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SPEECH/04/64

Dr. Franz FISCHLER

Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

EU Enlargement and Globalisation A dual Challenge for Europe

Ökosoziales Forum

Vienna, 9 February 2004

Ladies and Gentlemen,

The winter conference in Vienna has long been a permanent fixture on the Austrian farming calendar. It is more dependable than most farmers' weather predictions.

But we still always look forward to this conference because it is a good place for political dialogue and sometimes heated debate. The fact that the conference always manages to be exciting is to the organisers' credit, above all Joschi Riegler, who has been running the winter conference for years. Obviously, this year enlargement, which will be in exactly 81 days from now, features high on the agenda.

Former German Chancellor Willy Brandt once said that for him, without its eastern part, Europe was a mere torso. And in Austria we have seen for ourselves at close quarters what it is for whole regions such as the Waldviertel or Burgenland to feel like their arms or hands have been cut off by the iron curtain. All the more satisfying, then, that on 1 May our European torso will finally find its limbs again and regions once on the fringe will move back to the centre of Europe.

The fact that this move back to the fold has in effect already taken place, with so many prominent representatives from the new Member States present today, is particularly pleasing. I would therefore like to extend a warm welcome to all our guests from the candidate countries.

The Federation of Austrian Industry has worked out that, over the past few years, the rise in gross incomes in the Austrian border regions was much sharper than the national average - in the Waldviertel, for example, the rise in incomes was almost 10% more than in Austria as a whole.

I do not need to remind you that many businesses on both sides of the border saw their profits improve after it opened. The profit-and-loss accounts of large Austrian banks also show that a substantial part of their profits came from business with and in the candidate countries.

You may say that that is all well and good, but how does it help us to cope with the consequences of enlargement for agriculture?

After all, accession will bring a further four million farmers into the EU, on top of the seven million farmers already in EU-15. A question in some people's minds is: what's in enlargement for us, apart from more competition?

I make no bones about the fact that integrating the widely agriculture-based economies of the candidate countries will mean greater competition for us in the farming sector.

And of course it is also clear that not everyone greets more competition with open arms.

But the fear of losing out in this new competition exists on both sides.

The arguments put forward in the candidate countries to support this view are their lack of capital, the extent of the subsistence economy and their outdated marketing structures, while here it is the lower production costs in the new Member States and failure to meet standards, etc.

According to a study by WIFO, the Austrian Institute of Economic Research, wage levels in the accession countries are 40% below the EU level on average.

Is this cause for concern? Only to an extent, because their productivity levels lag even further behind than their wage levels. Productivity is increasing, but not as quickly as wages. This means that these countries will be able to draw hardly any competitive advantage from their lower wages. And I have already pointed out on several occasions that there will be no compromise on hygiene standards and food safety.

Over the last four years the EU has made €1.33 billion available for the new Member States to prepare their agricultural sector for enlargement and in particular bring it up to our standards. But the legacy of decades of planned economy cannot be eliminated overnight.

Therefore, in agriculture, enlargement will bring major challenges and more competition for us and the new Member States alike but, and that is the other, positive side of the coin, greater opportunities as well.

In concrete terms this means: more trade, greater openings on a larger internal market, and uniform standards. In a nutshell: enlargement can be managed so that both sides end up winners.

Preparing the accession countries for EU membership and conclusion of the agricultural trade agreements have already led to improved trade relations over the last few years.

Take the wine sector, for instance, where exports have seen rapid growth: for example, in 1997 the Czech Republic imported 2.5 million litres of Austrian wine but last year the figure was 15.5 million litres!

There is no reason to assume that market opportunities will not continue to grow after enlargement.

We will then have an internal market of 450 million consumers without tariff restrictions, export quotas or trade barriers.

Purchasing power in the accession countries, which has been growing twice as quickly for a good decade, will lead to large numbers of new customers demanding branded food items from EU-15, as evidenced by the wine export figures. The experts expect this trend to continue in the new Member States in future, with further strong growth in cheese and meat product consumption, for example.

Farmers and the food industry in today's EU in particular will benefit from this increased demand because it is mainly their brands that are sought-after.

For farmers in the new Member States I see greater opportunities in low-cost cultivation of feed cereals, rape and renewable raw materials. Perhaps it will not be long before Austrian mixed feed plants start using Czech feed cereals, for example.

So the focus in the coming years will be to make intelligent use of the existing opportunities and play our strengths to the full on both sides, instead of waging a senseless price war in the hope that only the home side will survive. It is up to the policy-makers, both in Austria and in the new Member States. We must develop policy strategies to bring the transition to a successful conclusion.

But farmers must also play their part as entrepreneurs: the opportunities are there for those who respond quickly and cleverly to the new situation and demands, recognise trends, find niche markets for themselves and cooperate in joint undertakings.

In their marketing strategy, domestic businesses should push 'Austria' as a quality brand name: Austrian wine, Austrian cheese and Austrian meat products have always had a good reputation in the candidate countries. We must build on that.

We should not forget that there will be better export opportunities not just in the enlarged EU itself - enlargement will also give us new neighbours: Russia, Ukraine and Moldova will be on the EU's external border in future. Trade with these countries has also developed over the last few years, and the prospects here are also good. This is an opportunity that the candidate countries can more likely take advantage of than the countries of EU-15.

However, if all farmers are to benefit equally from the advantages offered by an enlarged internal market, we must make sure that we have a level playing field.

After the agreed transition period, the common agricultural policy must be applied in the new countries in exactly the same way as in the existing EU.

The agreed transition rules work both ways: on the one hand direct payments will not rise to their full amount until after a certain period, but on the other hand the obligations do not have to be met everywhere from day one. Except that, as I already pointed out, when it comes to food safety, there can be no compromise.

We have checked again to see if there are any improvements that can be made to ensure that the CAP works smoothly come the first of May.

But I am confident that the accession countries will make it if they maintain their high rate of reform in the last days and weeks before accession. On that point I must also say how remarkable the speed is with which the accession countries have pushed through and implemented their reforms. They have made a tremendous effort and deserve our respect.

There is no getting round it: enlargement is a challenge such as Europe has not faced before. But it is at the same time Europe's answer to globalisation. It is proof that liberalising trade brings more benefits than problems. It is proof that integrating markets will promote wealth. It is proof, though, too, that globalisation needs its own rules, and the law of the jungle should not prevail.

Globalisation - what do we mean by that? Well, we mean the growing, world-wide and mainly economic interdependence of all countries. The best indicator is growth in world trade: e.g. the EU's exports have gone up by 73% since 1995, our imports by 81%.

Even Europe's agriculture is meshing ever more strongly with the world market: the EU of 25 is exporting nearly a fifth of its agricultural production to countries outside the enlarged EU. At the same time, we need our imported raw materials for further processing in Europe.

For many people the word 'globalisation' has a negative, even a threatening ring. They feel powerless and exploited. This is precisely why I have always insisted that we need world-wide rules for dealing with globalisation. And the most important instrument for controlling globalisation is of course the WTO, to which the more than 140 states belong that are currently trying to conclude a new agreement in the Doha Round of trade talks.

I am sure you are aware that this round of negotiations has ground to a halt after the failure of the Cancún summit. This is all the more unfortunate because the EU has far better cards in its hand than in earlier rounds because of our recent CAP reform.

We have been trying for some months to get these talks back on track. In the last few months we have been pursuing a number of diplomatic initiatives to achieve this, and I have met personally with many ministers from around the world to try to convince above all the developing countries, in one-to-one encounters, how substantial the EU's offer is in reality.

And I can only welcome the recent initiative of the US trade representative, Bob Zoellick, to reach out to the developing countries and so move the blocked negotiations on.

Everyone knows that reviving the Doha Round will depend crucially on progressing the agriculture part of the negotiations.

The Americans say they want to abolish export subsidies. The EU tabled a proposal some months ago which involves negotiating with the developing countries about removing export subsidies on products of interest to them. We are still waiting for an answer, however.

Because the Americans are rightly concerned for the developing countries, I assume that they really want to discuss ALL forms of export aid, not only Europe's.

  • What about export credits for example and export dumping disguised as "food aid", as practised by the United States among others?

  • Why are there still no WTO rules on state trading monopolies? It is not acceptable when, like in Canada recently, the national budget is used to absorb the deficit of a body such as the Canadian Wheat board without this being considered as state promotion of exports.

  • How should all the various export taxes be treated? Is it fair that Argentina, by a marked differential in export tax on soybeans and soybean flour, is currently building the largest soybean mill in the world?

  • How can we explain that in most countries of the world there is a significant difference between internal and export prices for sugar?

To all these questions we must find a response within the framework of the WTO. Just pointing a finger at EU export refunds and hoping that this will crank up the international farm talks again is hardly helpful, especially when it is apparent - as my examples show - that other forms of export support are expanding rather than shrinking.

Our export statistics prove that our export refunds are not the root of all evil. In actual fact the EU has lost export-market share in recent years across all major agricultural products. But these lost shares have not gone to the poorer countries of the world, they have gone to the most competitive net exporters. If the poor countries are actually to get more export opportunities, we must not only open up more possibilities to them but also help them to bring tradable products to market.

This means the industrial nations supporting the developing countries. If they cannot sell their products, the additional trade openings are no good to them at all.

As for internal support for agriculture, the idea must be to cut back support which damages international trade, depresses prices or harms the developing countries.

Of course I am conscious that our farmers earn higher incomes than their African counterparts. But this support particularly after our CAP reform matches the services they provide, from upkeep of the countryside to animal welfare. And compared to the rest of the population, our farmers are earning not more but less.

I find it simply irresponsible to give the developing countries the impression that we only have to do away with EU farm support lock, stock and barrel to enable people in the Third World to have a better life.

It is not that easy. We must cut down on trade-distorting support, and we are more than ready to do so. We should also help the developing countries to help themselves. In other words: we need trade AND aid, not unusable trade openings IN PLACE OF aid.

On this point it would certainly be helpful if the representatives of farming made their position clearer.

And then there is the issue of opening up our markets. Europe is frequently portrayed as an impregnable fortress. The truth is that we have opened our agricultural commodities markets to the 49 poorest countries in the world completely, that 77 ACP countries have privileged market access, and the average rate of our duty on agricultural products is 10%.

As a result, we are buying 85% of the entire farm exports of Africa and 45% of South American exports. It ought to be the turn of the other industrial nations to allow in more imports. At any rate, we are already importing more from the Third World than the United States, Canada, Australia, Japan and New Zealand together.

This is not to say, however, that we should not do more.

If the poorest countries are actually to gain from trade liberalisation, they need both significantly better market access and help with producing to international standards. The contribution from the industrial nations should look like this: less trade-distorting support, reform of agricultural policy in the other industrial nations as we have just managed in the EU, and special treatment for developing countries. This is exactly what the EU is now proposing.

  • We are ready to dismantle trade-distorting subsidies by 60% - twice the amount in the Uruguay Round.

  • We are prepared to cut our spending on export refunds by 45% and we are ready to do away with support for exports altogether on products of special interest to the developing countries.

  • We are also offering to cut rates of agricultural duty by 36% on average.

  • But at the same time we will not stand idly by and see the legitimate expectations of our citizens put completely aside at international level. Environmental protection, sustainability, animal welfare and product quality must also be given an appropriate place in the international trading system.

At all events, I will continue advocating a successful conclusion to the trade talks. This is because we need a functioning world trading system. We need it because it is an important pre-condition for economic growth, and we need it because we want to see fair and equitable rules on international markets and not a free-for-all.

However, it will require a major effort to drag the WTO talks out of the mire again. In the end, success will depend on all members of the WTO. All must be prepared to converge on a position somewhere in the middle. This will require greater political will and accommodation all round - from the industrial nations as much as from the developing countries.

To conclude, then, I would like to sum up the two big challenges facing Europe as follows. First of all, we have to keep the enlarged European ship on course. Secondly, as the largest economic area in the world, with a population soon to top 450 million, we have to stake our claim as a leading global player. In the process, a further opening up of world markets is an important pre-condition for the world-wide economic growth we stand urgently in need of.

Sten Nadolny, the author of 'The Discovery of Slowness', wrote that "There are two occasions for everything, the right one and the missed one."

We are approaching the right moment now for EU enlargement and the WTO talks. Let us not miss it.

Thank you very much for your attention.


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