Convened by the Cordell Hull Institute and Carnegie Endowment for International Peace
Liberalizing Agricultural Trade and Developing Countries
TWO important developments have recently occurred in U.S. trade policy. With “fast track” trade-negotiating authority in hand, the United States is expected to press for greater progress in the Doha Round negotiations, while at the end of July the Admin-istration spelt out in more detail its proposals on agriculture. What do these last mean for progress in the negotiations as a whole?
Among negotiators in Geneva, it is well understood that progress on the rest of the Doha Round agenda, especially on items of interest to industrial countries, will depend on substantial progress being made on agriculture. Resolving the tensions surrounding trade in agricultural products is critical to the success of the Doha Round negotiations, which in turn is critical to strengthening cooperation among democracies in tackling poverty alleviation and countering threats to security, especially from global terrorism.
The Doha Round negotiations provide for governments to liberalize agricultural trade – an effort that, after being brushed aside in six previous rounds, began to make headway in the Uruguay Round negotiations. Not since the Repeal of the Corn Laws in Britain, which lead to the Cobden-Chevalier Treaty of 1860 and the système des traités that survived until World War I, has there been a comparable opportunity.
Securing agreement on the liberalization of agricultural trade, however, will require a concerted effort by the United States, the Cairns Group of smaller agricultural-exporting countries and other developing countries, many of whom are struggling to benefit under the terms of the Uruguay Round Agreement on Agriculture, a part of the WTO system.
Huge Backlog of Adjustment
While enormous progress has been made since World War II in liberalizing import restrictions on industrial products traded among developed countries, agriculture was treated for decades as a “special case”. Although there are many explanations for this, one of the most recognized causes has been the rising trend of protection afforded to agricultural producers in industrial economies.
Over the last half century, agricultural policies in industrial countries, based on price supports and subsidies, have stimulated agricultural production, generating surpluses so large that from time to time they have had to be destroyed, stored or dumped abroad – depressing prices in “world” markets, causing tremendous hardship in the farm communities of developing countries and many developed ones. (Increasingly, agricultural workers in developing countries are moving to urban centers, where meaningful employment is also hard to find.) The resulting distortions of production, consumption and trade in the agricultural sector, also affecting job opportunities, have reached staggering proportions. Even conservative estimates are hard to believe!
In industrial countries, those working on the land account for a tiny proportion of the labor force, while in developing countries farming accounts for a high proportion of employment, besides a way of life for most people. In spite of the important role that agriculture plays in poorer countries, farm lobbies in Western Europe, North-east Asia and certain segments in the United States are still the main interests shaping agricultural trade.
The consequences have extended far beyond exporting the costs of adjustment to other countries, many of them very poor. They have extended, through intensive-farming methods, to damaging the environment – to water pollution, soil erosion and all the rest. Now there are fears in affluent societies, whether exaggerated or not, about the safety of many foods being sold in their supermarkets, high streets and shopping malls.
Framework for Liberalizing Trade
In the Uruguay Round negotiations, the United States and the Cairns Group secured, after a long and acrimonious struggle, an agreement to extend the multilateral trade-liberalizing process to agricultural products. The Agreement on Agriculture provides for “substantial progressive reductions” in domestic support, border protection and export subsidies, as well as disciplines on sanitary and phyto-sanitary measures. The “package” also called for the “tariffication” of non-tariff measures and “an aggregate measurement of support” for agreeing and monitoring the reduction of farm-support measures.
Reaching that package of agreements took so long there was not really any time, patience or energy left to negotiate much actual liberalization. So the United States and the Cairns Group had to accept – along with some last-minute changes – a commitment to resume the negotiations in 1999-2000.
Those negotiations, along with negotiations on trade in services, resumed early in 2000. Serious progress was not expected though until they became part of a full-fledged round of multilateral trade negotiations which, following the failure of preparations for the WTO Ministerial Conference in Seattle, was finally launched in Doha last November, at the fourth WTO ministerial.
Another Confrontation Impending
These factors contribute to a tense situation that jeopardizes potential progress in the Doha Round negotiations on agriculture. So there is another major confrontation pending between, on the one hand, the United States and the smaller agricultural-exporting countries and, on the other, the European Union, Japan and the smaller farm-protecting countries. Also in the picture are the net food-importing developing countries, the developing countries that export labor-intensive horticultural products and the many NGOs concerned about development, environmental and food-safety issues.
Over the years there has developed an extensive professional literature on the costs of agricultural protection, indicating the substantial gains to be had from liberalization and reform, but others like to emphasize non-trade considerations. Since the Uruguay Round agreement, however, there has not been a significant reduction in the degree of protection afforded to farmers in high-income countries, as measured by the average “producer subsidy equivalent”.
Given the diffused effects of agricultural protection, the tendency for city people to idealize rural life and the arcane terms in which the issues are discussed, it does not take much to obfuscate public discussion enough for farm-support policies to survive serious criticism. The latest ploy is talk about the “multi-functionality” of agriculture (old arguments in a new guise).
For these reasons, the different strands of the case for agricultural trade liberalization and reform need to be drawn together, not only the standard arguments but those, too, of (i) humanitarian groups concerned about hunger and malnutrition, (ii) development groups focusing on poverty alleviation, (iii) environmental groups pursuing excessive use of fertilizers, the conservation of natural resources, the preservation of biological diversity et cetera, (iv) consumer groups campaigning on the cost, availability and quality of food, (v) taxpayer groups alarmed by massive public subsidies and (vi) academic economists and other trade-policy specialists who observe the magnitude of distortions in consumption, production and trade.
This conference is aimed at clarifying some of these issues that will have to be con-fronted in the Doha Round negotiations on agriculture. The agenda follows.
AGENDA OF THE MEETING
John Audley: Senior Associate and Director of the Trade, Environment and Development Project, Carnegie Endowment for International Peace, Wash-ington, DC
0830-0900 Registration and Coffee
Integrating Developing Countries in the WTO System
0940-1100 SECOND SESSION
Perspectives on Liberalizing Agricultural Trade
C. Joseph O’Mara: President, O’Mara & Associates, Washington, DC; former Special Agricultural Trade Negotiator, U.S. Department of Agriculture, on modalities for WTO negotiations on agricultural trade
Shishir Priyadarshi: Senior Counselor, Development Division, WTO Secretariat, Geneva, on the proposals for a “development box” in the liberalization of agricultural trade
Marcos Jank: Special Expert, Trade Integration and Regional Programs, Inter-American Development Bank, Washington, DC, and Professor of Agricultural Economics, University of Saõ Paulo, on revising the WTO rules on market access and trade-distorting subsidies.
General Discussion of Agricultural Trade Issues
Phil Twyford: Head, Washington Office, Oxfam International, on the thrust of the recent Oxfam report on the WTO system, Rigged Rules and Double Standards (2002).
Eugenio Diaz-Bonilla: Senior Research Fellow, International Food Policy Research Institute, Washington, DC, and former Argentine trade official, on the developing countries’ interest in agricultural trade liberalization.
Kathy Ozer: Executive Director, National Family Farm Coalition, Washington, DC, on the place of family farms in the liberalization of agricultural trade.
Richard Haire: Chief Executive, Queensland Cotton Corporation, Brisbane, Australia, on a Cairns Group farmer’s perspective on competing in world markets.
Bruce Gardner: Professor of Agricultural Economics, University of Maryland, and former U.S. Assistant Secretary of Agriculture, on how the interests of developed countries can be served while opening to imports from developing countries.
1300-1400 Buffet Luncheon
Broadening the Coalition for Liberalizing Farm Trade
Allen Johnson: Chief Agricultural Negotiator, Office of the U.S. Trade Representative, Executive Office of the President of the United States
1400-1500 CONCLUDING SESSION
Identifying Common Ground and Points of Difference
Rashid Kaukab: Director of the South Center, Geneva
Eugenio Diaz-Bonilla: Senior Research Fellow, International Food Policy Research Institute, Washington, DC, and former Argentine trade official
David Orden: Professor of Agricultural and Applied Economics, Virginia Polytechnic Institute, Blacksburg, Virginia; co-author of Policy Reform in American Agriculture (1998)