COMMON MARKET FOCUS

On sacrificial lambs etc

CRABRO

Studying the reports of the debate on the Common Market White Paper this week, the cut and thrust of arguments about who would make the best bargain, I was sud- denly reminded of the mouton forfaitaire.

Perhaps I had better explain. One of the features of the 1961-62 Common Market negotiations was the group of in- defatigable pressmen who took up resi- dence in Brussels and followed the intricacies of the long discussions wih all the enthusiasm of priests participating in a strange religious rite. They discussed the sluice-gate price for cricket-bats over breakfast, and the fate of East Indian kips in the small hours of the night. And when the official spokesmen had completed their briefing, then the residents would hold a second briefing for the bene- fit of the 'visiting firemen', to explain the precise meaning of the official jargon. One favourite phrase which regularly recurred was the montant forfaitaire. What it meant precisely I am afraid I can no longer recall.

But what I do remember was the dispatch which appeared in a leading American news- paper: a dispatch written by the paper's roving correspondent, whose enthusiasm was liable to run ahead of his grasp of the French language. 'Britain's Edward Heath', he revealed, 'today broached the important issue of sacrificial lamb'.

Now here we go again. Only this time it will be Mr George Thomson, fresh from his crash course in the French language,

struggling manfully with financial 'keys' and the FEOGA; and this time, I would hazard a

guess, it will be General Wilson pronouncing the inevitable 'non'. But unless and until that moment arrives it is already obvious that the common agricultural policy will be at the centre of all the argument. So we had better try and see if we can get it right. Are you sitting comfortably? Good. Then I will begin.

The common agricultural policy is not an elaborate scheme to assist the makers of refrigeration plant and grain silos by giving them unlimited orders for storage facilities for surplus wheat and butter, nor is it a

subtle plot dreamed up by the CIA to wreck

the cultural revolution by undermining Chinese farmers with massive shipments of dumped French wheat. It just looks that way. It is intended, rather, to encourage the members of the Common Market to eat each other's farm produce instead of buying from America or Australia or Canada; to narrow the gap between farm and factory incomes; to 'rationalise' the farming industry of western Europe by persuading millions of small farmers to quit the land for good; to enable foodstuffs to be freely traded within the Common Market across national fron- tiers; and to be France's compensation price for the loss of the traditional protective barriers around her fragmented industrial sector.

In some respects it has achieved what was expected of it. There is now (ostensibly, at least) free trade in grain, beef, pork, dairy produce, eggs and rice. The member countries' food imports from each other have grown much faster than their food im- ports from third countries: the purchases of Germany, the largest food importer of the Six, for example, have grown three times as fast from her partners as they have overall (this, of course, is one of the main reasons for American disillusionment with the whole idea of European integration). The propor- tion of the population engaged in agricul- ture has shrunk impressively : from 30 per cent to 24 per cent in Italy; from 25 per cent to 16 per cent in France; from 16 per cent to 11 per cent in Germany.

These results have been achieved, as we all know by now, at a cost. In financial terms it is a cost which bears a remarkable similarity to the cost of that other great exercise in international cooperation, the Concorde. By 1966-7 the bill was running at a little under $600 million. Since then it has really got into its stride: this year it is expected to come to $3,000 million, no less.

Unfortunately, however, it has not suc- ceeded in narrowing the gap between farm incomes and factory incomes. On the con- trary, these have continued to widen. This is basically because notwithstanding the drift from the land, the farms of western Europe are, by British standards, still wildly under- productive. In 1967, for example, the British farming industry, accounting for 3 per cent of our labour force, produced 3 per cent of our gross national product. That of the European Community, with nearly 16 per cent of the labour force, produced less than 8 per cent of the Six's GNP. Hence the Mansholt Plan, which is in- tended to accelerate the withdrawal of farmers from the land by pegging prices and at the same time offering the Uneconomic peasant a handsome golden handshake. One snag about this is that over the next decade it would be even more fiendishly expensive than ever: $3,750 million by 1975 is the current estimate, and on past performance this would• probably turn out to be a con- siderable underestimate. Moreover Dr Man- sholt has quite a reputation for cheery optimism. He used to assure us that a 10 per cent increase in the price the French farmer received for his wheat would not lead to any increase in production; things didn't quite work out that way.

But this is only half the story. The real shocker is that the common agricultural policy has proved remarkably successful at diverting the farmers of Europe away from the products their customers want and to- wards those they do not. As a broad general- isation it can be said that the citizens of an advanced industrial society tend to go for proteins and away from carbohydrates: they can afford—or should be able to afford— to cultivate the body beautiful. This means that consumption of bread, milk and sugar is sluggish, while consumption of meat rises rapidly. Dieting should suit us fine in western Europe. For we have a climate and a land- pattern which is much better fitted to live- stock farming than it is to growing wheat and sugar-beet. But the CAP has brooked no nonsense of that kind. Wheat, sugar and milk have been the great growth-stocks under its gentle encouragement, while beef production has lagged far behind. Before the CAP began the Community was around 5 per cent short of self-sufficiency in wheat and sugar, and just about in balance as far as dairy products were concerned. In beef and mutton it had a deficiency of around 10 per cent. By 1967- 8 there was a 10 per cent surplus of butter, a 5 per cent surplus of sugar, and a surplus of wheat amounting to no less than 12f per cent; while beef production had fallen to around 14 per cent below consumption, and mutton to 16 per cent below, and the defici- ency in feed grains (a basic raw material for livestock production) was unchanged. And of course if Britain joined the scheme the way it is run now the results would be more remarkable still, as the hill farmers of Scot- land and Wales ploughed up the moorlands to claim their guaranteed price for every modest blade of wheat.

So much for the effects of the cAP. What about its causes? The basis of the system is that the Brussels Commission fixes 'target prices' for the various farm products and adjusts them all the time, in accordance with guide-lines laid down by the Council of Ministers. These 'target prices' are supposed to be achieved by means of a levy on all food coming into the Community from outside, to bring the price of the imported food up to the target price plus a small percentage extra (the equivalent of a preferential tariff). Then if you buy food from one of your partners, you buy it at the prevailing internal market price, as influenced by the price of imports- after-levy. If on the other hand you buy food from overseas, you have-to pay a levy calcu- lated as the difference between the prevailing world market price and the internal market price. And just so that you should not have any incentive to go outside for your food supplies, you have to hand over the levy money to the central kitty.

The central kitty, or FEOGA, has three jobs to perform. It buys in internal surpluses in order to prop up the farmers' prices in times of glut; it subsidises exports so that member- countries won't suffer too -much from having to flog their surpluses at a fraction of the exorbitant price the home farmer received for producing them; and it pays for a system of aids to the farmer ostensibly designed to improve efficiency and reduce over-manning. One ultimate refinement must be added, and then our picture is broadly complete. The national governments are still under- standably worried lest their taxpayers should be saddled with an unfair share of the farm- ing burden. So there is an elaborate system of 'keys' by which the total contribution of each member-country is roughly related to its proportionate share in the Community's GNP, with a limit to the extent to which it is allowed to fluctuate from year to year.

The end-result of this elaborate system of checks and balances is that last year France received an estimated $940 million from her partners through the agricultural fund, against a contribution of $610 million. Ger- many received $464 million and paid in $728 million while Italy received $541 mil- lion and paid in $626 million. Luxembourg, happy Luxembourg, was just about in balance.

These are the calculations which form the basis for the white paper arithmetic. The most disturbing feature about the docu- ment is the assumption—shared equally by supporters and opponents of British entry— that there is a 'short-term price' for entry which we could afford (although of course opinions will differ as to what that might be), and also a limit beyond which we could not go; and that price and limit can only be determined by negotiation.

The fundamental objection to the 'short- term price' proposition is this. If one is seeking to enter a club one has to decide whether the entrance fee is within one's means. But supposing the entrance fee is to be exacted in hashish. Then it becomes a different proposition altogether: for one may have to say that the provision of hashish is undesirable even if one can afford it. And so it is with the European club.

It cannot possibly make any sense to try and reproduce the prairies in the Scottish Highlands: yet that would be the logical consequence of applying the present Com- munity farm pricing structure to our own agriculture. It cannot possibly make any sense to increase the dependence of western Europe on imported meat supplies: yet that is what would be likely to happen.

A combination of French negotiating skill, German domestic politics, and bureaucratic empire-building in Brussels has foisted on to the European Community the most prepos- terous distortion of good husbandry so far known to man. If persisted with it will surely wreck the Community.

Now that all the members are agreed about the desirability of enlargement we have a unique opportunity to expose the follies of the farming system and to insist upon its fundamental reform before it is too late. If, instead, we prefer simply to haggle about our share of the cost, in the deluded belief that by accepting the system we shall demonstrate our fitness for Europe, then the Europe for which we may be fit will be a Europe with a mighty poor prospect of survival.

The precise nature of the reform of the CAP will be for all the participants to decide. Ideally it might involve a judicious mixture of deficiency payments for those foodstuffs in which an enlarged Community will be in surplus, and import levies in respect of those foodstuffs in which an enlarged Community will not be self-sufficient. What matters is that the farm-gate prices for wheat, sugar and dairy produce within the Community must be drastically reduced. How it is done may be a matter for negotiation. But on the principle of drastic reduction we should be prepared to sticks