Re: Quebec Protests

["schulte-baeuminghaus" <cresscourt@xxxxxxxxx>]

Barkley,

You quote the standard arguments against the CAP that I have lived
with for the last almost forty years.
By and large, they are valid.
But they are far from the full story.
Especially in the context of so-called free trade and free-trade
areas, globalisation, and the rest, we need to look more deeply at
what the costs are of systems like the CAP and what are their
advantages.
I was in charge of our Mission to the EEC at the time the CAP was
born. Many of the concepts - relating especially to variable levies
and price supports - were the product of a brilliant young Frenchman
and, despite some family connections with Australia, we felt little
gratitude for what he did.
However, he pleased his own people, in Paris and Brussels, and over
time his accomplishment in creating one of the most restrictive
trading systems within what claimed to be a customs union dedicated to
liberal, non-discriminatory trade has to be admired.
So, let me be clear that I share many of your criticisms of the CAP -
officially and professionally.
I also have personal reasons for denouncing it.
One of the earliest, most able and most reliable of the EEC
Commissioners for Agriculture, a Dutchman called Mansholt, assured me
personally that "there will always be a market for beef in the
Community." He made several public statements to that effect.
In 1974, Australia sold a million tons of beef to the EEC countries.
We were
the biggest beef exporter in the world.
By then, Britain had become a Member of the EEC and our exports to
Britain were incorporated in the Community intake.
Towards the end of 1974, the EEC Commission suddenly lowered the boom
on beef
imports. We were not the only country affected. Canada, Argentina,
Yugoslavia - with its Baby Beef - and other countries formed a
committee in Brussels to try to modify what rapidly became an embargo
on non-EEC beef. We had little success.
I've forgotten some of the details and the timing but, within a fairly
short period, the EEC not only met its own requirements for beef but
became an exporter. In time, and for certain periods - I'm not sure
how long it lasted - the EEC replaced Australia as the largest
exporter of beef in the world.
At a property I had in Australia, we were running cattle as well as
sheep. During much of 1974, the stock we were running were worth more
than $200 a head. When the EEC Commission closed the market, they
slumped to less than $20.
Many people went bankrupt or gave up their properties and retired or
took up
something else.
So we felt much more unfriendly towards and critical of the CAP than
you show yourself to be in your message below. I'd even disagree with
you that, in France, the beef is "of better quality." In a country
that prides itself on its food, the beef, in my quite extensive
experience, is tough and tasteless. In Australia, we'd throw it away.
Our cattle are also among the most disease-free in the world. Your
claim that French cattle are disease free derives probably from the
contrast you draw with British beef at this unhappy moment in British
farming history.
But all that is by the way.
We are obsessed with the idea that protection - of almost any kind -
is bad.
Everyone jumps on that bandwagon. It's politically incorrect to jump
on any other.
But what has happened to countries which have swallowed that - hook,
line and sinker? Just bear in mind in all this that the proclaimed
free traders in the EEC/EU have applied their rules with remarkable
moderation.
As far back as 1974, the Australian Government opted for reducing
protection by unilaterally cutting import tariffs by 25% across the
board. Over the years, a variety of governments have cut tariffs,
quotas, subsidies - you name it, we cut, abolished or abandoned it.
What has happened? I remember one year, Brazil - I think it was - had
a massive crop of oranges. They had to get rid of them somewhere. They
landed massive cargoes of oranges in Australia at giveaway prices. Our
own
orange growers were ruined. They tried to grow alternative crops or
simply went out of business.
What did we gain? Our consumers should have got almost free oranges
and orange juice for a moment - but, in fact, the wholesalers did. The
retailers had much the same mark-ups. The consumer paid much the same
as if the local orange growers had not been ruined by imports.
Subsidies take a number of forms. Traditionally, state rail services
in Australia
have been provided at cost or below to rural areas which are dependent
on the railway as a lifeline to get their produce to market and get
their supplies. In recent years, the obsession with the bottom line -
and with budget surpluses - has caused governments to cut railway
losses
and one of the best ways is simply to discontinue the service. So
trains no longer run to many destinations. The subsidies are ended;
so, in many cases, are the farmers and the little country towns.
Unsubsidised, the Australian country towns die.
Subsidised to the limit, the EU country towns flourish.
That uncovers one of the disabilities under which economies like
Australia have suffered for many years past. There has been a tendency
for higher education in economics to be sought at what are regarded as
the high-standard American universities. Many Europeans would say
that the Americans, including their universities, know no economics.
They know only "business" - and that of a very American kind.
Anyway, an Australian returning to his home country with an MBA tends
to be regarded with awe. His recommendations on policy matters tend to
be applauded and, far too often, faithfully followed, however unsuited
they may be to Australian circumstances.
I must emphasise that, of course, the economics or "business" the
returning MBA has learned is in the context of the American economy -
an economy, society and political
environment not likely to be replicated very frequently elsewhere.
(In keeping with this, too many Americans imagine that what works in
America will work, for example, in "reformed" Russia  and the former
Soviet Republics and satellites or in any number of radically
different economies and societies all around the world. Many American
ideas don't work even in America but too few people realise that they
don't.)
We had a Premier of New South Wales a few years ago who had returned
to
Australia with an MBA. One of the things he did was to cut the losses
of NSW Railways. He discontinued many country services. The State
Budget improved. Many country communities died or went into terminal
decline. He got a better bottom line and helped to create a wasteland
in the process.
One of the other emphases in recent thinking has been on costs to the
consumer.  You emphasise this too. In relation to the EU/CAP, you say
-

>     The main arguments against it are a) that Europeans
> pay much more for their food, and b) that it is very
> expensive in budgetary terms in the subsidies paid
> to farmers.  I note that farmers are a very small percentage
> of the EU population, under 5 percent by now, I think.  So,
> and this is the usual story with protectionism, the many
> are paying a lot for the benefit of the few.  Certainly the
> EU farmers are making out like bandits.

We heed the mighty consumer in Australia too. The consumer must be
looked after. He must
not be asked to pay too much. He must not be taxed too much.
But the consumer has another hat too as a producer. If he doesn't
produce and sell,
he'll have no income to consume anyway. There must be some balance of
course. You can't ignore the consumer. But, if you ignore the producer
- fail to give him an environment of reasonable security - the whole
economic structure will collapse. Investment will drop, productivity
will fall and the production won't be there to satisfy needs - unless,
of course, you import it.
Someone will always be waiting out there to sell you the products that
you have caused your home industry to abandon.
Industry will simply be transferred.
Unemployment will probably be massive and chronic.
Foreign debt will build up. The exchange rate will fall. The consumer
will now anyway have to pay much more for what he needs - even though
he gets it "cheaply" from some overseas source.
When we were happily protectionist in 1974 - though the Government
wasn't; it cut tariffs by 25% - the Australian dollar was worth more
than the US dollar.
Now, after nearly thirty years of embracing free trade, attending to
the consumer, the bottom line, the need for competition, achieving
budget surpluses, shouting for globalisation - you name it, we've
tried to do it - after all that, the Australian dollar is worth about
50 US cents - the lowest point in all our history.
Something must be wrong somewhere.
I don't want to write you a book, Barkley, but you know where my
thinking is heading.
We have too readily denounced protectionism - including that in the EU
and its CAP. (Incidentally, the EU does not protect only agriculture.
At almost the same time as they destroyed our market for 1 million
tons of beef, they cut our exports of steel to the EEC from 1 million
tons of steel a year to a quota of 400,000 tons. They did not
negotiate. They did not give any notice. Overnight our steel exports
to the EEC were sliced by more than half.)
There has been some discussion of comparative advantage in the PKT
group. I've already gone on too long but dedication to comparative
advantage can be as self-destructive as dedication to "free trade" and
the rest that I've been discussing above.
Let's get more realism in our thinking. Let's hope that the Quebec
protesters and their colleagues elsewhere will start us down a more
realistic track and save the economies and societies of many of us
from even greater disasters than we've been through already.

James Cumes

P.S.  You say -

>I note that farmers are a very small percentage
> of the EU population, under 5 percent by now, I think.

Ever hear of a thing called a multiplier?
Think of all the "derivatives" from the 5% of the population who are
farmers. The service industry - industries - don't operate in
isolation. They grow largely as an adjunct to the primary and
secondary industries.
I can't give you a figure for those dependent directly and indirectly
on agriculture - I don't think I've ever had one - but you might find
that it's a good deal more than 5%.
My apologies that this has been so long.

James Cumes.
The Bookshelf of James Cumes
http://members.chello.at/schulte-baeuminghaus




----------
>From: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
>To: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
>Subject: Re: Quebec Protests
>Date: Wed, Apr 25, 2001, 9:57 pm
>

> James,
>     Hmmm.  You go from apparently denouncing the
> CAP to applauding it.  Oh well.
>     The main arguments against it are a) that Europeans
> pay much more for their food, and b) that it is very
> expensive in budgetary terms in the subsidies paid
> to farmers.  I note that farmers are a very small percentage
> of the EU population, under 5 percent by now, I think.  So,
> and this is the usual story with protectionism, the many
> are paying a lot for the benefit of the few.  Certainly the
> EU farmers are making out like bandits.
>        Now, one might argue that the food is also of better
> quality, at least in France and at least where there are no
> diseases.   Maybe.  But it is also twice what it is in the US,
> or that was my impression the last time I lived there.  And,
> if one wishes to insist on such quality, one can achieve
> it by mandating it via regulations.  Let the importers
> provide the quality and then let them sell their stuff.
>      Let me note that many European countries are reported
> to have higher per capita incomes than the US.  But very
> few are reported to have higher real per capita incomes
> on the basis of PPP measures.  One of the main reasons
> for this discrepancy is the very high price of food in Europe,
> despite the fact that the US also has some ag protectionism.
> It simply does not come close to what Europe has.
> Barkley Rosser
> ----- Original Message -----
> From: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
> To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>; "Peter Dorman >"
> <dormanp@xxxxxxxxxxxxx>; "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>
> Sent: Wednesday, April 25, 2001 3:50 PM
> Subject: Re: Quebec Protests
>
>
> Barkley,
>
> National protection within the EU for agricultural products, is not a
> question of internal tariffs or quotas. It's a question of guaranteed
> prices. Prices used to be guaranteed at a level, for example, that
> would ensure that a part-time pig-farmer with a couple of pigs
> in/outside, say, Dusseldorf, would make a nice living.
> He didn't have to sell his pigs.
> The CAP found some market for his pigs - or let them rot or gave them
> away or whatever.
> As to access for non-EU producers, what major product from, let's say,
> Australia, in which EU farmers have an interest, can the Australian
> farmers market on any scale in the EU? Such as wheat, other cereals,
> dairy products, fresh fruit, beef, lamb and mutton, sugar, etc
> etc.....
> We still sell some wool, because the Europeans can't produce enough
> especially of high quality - although most of the wool is now bought,
> not by the EU but by China, Japan and other Asian producers of fine
> woollen clothing and textiles.
> Originally, in the 'fifties/'sixties, the journos liked to talk of
> agriculture being the French payoff for German access for its industry
> to France. But look how the German farmers have benefitted from the
> CAP and how well French industry has done. Have you, in your visits to
> France, noticed how many French cars are on the road compared with
> German, Italian, Japanese or American? True, there are some, mostly
> with foreign number plates, driven by Germans, Italians, and so on.
> But it's not only the French who've enjoyed the CAP. The Danes regard
> it as their postwar version of the prewar Commonwealth Preference
> System. The Irish - God bless them - based their comeback from the
> potato blight - a hundred and more years ago!! - on the CAP. They've
> added industry on the back of that and it's good to see the Irish
> doing so well.
> You say that the CAP is "clearly one of the biggest single messes in
> the EU".
> But is it? And if so in what sense?
> Of course, everyone says it's one of the craziest policies in a crazy
> EU world.
> But please take a closer look.
> During several tough years, it was the CAP that held the EU together.
> Everyone in the EU - then called the European Economic Community - got
> something out of the CAP when they thought they were getting nothing
> much out of anything else in the EEC/EU system.
> But its value goes deeper than that.
> Please take a look at the countryside in the member countries of the
> EU and the way the little towns in the countryside have held together.
> Don't forget that it's more than the farmers who benefit from the CAP.
> The small-branch retail bankers, the road transporters, the railways,
> the retailers in the country towns, the doctors and the lawyers in
> farming areas, the buyers and sellers of farm produce, the insurers,
> the storers, the exporters, the farm-machinery suppliers, the
> suppliers of fertilisers and on and on and on.
> The farming areas in the EU look - and they mostly are - green and
> prosperous. Mostly they are, although they've got problems of which
> we're all aware.
> Have you looked at farming areas in countries which have "globalised"
> their agriculture - cut out protection, subsidies, encouraged
> cut-throat competition and the rest?
> Have a look some time at, for example, Australia. One of the most
> efficient farming countries in the world - once. Now too many farmers
> are bankrupt. Country towns are disapperaing. The bankers have fled to
> make money on mutual and pension funds, derivatives and foreign
> enterprises, and, generally, to have a shot at making money in the
> world casino economy. The doctors and lawyers have vanished to make
> money in Sydney and Melbourne. Protection of the bush environment has
> collapsed. Country roads have deteriorated. Railways have shut down
> many country lines.
> It's as though the gold mines have been worked out. The miners have
> gone. Their settlements are quietly going back to the bush.
> I used to think, like you, that the CAP was a mess. How I wish now
> we'd somehow been able to formulate and implement something the same
> kind of mess in Australia, even if it were to do no more than restore
> the Australian countrside to what it once was - its condition, let's
> say, some thirty years ago.
> I know there's a lot more to be said than this but it all leads to the
> conclusion that -
> The Quebec protesters have something real to protest about and, as
> soon as they get their thoughts and agenda togethers, we might begin
> to see some gradual - or revolutionary? - improvement for millions of
> people around the world, including those who abandoned so much to the
> siren call of the "free market," "globalisation" and other devices
> that appeal to a so-called élite but that are destroying many formerly
> stable, valuable societies, as well as individuals within them,
> whether in the cities or the countryside..
>
>
> James Cumes
> The Bookshelf of James Cumes
> http://members.chello.at/schulte-baeuminghaus
>
>
> ----------
>>From: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>
>>To: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
>>Subject: Re: Quebec Protests
>>Date: Wed, Apr 25, 2001, 7:48 pm
>>
>
>> James,
>>       My use of "fussing" was sarcastic.  I am all
>> too aware that the EU's CAP is this enormously
>> expensive and bureaucratic scam, mostly set up
>> to please the French, clearly one of the biggest
>> single messes in the EU, although not fatally so.
>>       However, you overstate things.  There is not
>> total protectionism with regard to non-EU ag
>> products, but certainly very vigorous protectionism.
>> OTOH, there is very little within the EU, although
>> it is not completely gone.  This is why agriculture
>> is a major sore point with regard to the admission
>> of new members and a major reason the French
>> are regularly the naysayers in terms of letting new
>> members in.  They were unhappy about the Spanish
>> and Portuguese geting in because of the competition
>> from their agricultural commodities, and it is because
>> of agriculture above all that the French have been
>> (trying to) block Poland and other East European
>> countries from entering.
>> Barkley Rosser
>> ----- Original Message -----
>> From: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
>> To: "J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>; "Peter Dorman"
>> <dormanp@xxxxxxxxxxxxx>; "Post Keynesian Thought" <pkt@xxxxxxxxxxxxxxxx>
>> Sent: Wednesday, April 25, 2001 3:00 AM
>> Subject: Re: Quebec Protests
>>
>>
>>> Barkley,
>
>
>