By Devinder Sharma
26 August, 2004
a truly historic agreement, it is now an embarrassing wake-up
call for the developing countries. The big boys have done it again.
This time, they have successfully managed to apply the dope trick on
the developing countries putting them in a hall of shame for
letting the rich and industrialized countries not only walk away with
all the trade-distorting farm subsidies but also allowing them to throw
a still protective ring around agriculture.
It is now official.
The United States will not be reducing its huge financial support to
farmers (and agribusiness companies) even after the 20 per cent cut
in trade-distorting subsidies promised in the first year of implementation.
The European Union too has also got a waiver. It does not need to make
any cut in agricultural subsidies from the existing level. Nor will
the export subsidies be removed for another ten years or so. All that
the developing countries have got in return is a lollipop some
imports to be protected under the category of special products.
The July 31 WTO
framework agreement, agreed upon by 147- members after a five day grueling
exercise in Geneva has drawn a structure that needs to be implemented
for furthering the Doha Development Agenda. The WTO director general
had therefore hailed the framework agreement as historic
and the developing countries G-20 and G-33 (and the least developing
countries under the banner of G-90) had returned back claiming victory.
No sooner the details began to be analysed, it became clear that the
developing countries had not only been duped but robbed in the daylight.
The new global
trade agreement protects US farm subsidies when prices for wheat, corn
or soybeans drop, US Trade Representative Robert Zoellick was
quoted in a news report. A pledge by the US to reduce farm subsidies
by 20 percent won't undercut payments Congress promised in a $125 billion
bill in 2002, he added. He was replying to a letter that the Democratic
leader Tom Daschle of South Dakota had written to President George Bush.
This reduction will not weaken our ability to support our farmers,
as you erroneously claim,' Zoellick replied.
colleague, and the chief US agriculture negotiator, Allen Johnson, told
reporters: The United States succeeded in shifting farm subsidies
to a new WTO category (read blue box) to avoid actual reductions.
Accordingly, the American government has paid its farmers about $23
billion annually over the last three years. Under the current WTO rules,
the maximum annual subsidy is $49 billion, meaning the US could lower
that cap without actually having to cut the payments. The 20 per cent
reduction will not have any impact on US subsidies since it would be
from an authorized ceiling not the actual payments.
The chairman of
the US Senate Finance Committee, Mr Charles Grassley, has reassured
American farmers saying that the framework agreement entails only shifting
of subsidies of the amber box of trade-distorting supports
to the blue box of subsidies that are decoupled from production
and are considered less trade-distorting. No wonder, the WTO framework
has been welcomed by 53 American groups and companies, including Monsanto.
US President George Bush as a result does not face any political embarrassment
from the powerful farmers lobby in the run up for the presidential election
slated for November.
While the framework
provides a cushion to the US/EU to raise farm subsidies from the existing
level it has for the first time turned the tables shrewdly against the
developing countries. Except for supporting the resource-poor farmers,
developing countries too will have to reduce their subsidies. Interestingly,
developing countries are being asked to cut domestic support for agriculture
at a time when a majority of the 3 billion farmers in the majority world
earn less than half of what a European or American cow gets as subsidy
US $ 3 a day. It is also widely accepted that developing countries
do not have the means to provide direct farm support to farmers. It
is therefore not only amazing but shocking beyond belief to see the
way the developing country negotiators goofed up.
If you read the
draft carefully, it becomes obvious that the first installment of a
cut in subsidies by 20 per cent is not based on the present level of
subsidies but on a much higher level that has been now authorized based
on the three components -- the final bound total AMS, plus permitted
de minimis, plus the Blue Box. For the EU, this should come to Euro
101.6 billion and after applying the first cut, the subsidies that can
be retained will be Euro 81.3 billion. I had earlier worked out the
actual reduction that the EU will have to bring about, which in essence
means it gets a leverage to further increase the subsidies.[i]
The sigh of relief
being expressed over the elimination of export subsidies is also likely
to be brief. Export subsidies have always been considered to be trade-distorting
and except for the talk for reducing these, no definite time schedule
had ever been spelled out. The July 31 framework also reiterates the
same old position without making any definite commitment. French Agriculture
Minister, Herve Gaymard, has made this abundantly clear when he informed
the media that it would not be before 2015 or 2017 when export subsidies
are completely eliminated. By the time these subsidies are actually
removed, developing countries would have become an open dump for the
cheap and highly subsidies agricultural imports thereby destroying millions
of livelihoods and further marginalizing the farming communities.
The framework also
provides more protection measures for the rich and industrialized countries.
Special and differential treatment, special safeguard measures and on
top of it the provision for designating some of the key products under
the category of sensitive products makes the domestic market
security more solid. Jim Grueff, assistant deputy administrator for
trade policy in the US Department of Agriculture, has already assured
the American Sugar Alliance that the US is very likely to
designate sugar as a sensitive product. Despite an interim
WTO ruling against the European Union for subsidizing its sugar producers
at levels far in excess of what the EU had committed to provide as part
of the Uruguay Round, the EU too is likely to follow the same path.
This makes a mockery of the ruling handed in a petition filed by Australia,
Brazil and Thailand against EU sugar subsidies.
For the developing
countries, the blame would rest mainly with the big two Brazil
and India that were part of the NG-5 (comprising the US, EU,
Australia, Brazil and India). They behaved like the big boys, bullying
their way and showing utmost contempt to the positions taken by the
other developing countries, including the least developing nations.
They were part of the compromise that forced the rest of the developing
world to remain quiet at the faulty frame being imposed. While US, EU
and Australia have walked back with the cake, Brazil and India have
only lost their credibility and will no longer be trusted by the developing
world. They deserve the brickbats. And rightly so.
is a New Delhi-based food and trade policy analyst. Responses can be
emailed at email@example.com)
[i] Devinder Sharma: WTO: Faulty Frame, Rude Results Hindu
Business Line, Chennai/New Delhi and several other places in India.