Tuesday, May 24, 2005

€uro rates and protectionist tariffs

The OECD is calling for a 0.5% cut in rates from the ECB. While this goes against the view of Jean-Claude Trichet at the ECB it would be welcomed by Germany, even if it might not suit all EUrozone member states. The imbalances within the Eurozone itself are the real crux of the problem for the ECB. The economists at the OECD need to take into account the fact that the EUrozone is not a politically integrated state or federation, but is rather a collection of such states which often have conflicting interests in terms of their approach to economic, and monetary policy that are dictated by domestic politics and electoral cycles. I think their call may fall on deaf ears. The Financial Times carries a story on this @ OECD calls for rates cut in Eurozone

Meanwhile the European Commission is set to continue to ensure that consumers in much of Europe overpay for fruit and vegetables.

The European Union will probably seek exemptions for fruit and vegetables from cuts in farm tariffs under the current Doha round of trade talks, Peter Mandelson, trade commissioner, said on Tuesday. Mr Mandelson's comment, made to the European parliament, was one of the opening bids in what trade negotiators say is likely to be a long and fraught process of designating products to receive special treatment under an eventual global trade agreement. Such items, known as "sensitive products", will face less stringent requirements for tariff cuts.

"It's more likely than not that fruit and vegetables will be among the sensitive products that we include," Mr Mandelson said. Such exemptions could be used by rich countries wishing to protect their domestic farmers, particularly in uncompetitive sectors where the local price is artificially maintained above the world price.

The EU runs a large trade deficit, particularly in bananas, oranges and orange juice, which account for about a quarter of the world's fruit and vegetable imports. It runs a special regime in which imports that undercut prices charged by domestic fruit and vegetable growers are charged a high tariff.
More @ FT EU mulls fruit tariff exemptions
Protectionism would be a better word for this policy.