New members for the E.C.? A progress report
June 01, 1993
by Teresa Acklin
Austria, Sweden, Norway and Finland on fast-track to E.C. membership.
The European Community is the incarnation of the chance for Europe's peoples to develop together.'' A stirring phrase, the authorship of which will become apparent to the reader later.
The E.C. took shape in 1957 with the Treaty of Rome. The six founding countries were France, Germany, Italy, Belgium, the Netherlands and Luxembourg. The first enlargement of the E.C. took place in 1972, when the United Kingdom, Denmark and Ireland joined. In 1981, Greece became a member, and in 1986, Spain and Portugal followed, making a total of 12 countries.
Grain has always played an important role in the politics of enlargement. The Common Agricultural Policy (C.A.P.) was established in January 1962 and remains the E.C.'s only common regime after the first 35 years of the organization's existence. The C.A.P. was based on common price levels, the most important being cereal prices achieved in 1967.
In the case of E.C.'s first enlargement (which provided a five-year transition period in order for the U.K., Denmark and Ireland to bring agricultural prices up to Community levels), the availability of new markets for French grain exports was a decisive factor in persuading the French to withdraw their opposition to British membership. The French saw the opportunity, through “Community preference,'' to capture the U.K. wheat import market previously filled by more than 4 million tonnes per year of North American hard wheats. This outlet subsequently diminished through the stimulus E.C. membership provided to U.K. wheat production.
In the third enlargement (which provides for a 10-year transition period for Portugal and Spain), grain was again the subject of tense negotiation. It was finally agreed that 2 million tonnes of maize and 300,000 tonnes of sorghum per year would be allowed into Spain and Portugal from the U.S. and other exporters at a reduced import levy. This agreement was subsequently extended and remains in force, reducing coarse grain imports from other E.C. sources.
There are applications for E.C. membership from Turkey, Malta and Cyprus, on which negotiations are not active; and applications from four members of the European Free Trade Association (E.F.T.A.) Austria, Sweden, Finland and Norway on which negotiations started on Feb. 1, 1993. Another E.F.T.A. member, Switzerland, also had applied to join at the same time, but dropped out when public opinion rejected membership in the European Economic Area (the E.E.A. allows for free trade between the E.C. and E.F.T.A. countries).
The remaining countries of E.F.T.A., namely Iceland and Liechtenstein, have not yet applied for E.C. membership, although both are discussing the possibility. Finally, the countries of central and eastern Europe also are possible E.C. candidates.
Becoming a member of the Community is not automatic, even for European countries that fulfill the prerequisites of democratic government and an adequate human rights record.
But, no great problems (apart from ratification of the Maastricht Treaty) attend the current negotiations with the four E.F.T.A. countries. The position of state grain boards with monopoly powers, notably in Finland and Norway, will have to be adjusted, and Norway is seeking an intervention regime for oats (currently supported in the E.C.-12 countries through barley support), quoting the precedent established in the third enlargement by Portugal, which obtained a temporary intervention scheme for triticale. All the applicants are expected to be net contributors to the Community budget and thus act as a balance to the current Mediterranean members, which are expensive beneficiaries. They also possess functioning market economies and legal and administrative frameworks that enable them to apply Community legislation, including existing legislation known as the Community acquis.
The E.C. will negotiate with each applicant country separately, although the talks will parallel one another, and hopes are that all negotiations will be concluded by Jan. 1, 1995. The background to the negotiations is found in Commission documents giving the “Opinion of the Commission'' on all four applications. Each contains a section on agriculture.
The figures for grain production and trade for the four applicants are shown in Table 1 on the previous page.
The Swedish situation is typical. There are 95,000 farms in Sweden with an average size of 70 arable acres. There are 84,000 full-time agricultural workers representing 1.9% of the work force (down from 3.1% a decade ago) and another 22,000 part-time workers. Agriculture represents 1.2% of Swedish gross domestic product and forestry as much again. The E.C. already is the most important trading partner for Sweden, accounting for 47% of Sweden's food imports and 40% of exports.
Sweden has for some time been modifying agricultural support in readiness for E.C. membership without a period of transition. In 1990, Sweden decided not to increase price supports but instead introduced direct payments to farmers and expects to abolish export subsidies when a GATT agreement is reached. The general level of farm support is still 15% to 20% higher than in the E.C., and this may cause problems. A period of transition may be necessary in the other applicant countries to bring their cereal prices into line with those of the E.C., as Table 2 comparing basic support levels per tonne for wheat shows.
All the applicant countries except Norway are surplus grain producers. There is, therefore, little scope for increasing French wheat exports, though U.S. wheat exports to Norway will no doubt disappear. Norway itself is expected to increase wheat production. Since export costs in the four countries are higher than in the E.C.-12, their export bids are likely to be ineffective, and the expectation in Brussels is that a large wheat surplus will develop. It is possible that French producers of maize starch will find an increased market because much Scandinavian starch is produced from potatoes, but this possibility is not being pursued energetically at present. One significant change is that while U.S. rice now is imported with no restrictions, the four countries will have an incentive after enlargement to source their rice imports from within the Community.
The quotation that opened this article is the closing sentence in the Swiss government's report on its own application which, ironically, was subsequently thrown out by popular referendum. The irony of the present enlargement negotiations will be compounded should the Maastricht Treaty fail to be ratified and thus cause the negotiations to stall.TABLE 1
|Production 1991 (estimates)|| 1991-92 (estimates) Trade|
| (million tonnes)||(million tonnes)|
|Country||Wheat||Barley||Oats||Maize||Rye||Other||Wheat and flour||Coarse grains|
|Note: Norway imports wheat from the U.S. (fed to fish) under the Export Enhancement Program, also small amounts from Canada and the E.C. 12. Finland exports oats to the U.S., as occasionally does Sweden.|
|Source: International Wheat Council|
|Basic support levels per tonne of wheat|
|(in national currency)||(in U.S. $ equivalent)|
|Finland (c) (1989-90)||2,937||n.a.||311||n.a.|
|E.C. 12 (ecus) (e)||158||158||203||210|
|E.C. 12 (ecus) (f)||151||151||193||199|
|Notes: (a) Target price before VAT (10%) and also before producer contribution.|
|(b) Basis “ordinary wheat."|
|(c) Autumn wheat, March 1 each year.|
|(d) Milling quality wheat.|
|(e) E.C. buying-in rate (94% of intervention) common bread-making wheat August.|
|(f) Feed wheat price.|
|Source: International Wheat Council|