WORLD TRADE ORGANISATION: Agricultural talks enter crucial stage

Issue 

BY EVA CHENG

On July 28-30, the World Trade Organisation (WTO) will hold yet another "mini-ministerial" — its fourth since the Doha ministerial summit in November 2001 launched a new round of global trade talks.

The meeting, in Montreal, is an eleventh-hour attempt to cobble together enough agreement among WTO member-states to avoid the September 10-14 mid-term review, to be held in Cancun, Mexico, looking like a flop.

The first post-Doha mini-ministerial was held in Sydney last November. A month later, the first major deadline of the negotiations was missed. Another mini-ministerial, held in Tokyo in February, failed to achieve a breakthrough. Three more key deadlines failed to be met in the lead up to a further mini-ministerial held in Sharm el-Sheikh, Egypt, on June 21-22. It, again, failed to turn things round.

The Doha-initiated round of talks were scheduled for completion in December 2004, with new trade rules set to take effect on January 1, 2005.

Make or break

While the negotiations cover about a dozen areas, agricultural trade is widely viewed as the "make-or-break" issue. The round operates on the basis that "nothing is agreed unless everything is agreed". It is widely believed that many countries will be willing to go easier in other areas if they get what they want on agriculture.

However, the talks on agriculture are not going well. A basic framework — "modality" in WTO-speak — on agriculture was scheduled to be agreed upon by March 31. But that target wasn't met. Three months later, not only had the opposing negotiating positions not been bridged, some of them had hardened.

The most widely reported dispute is between the US and the 17-member Cairns Group of agricultural exporters on the one hand, and the European Union (EU) and Japan, on the other. Australia chairs the Cairns Group, which mainly supports US positions.

The US-Cairns camp is opposed to nominal export subsidies for farm products, and holds the EU as the key culprit. Other forms of subsidies that indirectly enhance exports are rarely scrutinised.

The EU's Common Agricultural Policy provides about US$60 billion in subsidies to EU agricultural producers, mainly in the form of export subsidies. However, this is only a fraction of the $300 billion-plus of farm subsidies of different shapes and forms that the rich countries dish out each year to their richest farmers and agribusiness corporations.

The US has managed to massage the Agreement on Agriculture (AoA), the WTO framework which regulates agricultural trade, in such a way that Washington's huge farm subsidies are ruled "WTO-consistent". US farm subsidies act to depress world farm product prices, making imports from the US and EU cheaper than homegrown products in many underdeveloped countries, thus forcing local farmers out of business.

The US government will provide $180 billion in farm subsidies over the next 10 years under a farm bill introduced by President George Bush in 2002.

Crooked agreement

The US is not the only rich country to benefit from the crooked nature of the AoA. Like the rest of the WTO trade rule regime, AoA builds on the hypothesis that minimal trade restrictions will bring maximum benefits to all countries. It was introduced in January 1, 1995, coinciding with the formation of the WTO, and extended global trade rules for the first time to agricultural products.

The General Agreement on Tariffs and Trade, the WTO's predecessor, started in 1948.

The agricultural rules were structured under three main headings — market access, domestic support and export subsidies. The first was to be expanded, and the other two minimised over time. All tariff and non-tariff barriers to trade were to be converted to a composite total — "aggregate measure of support" — and "bounded" at that level, for forced reduction within a defined period (by 36% within six years for developed member countries and by 24% within nine years for underdeveloped member countries). Reduction is exempted for the least developed member countries.

Domestic support is to be reduced by 20% and 13.3% respectively by the developed and underdeveloped countries. Export subsidies must be slashed by 21% in volume terms and 36% in value terms.

Throughout the agreement, concessions were incorporated nominally for underdeveloped countries, giving the impression that their interests and difficulties were given serious consideration. The reality is quite different.

Some domestic farm supports are exempted from reduction or challenge on the excuse that they are not "trade distorting". Those supposedly distorting trade only minimally receive "green box" protection and those linked to production control can claim "blue box" exemption, leaving only the output-enhancing measures — labelled "amber box" — targeted for reduction.

Seven years after they were allowed for, these exemptions were found to be a major source of abuse, primarily to the advantage of the richer countries.

In the January 1999 issue of Third World Insurgence, Bhagirath Lal Das, the former director of international trade programs in the UN Conference on Trade and Development, said the exempted subsidies "are generally prevalent in developed countries... whereas subsidies which are generally prevalent in developing countries, e.g., investment subsidy and input subsidy, covered by Article 6, do not have such dispensation."

These exemptions were tailored for the rich countries, since countries which didn't have them weren't allowed to have them after the AoA was introduced.

Writing in the July/August 2000 edition of the bulletin of the Federal Reserve Bank of St Louis, Stanford University's Professor Timothy Josling admitted it is "widely accepted" that the AoA "did little to liberalize trade in agricultural products and improve market access", adding that "tariffs on agricultural goods are still on average about three times as high as on manufacture goods".

The ratio of agricultural to industrial tariffs in industrialised countries was, in fact, nearly 10-to-1, indicating the rich countries' greater success in circumventing the WTO's flimsy rules to maintain effective barriers to agricultural imports.

Following a schedule decided during the Uruguay Round, the renegotiation of the AoA started in March 2000. Three drafts have been put forward so far (in December 2002, February and March, respectively). They have essentially the same approach and have all been knocked back by the majority of WTO member-countries. They were all drafted by pro-US WTO bureaucrat Stuart Harbinson and had attracted no complaints from Washington.

The EU's main objection to those drafts was that the US is too aggressive in demanding the EU reduce its farm sector supports while allowing US farm subsidies to hide behind the "WTO-consistent" support categories, such as export credits and food aid. The EU accuses the US of using "food aid" as a means to indirectly subsidise its agricultural exports.

In a joint statement issued on March 18, EU agricultural commissioner Franz Fischler and EU trade commissioner Pascal Lamy wrote: "We find the [March] draft unbalanced against those developed countries like the EU that have pursued an internal reform path and in favour of those who had increased trade-distorting support."

The Third World's concerns are more fundamental. After seven years of implementation of the Uruguay Round agreements, the leaders of the underdeveloped countries have come to realise that many of the benefits that they have been promised within the AoA, and the trade-offs of benefits between the AoA and other areas of the global trade rules, have not been delivered.

Speaking to a February 19-21 NGO meeting in Geneva, Bhagirath Lal Das said the Harbinson [February] draft is "grossly inadequate" because it neither "addresses the basic problems in the trade in agriculture", nor does it "take into account the basic problems of the developing countries in this area".

Uneven 'playing field'

Lal Das said the main problems were that "the playing field in the international trade in agriculture is highly uneven and distorted" and the underdeveloped countries suffered "additional handicaps" due to "their weak economies and heavy dependence of their populations on agriculture". He said the AoA in fact enhanced those distortions and handicaps.

On June 10, a group of 27 poor countries put forward a position paper on the Doha Round, calling for a refocus on the promised "developmental dimension" of the whole Doha package, the need for "overall delicate balance" and the importance of all member countries participating in the WTO's decision-making processes. The WTO is infamous for marginalising the input of Third World countries.

The statement said agriculture is of central importance but cannot be taken as a "self-contained" issue. China, Brazil, Cuba, Venezuela, India, Malaysia, Mexico, Argentina and South Africa are signatories to the statement.

In the Sharm el-Sheikh mini-ministerial, Singapore led the call for a brand new draft on agriculture, supported by Japan, South Korea and Switzerland.

The rich countries' bid to skew the AoA rules to their advantage comes as no surprise. To maintain their domination of world farm product trade, the US and EU seek to maintain and increase the underdeveloped countries' dependence upon food imports by driving local farmers out of business.

From Green Left Weekly, July 9, 2003.

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