Michael Hudson: Agricultural Imperialism in the EU | naked capitalism

Yves here. Michael Hudson explains how the US sought to promote dependency in grains as a way of preserving its economic dominance.  While most of us know wars are often fought over resources, we don’t often think in the modern era of control of supplies of agricultural goods accomplishing similar ends.

By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization.

A new monthly column for German newspaper Berliner Wochenende.

Ever since World War II, U.S. trade strategists have based their international policy on control of two key commodities: oil and grain. Economically, they have been the mainstay of the U.S. balance of payments, the leading categories of export surplus (along with weapons), especially as the U.S. economy has deindustrialized.And politically, these are basic needs of every economy. U.S. diplomacy has sought to make other countries dependent on American grain. In the 1950s, most notably, U.S. opposition to Mao’s Communist revolution in China sought to impose a grain embargo on that country. But Canada broke the sanctions – creating good will for decades.

U.S. trade strategists have sought to promote grain dependency on U.S. farmers by opposing foreign attempts to achieve grain self-sufficiency. Most notoriously, the World Bank from the outset refused to make any agricultural loans to Global South/Third World countries for the production of food grains. Lending has been limited to promoting tropical crops that do not compete with U.S. farm production. The result is that countries like Chile, with the world’s largest supply of natural guano fertilizer, have squandered their export earnings from copper on buying U.S. grain that they could easily have produced themselves.

As soon as the seven-member Common Market/EEC was created in 1958, its Common Agricultural Policy became the main area of diplomatic conflict between the EEC and the United States. That was one reason why U.S. diplomats promoted the European Free Trade Area (EFTA) as a rival. They had grandfathered America’s heavy agricultural protectionism into trade agreements. President Roosevelt’s Agricultural Adjustment Act, price supports (“parity pricing”), agricultural extension services and other government support made sustained farm productivity gains exceed those of any other country.

So it was no wonder that Europe’s CAP sought to achieve similar gains for its farm sector, and consequent contributions to the trade balance of France, Germany and other member countries. For the EEC, the CAP was the major and most successful economic achievement of the 1960s and 1970s. Europe became a major grain exporter. There was nothing that U.S. diplomacy could do to preserve its former market dominance in this area.This success made agriculture a key element of French and German diplomacy with the EEC expanded into today’s European Community. Obviously, these two leading farm producers have sought to maintain their own dominant position.

It is only natural that new EU member countries would like subsidies for their own agriculture to achieve similar farm productivity gains and similar supports. This has been an ongoing political fight within the EU. And it has come to a head with the war in Ukraine, seeking access to the European market. Its soils are famously the richest and most productive in the world, making it a natural global exporter of grain, sunflower seeds and other farm products.

But once again, U.S. diplomatic interests are antithetical to those of the EU. American companies have bought up broad swaths of Ukrainian farmland, and seek access to European markets, starting with Poland. Its president Andrej Duda explained the problem in an interview with Lithuanian National Radio and Television:

I would like to draw particular attention to industrial agriculture, which is not really run by Ukrainians, it is run by big companies from Western Europe, from the USA. If we look today at the owners of most of the land, they are not Ukrainian companies. This is a paradoxical situation, and no wonder that farmers are defending themselves, because they have invested in their farms in Poland […] and cheap agricultural produce coming from Ukraine is dramatically destructive to them.

The threat to Poland and other European farm producers of low-priced Ukrainian grain has been intensified by two major developments. Ukrainian access to the Black Sea being blocked, leaving rail transport westward as its major alternative to sell its grain. And the U.S. company BlackRock has worked with Ukrainian President Zelensky to organize U.S. and European investment in Ukrainian industrial-scale agriculture to help provide foreign exchange for the country in its NATO-backed war against Russia.

National Ukrainian lobbying interests have joined U.S. diplomatic pressure for tariff-free access to the EU grain market. Polish farmers recently have sought to block Ukrainian grain imports from lowering the prices at which they can sell their own grain. Without price supports for this and other EU farmers, the threat of U.S.-backed Ukrainian farm competition is a major deterrent to Ukrainian membership in the EU.

As such, it revives the U.S.-European conflict of agricultural interests that has been waged for over half a century. Extension of the EU economic supports for Ukrainian farm competition would be, in the sphere of agricultural trade, the equivalent of destruction of the Nord Stream gas pipeline in impairing European prosperity.

U.S. agricultural interests in opposing the EEC’s CAP after 1958 now pit U.S. investment interests against today’s EU farm producers.