Stephen came to meet our group in Saltburn on the 10th March 2012. This is the third time we have met him over the years. We have spoken to him before about trade. We knew that Stephen is largely supportive of the WDM position. Previously Stephen’s role in the EU had been focussed on labour relations and we were unaware that he had recently taken on different responsibilities. Before meeting Stephen we had sent him a copy of ‘Broken Markets’.
We introduced ourselves and explained that we are concerned about food speculation because of the devastating effect that it is having on the poorest people in the world. Andy Welford gave a presentation on the subject from his perspective as a British farmer. He pointed out that developing countries have become much more dependent on imported foods over recent decades. For example, in 1970 Africa had been a net exporter of food but it is now heavily reliant on exports of staple foods. This has happened as a result of free trade policies which have forced them to open their borders to cheap imports which have undermined local food production. That imported food has now increased in price, meaning that the poorest people, some billion worldwide, are now unable to afford to buy the food they need. Speculation in food markets is causing greater volatility in food costs which has contributed to higher prices.
Mifid
Stephen agreed with the analysis and said that he is a member of the ECON committee. The lead MEP for this legislation is Markus Ferber who is a German conservative. He is not entirely sympathetic to the cause but in Stephen’s view he can be worked on. He is a member of the German CDU party, the Bavarian wing which is right of the Tories.
We asked why he had the job of leading this legislation if he was not in agreement with it. Stephen explained that the Christian Democrats are the largest group in parliament, followed by the Socialists who are 80 seats behind. The parties are awarded points which can be used to bid for everything. In this way the chair and vice chair posts are bargained for and agreed on. The way in which the Committees are run also depends on this system. As major issues arise the co-ordinator can bid and win proposals. A shadow rapporteur is appointed to represent the views of the opposing parties.
Mifid is not the only proposal that is dealing with financial regulation but Stephen agrees that it is probably the most important. There is also legislation that is trying to address the problem of over the counter derivatives – this is a corner shop approach to dealing. It takes place on a huge scale with over 600,000 billion deals every year. Stephen mentioned how the market volatility is also causing problems for the poorest people in the UK because incomes have remained static while the costs of fuel and food have increased.
FTT
Stephen then also spent a while talking about the Financial Transactions Tax. He mentioned again the 600,000 billion individual trades that take place and pointed out that even a tiny tax would yield a lot of money. The EU wants a tax but the UK is resistant because of the possible damage that might be caused to the City of London. Ed Balls remains to be convinced. Ed has said he is in favour of it but that it needs to include New York. Obama is in favour but says it needs to be a global tax. Sarkosy and Merkel are interested is such a tax.
If 0.05% tax was charged per transaction then it would yield 200 billion euros per year but the EU proposal is that a tax should be levied at two different rates; 0.01% on derivatives and 0.05% on shares. At first sight this seems strange because the more damaging form of trade would be taxed at a lower rate but there are many more transactions in derivatives.
Stephen said that it has been found that there are advantages to the computers being sited close to the trading floors as this gives an advantage of fractions of a second when trading takes place.
Since the Lisbon treaty there is the possibility of enhanced co-operation between the EU countries. There are nine countries which have expressed an interest in a FTT. There are fears that such a tax would damage the EU’s GDP. The Socialist and Democratic Group has commissioned a study into this which found that in fact such a model could increase the GDP by 0.25%. It also stated that if the FTT was introduced in a particular way then the potential loss of jobs could be avoided.
Sweden introduced a FTT tax which had to be paid if you were resident in Sweden and this turned out to be an easy tax to avoid. Any such tax would need to be combined with a stamp duty payment which cannot be avoided in the same way. Stamp Duty already operates in London. 40% of the income from this stamp duty is derived from transactions taking place outside the UK. This proposal is being debated now with Ed Balls.
Future Campaigning
We asked Stephen if there was anything that WDM could do to take this campaign forwards. Stephen suggested the following:
- Broken Markets Stephen was very complimentary about this publication. He found it very readable. He thinks it would be worth sending to all UK MEP’s. He said that while much of the information contained in it is not new it gives a different slant on the problem by emphasising the effect that speculation is having on the poor. MEP’s are familiar with the problem of derivatives but may not have thought about the effect of speculation on food. We queried whether this would need to be a hard copy. He thought not as all MEP’s are very familiar with computers. A link to the document would be sufficient.
- Financial Transactions Tax He thinks that we should lobby on this as well as on the Mifid. In particular he suggests that pressure should be brought to bear on Ed Balls and Ed Milliband. They need to come on side in order to support a European FTT.
- We asked about the best ways of lobbying MEPs. Stephen said that individual letters are effective. They might often receive a rather bland response from the link MEP but the number and subject of letters are noted and do have an impact.
- WDM should continue to lobby in June/July. It would be helpful to have a synopsis of the salient points raised in Ferbers report together with the main amendments that should be supported or particular points that are concerning. There may be a split vote. It would be worth emailing every MEP with a summary at that time.
- Stephen will forward anything relevant to us in the future. WDM are welcome to make contact with him. He is the first vice president of the S&D group (one of eight vice presidents). He has special responsibility for ECON, employment and the internal market.
- Key people for us to contact are Veronique Dekesey [Belgium] and Libori Rucek [Czechoslovakia]. They are members of the foreign policy committee.
- Alica Ferrero is the socialist shadow on the ECON committee. Stephen will check this and send us her contact details. Luca Forsati from Milan is the Socialist with the responsibility for dealing with financial issues. He is willing to be contacted directly and he speaks excellent English.
Barbara Welford
East Cleveland WDM