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Business News/ Opinion / Online-views/  Farm trade and stalled reforms
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Farm trade and stalled reforms

The latest debacles call for reform of the US's farm policies. Washington must be prepared to give for what it wants to grab from others

Members at the World Trade Organization (WTO) in Geneva, Switzerland, failed to arrive at a work programme for concluding the long-pending Doha trade negotiations. Photo: AFPPremium
Members at the World Trade Organization (WTO) in Geneva, Switzerland, failed to arrive at a work programme for concluding the long-pending Doha trade negotiations. Photo: AFP

A tale of two failures on Friday underlined a common narrative confronting global trade. Members at the World Trade Organization (WTO) in Geneva, Switzerland, failed to arrive at a work programme for concluding the long-pending Doha trade negotiations. Talks among 12 countries to liberalize trade on the Pacific region also broke down in the Hawaiian island of Maui. Both the fiascos highlighted the importance of reforming global farm trade. Ironically, the US, the world’s leading exporter of farm products of around $150 billion, is at the centre of both these developments.

To start with, the blueprint for wrapping up the 14-year-old Doha trade negotiations began last year. The ebullient director general of the WTO, Roberto Azevedo, took upon himself the mammoth task of concluding the round within 12 months, by 15 December. After clinching an agreement on trade facilitation for removing customs-related bottlenecks, Azevedo has remained confident he would add another jewel to his crown by concluding the Doha round.

The trade facilitation agreement, though, part of the Doha Development Agenda (DDA), was certainly not the main issue. If anything, it was plucked out of the DDA at the insistence of the major industrialized countries led by the US.

The European Union and the US also deserved credit for their leadership in launching the Doha round in 2001. Agriculture, however, remained the first among equals in the Doha agenda. Other areas include reducing tariffs on industrial goods, liberalizing trade in services, improving anti-dumping and anti-subsidy (countervailing) measures, strengthening developmental flexibilities for developing and poor countries and so on.

Considerable progress was made during the negotiations on agriculture. For example, after a debacle at the Cancun ministerial meeting in 2003, trade ministers had agreed on what was called the July 2004 framework agreement that clarified how the different areas of the DDA, particularly agriculture, will be addressed. Subsequently, the Hong Kong ministerial declaration in 2005 further concretized the specific elements in agriculture, including cotton an area of life-and-death for the poorest farmers in four West African states, industrial goods, and services among others. Even though the Doha negotiations broke down in 2006, they were revived in 2007 largely due to the fireside chats initiated by then chair of the agriculture negotiations, Crawford Falconer of New Zealand.

Despite considerable disagreements, Falconer’s efforts brought about a sea change in the Doha agriculture negotiations. He produced several draft negotiating texts culminating in what is popularly called the Rev.4 or the fourth revised draft text of modalities in December 2008.

“The December 2008 draft modalities are the basis for negotiations and represent the end-game in terms of the landing zones of ambition," Azevedo had declared in his previous avatar as Brazil’s trade envoy to the WTO in 2011.

The US, which was a party to the drafting of the Rev.4, pulled out because of pressure from its powerful Farm Bureau. Washington then went on to suggest that the draft modalities contained too many black holes of flexibilities for India and other developing countries. Unless China and India agreed to reduce their farm subsidies, the US said it will not undertake any commitments to reduce farm subsidies.

Washington is required to bring its trade-distorting domestic farm subsidies below $14.5 billion, while China and India are exempted from undertaking any commitments as per the Rev.4. Because of the farm bill passed last year, the US now crossed the limits set for trade-distorting domestic subsidies.

Against this backdrop, Azevedo coined some ingenious slogans such as what is doable and do-ability to ensure that countries like the US are spared from undertaking substantial commitments to reduce their trade-distorting domestic support. But a large majority of countries waved a red flag against the director general’s strategy on the ground that it would leave the imbalances in the agriculture sector unaddressed. They demanded the Rev.4 ought to be the basis for the work programme.

Brazil, said ambassador Marcos Galvao, will not tolerate attempts by a few members to ensure that agriculture ends up with “close to zero progress".

“We will reject upfront any approach, formula, benchmark, schedule, modality or a proposal the result of which could amount to maintaining or worsening the disadvantaged position of agriculture within the multilateral trade regime," Galvao told his immediate predecessor Azevedo, who is now the WTO chief.

Coming to the Trans-Pacific Partnership (TPP) talks that failed on Friday, Australia placed the blame squarely on the US, Canada, Japan and Mexico. Canberra said it is being denied liberal market access for sugar in these four countries. New Zealand, too, is unhappy that it failed to secure substantial access for its dairy products in Canada, Mexico and even the US.

It is an open secret that the 12-member regional group, which includes the US, Singapore, Brunei, New Zealand, Chile, Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan, saw some exclusive deals between Washington and Tokyo.

The US, for example, managed to secure maximum mileage for agriculture products in the heavily protected Japanese market. The US ranchers and heavily-subsidized farmers of agricultural products secured unprecedented access for rice, beef and also sugar in the Japanese market as part of the TPP. But Japan is not willing to extend the same treatment to Australia for beef, lamb and sugar. Further, the US, which protects its sugar producers, is not prepared to offer access to Australia. Vietnam is denied access for its rice in the Japanese and other TPP markets, including the US.

While it is true that the TPP talks collapsed due to other issues such as automotives and data protection for biologicals for a period of 12 years, the US’s opposition to open its sugar market or Canada’s refusal for imported dairy products indicate that agriculture needs reform.

Thus, the latest debacles call for reform of the US’s farm policies. Washington must be prepared to give for what it wants to grab from others. The champion of the open-door policy must occasionally live up to its own ideals.

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Published: 04 Aug 2015, 12:53 AM IST
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