Newsletter #14: Mercosur, sugar crisis, CAP 2020 on stand by, counter-cyclical aid on US milk, dumping, civil wars in Africa


Is the EU-Mercosur agreement that has just been signed but still to be ratified the globalist best-seller of an outgoing Commission? Why now ? And especially why engage with a Brazilian President who just refused to organize the COP 25, has re-launched the deforestation and reauthorized 239 molecules, most of which are banned in Europe? The meat and sugar sectors, on the contrary, expect solutions and visibility to project themselves into the future.

This is the subject of the study “A European sugar policy that needs rebuilding” that we have just made public. We retrace the history of sugar policy to see that the 2006 reform had produced a satisfactory result and that the decision to abolish the quotas did not respond to international pressure. In view of the strong policies of the main producing countries, the European Union is the only one to want to rub the “world price” which is de facto the export price of Brazil. It is shown that with a stabilizing flywheel of 16 million tonnes of sugar, equivalent to 0.34% of annual oil consumption, we would avoid the yoyo of prices, which would encourage thinking about the flexibilisation of biofuel policies.

Being able to help the supply to adjust to the demand will remain an objective of the effective agricultural policies, because as Thierry Pouch recalls the “law of the outlets” of Jean-Baptiste Say is largely invalidated. The sugar crisis resulting from the end of the quotas offers a particularly comical demonstration that the latter was the brother of Louis Say, founder of Say sugar confectioneries in the early eighteenth century, which were included in the group Béghin-Say bought at the beginning of 2000s by the cooperative Tereos.

The current CAP is running out of steam and although the European Parliament’s action has brought some improvements in crisis management, the Commission’s proposal was too late and too much a continuation of the previous reform to have a chance succeed. This is the conclusion we draw from the very detailed article by Aurélie Trouvé who draws up, at the time of the change of term, the state of progress of a negotiation of the 2020 CAP that would need a reboot.

Fortunately, to avoid the accumulation of bad news, there is American agricultural policy: in the country of Uncle Sam, there are solutions to address agricultural problems! This is the case for the dairy sector which, thanks to the new Dairy Margin Program (DMP), will see farmers receiving counter-cyclical subsidies as soon as the price of milk drops below around € 350 per ton of milk. What to cover production costs, especially for farms with less than 200 cows that will benefit compared to larger farms.

Agricultural prices do not converge spontaneously to their equilibrium level, but instead are marked by long phases of dumping and brief episodes of outbreaks when food security is at stake. This is the belief of Karen Hansen-Kuhn and Sophia Murphy in an article published by the IATP where they call to resume the definition of dumping of GATT and to abandon that of the WTO. According to them, the first is more satisfactory because it takes into account the costs of production while the second is concerned only with the price difference of a product between the domestic market and the export. The issue of dumping merits a renewal of the current approach to international trade and agricultural policies as it harms local producers, foreign farmers and environmental objectives.

Finally, dumping, we are interested in the work of Mathieu Couttenier which shows that low agricultural prices are destabilizing factors of African states. Hunger riots like the Arab Spring have shown the risks of too high prices, but the reverse is not good either: the loss of income related to agricultural activities increases the risk of conflict, and the occurrence of these conflicts are more important in the most integrated areas of international trade.

Good reading !

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