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History in the Making

February 23, 1988

The emergency European Community summit has made history and at the same time contrived a challenge for Europe's competitors, not least the United States. This is a welcome as well as a sobering step along the path to broader unity among the Europeans.

There really were two accomplishments, closely interrelated:

--European farmers were finally told that the years of virtually unlimited subsidies are over and that the economic forces of world competition will begin to play an increasing role.

--The way was cleared at last to proceed to total economic integration of the 12 nations by 1992.

The European Economic Community was on the brink of bankruptcy, ruined by a wasteful farm-support program that was chewing up two-thirds of the community budget, building mountains of surplus commodities and disrupting world markets as the subsidized exports were sold. Now the crisis has been eased, and bankruptcy has been avoided. Crop limits have been agreed on, farm prices will be cut when production exceeds those limits, and the common agricultural policy will be tamed at least to the point of taking only about half the community budget. That in turn will allow more funds for development by the poorer members--Greece, Spain and Portugal.

There is a familiar ring to all of this for the United States. Europeans note that in 1986 the American government spent $7,000 per farmer, compared with $2,800 in the European Community. Last year the U.S. programs totaled more than $20 billion--about the same as the European total--including $17 billion in direct payments to farmers, with most of the assistance going to large farms with the least need for supports. Furthermore, burgeoning American farm-export programs increasingly disrupt the world market, not only competing with the Europeans but also undermining the sales of nations not having subsidies.

Clearly the United States and most members of the European Community, but particularly France and West Germany, face political pressures from their farmers. These pressures to maintain costly subsidies pose major obstacles to the U.S. commitment, so well articulated by President Reagan, to move to free world markets in agriculture by the end of the century. In fact, leaders of the European Community have rejected the notion of eliminating subsidies. And most American farmers no longer feel confident about their ability to compete in the increasingly competitive world food and fiber market without costly government protection.

Even the concessions that were won last weekend at the European summit will not make much easier the negotiations that lie ahead on the agricultural elements of the new General Agreement on Tariffs and Trade in Geneva. Nor will those concessions assure the realization of an integrated European economy by 1992; by one calculation only 67 of about 300 measures required to facilitate that change have thus far been negotiated by the Europeans.

But the summit agreement was nevertheless of enormous importance. It was "indispensable" to achieving market unification of the European Community, as Jacques Delors, president of the community, said. And, as he also pointed out, "Without this agreement there would have been stagnation in Europe." The agreement will make Europe more competitive with the United States, but it also will vitalize the community that buys about one-quarter of all American exports. The importance of that economic vitality is the more apparent when it is remembered that the European Community and the United States together represent 30% of the world's trade and 70% of the world's gross national product.

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