The G20 Seoul Summit: How do Monetary and Currency Imbalances Undermine European Agriculture?

PARIS, November 9, 2010 /PRNewswire/ -- According to momagri(c), a think tank advocating a new vision for global agriculture, the international community is not fully taking into account the impact of monetary and currency imbalances on agricultural activities.

Yet, in an environment of food, financial and budgetary crises and in proportions unknown till now, the currency exchange rates and key rates set by Central Banks have become crucial variables for agricultural competitiveness. A comparison between Europe and the United States illustrates this point:

    - The under evaluation of the dollar versus the Euro has been
      an indirect but effective financial support for American agriculture
      for he past two years. This support has been assessed at $17.8 billion
      in 2008 and $14.4 billion in 2009;

    - The more advantageous interest rates of the American Federal
      Reserve (the Fed) than those of the European Central Bank (ECB) result
      into a support for American farmers of $2.9 billion in 2008 and $106
      million in 2009.

This represents a total of $20.7 billion in $20.7 billion in 2008 and $14.5 billion in 2009, or 6.5 and 5.0 percent of the value of American agricultural production.

For Christian Pees, momagri(c) Vice President, "All who experience these imbalances are subjected toconstant burdens that are all the more exacerbated in periods of high price volatility."

According to momagri(c)President Pierre Pagesse,"It is essential to consider these currency exchange and monetary variables starting with the up-coming G20, since agricultural markets--now more unstable because of speculation--are harbingers of a new financial and food crisis.Not to mention thatthe threat of unregulated liberalization of international agricultural trade is still existing at the WTO."

This analysis, which concerns the genuine nature of support provided by governments to their agricultural activities, was conducted by momagri(c) in the framework of its project to develop a Rating Agency for agriculture and its issues at stake.

A first report on comparisons between the United States and France will be published in mid-January 2011.

It will allow determining the direct (agricultural policy budgets) and indirect (financial and monetary policies, food subsidies...) support measures to agriculture that are implemented in the world's two major producing regions.

A new international budgetterminology to facilitate comparisons between national budgets has been designed to that end.

momagri(c)'s comparative studies will continue to be carried out in 2011 and will concern Brazil, Canada, China and India, before involving all major producing nations. It will then be possible to benefit from useful data for economic and trade negotiations, since it will be based on indisputable public policies.

momagri(c)'s approach supports the need to command common standards that are adapted to economic reality, which is precisely the theme of the next Davos Forum to be held on January 26-30, 2011.

http://www.momagri.org

SOURCE momagri