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Freedom to Farm: The root of current farm-related problems

(Monday, Jan. 2, 2006 -- CropChoice news) --

1. Freedom to Farm: The root of current farm-related problems
2. Family farmers bring crops, new restaurant to D.C.
3. The Doha "Development" Round would develop the rich
4. WTO agreement will not benefit developing or developed world farmers
5. Sanity: Hong Kong Ministerial
6. NFU: Statement by Dave Frederickson on WTO agreements
7. Development left behind in WTO agreement in Hong Kong
8. EU outlines labeling plans for organic farming


1. Freedom to Farm: The root of current farm-related problems

The need for the US to completely dismantle its farm program is one of the ideas being spread at this time by think tanks, academics, and trade officials. The argument is that the current program with its LDP/MLGs and counter-cyclical payments subsidize the export of US grain at below the cost of production leaving us open to charges of dumping.

This is essentially the argument that Daniel A. Sumner makes in the analysis he did for the Cato Institute, Boxed In: Conflicts between U.S. Farm Policies and WTO Obligations. Last week we looked at the model that Sumner used in his analysis and showed that by looking at crops one at a time he came to some very questionable conclusions.

We would not disagree with the overall conclusion that US farm programs have resulted in lower prices for US farmers and thus farmers around the world. We would not disagree with the argument that US farm policy allows US farmers to sell their crops at below the cost of production, both domestically and in the export market.

What we do disagree with Sumner about is the cause of the low prices and below the cost-of-production-exports. He argues that it is the subsidies themselves because they result in excess US production. We would argue that the problem is not with the subsidies themselves but rather the set of policy mechanisms contained in the 1996 and 2002 Farm Bills. From a trade compliance point of view, the 1996 Farm Bill was the wrong legislation at the wrong time. And the 2002 legislation made the situation even worse.

Let us suppose that in 1996 we had renewed the policy instruments contained in the 1990 Farm Bill (a far from perfect piece of legislation) with a minor tinkering, what would be the current cost of this program? Would it cost more or less than the current $20+ billion? What boxes would these payments fall into and what would be the impact on commodity prices in the US and around the world?

The costs for a continuation of the policies contained in the 1990 Farm Bill would be in the range of $8-$10 billion a year, a far cry from the $20+ billion slated to be spent this year. Because the 1990 legislation used supply management programs much of the cost of the farm program would be blue box and compatible with our current and projected World Trade Organization (WTO) obligations.

With the elimination of supply management programs in the 1996 Farm Bill, at any given stocks-to-use level, US farmers received $0.34 a bushel less for their corn than they did under the 1990 Farm Bill and earlier legislation going back to the mid 1970’s.

Soybean and cotton prices would also have been proportionately higher under supply management than under the current legislation. As a result, under supply management US prices could easily have approached the non-land cost of production. Because the US is the world price leader in agricultural commodities, much of this price gain would have been transmitted to farmers around the world, reducing their incentive to charge the US with dumping.

The irony is that while the 1996 Farm Bill was touted as being more market oriented than previous legislation it is actually less market oriented than its predecessors under which farmers earned most of their income from the marketplace and not the mailbox. In addition to being less market oriented, we argue that in terms of WTO negotiations it is more market distorting.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC). (865) 974-7407; Fax: (865) 974-7298; dray@utk.edu; http://www.agpolicy.org. Daryll Ray’s column is written with the research and assistance of Harwood D. Schaffer, Research Associate with APAC.

2. Family farmers bring crops, new restaurant to D.C.

Erin Killian
Staff Reporter
Washington Business Journal
December 16, 2005

Family farmers from all over the country will soon have a chance to showcase their blood-red tomatoes, Havarti cheese and fresh cuts of beef at a new restaurant in Georgetown's Washington Harbour.

The North Dakota Farmers Union aligned with D.C.'s Magnate Group, a lobbying and financial services firm, to create Agraria, the parent company of a new restaurant with the same name.

The company signed a lease Dec. 12 to open a 14,000-square-foot restaurant in the old Harbour Club space behind Tony & Joe's.

Magnate CEO Tom Prescott, the project manager, plans to open the restaurant -- flush with four fireplaces, 50 outdoor seats and views of the Potomac River -- by May.

Agraria retained local restaurant designer Adamstein & Demetriou to build out the nearly $4 million 350-seat space. Prescott expects to start construction in late January or early February.

The restaurant, owned in part by hundreds of farmers, will showcase the lives of family farmers and offer talks on American farming. The Georgetown restaurant is the first in a long-term plan to educate consumers about the history and roots of family farms.

The farmers union formed Agraria in 2002. It was close to signing an agreement at Baltimore's Inner Harbor at the time, but a deal never came to fruition. In D.C., Bill Miller of Transwestern brokered the Washington Harbour deal.

Although the farmer's union currently is the majority shareholder, the company's goal is to relinquish control to the family farmers, Prescott says. Farmers can invest in the private company until December 2006.

The Agraria venture brings not only attention to the produce of farmers from California to Florida but also offers a business plan that calls for five restaurants nationally over the next 10 to 20 years. Each restaurant will buy produce directly from local farmers to cut out the distributor.

Of course, there's also an underlying political theme, as there usually is in D.C.

The farmers union developed a relationship with Magnate because Magnate has lobbied on behalf of the farmers in the past.

U.S. Sens. Kent Conrad and Byron Dorgan and U.S. Rep. Earl Pomeroy, all three North Dakota Democrats, "have always been interested in the project and interested in taking care of farmers," says Prescott, who has worked closely with them.

The restaurant owners spent the summer milling around D.C. farmers' markets and spreading the word about the project. Now they're reaching out to farmers from Fredericksburg, Va., to Pennsylvania.

Chef Paul Morello, a New York native who was executive chef at Les Halles in D.C. and Miami for two years, says he's talking to 25 Pennsylvania farmers who have some "exotic" products.

Morello trekked to North Dakota to meet with farmers at a mill that will supply flour for his homemade gnocchi and lasagna. He's ordered 300 pounds of freshwater prawns per week for August and September from the University of Kentucky and is planning a prawn festival for the late summer months. Morello is using only American cheese from Wisconsin and Idaho.

Agraria, he says, is "a chef's dream."


3. The Doha "Development" Round would develop the rich

by Paul Beingessner
Canadian farmer, writer

The World Trade Organization talks have come and, for the moment anyway, gone. In their wake they leave a cacophony of competing noises from governments, farm groups, transnational corporations and writers like me. It is hard to figure out the impacts of any WTO agreement because the voices commenting on it almost always do so from a position of self-interest. You can usually understand the biases of a particular voice if you follow the money, but even this maxim breaks down if the voice is speaking out of ignorance. Some groups that urge a particular course of action don't seem to know what they are talking about.

The Doha Round of WTO talks was supposed to be the "development" round. It was supposed to benefit poorer countries of the world proportionately more than richer ones. The previous round of talks, the Uruguay Round, was criticized because it advanced the interests of rich countries while ignoring or even worsening the economic conditions in poor nations.

During the Uruguay Round, poor countries were poorly organized and ineffective at protecting their interests. Since then, a number of "lesser developed countries" have emerged as leaders among poor nations - notably India, China and Brazil. As a result, developed countries have had a harder time getting their way in the Doha Round. The newly emerged blocks of poor nations challenged the blather put out by rich countries, and so the talks achieved little.

There are many contradictions in the statements by governments and others about the impact of a conclusion to the WTO talks. The basic premise about trade liberalization seems to be that more trade is good for everyone. "Truth About Trade and Technology", a right wing website claiming to represent the interests of farmers and ranchers in the U.S. put it like this, "U.S. farmers and ranchers have a large stake in seeing that barriers to trade are reduced so that developing country economies expand and demand for food from paying customers increases."

In this version of world economics, reducing trade barriers like tariffs and export and domestic production subsidies would mean poor countries would be able to export something (what?) and thereby increase their standard of living, which in turn would allow them to buy more food from U.S. producers. The trouble is, most poor countries rely on agricultural exports themselves. They see improved trade as something that would raise prices for agricultural products and allow them to produce and sell more to rich countries - the very countries counting on selling agricultural goods to them!

This website also claims that "free trade keeps food prices low for consumers, makes a wide variety of products available everywhere, and increases economic prosperity." I have yet to figure out how low food prices are supposed to benefit the farmers and ranchers this group purports to represent.

A report issued by the United Nations Food and Agricultural Organization a couple years ago puts the boots to the notion that the version of trade liberalization advanced at the WTO would produce a win for everyone. This report analyses the effect of a WTO agreement based on three proposals - that of the U.S., the EU and Stuart Harbinson, the WTO General Council. The FAO models the world economy that would exist under each scenario, and comes to some startling conclusions.

Basic to the models is the notion that elimination of production and export subsidies would result in less food being produced in most countries, and hence, higher world prices. (That is the conventional wisdom, though some economists question it.) But, in rich countries, higher food prices would be offset by lower tariffs on imported food. In rich countries, this would make consumers better off. Consumers in poor countries would be worse off, since their cost for food would rise to world price.

Farmers in rich countries would be worse off, according to the FAO analysis. The loss of production subsidies would be greater than the gain from higher prices. Price gains would be modest, at best, ranging from 11 percent for wheat to 3 percent for pork. Farmers in some poor countries might have more income, but many of the poorest of the poor countries are net importers of food and farmers there, paradoxically, would be worse off due to higher food prices.

Most telling was a chart showing the changes in total welfare in rich and poor countries. All three proposals would benefit the economies of rich countries greatly - from 12 to 24 billion dollars. The poorest of the poor countries would lose in two of the three scenarios and gain only slightly in the third. The rest of the poor countries did not fare much better in any scenario.

The FAO report is blunt about several things. Farmers in rich countries could expect to suffer, while consumers would benefit. Rather than being lifted from poverty, poor countries would at best benefit slightly, and at worst be significantly worse off. The FAO report also speculates that the market power of large corporations might enable them to capture the benefits that would result from an agreement.

Several things are clear. Farm groups in countries like the U.S. and Canada that think the WTO would make them better off haven't done their homework. The Doha Round will not lift anyone out of poverty but it would enhance the economies of the already-rich countries. And last, trade would benefit the traders more than anyone else.

Farmers in rich countries should realize their interests coincide most closely with those of poor countries. Larger forces are exploiting both. They should work together to build fair trade rules on the ashes of the WTO's latest efforts.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net

WTO agreement will not benefit developing or developed world farmers

An editorial comment on The Recent World Trade Organization Negotiations, by John Dittrich, American Corn Growers Association

TILDEN, Neb., Dec. 21, 2005 ­ The recent WTO agreement by negotiators in Hong Kong sets a target of eliminating export subsidies by 2013. Eliminating subsidies is a goal curiously touted as benefiting both developing and developed world farmers (depending on the spin in each country), and reducing trade frictions.

However, ACGA believes that it is not clear that such a draft agreement, even if fully implemented, will do anything to meaningfully increase world agricultural commodity prices. Increasing commodity prices are an overriding goal for the trade talks expressed by advocates for poor farmers in developing countries. Developing country advocates have properly documented low farm prices as being very damaging to poor farmers everywhere.

In a December 9 presentation to the Nebraska Farmers Union Annual Convention titled "2007 Farm Bill Preview", I addressed this issue, explaining that according to Daniel Sumner, the director of the University of California’s Agricultural Issues Center, U.S. subsidies depress world corn, wheat and rice prices by 4 to 10 percent. Mr. Sumner, who interestingly worked as a consultant for the Brazilian Government when challenging U.S. cotton subsidies, therefore optimistically insinuates that world prices would rise 4 to 10 percent if all subsidies were eliminated.

On the other hand, the 2003 University of Tennessee report "Rethinking U.S. Agricultural Policy" documents modeling of the complete elimination of developed country subsidies by the International Food Policy Research Institute. Their modeling under this total subsidy elimination scenario projected a 1 to 3percent increase in global commodity prices over baseline, after 20 years!

Do advocates for poor farmers such as Oxfam International seriously believe that a 1to 10 percent increase in world commodity prices from their current disastrously low levels will have any significant impact on poor farmers in developing countries? Do U.S. trade negotiators believe that a 1 to 10 percent increase in U.S. farm prices will make up for the elimination of subsidies?

Clearly, if the 2007 farm bill is guided by the recent and past WTO agreements, there will be few winners in developing or industrialized countries like the U.S. In general, it is my opinion that supporters, and many critics, of the status quo in agricultural policy have for too long received faulty, unbalanced, and incomplete analysis or "intelligence" about how agriculture has actually responded to our 20-year experiment in U.S. farm and trade policy, and how global agriculture is likely to respond to elimination or reduction of subsidies.

Policy makers and trade negotiators worldwide must come to grips with the uniqueness of food and agricultural production. Their current treatment of agriculture is analogous to trying to drive a square peg into a round hole.

While promoting ACGA thoughts on provisions that would result in realistic treatment of agriculture in the 2007 farm bill and trade negotiations, I predict that unless agricultural trade provisions are negotiated separately from non-agricultural negotiations, the pain and turmoil felt by farmers in both developing and developed countries will continue to be a source of intense trade friction, and will hinder all trade negotiations. Canada’s recent decision to apply tariffs to U.S. corn imports is but one clear example.

It is critical that the terms of debate for agriculture be changed. It is clear that our next farm bill has deep implications for not only U.S. farmers, but for U.S. foreign policy goals, U.S. and global energy concerns, and U.S. and global food security.

Dittrich’s presentation can be viewed at "2007 Farm Bill Preview" at http://www.acga.org .

5. Sanity: Hong Kong Ministerial

By Devinder Sharma
ZNet Commentary
Dec. 24, 2005

Much Ado About Nothing

We were made to believe that everyone cannot be befooled at all the times. Ten years after the World Trade Organisation (WTO) came into existence, and looking at the outcome of the sixth Ministerial Conference at Hong Kong, it is time to bury the age-old adage under the heaps of trade drafts.

For the sixth time in a row, the trade ministers of the developing world - representing issue-based coalitions like G-20, G-33 and G-90 - have been duped to believe that trade is for development. Despite making loud noises, threatening and fuming over the injustice done to the poor and developing countries, the trade ministers of the G-110 countries, comprising the entire developing world, finally bowed before the rich and mighty.

You da man

Ten years after the WTO came into existence, and after six ministerial conferences, developing countries have failed miserably to force the rich industrialised countries to remove even one dollar from the massive agricultural support they provide to agribusiness corporations in the name of farmers. Unable to make any dent in the citadel of unfair trade - farm subsidy of US $ I billion a day - developing countries have time and again taken refuge behind an illusionary smoke screen. After each of the ministerial conferences, they have returned 'victorious', and the price has been paid by millions of small farmers edged out of farming.

Hong Kong Ministerial (Dec 13-18, 2005) was no exception. Much excitement is over the elimination of export subsidies by 2013. This is the first time developing countries have managed a mention of reduction in subsidies. At present, export subsidies do not even constitute one per cent of the total support of US $ 360 billion that the richest trading block - 30 countries forming the Organisation for Economic Cooperation and Development (OECD) - provide for agriculture. In any case, FAO projects that export subsidies have been steadily on the decline, falling from US $ 7.5 billion in 1995 to US $ 3 billion in 2001.

EU provides 90 per cent of the global export subsidies. Over the years, it has very conveniently shifted the export subsidies to be part of the domestic support. Some estimates point out that EU does not shell out more than US $ 1.2 billion as export subsidies. As the French economist, Jacques Berthelot explains: "Formal export subsidies to EU cereals were reduced from Euro 2.2 billion in 1992 to 121 million in 2002. But domestic support in the form of direct payments that helped exported cereals rose from 117 million euros in 1992 to 1.3 billion euros in 2002."

Not only export subsidies, but other export measures with equivalent effect such as export credits, guarantees and insurance in excess of 180 days has also to be eliminated. These pertain essentially to the US, which provides 95 per cent of such global export measures. Developing countries have probably forgotten that the former USTR, Robert Zoellick, had suggested a flexibility formula for phasing out the export credit programs, which the EU and other members charge is a form of an export subsidy. To eliminate the subsidy component of export credits, all he had promised was his willingness to reduce repayment periods from 36 months to six months on the loans provided for buyers of some commodities.

In turn, developing countries have agreed to a "high level of ambition for market access in agriculture and non-agriculture goods." The text links the market access in both areas, stating that the "ambition is to be achieved in a balanced and proportionate manner." This is what exactly the developed countries had been keenly looking forward, and this is where the developing countries gave in. Step by step, developed countries have been able to get more market access from the developing countries, without showing an equal reciprocation.

Another key achievement is the promise of elimination of much-maligned US cotton subsidies. Let me first make it clear, it is not the cotton subsidies that the US has promised to remove by 2006. It is the export subsidies on cotton that the US is willing to do away with. In reality, as some estimates show it does not translate to more than $ 30 million, which is not even a drop in the ocean for American cotton growers. The US provides barely 1.4 per cent of the global export subsidies.

Let me explain. For the 20,000 cotton growers in America, it will be business as usual. In 2004, US cotton farmers got federal support to the tune of $ 4 billion, which means $ 10.1 million a day. In 2005, UN Human Development Report 2005 states the cotton growers were paid an additional $ 700 million thereby jacking up the total subsidy to reach a staggering figure of $ 4.7 billion. It is this huge subsidy support, much of it considered non-trade distorting that actually causes the global prices to slump. Indian cotton growers or for that matter cotton farmers in western Africa are thereby priced out of the international market.

The Hong Kong declaration does not talk about reduction in domestic support in case of cotton. All it says is: "as an outcome of negotiations, trade distorting domestic subsidies for cotton production should be reduced," which in trade terms means practically nothing. In fact, the contentious issue of domestic support for agriculture has remained untouched. And that is where the US, EU and Japan have succeeded. They have emerged scathe-free from a negotiating position that could have derailed the Hong Kong Ministerial. Developing countries term this as a 'success'.

Let us not forget that in the first three years of the notorious Farm Bill 2002, America provided an additional support of at least US $ 125 billion (70 per cent of the total allocated budgetary support of US $ 180 billion) to its estimated 9,00,000 farming families. These counter-cyclic payments, again considered non-trade distorting have already filled the bank accounts of the agri-business companies and the elite in the American society.

And yet, the US is getting ready with another version of the Farm Bill that should come into vogue in 2007. On top of it, there is no provision in the Hong Kong declaration that can stop the developed countries to further increase their agricultural subsidies. Under the July Framework 2004, developing countries have now legally permitted the developed countries to increase their agricultural subsidies

When asked, India's Commerce Minister Kamal Nath replied: "The US has already offered to reduce domestic support by 53 per cent while the EU offer is for 70 per cent." This was actually a commitment that the US and EU had made in mid-October. Interestingly, the minister had then lashed out: "What the US proposed last month is not real cuts in agriculture subsidies. The real cuts would be when there is decline in the support provided by the US treasury," he asserted. But post-Hong Kong, for some strange reasons the minister agreed to the same commitment!

The US/EU offer pertained to cut the ceiling on trade-distorting subsidies by 60 per cent and 70 per cent, respectively. Let me clarify here that the US/EU proposal did not mean reduction in farm subsidies by 60 to 70 per cent but a reduction in the 'ceiling' on trade-distorting subsidies. As far as the overall reduction is concerned, it does not translate into any reduction in the domestic support being given.

Kamal Nath probably thought that public memory is too short. Just in a matter of ten days, he made a complete u-turn in his stand on agricultural subsidies. This is exactly what he did at the time of accepting the July Framework. Two days before the final draft was accepted in Geneva in the early hours of August 1, 2004, he had publicly rejected it. And then, for reasons that remain unexplained, accepted the same draft (with hardly any changes) two days later and called it a 'victory' for India.

There is no denying that the biggest culprit is the July Framework 2004. It provides a cushion for the developed countries to raise farm subsidies from the existing level. It also is the foundation for future negotiations under the Doha Development Round. But if you read the draft carefully, it is obvious that the developing countries had been taken for a ride. Instead of re-opening the framework agreement, developing countries continue to negotiate on a faulty structure. It is because of the framework agreement that the developed countries are promising to cut domestic support, which in reality is only on 'paper'.

The first instalment of a cut in subsidies by 20 per cent under the July Framework is not based on the present level of subsidies but on a much higher level that has been now authorized based on the three components -- the final bound total AMS, plus permitted de minimis, plus the Blue Box. In other words, developed countries have been allowed enough leverage by the developing countries to increase their subsidies. How can the developing countries justify this? How could they forget that as long as the agricultural subsidies remain, protecting food and livelihood security in developing countries is not at all possible?

Allowing developing countries to select its own list of special products, which would be outside the ambit of tariff reduction formula, along with special safeguard mechanisms (SSM) is being touted as adequate safeguard to protect farmers from income levels falling due to unfair competition from subsidised imports. SSM enables government to raise import duties on agricultural products if there is a surge in imports or fall in world prices.

We need to understand this. Developed countries have used special safeguards measures (SSM), only by 38 rich countries so far, to restrict imports from developing countries. They have already been taking advantage of this flexibility by reserving the right to use the SSM for a large number of products: Canada reserves the right to use SSG for 150 tariff lines, the EU for 539 tariff lines, Japan for 121 tariff lines, the US for 189 tariff lines, and Switzerland for 961 tariff lines.

The only redeeming feature is that the developing countries will now be allowed to use the same measures, and this is where these countries can assert on re-imposing tariffs and counter-veiling duties to meet food security concerns. These measures however are temporary and would only come in place after the importing countries have actually felt the after-shock of import surges.

As far as special products are concerned, not all products or tariff lines can be protected under the SP category. The draft very clearly states that at present the offer is to classify anything between 1 to 20 per cent of the total tariff lines as special products. For a country like India, which grows 260 crops a year, and has 680 tariff lines in agriculture, not more than 60-80 tariff lines can be protected under the SP category. What would happen to the remaining 600 tariff lines? Isn't it a fact that each tariff line is linked to the livelihood of thousands of farmers?

This 'benevolence' is no justification for the developing countries to rejoice. The fact is that the developed countries have also been allowed a similar provision under the July Framework. Developed countries can term some crucial commodities as 'sensitive' and thereby deny market access. For instance, the US, EU, Japan and Canada maintain tariff peaks of 350 to 900 per cent on food products such as sugar, rice, dairy products, meat, fruits, vegetables and fish, which can be easily brought under the category of 'sensitive' and some 25-40 of the sensitive tariff lines under the tariff rate quota can be easily protected under this category.

It is now abundantly clear that while the developing countries have got Special Products and SSM, the developed countries have almost an equal and parallel provision of Sensitive Products and SSM. If the developed countries had felt satisfied with the two provisions - Sensitive Products and SSM - to protect their agriculture, there would have been no need to provide the monumental farm subsidy support. The fact that developed countries, adequately armed with the safeguard provisions (besides non-tariff barriers and phytosanitary measures), are still not willing to eliminate agricultural subsidies, clearly shows where the key to a fair trade in agriculture lies.

Unless agricultural subsidies are removed there is no way developing countries can escape the harmful impacts of cheaper and subsidised food surges. Highly subsidies imports from the developed countries have already done irreparable damage to the agricultural production potential of the developing countries. Between 1995 and 2004, Europe alone has been able to increase its agricultural exports by 26 per cent, much of it because of the massive domestic subsidies it provides. Each percentage increase in exports brings in a financial gain of US $ 3 billion.

On the other hand, a vast majority of the developing countries, whether in Latin America, Africa or Asia have in the first 10 years of WTO have turned into food importers. Millions of farmers have lost their livelihoods as a result of cheaper imports. If the WTO has its ways, and the developing countries fail to understand the prevailing politics that drives the agriculture trade agenda, the world will soon have two kinds of agriculture systems - the rich countries will produce staple foods for the world's 6 billion plus people, and developing countries will grow cash crops like tomato, cut flowers, peas, sunflower, strawberries and vegetables.

In reality, WTO would ensure that the reins of food security are passed into the hands of rich and developed countries -- back to the days of 'ship-to-mouth' existence. Developing countries have no one to blame, but themselves. #

(Devinder Sharma is a New Delhi-based food and trade policy analyst)

6. NFU: Statement by Dave Frederickson on WTO agreements

For Immediate Release
December 19, 2005
Contact: Emily Eisenberg
Liz Friedlander

WASHINGTON (December 19, 2005) - National Farmers Union President Dave Frederickson made the following statement about the World Trade Organization's (WTO) failure to reach a meaningful agreement about agriculture trade:

"The failure of the WTO to agree to anything more than the elimination of export subsidies by 2013 is an indication that any agreement on agriculture will be difficult to achieve until they are willing to negotiate all factors of trade, not just export subsidies, domestic subsidies and market access.

"To have a truly level playing field in the global marketplace, trade distorting issues such as labor standards, environmental standards and currency manipulation must be addressed. Otherwise, the agreement will benefit the lowest cost producers who pay the lowest wages, abuse the environment, and/or manipulate currency in order to increase world market share.

"The current trade agenda pits farmer against farmer, and country against country, in a never ending 'race to the bottom' of commodity prices. What farmers and ranchers in this country and around the world need more than anything is a profitable price from the marketplace, not lower commodity prices.


7. Development left behind in WTO agreement in Hong Kong
Deal disguises failure to promote development, help farmers and workers

Press Release from the Institute for Agriculture and Trade Policy
December 19, 2005
Contact: Ben Lilliston, HK, 9328-2739, ben@iatp.org

Hong Kong - A watered down agreement announced late last night by the World Trade Organization (WTO) at the Hong Kong Ministerial reflects the struggles of a deeply flawed Doha Round that is far off-track, according to the Institute for Agriculture and Trade Policy.

"It is not surprising that the Doha Round can't achieve meaningful progress. The agenda is promoting a vision for liberalization that is not supported by most members. Even those that use free trade rhetoric, like the U.S., aren't ready to commit to it in practice," said IATP's Trade Director Sophia Murphy. "We have ten years of the WTO, and it's clear that the push for greater liberalization has not helped farmers, increased employment, or promoted development in poor countries."

The watered down Hong Kong declaration requires few changes for countries like the U.S. while extracting significant concessions from developing countries to open up their borders for multinational services industries. "The Doha Round has taken some of the most important priorities, such as agricultural dumping, domestic policy space for rural development and job creation, off the table at the WTO," said Alexandra Strickner, Director of the Geneva based Trade Information Project of IATP.

"The message from poor countries is clear. This is not the development Round they asked for. The voices of the large number of people around the world have been seriously marginalized and their demands sidelined," said Carin Smaller, trade analyst at IATP. "The Ministerial Declaration is full of empty promises."

A series of recent economic studies, including from the World Bank, have steadily downgraded the projected benefits of greater liberalization, while the balance of benefits are now expected to accrue more to the 30 or so developed countries rather than to the approximately 120 others from the developing world. "The Doha Round is stuck in an outdated model for development through trade," said Murphy. "We need a shift at the WTO that puts the livelihoods of people and the strengthening of communities first. Trade, if managed correctly, can play a useful role. But countries must be allowed to determine the role they want trade to play, not forced into agreements that even multilateral development agencies question."

The Hong Kong declaration itself was a largely face-saving exercise with little substance. The declaration was deliberately kept minimalist to avoid another failure like Cancun. In fact, the agreement is so watered down it is hard to determine what impact it will have. Most of the work is still to be done.

Here is a brief analysis of some of the key components:

On NAMA (Non-Agricultural Market Access): The language on manufactured goods and natural resources continues to go entirely in the wrong direction, forcing the opening of markets for developing countries while threatening employment, development and the environment. Developing countries have rejected this text for years and yet the same details keep reappearing. The text proposes to cut industrial tariffs using a Swiss formula. This is the most drastic way to cut tariffs and has already been rejected in the agriculture negotiations. Such steep cuts will have a disastrous impact on developing countries' ability to build up an industrial base and to protect their natural resource base.

On Development: The Hong Kong development package is empty. The U.S. has offered to eliminate export subsidies on cotton but that is simply implementation of existing rules. The U.S. is already obligated to eliminate export subsidies for cotton under the Brazil-US Cotton ruling. On duty free and quota free access to Least Developed Countries, once again, the US is offering 97 percent of tariff lines whereas only about 3 to 7 percent of U.S. tariff lines are high enough to be trade barriers. So the 3 percent gives the U.S. tremendous flexibility to protect products of real interest to LDCs, such as sugar and textiles. In return for these empty concessions, the U.S. is demanding an aggressive liberalization commitment from developing countries that will be quite costly for their own development prospects.

On Cotton: The new text shows the clear limits on USTR Portman's mandate: overnight the commitment to cut domestic support on cotton was watered down from "will" to "should," which is now in brackets, after U.S. Senator Chambliss sent a letter repeating his position that cotton should not be treated separately from other crops.

On Services: Developing countries fought hard to weaken the language of the services text that proposed mandatory plurilateral negotiations on market access. Despite the changes made to the text, it is still in the interests of developed countries services corporations. As of the beginning of 2006, developing countries will face plurilateral services negotiations in which they will be asked to either open up their water, energy, retailing and other key infrastructural services sectors.

On Food Aid: At last some more detail on food aid is offered in this declaration. However, the disciplines on in-kind food aid, monetization and the resale of food aid in third country markets have yet to be negotiated, so whether the WTO will end up with rules that really control U.S. abuses of food aid programs is not yet clear.

To read the text, and hear audio comments from IATP staff, go to: tradeobservatory.org.

The Institute for Agriculture and Trade Policy works globally to promote resilient family farms, communities and ecosystems through research and education, science and technology, and advocacy. Find out more at - iatp.org

8. EU outlines labelling plans for organic farming

BELGIUM: December 22, 2005

BRUSSELS - Organic farmers across the European Union will soon have to move away from national labels for their produce and clearly inform consumers that it comes from the EU, a draft law on organic farming said on Wednesday.

While the European Commission, author of the draft, would like to encourage greater use of an EU organic logo that it launched in 2004, it would still allow farmers the freedom to use other labels provided they include the words "EU-organic".

At present, producers have difficulty selling organic food in different EU countries as there is a patchwork of national and private logos which can be costly and complicated to obtain.

The draft, to be discussed by agriculture ministers next year, requires that at least 95 percent of the final product must be organically produced to be labelled as such.

Products containing genetically modified (GMO) material may not be labelled as organic, except for those with up to 0.9 GMO percent through accidental or unavoidable contamination. This is in line with current EU law on biotech food and feed thresholds.

The International Federation of Organic Agriculture Movements (IFOAM) welcomed the Commission's draft law but voiced concern that it failed to address the thorny issue of liability in cases where GMO material is detected in organic crops.

"It is welcome news that the EU organic label will not be made obligatory, allowing full space for private labels," IFOAM said in a statement. "An existing legal loophole will be closed so that products labelled as containing GMOs can never be called organic. However, not addressing here the issue of liability in case of GMO contamination is a continuing concern," it said. Separating GMO, traditional and organic crops, known as coexistence, is a problem that EU has yet to get to grips with.

Several EU states, particularly those like Austria and Luxembourg that consistently vote against new authorisations of GMO products, want hard-and-fast EU legislation in this area.

Although Europe saw its organic farming area jump by nearly 70 percent in the late 1990s, this growth rate has now slowed down in several countries where it has reached a plateau.

In the EU-25, the amount of organic farmland is around 5.7 million hectares, or some 3.5 percent of its total agricultural area, and around 175,000 farms are now run organically.

Germany has Europe's largest organic market at just over $3 billion, with fruit and vegetables as its top revenue earners.

Britain, Italy and France also have important markets, where there have been high growth rates in recent years. Britain, for example, is home to Europe's largest organic fruit market.

But the average market share for organic products in the EU remains small at around two percent, with some exceptions such as vegetables at between five and 10 percent.