Blame Mendelssohn

French President Nicolas Sarkozy has blamed Peter Mandelson, the EU trade commissioner, for the Irish ‘no’ vote in the referendum on the Lisbon Treaty.  I yield to no one in the strength of my belief that the EU commissioners have super-human powers.  Even so, Sarkozy’s has to be an unusual mind to reach that conclusion. Why not blame the French and Dutch voters who in 2005 rejected the Treaty establishing a Constitution for Europe?  Without their ‘no’ vote there might not have been any need for a Lisbon Treaty – and it would have been such fun to have a referendum in the UK.

The reason offered for Mandelson’s pivotal role in the Irish ‘no’ is that his proposal to cut Europe’s agricultural tariffs to revive the Doha round would have alienated Irish voters.  This is unlikely, to say the least, regardless of whether the Irish vote their wallets or their ideals.

Wallets first.  Agriculture is not a significant part of the Irish economy any longer.  In 2006, the last year for which statistics are available, agriculture, forestry and fishing were 2.6% percent of Irish GDP.  No doubt even this low figure is artificially inflated by the protection that continues to be offered to the EU agricultural sector through the Common Agricultural Policy.  The corresponding figure for the UK is less than 2 percent (agriculture on its own is just 1 percent of UK GDP) and for the USA around 1 percent of GDP.  In none of these countries is agriculture an important source of income and jobs.

Ideals.  President Sarkozy asserted “A child dies of starvation every 30 second and the Commission wanted to reduce European agricultural production by 21 percent during World Trade Organisation talks. This was really counter-productive.”  and “Frankly, there’s only one person who thinks like that and it’s Peter Mandelson, and it’s not France’s position”.   Even by the standards of French presidents appeasing their agricultural lobbies, this is an unusually silly sequence of assertions.

First, the relation between European agricultural production and children dying of starvation is not at all obvious.  Starvation is a consequence of extreme poverty, distribution failures and the absence of any kind of safety net.  It is not the result of a global shortage of food, let alone of a reduction in EU food production.  This has been well documented in a large literature started by Amarya Sen’s book  Poverty and Famines: An Essay on Entitlement and Deprivation (1981). Even during the Bengal famine of 1943 in which three million people died of starvation, there was an adequate food supply in Bengal to feed everybody.  However, the very poor, including rural landless labourers and some groups of urban service providers did not have the monetary means to acquire food when its price rose sharply due to factors  connected to the war in the region.

Second, the Commission does not propose to cut European agricultural production by 21 percent.  The Commission made proposals to reduce tariffs as part of a world-wide reduction in agricultural protection.  It is possible that the net effect of this global agricultural tariff reduction would be to reduce European agricultural production, but the 21 percent figure is plucked out of thin air. This is typical political rhetoric: think of a number and double it.  Then double it again.

Third, the position of the Commission on tariffs is on behalf of all 27 EU members and endorsed by all 27 Eu members, including France.  France no longer negotiates external tariffs.  That is a Commission competency.  I have views on the Middle East.  As I don’t take part in the negotiations, I don’t have a position.  France (or its president) may have views on agricultural tariffs; it has no position because it no longer plays the game.

Fourth, agricultural production in Europe is not the same as food production.  Part of it provides raw materials for industrial products rather than for food products.  Thanks to EU bio fuel subsidies, an increasing share of a range of crops is diverted away from feeding humans or animals and towards producing substitutes for oil-based fuels.

Fifth, the greatest contribution the EU can make to improving the efficiency of global food production and the security of food supply is to fight for global free trade in agricultural products and to end, unilaterally if necessary, all protection of European agriculture.  That means no tariffs, quotas, subsidies to production, consumption or exports, income supports or any other non-tariff barrier to trade, and no other forms of administrative, regulatory or fiscal/quasi-fiscal support for agriculture.

Being able to source agricultural products freely from anywhere in the world will give Europe signficantly greater security of supply than attempting to establishe food self-sufficiency at the level of the EU.  With French farmers, truck drivers and fishermen blocking roads and blockading ports at the drop of a hat, I know I cannot count on food products reaching me reliably from or via France.

Further contributions to global food supply and security could be made by the EU ending its subsidies to bio fuel production.  Subsidies should instead be directed towards R&D into more effective second and third-generation bio fuels and into other forms of renewable energy – preferably sources of renewable energy that do not depend on agricultural production.  The agricultural sector has been and continues to be the greatest environmental destroyer mankind has ever created.

Finally, the EU could end its atavistic and luddite opposition to GM crops.  It is clear that the world needs a new ‘green revolution’, both to boost agricultural productivity in exisiting regions of cultivation, and to make better use of the marginal lands that will have to be put under the plough to feed the a world population that may not peak before a further 3 billion people have been added to the total.

Blame Mandelson!  It would have made as much sense to blame Felix Mendelssohn Bartholdy.  I am sure a lot of potential agricultural production in Europe (perhaps as much as 21%) was lost by farmers nodding off while listening to the second movement of his violin concerto, instead of ploughing a straight furrow.

Maverecon: Willem Buiter

Willem Buiter's blog ran until December 2009. This blog is no longer active but it remains open as an archive.

Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC; adviser to international organisations, governments, central banks and private financial institutions.

Willem Buiter's website