Friday, December 21, 2007

A significant move

If you want a taste of the real world, outside the foetid bubble of Westminster politics, go down to the shops today and buy a loaf of bread. And, as you count out your pennies (although folding money would be quicker), try to recall what you were paying this time last year.

Yet, food price inflation – and inflation generally – is the stuff of real politics and, in the corridors of power, there is real concern that the situation is getting out of control, requiring panic urgent measures.

Here though is also a pointer to the irrelevance of the British government. The decisions are not being made in Westminster – where the MPs have already gone off on their Christmas break – or in Whitehall, but in Brussels, where today the EU commission took the ground-breaking step of removing all import duties on cereals with the exception of oats, buckwheat and millet for the marketing year ending June 2008.

What might seem to some as a minor, technical adjustment is in fact enormously significant, marking a formal acknowledgement that the European Union is no longer self-sufficient in key food commodities, having become a net cereal importer in the 2006-07 season. Europe is now reliant on the global market to keep its population fed.

However, the European Union is not the only player in the game and while some exporting countries are rejoicing in the tariff move, other countries as far afield as Nigeria are also reducing theirs. We are undergoing a reverse bidding war, as governments slash their taxes to keep their own populations fed.

Yet, in a classic example of the disconnect which plagues our rulers in Brussels, yesterday we saw the commission's proposals require emission limits on new cars, with a cap of 130 grams of CO2 per kilometre. But, having exhausted the immediate potential for engine improvements, the commission is also relying on increased use of biofuels to enable its standards to be met.

Thus, increased use of biofuels is to be built into legislative standards, increasing pressure on supplies which would otherwise be used for food, this factor already having been instrumental in driving up prices. Joined-up thinking anyone?


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