By Gustavo Capdevila
GENEVA, Dec 8 2005 (IPS)

There is little hope that the World Trade Organisation (WTO) ministerial conference set to start next Tuesday in Hong Kong will make significant progress towards the elimination of trade barriers in agriculture, say observers.

Panos Konandreas with the Food and Agriculture Organisation (FAO) office in Geneva pointed out that agriculture is “a very sensitive sector,” and said no one can expect advances overnight in a world where trade distortions abound.

The controversial question of the freeing up of trade in agricultural products is practically the central focus of the Doha Round of multilateral trade talks that the WTO aims to complete within a year.

The fate of the sixth WTO ministerial conference, to run Dec. 13-18 in Hong Kong, and of the Doha Round itself, depends on an agreement being reached between countries with vastly different interests when it comes to agriculture – a stiff challenge.

“If we manage in this round to agree on the elimination of export subsidies by a fixed date we will have made good progress,” said Konandreas.

But that hope contrasts with the ambitions of non-protectionist agricultural exporting countries, which along with an end to farm subsidies are also demanding substantial improvements in domestic supports and market access.

The negotiations for the liberalisation of trade in manufactured products began in 1946, when the General Agreement on Tariffs and Trade (GATT) began to take shape. The agreement, which went into effect in 1948, was the precursor to the WTO.

The big leap forward in the removal of tariffs on industrial goods occurred in 1995, when the reforms introduced by the Uruguay Round entered into force. And it was only around that time that the first moves in the multilateral system to phase out protectionist policies in agriculture began to timidly appear.

A glance at global trade figures show that in 1963, trade in farm products accounted for 29 percent of all trade, a proportion that had plunged to 9.3 percent by 2002, while the share represented by trade in industrial goods climbed to 60 percent.

Looked at from another angle, agriculture has a singular importance. The International Labour Organisation (ILO) notes that 75 percent of the world’s poor live in rural areas, and agriculture employs 40 percent of workers in developing countries while accounting for 20 percent of the gross domestic product (GDP) of those nations.

But FAO holds that there is a correlation between the prevalence of hunger and a country’s openness to agricultural trade.

The highest rates of chronic malnutrition are found in nations of sub-Saharan Africa and other Least Developed Countries, where the chronically malnourished account for one-third of the population on average, said FAO Assistant Director-General Hartwig de Haen.

Observing that “The countries with very little chronic undernourishment are countries that are far more integrated into the world markets,” de Haen stressed that “this is just a correlation, not a cause and effect relationship. But what we can conclude from this.is that openness to trade in agriculture does obviously not cause food insecurity and hunger.”

Nevertheless, he added, trade reform in agriculture will pose difficulties for developing nations. On one hand, it will reduce trade- and market-distorting subsidies, thus leading to a reduction in the surpluses on the market and driving up the price of labour.

For net importing countries in the developing world, that would be bad news, because world prices for foodstuffs – including grains, dairy products and meat – would rise between five and 15 percent, according to estimates, said de Haen.

Net food importing countries would thus lose out, he said, “because they would have to import at higher prices and particularly in the short run, before they have adjusted to this new world market situation.” Consumers would have to pay higher prices as well, he added.

FAO believes the potential gains would be enjoyed by countries that do not resort to protectionist policies in agriculture, including a number of developing nations and some industrialised ones.

FAO economist Terri Raney said “It’s very important for developing countries and of course all members in the negotiations to think beyond agriculture. We tend to look at agriculture in isolation and what we see in the case studies is that there is a much more dynamic process of adjustment.even within rural areas.”

“Countries should be thinking about labour intensive manufactures, they should be thinking about value added agriculture, not just about growing commodities themselves. (They should) think about the kind of activities that would generate employment opportunities for their people,” she added.

De Haen pointed to “a rising import gap. We predict that in 30 years the agriculture trade balance of the developing countries at large (that includes of course Brazil and China, but also all the poor countries) will widen into a net deficit,” something that has already occurred in the LDCs, where most of the world’s poor live, he said.

For that reason, FAO recommends increasing the competitiveness of agriculture in developing nations to reduce their dependence on imports. “If that doesn’t work,” said de Haen, “these countries will have to generate foreign exchange from non agriculture exports.”

While China already does this, the LDCs “have little potential for expanding their non agriculture exports in services or goods,” he added.

The negotiations will continue next week in Hong Kong against a backdrop of “relatively high distortions in world agriculture markets,” said de Haen.

The protectionism of the industrialised nations grouped in the Organisation for Economic Cooperation and Development (OECD) remains very much in place, with farm subsidies running to between 250 and 270 billion dollars a year.

If an eventual reform of the WTO Agreement on Agriculture eliminates tariffs, the greatest benefits will go to the same OECD countries that currently charge high import duties, according to the projections by FAO economists.

Consumers in those countries will gain more than farmers will lose, said de Haen.

Given the high degree of uncertainty facing trade in agriculture, the FAO official asked “Can trade work for the poor?”

The answer is yes, “but only if complementary policies and investments are undertaken to ensure that the benefits of trade reform really reach the poor,” he argued.

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