TRADE-AGRICULTURE: Industrialised Nations Delay Liberalisation

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Oct 3 2000 (IPS) - Recent setbacks to the liberalisation of global trade in farm products have given rise to renewed scepticism in agricultural exporting countries demanding the removal of protectionist measures.

One of the blows came at this week’s meeting of the World Trade Organisation’s Committee on Agriculture in Brussels.

The representatives of the United States and of the Cairns Group — which links 15 agricultural exporting countries that do not subsidise farm production — rejected several European Union (EU) proposals as merely a surreptitious form of increasing subsidies for rural producers.

While the Cairns Group was expectantly waiting to see how European protectionism would be rolled back another step, the EU proposed maintaining supports for farmers, combined with limits on production.

The European bloc also asked to be allowed to compensate farmers for the expense of guaranteeing the “well-being” of livestock, based on the European concept of the “multi- functionality” of agriculture.

According to that view, the rural landscape and the quality of life of people in the countryside must be protected, because the (relatively unprofitable) production of farm goods is merely one of the rural sector’s many tasks or roles.

But the delegates of the United States and the Cairns Group (made up of Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, the Philippines, Indonesia, Malaysia, New Zealand, Paraguay, South Africa, Thailand and Uruguay) rejected the European initiatives, which the Argentine delegation even termed “absurd.”

But despite its support for the movement to free up trade in farm products, the United States irritated the Cairns Group this week when it reported that U.S. farmers received 28 billion dollars in support last year.

The Organisation for Economic Cooperation and Development (OECD) — the 29-member “rich nation’s club” — had stated earlier in its annual report that rather than diminishing, subsidies for agriculture increased last year to 1989 levels.

The OECD attributed that rise to the slump in the prices of international agricultural commodities.

EU subsidies as a share of the rural sector’s gross revenues climbed from 38 to 49 percent in the past three years, compared to a rise from 14 to 24 percent in the United States, in the same period.

On average, official aid to farmers represented 40 percent of gross agricultural revenues last year in the EU, the United States, Japan and South Korea.

While the level of support had steadily dropped in the 1990s to 31 percent in 1997, it began to climb again in the wake of the global financial meltdown.

Thus, while the governments of countries like Japan, Norway and Switzerland provided farmers with approximately 65 percent of their income, governments of Cairns Group members like Australia and New Zealand provided a mere two and six percent, respectively.

Farmers in Argentina, meanwhile, argue that not only do they not receive subsidies, they pay high taxes and high costs.

“In Argentina we are not asking for subsidies,” economist Ricardo Rocatagliata, with the Rural Society, told IPS. “We are seeking relief from the heavy tax pressure on us, and asking that the monopolistic control over services and goods we need as basic inputs, like fuel, not be allowed.”

Rocatagliata says the United States and the EU — who he believes should be “at the vanguard of the liberalisation of agricultural trade” — are acting under the pressure of their farmers, who do not even want to hear any mention of the idea of removing subsidies.

“U.S. leadership is waffling due to the fact that it is an election year, and until the results are in there will be no major decisions in the area of foreign trade,” he said.

Rocatagliata said the reform of the EU Common Agricultural Policy proposed last year “entailed merely a shift in the aid, because they drop price supports on one hand, while offering different subsidies on the other, which means the trade distortions remain in place.”

While the United States should lead the process of liberalisation of trade in agriculture, the Cairns Group should continue pressing for a reduction of subsidies at its Oct 10-13 meeting in Canada, the analyst recommended.

Cairns Group farmers believe prices will rise if farm subsidies are cut — which would benefit many developing countries, which have lost billions of dollars in farm exports, unable to compete with the subsidised production of industrialised nations.

But the OECD reported that the income of farmers who currently enjoy subsidies would drop by 66 percent if such aid were eliminated — a figure that explains the heavy resistance to abandoning protectionism.

According to the OECD, countries that subsidise agriculture spend some 360 billion dollars in various kinds of support for farmers.

United Nations Secretary-General Kofi Annan criticised such aid last month, estimating the global economic losses attributable to agricultural protectionism at 150 billion dollars, 20 billion of which would represent lost exports by developing countries.

At a rural fair in July, Argentine President Fernando de la Rúa said there would be no more “ingenuousness in the face of those who discriminate against us,” while pledging to step up the government’s lobbying in international forums.

The government also raised the spectre of stiffer tariffs for industrial imports from rich countries — a move that for the time being seems as unlikely as the hoped-for reduction of farm subsidies by industrialised nations.