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Connections - Farm, Food and Resource Issues

WTO Doha Round: the opportunity of a century to liberalise farm trade

 Lyall Howard

Deputy Chief Executive Officer and Policy Manager for Trade and Quarantine,
National Farmers' Federation

The new negotiations in the World Trade Organisation (WTO) are a unique opportunity for the world to fix a global problem that has persisted for half a century. Protectionism in world agricultural trade is an enduring and costly mess that causes social and economic damage in developed and developing countries alike.

Director General of the WTO, Mike Moore, said at the United Nations’ ‘Financing for Development Summit’ in Monterrey this year, “If governments put their minds to it, the new trade round launched at Doha can bring huge benefits. The World Bank’s Global Economic Prospects report estimates that abolishing all trade barriers could boost global income by US$2.8 trillion and lift 320 million people out of poverty”.[1]

Agriculture is the backbone of almost all developing countries. Yet, massive agricultural support in the rich world undercuts developing countries and forces even the most efficient producers out of the marketplace. The return to developing countries from agricultural trade liberalisation would be eight times all the debt relief granted by the developed world thus far.

Some people say that it is not ‘politically realistic’ to expect free trade in agriculture. That view is wrong. The troubles with agricultural trade have not occurred by accident. They are a man-made problem. Therefore, they can be un-made. Playing the ‘politically realistic’ game is irresolute and narrow-minded and more suited to the actors in the ‘Yes Minister’ television series. What was yesterday’s politically ‘impossible’, such as the fall of the Berlin Wall, is today’s common sense. Liberal trade for agriculture is a possibility. We know that it is a difficult thing to achieve, but assertions that it is not politically feasible should be rejected.

The disappointing and untimely outcome of the 2002 farm bill debate in the United States might also seem good enough reason to think that agricultural trade liberalisation is out of reach. Although understandable, such a reaction is mistaken.

It is true that the 2002 farm bill represents a significant departure from the 1996 ‘Freedom to Farm’ policy designed to wean farmers off the public purse. Described by the Washington Post as “the mother of all pork” [2] the 2002 farm bill increases government support for American agriculture, which damages the proper functioning of world agricultural markets. Nevertheless, it would be wrong to walk away from Washington.

The formal position of the United States Government in the current round of negotiations in the World Trade Organisation (WTO) is closely aligned with that of the Australian-led Cairns Group. A cluster analysis of the negotiating positions of all 145 members of the WTO by the Danish Research Institute of Food Economics [3] shows that the United States and the Cairns Group have many similar objectives for agriculture reform. It is the European Union (EU) that is isolated in its position of opposing substantial reform of agriculture policy and in seeking negotiations on so-called multifunctionality, animal welfare and the environment.

In market access the European Union’s negotiating proposal would do little to address tariff peaks or tariff escalation, areas that the United States, the Cairns Group and developing countries have targeted for reform. The United States and the Cairns Group have proposed the elimination of the special agricultural safeguard, while the European Union wishes to retain it. The United States, the Cairns Group and developing countries have lined up against the EU with robust demands to reduce and eventually eliminate export subsidies. In domestic support the United States, the Cairns Group and developing countries have called for the blue box to be subject to reduction commitments followed by elimination. The EU wants to retain the blue box, which it considers critical to the multifunctional role of agriculture.

None would suggest that Australia and the United States see eye-to-eye on every issue in the WTO. For example, Australia is likely to line up with the developing countries in seeking constraints on the green box, a move that will be opposed by the US. The bottom line, however, is that the Cairns Group and the United States have mostly compatible policy objectives and both groups have greater potential to achieve their objectives by cooperating than by working alone.

Throughout the farm bill debate there were many brave and sensible voices calling for reform of US agriculture policy. In the Congress, Senator Richard Lugar, Ranking Republican Member of the Senate Agriculture Committee, said in an editorial in the New York Times, “If agriculture policy is to change, new forces must become engaged”.[4] Senator Lugar is correct. For farm policy to change, new political forces inside the United States must become engaged in the debate.

There is no more powerful country than America to fight for the broad mass of people in the world and it is in Australia’s interests to support the American leadership that wants to see change.

The issue for Australia, therefore, is to find ways of working with Washington to build and consolidate a consensus in favour of agricultural trade reform. US leadership is the key to reforming the international trading system for agriculture. The US has provided strong international leadership for trade reform in manufactured goods and with the election of the Bush administration there remains a strong ideological commitment to free trade.

Negotiations on agriculture have been taking place in the WTO over the past two years and in November 2001 those ‘sectoral’ negotiations were consolidated into the broader ‘Doha Round’. But just as a horse can be dragged to water and not made to drink, so negotiations can be started but not made to yield results. It was US leadership under Ambassador Zoellick that brokered the deal at Doha. What the world needs now is another injection of American leadership to put some horsepower under the talks. Without a further injection of leadership we run the risk of repeating the results of the Uruguay Round, where overall reductions in protection were limited, largely because of loopholes in the Agreement on Agriculture. In short, the Uruguay Round outcome permitted countries to meet the letter of the agreement but not its spirit.

By working together, the United States and the Cairns Group can overcome the defensive stance of the European Union and provide global leadership to support a visionary and bold result for agriculture in the Doha Round. To encourage this process, Australian agribusiness leaders and the National Farmers’ Federation (NFF) are working with agribusiness leaders in America to support the Cordell Hull Institute in Washington, D.C. in an effort to start and promote a process for overcoming the hurdles to agriculture reform in the WTO.

In May 2002, the Cordell Hull Institute, which is a non-profit educational foundation dedicated to fostering initiative and leadership in international trade policy, hosted a trade policy roundtable in Washington, D.C.  NFF and Australian agribusiness leaders participated in the roundtable, which developed a process for ongoing trade policy engagement throughout the Doha negotiations.

This important initiative has shown that Australia and the United States have placed agriculture at the ‘heart’ of the Doha negotiations and that there will be no progress in other parts of the Doha Round until serious progress is made on agriculture. The WTO’s credibility as a trade liberalising body is at stake with this issue. In the 21^st century the world deserves nothing less than to extend to agriculture the same treatment that it has extended to trade in manufactured goods. Turning the minority in the US who are campaigning for reform of world agricultural trade into the majority and securing US leadership is the place to start.

References

Beierle, T. C. (2002) “From Uruguay to Doha: Agricultural Trade Negotiations at the World Trade Organisation”, Resources for the Future, Washington, D.C.

Stoeckel, A. & Cuthbertson, S. (1987) “The Game Plan: Successful Strategies for Australian Trade”, Centre for International Economics, Canberra.