EU Agri Budget 2002 To Affect Indian Exports

Updated: Jul 29 2002, 05:30am hrs
The hope that the developed nations would implement their commitment for reducing their domestic support and subsidy to agriculture has now been belied.

The developed countries had made their commitments at the last WTO ministerial meeting at Doha, to gradually phase out their high level of subsidy and support to the farm sector. But within less than a year after making this commitment, President George W Bush signed the US Farm Bill, 2002 for raising the domestic support to agriculture to $118 billion in a span of six years. Subsequently in the current year President Bush signed the US Bioterrorism Preparedness Act, which made import laws for food products more stringent on grounds of food safety.

Now the European Union has come out with a Euro 44.50 billion budget for the year 2002. The support to the farm is about 50 of the total budgetary outlay. Expenditure on structural development funds, transport and fisheries make up another 35 per cent.

The implications of the US Farm Bill, 2002 and the US Bioterrorism Preparedness Act on Indian agriculture and agro exports had been extensively discussed in this column as early as on June 10 and July 1, this year. It was also made clear in the June 10 column, that the European Union is likely to follow suit by increasing their level of farm subsidy. Now it is time to discuss the implications of the recent EU Agriculture Budget.

It is now abundantly clear that the developed nations are in no mood to reduce their level of subsidy to the farm sector. Nafta, including US and the European Union are two major trading blocs. In fact, world trade is largely dominated by these two blocs. The increase in farm subsidy in US and in EU, therefore, will further distort trade and depress global prices affecting the export performance of the developing countries. India and other developing countries should raise this concern at the WTO.

The EU has launched a new scheme to benefit small farmers, apart from the large farm estates holders. The EU Agricultural Council has agreed on new rules to simplify direct aid payments to small farmers at a cut-off point of euro 1,250 per year till 2005. About one-third of Europe’s farmers will be benefit under this new Small Farmers’ Scheme (SFS). SFS payments will be notified as Green Box subsidies and will be decoupled from production and cover arable crop and livestock sectors. By this scheme the EU intends to shift the subsidy from Blue Box to Green Box.

The EU and other developing countries has been shifting subsidies given under Blue Box to Green Box, as the subsidies given under Blue Box has been a centre of controversy at the WTO. Some policy analysts also think that EU in the course of time may shift the SFS payments to the rural development pillar of the CAP, which implies the possibility of co-financing by member states. Under European Agricultural Guidance and Guarantee Fund (EAGGF), the budget for fresh fruit and vegetables has been decreased by 10.7 per cent while that on processed fruits and vegetables has been increased by 18 per cent. This is also another intelligent way of showing that EU is also decreasing its subsidy. But the fact is that EU is more interested in boosting its exports of processed foods. The EAGGF finances expenditures on agricultural market organisations and rural development measures that accompany market support.

Under EAGGF, the support for total plant products has been increased to euro 27,349 million. Support for total animal products including meat, poultry, bee-keeping and fisheries has been marginally decreased to euro 10,860 million as against euro 11,130 million last year. Support under ancillary expenditures like refund on products, food programmes, distribution of agro products to deprived persons in EU, programmes in remote regions and veterinary and plant health measures has been raised to euro 1,426 million. EAGGF support under rural development and monetary reserves has been estimated at euro 44,481 million.

The budgetary outlay for EU export refunds for commercial products has been estimated at euro 2,983 million. There has been a marked increased in this fund for sugar, butter and butter oil, skimmed milk powder, cheese, other dairy products, eggs and poultry meat. The total direct payments to farmers has been increased to euro 29,966 million.