Wednesday, July 14, 2004

Trading Issues: EU takes Sugar Bull by Horns

Despite the rhetoric of free trade here in the United States, the oldman finds it interesting that we are taking tariff or trade actions right and left while it is Europe that is getting into the business of cutting agricultural subsidies.

BRUSSELS, Belgium - The European Union's head office tackled the sticky problem of sugar subsidies Wednesday, proposing price and production cuts to reform a system critics charge hurts farmers in poorer countries and consumers at home.

Calling the current regime antiquated and economically unsustainable, the European Commission said it wanted to cut guaranteed sugar prices in Europe by one-third over two years and reduce production by 2.8 million tons over four years.

Subsidized sugar exports, blamed for driving down world market prices, would be whittled down to 400,000 tons from 2.4 million now.

EU Agriculture Commissioner Franz Fischler conceded the changes would likely result in job losses, squeezing some European farmers and sugar mills as well as former European colonies that currently depend on import preferences at Europe's inflated prices.

Europe simply has had more discipline in the long term financially and in their banking system (though the European economy is far from perfect), and therefore it has the leeway to do this now. In contrast, here in America we have gotten into a very bad snafu of debt, artificial demand for our debt, artifically lowered borrowing rates, and relying on foreign capital that wants to leverage their currency down in order to penetrate our markets. So the only thing holding that whole mess together is protectionism for politically key consituent industries, otherwise the outcry would unravel the whole system. That's why we penalize shrimp imports here and Europe is cutting agricultural subsidies.

For all the free trade rhetoric of American globalization proponents, it's Europe that's walking the talk in this instance.

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