EU's New Members Divided on Trade

Had the WTO deal flown, it would have meant new EU countries losing the farm subsidies they still need to catch up with the old-timers

The last attempt to salvage the World Trade Organization talks came and went without much success, apparently over a not-so-important point concerning a surge in food imports that upset the Indians.

The basic dividing line that emerged from the wreckage, and indeed from years of negotiations, was between rich America and Europe on the one hand and the developing countries on the other. Roughly put, the poorer countries demanded lower farm subsidies in the West to give their products a chance to compete, while the rich countries demanded lower trade barriers in the larger developing nations.

That equation, however, obscures certain important differences within the developed world, and particularly within Europe. Some new members of the European club don't feel so rich, and they're not ready to give up the subsidies that could help them, finally, to catch up with everybody else.

For instance, where agriculture is only 1.5 percent of the Danish economy, in Poland it is 4 percent, occupying 16 percent of the labor force (a bit less in Hungary). You can see why the Poles would worry about the short-term consequences, a drop in farm income. But you will also remember that the Polish government, problematic as it often is in EU circles, didn't threaten a veto as Budapest did. It said OK through clenched teeth.

Hungarian Prime Minster Ferenc Gyurcsany, usually happy to speak for his colleagues in Eastern Europe, was on holiday before the talks ended, so it was left to his hapless state secretary, Abel Garamhegyi, to explain the aggressive effort the Hungarian government, along with France and Lithuania, was then making to undermine the talks, ready even to veto "if we must." In the event they were lucky enough not to have to, as the Indians did it for them.

The minister simply said that the deal wasn't good enough, Europe gave too much for too little, getting little industrial market access in return for the substantial cuts in agricultural duties and subsidies, and no, the problem is not that we don't want to give up the support money the European Union pays our farmers that, my good man, took a decade to finally get our hands on.

Those who protested the deal were, no doubt by pure coincidence, most dependent on the subsidies, financially and ideologically (led, naturally, by the French, protectors-in-chief of the Common Agricultural Policy). Brussels has always said the deal wasn't that terrific, and it really must have thought that, trying as it were to hide the dodgier figures from the press in Geneva. Still, almost everybody said OK in the end.

And yet, to be fair to Gyurcsany and his Lithuanian colleague, the basic argument underlying the entire WTO round—that the rich world must give up some of its privileges so that poor African farmers can export more beans—has always sounded a little odd round these parts. Not because people would really disagree. But because few here would think of themselves as part of the rich world.

The figures paint a picture of relative prosperity for Hungary: per capita GDP is about two-thirds of the EU average and most Eastern European states are worse off. But perception is the key. As an official close to the prime minister told me, "We realize that the trend is that we're producing the Nokias and they the beans but, frankly, we're nowhere near that just yet."

We're not poor anymore, thank God, but—and!—we're damn sure not giving up those subsidies, thank you very much, the reasoning goes. And why would we? As this official very reasonably pointed out, for the first time in 20 years farmers here are not setting up roadblocks. They are making money. Heavens, finally.


How to play the trade issue is only one of the dilemmas that this region constantly faces as it navigates its way from relative poverty to relative plenty and all the responsibilities that that brings. It's an odd place to be, somewhere in between, politically, financially, and intellectually. Whether or not to adopt the euro quickly is a question that becomes trickier, halfway to rich Europe but not quite there yet. Member of EU? Yes. Adopt euro? Naturally. Is this what you really need? Hang on a minute, I haven't actually thought about that.

Incidentally, it probably is.The euro will present Eastern European economies with certain difficulties but ultimately it will be good for them. And so will trade liberalization, in the final reckoning.

Foreign military engagement, such as the war in Afghanistan, is another example, carrying as it does considerable financial and political burdens. Most people here don't understand why our soldiers should be risking their lives in "America's war" 4,000 kilometers away, trying to pacify warring tribes that seem to have been fighting one another forever anyway.

And yet formerly wary—and militarily weak—Eastern European states are rushing into the gap. Mostly, of course, because such is the importance they attach to their friendship with America. But the point is that they are rising to the challenge membership of elite clubs such as NATO demands. It doesn't mean that the policy is always the right one. But our nay-sayers, when they have their way, are primarily animated by the curious place this transforming region still occupies between East and West.

But these are mostly just growing pains and we're getting there.

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