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 FERTILISER INSTITUTE'S 9TH WORLD CONFERENCE 
San Francisco, CA 
September 17,1984 
I would first of all I ike to say how grateful am to 
you Mr. Chairman and to the Ferti I iser Institute for pro-
viding me with this opportunity to say a few words on a 
topic not only of vital importance to 8 million European 
-F1rmers and their families and to 270 million European 
consumers but also of at least some passing interest to 
the fertiliser industry and to its clients around the 
world. refer, of course, to the subject of European 
agriculture - and to its place in international trade. 
am also grateful to have the opportunity of visiting 
San Francisco again - albeit far too briefly. Little 
did realise as strolled the streets and rode the 
trollies in July with my family that would be back so 
soon in the city on the bay- the city with a cool climate 
but a warm heart. 
l. 
When taf~ed to the organisers about the area should 
try to cover this morning, it was suggested that I should 
not restrict myself to European agriculture but should 
perhaps also share some thoughts with you on trade in 
general between the European Community and the United 
States. wi II have a shot but should warn you that 
my remarks wi I I have a marked agricultural flavour. 
Let us start by looking at the rising tide of 
American involvement in external trade. 
. I .... 
For something like one hundred years after the 
Civil War, American involvement in foreign trade never 
rose above 3-4 percent of the Gross National Product. 
In the 1970's it exploded and foreign trade now accounts 
for some 12 percent of American GNP. One-fifth of 
American industrial production is exported, two-thirds 
of its wheat and two-fifths of its rice, soyabeans and 
cotton. In the mid -1950's when the United States 
secured its waiver from the obligations of the General 
Agreement on Tariffs and Trade (the GATT) in the field 
of agriculture, American farm exports were relatively 
sma 1 1 • The main concern of the US Administration in 
2 • 
those days was that the international trading rules should 
not interfere too drastically with the operation of the 
internal American agricultural market administered and 
regulated by various Federal programmes. Then came the 
great agricult~ral boom fuelled by expanding economies 
around the world, pressing food needs and a low dollar. 
And, between 1970 and 1980, the va 1 ue of US ag r i cu 1-
tural exports jumped from $7 bi 11 ion to over $41 bi H ion. 
Certainly, they dipped in the two following years but 
1984 agricultural exports are forecast to rise by 9% 
to some 38 bio $ - an enormous expansion over 14 years 
ago and a great tribute to the American farmer and to 
the suppliers of his inputs. 
. I ... 
3. 
In al 1 this, the European Community has proved a 
very valuable customer. Total trade between the EC 
and the US in 1982 amounted to some 90 bio $-one-third 
of total world trade. As Secretary Shultz said in Brussels 
some months ago - 11 We must be doing something right 11 • 
And, despite talk of the EC 1 s protectionist Common 
Agricultural Policy, we remain the American farmers• 
biggest customer. Even with a dollar at record heights 
the Community ran a substantial deficit in agricultural 
trade with the United States in 1983 of some $5 billion 
when we took $7.6 bill ion worth of US farm products compared 
with the $5.9 billion you sold to Japan and the $4.9 
bill ion to the whole of South America. There is much 
talk in Kansas City, in Chicago and perhaps here in San 
Francisco of the United States• image as a reliable supplier. 
It seems to me that the Community is a very reliable cus-
tamer - and in hard cash. 
Another aspect I would like briefly to mention is the 
maintenance of what we call the one world trading sy..;;tem. 
World free trade in the strict sense of the term does not 
exist- like absolute zero in physics it is a concept 
more for the laboratory than the real world. But we have 
made enormous progress in reducing barriers to world trade, 
and this we should remember has coincided with the greatest 
increase in prosperity the world has ever known. 
Between 1926 and 1935 the volume of world trade of manu-
factured goods col lapsed by 28 percent. In the decade up 
. I ... 
to 1972 the volume of world trade rose by 8.5 percent 
per year. Even after the oi 1 shock it grew by 4.5 per-
cent a year. How did this affect the United States ? 
Between 1929 and 1939, the Gross National Product in 
real terms hardly changed. Between 1939 and 1982, it 
went up in real terms by a factor of five. The face 
of the United States has changed, thanks in good measure 
to foreign trade. 
4 . 
This world prosperity,which whatever its imperfections 
and shortfal ls,was hardly dreamt of forty years ago. But 
it depends on a fragile balance of obligations and advan-
tages hammered out within the international trading rules 
of the General Agreement on Tariffs and Trade. And pre-
eminent in that is the responsibi 1 ity of the United States 
and the European Community who are the two major players 
on the world trading stage. Together, as have just said, 
they account for something ike one-third of world trade 
and thus have a major stake in the maintenance of the one 
world trading system. I f e v e r t h e r e we r e t o come a ... d a y 
when trade barriers would start escalating between us and 
the shutters were to come clanging down on both sides of 
the Atlantic, then the world would be threatened with a 
move back to the wasteland of the 1930's. And that is 
the real - the unavoidable answer - to all those on either 
side of the Atlantic who want new trade barriers, and yet 
further trade barriers, imposed to help industries in dif-
ficulty. for whatever reason" 
. I ... 
5 • 
that 
But, realise/there are influences at work in the 
other direction. No European 1 iving in the United States 
can fail to be impressed by the gradual shift in power 
and influence in this country towards the South and the 
West. do not make this point in any critical sense. 
It is a fact of geography and history. And Europe must 
learn to live with it. But combined with the virtual 
disappearance of the generation of American Statesmen who, 
in the 1940 1 s and 1950 1 s, who were much mixed up with the 
European affairs, there is a natural tendency for 
the new power-brokers of this country to ask themselves -
Is not, and this is a very real question here in Cali-
fornia, the real world for the United States the Pacific 
and the South ? -
Then, there is of course a rising tide of protectionist 
sentiment around the land. There is no monopoly of this on 
this side of the Altantic as we in Europe know only too wel 1. 
But the strength of the dollar, competition from across the 
Pacific rim, not only from Japan, and the fact that a number 
of developing countries have had to retrench substa~ial ly 
on their purchases have meant a tough time for American 
exporters and a tough time for al 1 Americans who compete 
with imports from abroad. In the Community, we welcome 
the stand which the Administration has taken against both 
versions of the Wine Equity Bi 11, domestic content, the 15 
percent steel quota bil 1 and on copper. But you will under-
stand me if we say we are sti 11 worried by other decisions 
. I ... 
6. 
and ones which have still to be made by the Administration 
over the next couple of months. 
But, Mr. Chairman, have sketched out very briefly 
enough of our general background. This is as necessary 
as the background in any portraito Let us come to the 
subject on which warned you I might concentrate - - -
agriculture. What are we arguing about ? Are we a 
threat to the American farmer ? 
Anyone from Europe who goes about and speaks in the 
United States quickly realises that mentioning the Common 
Agricultural Policy does not lead to a burst of enthusiastic 
cheering from the back of the hall. But the Common Agricul-
tural Policy is so festooned with myths that it is attimes 
from outside Europe difficult to see the pol icy. So let me 
explode a few myths. 
vias a Common Agricultural Pol icy necessary ? Answer, yes. 
Because when the original Six: France, Germany, Italy, Belgium, 
Luxemburg and the Netherlands, set up the European Community 
in 1957 their first task was to free trade. This could be 
done relatively easily for industrial products by cutting 
tariffs. But the varieties of agricultural protection 
in the individual states were 
I so manifold and ingenious that cutting tariffs would have 
been meaningless. Europe could not unite half in free 
trade and half not. So, the only solution was to establish 
a unified Common Agricultural Policy. 
. I .. ~ 
Was not its aim to pamper the European farmer ? 
Answer, no. The aims were very much those of US farm 
pol icy. To increase productivity, to secure a fair 
standard of living for the farm population, market 
stabi I ity, the assurance of an adequate food supply 
and reasonable consumer prices. 
But has not this led to a vast and over-blown agri-
cultural population ? Answer, no. 
Over the last twenty years, the EC agricultural labour 
force has dropped by more than 50 percent from 19 mi I I ion 
to less than 8 mi II ion. That meant the loss of one job 
every minute in European farming. 
the average farm size doubled. 
During the same period, 
But has the CAP feather-bedded European farmers ? 
Answer, no. 
In fact, since 1975, EC farm incomes have fallen well 
below industrial EC incomes. 
Has the CAP led the EC to be a net food exporter ? 
Answer, no. 
Whilst we are net exporters of some products thanks to 
increases in productivity, our overal I trade deficit in 
food and agricultural goods grew from some $14 bi I 1 ion 
in 1973 to $23 ni Ilion in 1982. 
. I . .. 
7. 
All this has to be seen against the background - as 
pointed out earlier - that the Community is the American 
farmers• biggest customer with a net agricultural surplus 
for the United States in the Community market last year of 
$5 billion. 
The factors which are responsible for the hard times 
that American farm exports have been going through are not 
the European Community but cut-backs in purchases by deve-
loping countries strapped for cash, record US production, 
client countries changing their suppliers because of dif-
ficulties in other sectors- such as textiles- and above 
all the high level of the dollar. 
Let me quote SecretaryBlock in a recent speech: 11 This 
leaves our agricultural sector increasingly sensitive to 
the fact that qver the last three and a half years the 
8. 
value of the dollar has risen about 30 percent. This has 
caused our farm products to become more expensive in foreign 
markets. Our competitive position has been weakened1 As a 
result the value of our agricultural exports has declined 
by $5-6 billion. 11 • This was in a speech he made on 26 June 
since when the$ has continued on its inexorable climb;, 
In fact, the major argument between us has centred on 
subsidies. The claim is often made in the U.S.A. that the 
Europeans are selfishly and massively subsidising their 
agricultural exports, thus capturing overseas markets and 
. I ... 
9. 
taking bread out of the mouth of the American farmer. 
We point to the existence of massive agricultural subsidies 
on both sides of the Atlantic. The total Community budget 
for 1983 amounted to some $23 bi I lion- less than one per-
cent of Community GNP- of which $15 billion was spent on 
agriculture. But price support alone in the United States 
for that year amounted - according to the report of the 
Counci I of Economic Advisers - to $18.9 bi II ion -with 
an extra $9o4 billion for PIK. offer these observations 
not to score points but to register the fact that subsidies 
to agriculture are a political fact in the modern world. 
Perhaps we are all sinners in eyes of the Lord. 
The last major round of trade negotiations, the Tokyo 
Round, which was concluded in 1979, recognised agricultural 
subsidies as a fact of I ifeo And the rules laboriously 
hammered out allowed subsidies to agricultural exports pro-
viding that th~se were not used to take more than an equi-
table share of the world market. What, our American friends 
ask, is equitable? We explain that this is rather like 
d r a f t i n g a d e f i n i t i o n o f a n e I e p h a n t • D i f f i c u I t , b u"1: i f 
one were to enter this room, 
the kind of animal involved. 
think most of us could guess 
Let me give just two sets of figures. In the 1970's, 
Community exports of wheat and wheat flour combined rose 
from 10 percent to 14 percent of the world market. Cer-
tainly an increase and an increase in exports which were 
subsidised. But the United States share of the world trade 
. I ... 
rose from 34 to 46 percent. I make this point not in 
an accusatory fashion, but simply to say that it would 
be difficult to conclude from this that we were breaking 
the international trading rules or hogging the world 
market. 
We talked about this in Brussels in December 1982 when 
Secretary Shultz and four of his Cabinet col leagues sat 
down with Gaston Thorn, the President of the European Com-
mission, and his team. 
tural export subsidies. 
We agreed to talk about agricul-
And we have made some progress. 
The discussions cleared away a great deal of statistical 
undergrowth of mismatching figures and misconceptions and 
enabled us to explain with a common statistical base that 
we were operating fully within the concept of an equitable 
share of the world market and thus fully in accordance 
with the international trading rules. 
But we have gone further than this. We have started 
discussions aimed at clarifying the international trading 
rules on subsidies. And in the work of the Committee set 
up in Geneva under the GATT to look systematically at alI 
forms of agricultural protection - and the rules for agri-
culture in world trade - there is close and constructive 
collaboration between the EEC and the American side. 
We have also embarked in the European Community on a 
reshaping of our Common Agricultural Policy which has, to 
a large extent, become the victim of its own success. 
1 0 • 
. I . . . 
As the Commission we put forward some major proposals to 
our Council of Ministers for changes in the Common Agricul-
tural Pol icy and for 1 imitation of support. The package 
we put forward was based on three main principles 
(a) restriction of the volume of production 
Jn which Community farmers receive a 
guaranteed price - something we have 
been urging the Counci 1 to do for years 
(b) a requirement that EC farmers should foot 
the bil 1 for their own overproduction ; 
(c) a reduction in the gap between the Community 
and world prices. 
And we got this package through. In March of this year, 
the Community Counci 1 of Ministers adopted a major package 
of reforms. This included a freeze on milk prices, the 
introduction of restrictive quotas which will reduce sub-
sidised dairy production by 7% with harsh penalties for 
any additional quantities, and a stringent pol icy for 
1984-85 prices of al 1 other products with price reductions 
in a number of cases. In addition, since in politics we 
have to tackle one thing at a time, the Commission has 
made no secret of its plans to propose for next year 
meaningful cuts in grain prices following this year's 
one percent cut. The dairy farmers caught it this year; 
our cereal growers know it is their turn next. 
. I ... 
l I • 
I 2. 
This package represents a major shift in the direction 
preached for years by American critics of the Common Agri-
cultural Policy and should be welcome news for American 
farmers. 
But the package has some external effects. The pro-
posals would require substantial sacrifices from EC farmers 
and have not generally been well received by them. When 
the EC is asking its own farmers to make sacrifices and, 
in fact, to control their production, which would 
be of substantial benefit to our trading partners, the 
Commission believes that it is not unreasonable for the 
Community to review its treatment of competing imports 
provided that this is done strictly in accordance with 
the international trading rules set out in GATT. 
So let me spell out what we propose in particular in 
relation to grain substitutes. The EC cannot implement a 
guarantee threshold for grain and move its prices towards 
those of its competitors without stabi 1 ising imports of 
grain substitutes. These displace both American corn and 
Community grown cereals in animal feed and have the effect 
of forcing more EC grain onto the world market. This is 
not a proposal aimed specifically at the United States. 
Substitutes are imported from a wide range of sources and 
satisfactory arrangements have already been made for manioc 
and bran coming from Southeast Asia and elsewhere. What 
we now have in mind is to stabilise the imports of other 
. I . . . 
1 3 . 
important substitutes - corn gluten feed for example, a 
by-product of corn sweetener, the booming production of 
which in the United States is due in no small part to the 
protective and high priced arrangements enjoyed by sugar 
growers and of ethanol production encouraged by tax exemptions. 
Imports of corn gluten feed into the EC have, in fact, 
soared from 700,000 tons to 3.5 mil 1 ion tons since 1974. 
Our intention, therefore, for corn gluten feed is not to 
ban imports or reduce them, but to stabi 1 ise these imports 
after discussion with the EC 1 s major suppliers against 
appropriate compensation on our part - and in ful 1 accor-
dance with the GATT rules. 
We are asked whether this is a case of corn gluten 
today and soybean tomorrow. Our answer is unequivocal. 
Action on soybean is not repeat not part of this package. 
We are also asked whether this means that American 
farmers wi li bear the major burden of the reforms. Again 
our answer is clear. 
It is European farmers who wi 11 bear the burden of these 
reforms with a tough policy on prices, production quotas, 
with severe penalties for farmers who exceed them and a cut 
in financial assistance. Anyone who wonders where the bur-
for example 
den is should readjabout the added security provided for 
European Agricultural Ministers when they visit their 
constituents. 
. I . . . 
is only a very small part of a major attempt to reshape 
the Common Agricultural Policy, to cut subsidies and to 
reduce the gap between EC prices and world prices. This 
has been seen in the United States as a golden path which 
we have been asked for years to follow. We cannot follow 
it if we exempt competing imports from the equation. And 
I would add that since stabilisation of imports of corn 
gluten feed wi I I mean less Community wheat being pushed 
out on to the world market, measures in this area should 
be of direct benefit to American, Argentinian, Australian 
and Canadian grain farmers. 
So in summary, Mr. Chairman, our thesis is this. 
I 4. 
Whatever arguments we have must be seen against the back-
ground of the strong political links which bind us, and the 
major responsibilities which the United States and the 
European Commu~ity both have in maintaining the one world 
trading system and the prosperity of the West. 
In one of our major problem areas, agriculture, we have 
started to talk, we have made some progress, we on our side 
are making major attempts to reshape the Common Agricultural 
Pol icy and to reduce our subsidies - a path along which you 
are also trying to go. believe that our joint responsi-
bil ities compel us to move along the road of co-operation 
and not confrontation. We have made a start. Let us con-
tinue along this difficult but promising road. 
14 Sept. 1984 


Address [on European agriculture and international trade] by Derwent Renshaw, Secretary for Agriculture, Delegation of the Commission of the European Communities, Washington DC, at The Fertiliser Institute's 9th World Conference. San Francisco, 17 September 1984

Address [on European agriculture and international trade] by Derwent Renshaw, Secretary for Agriculture, Delegation of the Commission of the European Communities, Washington DC, at The Fertiliser Institute's 9th World Conference. San Francisco, 17 September 1984

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Archive of European Integration

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