although it has been given added publicity by Giscard's recent annoucement that France would shortly be taking a new initiative in regard te the political organisation of Europe. The relance idea originally emerged in July at the time of the meeting between Valery Giscard d'Estaing, the new President of France, and 'Helmut Schmidt, the German Federal Chancellor — old friends who, having both been Finance Ministers, had allegedly developed a mutual admiration for each other's ability, and who, as youngish technocrats, unlike their more ideologically hidebound predecessors, understood the needs of the times. Moreover, they expected to do something about it.

Nevertheless, no communique was issued from the Schmidt-d'Estaing meeting, and it can be noted that the issue of a loan from Germany to France, which had once featured, so brazenlY in the headlines, had disappeared. (A report circulated in Bonn at the time said the Germans were making it the condition that France should return to the Joint European float; the thought occurs that conceivably Giscarcl d'Estaing's remark that he would soon produce new proposals for an economic monetary union marin fact be nothing more than a formula to get back into the float and thereby to achieve the terms for loans from Germany.)

There were two other fundamental questions which arose at the time of the meeting, but which were not put, let alone answered. First, it was admitted that Schmidt was, and is, an Atlanticist; the question immediately arose, was the French leader also an Atlanticist? And secondly, if so, was he prepared to jettison the anti-American line of his predecessors, and if he

did, what would be the nature of the Europe Which would emerge from such a rein rice? Both question are given an added emphasis now by virtue of d'Estaing's statement that Europe was not mentioned by newly-elected Gerald Ford in his first speech as President — although there was no reason why France

should have been mentioned in that speech — f!'orri which d'Estaing has drawn the conclusion

Mat Europe stands alone and must in fact take Care of its own destiny independently of the United States. The spirit of relance soon found another worthy knight in the form of the deservedly

13°Pular Belgian Prime Minister, Tindemans WHO, accompanied by his Foreign Minister, van Elslande, toured the European capitals and returned to Brussels in the first week of July, announcing his conviction that the relance would take place before the autumn. The detailed views he set out at that time are in fact directly contrary to those which d'Estaing put forward recently. The Belgian Prime Minister

stated that not all Europe's problems would be

!added within the framework of the Community, once the relance got under way, and he Mentioned three areas — defence, finance and energy _ which required a structure which would include the United States.

A moment's thought will convince anyone still capable of looking at the facts and 1Ssessing them that if this statement of

,findernans represented a picture of the reality ne obtained from his travels then the new ,re-launched European Community could only r a sub-branch of a larger organisation which 'Or convenience may be called the North Atlantic Economic Community. Reality's first victory came at the meeting of !rile finance ministers here in Brussels on July 15. f'°fl'ophasise the stark magnitude of the crisis ,aciog the Community, the EEC Commission td, in the previous week, quite unusually, and icially, leaked before schedule their latest statistics on the rate of inflation in Europe and .rtke growth of balance of payments deficits. Vese purported to show that past estimates "ad understated the problem and that, in a situation of dire urgency, a comprehensive Community approach was necessary. Uncle terecl, the finance ministers referred the omission's report back for further study, and adopted a bland communique which enabled each member state of the Community to go its °Am way. Looking ahead it is difficult to see how the rew proposals can have any effect. The 1-Uropean political union can only be a federation or a confederation. The former is as unacceptable to the French electorate now as it

l'as been in the past; this leaves confederation

some version of the Fouchet plan, drafted 41 1961 under the direction of General de Gaulle. The chief feature was the provision for

,a European political commission which would 2e set up in Paris and would consist of senior

:Preign office officials and would aim at 'c'rfning a united European foreign policy cEovering all the above subjects with the liroPean Council of Ministers.

If this is the French President's aim, he will

'ave to persuade his fellow members of the ;;Gfritnunity to accept the new anti-American e'ne. Even to try, Giscard would need more bic°,nomic muscle than he has in the fearful ,alanee of payments deficit that France ;Ur! ently possesses. There is a possibility, so far rfnvestigated but which may emerge in the `.."3Pe-Arab dialogue later this year, and of ewhich the recent abandonment of the arms nibargo to the Middle East may be sympto &tic, that the French have already arranged e deal with the Arab countries which will tg,n, arantee them both oil and currency, and at togek_saMe time enable the Arabs and the French a_ue gin the process of out-manoeuvring the 'co-manoeuverer, Henry Kissinger.

Ge. raid Segal is The Spectator's correspondent in Brussels