At Last, Eurofarm

At 5 o'clock one morning last week, Common Market Commission President Walter Hallstein, unshaven and wearily ebullient, emerged from a meeting in Brussels to announce "the most important step in the history of the building of the community." With only a few loose ends left lying around, the Common Market had finally finished the work of creating a unified farm economy for its six member nations.

The meeting not only settled the biggest outstanding problem among the Six, but it also removed the most important obstacle to the significant Kennedy Round talks at Geneva, which are supposed to negotiate worldwide across-the-board tariff cuts. These tariff conferences could not begin until the Common Market countries settled their own farm policies.

Boycotted. It took five years of hectic negotiations to create Eurofarm. Just last year, when the French boycotted the Common Market for seven months over the issue of farm financing, it looked as if the whole European Community might fall apart. It was largely a struggle between farm-efficient France, which wanted low prices to open up the Common Market to its farmers, and factory-efficient Germany, which wanted to protect its uneconomical, small-scale agriculture. As was in evitable if agreement was to be reached at all, last week's pact was a compromise. It fixed the prices to be paid throughout the Common Market for beef, sugar, milk, rice, olive oil and fruits and vegetables. The prices are higher than those now paid in the relatively efficient farming countries of the Six, France, Belgium, The Netherlands and Luxembourg, and lower than those in Germany and Italy. For instance, the minimum price for sugar beets will be set at $17 a ton, which is 42% higher than the current French price -- but 6.6% lower than the German price.

Penalized. The immediate effect will be to raise consumer prices in most Common Market countries -- although, paradoxically, the underlying aim is to increase output and lower prices. Under the agreement, subsidies are supposed to encourage efficient producers and penalize less efficient producers, so that prices ought to fall in the long run. But the short-run effect is bound to be inflationary, and French Foreign Minister Maurice Couve de Murville complained: "One cannot pretend that, from the economic standpoint, what we have done is entirely defensible."

In May, in another marathon session ending at 5 a.m., the Common Market had agreed on a financing system for price supports and export subsidies--of which France will collect about 45% --and for modernizing farming, which will benefit Italy the most. These and other agreements virtually complete the creation of what the French call Europe verte (a green Europe), which will formally sprout on July 1, 1968, the date when the last industrial tariffs among the Six are also scheduled to disappear.

Excepted. Three days after fixing their internal farm prices last week, the Common Market settled a joint farm-tariff policy with which to confront the U.S. in Kennedy Round sessions at Geneva. At first, five of the members were fully prepared to negotiate cuts on all farm products. But then the French put forward reservations and the others, not to let France get something for nothing, added theirs. They ended up with a long list of excepted products such as tomatoes, potatoes, peas, frozen fish, which they say they will refuse to discuss at Geneva.

Exceptions or no exceptions, the Kennedy Round can now pick up again seriously in September. Chances are that a general tariff reduction, not the desired 50%, but maybe around 30%, will be achieved before the U.S. delegation's authority from Congress to make tariff cuts expires on July 1, 1967. A successful Kennedy Round will boost U.S. exports, but the Eurofarm agreement will have the opposite effect. European agriculture, expanding behind a common tariff, is expected to cut deeply into U.S. farm exports to the Common Market nations, currently worth $1.6 billion annually.

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