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TRADE: U.S. Farm Subsidies May Survive WTO Doha Round

Analysis by Aileen Kwa*

GENEVA, Jun 24 2008 (IPS) - Delegates at the World Trade Organisation (WTO) disagree with WTO Director General Pascal Lamy’s view that the negotiations on trade in agricultural products are ‘‘nearly there’’.

Earlier this month Lamy noted that, ‘‘we are nearly there in agriculture, but not really there in market access for industrial goods’’. He has made similar pronouncements in other forums.

Some developing country delegates have vehemently disagreed with such an assessment.

One African delegate told IPS on condition of anonymity that, ‘‘there is this idea which has been floated that agriculture is progressing. It is more stable, and we should focus on NAMA (non-agricultural market access). We regard this with great concern. Agriculture has made progress in the past months. But are we there yet or are we close? No’’.

He elaborated, saying that delegates are concerned about the U.S.’s domestic supports. The recent Farm Bill is, even in this era of extremely high prices, set to increase supports to U.S. farmers.

Another developing country delegate also noted that, ‘‘there is a wrong picture drawn out there that there is a lot of progress within the consultations in agriculture. We are underestimating how much work we still have in agriculture. We are very far from agreement on the SSM (special safeguard mechanism)’’. The SSM is meant to be a tool for developing countries to protect their markets.

He said that the special session on the SSM held by the chairperson of the agriculture talks, Crawford Falconer, dubbed ‘‘a walk in the woods", at the end of last week produced no results.

Part of the problem is that the U.S. has still not indicated that it would accept the lower domestic support range in Falconer’s latest negotiating text. The U.S. currently provides about 7.5 billion dollars in ‘‘trade-distorting’’ domestic supports.

The agriculture draft text allows the U.S. to continue such supports to the tune of between 13 to 16 billion dollars, the exact figure to be negotiated. Even the lower end of the range will allow the U.S. room to double its subsidies to farmers.

Press reports at the end of last week quoted India’s minister of commerce and industry Kamal Nath saying, ‘‘my offer to the US is that they should reduce their subsidy by just one dollar and we have a deal. (But) they say, ‘forget about reducing the subsidy even by a single dollar, we want to have a right to double it in the next 10 years’".

Talks on tropical products and preferences are equally stuck. The European Union (EU) seemingly aims to liberalise products that the African, Caribbean and Pacific (ACP) countries want protected in order to preserve their access to the EU market.

While sugar and bananas are the headline products at risk, other products that are important to the ACP include a whole variety of fresh and dried fruits; various forms of oils (ground nut and cocoa); and vanilla and other extracts, essences or concentrates.

The latter products are often disregarded because of their small trade volumes. However, what may not be seen by bigger economies as significant exports from the ACP are important to ACP small-scale farmers.

The NAMA talks have reached a stalemate. There are several major issues there that are potential deal breakers.

Firstly, those developing countries that are to apply deep tariff formula cuts are opposed to the numbers in the current text calling on them to reduce their tariffs by a larger percentage than even the developed countries. These countries form the NAMA 11 coalition of developing countries which include South Africa, Namibia, Egypt, Tunisia, Brazil, Argentina and India.

According to an analysis by the inter-governmental organisation South Centre, the NAMA 11 developing countries will have to reduce their tariffs by between 54 and 60 percent while the developed countries reduce their tariffs by only 30 percent.

Trade unions from NAMA 11 countries sent a letter to their trade ministers earlier this month stating that the numbers in the draft text would lead to ‘‘the loss of employment in many sectors, and will hamper the future development of industries in our countries’’.

The NAMA text allows countries some ‘‘flexibilities’’, referring to a limited number of tariff lines that can have smaller cuts than what is called for by the general formula.

However, a major problem for Mercosur (the South American Common Market comprising Argentina, Brazil, Paraguay and Uruguay) is that the text has introduced trade volume restrictions for items enjoying such ‘‘flexible’’ treatment. This was pushed for by the U.S. and EU.

For the Mercosur countries, it means that even though ‘‘flexibilities’’ are provided they will not be able to utilise them fully. Explained one negotiator, ‘‘take an economy like Argentina. Though they may be allowed flexibilities for 12 to 14 per cent of their tariff lines, they will hit the trade volume limitation after using flexibilities on only seven percent of their tariff lines’’.

As a group, Mercosur has proposed that they apply flexible treatment to 16 percent of their custom union’s tariff lines without any trade volume restrictions. One delegate of Mercosur warned that this ‘‘is a make or break issue for us. Without it, we cannot even sit down and talk’’.

The other issue that NAMA 11 countries have loudly protested against is the clause on ‘‘anti-concentration’’. The chairperson of the NAMA talks, Donald Stephenson, has included negotiating texts which developing country delegates say will considerably reduce their ability to protect certain sensitive sectors.

These texts, they told IPS, go beyond the mandate of the NAMA negotiations. The original mandate states that countries should not use their flexibilities to protect entire categories of products. The text now says that entire sub-categories of products cannot be protected by the flexibilities.

As one delegate explained, ‘‘why should we comply? Shall we have the same thing in sensitive products?’’ He was referring to the clause in agriculture where the EU and other developed countries enjoy flexibilities and are able to protect certain agricultural sectors.

‘‘Should we say there that they cannot have their flexibilities concentrated on a whole group of products? Will they agree? It is against the mandate.’’

*This is the second of two articles by trade policy expert writer Aileen Kwa.

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