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Cablegate: Poland's Uncommon Agricultural Policy

VZCZCXRO4842
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHWR #0973/01 2331412
ZNR UUUUU ZZH
R 201412Z AUG 08
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 6909
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHBS/USEU BRUSSELS
INFO RUEHKW/AMCONSUL KRAKOW 2153
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 WARSAW 000973

SENSITIVE
SIPDIS

STATE FOR EUR/NCE
STATE FOR EEB/TPP/ABT/BTT FINN
USDA FOR FAS/OSTA MHENNEY, LJONES; FAS/OCRA RCURTIS, DSEIDBAND;
FAS/OGA MHOUSE, ARIFFKIN; FAS/OFSO DYOUNG
BRUSSELS PASS AG MINISTER COUNSELOR;
EUROPEAN POSTS FOR AGR/ECON

SENSITIVE

E.O. 12958: N/A
TAGS: EAGR ECON ETRD TBIO PGOV PL
SUBJECT: POLAND'S UNCOMMON AGRICULTURAL POLICY

REF: Warsaw 823, Pawlak-Quanrud Meeting

WARSAW 00000973 001.2 OF 002


1. (SBU) Summary. This cable outlines the upcoming crisis in Polish
agriculture. The rural economy enjoys significant subsidies from
the EU Common Agricultural Policy (CAP), but the CAP, drought, and a
failure of leadership from the Ministry of Agriculture, are creating
the circumstances under which Poland will be a net agricultural
importer of some primary commodities. Poland is France's strongest
ally in support of the Common Agricultural Policy (CAP). This
partnership blunts the interest of Poland in assisting the United
States with its EU trade problems. Poland votes with France against
the U.S. trade agenda in agriculture and the agenda items of the
Transatlantic Economic Council (TEC). Poland's support for France
helps the two nations act as a bulwark against CAP reform and lower
future payments, but the CAP is part of Poland's problem down on the
farm.

-----------------------
A Trade Imbalance Looms
-----------------------

2. (SBU) Two years of subpar grain and oilseed harvests are
beginning to take their toll on the farm economy, and 2008 is
shaping up to be just as bad. Poland's acreage devoted to grain
production has slipped 500,000 hectares over the last ten years,
while its yields have increased only slightly. Poland produces in
an average year as much grain as it did in 1998, and in 2008, as in
2007, the crop will be below average due to poor weather. Poland
has the highest animal feed prices in Europe and input prices for
beef, pork, poultry, and dairy are climbing. Poland's borders with
other EU nations are open and agricultural imports are flooding in,
up twice as fast each year. A Pole visiting a grocery store is now
just as likely to purchase imported pork, the ubiquitous staple
protein of Polish cooking. Poland's hypermarkets are filled with
products available from Western Europe, supplied by their economies
of scale. Ten percent of the live hog population of Poland is
imported rather than produced domestically. Crop producers are
squeezed in the middle as high fuel costs and a 150 percent jump in
fertilizer and pesticide costs are eating away at profits. Bright
spots are visible in the trade of fruits and vegetables, and dairy
is still profitable, but Poland's exports are flat at present and
there is less Polish-produced meat every year.

------------------------------------
Biotechnology is part of the problem
------------------------------------

3. (SBU) Poland has an intensive outbreak of the European Corn
Borer that caused a $400 million corn crop loss in 2008. With
agriculture worth $35 billion to the economy annually, such a loss
has a measurable impact. Due to this problem, Poland imports $175
million in corn each year, a number that will rise in 2008 as the
drought and pest problem worsen. The government banned the sale and
registration of biotech seeds in mid-2006. A planned ban on
importing GM crops as animal feeds was defeated by a coalition of
Polish industry in July 2008. Poland is now considering adopting a
regulation to approve coexistence principles for biotech products,
and the Ministry of Environment has published a draft regulation.
The strict draft law calls for regions to declare themselves GMO
free, and threatens farmers with a three year jail term for planting
in GM free regions. Farmers must make financial deposits to pay
potential damages and get neighbors' permission before planting.
Some scientists call for a 5 kilometer barrier between GM and
conventional crops -- even crops that are non-pollinating. The
Ministry of Environment uses the talking points of the anti-GMO
movement and when it conducts education seminars or publishes
materials they are derived from those sources. One expert advising
the Ministry on biotechnology works for an NGO based in the UK that
advocates farms return to using draft animals. (Comment. A bit of
reality is needed at the Ministry of Environment which is the block
on progress with the biotech issue. The Agriculture Ministry
supports a new approach to biotechnology policy and acts
accordingly. End Comment.)

---------------------------------------
The other problem is Poland's EU allies

WARSAW 00000973 002 OF 002


---------------------------------------

4. (SBU) Poland opened its borders to Europe and closed its borders
to non-EU nations on May 1, 2004. Since then its farm economy
prospered due to the import substitution of products from
third-country markets. U.S. farm exports to Poland are off $1
billion since its EU accession. Now, the more heavily subsidized
farm economies of Old Europe are exporting their agricultural
products to Polish consumers. The imported products are not food
luxuries for wealthier Poles, but basic staples produced in Western
Europe. Even as EU subsidy payments are supposed to equalize in
theory as the full accession agreement factors in by 2013, Poland
will never receive the high levels of subsidies enjoyed by France,
for example, due to the calculation of payments based on historical
yields. A French hog producer receives a payment on each carcass
and no such program is available for his Polish counterpart. Even
in 2013, Polish farmers will receive no more than one fifth in
subsidy payments what a French farmer earns for the same crop. Land
prices in Poland have risen quickly, and input prices are the same
for each producer, so where is the equity in modulating payments
across member states as is required under the CAP? Polish farmers
know they face open borders and their own access to store shelves
competes with other EU farmers. While Polish farmers are becoming
more vocal about the problem of the permanent discrimination they
face, the Ministry of Agriculture will not shift its support away
from France until after the CAP Health Check and the end of the
French EU Presidency. Poland voted against U.S. poultry access to
the EU in Brussels last month, largely under the sway of France, but
also because of its own current difficulties over the
competitiveness of its poultry industry. Polish veterinary sources
say that the United States would have a better chance advancing U.S.
poultry access post-French EU Presidency.

5. (SBU) Agriculture Minister Sawicki is focused on his leadership
fight with Minister of Economy and Deputy Prime Minister Pawlak at
their Polish Peoples Party (PSL) party election in September.
Sawicki's best chance to use the Agriculture Ministry to sway the
election is to keep the spigots open for EU funds. Sawicki is
popular and he may win in a race against Pawlak, but sources
indicate he plans to remain in his present post. During
negotiations with majority coalition partner Civic Platform (PO),
Sawicki may wish to push Pawlak aside for his own preferred
candidate to run the Ministry of Economy. Andrzej Lepper held the
post of Deputy Prime Minister and Minister of Agriculture during the
PIS-Samaobrona coalition, but getting the title will be something
Sawicki must negotiate. Recently, Pawlak has indicated a new
openness to support biotechnology and market oriented CAP reform,
see reftel. Sawicki has proven himself capable of tackling tough
problems such as reform of the agricultural pension system,
defeating a ban on biotechnology in animal feeds, or pushing the EU
Council of Ministers to expand the dairy quota. The extent to which
Sawicki will be allowed to change ministerial positions depends on
the strength of the original coalition agreement with PO and whether
he can cope with accusations of political favoritism. The Prime
Minister's office overruled a Sawicki appointment to the
Agricultural Marketing Agency, the smaller of the two EU CAP payment
agencies, due to that fact.

6. (SBU) Comment. After the French EU Presidency ends, and
Sawicki's power base at the Ministry of Agriculture strengthens
after PSL party elections, expect to see Poland act more
independently on issues relating to the CAP and biotechnology.
Poland's farmers are losing ground, and the Ag Ministry knows it.
End comment.
ASHE

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