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TRADE: Subsidies (and Food Prices) Soar at Doha

Gustavo Capdevila

GENEVA, Jul 28 2008 (IPS) - Bias in the WTO proposals to reform agricultural trade, which are being analysed for the second consecutive week, will definitely aggravate the food crisis caused in recent months by the high prices of farm commodities, according to Aftab Alam Khan, an expert with the non-governmental organisation ActionAid.

The crucial deliberations begun by the World Trade Organisation (WTO) on Jul. 21, with the participation of trade ministers from over 30 countries, had created expectations, at least among WTO leaders, that the meeting could contribute solutions to the food crisis, even if it were in the medium to long term.

The Doha Round of multilateral trade talks could come up with part of the solution, WTO Director-General Pascal Lamy said on May 7, when calling the ministers together began to be seen as a possibility.

But the reforms suggested in the draft texts under discussion by the ministers and representatives of the rest of the 153 member countries indicate that nothing will change, the ActionAid expert maintained.

In regard to the food crisis, opening up agricultural markets more widely under the Doha programme will likely bring about more volatility in farm prices, said Carin Smaller, a Geneva-based researcher for the Institute for Agriculture and Trade Policy (IATP).

"The food crisis has various dimensions, but one of the most important is the transformation of agriculture in developing countries from being a source of food security and livelihood for farmers into an export oriented and market oriented sector," Khan told IPS.

One of the salient features of the crisis has been the doubling of food prices in recent years. In particular, the prices of rice, maize and wheat have reached unprecedented levels.

Although this situation increases market uncertainty, the most serious consequence is the worsening of the conditions facing the 850 million people in the world who suffer from chronic hunger.

The Doha Development Round of trade talks, launched in the capital of Qatar in November 2001, was to produce a result that would be favourable to the developing world, Khan pointed out.

Poor farmers have been hoping for an agreement that wouldl protect their lives and livelihood. However, what we are seeing here over these two weeks is that the interests of poor farmers have been thrown into Lake Geneva, the expert said.

The texts presented so far by the WTO and by Lamy only serve the interests of the rich countries and agribusiness companies, he added.

Khan said that Lamy’s proposal on the subsidies that the United States and the European Union pay their farmers would allow these countries to double what they already shell out.

In the case of the United States, which grants agricultural subsidies of between seven and eight billion dollars a year, the draft text would authorise it to spend 14.5 billion dollars, close to double the amount it now pays. The EU, which it is estimated will cut its subsidies to 12 billion dollars a year by 2014, would be allowed under Lamy’s proposal to spend 22 billion dollars a year, Khan said.

And those government funds to support farmers "do not include an untouchable box of agricultural subsidies, the Green Box," which includes forms of support for farmers that the WTO does not consider as distorting free trade, he said.

The EU is authorised to spend some 32 billion dollars a year in Green Box subsidies, and the U.S. is allowed some 50 billion dollars a year. These subsidies "are untouchable (non-negotiable), and can be given at any time," Khan said.

According to United Nations Conference on Trade and Development (UNCTAD) studies, if the Green Box were subject to regulation, as developing countries demand, farm exports from the U.S. and the EU would be reduced by around 40 percent.

Food sovereignty is the answer to the food crisis precipitated by soaring agricultural commodity prices, Khan said. But the government of the Philippines, for example, was advised by the World Bank not to worry about food self-sufficiency, as the country could buy rice on the international market.

With the new reality of high prices, rice has become unaffordable. In April, Philippines President Gloria Macapagal-Arroyo adopted policies aimed at boosting food self-sufficiency, Khan said.

So food self-sufficiency is the answer for developing countries, which need to protect and develop their agricultural industries, and support small farmers to produce more food, he said.

But the draft texts produced by the WTO during these two weeks are in opposition to this solution, and therefore, the food crisis will be aggravated, Khan concluded.