Macron Breaks Taboo, Spain Makes Gibraltar Demands
Emmanuel Macron touched one third rail of French politics and didn’t die: labor reform. Now he is grabbing the other: agriculture.
French farmers rely heavily on EU agricultural subsidies and are generally less innovative (defenders would say more traditional) than their peers in Germany and the Netherlands, the two largest exporters of agricultural goods in Europe.
Macron has already opened the door to subsidy reform, arguing that, due to Brexit, cuts are inevitable.
At the same time, he has promised €5 billion in public investments to kickstart a “cultural revolution” in the sector.
That may not be enough to convince skeptical farmers while cutting EU subsidies will run into opposition from Italy, Poland and Spain. But it’s a start. Read more
Protests by French farmers against low dairy and meat prices are diving Europe. While similar actions are expected in neighboring Belgium, Germany and the Netherlands are irked that the Paris government is enacting protectionist measures in an attempt to quell the unrest.
When French farmers blocked the roads in northwestern Brittany and Normandy last week, the Socialist administration of President François Hollande quickly gave into their demands, canceling around €100 million in taxes and allowing them to defer another €500 million for three to four months. The state also promised €500 million in support to help indebted farmers restructure their loans.
The concessions didn’t stop farmers in Alsace, in the northeast of France, from blocking German trucks carrying agricultural products into the country this weekend.
The French, who are Europe’s largest producers of agricultural products, say beef prices have fallen 13 percent in the last two years while pork producers have been hit by a Russian embargo imposed in retaliation for European sanctions.
Dairy is said to be 12 cents below its break-even price.
Europe liberalized its milk market in April, removing a quota system that had been in place for thirty years. While the reforms have benefited some, especially large agricultural companies, smaller and outdated farms are struggling to make end meets.
French officials estimate that one in ten farms are in financial difficulties while tens of thousands could face bankruptcy.
Belgian farmers have similar laments and are expected to throw up roadblocks of their own on Thursday.
Germany’s agriculture minister, Christian Schmidt, reminded the French government on Wednesday that it must “stick to the rules” of the single market and not stop products from his country being sold in France. “I don’t see French farmers hindering their exports, so imports should not be hindered either,” he said.
In an interview on German radio, Schmidt urged French farmers to consider instead why they had lost competitiveness relative to Germany and other European nations.
French agricultural exports have steadily declined since countries in Central and Eastern Europe joined the European Union. But other Western Europeans have managed to maintain their position.
Open Europe, a British-based think tank, points out that this is despite — “or possibly because of” — France being the single largest recipient of farm subsidies under Europe’s Common Agricultural Policy (CAP). The country is due to receive €62.8 billion in support under the current 2014-2020 budget.
The organization is skeptical of the policy’s effectiveness.
By providing income support irrespective of whether any meaningful economic activity takes place on a farm, direct CAP subsidies often act as an outright disincentive for farmers to modernize, in turn locking in unviable business models and hurting Europe’s competitiveness.
The Dutch, who are the biggest exporters of agricultural products in Europe and advocate reform the subsidies system, are unlikely to protest. But their farmers are disgruntled by the extra help their French competitors are getting.
Pork producers in the Netherlands said on Wednesday, “If Brussels approves the €600 million in support of French farmers, then there is room for our government to restructure pig farms as well.”
German dairy farmers similarly complained to the European Union about the extra support for French farms and a proposed “eat French” campaign. Spanish farmers warned they could retaliate with a boycott of French products.
By Promoting Autarky, Russia Condemns Its People to Poverty
Following Russian sanctions banning the import of most farm products from Europe and North America, Prime Minister Dmitri Medvedev on Tuesday suggested the country should become agriculturally self-sufficient. This foolish longing for autarky does not bode well for the country, already teetering on the brink of recession.
On a visit to Pyatigorsk in the North Caucasus, Medvedev promised a new food program for Russia that would boost state investments in agriculture to end its dependence on imports.
The Russian import ban was itself a response to Western sanctions enacted against banks and energy companies following the downing of a passenger airliner over the east of Ukraine last month for which European countries and the United States blame pro-Russian separatists. Russia denies Western accusations that it backs the Ukrainian uprising even as Russian weapons have found their way into country — possibly including the advanced missile launchers needed to intercept an airplane at high altitude.
The uprising in Ukraine has sparked the worst crisis in East-West relations since the end of the Cold War and threatens to reverse at least part of the economic integration that has taken place between Russia and the West since then. Both sides now prioritize geopolitical imperatives over economic wellbeing — but only Russia seems to welcome the opportunity to withdraw itself from international trade. Read more
Russia Retaliates Against Western Sanctions, Economy on the Brink
Russia on Wednesday suspended beef and cattle imports from Romania. While it cited an outbreak of mad cow disease in the former Soviet satellite state — first reported in July — the timing of the embargo suggests it was enacted in retaliations against Western sanctions.
A day earlier, Russia announced it would sue German defense contractor Rheinmetall after the company was forced to cancel a €100 million contract to export combat simulation and training equipment to the Russian army.
The Russian business daily Vedomosti reported the same day that the country may restrict or ban European airlines from flying over Siberia — which would make flights to Asia take longer and require more fuel.
Russia earlier banned dairy products and juice from Ukraine, vegetables from Poland and beef from Australia.
The bans came after Western countries imposed additional sanctions on Russia following the downing of a Malaysia Airlines jet over eastern Ukraine three weeks ago. Almost three hundred passengers and crew were killed when pro-Russian separatists apparently mistook the commercial airliner for an Ukrainian military transport aircraft. By far most passengers were Dutch; 27 were Australian nationals.
Although Russia has denied Western accusations that it backs the Ukrainian uprising, Russian weapons have found their way into country — possibly including the advanced missile launchers needed to intercept an airplane at high altitude.
Yet Russian president Vladimir Putin has cast the blame solely on Ukraine, saying it “bears responsibility” for the plane crash.
Western countries first imposed financial sanctions on Russia after it annexed Ukraine’s Crimean Peninsula in March. Several European countries, notably Germany, Italy and Spain, were seen as reluctant to threaten severing ties further, given their business relations with Russia.
The European Union as a whole gets roughly a third of its natural gas from Russia, giving Putin significant leverage over his western neighbors.
Russia also buys €2 billion worth of fruit and vegetables from the European Union every year. But for most countries, it is a small export market. 8.7 percent of Poland’s foreign trade was with Russia last year. For Germany, which is often seen as “soft” on Russia, the country made up only 3.7 percent of its trade in 2013.
While earlier sanctions accelerated Russian capital flight to $75 billion, business leaders who were affected by the punitive measures refused to speak out — perhaps fearing that criticizing Putin could cause more harm to their companies than the sanctions themselves.
The shooting down of the Malaysia Airlines jet — and Russia’s refusal to admit culpability — hardened European leaders’ resolve to expand the sanctions. They now include energy, which provides more than a half of Russia’s revenues, and banking, making it more difficult for Russian companies to borrow.
Russia’s economy is now teetering on the brink of recession. The retaliatory measures it has enacted could push it over the edge. Banning cheap import products from Europe could make it harder to control inflation, the Russian central bank warned on Tuesday.
The annual inflation rate fell to 7.5 percent in July, still well above the 6.5 percent increase seen in 2013.
Fueled by Green Policy, Corn Production Hurts Environment
While federal ethanol subsidies expired last year, the Obama Administration’s strict clean fuel standards still give farmers across the United States an incentive to plant corn — to the detriment of the environment.
The Associated Press reports that “across the Dakotas and Nebraska, more than one million acres of the Great Plains are giving way to cornfields as farmers transform the wild expanse that once served as the backdrop for American pioneers.”
The physical expansion of the American Midwest, the world’s largest contiguous piece of farmland, is fueled by a green energy policy that requires oil companies to blend billions of gallons of corn ethanol into their gasoline, keeping prices high.
The administration ignored warnings from scientists that its more stringent policy could end up raising emissions if too many farmers plowed over virgin lands — and accelerate aquifer depletion as a result of increased irrigation.
That’s because plowing into untouched grassland releases carbon dioxide that has been naturally locked in the soil. It also increases erosion and requires farmers to use fertilizers and other industrial chemicals. In turn, that destroys native plants and wipes out wildlife habitats.
The Associated Press estimates that some 1.2 million acres of grassland have been lost since the Renewable Fuel Standard was introduced.
Nearly half of America’s corn crop is used to produce ethanol. The rising price of corn makes other products, including breakfast cereal, dairy and eggs, more expensive as well.
Canada and the European Union cleared the way toward ratification of a comprehensive trade agreement on Friday although France, which is stalling talks for a similar pact with the United States, signaled some reservations about the influx of Canadian beef.
“I am waiting for confirmation from the commission that this accord, particularly in agriculture, does not set a precedent for talks with the United States,” said France’s trade minister Nicole Bricq at a meeting with her European counterparts in Luxembourg.
The deal with Canada, which eliminates tariffs on almost all goods and services and is expected to increase bilateral trade by more than €25 billion per year, will give French cheese makers easier access to markets across the Atlantic. Canada’s dairy industry had resisted raising the quota for European imports but the provincial government of Quebec, which produces half of the country’s cheese, said Prime Minister Stephen Harper had agreed to compensate producers for any losses they suffered as a result of the treaty.
“This is the biggest deal our country has ever made,” Harper said in Brussels, adding that it outstripped the North American Free Trade Agreement between Canada, Mexico and the United States.
The deal is also a breakthrough for Europe’s free-trade agenda which had previously achieved only smaller agreements with Singapore and South Korea. Proponents hope that it will boost the chances for an investment and trade accord between Europe and the United States which could add half a percentage point to the national incomes of both economic blocs every year. Negotiations were set back earlier this month as a result of the federal government shutdown in Washington DC. Renewed talks could be frustrated by French resistance to freer trade.
In July, France persuaded the other European Union member states to exclude Internet services, film and television from the transatlantic trade talks, threatening to block the process altogether if the “cultural exception” was abandoned.
As one of the largest recipients of European agricultural subsidies, France also insists on “red lines” against importing genetically modified crops and chemically cleansed meat. “France will be extremely vigilant to ensure that the red lines set out in the [negotiating] mandate given to the European Commission are fully taken into account,” ruling Socialist Party lawmaker Stéphane Le Foll told the Financial Times.
While common in the United States, genetically enhanced foods are controversial across Southern and Western Europe. France has banned genetically modified crops altogether.
North Korea Plans to Liberalize Agriculture, Slightly
Is North Korea coming to terms with economic reality? Officials deny it but announced agricultural reforms suggest it is.
Last week, North Korea’s state news agency denounced speculation of change in the country as “foolish” while quoting a spokesman for the Committee for the Peaceful Reunification of Korea, one of the North’s bodies responsible for relations with the South, who said rumors to the effect were “ridiculous rhetoric” spread with “sinister intent.”
North Korea watchers have noted changes in the way the regime presents itself to the world since Kim Jong-un took over as leader from his father Kim Jong-il in December of last year. The young Kim seems more susceptible to Western influences and has apparently curtailed the power of the army in favor of the party which would represent a shift from military to civilian rule.
Kim named himself marshal of the Democratic People’s Republic of Korea last month after the ouster of Vice Marshal Ri Yong-ho, the former army chief of staff who was considered a Kim family ally but resigned over “illness.” The timing of Ri’s departure and Kim’s promotion suggested that the former was actually purged while party boss Choe Ryong-hae — a member of the presidium of the Workers’ Party who was promoted to vice marshal despite his lack of military experience — now appears by the leader’s side in public and probably has the upper hand.
The personnel changes at the top of the North Korean hierarchy mean very little for the average, undernourished North Korean citizen. A liberalization initiative in agriculture, sanctioned by Kim Jong-un himself, has the potential of improving their lives.
The planned reforms are intended to enhance yields and help mitigate chronic food shortages that plague the communist country. North Korea’s existing system of collective labor in farming villages collects harvests by the state and redistributes them to households according to their needs. The reforms, if implemented, will allow farmers to consume part of their produce or sell it on the market, thus giving them an incentive to produce more.
China introduced a similar “responsible production system” in the late 1970s whereupon yields increased rapidly.
In a meeting with Chinese representatives on Friday, Kim insisted that, “Developing the economy and improving livelihoods, so that the Korean people lead happy and civilized lives, is the goal the Korean Workers’ Party is struggling toward,” reported the Xinhua news agency.
For years, China has made up for North Korean food shortages with aid. It is increasingly hard pressed to defend the regime on the world stage, given its oftentimes erratic behavior. If the North follows its example of economic reform, policymakers in Beijing will sigh in relief.
In the paranoid political culture of Pyongyang, politicians who advocate change, if there are any, must tread carefully indeed or risk expulsion — or worse. But if the initiative comes from the top, there may be hope for North Koreans yet.