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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

 

 

About twelve of us met with Fiona on the 13th January 2012, mostly local WDM members but also a few other representatives of local church groups.   Prior to the meeting we had sent Fiona a copy of ‘Broken Markets’.

Introduction to the Issues

Andy Welford gave a 15 minute presentation on the issues of food speculation.  He approached it from his perspective as a diary farmer.  He made a distinction between the historic trading of food stuffs which sometimes involves the advance sales of crops to the end buyer and the recent damaging trading of derivatives by speculators who will never see a crop and have no interest in the end product beyond the profit they can make from it.

He used wheat prices as an example of the increased food price volatility; they more than doubled in 07/08 and then they dropped again, before spiking again 2010.   This has caused food prices to rise even in the UK but in developing countries where people can spend up to 80% of their income on food then the result is poverty and starvation.  The number of people living in poverty has increased.  The Millenium development goals are most unlikely to be achieved.

Part of the problem is the developing country’s dependence on imported food.  This has come about because of the free trade ethos.  Developing countries were obliged to open their doors to food trading and to cheap imports.  At that time the developed countries had food surpluses which they were keen to get rid of but the situation has now changed and there is no longer such a surplus so food is no longer being dumped on developing countries.  Unfortunately in the process the developing countries’ own production of staple foods has been damaged so they are no longer able to feed their own people.

It seems that the normal laws of supply and demand are not responsible for causing the spikes in prices that we are seeing.  Between 2000 and 2008 the amount of money that has gone into food speculation has increased by 500%.   The EU is proposing putting limitations on this activity through the Markets in Financial Instruments Directive – MiFID which is due to be considered by the Parliament and the Commission later this year.  We would like it to enforce transparency in the investment activities of banks and other financial institutions and also to impose ‘position limits’ on their involvement in food speculation. It must not be allowed to be watered down by lobbying from the financial sector.

Fiona’s Presentation

Fiona started by stating how grateful she is to WDM for focussing on this issue and for bringing it to her attention.  As far as she is aware the other NGO’s are not campaigning on the issue of food speculation.   She praised the document ‘Broken Markets’.  She said she has found it very useful and that it contains good explanations of the problems.

She pointed out that there are other causes for the recent food shortages:  climate change, bio fuels, growing population and changing diet but she agrees that food speculation has added to the difficulties. It is particularly damaging because it results in sudden and unexpected price rises which cannot be planned for.

Fiona is a full member of the Industry, Resource and Energy Committee and she is a substitute on the Development Committee.  She has colleagues who are members of the Development Committee who she had spoken to prior to meeting with us.  They will be compiling an ‘Own Initiative Report’.  This lays out the position and the views of Committee members and tends to influence the direction of future policy.  There has also been the Zimmer Report on food speculation and food security.  This was published in July 2011.  It addressed the role of speculation.

Fiona said that as a result of us contacting her she has researched the matter of MiFID.  She has spoken to members of various relevant committees.  The ECON Committee is the main committee dealing with MiFID but the Development Committee also has an input.

She explained that the MEP’s are all members of different parties in their own countries but that in the European Parliament they are grouped together into seven main groups.  These include the EPP (Right wing), Socialists, ALDE (Liberal Democrats), ECR (Conservatives) and the Greens.

Fiona is going to push to be a Shadow on the Development committee for ALDE.  This will mean she could give an opinion on matters and would be able to have more influence on policy, in particular on MiFID.  She suggested that WDM head quarters could liaise with her on the best way to carry these issues forward.

Fiona agreed that transparency and openness are needed.  In her view America is better at this than the UK is.  The problem at the moment is that the Tories are very resistant to any legislation – their instinct is to protect the City.

Fiona also agreed that position limits are necessary.  The Regulator should be able to step in and say that there is too much activity and limits should be placed on trading.   She says that George Osbourne is particularly resistant to this.  He wants ‘alternative arrangements’ for regulating trade but he has not specified what these might be.

MEP’s now have the power to say no to trade agreements.  This has increased the lobbying potential for WDM.

In the United States the Dodd Frank law has been introduced to limit food speculation.  However, Fiona stated that this in not yet a done deal.  It is particularly important that the EU should pass similar legislation in order to encourage the USA to pursue this course of market regulation.

We talked about the Financial Transactions Tax.  Fiona is in favour of this, particularly as a means of raising revenue to fulfil the commitments that were made to developing countries to help them to address climate change.  It would be a new mechanism for raising money.  She suggested that it could be renamed ‘stamp duty’ which would make it more acceptable and cause less resistance.  It would be useful if WDM could do some research on the impact of such tax and on the amount of damage that would be caused to the City of London.  (It was noted that the local Lib Dem MP for Redcar, Ian Swales, had introduced an Early Day Motion on the subject of a FTT)

Tar Sands is an issue of concern for Fiona.  There is a move at the moment to fight for different carbon values to be given to different types of oil, recognising their varying amount of pollution.  Canada is very opposed to this.  There is also an issue of indirect land use change in relation to biofuels.  The EU is lobbying on this.

Summary

Fiona had read the publication ‘Broken Markets’ and she commented on how useful and informative it had been to her and what high quality information it contained.   She said that she was very grateful to WDM for providing the information and bringing it to her attention. She also said that WDM appears to be the only NGO which is taking this campaign forward.

She said ‘because you invited me to meet with you I have researched the issues and looked for ways that I can support the food speculation campaign.’

She said she would welcome support from national WDM in the future to guide her about approaches that might be useful.  She says she can be contacted by email.  Basically she is willing to become very involved in this campaign and is attempting to get herself onto the relevant committees in order that she can influence policy in the future.

We are delighted with how effective our lobbying has been on this occasion.   Fiona is willing to work alongside WDM to try to address the issue of food speculation.

Barbara Welford

East Cleveland WDM