THE crucial 6th WTO ministerial meeting just six weeks away, the negotiators in Geneva are busy finalizing the text of the proposals to be presented at Hong Kong mainly on agricultural subsidy. The WTO director general Pascal Lamy has given first week of November as deadline to the chair of committee to propose the key elements of the text. The debate is focused on US and EU proposals mainly on agriculture.
The current WTO negotiations which started in 2001 as Doha Development Round has to deliver and lift the majority of rural poor in developing countries from poverty.
The Doha round provides an opportunity to change the rules of game. Rich countries promised practical measures to ensure a fair global trade. Four years later, nothing substantial has been achieved.
Trade barriers remain intact, agriculture subsidies have been increased and protected under several heads, and rich countries have progressively pursued rules on investment, services and intellectual property that threaten to reinforce global inequalities.
There are several fundamental imbalances in the texts of the WTO agreements which have to be removed in order to enable the multi-lateral trading body to deliver to developing countries and help in achieving the millennium development goals. No doubt there is a great potential in trade for poverty eradication and human development if provided the necessary conditions.
The majority of developing countries are expecting progress in following areas in order to conclude the round: Agreement on Agriculture (AoA): While advocating free trade and opening up the markets, the world’s rich countries provided substantial subsidy yearly to their farmers. Developing countries, except few, are either unable or told by the World Bank and IMF to eliminate the agriculture subsidies in order to be competitive. The elimination of subsidies in developing countries has proved to be detrimental for rural livelihood and food security of billion poor farmers around the world.
There is no current data available on subsidies by rich countries, but estimates show that the annual aggregate amount paid to farmers under various heads is about $ 360 billion. The Human Development Report of 2005 estimated $279 billion subsidies in year 2004. The EU provided $133 billion, followed by Japan $56 billion, USA $46 billion and other rich countries $51 billion. These heavily subsidized farm production is dumped into global market and reduces the international prices. According to one estimate US rice is produced at $415/tone and exported at the rate of $274/tone.
Developing countries have been demanding since the start of Doha round the elimination of all these subsidies to provide the level playing field to the farmers in developing countries.
The second important issue is protection of rich countries market through various tariff and non-tariff barriers. The rich countries maintain tariff peaks such as Japan on rice and tariff escalation- high tariffs on the export of processed goods and lower on raw goods. Japan imposes seven times higher tariff on processed food items and Canada 12 times. The tariff on raw sugar is nine per cent in Canada while it is 107 per cent on processed sugar.
According to Third World Network, out of 2727 tariff lines in agriculture and fisheries in European Union, EU maintains high tariff on 1273 lines, Japan maintains high tariff on 718 out of 1890 items including 100-300 per cent tariff on 53 items. Similar is the case of USA and Canada. The closed markets of rich countries deny the rights of farmers in poor countries to sell their surplus production.
The third issue in agriculture negotiations is the subsidies to exporters by rich countries. The developed world not only provides subsidies to their farmers and protects market through tariffs but also promotes the excessive production of agriculture by providing export subsidies which aggravates the situation in global markets where the cheap agriculture products are dumped. Though the countries agreed in July last year to eliminate all kinds of exports subsidies but failed to announce the deadline.
After wasting four years, on October 10, 2005 both USA and EU submitted proposals at the exclusive meeting of about fourteen countries at Zurich. The proposals were portrayed in media as a big move from rich countries that would yield results in Hong Kong ministerial. Once again the efforts have been intensified to get pre-determined results.
In fact, the proposals recognize agriculture talks as a fundamental for clearing the way for ministers to reach an agreement in Hong Kong. But both the proposals fail to offer much in real terms to the million of poor farmers in the developing countries.
The negotiators in Geneva are quite happy with the US proposal while annoyed with the EU. EU’s trade negotiator Peter Mandelson is under pressure from France which doesn’t want any compromise on agriculture. France even managed to challenge the proposal presented by EU along with other 13 EU countries to write to Mr. Mandelson that he is crossing the limits. A quick analysis of the both the recent proposals found that:
* Nothing substantially has been offered in respect of cut in subsidies. The US suggests 83 per cent cut in trade distorting subsidies (there are other subsidies which they don’t think are trade distorting as mentioned later) and over all 75 per cent cut in allowed levels. Here is the trick, the proposal do not suggest the cut in applied levels. The Uruguay round agreement on agriculture allows certain upper limits to rich countries for providing subsidies, that limit is so high and countries are not using that limit fully, so they have enough room to play around.
The latest proposal is basically disguised in the higher percentage cuts but is not meaningful for the cuts in real terms. Even in some cases, the proposal has likelihood to increase the current applied level of trade distorting subsidies.
* The other major issue with US proposal is that it keeps intact the other subsidies under which US is paying more than the trade distorting one. It even does not want to touch the green box type of subsidies. The developing countries especially G-20 group has been demanding end of these types of payments, but US intends to shift payment from one type to another.
* In the areas of reducing tariffs, the US suggests equal levels for both developed and developing countries. The special and differential treatment is the crucial element of all WTO talks in order to give special treatment to developing countries. But US suggests just slightly lesser reduction in tariff, which may result in the flooding of cheap products from rich countries into developing world.
* The US proposal suggest implementation in three stages and it also suggests the review after the implementation of agreed cuts in first phase, which means to linger on the commitment and the demand from developing countries to initiate a development review or audit has never been entertained by rich countries, but conversely they are proposing the review of cuts in subsidies on their economies.
* The EU proposal for which even the France is not happy and lobbying with other EU countries to block the deal is actually offers nothing and puts pressure on developing countries to open up the markets for industrial sector and services.
According to one developing country, negotiator EU wants to be more ambitious on services and NAMA in order to lower the developing countries ambitions on agriculture. But developing countries are determined not to move on other parts of negotiations if there is no substantial gain in agriculture which is being promised since last ten years.
* The EU proposal is bit vague and do not clarify either subsidy cuts or tariff reduction. The major drawback of EU proposal is its condition to link the progress on agriculture with NAMA and services.
Taking stock of the current proposals and negotiation status, it is essential that developing countries should demand re-writing the WTO rules in order to fix the existing inequalities and share the benefit of global trade.
In addition, the poor countries should not compromise on their right to protect in order to meet wider social policy objectives. Doha Round provided an opportunity to not only expose the hypocrisy of rich countries but also demand the just, equitable, honest and better deal in Hong Kong.
The implications of bad deal will be detrimental for developing countries as they are already facing the consequences of unbalanced deal in Uruguay.
THE crucial 6th WTO ministerial meeting just six weeks away, the negotiators in Geneva are busy finalizing the text of the proposals to be presented at Hong Kong mainly on agricultural subsidy. The WTO director general Pascal Lamy has given first week of November as deadline to the chair of committee to propose the key elements of the text. The debate is focused on US and EU proposals mainly on agriculture.
