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Europe's hurting the poor

By Mark Vaile - posted Thursday, 27 October 2005

There was a time when Victoria had a 45 per cent tariff on wigs imported from NSW. Its tariff on a ton of wheat was three pounds, five shillings and four pence, at a time when wheat cost between five and six pounds a ton. These tariffs were all swept away by federation.

You would be laughed at today if you argued that Victoria needed to protect its strategic wig industry from competitors in Sydney. You would be mocked if you claimed that Victoria should subsidise its wheat growers and impose high tariffs to protect its unique way of farming.

But I heard similar arguments in Geneva last week. I went there to meet my counterparts from the US, the European Union, India and Brazil. I hoped that we would get closer to an agreement on how to cut farm protection, which is a crucial part of the Doha Round of multilateral trade negotiations. These negotiations are now on the brink of collapse, because the EU - and especially France - is refusing to make a meaningful offer on reducing its barriers to imported farm products.


The stakes could not be higher: the distortions in agricultural trade are keeping millions of people in poverty. Agricultural trade is marked by very high tariffs. The tariff for beef in the EU is 85 per cent; the tariff on sugar is more than 180 per cent.

Primary producers in the world's developed countries receive about $US280 billion ($373 billion) a year in government support. In the EU, farmers receive one-third of their income from government subsidies.

A typical cow in the EU receives a government subsidy of $US2.20 a day. The cow earns more than 1.2 billion of the world's poorest people. The World Bank has said that real reform could increase the world price of dairy and sugar by 20 to 40 per cent and the world price of rice by at least 33 per cent. One estimate is that real reform would lift an additional 140 million people out of poverty.

We're not talking about relative poverty here or Henderson poverty lines. We're talking about absolute poverty, about people who earn less than those European cows.

The increased income would enable them to feed their children better and give them a basic education. It would allow them to look up from their mattocks with hope for the first time in their lives.

Of course, we could achieve even more by increasing aid and relieving Third World debt at the same time.


That's why the Australian Government aims to double our overseas aid to about $4 billion a year by 2010. The increase in aid will be conditional on the recipient countries strengthening their governance arrangements and reducing corruption.

Australian primary producers would also benefit from trade reform. The Australian Bureau of Agricultural and Resource Economics has estimated that trade reform would increase the average farm income of grain growers by $26,500 a year; it would increase the average income of dairy farmers by $17,700 a year.

We've heard many noble sentiments from world leaders about reforming trade. But now it's time for detailed proposals. The US has put forward a plan to cut agricultural subsidies by 60 per cent. It goes well beyond any previous US offer. In contrast, the EU has put forward a disappointing offer. It has offered to cut tariffs by 20 to 50 per cent, which is just not enough.

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First published in The Australian on October 25, 2005.

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About the Author

The Hon Mark Vaile MP is the federal Minister for Trade, Deputy Leader of the National Party, and Member for Lyne (NSW).

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