TRADE: Thailand Relieved at EU’s Call for Cuts in Farm Subsidy

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Jul 12 2002 (IPS) - Thai trade officials are giving cautious cheer to the European Union’s (EU) decision this week to reform Europe’s hefty farm subsidies, saying Thai farmers stand to gain from the move.

They are especially relieved by the EU proposal after spending jittery weeks in the wake of the passage of U.S. farm act, approved by U.S. President George Bush in mid-May.

While the EU’s announcement Wednesday aims to cut by 21 percent its current 40 billion euros (39.45 billion U.S. dollars) a year in farm subsidies, the new U.S. law would give 180 billion dollars in subsidies to American farmers over the next 10 years.

“If the European Union reduces its subsidies to farmers, it would help boost the export prices of agriculture products from Thailand to the EU market,” Suvarn Valaisathien, deputy commerce minister, was quoted as saying in the English-language daily ‘The Nation’ Friday.

However, according to Suvarn, Thailand would still have to “monitor if our export prices to third countries, where the EU also exports the same products, would be affected”.

The days leading up to the EU announcement revealed just how concerned Thailand was in other quarters, too, particularly if the EU retained its Common Agriculture Policy (CAP). The CAP and the U.S. farm act threatened to undermine the global push towards free trade, critics here say.

“There has never been an economic justification to the CAP programme. It is part of the ‘European Fortress’ of unfair protectionism that co-exists with EU demands that the developing countries lower barriers in their manufacturing and services sectors,” argued an editorial in ‘The Nation’ earlier in the week.

“After years of giving lip service to the idea of cutting farm subsidies, it is imperative that the EU finally starts to do so,” it added.

“Otherwise, global trade will not move forward since farm-exporting nations and developing nations have little patience left for a process that benefits developed countries more than developing ones,” it said.

The CAP, which originated in the early 1960s, was a result of pressure from France to help thousands of small farmers. The hefty annual subsidies amount to nearly half of the EU budget, estimates one report.

European farmers gain from selling their products at prices that do not reflect the true cost, but their counterparts in the developing world stand to lose, since European-subsidised produce in the world market drives down prices.

Similar trends would arise from the U.S. farm act, a move that Thailand, among other countries in the developing world, is livid over.

“It is hypocrisy. The US has taken some alarming moves to protect certain sectors in its economy,” says Thitinan Pongsudhirak, a political economist at Bangkok’s Chulalongkorn University.

Yet Thitinan admits that Thailand and other developing countries that export farm produce can do little when up against the U.S. and the E.U.’s trade policies. Complaints against the EU farm subsidies for instance have been around for many years.

“Our agriculture lobby is weak when going against the US and the EU,” he explains. “They always sidestepped the WTO (World Trade Organisation) on this.”

This impotence is evident in the lack of a concrete, combative Thai policy to take on what many have called Washington’s double standards in trade policy. In the weeks since the farm law was passed, the Thai government is still in two minds about how it should proceed in responding to it.

“We want to negotiate through the WTO,” says Tawatchai Dechachete, a policy and planning analyst at the ministry of agriculture. “We will also share opinions with other developing countries and exert pressure.”

Thailand, in fact, can take comfort in a speech delivered this week by the WTO’s next director-general, Thailand’s Supachai Panitchapakdi. The current round of global trade negotiations should attend to key agriculture issues that concern developing countries, Supachai told an economic forum Monday at the U.N. conference centre here.

Thitinan hopes that Supachai’s presence at the helm of the WTO starting September will serve as a significant opening for developing countries. “It is an advantage countries like Thailand should use when free trade is undermined by policies like the U.S. farm bill.”

The WTO does has a panel to hear trade disputes, but the United States has not violated WTO rules since the existing trade rules shaped during the Uruguay Round of talks permits the United States to pump in a maximum of 19.1 billion dollars a year in domestic farm subsidies.

The subsidies under the U.S. farm act would cover almost all U.S. growers, not just the big producers of wheat, corn, soybeans, rice and cotton. The law would also bolster subsidies for mohair, honey, and wool while creating new ones for lentils, peanuts, dry pea, chickpeas, and milk.

“Farmers in the developing countries are often the victims of policies to subsidise agriculture in the developed world,” says R B Singh, head of the Food and Agriculture Organisation’s (FAO) Asia-Pacific division. “They account for a large number in Asian countries, since agriculture is the backbone of many economies.”

The mainstay of Thailand’s agriculture sector is rice, followed by maize, sugarcane, cassava, livestock and fisheries. Over 3.5 million in this country of 63 million people are rice farmers.

Thailand is the world’s leading rice exporter and shipped some 6.5 million tonnes of rice last year. The country, and five other Asian rice producers — China, India, Vietnam, Pakistan and Burma — account for 70 percent of the world’s trade, an estimated 16.5 million tonnes of grain out of the global total of 23.2 million tonnes.

“Farmers need to be protected by enabling they get a good price for their products,” Singh says. “The price of rice in the international market is low, less than 200 (U.S.) dollars per tonne but it should be about 250 (U.S.) dollars per tonne.”