Renshaw, Derwent.

English

Archive of European Integration

• 
Address presented 
. 
by 
Derwent RENSHAW 
Secretary for Agriculture 
Delegation of the Commission 
of the European Communities 
Washington, D.C. 
at 
THE GREAT PLAINS SYMPOSIU.H ON AGRICULTURAL TRADE 
Fargo, No. Dakota 
12-13 June, 1984 
I intend concentrating the short time at my disposal 
on differences and similarities between us and EC farm 
policies, on the steps taken recently by the EC to reshape 
its agricultural policy and the effect these steps should 
have on international agricultural trade, since in spite 
of an important drift in US trade interests towards the 
Pacific Basin, the US and ~he EC remain the two leading 
actors on the world's agricultural stage, accounting bet-
ween us for one third of all world trade in farm products. 
And whilst North Dakota's interest in farm exports may not 
be as great as say Illinois or Iowa, it is the second most 
important exporter of wheat in the United States after 
Kansas. Consequently, all of us have an interest in avoiding 
conflict and in doing our utmost to cooperate. 
First, the differences. There is the very obvious 
contrast in geographical size between the EC and the US 
and between the size of our farms which has led to a dif-
ferent emphasis on products. Here in the us, you have 
tended to concentrate more on the production of grains 
and oilseeds whereas we have placed more emphasis on live-
stock and livestock products with a highly profitable re-
sult for American soyabean growers - with the EC, according 
to-the American Soybean Association, taking 48% of all US 
exports. 
So much for some differences. As to similarities 
. I ... 
1. 
we both belong to broadly the same temperate climatic zone 
and, as a result, have a number of products which are 
• 
common to both - wheat and dairy for example. 
We both also have - on each side of the Atlantic -
farm policies which-strike me as being very close in their 
aims but with, perhaps, different machinery for implementing 
them. 
The aims of the Common Agricultural Policy (CAP) are 
clearly laid out in Article 39 of the Treaty of Rome - our 
founding Constitutio~ - and are : 
Increase agricultural productivity (through 
technical progress, etc.) i 
Ensure fair standard of living for farmers 
Stabilise markets (ie. iron out violent 
fluctuations in supply and in prices) ; 
Assure sufficient food ; 
Ensure food supplies at reasonable prices. 
Not very different from us aims. And, furthermore, we both 
have policies which have had uncomfortably similar results 
with increases in both productivity and production leading 
to quantities beyond those which the market can absorb. 
Wheat production in the US, for instance, in the decade 
pre PIK, had increased by 72% and a large proportion of that 
in soft wheat - often double cropped with soya - not a very 
common practice on these Northern plains. This was more 
than 2 1/2 times the average world growth of 27%. Not 
only did this have a de-stabilising effect on the world 
market but made US wheat farmers critically dependent on 
2. 
./ ... 
this market - unpredictable at the best of times and down-
right unreliable at others • 
• 
At the same time, in the EC, the Common Agricultural 
Policy - to a large extent the victim of its own success - has 
led to increased productivity and reduced our de-
pendence on imports for the supply of some agricultural 
products and, in other cases, transformed the Community 
into a net exporter of other products. 
Productivity increases have also led to an imbalance of 
supply and demand - as here - with milk as the most glaring 
example. However, in spite of our achieving security of 
supply in a number of important farm products - one of the 
Treaty's aims - the EC remains by far the world's largest 
importer of agricultural and food products whilst the us 
remains the world's leading exporter. 
A great deal is made of the US reputation as a reliable 
supplier - and understandably so - but how many of you have 
paused to consider how very reliable the EC is as the world's 
best customer for US farm products, taking 7.6 bio $ worth 
in fiscal 1983 - a figure which is forecast to rise by 16% 
to 8.8 bio $ in fiscal 1984 - and running a massive farm 
3. 
trade deficit with you of 5 bio $. This suggests to me that 
international farm trade across the Atlantic - and particularly 
that which follows the same direction as the prevailing 
wind - is pretty free already. Only about 15% of our imports 
from industrial countries are subject to levies and virtually 
all farm products from the developing countries enter free • 
. / ... 
.... . ,.;. . :'·' 
_., ... , 
This reliability as a customer has, what is more, been main-
tained without the benefit of such goodies as PL 480, Blended 
Creait, PIK exports. 
But it is, of course, on world export markets for agri-
culture where some differences have arisen between us with 
some fairly shrill criticism of the EC's exports refunds. 
These criticisms lhave tended to intensify during periods 
when the US dollar is strong or when world markets are no 
longer expanding. 
4. 
Let me spend just a few moments on this question of our 
export refunds. Here there seems to be the feeling that 
agricultural subsidies - whether used domestically or abroad -
are an invention of cunning Europeans and the work of the devil. 
First, GATT rules on international trade specifically permit 
export refunds provided that a country does not obtain an in-
equitable share. 
We claim we have held to these rules and trade statistics 
support our claim. For example, over the ten years 
up to the beginning of the 80's, the Community share of the 
world market in wheat and wheat flour rose from 10% to 14%; 
that of the US from 34% to 46%. I say this in no accusatory 
sense, but submit that on the basis of these figures no 
reasonable person could possibly conclude that we had acted 
against the rules or taken an inequitable share. 
./ ... 
s. 
Second, the US in addition to supporting its agriculture at 
horne - at considerably greater cost than in Europe incidentally 
[~lrnost 30 bio here compared with 13.5 bio $ in the community] -
also deploys export aids - some of which I mentioned a moment 
ago. 
On the question of credit for farm exports, Secretary 
Block said recently 1 when he repeated something our wise 
and distinguished moderator had already declared,that "This 
Administration spent more on credit for agricultural exports 
in the last 3 years than all previous administrations to-
gether over the last 25") and there are plain' straight- forward 
subsidies. 
The USDA in its April publication "Middle East & North 
Africa- Outlook and Situation" says: "Inl983, Egyptbought 
1 rnio t of US wheat flour at a subsidized price of only $136 per ton, 
about one-third belowe the average 'WOrld market price" and an accom-
panying graph clearly shows how the United States' share of 
the Egyptian market has evolved spectacularly from 1972 when 
it had no share at all to 1983 when it had 40% of the total 
market - domestic production included about 50% of the imports. 
So, agricultural subsidies are a fact of life and perhaps, 
we are both sinners in the eyes of the Lord, But, how will 
these trading relationships develop in the future ? Always 
a cautious person by virtue of my Yorkshire upbringing rash 
to attempt prediction particularly in election year. In any 
case, the weather sometimes gives us all a healthy reminder -
all is not decided in Washington, Geneva, Brussels. 
·I ... 
~ ~' ·'·. -· "': 
. ' 
Whatever happens, we must never lose sight of the fact 
that no one has God given right to dominate world markets at 
• 
expense of others who may have different methods of support 
and that the US and EC have everything to gain from harmo-
nious working world trade. Both must seize opportunity to 
cooperate, since if we don't we shall all be losers. 
All is very well say,ing this. It is not going to be easy 
to achieve in face of the difficult problem of selling agri-
cultural products on static world markets. '!here does not. seem to 
me much prospect of great improvement in the short term with 
yields tending to increase and commercial markets tending to 
stagnate. A lot of course will depend on the $ and how soon 
developing countries can get their economies moving viably 
again. Not all dependency. Light at end of tunnel (hope 
not headlight of approaching train!). 
Positive signs for world trade : 
Whilst there is more produced than the commercial market 
can absorb, hungry mouths continue to multiply ; 
6. 
Useful, positive start to GATT Agriculture Committee, where 
a real effort is being made to clarify the rules for agri-
cultural trade, and it is in the GATT that we should seek 
to find ways out of our problems; but all these efforts-will 
be rendered totally ineffectual unless all exporters submit 
to the disciplines. I 
./ ... 
. ; .:-~~ .... -. 
In this context, it would be helpful if it were re-
• cognised from the outset that every agricultural 
exporting nation assists its farm trade directly 
or indirectly and if prominent officials here would 
refrain from muddying the waters by misleadingly 
stating that whilst the US had taken steps to cut 
grain production over.the past two years, the EC 
7. 
had stepped in and increased theirs. The facts are rather 
different and show that EC grain production did not increase 
neither did our share of the world market. 
Both sides moving along similar tracks : control of farm 
spending. 
Last, nowhere more evident than in recent Brussels decisions 
on future of CAP and _on farm prices for 1984/85. Not time 
for details, but 3 major points : 
1. Agriculture guarantees no longer unlimited ; 
2. Effective control milk production - restrictive quotas 
with harsh penalties for exceeding . , 
3. Tough price policy (for first time ever price cuts 
for several products in several countries). 
This is by no means the end of the story. More hard 
decisions will be required. EC milk producers bore brunt 
of attack this time round - because supply/demand imbalance 
most serious - grain producers escaped relatively lightly 
with only a 1% price cut compared with the awful fate which 
befell our milk producers. They are next in the firing line • 
. / ... 
~-~-------
But did not this package also include decisions on cgf 
you might ask ? Should not exaggerate or overdramatise this 
qusstion, because : 
- First, EC making use of its GATT rights which provide for 
the renegotiation of concessions subject to appropriate 
compensation. 
- Second, the Community is not taking immediate, unilateral 
action to prohibit or even reduce imports of corn gluten 
feed which displace grain in animal feed and force it onto 
the export market, but is proposing negotiations 
with a view to stabilising them. These talks started to-
day in Geneva. 
- Third, the measure has to been seen in the general frame-
work of the decisions taken recently to reform the CAP 
which will result in major sacrifices by our farmers 
- drastic limitations in financial support ; 
- cutting back on milk and other surplus production 
(should reduce demand for cgf and other substitutes) ; 
- and a tough price policy which should bring our 
prices and particularly our grain prices closer 
to those of our competitors' (This will over time 
reduce demand for cgf) - meanwhile, we do not wish 
to see our efforts to get our prices down under-
mined by increasing imports of substitutes ~ 
./ ... 
-. 
a. 
-------·--------
These recent decisions taken in Brussels represent an 
important contribution towards a better balance of supply 
and demand on world markets which should be of benefit to 
• 
all farmers in all trading nations. They were not taken 
just for budgetary reasons, but to fit our farming to meet 
changed economic circumstances of the mid 1980's and beyond. 
They will not lead to dismantling of the CAP nor to the 
disappearance of European farm products from world markets • 
• 
We are not going to fold our tents and silently steal away. 
You can instead expect to see a leaner, more streamlined 
European agriculture. 
Therefore, all more reason for us to seek cooperation 
rather than conflict. EC, whilst vigilantly defending its 
own interests, will be prepared - as it has been in the past -
to search diligently with the us and others for ways of co-
operating so as to promote world trade. I would have 
thought that a modest start could be made on the world's 
stagnant wheat market, where crippling debts in many of 
the purchasing countries are coupled with anticipated 
record crops in the major exporting countries. For our 
mutual survival there has to be at least a minimum degree 
of understanding between us. Perhaps an agreeMent on pricing 
would be too ambitious at present but surely efforts could 
be~ade to find an understanding on approximate market share& 
if prices dropped below a certain level, on assisting import-
ing countries to finance their purchases and on food aid • 
. / ... 
9. 
10. 
But for this and for any other concerted measures, we 
shall need considerable political will not only in 
• 
Washington and Brussels, but in capitals around the 
world and in communities such as Fargo to achieve rules 
of conduct for agricultural trade which will benefit 
us all. 
* * * 
DR/sbh 
11 June 1984 


Address presented by Derwent Renshaw, Secretary for Agriculture, Delegation of the Commission of the European Communities, Washington DC, at the Great Plains Symposium on Agricultural Trade. Fargo, ND, 12-13 June 1984

• Address  presented  . by Derwent  RENSHAW Secretary for Agriculture Delegation of the  Commission of  the European  Communities Washington,  D.C. at THE  GREAT  PLAINS  SYMPOSIU.H  ON  AGRICULTURAL  TRADE Fargo,  No.  Dakota 12-13  June,  1984 I  intend concentrating the  short time at my  disposal on differences and similarities between us  and  EC  farm policies,  on  the steps  taken  recently by  the  EC  to reshape its agricultural policy and  the effect these  steps should have  on  international agricultural trade,  since in spite of an  important drift in  US  trade interests towards  the Pacific Basin,  the  US  and ~he EC  remain  the  two  leading actors  on  the world's agricultural stage,  accounting bet-ween  us  for  one  third of all world  trade in  farm products. And whilst North  Dakota's interest in  farm exports may  not be  as  great as  say Illinois or Iowa,  it is the  second most important exporter of wheat in the United States after Kansas.  Consequently,  all of us  have  an interest in avoiding conflict and in doing our utmost  to cooperate. First,  the differences.  There  is the very obvious contrast in geographical  size between the  EC  and  the  US and between  the  size of our  farms  which has  led to  a  dif-ferent emphasis  on  products.  Here  in the us,  you have tended to concentrate more  on  the production of grains and oilseeds whereas  we  have  placed more  emphasis  on  live-stock and  livestock products with  a  highly profitable re-sult for American  soyabean  growers  - with the  EC,  according to-the American  Soybean Association,  taking  48%  of all US exports. So  much  for  some  differences.  As  to similarities . I ... 1. we  both belong to broadly the  same  temperate climatic  zone and,  as  a  result,  have  a  number of products  which  are •  common  to both - wheat and dairy for example. We  both also have  - on  each  side of the Atlantic  -farm policies which-strike me  as  being very close in their aims  but with,  perhaps,  different machinery  for  implementing them. The  aims  of the  Common  Agricultural Policy  (CAP)  are clearly laid out in Article  39  of the Treaty of Rome  - our founding  Constitutio~ - and are  : Increase agricultural productivity  (through technical progress,  etc.)  i Ensure  fair standard of  living for  farmers Stabilise markets  (ie.  iron out violent fluctuations  in supply  and  in prices)  ; Assure  sufficient food  ; Ensure  food  supplies at reasonable prices. Not  very different from us  aims.  And,  furthermore,  we  both have  policies which  have  had  uncomfortably similar results with increases in both productivity and production leading to quantities beyond  those which  the market  can  absorb. Wheat  production in the  US,  for instance,  in the  decade pre  PIK,  had  increased by  72%  and  a  large proportion of that in soft wheat  - often double  cropped with  soya  - not  a  very common  practice on  these Northern plains.  This  was  more than  2  1/2  times  the average world  growth of  27%.  Not only did this have  a  de-stabilising effect on  the world market but made  US  wheat  farmers  critically dependent on 2. ./  ... this market  - unpredictable at the best of times  and  down-right unreliable at others  • • At  the  same  time,  in the  EC,  the  Common  Agricultural Policy  - to  a  large extent the  victim of its own  success  - has led to increased productivity and  reduced our de-pendence  on  imports  for  the  supply of  some  agricultural products  and,  in other cases,  transformed the  Community into  a  net exporter of other products. Productivity increases have  also led to  an  imbalance of supply and  demand  - as here  - with milk as  the most  glaring example.  However,  in spite of our achieving security of supply in  a  number  of important  farm products  - one of the Treaty's  aims  - the  EC  remains  by  far the world's largest importer of agricultural and  food  products whilst the  us remains  the world's leading exporter. A  great deal is made  of the  US  reputation as  a  reliable supplier - and  understandably  so  - but how  many  of you have paused to consider how  very reliable the  EC  is as  the world's best customer  for  US  farm products,  taking  7.6 bio  $  worth in fiscal  1983  - a  figure which  is forecast to rise by  16% to 8.8 bio  $  in fiscal  1984  - and  running  a  massive  farm 3. trade deficit with  you of  5  bio  $.  This  suggests  to me  that international  farm  trade across  the Atlantic  - and particularly that which  follows  the  same  direction as  the prevailing wind  - is pretty free  already.  Only  about  15%  of our imports from  industrial countries are subject to levies  and virtually all farm products from the developing countries enter free  • .  / ... ....  .  ,.;.  .. :'·'  _., ...  , This  reliability as  a  customer has,  what is more,  been  main-tained without the benefit of such  goodies  as  PL  480,  Blended Creait,  PIK  exports. But it is, of course,  on world export markets  for agri-culture where  some  differences  have  arisen between  us  with some  fairly shrill criticism of the EC's  exports  refunds. These  criticisms  lhave  tended  to intensify during periods when  the  US  dollar is strong or when  world markets  are  no longer expanding. 4. Let  me  spend  just a  few  moments  on  this question of our export refunds.  Here  there  seems  to be  the  feeling that agricultural subsidies  - whether  used domestically or abroad  -are  an  invention of  cunning Europeans  and  the work of the devil. First,  GATT  rules  on  international trade specifically permit export refunds  provided that a  country does  not obtain an  in-equitable share. We  claim we  have  held to these  rules  and  trade statistics support our claim.  For  example,  over the ten years up  to the beginning of the  80's,  the  Community  share of the world market in wheat  and wheat flour rose  from  10%  to  14%; that of the  US  from  34%  to  46%.  I  say this in no  accusatory sense,  but  submit that on  the basis of these  figures  no reasonable  person could possibly conclude that we  had  acted against the rules or taken  an  inequitable share. ./  ... s. Second,  the  US  in addition to supporting its agriculture at horne  - at considerably greater cost than  in Europe  incidentally [~lrnost  30  bio here  compared with 13.5 bio  $  in the  community]  -also deploys  export aids  - some  of which  I  mentioned  a  moment ago. On  the question of credit for  farm  exports,  Secretary Block said  recently 1when  he  repeated something our wise and distinguished moderator  had already declared,that  "This Administration spent more  on  credit for agricultural exports in the last 3  years  than all previous  administrations to-gether over the last 25")  and there are plain' straight-forward subsidies. The  USDA  in its April publication  "Middle East  & North Africa- Outlook  and Situation"  says:  "Inl983, Egyptbought 1 rnio  t  of US  wheat flour at a  subsidized price of only $136  per ton, about one-third belowe the average 'WOrld  market price" and  an  accom-panying graph clearly shows  how  the United States'  share of the Egyptian market has  evolved spectacularly  from  1972  when it had  no  share at all to 1983  when it had  40%  of the total market  - domestic  production included about  50%  of the  imports. So,  agricultural subsidies are  a  fact of life and  perhaps, we  are both sinners in the  eyes  of the  Lord,  But,  how  will these trading relationships develop in the  future  ?  Always a cautious person  by virtue of my  Yorkshire upbringing rash to attempt prediction particularly in election year.  In  any case,  the weather  sometimes  gives  us all a  healthy reminder  -all is not decided in Washington,  Geneva,  Brussels. ·I  ... ~  ~'  ·'·. -·  "':  .  ' Whatever  happens,  we  must never  lose sight of the  fact that no  one  has  God  given right to dominate world markets at • expense of others  who  may  have  different methods  of support and  that the  US  and  EC  have  everything to gain  from  harmo-nious  working world trade.  Both must  seize opportunity to cooperate,  since if we  don't we  shall all be  losers. All is very well  say,ing  this.  It is not going to be  easy to achieve in face  of the difficult  problem of selling agri-cultural products  on static world markets. '!here does not. seem to me  much  prospect of great improvement  in the short term with yields  tending to increase  and  commercial markets  tending to stagnate.  A  lot of course will depend  on  the  $  and  how  soon developing countries  can  get their economies  moving  viably again.  Not all dependency.  Light at end of tunnel  (hope not headlight of approaching train!). Positive signs  for world trade  : Whilst there is more  produced  than  the  commercial market can  absorb,  hungry  mouths  continue  to multiply  ; 6. Useful,  positive start to  GATT  Agriculture Committee,  where a  real effort is being made  to clarify the rules  for agri-cultural trade,  and it is in the  GATT  that we  should seek to find ways  out of our  problems;  but all these efforts-will be  rendered totally ineffectual unless all exporters submit to  the disciplines. I ./  ... .  ;  .:-~~ ....  -. In this context, it would be  helpful if it were  re-•  cognised  from  the outset that every agricultural exporting nation assists its farm trade directly or indirectly and if prominent officials here would refrain from muddying  the waters  by misleadingly stating that whilst the  US  had  taken steps to cut grain production over.the past two  years,  the  EC 7. had  stepped in and  increased theirs.  The  facts  are rather different and  show  that EC  grain production did not  increase neither did our share of the world market. Both sides moving  along similar tracks  :  control of  farm spending. Last, nowhere  more  evident than in recent Brussels decisions on  future of  CAP  and _on  farm prices  for  1984/85.  Not  time for details,  but  3  major points  : 1.  Agriculture guarantees  no  longer unlimited  ; 2.  Effective control milk production  - restrictive quotas with harsh penalties for  exceeding  .  , 3.  Tough  price policy  (for first time ever price cuts for several products in several countries). This  is by  no  means  the  end of the story.  More  hard decisions will be  required.  EC  milk producers  bore brunt of attack this time  round  - because  supply/demand  imbalance most serious  - grain producers escaped relatively lightly with only  a  1%  price cut compared  with  the  awful  fate which befell our milk producers.  They are next in the  firing line  • .  / ... ~-~-------But did not this package also include decisions  on  cgf you might ask  ?  Should not exaggerate or overdramatise this qusstion,  because  : - First,  EC  making  use of its GATT  rights which  provide  for the renegotiation of concessions  subject to  appropriate compensation. - Second,  the  Community is not taking immediate,  unilateral action to prohibit or even reduce  imports of corn gluten feed which displace grain in animal  feed  and  force it onto the export market,  but is proposing negotiations with  a  view  to stabilising them.  These  talks started to-day  in  Geneva. - Third,  the measure  has  to  been  seen in the general  frame-work of the decisions  taken recently to  reform the  CAP which will result in major  sacrifices by  our  farmers - drastic limitations in financial  support  ; - cutting back  on milk  and other surplus  production (should reduce  demand  for  cgf and other substitutes)  ; - and  a  tough price policy which  should bring our prices and particularly our  grain prices closer to those of our competitors'  (This will over  time reduce  demand  for  cgf)  - meanwhile,  we  do  not wish to see  our efforts to get our prices  down  under-mined  by  increasing imports of substitutes ~ ./  ... -. a. -------·--------These  recent decisions  taken in Brussels represent an important contribution  towards  a  better balance of supply and  demand  on  world markets which  should be of benefit to • all farmers  in all trading nations.  They  were  not taken just for budgetary reasons,  but to fit our  farming  to meet changed  economic  circumstances of the mid  1980's  and  beyond. They  will not  lead to dismantling of the  CAP  nor  to  the disappearance of European  farm products  from world markets •  • We  are not going  to  fold  our tents  and silently steal away. You  can  instead expect to see  a  leaner,  more  streamlined European  agriculture. Therefore,  all more  reason  for us  to seek cooperation rather than conflict.  EC,  whilst vigilantly defending its own  interests, will be  prepared  - as it has  been  in the past  -to  search diligently with  the  us  and others  for  ways  of co-operating so as  to  promote world  trade.  I  would  have thought that a  modest start could be  made  on  the world's stagnant wheat market,  where  crippling debts  in many  of the purchasing countries are  coupled with anticipated record crops  in the  major exporting countries.  For our mutual  survival there  has  to be  at least a  minimum degree of understanding between  us.  Perhaps  an  agreeMent  on  pricing would  be  too  ambitious  at present but surely efforts could be~ade to  find  an  understanding on  approximate market  share& if prices dropped  below  a  certain level,  on assisting import-ing countries  to  finance  their purchases  and on  food  aid  • .  / ... 9. 10. But  for this and  for  any other concerted measures,  we shall need  considerable political will not only in • Washington  and Brussels,  but in capitals around  the world  and  in communities  such as  Fargo to achieve rules of conduct  for agricultural trade which will benefit us all. *  *  * DR/sbh 11  June  1984 

Address presented by Derwent Renshaw, Secretary for Agriculture, Delegation of the Commission of the European Communities, Washington DC, at the Great Plains Symposium on Agricultural Trade. Fargo, ND, 12-13 June 1984

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