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WTO: The dope trick
(Wednesday, Aug. 25, 2004 -- CropChoice news) -- Devinder Sharma commentary, 08/24/04: It is now official. The United States will not be reducing its huge
financial support to farmers (and agribusiness companies) even after the 20
per cent cut in trade-distorting subsidies promised in the first year of
implementation. The European Union too has also got a waiver. It does not
need to make any cut in agricultural subsidies from the existing level. Nor
will the export subsidies be removed for another ten years or so. All that
the developing countries have got in return is a lollipop – some imports to
be protected under the category of ‘special products’. The July 31 WTO framework agreement, agreed upon by 147- members after a
five day grueling exercise in Geneva has drawn a structure that needs to be
implemented for furthering the Doha Development Agenda. The WTO director
general had therefore hailed the framework agreement as ‘historic’ and the
developing countries – G-20 and G-33 (and the least developing countries
under the banner of G-90) had returned back claiming ‘victory’. No sooner
the details began to be analyzed, it became clear that the developing
countries had not only been duped but robbed in the daylight. “The new global trade agreement protects US farm subsidies when prices for
wheat, corn or soybeans drop,” US Trade Representative Robert Zoellick was
quoted in a news report. “A pledge by the US to reduce farm subsidies by 20
percent won't undercut payments Congress promised in a $125 billion bill in
2002,” he added. He was replying to a letter that the Democratic leader Tom
Daschle of South Dakota had written to President George Bush. “This
reduction will not weaken our ability to support our farmers, as you
erroneously claim,'' Zoellick replied. Zoellick’s colleague, and the chief US agriculture negotiator, Allen
Johnson, told reporters: “The United States succeeded in shifting farm
subsidies to a new WTO category (read ‘blue box’) to avoid actual
reductions.” Accordingly, the American government has paid its farmers about
$23 billion annually over the last three years. Under the current WTO rules,
the maximum annual subsidy is $49 billion, meaning the US could lower that
cap without actually having to cut the payments. The 20 per cent reduction
will not have any impact on US subsidies since it would be from an ‘authorized’ ceiling not the actual payments. The chairman of the US Senate Finance Committee, Mr. Charles Grassley, has
reassured American farmers saying that the framework agreement entails only
shifting of subsidies of the ‘amber box’ of trade-distorting supports to the ‘blue box’ of subsidies that are decoupled from production and are considered less trade-distorting. No wonder, the WTO framework has been
welcomed by 53 American groups and companies, including Monsanto. US
President George Bush as a result does not face any political embarrassment
from the powerful farmers lobby in the run up for the presidential election
slated for November. While the framework provides a cushion to the US/EU to raise farm subsidies
from the existing level it has for the first time turned the tables shrewdly
against the developing countries. Except for supporting the resource-poor
farmers, developing countries too will have to reduce their subsidies.
Interestingly, developing countries are being asked to cut domestic support
for agriculture at a time when a majority of the 3 billion farmers in the
majority world earn less than half of what a European or American cow gets
as subsidy – US $ 3 a day. It is also widely accepted that developing
countries do not have the means to provide direct farm support to farmers.
It is therefore not only amazing but shocking beyond belief to see the way
the developing country negotiators goofed up. If you read the draft carefully, it becomes obvious that the first
installment of a cut in subsidies by 20 per cent 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. For the EU, this should come to Euro 101.6
billion and after applying the first cut, the subsidies that can be retained
will be Euro 81.3 billion. I had earlier worked out the actual reduction
that the EU will have to bring about, which in essence means it gets a
leverage to further increase the subsidies. [1] The sigh of relief being expressed over the elimination of export subsidies
is also likely to be brief. Export subsidies have always been considered to
be trade-distorting and except for the talk for reducing these, no definite
time schedule had ever been spelled out. The July 31 framework also
reiterates the same old position without making any definite commitment.
French Agriculture Minister, Herve Gaymard, has made this abundantly clear
when he informed the media that it would not be before 2015 or 2017 when
export subsidies are completely eliminated. By the time these subsidies are
actually removed, developing countries would have become an open dump for
the cheap and highly subsidies agricultural imports thereby destroying
millions of livelihoods and further marginalizing the farming communities. The framework also provides more protection measures for the rich and
industrialized countries. Special and differential treatment, special
safeguard measures and on top of it the provision for designating some of
the key products under the category of ‘sensitive’ products makes the
domestic market security more solid. Jim Grueff, assistant deputy
administrator for trade policy in the US Department of Agriculture, has
already assured the American Sugar Alliance that the US is ‘very likely’ to
designate sugar as a ‘sensitive’ product. Despite an interim WTO ruling
against the European Union for subsidizing its sugar producers at levels far
in excess of what the EU had committed to provide as part of the Uruguay
Round, the EU too is likely to follow the same path. This makes a mockery of
the ruling handed in a petition filed by Australia, Brazil and Thailand
against EU sugar subsidies. For the developing countries, the blame would rest mainly with the big two –
Brazil and India – that were part of the NG-5 (comprising the US, EU,
Australia, Brazil and India). They behaved like the big boys, bullying their
way and showing utmost contempt to the positions taken by the other
developing countries, including the least developing nations. They were part
of the compromise that forced the rest of the developing world to remain
quiet at the faulty frame being imposed. While US, EU and Australia have
walked back with the cake, Brazil and India have only lost their credibility
and will no longer be trusted by the developing world. They deserve the
brickbats. And right so. Devinder Sharma is a New Delhi-based food and trade policy analyst.
Responses can be emailed at dsharma@ndf.vsnl.net.in. NOTES | |
