To save global trade talks, act on agriculture
Kevin Watkins International Herald Tribune
THURSDAY, OCTOBER 6, 2005
NEW YORK 'Free trade," wrote Richard Cobden in 1857, "is God's diplomacy,
and there is no more certain way of uniting people." You can't help wondering
what he would have made of the Doha "development round" of world trade talks.
After four years of what passes for negotiations, the score card for
delivery remains a blank sheet. While the Group of Eight summit meeting in July
marked a quantum shift in rich-country commitments to aid, when it comes to
trade, inertia is the order of the day. The World Trade Organization's
ministerial meeting in Hong Kong in December now represents high noon for the
Doha round - and the odds on outright failure are shortening by the day.
Such an outcome would be a disaster. Success in the Doha round would give
a powerful impetus to global poverty reduction efforts. Improved access to
markets and an end to unfair trade practices in agriculture could help lift
millions of the world's poorest people out of destitution. Failure would signal
that rich countries were unwilling to undertake the reforms needed to achieve a
more equitable pattern of globalization. More than that, it would threaten
global prosperity, weaken the legitimacy of the WTO and undermine the
rules-based trading multilateral system, opening the door to a resurgence of
unilateralism.
To avert failure, northern governments need to ask for a lot less and
give a lot more. Instead of demanding deep liberalization in developing
countries, they should be offering deep liberalization in their own backyards.
And they should start by getting serious about agriculture - the litmus test
for a successful Doha round.
The problem in agricultural trade can be summarized in three words:
rich-country subsidies. This year, northern governments will allocate about $1
billion a day to domestic agricultural subsidies. These subsidies, reinforced
by high tariffs, systematically reinforce poverty among farmers in poor
countries, flooding markets with cheap surpluses.
The European Union and the United States bear primary responsibility for
tackling the problem. This year, America will spend more than $4 billion in
payments to cotton producers. That sum exceeds the national income of a country
like Burkina Faso, where some of the world's poorest farmers pick up the bill
for American subsidies in the form of lower prices. Not to be outdone, the EU
produces sugar at three times world market price and keeps imports out with a
tariff in excess of 300 percent.
Having spent most of the past four years locked in mutual recrimination
and finger-pointing, the trans-Atlantic mood music in the agricultural trade
negotiations has started to change. In July the G-8 pledged to phase out export
subsidies, albeit at an unspecified future date. More recently, the EU and the
United States have competing to offer grandstanding statements promising deep
cuts in "trade-distorting subsidies." Developing countries would be well
advised, however, to read the small print.
Under the current negotiating framework, subsidies deemed "distorting"
will be subject to the full rigor of any WTO agreement, but "non-distorting"
subsidies are effectively exempt.
Therein lays the rub. Less than half of European Union and American
support to agriculture is now covered by effective WTO rules, and that share is
shrinking. Under the reformed Common Agricultural Policy, or CAP, the European
Union will still be spending more than 40 percent of its total budget, or more
than 40 billion a year, on agricultural subsidies.
The danger now is that a WTO agreement will stamp a multilateral seal of
approval on an elaborate subsidy reshuffling exercise. This would be a
perversion of the "development round." From the perspective of smallholder
farmers growing rice, cotton or sugar in developing countries, reclassification
of subsidies at the WTO to accommodate EU and US interests is hardly a
substitute for a real deal to end unfair competition.
What is needed at the meeting in Hong Kong in December is an agreement to
get back to basics. Instead of maintaining the current subsidy classification
system, a ceiling should be set on the overall level of all support to
agriculture. An early phase-out of export subsidies would help, but this should
not be a substitute for deep cuts in tariffs or in direct payments to
large-scale farmers. In practice, this implies biting the bullet on a
fundamental revision of both the 2002 U.S. farm legislation and the EU's
lamentable excuse for CAP reform in 2003.
After four years of going nowhere fast, and with the stakes as high as
they are, the Doha round of agricultural negotiations can no longer be left to
trade ministers. Political leaders need to provide leadership - and they need
to start now.
Kevin Watkins is the director of the UN Development Program's Human
Development Report office.
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