Europe is sinking in an environment that takes it less and less into account. Now, as the world embarks on a turbulent transformation, it is turned upside down by agriculture. A crisis that once again manifests its palpitating fragility. Something similar happened with Greece that put the euro on the ropes. It happened again with the Russian invasion of Ukraine. Initial babbles, especially from German Chancellor Olaf Scholz, to end up in the arms of US President Joe Biden. Now, the rout, each one to his own. The Greeks give up their fleet to Russia’s energy exports; Russian gas breaks entry records in European ports, especially Spanish ones; Eastern trade with Moscow revives.
European existential weakness? It tends to faint when the resistance of its weakest fuse breaks. Since the start of the pushback a few weeks ago, Brussels has made at least two major corrections to its policy towards the sector.
The Greek comparison is useful. That country’s economy represented less than 2% of the eurozone as a whole; that of the agricultural sector is a little more than 1% and 4% of employment (in Spain a little more, but not much). But as in the first case, these data say very little. Another one highlights its internal significance: of the community budget, more than 30% is allocated to the Community Agricultural Policy (CAP); However, it is very unequally distributed, 20% of the recipients take up to 80% of the money.
It is a sector – agriculture, livestock, fishing and hunting – welcomed with sympathy by the social majority, which fuels nostalgia for its roots and suggests idyllic postcards, despite the fact that it is still a business for a few and an ordeal for the majority of its practitioners. Globalization has decimated it and it lives in a permanent price crisis that has led it to explode against governments of all stripes.
As a farmer from the cinematographic, and therefore symbolic, population of Alcarràs explained yesterday in these pages: since 2014, after the first crisis in Ukraine, the price of fruit “went into free fall and we have not recovered.”
It is also a very conservative social unifier and for that reason it has been artificially maintained with aid that is politically very directed towards specific sectors. Also to try to compensate for food inflows from outside the Union. That is why those who are inside destroy Moroccan fruit: as the French did with Spanish fruit a few years ago and more episodically, also now (the case of the tomato and the former French minister Ségolène Royal is the latest episode).
Vox rides on this structural conservatism, which has converted the Ministries of Agriculture of Aragon, Castilla y León, the Valencian Community and Extremadura, into logistics centers for protests and battering rams for their expansion and political proselytism, in bitter competition with the PP. A new manifestation, in case there were any doubts, of the consequences of the pacts of Alberto Núñez Feijóo’s PP with Santiago Abascal.
Meanwhile, outside of turbulent Europe, there are also disturbing movements. Friend Biden has decided to review his exports of LNG (liquefied gas), which Europe uses as an alternative to the decision to dispense with Russian, 40% of the supply, to see if it is appropriate to reduce them. And this despite the fact that they are a very good business for American exporters and politically they have accentuated European dependence on Washington.
The decision may simply be due to electoral calculations; it was announced at the start of the presidential elections next November and Biden wants to attract environmental votes to defeat Donald Trump, his almost certain rival. Although it is striking that Biden is not concerned about the European reaction and instead does not distance himself from Israel in the face of the massacre that he is carrying out in Gaza despite the growing relevance of this issue in public opinion in his country. As it may be, the German Vice Chancellor, Robert Habeck, has closed a contract in Algeria to obtain gas from that country through a gas pipeline that crosses Tunisia, Italy and Austria.
Meanwhile, in Xi Jinping’s China, deflation (a general drop in prices) is advancing, reducing the domestic market and pushing its companies to export more. Although we have to wait a few months to see if this situation is consolidated, these exports are beginning to transmit the drop in prices to the world through their product sales. According to the Financial Times, the price of Chinese exports has fallen at the fastest rate since the 2008 financial crisis.
Good news if you think only of its effects on interest rates in Europe, which will fall sooner and faster than expected. But in industrial terms and prices of domestic products, such as those of agricultural products that are at the center of the debate these days, it will mean adding more tension factors. A symptomatic example. The Chinese electric vehicle manufacturer BYD, led by Wang Chuanfu, capable of manufacturing one million units in three months, has announced discounts at its European dealerships. In Germany, the continent’s first market, the reduction by the Shenzhen-based company reaches up to 15%, which has greatly worried the country’s large firms, starting with Mercedes-Benz, which has already warned of the impact on its profits. of that trade war.
It does not seem that US-driven deglobalization and disconnection from China will prevent deflationary contagion. The Chinese continue to reach Western markets through third countries; to the US through Mexico especially. They would be bad times for agricultural prices…and for everyone else.