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Towards Cancun WTO Ministerial


At probably the last officially organized public symposium in Geneva (June 16-18) before the forthcoming WTO Ministerial at Cancun in early September, the writing is clearly on the wall: agriculture has for all practically purposes been abandoned in the ongoing multilateral negotiations.


 


And with this cleverly manipulated turnaround, ends the final hope for billions of small and marginal farmers in the developing world who were initially promised the stars when the WTO was formally launched on January 1, 1995. Eight years later, their dreams have been completely shattered. Swamped by a surge in food imports, and with their respective governments agreeing to further lower the tariffs, it is only a matter of time before the collapse of agriculture in the developing world triggers massive displacements from the rural areas. 


 


The big boys have done it again. After Doha, where the United States, European Union and the Cairns Group of grain exporting countries, managed to stage a coup of sorts by committing nothing more by way of reduction in their mammoth agricultural subsidies, the focus of the ongoing negotiations has been very conveniently shifted to market access and its modalities. Except for a regular mock drill of a ‘tit-for-tat’ over subsidies and domestic protection that is staged so eloquently by the EU and the Cairns group, the underlying emphasis remains on force opening the developing countries to provide increased market access. 


 


At Geneva too, Mark Vaile, Minister of Trade for Australia (part of the Cairns Group), and Ambassador Luzius Wasescha of Switzerland (keen to protect subsidies) did regale the audience with scathing charges and counter-charges. Trading charges in open forums is surely meant for the public galleries, the hidden agenda for both the blocks being to protect their highly subsidized (and protected) agriculture. The public postures notwithstanding, the US/EU have a history of arriving at a compromise to protect their economic interests, and every other country is then made to fall in line. But what has become more significant during the post-Doha phase is the co-option of the developing countries as well as the civil society groups in the process of hijacking the ‘Agreement on Agriculture’ (AoA).


 


The AoA hinged precariously on eliminating agriculture subsidies as a basic step in getting the fiscal house in order. Knowing well that any reduction in subsidies would be politically suicidal, the developed countries managed to not only maintain the level of subsidies but in fact succeeded in increasing it manifold. At the same time, they continue to arm-twist the developing countries to reduce tariffs and open up markets for farm goods from the industrialized countries. Shifting the focus to increased market access or what some negotiators call as ‘over-ambition’ on market liberalization became the rallying point. Agricultural subsidies have been simply pushed back to the backburner.


 


An indication to this clever shift in negotiations was time and again provided by the US Secretary of Agriculture, Ann Veneman: “Some developing countries argue that they shouldn’t have to open up markets until the developed countries first make domestic support reductions. This is a formula for failure.” Echoing the same brand of hypocrisy, the World Bank Chief Economist Nicholas Stern, while traveling through India, denounced subsidies paid by rich countries to their farmers as “sin …on a very big scale” but warned India against any attempts to resist opening its markets. “Developing countries must remove their trade barriers regardless of what is happening in the developed countries.”  


 


The only way to escape reduction commitments was to shift the focus entirely on to market access, special safeguard mechanisms, tariff rate quotas, and strategic products. Stuart Harbinson, chair of the agricultural negotiations, presented his first draft of possible modalities for the agriculture negotiations on February 12, 2003. This was the culmination of the post-Doha negotiations and the paper reflected a compromise formula based on the conflicting positions of the governments. A second draft was released on March 18, just before the self-imposed deadline of agreeing to new modalities by March 31, 2003. Harbinson actually has no mandate to present such drafts in his own ‘individual’ capacity. But he did, and no country objected.


 


The presentation of such drafts, and still worse the numerous proposals being put forward by the chairman of the councils, has in reality marginalized the developing countries ability to negotiate and exert pressure. Such has been the bureaucratization of the negotiating process that real power has clearly shifted to the narrow corridors of the Centre William Rappard (housing the WTO) in Geneva. Trade experts, who have little idea about the ground realities in the developing countries, their only brush with subsistence farming being through the television snippets, are busy framing formulas and proposals that they think would help farmers in the majority world. 


 


The Harbinson drafts (including the revised ‘Harbinson 2’) nevertheless were largely welcomed by a majority of the western NGOs. Equally worse, the developing countries dominant group in WTO agricultural negotiations, better known as Like-Minded Group (includes India, Pakistan, Nigeria, Kenya, Uganda and Zimbabwe besides others), actually ‘celebrated’ the Harbinson draft 1 as ‘a small victory’ for the coalition of developing countries that have fought hard for resisting further opening up their domestic markets. In reality, the Harbinson drafts are nothing more than the proverbial bikini – protecting more than what it reveals.


 


It created three bands for reduction in higher tariffs that would enable more and easy market access. For the developed countries, tariffs higher than 90 per cent would be reduced by an average of 60 per cent, with a minimum of 45 per cent cut per tariff line. Tariffs between 15 and 90 per cent would be cut by 50 per cent, with a minimum of 35 per cent cut. Tariffs lower than that would be reduced by 40 per cent, with a minimum cut of 25 per cent. At the same time, it called for a 60 per cent reduction in domestic support in amber box in the next five years. The draft proposed the elimination of export subsidies over a period of ten years.


 


In other words, Stuart Harbinson had very cleverly proposed a formula that actually aims at seducing the developing countries with the promise of an increased market access into the rich industrialized countries. In addition, he provided another lollipop to the developing countries – the option to classify a number of ‘strategic products’ with respect to food security, rural development and/or livelihood security concerns. Unfortunately, the developing countries were trapped by the discussions around the new special safeguard mechanism that he had proposed, without realizing that this new safeguard mechanism does not first remove the ‘special safeguards’ provisions under Article 5 of the AoA, which is a privilege enjoyed by only 21 developed countries, including the United States.


 


The concept of ‘strategic products’ is merely a proxy for the ‘development box’, a proposal that will eventually turn out to be more damming if implemented. More and more countries have lately understood the dangers of supporting the ‘development box’ and have by and large backed out. The ‘strategic product’ concept, therefore, is equally harmful for the developing countries. It does not realize that production of crops and its imports into developing countries cannot be equated with industrial production. This is a mistake, which was earlier committed also by some Indian macro-economists, when they computed agriculture trade in the same manner as they would do to scooter manufacture or bicycle production capacity of the industrial units. The much-hyped ‘big-bang’ theory that came up as a result failed, and is no longer talked about.


 


Although Harbinson did propose minor tinkering in the composition of subsidies in blue box and amber box, it is nothing significant to rejoice. Such rope tricks have earlier been performed, and will continue to be performed so as to hoodwink the developing countries to believe that the rich countries are moving in the right direction. We are aware that the the European Union in 1995-96, had provided US$ 48 billion under ‘amber-box’ subsidies and another US $ 40 billion under ‘blue’ and ‘green box’ subsidies.  In 2002, it shifted and juggled the figures to provide US $34 billion in ‘amber’ box and US $ 52 billion as ‘blue’ and ‘green box’ subsidies. The net subsidy level however did not show any significant shift, and in fact remained almost at the same levels: US $88 billion moving to $86 billion.


 


On the other hand, Cairns group has vociferously campaigned for the elimination of food subsidies and for increased market access. They claim that they do not provide any agricultural subsidy and still trade at competitive prices because of high efficiency. At the same time, the two major pushers of the Cairns group approach – Australia and New Zealand – do not talk about the subsidies being granted by way of market promotion and still worse the massive subsidy that goes towards freight and transportation. Further, these countries have practically blocked developing country imports under the stringent norms of sanitary and phytosanitary measures (often more tougher than what is prescribed by Codex Alimentarius).


 


In reality, the talk of high quality of farm produce is only for academic purposes and trade negotiations. The fact remains that Australia and New Zealand have dumped sub-standard agriculture produce on developing countries, including India. Australia had exported one million tonne of wheat to India in 1996, which was nothing but cattle feed. New Zealand continues to export poor quality butter oil to India. The quality of apples (and other fruits) that comes in from New Zealand and Australia too is very low. Wheat and soya from Argentina has been tested to be sub-standard a number of times. It is simply because of the inability of the developing countries to have adequate monitoring facilities for checking quality of food imports that the claims of these countries remain unchallenged.   


 


Regardless of the commitments being reached at the WTO negotiations, the US merrily goes on flouting these under one pretext or the other. The world is expected to behave like an Ostrich when it comes to the WTO violations from the world’s only super cop. Whether it is the additional federal support of US $ 180 billion for the next 10 years that has been promised for American farmers, or the grant of US $ 110 million for export promotion that has recently been announced, the WTO seems helpless. “Who can tell the United States?” is what a senior WTO official at Geneva replied when confronted with the inequalities in the trading system that are being perpetuated.


 


It is very clear that the US and the European Union (along with Japan, Switzerland and South Korea) are not going to phase-out, what to talk of eliminating, agriculture subsidies. Harbinson’s proposal for elimination of export subsidies (not all subsidies) over the next ten years is therefore no sop to the developing countries. What is not being understood is that it is not only export subsidies that distort trade, all kinds of domestic support whether it is de-coupled income support or credit for insurance and the support for export promotion are equally damaging. These subsidies insulate the rich country farmers from the volatility of the global markets thereby throwing a strong protecting ring.


 


Developing country farmers are therefore being very conveniently led to a slaughter house. As long as the farm subsidies in the rich countries remain, no amount of safeguards can protect the developing countries from highly subsidized imports and the resulting impact on the livelihood security of the farmers would be catastrophic. For the developing countries, the need of the hour is not to be lured by diversion tactics that the rich and industrialized are specialists in. The focus has to be brought back to the elimination of agriculture subsidies as a pre-requist to further negotiations. The modalities that developing countries need to ensure are:


 



  • Zero subsidies: Developing countries must strive for the elimination of all agricultural subsidies. Subsidies under all boxes – green box, amber box and blue box – need to be first abolished before any more commitments are made. Agriculture negotiations should only be confined to the timeframe under which these subsidies can be removed. ‘Peace Clause’ that allows the European Union the privilege to increase subsidies, needs to be culminated when it ends in Dec 2003. Along with farm subsidies, the monumental subsidies provided for freight also need to be disciplined.

 



  • Market Access: No further concession on market access till the subsidy issue is resolved. The new special safeguard mechanisms, including the denomination of ‘strategic products’, need to be debunked. Strategic products do not protect the socio-economic interests of the developing nations. Peas, for instance, is not a strategic product for India’s food security. But its import has increases four times in the past four years. In fact, the import of fruits has vegetables into the country, which is the biggest producer of fruits and vegetables in world, has increased two-fold in the past one year. While it may be practically difficult to classify each of these crops as ‘strategic’, the cumulative impact of imports is leading to a serious crisis.

 



  • Quantitative Restrictions (QRs): Developing countries need to be allowed the same provisions of the special safeguard mechanism that protects agriculture in 21 rich countries from import surges. In addition, developing countries should have the right to re-impose quantitative restrictions that in reality are the only measures that protect food security and the livelihoods of millions of small farmers.

 



  • Multilateral Agreement Against Hunger: Among the new issues to be introduced at Cancun, the developing countries need to strive for the inclusion of a Multilateral Agreement Against Hunger. This should be based on the guiding principle of the right to food and should form the basis for all future negotiations. Such a multilateral agreement would ensure that countries will have the right to take adequate safeguard measures if their commitment towards the WTO obligations leads to more hunger and poverty.

 


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