Ministerial Conference, Seattle Nov 30-Dec 3. TRADE-AGRICULTURE: Is Trade Liberalisation Inevitable?

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Nov 22 1999 (IPS) - Current conditions are far from ideal for negotiating liberalisation of agricultural trade, but countries with heavy interests in the sector are confident that protectionist nations – sooner or later – will assent to cutting their subsidies.

This is the prevailing attitude among governments and farmers in key agricultural exporting countries which are opposed to subsidy in the days preceding the World Trade Organisation’s (WTO) Third Ministerial Conference, to be held in the U.S. city of Seattle, Washington, November 30 to December 3.

A WTO commission has prepared a draft declaration for the conference that attempts to unify the world trade positions of nearly 140 nations. Depending on the meeting’s results, a new round of multilateral talks may be launched, and is expected to last at least three years.

“The United States needs to send a very strong political message in Seattle, because as the host country it cannot allow a resounding failure,” stated Raul Rocatagliata, an economist at the International Federation of Agricultural Producers (IFAP).

With the conference approaching, several meetings of government leaders this month have called for eliminating agricultural subsidies. For example, the Ibero-American Summit held in Havana and the meeting of trade ministers from the Americas in Toronto earlier this month made such declarations.

The issue of liberalising agricultural trade puts major developing country producers and some developed countries squarely against the European Community and Japan which use subsidy to protect their farmers.

Pushing the international fight to liberalise agricultural commerce also to protect their farmers–is what is known as the Cairns Group, backed by the United States. Membeers of the Group are Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay .

The European Union (EU) and Japan’s resistance to doing away with subsidies for production and export of agricultural goods has stalled progress on the issue, Alicia Urricarriet, a delegate from Argentina’s Rural Association, told IPS.

But she maintained that the agricultural issue cannot be overlooked and must be dealt with in multilateral negotiations, otherwise advances in liberalising other economic areas will be impossible.

Carlos Perez del Castillo, Uruguayan ambassador to the WTO, is of a similar opinion, saying he fears the Seattle conference will be doomed by the hard-line attitudes of protectionist countries.

According to the Organisation for Economic Co-operation and Development (OECD), the United States, the EU and Japan spend a combined total of more than 300 billion dollars each year on granting various types of agricultural subsidies.

This type of assistance distorts trade and intensifies price- cuts, affecting countries like the members of the Cairns Group which has announced it will try to obtain commitments to eliminate subsidies for production and export – including export loans -, as well as promises to guarantee open access to world markets.

According to the Cairns countries – which represent 25 percent of world agricultural commerce – the sector must be given the same treatment as industry or service sectors, where tariffs are 10 times less on average.

Urricarriet reported that the EU and Japan rejected the fourth and fifth versions of the draft Ministerial Declaration proposed by WTO Director-General, Mike Moore, and instead laid down an extensive agenda of issues for the trade debate.

“They want the agricultural issue to be diluted in a list of much broader questions that includes services, intellectual property, public sector purchases, investments, and they even propose to reopen closed issues like safeguards and measures against unfair competition,” she commented.

Some European negotiators believe that Moore, former prime minister of New Zealand, is more responsive to U.S. interests than to Europe’s.

In a speech this month in Rome, Moore exhorted WTO members to think beyond trade, saying it is essential to promote development in countries that need to place their products on the global market, because this will help ensure a more secure and stable world.

Moore maintained that the current state of trade talks is serious but not desperate, and that the dominant attitude in Geneva (home to the WTO) makes him optimistic. He assured that failure at the WTO’s Ministerial Conference is “unthinkable,” though he admitted that all agenda points cannot be agreed upon before the Seattle meeting commences.

When the last period of international trade negotiations (known as the Uruguay Round) concluded, the influence of the Cairns Group, backed by the United States, allowed it to win commitments to begin talks at the end of this year about eliminating agricultural subsidies.

“They must comply with this mandate even if there is no formal launch of a new round of talks in Seattle,” said Urricarriet, who nevertheless acknowledged that negotiations “will be extremely difficult,” especially considering that parties must agree on the agenda for the year 2000.

The protectionist countries do not explicitly oppose the continuation of subsidy debates, but they refuse to draw up a guide for the period following the Ministerial Conference.

Perez del Castillo warned that the EU and Japan are unwilling to define goals, methods or timelines for future negotiations, though they do make efforts to advance issues in their interest, but which lack a mandate.

Urricarriet conceded that the current context is not propitious for demanding subsidy cuts. When the Uruguay Round began, the situation was similar: low prices and rising currency rates.

The Federation of Rural Associations of Mercosur (Southern Common Market – Argentina, Brazil, Paraguay and Uruguay), indicated that 1996’s high prices led them to underestimate the level of protectionism practiced in industrialised countries.

The Federation gave the example, in recent years, of wheat tariffs in the EU, which jumped from 87 to 170 percent.

The Mercosur group also reported that, after the Uruguay Round, the EU spent 6.7 billion dollars subsidising its exports and manoeuvred food assistance to poor countries in order to cover the poor performance of its subsidised exports.

Agricultural commodity prices have been falling since the 1997 international financial crisis began. As a result, profits have dropped, leading countries to further protect their markets and further intensifying price vulnerability.

The Argentinean Rural Association delegate also commented that in the United States, which will hold presidential elections in 2000, public opinion does not seem to back liberalisation because of some of the negative effects of the North American Free Trade Agreement (NAFTA), especially on employment.

But in liberalisation’s favour is the weight of agricultural subsidies on industrialised nations’ budgets and declarations by the World Bank, which has called on the WTO ministers to launch a “development round” in Seattle, one that includes the hopes of everyone, but especially the poorest countries.