A sea change is taking place in the World Trade Organization. The former GATT negotiations were largely conducted between the major powers. Many issues of industrial protection and tariffs were tackled positively, but the difficult issue of agriculture was left out, and the wealthy industrial countries expanded their farming sectors through a huge array of subsidies.
When the Uruguay Round of the GATT got under way in the mid 1980s, the organisation had expanded to include more countries for which agriculture was important. A number of these countries joined a loose coalition named the Cairns Group (because it had its first meeting in Cairns, Australia). New Zealand was a founding member of the group. People from these countries were determined that agriculture would be placed firmly on the agenda, and they worked for reductions in the key areas of protection – export subsides, border protection and domestic subsidies.
The Cairns Group was only partly successful. Agriculture did make it on to the agenda and some reforms were made, but it was in the end still a negotiation between Europe and the United States that everyone else had to go along with. Internal politics in those countries and Japan have determined that any progress in agricultural trade reform is very slow. The motif appears to be ”put it off to the next decade if you can.” One of the outcomes of the Uruguay Round was to change the name of the General Agreement on Tariffs and Trade to the WTO. A positive point was an agreement to keep negotiating on agriculture in a new round, meant to start in the United States city of Seattle in November, 1999.
Those of us who were there will never forget the ”Battle of Seattle.” Many more countries had joined the WTO and it was now a genuinely global organisation. Anti- globalisation protesters made the WTO a major target and disrupted the meeting in a major way. Despite all the publicity the disruption caused, it was not the reason for the failure of the meeting. The meeting failed because the old protagonists could not agree on a framework for negotiations.
While the protesters and professional agitators may not have caused the failure of the meeting, many of the opponents of the WTO were on the streets because they had been convinced that a WTO agreement would disadvantage the poor people of the world. It was of real concern for me to see the churches so involved in the protest. Several churches even provided shelter and food for the demonstrators. Many aid organisations were also against change. Owners and unions in the protected industries in the wealthy countries had done a great job of infiltrating these organisations and convincing them that trade was bad. It is difficult for governments to make progressive agreements if large sections of their constituents are against change.
To the credit of the churches and the trade organisations, they have given the issues a lot of consideration since the Seattle meeting. Many of them have changed sides and are now taking positions very similar to those expressed by the Cairns group. For example, the aid organisation Oxfam has come out with a report that puts much of the blame for world hunger on the subsidies paid in the wealthy countries.
A Washington DC-based organisation, the Bread for the World Institute, has just published a report called Agriculture in the Global Economy. This organisation has the backing of most of the churches and many of the aid organisations in the United States. It urges the United States and other industrialised countries to live up to their free-trade rhetoric and work to eliminate trade-distorting farm policies. Bread for the World says that this would open opportunities for millions of struggling families to work their way out of poverty and hunger. The organisation also emphasises the fact that most of the subsidy money paid in wealthy countries goes to a few wealthy farmers and corporations, while the majority get nothing.
These are things that those of us in the Cairns Group have been pointing out for a long time. The difference now is that the constituency that is working for change is much bigger than it was previously. In addition to the groups I have already mentioned, organisations such as the International Food and Agricultural Trade Policy Council (IPC), the World Agricultural Forum and the Mexico Action Summit are starting to have a real impact.
The poorer countries have a real problem in negotiating. They do not have the resources to match the wealthy countries and are at a huge disadvantage when it comes to working in Geneva, the headquarters of the WTO. The IPC recognises this, and has been helping these countries develop their negotiating skills. In the early stages of the negotiations a large number of the developing countries thought that their interests were best served by applying defensive measures of their own, such as high tariffs. While some of them still want to do this, many more now see better market access and elimination of subsidies in the wealthy countries as a much better option.
The Europeans have recognised this, and are offering better market access to the least developed countries. They have also made modest moves towards moving their subsidies from products to people. The reforms announced by the Europeans, and the further changes signalled, might have been enough to form an agreement in the environment that prevailed in the Uruguay Round, but they will not bring about an agreement in this Doha Development Round.
Representatives of the poorer countries who were at meetings I attended in the United States and Mexico earlier this year were far from impressed. They claim that the market access offered by the Europeans is meaningless if they continue to be shut out through sanitary regulations. They add that even if they could comply with the sanitary regulations, they are still at a huge disadvantage because of the subsidies being paid in the wealthy nations. In their judgement it makes little difference whether the subsidies are decoupled or not. They still consider that the farmers being paid the subsidies will have the money to outbid any new unsubsidised players in the market. Raul Montemayor from the Philippine Farmers Union compares the situation of small farmers in developing countries to that of ”pinweight boxers” fighting a strong Mike Tyson who also cheats.
The poorer countries are now much better organised than they were previously. The formation of the G21 (now about 26) just before the Ministerial meeting in Cancun was the result of this better organisation. It is no surprise to me that the participants in Cancun failed to reach agreement. The meeting did not fail because the United States and Europe could not agree. It failed because the wealthy countries did not move nearly far enough to satisfy the poorer nations. The Europeans and the Americans did offer further concessions at Cancun, but they wanted concessions from the poorer countries in what are called the Singapore issues before they would lock these concessions in. A number of the poorer countries would not buy this and the meeting was adjourned.
Opinions differ on whether or not those who would not sign up overplayed their hands or not. Many old hands argue that it is better to take what is on offer rather than run the risk of getting nothing at all. Others claim that what was on offer did not go nearly far enough for developing countries to give up some of their own protection. In some ways the lack of agreement at this stage is not a bad thing. In my opinion it would be better to wait until the time is ripe to secure a really meaningful agreement than to settle for something less than adequate.
When will the time be ripe? I believe that 2005 is the optimum year to get the best possible settlement. The United States presidential elections will be out of the way. The US will have a huge internal deficit to be dealt with. The enlarged European Union will be having trouble financing its expansion, and the Japanese economy will still be very sluggish. Most importantly, the coalition for change will have expanded to the point where its views are clearly in the majority. The developing countries may be prepared to wait until 2005, provided that they then get what they want. If they do not get what they want by then, the whole world of trade agreements could well be thrown into chaos.
This is not an economic issue for the wealthy countries, it is a political one. Politicians are frightened that they might not get elected if their rural communities don’t vote for them. They are also worried that their political parties would lose the large donations that they get from their protected sectors. What nonsense! One day the majority of people in these countries will wake up and understand how much better off they would be if they did away with farm subsidies and protection. Governments would save themselves billions of dollars. Consumers and taxpayers would get a much better deal and farmers would enjoy freedom and opportunities they do not have now.