TRADE: European-U.S. Dispute Bodes Poorly for Agricultural Talks

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Jun 13 2002 (IPS) - The negotiations for eliminating international trade barriers affecting farm products recommence next week at the World Trade Organisation (WTO) amidst a climate of distrust created by the protectionist policies of the economic superpowers.

The WTO Committee on Agriculture will focus on one topic in particular, known as export competition, which covers the areas of greatest discrepancy in the interests of the world’s leading agriculture exporters: the European Union and the United States.

Export competition includes several sub-issues, including export subsidies – the preferred recourse of the European countries for protecting their farmers -, and export credits and food aid, two stratagems used by the United States for the same ends.

Other sub-themes refer to the state commerce entities, an old system of regulatory commissions for specific farm products that is still found in some countries, and the restrictions and taxes on exports, which some governments apply to encourage added value to exportable farm goods.

But the international farm talks are not limited to export competition. Under the WTO Agreement on Agriculture, when the negotiations end on Jan 1, 2005, accords must also have been reached on about two other subjects: market access and domestic support.

Market access negotiations are scheduled for the first week of September, while domestic support will be discussed at the end of that month.

The specialised commission of the WTO is slated to meet in informal sessions Jun 17-19 and will spend one day, Jun 20, on formal deliberations in which delegates will review the results of the week’s talks on export competition.

For now, the proposals of the countries or blocs are presented before the committee verbally. In the current phase, the negotiations revolve around what are known as “modalities”, which reflect the scope and objectives of the agreement and the formula used.

Another discussion point which cuts across all others and must be negotiated as part of each of the main issues, is the special and differentiated treatment given some trade partners, taking into account the particular conditions of certain countries, usually as a result of their lower level of development.

The procedural framework of the negotiations began to liven up two weeks ago when the United States launched its proposal for eliminating export subsidies through a five-year prorated reduction plan.

The Cairns Group, which consists of agriculture exporting countries that provide little or no state protection for their farm sectors, is calling for an initial 50-percent reduction of the tariffs agreed at the close of the Uruguay Round of multilateral trade talks (1986-1994).

The other half of the subsidies would disappear, according to the Cairns Group initiative, through three equal reductions over the three following years.

The EU rejects the U.S. proposal, announced the bloc’s agriculture commissioner, Franz Fischler. The Europeans would rather discuss other forms of protection simultaneously, such as export credits, which the United States applies on a preferential basis.

However, the climate in the lead-up to next week’s talks did not heat up as a result of the differences about the export subsidies.

The storm clouds, within the always-tense trade relations between the two superpowers, began to form in March, when the United States implemented so-called “safeguard” measures for steel imports, to the detriment of several exporters of that commodity, the EU in the lead.

The situation grew even more complicated with the subsequent U.S. decision to boost farm subsidies to 180 billion dollars, distributed over the next 10 years.

While the United States and the EU continue to be caught up in a dispute over the liberalisation of farm markets, the latest reports from the Organisation of Economic Cooperation and Development (OECD), whose 30 members include all industrialised countries, present the two as the most protectionist markets.

The OECD announced last week that the U.S. public coffers provided 21 percent of the total agricultural domestic product of that country in 2001. The total government contribution to the sector reached 49 billion dollars.

The EU, meanwhile, disbursed 93 billion dollars for the same purpose, the equivalent of 35 percent of the agricultural domestic product.

Overall, the state intervention in farm markets for the OECD entailed 311 billion dollars of public funds in 2001. In other words, on average, the world’s wealthy nations together spent 850 million dollars a day to shore up inefficient farm sectors.

At the head of the list was the Swiss government, which provided 69 percent of its farmers’ income. Next were Norway (67 percent), South Korea (64 percent), Japan and Iceland (both with 59 percent), EU (35 percent), United States (21 percent) and Mexico, with 19 percent.

For the three members of the Cairns Group that are also part of the OECD, Canada’s subsidies represented 17 percent of farmers’ income, Australia four percent, and New Zealand one percent.

A negotiator from one of the 18 countries of the Cairns Group, who spoke on condition of anonymity, said the latest decisions and disputes between the United States and EU have not sent a positive message to the WTO Committee on Agriculture.

The climate of the negotiations worsens as all attitudes are turning against the mandate of the WTO Ministerial Conference held in Doha, Qatar, last November, where the member countries agreed to work towards trade liberalisation and substantial reductions in farm subsidies, said the source.

In its final declaration, the Doha Ministerial Conference, which officially launched a new round of multilateral trade talks, states that the member states should reduce, “with a view to phasing out, all forms of export subsidies.”