I am honoured to have been invited to give this Memorial Lecture honouring a man who made an important contribution to public debate and the evolution of agricultural policy in this country. He might well have been surprised at my intervention in a debate regarding an area in which I am hardly an expert.

The invitation may have been extended to me primarily because of my involvement in the conclusion of the Uruguay Round and the creation of the World Trade Organisation. That being the case my comments will significantly focus on the issues now being debated in the Doha Development Round. However I would like to begin with some reflections on the evolution of the Common Agricultural Policy (CAP) of the European Union. It is necessary to do so because memories are short and an understanding of why the CAP is a core policy of the EU has been signally lacking, particularly in the United Kingdom media, in addressing the issues of both Europe in general and agriculture in particular.

Any reading of the history of the European integration process will clearly point out that there could not have been a Common Market without a Common Agricultural Policy. In his memoirs ‘Architect of European Unity’ Robert Marjolin, a Frenchman who played an important role in the drafting of the Treaty of Rome, wrote “The creation of a common market was inconceivable without the inclusion of agriculture; the special circumstances in which the latter operated would necessitate official intervention in this area.” He also wrote that “France would never have accepted a customs union that did not include agriculture and did not guarantee French producers protection comparable to that which they were receiving under French law.” This was and is a historic fact. Therefore an essential element in the adoption of the Treaty of Rome and the early evolution of the EEC was the CAP. It is also readily apparent why this was the case. A customs union could not have come into existence in the absence of a common approach to agricultural support and external tariffs. It is also correct to state that if each Member State were left to its own devices in regard to providing support to its agricultural sector rather than providing support under common rules the result would have been disparities that would so distort the European market for agricultural products that the Common Market as a whole could never have come into existence and economic borders would remain to this day. Everyone knew this at the time – including in particular the Americans who not merely supported European integration but, in my opinion, were instrumental in its creation. Certainly the British knew it and indeed their reluctance about being part of the European adventure in the early days was based, at least in part, on a rejection of the CAP.

So when one hears and reads about the need to end the CAP one needs to recognize that this is not a new debate. It is attacked in various ways. For example the much cited observation that 40% of the EU budget is devoted to the CAP sounds excessive unless it is explained that the total EU budget itself is ludicrously small amounting to approximately 1% of EU GDP. So also of course is the EU bureaucracy. So also with the caricature about the size of the EU bureaucracy. Of the 20,000 employees of the European Commission only 2,500 have any decision making capacity and only a very small proportion of these deal with agriculture. (The rest are translators and clerical workers). So the amount we are talking about is tiny in comparison to the total amount of tax taken by the national governments of the EU from their citizens which is above 40% of GDP.

All of this is not to say that conditions today in the agricultural sector or more generally are at all comparable to those that pertained in the early days. Then national interventionism in economic matters was widespread and the recognition that competition for markets provided the best means to ensure efficiency and innovation was nothing like it is at this time. The evolution of the EU itself has demonstrated the changing perception of policy makers as to how an economy can grow and the importance of liberalized markets. In industrial sectors former monopolies in sectors like air transport, telecommunications and energy have been privatized and this would have been unthinkable in 1957. National protectionism has been vigorously attacked across the board. Furthermore the disastrous failure of communism, and state planned economies generally, have converted the world to a new reality and a new potential. Much of this global liberalization has come under the aegis of GATT and now the WTO. It is important here to underline the fact that the GATT/WTO system is not about free trade as such. It is about liberalizing trade gradually and in a differentiated manner between Member States on the basis of agreements that provide reciprocal benefits. No agreement in the eight Rounds that have already taken place could have been reached without perception of mutual advantage.

The difficulty regarding further agricultural reform relates in part to a point made by the Taoiseach in an article in the Financial Times on the 28th September, 2006. He pointed out correctly that the average farm size in the EU is only 18 hectares compared with 178 in the US. Some European farms on the margin of commercial viability deserve support. At the same time the total amount of transfers to agriculture, according to the OECD, are $103bn in the EU and $92bn in the US. They are therefore broadly comparable although the average farm in the US is almost ten times larger than the average in the EU. Expenditure on the CAP is also falling. We also import far more agricultural products than the US.

On the other side in a seminal paper “The Common Agricultural Policy: Moment of Truth in France”, published by the very prestigious French Institute Group d’Economie Mondiale under the direction of one of France’s most eminent economists Patrick Messerlin it is pointed out that 1% of the richest farmers get more subsidies than 40% of the poorer. If this is correct – and one has every reason to be confident about the paper that contains it – then it adds to the case that some further changes in the CAP are required and these might well facilitate a move towards a solution in the Doha Development Round.

There is no country in the world with a greater interest in a favorable outcome to the current trade talks than Ireland. I believe that the EU has more room for compromise and should be prepared to move further, assuming other aspects of the negotiations are favourable. Let me explain why and how.

The first point to make is that while most Member States have always sought to insulate CAP reform from external influence, the reality is always more complex. In the final years of the GATT Uruguay Round, at a time when no deal on agriculture seemed possible, Ray McSharry drove the domestic European process to achieve the first major reform of the CAP since its inception while simultaneously opening the doors to a deal in Geneva. At the time, McSharry insisted that CAP reform was entirely a domestic matter. Whilst, entirely understandably, he poured scorn on those suggesting the GATT was motivating his efforts it was, in fact, the case. Indeed, in 1992 and 1993 the domestic reform package had to be supplemented by the “Blair House” agreements in order to tie down a final agreement in the Round.

In 1999, the EU members adopted Agenda 2000 which deepened the McSharry reforms and opened the way for agricultural negotiations to restart in the WTO.

More than a decade after McSharry, another Agriculture Commissioner, Franz Fischler, showed no less resolution and political courage, in securing a new and profound reconstruction of the CAP. Presented in 2002 and negotiated as a domestic reform initiative (in fact, the so-called Mid-Term Review of Agenda 2000), the Fischler plan – or an approximation to it after Member States had had their say – became the vehicle that made possible a serious negotiation on agriculture in the Doha Round.

The European insistence on the near sanctity of its CAP reform efforts as entirely domestic initiatives is understandable – especially these days when the anti-globalization brigade have made many governments regard concessions in the WTO as politically incorrect. It is not especially different from the attitude of the US Congress as it writes and re-writes Farm Bills every few years. However, there is a trap.

The EU’s negotiating partners tend to respond that if CAP reform is a domestic issue – on which they have no direct impact – then they will pocket the benefits and seek to negotiate yet better terms from that base. In some senses that is precisely where we are at the moment. It is also why finding a way forward is so difficult. The EU feels it has done more than its fair share in reforming domestic farm subsidies – and, of course, agreeing to eliminate export subsidies within the Doha Round. The Commission says, not without substance, that it is now the turn of the others also to step up to the table and put down something which Europe can take to the bank.

The others say domestic support payments in the EU – even if they are now largely de-linked from production and theoretically much less trade distorting than before – remain very high in total. Eliminating export subsidies is all very well, they say, but that support has been falling in any case, and will likely continue to fall. What they really want is new market access in the European Union; only that will satisfy their own exporters. Further, only if that additional market access is available, and meaningful, for agricultural products will most of them even begin to talk seriously on opening their own markets for industrial goods and services – something the EU must have.

So, we have an impasse which we have been unable to remove for the best part of two years.

The impasse is there, in part, because the EU has failed to convince its counterparts in the WTO that anything has really changed for farmers in Europe. For the rest of the world, EU agriculture continues to be a non-competitive, economic dinosaur hiding behind high tariff walls and propped up by limitless sacks of taxpayers’ cash. Yet the reality is quite different. The de-linked single farm payment system is changing, and will continue to change, the face of rural Europe. Across the continent, farmers organizations are having to deal with the new realities and individual farmers are beginning to make different commercial decisions impacting what they grow and raise and how much. Further, they are coming to terms with the added constraints and opportunities represented by new food safety and food quality regimes, animal welfare regulations, requirements for the stewardship of the countryside, rural development responsibilities, environmental standards as well as the rigours of international competition. For most, life and livelihoods are far less predictable than before.

These radical shifts affecting farming communities throughout Europe are necessary and unavoidable. So are the stresses and strains of integrating ten new members with significant farm sectors. But they are also unrecognized by many of our trading partners. That needs to change. Trade negotiations are about economics, that is for sure. But they cannot be based solely on broad statistics that fail to capture structural change, especially when that change is affecting the lives of very far from wealthy families and individuals.

In short, the EU has a communications job to do. If the nub of the issue in the Doha Round is that Europe cannot, at one and the same time, go through a painful and profound reform of the CAP – for the third time in 15 years – integrate ten new members and tear down its tariffs protecting farmers from the full might of international competition, then we will need to do better in convincing the rest of the world why not.

While we are doing it, we will also have to make clear – as, in practice, do the WTO rules – that the European Union is not required, and cannot be so required, to give up all semblance of a rural community producing food from within rather than relying solely on suppliers outside. This, also, was a founding principle of the CAP and, given the experience of the post-War years, understandably so. The European Union is a massive importer of food – the largest importer of all, and the largest importer from developing countries – even as things stand. Yet there remains an issue of food security, as is the case in every other WTO member. A community the size of the European Union simply cannot give up farming because other suppliers can deliver more cheaply.

Furthermore, while the budget for the CAP may be excessive – certainly measured against other EU-funded policy areas, and against government support offered in other WTO members – it is undoubtedly the case that in many, if not all, member states people do not resent what is spent on farmers. If there is a price to be paid for maintaining rural communities, maintaining the countryside and having good local products in the shops, then taxpayers and consumers generally appear ready to pay a price – so long as there are also cheaper options available in the shops for the less well off.

What Europe cannot expect to do is hold on to markets elsewhere on the basis of subsidized food production in the EU. Those days are over, and rightly so. We are taking far too long to phase out trade-distorting policies in favour of certain politically influential agricultural sectors. Our competitors are right to complain. They have good reason for doing so and will continue until such trade distorting policies are withdrawn, if necessary through dispute settlement challenges in the WTO.

That said, CAP reform and the Uruguay Round agreements have already had a profound impact on the EU’s agricultural export performance. The notion that European farm exports continue to unfairly flood the world is simply wrong. We have lost market share in most of the major product sectors over the past 15 years. Recent WTO figures show, for instance, that our share of world skimmed milk exports has dropped from over 40%, in the 1986-1990 period (the base period for Uruguay Round commitments), to less than 20% in 2003. Our share of the butter and butter oil market has fallen from almost 55% to around 33%, and that for cheese almost identically. Looking at the bovine meat market, the reduction is from 25% to 6%; for pig meat from 30% to 23% and for poultry from 23% to 11.5%.

Now, some of these market share reductions are less serious than they look since international demand in some sectors has risen hugely in the period. And there is no doubt that many European products are competitive, well marketed and of world-class quality. Europe can and will continue to be a big player in global farm trade.

But it is worth noting that the corresponding shares of some of the EU’s biggest critics in the WTO have shown few such reductions, and in many cases some very impressive gains. Take bovine meat; in the same period, the US has doubled its global market share to 18% while Brazil has virtually tripled its share to almost 17%. New Zealand has moved from 12% to 18% of world cheese exports. Australia has nearly doubled its shares in the main dairy markets. Brazil now commands 30% of the international sugar market, up from 6.6% in the base period. Despite the fact that the EU has done a poor job in reforming the sugar sector, it has nonetheless seen its share of global sugar exports fall from 18% to 11%.

Certainly, many farmers in developing countries and, especially in the competitive exporting nations, are having a tough time. But this single-minded, obsessive portrayal of the EU as the ultimate villain is simply wrong. But let us not deny that the EU still has work to do in reforming its agricultural policies. It has already come a long way and has less reason to be ashamed than its critics suggest but reform is not over.

From this reasoning, you will understand that I am not about to call for a complete re-think of the EU position in the Doha Round. We have accepted the elimination of export subsidies – on condition that other unfair forms of export support are disciplined – and the Commission is able to agree a large reduction commitment in trade-distorting domestic support limits. All this has been conceded. So, what can be done on market access?

The EU has made an offer which is regarded by some participants as insufficiently ambitious. It amounts to tariff cuts of 35 – 60%, with lower cuts on 8% of tariff lines designated as sensitive products, and expanded tariff rate quotas on those sensitive products. It has to be said that several other participants in the Doha Round are somewhat fearful that even the EU offer is too ambitious for their own farm sectors to sustain – Japan, Korea and Switzerland among them. And developing countries enjoying EU preferences are equally worried.

I tend to agree with the Commission that in the absence of serious offers in the Doha negotiations related to market access for industrial products and services by some of the big emerging economies, they will find it impossible to improve the EU’s agricultural offer right now.

When, however, the time is ripe, I believe the European Union could and should table marginally more forthcoming basic tariff cuts and agree to reduce the percentage of tariff lines to be regarded as sensitive.

I would hope that such a move would help facilitate consensus in Geneva on the basic negotiating targets that we refer to as “modalities”. If that can be done quickly then where there is some remaining dissatisfaction participants might enter into a normal process of bilateral negotiations to see whether additional trade-offs are possible. That could mean, for instance, negotiating extra tariff cuts or expanded tariff quotas on individual agricultural product lines in return for improved market access on specific industrial products or better access for certain services providers. In other words, the broad modalities ought to be seen as a base from which better conditions could be negotiated between trading partners – and then multilateralized through the most-favoured nation rule.

As things stand we are in danger of seeing the Doha Round either drag on inconclusively for years or peter out on the basis of a lowest-common denominator deal to end the misery. Either way, it would likely be towards agriculture that the accusing fingers will be pointed; and, no doubt, the EU will be the fall guy. The reality is that much is already on the negotiating table that would improve markets for farmers across the world. We could probably get a little more. But to do that, negotiators must now focus on all those other aspects of the Doha agenda on which much bigger benefits can be secured in the industrial and services sectors – for developing as well as developed countries. In a trade round – balance is everything; and we are a long way from achieving that balance. Time is short; one can only hope that some political vision and courage – and objectivity – will mark the coming months in Geneva.