DEVELOPMENT: EU Presses On With Subsidies

By IPS Correspondents Reprint | | Print |

David Cronin

BRUSSELS, Apr 16 2007 (IPS) - This year the European Union will spend more than 35 percent of its 115 billion euro (156 billion dollars) budget on supporting farmers, even though agriculture accounts for less than 5 percent of the EU workforce.

With such a disproportionate focus on farming, does the Union have any moral authority to demand liberalisation of the food trade in poor countries, where often 70 percent of people rely on agriculture to make a living?

Agriculture has become the most contentious issue in the Doha round of world trade talks, which were launched at a ministerial conference in the Qatar capital in 2001.

Representatives of four key players in global agriculture – the EU, the United States, India and Brazil – met in New Delhi Apr. 11-12 to see if they can find common ground on the areas of discord. Although they agreed to further dialogue, the differences between the two rich blocs and the considerably poorer India and Brazil remain vast.

India is leading efforts by developing countries at the 150-member World Trade Organisation (WTO) to prevent unfettered liberalisation.

Aftab Alam Khan, head of ActionAid’s trade campaign, called on India to resist pressure from the EU and the U.S. to soften its stance.

“It is important to understand that protecting agriculture in poor countries is a matter of life and death,” he told IPS. “There are 350 million poor farmers in India alone.

“It is very clear that the EU is continuing to pursue hypocritical policies. It is trying to protect its own agriculture, when only 3-4 percent of people in the EU are involved in agriculture, compared to 70 percent in poor countries. The level of development and the scale of poverty are also much different.”

But Michael Mann, agriculture spokesman with the EU’s executive arm, the European Commission, said that anti-poverty activists are misrepresenting the Union’s position.

Tariff reductions sought by the EU for India are two-thirds of those it has proposed for richer countries, he said. The Union, he added, is seeking to increase its exports of value- added goods to India and it has not echoed U.S. demands that India drop its demands on ‘special products’.

Along with Indonesia and the Philippines, India is demanding that it should not have to cut tariffs on imports of ‘special products’ such as maize, cotton and rice.

European wine and spirits manufacturers are especially eager to boost their sales to India’s bourgeoning middle class. The EU has complained to the WTO about how India imposes taxes and duties as high as 550 percent on spirit imports and 264 percent on wine.

It is likely that the Union will ask the WTO’s dispute settlement body to probe the levies at an Apr. 24 meeting. Yet the New Delhi government has signalled it may introduce legislation on reduced tariffs before then, to prevent the dispute from escalating.

“It is absolutely wrong to say we are going out of our way to damage the Indians,” Mann said. “In contrast to the U.S., we are sympathetic to the Indians on special products. And we are not in any way trying to undermine subsistence farmers.

“Development NGOs (non-governmental organisations) tend to lump ourselves together with the U.S. but our positions are completely different. We are proposing to cut our trade distorting subsidies by 70 percent, whereas the Americans are spending more on trade distorting farm subsidies that are specifically damaging to the Indian markets.”

Although the U.S. had offered to cut its domestic support for agriculture by 53 percent in the Doha talks, it is increasing spending on agriculture under the 2007 Farm Bill.

Peter Mandelson, the European commissioner for trade, has said that he wants a breakthrough in the Doha talks before the negotiating mandate given by the U.S. Congress to the country’s Trade Representative Susan Schwab, expires in June. Mandelson has said that unless swift progress is made in the talks, it is doubtful whether the Doha round can lead to a new international trade agreement this year.

Later this month, the diplomat chairing the negotiations on agriculture in the Doha round will try to inject a fresh impetus to them. Crawford Falconer, New Zealand’s ambassador to the WTO, is to present a paper considering what progress has been made in the talks and what compromises can be brokered.

Shelby Matthews, a trade specialist with the Committee of Professional Agricultural Organisations in the European Union (COPA), said that the proposals made by the EU will mainly benefit countries such as the U.S., Canada, Australia and Brazil that are already significant agricultural exporters.

“It’s not going to be the poor developing countries that will benefit,” she told IPS.

New data released by the WTO indicates that 2006 was a record year for developing countries, with their share of world merchandise exports reaching 36 percent. While the 50 countries designated as ‘least developed’ by the United Nations commanded less than 1 percent of exports, their level was the highest since 1980.

“A successful conclusion of the Doha round holds great potential for boosting growth and alleviating poverty,” said Pascal Lamy, the WTO’s director-general. “An agreement would also deliver more relevant trade rules, helping to establish a more stable and certain foundation for today’s dynamic global marketplace.”

Lamy has been striving to find common ground between the U.S. and developing countries on the ‘special products’ issue. He has said that the use of special product provisions will be restricted and that it will shrink in the future.