By Ewan Pate, farming editor

BRUSSELS IS a hotbed of negotiation and discussion this week as EU delegations prepare for next month’s world trade talks in Hong Kong.

It already seems that progress will be limited as far as agricultural commodities are concerned.

Trade Commissioner Peter Mandelson has gone to the wire as regards what he can offer on the road to free trade.

Another inch further, and the EU member states, notably France, will cry foul.

As far as most EU members— with the exception of the UK— are concerned, the Common Agricultural Policy has been reformed and now conforms to WTO ideals.

The CAP is now regarded as being non, or minimally, trade distorting.

Others of the 148 countries in the talks disagree, but the EU can at least claim the moral high ground over the United States where direct support is still in place in the form of the cutely named “counter-cyclical payment.”

Essentially, this tops up commodity prices for US farmers whenever there is an oversupply and a market slump.

It is little different from the deficiency payment scheme which operated in the UK in days of yore, but it amounts to a $2 billion subsidy which is clearly trade distorting.

NFUS president John Kinnaird is in Brussels this week meeting officials and MEPs as well as forging alliances with other farm unions.

He said yesterday, “A firm deal in Hong Kong is unlikely and whether there will be enough progress to deem the meeting a success remains to be seen.

“However, if the framework for a deal is thrashed out, it could have more impact on Scottish agriculture than reform of the Common Agricultural Policy.”

The area of greatest danger for EU farmers could be the little-understood matter of import tariffs. These are formidable barriers to free trade and have been put in place to protect high cost-production areas such as the EU from cheap competition.

They range from an insignificant 7% on fresh eggs to a massive 144% on certain cuts of frozen beef.

“The moves to tackle these import tariffs could have the greatest impact on Scotland,” said NFUS vice-president Bob Howat at a briefing yesterday in Edinburgh.

“We are not a major agricultural exporter outwith the EU, so we have little to gain from greater access to foreign markets.

“On the flip side, our competitors have a great deal to gain from greater access to our market.”

Negotiations are going to have to be very carefully balanced indeed.

A commodity, for example beef, can be declared “sensitive” if cheap imports are thought likely to have a major impact.

In that case the higher import tariff might be allowed to remain but a larger tonnage would be allowed to enter free of tariff altogether.

Also, raising tariffs on one commodity has to be matched by reductions on another.

It is fiendishly complicated, and as Mr Howat remarked, “It may not always be in our interests to go down the route of higher tariffs.

“It will be a delicate judgment as to where the balance of advantage lies and until we see the outcome of the Hong Kong talks we won’t be able to make that judgment.”

There is no doubt tariff cuts could have a dramatic effect on prices.

Take as an example the current arrangements for fresh beef at an EU price of 7 euros per kg.

The Brazilian import price, including transport, of 3 euros per kg would attract a tariff of 3.4 euros per kg giving an entry price of 6.4 euros. However, if current EU Commission proposals for a 50% cut were to be adopted the position would be very different.

The delivered price would still be 3 euros per kg but the tariff would be only 1.7 euros, so the entry price would become 4.7 euros per kg.

This is a third lower than an EU price which already barely covers costs.

The Irish government has already warned that tariff cuts of this magnitude would kill the Irish beef industry stone dead.

The position in Scotland would surely be no better if Brazilian beef and Scotch were considered like for like as regards quality.

This mustn’t be allowed to happen, according to Mr Howat.

“The WTO must address the issue of varying production standards,” he said.

“It would be perverse if the WTO persisted with a system which effectively penalised producers in this country for high production standards, by allowing cheap imports to undermine the industry.

“We know that faces huge opposition from agricultural exporters, hence we have to continue to press our own domestic supply chain for recognition of high standards.”

This means that supermarkets and their customers have to be prepared to pay more for produce which is produced to the higher ethical standards which they have demanded in recent years.

The track record is not encouraging.

The decisions on tariffs taken around the negotiating tables of the WTO may yet prove to be very critical for Scottish farmers.