HomeDOCUMENTSMission Reports200326-27 JUNE 2003 - VISIT TO MADRID by the SUB-COMMITTEE ON TRANSATLANTIC ECONOMIC RELATIONS
26-27 JUNE 2003 - VISIT TO MADRID by the SUB-COMMITTEE ON TRANSATLANTIC ECONOMIC RELATIONS
José Cruz Pèrez Lapazarán, Chairman of the Committee on Agriculture, Congreso de los Diputados
1. José Cruz Pèrez Lapazarán discussed recent agricultural reforms recently agreed by European leaders and their implications for the global trading system. He argued that Spain has a strategic goal to maintain a strong agricultural sector, and this informs its support for subsidies. This is hardly unique; Canada, for example, demands liberalization. Yet, at the same time it subsidizes its farmers as well.
2. The world's population is rising inexorably and this will eventually lead to higher food prices, which are currently quite low. This too might be a rational for current European subsidies. That said, Europe has changed its agricultural policy significantly over the last twenty years. It has abandoned production guarantees and is far more market oriented than previously. Yet, its policies are also focused on rural development. This multifunctional approach to agricultural policy clearly diverges from that of the United States, which focuses largely on the market side of farming. Mr Perez noted that farm policy even has a security dimension, in so far as it must also address the potential threat of bio-terrorism and other threats to food security.
3. Mr Pèrez Lapazaran noted that the EU leaders have just agreed to an important reform of CAP. Mr Fischler has characterized this as a halfway reform. Cereal and Meat farmers were receiving direct payments, but these are now to be partly de-coupled from production. He said that nut and fruit farmers required additional protection in Spain and that farmers in those sectors play a key role in limiting hillside erosion. Spain strongly supports intervention to support Mediterranean farming, and this sometimes generates friction with northern EU states that seek a more liberal approach.
4. Spain supports the introduction of biotechnology into farming although with certain safeguards for consumers. Spain has thus opposed the informal EU moratorium on introducing new GMO's.
5. Spain acknowledges the importance of agricultural trade to development, and Mr Pèrez Lapazaran indicated that Spain imports a significant amount of food from developing countries and strongly supports the EU's "All but Farms" initiative. But it is also concerned about the importation of certain sensitive products.
6. The government has also recognized the problem of over fishing and has sought to encourage a reduction in the catch of the Spanish fleet. Yet it is proving very difficult to win over the industry to this argument and there are compliance problems. Global agreements still allow very high catches.
Francisco Utrera, Secretary of State for External Trade
7. Mr Utrera discussed the importance Spain attaches to trans-Atlantic trade and indicated that the trade relationship between the United States and Europe was essentially solid. Only 3% of this commercial exchange is subject to ongoing trade litigation. Current political discourse should reflect this, he argued, rather than constantly focusing on the difficult elements of the trade relationship. The media tends to overstate trade disputes, and this creates a public impression which is not helpful. The coming ministerial in Cancun presents an opportunity to right this situation.
8. Even within the WTO process, there have been some important advances made in the negotiations and this should provide a more solid basis for advancing development. At the same time though, some of the demands being made are not realistic. Those calling for the total liberalization of agricultural policy, for example, are raising expectations beyond what negotiators can possibly achieve. From a developmental angle, he argued, it would probably be more pragmatic to stress the importance of opening south-south trade and liberalizing service markets - positions the EU is now advancing. Improved investment protection would also benefit developing countries. Environment, he said, was simply a non-starter and should not enter into the ongoing trade talks, and there are legitimate concerns that bringing such issues to the table only would render the talks far too complex. Any agreement must be based on a consensus among all parties, and issues like the environment are simply too controversial to inject into this process.
9. Luis de Guindos, Secretary of State for Economics , pointed out that the macro-economic situation in Spain has been relatively strong compared to the rest of Europe. The economy has continued to generate jobs even in a very difficult international economic climate. Growth between 2000 and 2002 stood at 2. 9% in Spain as opposed to an EU rate of 1. 9% and an American rate of 2. 17%. Ten years ago, Spain had a per capita income that stood at 75% of the EU average; it is now 85%. The budget is now in good condition and the country enjoys a triple a rating.
10. At the micro level, restructuring has paid off. Greater competition has been injected into a number of critical sectors, and this, in turn, has helped lower prices and improve service. Corporate governance has been overhauled and thereby further stabilised the market.
11. Immigration has been critical to economic growth. Immigrants play a very important role in the labour market and their presence has helped the Spanish economy avoid dangerous bottlenecks. The employment market has undergone a radical change since the jobless rate stood at 25% several years ago. The market has been made far more flexible; severance payments were lowered and part time work has been made easier to offer and to accept. Implementing this required the patient construction of a new social consensus, and this is an ongoing process. Ultimately the mandatory age will have to be extended because of demographic trends and the relentless ageing of Spanish society.
12. The delegation met with experts at the Fundacion Ortega y Gasset, a research center for the study of society and the humanities. It grants Masters and Doctoral Degrees in a number of fields including international relations and economics.
13. Rafael Myro, a professor of Economics at the Fundacion then provided a detailed comparison of the European and American economies. For some twenty years, European growth and labour productivity kept pace with that of the United States but not over the past 8 years. There are seven determinants of labour productivity. But when economies are very advanced, technology advances are the most important. Financial capital accounts for roughly 10% of growth, human capital accounts for 23% and the rest is driven by technical progress. Thus technology is the key to growth.
14. There are several sources of technological progress. Engineers, scientists, and academics all play a pivotal role in developing the ideas needed to spur on growth. Europe has tried to match the United States in terms of the number of technicians working on advanced ideas that will redefine future production. Several countries like Italy have a relatively low percentage of workers in these advanced fields, but Europe as a whole is not so different from the United States in terms of the number of idea workers.
15. There is an important difference, however, in the number of years spent in advanced study. This points to a more compelling problem for Europe: the inflexibility of its education system. There also appears to be less efficiency in European research, and the quality of research at European universities has not kept pace with that of the "global universities" in the United States. Indeed many European researchers end up working in the United States because of the greater opportunities they have there.
16. Florentino Portero, the Director of the Institute for Strategic Studies discussed Spain's strategic priorities. He noted that the trans-Atlantic commitment remains the foundation of Spain's defense policy. Spain is strongly committed to the relationship, which is additionally informed by its special relationship with Latin America. The United States itself is increasingly a country of Spanish speaking immigrants and the presence of 43 million Spanish speakers only adds depth to Spain's vital relationship with the U. S.
17. Historically the relationship has been complex. During the Franco years, Spain sought to export anti-liberal and radical Catholic ideas while fostering nationalism and anti-Americanism. This has changed dramatically. Now Spain shares with the United States on the need for the rule of law, democracy, the fight against corruption, and free markets. This has greatly expanded the space for close cooperation with the United States.
18. Spain also confronts a serious set of security challenges to its south. The countries of northern Africa have failed to modernize, and this has led to very strong immigration pressure and growing instability. The Basque terrorist movement was long seen as a strictly Spanish problem but September 11 has changed this perception. Spain's allies have come to a better appreciation of the nature of this problem, in part, because the United States made anti-terrorism a core priority.
19. Mr Portero alluded to certain difficulties in the Franco-Spanish relationship. He noted, for example, that last year France did not support European demands that Morocco abandon the Spanish island-rock it had seized. France seemed more concerned with preserving its relations with Morocco, ultimately compelling the Spanish government to appeal to the United States for support. The Spanish saw this an object lesson regarding the importance of the United States even in regional matters like this.
20. Spain has supported the US position on the Iraq war and backed the US position in the UN Security Council. Prime Minister Aznar also signed the noted Wall Street Journal letter expressing solidarity with the United States, a letter that angered several of Spain's European partners. But Spanish officials resolutely defend this position, noting that the government fully shares American threat assessments, in part, because of their own experience with terrorism. Spain has forcefully promoted this view within Europe as well. The government was particularly dismayed with arguments made by some European governments implying that the great threat to global security was America's international posture. Spanish authorities see the United States as part of the solution, not the problem. Mr Portero suggested that France and Germany, not Spain and Britain, were responsible for the lack of European unity and the serious damage to Europe's second pillar. Europe, he argued, is no longer united in a common assessment of threat, and France and Germany seem more intent on containing American power than dealing with terrorism. He argued that the discussions surrounding Iraq had squandered much of the good work done within Europe since St. Malo creating a genuine potential for defense policy to be renationalized in Europe.
21. Spain is now reconsidering its relationship with both the United States and France. It must be said that the Spanish people have long had a love hate relationship with both countries. Many left wing Spaniards opposed the war, but very few of them were sympathetic with the French position during the Iraq debate. Their sympathies lay more with Germany's pacific positions. Mr Portero also suggested that American leaders like Donald Rumsfeld have no sympathy whatsoever with the goals of European unity and are very much content to foster division to exercise power more effectively.
22. Pierre Lellouche noted in the discussion period that the break between France and the United States appears to be complete. He suggested France and the United States are divided over the threat to Middle East peace with France identifying Sharon as the problem and the US seeing Arafat and the Palestinian terrorist networks. There is also a fundamental divide on the broader question of what powers shape the global system: the Americans are convinced that this is for them to decide while France sees the Security Council as the ultimate arbiter. Even though there have been signs of reconciliation, neither side is moving from these fundamental positions. France finds itself isolated alongside the German left. Much now depends on Iraq. If the situation there improves, France will find itself even more isolated, but if it worsens, other countries might move closer to the French position. At the very least, both sides need to tone down their rhetoric and focus on practical matters in order to prevent an already difficult situation from worsening.
23. Javier Jimenez Ugarte opened his remarks by noting that Spain has recently completed a strategic review. He outlined the processes by which this review was conducted and the way in which other national strategic reviews helped structure and inform this study. The September 11 attacks occurred in the midst of this process, and this required a certain degree of reconsideration. The final study defines Spain's national security interests, reviews the risks it confronts and the scenarios in which these risks might manifest themselves, and then outlines the missions of the armed forces.
24. Spain has decided to create a joint Rapid Reaction force while a joint integrated command structure has been introduced. The Military structure will be driven by missions rather than on the number of troops and the military has rededicated itself to achieving a higher degree of interoperability.
25. Spain's core interest obviously lies in defending its sovereignty while it maintains a strategic interest in project stability, defending human rights and countering terrorism. From these broad goals, Spain has ordered its military missions and assignments.
26. The government hopes to build professional military forces of roughly 100,000, although there are currently only 74,000 serving in the military. This is partly a demographic problem for which the government is seeking a solution. The state, for example, is now paying Spanish families when they have a third child. The Ministry of Defense is also exploring the possibility of allowing military officers to begin their training at universities, and then move on to military academies afterwards.
27. Events in the Balkans and then in Afghanistan have led to a fundamental change in the way Spain views the world. It has embraced a more proactive position on international policy and has dedicated itself to contributing to peace and stability with military assets. One problem has been Spain's outstanding need to upgrade the technological capability of its military forces. Obviously funding constraints are an important part of the problem, and the military is looking for savings through rationalization to underwrite force upgrades. The government is dedicated to achieving a low budget deficit and so it is important for the military to demonstrate a high level of efficiency while nonetheless making the case that military spending should be understood, at least partly, as an investment and not simply as consumption.
28. Mr Ugarte also discussed the problem of Gibraltar and expressed deep regret that the recent referendum had thwarted the deep efforts of British and Spanish authorities to deal with key elements of the problem.