TRADE: EU On Its Way To What It Wants

By IPS Correspondents Reprint | | Print |

David Cronin

BRUSSELS, Jul 31 2007 (IPS) - As European trade officials prepare for their summer holidays, they have good reason to be satisfied with the latest efforts to revive the Doha round of talks on global commerce. Their counterparts from poor countries, however, are unlikely to be so cheerful.

Papers due to form the basis of discussions at World Trade Organisation (WTO) level in the autumn would allow the European Union continue with dishing out lavish subsidies on farmers. They also incorporate EU demands that some of the fastest growing poor countries should substantially lower the taxes they levy on industrial imports from the West.

The ‘modalities papers’ as they are called by the 150-country WTO have received a largely upbeat response from senior EU figures. Peter Mandelson, the European commissioner on trade, said Jul. 23 that he would have preferred if the papers had suggested “more ambitious” cuts in industrial tariffs for developing countries but that they were “more helpful” than figures previously put forward by “the emerging economies”, the term he generally uses to describe Brazil and India.

But anti-poverty activists and the governments of poor countries are less sanguine about the two papers: one on agricultural trade, drawn up by New Zealand diplomat Crawford Falconer, the other on non-agricultural market access (NAMA), drawn up by Don Stephenson of Canada.

Talks on agriculture are scheduled to commence Sep. 3, with the NAMA negotiations kicking off later that month.

These papers have been prepared as part of efforts to breathe new life into the Doha talks, which suffered a setback in June when a bid to produce a breakthrough between the EU, the U.S., India and Brazil failed. Those hoping for a successful outcome to the round have warned that the next few months will be crucial, particularly as the focus of U.S. politics is soon likely to shift to the 2008 presidential election campaign.

The agriculture paper recommends that a ceiling of between 16.5 billion and 27.6 billion euros (22.5 billion and 37.7 billion dollars) per year should be placed on the EU’s ‘domestic supports’ for farmers. Theoretically, such payments do not bankroll produce destined for export. But they can lead to the ‘dumping’ of cheap European goods on poor countries, undermining the incomes of their farmers.

Aftab Alam, head of ActionAid’s international trade campaign, told IPS that the proposal was “unjust and not acceptable to poor farmers and agricultural workers.”

He pointed out that the EU’s own Common Agricultural Policy already allows it to spend 12 billion euros (16 billion dollars) on ‘domestic’ subsidies each year until 2014. Under Falconer’s recommendations, there would “still be this big scope” for the Union to increase such expenditure by up to almost 16 billion euros (22 billion dollars).

Alam also protested that Falconer’s paper would leave untouched what the WTO classifies as “green box” subsidies. Officially, such payments either do not distort trade or cause a minimal distortion. They include direct income supports to farmers that are ostensibly delinked from the amount of food produced.

Yet critics of EU trade policies have argued that production can be higher as a result of ‘green box’ subsidies than it would be without them and that this has a knock-on effect for world commerce. “The EU spends 50 billion euros (68 billion dollars) on green box subsidies and a large part of it is trade distorting,” said Alam.

He underlined, too, how the EU would be able to designate between 88 and 132 agricultural goods as “sensitive” and take special measures to protect them, while a proposal from more than 40 poor countries to allow them protect particular products had been “sidelined”.

“This is interesting on the one hand, and on the other hand it’s painful,” he said. “Seventy percent of the population in developing countries is engaged in agriculture, while in Europe only 2-3 percent of the population is in agriculture. It is developing countries that need protection, while it is Europe that is being facilitated to protect agricultural products.”

The ‘Doha development round’, as it was dubbed when launched at a 2001 WTO conference in Qatar, is based on a declaration about using trade as a vehicle to alleviate poverty. Yet many campaigners believe the new proposals are at odds with that objective.

If Don Stephenson’s proposals on NAMA are implemented, the EU would be required to cut its tariffs on industrial imports by 33 percent, the U.S. 29 percent, Brazil 66 percent and India 63 percent. Poor countries are concerned that this would deprive them of the substantial revenues generated from trade taxes and deny them the chance to shield their indigenous firms from floods of cheap imports.

“The NAMA text turns the negotiating mandate on its head, requiring a developing country such as Brazil to make more than twice the cut in tariffs than the U.S.,” said Celine Charveriat from Oxfam’s Geneva office. “This proposal forces a handful of developing countries, with large and growing populations, to carry the burden of a WTO deal. It would lead to significant job losses and would stifle efforts by developing countries to move into higher value-added sectors.”

Nigeria’s ambassador to the WTO Yonov Agah said: “As this round is not a market access round but a development round, poor nations cannot be pushed into exposing their volatile and fragile manufacturing sectors to foreign competition in a manner that undermines their chances of developing local industries. Modalities on industrial tariffs should not lead to job losses and the de-industrialisation of developing economies.”