Thursday, December 15, 2005

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It's déjà vu in Hong Kong... or is it?

A former U.S. trade negotiator during the Uruguay round sent me an e-mail that contained the following:

I haven't keep current, thank goodness, on ag trade policy issues for more than 10 years. However, I suspect the lay of the land hasn't changed much: - Agricultural trade, as usual, is the biggest block to freer trade for agricultural products... but also non-agricultural products since the agricultural stalemate is holding up progress in non-agricultural talks:
- The EU is the biggest block to freer trade in ag products.

- France is the biggest block to the EU accepting freer trade in ag products (and therefore non-ag products).

- French agricultural organizations (especially FNSEA) are the biggest block to the government of France accepting freer ag trade.

- French grain and meat producers are the biggest anti-free trade forces in the FNSEA.
Given the current stalemate in talks -- and Peter Mandelson's intransigence on the EU taking the next step on ag subsidies -- it would seem that everything old is new again. However, there are two new wrinkles to current negotiations as opposed to prior rounds.

First, small countries have figured out that they can use the need for consensus to threaten walkouts if they don't get something. For example, The Independent's Philip Thornton reports that the west African country of Benin is now a major player:

The mood soured [at the WTO meetings] further when Benin indicated it was prepared to walk out of the talks over the failure of the US to meets its demand to end cotton subsidies.

The last meeting two years ago in Cancun, Mexico, collapsed after a handful of countries walked out over cotton, depriving the WTO of the 100 per cent mandate it needs to strike a deal.

Samuel Amehou, Benin's ambassador to the WTO, said African cotton producers have to compete against vast subsidies paid to US farmers. He said African states would "not accept any consensus that did not take the legitimate interests of the African farmers into account".

He added: "The conference in Hong Kong is the place to hold people to their commitments."

Ibrahim Malloum, the head of the African Cotton Producers Association, said he did not want a repeat of Cancun but added: "We came here to get concrete results, not to hear more proposals that will never be respected."

Second, the "advanced" developing countries are getting just as good at being hypocrites on trade issues as the developed world. Consider these excerpts from Victor Mallet's FT story on Indian commerce minister Kamal Nath:
Kamal Nath, India’s commerce minister, said there would be no deal at the WTO talks in Hong Kong unless developed nations stop demanding concessions from poor countries in exchange for reducing agricultural and other protectionism that should not be there in the first place.

In an interview with the Financial Times, Mr Nath said: “What really upsets me is that developed countries are asking: ‘If we stop doing what we shouldn’t be doing, what are you willing to pay us for it?’”

“That approach is not one which is going to fly.”

He added: “We can’t have our economy shaken by subsidised exports of food, of grains, and at the same time we can’t have our economy shaken just as we are nurturing our manufacturing sector.”

This sounds great -- but let's reconsider what Arvind Panagariyapointed out in Foreign Affairs about levels of protection in the developing and developed world.
Take sugar, for example: Sugar is highly protected in virtually all major developed and developing countries. It is subject to the following MFN rates, for example: 72 percent in South Africa, 60 percent in India and Japan, 56 percent in high-income developing Asia, 43 percent in the United States, 23 percent in Central America and the EU (and 74 percent in other European countries), 18 percent in China, and 17 percent in Argentina and Brazil. Thus, reforming tariffs on sugar will require virtually all WTO members to liberalize. The EU and the United States are major offenders, but others -- including developing countries -- are not without blame....

[T]he EU also needs compensation for its [agricultural] concessions. Recall that at Cancún it dropped investment, competition policy, and government procurement from the Doha agenda. And because the EU does not have a comparative advantage in agriculture, it is naturally seeking cross-sector reciprocity in the form of liberalization in industrial products and services. The next step in breaking the U.S.-EU impasse is to put offers on industrial products and services on the table quickly. This would be a step forward: the elimination of tariff peaks in developed countries and liberalization by developing countries in trade in the industrial sector promise gains commensurate with agricultural liberalization.

But for tariff reductions to really be beneficial, action will be required of both developed and developing countries. The gains to developing countries from lowering border barriers will be minuscule if reform is limited to developed countries.

When Nath blames EU intransigence on agriculture for the talks not going anywhere, he's half right -- because at this point India deserves just as much of the blame.

posted by Dan on 12.15.05 at 06:05 AM


Ah yes, the old cotton subsidies argument again. Speaking of hypocrits, the West African nations are about the biggest. They know two things--1) the US gov't subsidies are NOT what make American cotton (specifically west Texas upland cotton) preferable and profitable, and 2) that if they cry loud enough, everyone will feel sorry for them and not bother to check out the facts, thus forcing UNFAIR trade practices to be enacted that favor the "little guys." Don't believe me? Look it up.

posted by: Useless Grant on 12.15.05 at 06:05 AM [permalink]

re: ag lobby-France-EU-WTO connections, sounds like John Keeler's old argument still holds water -- "Agricultural Power in the European Community: Explaining the Fate of CAP and GATT Negotiations," Comparative Politics 28 (1996), pp. 127-149.

posted by: jerry garcia's middle finger on 12.15.05 at 06:05 AM [permalink]

Well then, Mr. Grant (or may I call you Useless?), I guess if the cotton producers could get by just fine without the subsidies, they wouldn't mind if we removed them, right?

posted by: Adam on 12.15.05 at 06:05 AM [permalink]

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posted by: qwiy ngjrc on 12.15.05 at 06:05 AM [permalink]

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