Farm reform lies at heart of world trade battle
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Farm reform lies at heart of world trade battle

Trade ministers meeting for a likely bruising clash of views at next week's summit in Mexico certainly agree on one thing -- without progress on farm reform, the current round of world free trade talks is going nowhere.

india Updated: Sep 06, 2003 14:16 IST

Trade ministers meeting for a likely bruising clash of views at next week's summit in Mexico certainly agree on one thing -- without progress on farm reform, the current round of world free trade talks is going nowhere.

Promises from rich states, particularly the European Union, that fresh negotiations on lowering barriers to business across the global economy would help prise open their farm markets were a key reason poor states and agriculture exporting countries agreed to the Doha Round of talks.

When ministers from the World Trade Organisation's (WTO) then 144 states launched that round in the Qatari capital in late 2001, world farm negotiations had been stuck in the mud for two years.

The new round, covering everything from industrial tariffs to international trading rules and markets for services, as well as agriculture, was touted by the EU as offering the chance for trade-offs which could let the 15-nation bloc be more generous on the politically sensitive farm front.

But the euphoria that accompanied the accord in Doha, seen by many as a chance to inject new life into a flagging world economy, faded fast as the round missed a series of deadlines for interim deals, including agriculture.

Now trade ministers, meeting in the Mexican resort of Cancun from September 10 to 14 for what had been billed as mere "stock-taking", face the daunting task of succeeding where their envoys in Geneva have failed -- securing accords to put the round back on track to conclude at the end of next year.

"It is crucial. The moment that we get a deal in agriculture, other things will start to fall into place," said Uruguay's ambassador to the WTO Carlos Perez del Castillo, current president of the trade body's executive General Council.

"For many developing countries, it holds the key to their economic progress, while for many (agriculture) importing rich countries, it is highly sensitive, politically," he added.


According to the Organisation for Economic Cooperation and Development (OECD), rich state spending in support of their farmers runs at more than $300 billion a year, which is many times more than they spend on aid to poor states.

With negotiations already underway in Geneva to cut farm aid by rich states, the United States announced last year that it would give farmers an extra $175 billion in support over 10 years.

It defended its action by saying that it was still well below WTO-set ceilings for subsidies and that it was only acting to defend its farmers against the effects of support programmes in Europe and elsewhere.

The massive level of spending on farmers in the United States and the European Union, the two biggest subsidisers, distorts trade by allowing the trading giants to export at prices well below world market levels, critics say.

The result is that poorer nations, and even rich and efficient farm exporting countries like Australia and New Zealand, can struggle to compete for international business and even find themselves under pressure at home with cheap EU and US goods undercutting local produce.

According to pressure group Actionaid, the United States has been selling cotton on the world market at between 20 to 55 per cent of the cost of production over the last 10 years.

EU wheat had recently been off-loaded at 30 to 35 per cent of the price it cost the farmer to produce -- a practice known as "dumping" in trade parlance.

"Dumping can have a devastating impact on developing country farmers, depriving them of their livelihoods and forcing them to leave their lands," it said in a report.


Farm trade accounts for less than 10 per cent of world commerce, but it has long punched far above its weight when it comes to negotiating global trade pacts. Virtually no aspect of trade touches as many political nerves.

In many poor countries, it not only makes up a big part of the economy, it is also the leading generator of employment, food and livelihoods.

The struggle does not just pit rich subsidisers against the rest. Some poorer countries are also keeping a wary eye on the more successful developing country farm exporters such as Brazil and China, the latter already the world's fifth largest, who, they fear, could swamp them if they open their markets too fast.

"It has always been difficult to do deals in agriculture because there are so many interests involved," saidGeneva-based trade analyst, Chakravarthi Ragavan.


The timetable for the Doha Development Agenda, as the trade round is officially called, set out an end-March 2003 deadline for negotiators in Geneva to agree on a detailed blueprint for farm reform -- including figures and target dates -- that ministers could review in Cancun.

But they failed. Instead, ministers will have before them a so-called "framework" drawn up by Perez del Castillo that seeks to pin point where agreement might be reached in the three core areas -- the "three pillars" -- of farm reform, which are domestic support, market access and export subsidies.

The plan, which draws heavily on a joint proposal put forward by the European Union and the United States, has been attacked by the exporters as not going far enough in dismantling export subsidies and by the EU and the United States for not doing enough to open up developing country markets.

And non-governmental organisations (NGOs), who will be present en masse at Cancun, have been vocal in dismissing the attempt at compromise.

"This is a travesty of the development round. The two big subsidy powers are allowed to keep much of their huge subsidy arsenal in place and continue export dumping," said Celine Charveriat of Oxfam.

First Published: Sep 06, 2003 13:59 IST