common ground

International Agriculture

Program 0220 May 14, 2002


Related links:
http://europa.eu.int/pol/agr/index_en.htm
www.cubatrade.org or www.giraldilla.com

External sites are not endorsed by Common Ground or the Stanley Foundation

(This text has been professionally transcribed, however, for timely distribution, it has not been edited or proofread against the tape.)

Pavel Nauratil: [via a translator] When the European Union will eliminate the subsidies—my opinion is that the farms will be concentrating from the small family farms to the much more bigger units.

KRISTIN MCHUGH: This week on Common Ground, an agricultural controversy hits the European Union. Plus, farming may help open US trade with Cuba.

GEORGE RYAN: We’re constantly looking for new markets, new places to sell our, especially our agricultural products, but other products as well.

KEITH PORTER: Common Ground is a program on world affairs and the people who shape events. It’s produced by the Stanley Foundation. I’m Keith Porter.

MCHUGH: And I’m Kristin McHugh. Agriculture is a hot topic as the negotiations for the next round of enlargement in the European Union enter the final stages. Poland, with its huge, inefficient farm economy, would bankrupt the EU’s common agricultural policy if the EU maintains its current farm subsidies.

PORTER: That prompted the EU to tell potential new members their farmers will only get a quarter of the price supports given to current EU members. As Common Ground’s Max Easterman reports, that’s not going down well in efficient-minded places like the Czech Republic.

[The sound of a vehicle, perhaps a truck or a tractor, in the background.]

MAX EASTERMAN: Trhovy Stepanov is a small town about 50 miles southeast of the Czech capital, Prague. Before the Velvet Revolution of 1989, it was the headquarters of a collective farm, a big one by local standards, nearly 8,000 acres, taking in six of the surrounding villages. It grew wheat and vegetables and reared cows, pigs, and chickens. By communist standards it was highly productive.

[The sound of farm animals in the background.]

Today, Trhovy Stepanov is no longer a collective. It’s a cooperative. Most of the former landowners and farm workers didn’t take their land away and farm it privately, which they could have done. They were persuaded it would be easier to get investments to modernize if they kept the land holdings much as they were—in a kind of common ownership. And it was clear they did have to modernize to meet the competition from the European Union. The farm manager is Pavel Nauratil. He’s brought me here to his new cow shed to explain what he’s achieved.

Pavel Nauratil: [via a translator] First of all we were pressed to make the complete change of technologies. Because before the Velvet Revolution all the cows were put together in the closed buildings. Now, practically as you can see in accordance with the European Union standards we moved them, they are standing in a free stance. Secondly we changed the productivity of labor. In early ‘90s we have the output from one cow 4,000 liters per milk per year. Nowadays we have 10,000 liters per one cow per year. in 1990 70 people were taking care of all the cows. Nowadays only 15.

[The sound of people getting into a vehicle and shutting the doors.]

EASTERMAN: Mr. Nauratil is proud of what he’s done with this old collective farm. We’re just off to see his new pig pens. It’s a 10-minute drive away. It gives you some idea of how big this farm is. They cost him over a quarter of a million dollars. Czech farmers don’t get much money from the government. It can only afford to fund interest payments on loans. So all the capital has to be borrowed from the bank and repaid out of profits. This means that farmers already inside the European Union are getting about four times as much in subsidies as here in the Czech Republic.

[Easterman questions Mr. Nauratil]

[With the sound of hogs in the background]

EASTERMAN: When you do join, do you expect that you will get that level of revenue support?

Nauratil: [via a translator] As far as I know I don’t think so. If there’s a single market then conditions should equal in this case. Otherwise it is not a single market. Otherwise it is only the way how to get another markets for the excess of overproduction. We have the already experiences the European Union. The original old farmers in the European Union are getting 70 or 75 percent more. Then you’ll be able to sell its products under the cheaper prices than we will be able to. And we will be liquidated on the market. We won’t be able to be competitive. This is not a fair play.

EASTERMAN: But Pavel Nauratil isn’t about to go under just yet. He’s making another big investment, here in his chicken production, to triple output to 3,000 tons a year. He says it’s all about economies of scale. And EU policies will encourage that trend.

Nauratil: [via a translator] When the European Union will eliminate the subsidies my opinion is that the farms will be concentrating from the small family farms to the much more bigger units. This process, you know, already came to agriculture in Australia as well as in the United States. The bigger farm will buy the smaller farm. This is the question about the concentration of the capital.

[The sound of goats or sheep in the background]

EASTERMAN: Well, that’s exactly what worries the Czech Republic’s 7,000 or so private farmers. Their farms are usually 10 times smaller than the cooperatives, about 700 acres on average. And they’ve struggled against what you might call a dung hill of obstacles to get them up and running. In this village, about 25 miles west of Prague, people were only able to get their land back from the collective when one of their number, Emil Beer, was voted in as mayor and used his position to force restitution through.

EMIL BEER: [via a translator] The chairman of the cooperative was a big communist, strong communist, and therefore was hard fighting with her. The animals and the tractors and so on, it was very hard. A big battle. And we received the old machinery from the cooperative, therefore we have to resolve to repair it step by step.

EASTERMAN: And there was no help from the government?

BEER [via a translator] No, no, no.

[The sound of people walking through a farmyard.]

EASTERMAN: Many private farmers have faced far worse than that. There was no land register under communism. The comrades bulldozed hedges, boundaries, and rounds in their enforced collectivization. So come the 1989 revolution even if you could prove you had title to a piece of land you often couldn’t get to it because the road had gone. Michel Pospetiel—he’s the man you heard translating what Mr. Beer had to say—Mr. Pospetiel is a small farmer himself. He gave up his safe desk job and a warm flat in Prague for the uncertainties of a rundown country farmhouse.

MICHAL POSPISTIL: People get the land back and the land is in the small pieces. It’s spread all over. Therefore they are not able to work on it because they are not able to found it. They know they own it on the map but in reality they are not able to say, “That is my piece of land.” And from this point of view it’s also not possible to make a really free market of the land. Because when somebody would like to buy it I have to show him where the field is and I have to guarantee that he is able to farm on it. The land reform was not started yet in the Czech Republic fully because the lobby of the cooperatives are against it because they will lose the right of the farming on it. They want to keep the land and they want to keep the machinery without any clear relations of the owners.

[A dog barks and people continue walking through the farm.]

EASTERMAN: Small farmers worry that the big boys are just in it to exploit the land for what they can get. Michal Pospistil admits that they are often much more efficient than he could possibly be. But at the cost of damaging the countryside and soaking up subsidies, private farmers, he says, don’t want price supports. They need something much more fundamental.

POSPISTIL: They would like same amount of the money but for private farmers it’s better to spend it by the investment through the infrastructure of the farm and the infrastructure of the land. And that means to invest to the country and also to invest to the new equipment, to the nature also, to the new biotechnology. The results of the direct payment support price on one side will be the very high price of the land and the other side also, establish a group of very rich managers of the big farms. Because the money are to the pockets of the managers. [laughing]

EASTERMAN: It’s fair to say that so far the Czech government hasn’t paid that much attention to the private farmers when it’s been negotiating with the European Union. It’s been banging the table for higher price supports. Perhaps that’s not surprising, as the President of the Association of Cooperative Farms, Miroslav Jirovsky, is one of those whose been involved in the talks. And he’s outraged at the attitude taken by the member states.

MIROSLAV UROVSKY: [via a translator] We thought the EU took us seriously and realized we were doing everything we could to raise standards and efficiency. But now we’ve reached the finishing line, it seems everything they’ve said over the last 10 years has just been hot air. If all they’re offering is 25 percent of current subsidies then I can’t support joining. We’ve got a $60 million trade deficit with the EU now; what they’re offering will mean more reductions and total bankruptcy for a lot of our members. If the government accepts this I shall resign.

EASTERMAN: The EU is going to find Mr. Jirovsky a tough opponent. But bankruptcy is also the threat facing the Union itself. The key to the problem is Poland, which has a huge and very inefficient agricultural sector. If current price supports were an offer, Polish farmers’ incomes would go up by more than a half overnight. But the EU could not afford it. The solution might be to keep Poland out till its economic performance has improved. But the Prague-based analyst Pavel Bratinka says that is a political impossibility.

PAVEL BRATINKA: It’s because of historical guilt that European Union especially Germany wants to see Poland integrated as soon as possible.

EASTERMAN: You mean guilt about the Second World War?

BRATINKA: Second World War, the partition of Poland; it’s a collective European guilt. And so this is the reason why it’s a must to see Poland taken in. On the other hand there is this huge cost because of Polish agriculture, this cannot be done without cutting subsidies. And we Czechs are thus victims of this game.

EASTERMAN: Well, inside the EU they don’t see the Czechs as victims of a game but as potential beneficiaries of a carefully constructed process. The main beneficiaries may well be the private farmers. Here’s why. Brussels is becoming acutely aware that it can’t go on paying out huge price supports, even to its existing farmers. Quite apart from the environmental problems it causes, the World Trade Organization basically accepts the view of the Americans and the Australians in particular that the common agricultural policy is anticompetitive. It’s got to change. And the European Commission spokesman in London, Geoffrey Martin, says this will happen before the new members get into the Union.

GEOFFREY MARTIN: There will be a fundamental change in the way in which agriculture is to be funded. Away from price supports towards a world class competitivity. The smaller farmer will get huge advantages from rural development, away from agriculture and into, for example, small business and tourism. Whereas the larger farmers will face the challenge of world price rather than the advantage of price supports in an internal market.

EASTERMAN: There is a warning bell for the bigger farmer, then?

MARTIN: There is the challenge, if you like to put it, rather than the threat—the challenge of competing in price terms with the world market rather than receiving protection within what the Americans would call a protected market. And this will mean added costs on the part of large producers in the incoming countries.

[The sound of trolleys and vehicle traffic in the background.]

EASTERMAN: I have the impression that the significance of that hasn’t yet sunk in here in Prague. The debate rages about the low level of price supports and the fact that several existing EU member states have said that the deal on offer to new members is actually too generous. Politicians and civil servants here are angry about that and worried about what it will mean for the referendum they have to hold next year on joining the EU. I’m on my way now to the Foreign Ministry to meet Petr Jezhek, the Deputy Secretary who’s in charge of EU integration.

PETR JEZHEK: There may be forces which would like to make the package offered to the candidate countries unacceptable, totally unacceptable, and then to blame the candidate countries for prolongation of the, the accession process. But hopefully this is only speculation.

EASTERMAN: But for it to be speculation there has to be a greater truth there.

JEZHEK: There is no smoke without fire. It causes political problems here but if the deadline is not met it will cause a problem for the whole enlargement process and for the credibility of the EU. Because, well, citizens will be tired of waiting and knocking the EU door. So expectations regarding the better economic performance after the enlargement will be diminished.

[The sound of Czech band music playing in the background.]

EASTERMAN: It’s clear that for many Czechs, like those enjoying the spring sunshine here on the Charles Bridge, joining the EU is not going to bring the good times they imagined a few years ago. Farmers in the existing member states are a powerful lobby and there are elections in France and Germany this year. Politicians there can’t afford to ignore voters who think enlargement could damage their incomes. So there’s more than an element of grandstanding and shadowboxing in the enlargement talks. It’s all perhaps strangely appropriate in this city, famous for its black theater, where what you see is more illusion than reality. Sadly though, reality suggests there are tough times ahead for the farmers and for everyone. For Common Ground, this is Max Easterman in the Czech capital, Prague.

[The sound of Czech band music playing in the background.

MCHUGH: A Midwestern state ends Cuba’s trade isolation, next on Common Ground.

GEORGE RYAN: We’re number six in all the states that would benefit if an embargo was lifted. So it’s worth doing for us.

PORTER: Printed transcripts and audio cassettes of this program are available. Listen at the end of the broadcast for details, or visit our Web site at commongroundradio.org. Common Ground is a service of the Stanley Foundation, a nonprofit, nonpartisan organization that conducts a wide range of programs designed to provoke thought and encourage dialogue on world affairs.

MCHUGH: The governor of Illinois, George Ryan, has long been surrounded by controversy. A campaign finance scandal has dogged his administration since he took office in 1998. And he has taken some unusual positions for an elected official from the Republican Party. For example, in 2000 he suspended enforcement of the state’s death penalty.

PORTER: And his unorthodox views extend into international affairs and global trade. In 1999 he took the first of his two trips to Communist-controlled Cuba, where he became the highest ranking American official to visit that island in 40 years. To learn more about Ryan’s bold approach to foreign policy I spoke with the Governor in his Chicago office.

GEORGE RYAN: There isn’t anything more important, I think, to our economy than exports. It accounts for a lot of the employment in the state of Illinois. It’s very important to the largest industry we have, which is agriculture. We’re constantly looking for new markets, new places to sell our, especially our agricultural products but other products as well. We’ve opened an office in South Africa that I think has been very successful thus far. And we continue to search for places to sell our corn and grain for the farmers.

PORTER: Who are the biggest trade partners.

RYAN: Certainly Canada I think is one of our biggest. Mexico. Being the neighbors that they are, are our biggest partners.

PORTER: I think that our listeners might be surprised to hear that late last year there was a shipment of corn that went from Illinois to Cuba and it was all completely legal. How did that happen?

RYAN: The United States Government has had an embargo on Cuba for 40 years. And they’re starting to soften a little bit on it. And they lifted the embargo for humanitarian reasons on agricultural and food products and on medical supplies and pharmaceuticals. We took a trade mission down, a humanitarian mission, just to set up the stage for the opportunity, maybe, to do some business there. And we took down about a million dollars worth of food and pharmaceuticals and school supplies and donated it to the government and to the people of Cuba. Then we were invited back to sell some products, namely pharmaceuticals. But in the meantime Cuba, when they lifted the embargo on food decided that they were going to buy some grain from us, and they did. They bought about $35 million worth of corn and grains from Illinois—mostly from Illinois, and we’ve had two or three shipments since then. So we’re very happy about that.

And the next step was medical supplies. And they called and asked us to bring some companies down and we did that, about three weeks ago or a month ago. And have had I think some success with that. I haven’t had a full report on it yet.

PORTER: Going to Cuba is certainly an interesting thing for a Republican governor to do. It almost reminds me of a Nixon going to China kind of thing. And you’ve had a lot of criticism over this. I mean, has it been worth it?

RYAN: I suppose that you can do anything and get criticized for it. And that seems to be the mood today. Whatever you do, you get criticized for. But that’s not what this is about. I don’t care what I’m criticized for. And I think it’s the right thing to do. We’ve had an embargo on Cuba for 40 years and it hasn’t worked. I think the American government should lift that embargo, frankly, and open it up for trade. It means a great deal to states like Illinois and Midwestern states, especially in an area where we need to have all the help we can get and all the markets we can get. We think that if the embargo were lifted we could create another 1,400 jobs here in Illinois, just related to that operation in Cuba. We’re number six in all the states that would benefit if an embargo was lifted.

PORTER: Are you concerned at all about the human rights violations? Or, just the fact that it’s a communist government and by giving them humanitarian supplies you are helping to prop up the government there.

RYAN: Cuba is a little island nation that can’t defend itself too well in a lot of cases. And the big country like the United States can bully them around a little bit, if that’s the right term. But we, we don’t seem to care about other nations that may have the similar kind of violations, or civil rights violations, and human rights violations. And that’s countries like China, where we’ve given favored treatment to, favored nation treatment for trade. Cuba ought to have that as well. I would think that if we’re concerned about those conditions the best way to eliminate them would be to open up the country to democracy and to be a part of it. Every country in the world is doing business in Cuba but the United States. And we ought to be down there doing business and having our people there and expressing the democracy that we believe in. And I think that would help their human rights problem.

PORTER: Have you talked about other kinds of interaction? I mean, besides selling them the products? Have there been cultural interactions? People-to-people exchanges? That kind of thing?

RYAN: We’ve had a lot of that since I went down. You know, I was the first governor in 40 years to go to Cuba. And we, we had spent one evening before we came back after I think a five-day trip, had dinner with Fidel Castro, and had some interesting exchanges. We worked very closely with the federal government on that trip. And we had some requests from the Catholic church here in Chicago, the archdiocese asked to see if we could get more priests into Cuba for the religious practices that just had reopened in Cuba not too, too long before we went down. And they needed more practicing priests there to, to help with the churches. And we presented that to the President and he said, “Yes.” And I think that there have been some, some additional priests that have gone from the United States down to Cuba now.

We talked about a couple of young people that were sick and needed help and we brought ‘em back and we’ve had several children that have come back for certain diseases and for the treatment of, of problems that they’ve had and especially surgeries. Liver surgeries, a special kind of liver surgery that can only be performed at Children’s Memorial Hospital or at some hospital in London. We’ve taken these, a couple of these, or three of these children in and given them the kind of treatment that they’ve needed and sent ‘em back home. And they’re doing great.

We’ve had cultural exchanges with music groups that have gone down. Softball teams, girls teams, baseball teams. We’ve had a group that went down and donated recreational equipment, park equipment, to the schools and to the playgrounds of Cuba. And that’s all been as a result of our first trip there.

PORTER: People who are Cuba experts here talk about the difference between a hard landing or a soft landing in the future for Cuba. Hard landing being a sort of blood in the streets kind of thing, and a soft landing being a softer turnover in the government, something maybe like what’s happening in Vietnam.

RYAN: I don’t think that you’re gonna have any hard landings. I think that those days are probably gone. But certainly it isn’t anything that’s going to come fast. Fidel Castro is still there. He’s surrounded by people that believe in that system. But they’re, they’re smart enough to know that they have to open the door for trade, they have to let Americans involved there. And they’ve let every, other countries in. So, you may still have a communist operated system but we, we deal with China and other communist operated systems. So Cuba, the small nation that it is, can’t be too much of a threat to us. We could be a lot of help to them, frankly. We could help them and their people a lot if we had the opportunity. It’s the handcuffs that the Congress of the United States, that’s put on the United States business to go in there and do business. And we need, we need to relieve that, that embargo. Forty years of that embargo has done nothing that I know of.

PORTER: You mentioned your offices, your office in Africa as well. What’s the potential there? What can we expect? You know, these seem like such poor countries. Is there really a good trade potential there?

RYAN: Yeah, there is. There’s a lot of potential. And since the apartheid system is gone in South Africa now it’s much easier to go in there. And South Africa needs a lot of things. They had generations of people that weren’t educated, had no schooling. They need to have training and we’ve had some entrepreneurs from the Chicago area and from Illinois that have gone down there and set up operations to help train people in various jobs. And we’ve contracted with the South African government to do that. The trade situation is more, I think, a learning process for the people that are in South Africa, to teach ‘em, to help ‘em understand what it’s about, and to have some exchanges with ‘em. And it’s worked very well for us.

PORTER: Are there other areas—if you were going to be governor for much longer, if you had the, the power to do it, are there other potential markets that you see could grow?

RYAN: I would like to have an office in Israel. And of course we, we were gonna go over there last year. But because of the conditions there we canceled our trip and didn’t go. But I think that there’s a lot in common with Illinois and Israel and an opportunity for certain business and trade there. And the exchange of technological thoughts and ideas and the promotion to stay on the cutting edge of medical research, and a lot of things. So Israel would be a good country for us, I think, to have a trade office in and that may come in the future. I doubt if it will come during my term.

PORTER: We often don’t think about governors making foreign policy or being involved in that. Did you find that the federal system worked, has worked with you or worked against you as you tried to open up international markets?

RYAN: Oh, no, they’ve worked very well with us. We, even when we went to Cuba in spite of what you may have read or heard, the federal government in the Clinton administration and even in the Bush administration have worked very closely with us. And of course we wouldn’t go if they didn’t want us to or didn’t permit us to go and told us not to go. We, we wouldn’t be there. But I think they know and understand that there’s some potential there and they tried to ease everybody in.

PORTER: What have you done to prepare Illinois businesses for international markets and for international business?

RYAN: We have a lot of large corporations here in Illinois that are headquartered here and they do a lot of international business now. John Deere, Caterpillar, they do—Boeing—those are people that are already in the international marketplace. It’s the smaller people that we try to help with exporting their goods and doing business in other countries. And through the Department of Commerce and Community Affairs we have a, a division of international trade. We’ve got nine offices around the world and work closely with the small businesses, not like Caterpillar that they don’t really need us. And they, they can go down and do what they need to do, but smaller people and businesses that want to export their products and goods to a foreign country.

PORTER: And sometimes they face more than just the, sort of the trade barriers that you might think of with China or Cuba. Operating with countries in the European Union, for example, creates all kinds of problems for businesses as well.

RYAN: We’ve had an office now probably longer than any state in the United States in Europe—out of Brussels, frankly. It’s got to be 30 or 35 years that we’ve had an office there. We know and understand that market and have people in those places that can work with our businesses and help them when they go down there.

PORTER: So do you think there will be a day when small business in downstate Illinois, say in my home town of Mount Vernon, will be doing business in Havana?

RYAN: I think so. Yeah, I think the day will come when, when that’ll be opened up and people will be there. You know, like I said, every country in the world is doing business in Cuba but the United States. And I just hope we don’t get there too late and it’s all gone by the time we get there. But, but I don’t think that’s the case. We’re strategically located. Transportation costs can be reduced for, for a country like Cuba and especially in the purchase of grain. All we gotta do is throw it on a barge on the Mississippi River and float it down. So the transportation costs are really, are nil compared to bringing it up from South America someplace or some European nation to get the corn and the grain that they need. Illinois is an ideal spot—the Midwest frankly.

PORTER: Sometimes when I drive across the state and McLean County or something and you look out at that grain and it’s, it’s kind of amazing to think about all the places in the world where that grain will end up.

RYAN: We’ve got grain that goes all over the world and that’s good. We need to get more. Our greatest potential I think for international trade is with, in the area of ethanol. There’s countries all over the world now that are, are starting to get rid of the ingredient that we added to gasoline—MTBE has been eliminated because of the pollution that it causes. And ethanol is the desired product. We now think that’s going to be the big expansion. There are countries that need ethanol and Mexico being our neighbor is one of those countries that need some ethanol. We’ve worked closely with ‘em. I think we’re gonna have some pretty good export numbers on ethanol.

PORTER: And in the end it helps ease our dependence on oil producing nations.

RYAN: Absolutely. And it certainly helps our farmers.

PORTER: That is Illinois Governor George Ryan. His term of office ends next January and he is not seeking reelection this fall.

MCHUGH: Cassettes and transcripts of this program are available. The transcripts are free. Cassettes cost $5.00. To place an order or to share your thoughts about the program, write to us at: The Stanley Foundation, 209 Iowa Avenue, Muscatine, Iowa 52761. Please refer to Program Number 0220; that’s Program 02-20. To order by credit card you can call us at 563-264-1500. That’s 563-264-1500.

PORTER: Transcripts are also available on our web site, commongroundradio.org. Commongroundradio is all one word. Our e-mail address is commonground@stanleyfoundation.org. For Common Ground, I’m Keith Porter.

MCHUGH: And I’mKristin McHugh. Cliff Brockman is our Associate Producer. B.J. Liederman created our theme music. Common Ground is produced and funded by The Stanley Foundation.

© 2002 by The Stanley Foundation

Related links:
http://europa.eu.int/pol/agr/index_en.htm
www.cubatrade.org or www.giraldilla.com

sponsored by
The Stanley Foundation
209 Iowa Avenue
Muscatine, Iowa 52761  USA
563-264-1500
563-264-0864 fax
commonground@stanleyfoundation.org
www.commongroundradio.org