With the start of another meeting of the World Trade Organization’s Doha round slightly more than a month away, drama is building. The trade round that began in 2001 with the goal of opening the world’s agriculture and manufacturing markets is in what many observers call its most critical stage. Negotiators from the European Union, the United States, Brazil, India and Australia met in Geneva this week in an attempt to build a framework for the ministerial summit in Hong Kong slated for December. The stumbling block so far, though, has been the controversial issue of agricultural protection. Farm subsidies and tariffs artificially increase the world price of farm goods and make it difficult for the poorer countries to compete in the global market. An offer from the U.S. delegation to increase its cuts of subsidies and tariffs has so far gone unanswered by an increasingly divided Europe.
- Sarah Royce
Though the WTO and its predecessor, the General Agreement on Tariffs and Trade, have helped to foster one of the most expansive periods of world trade, agricultural subsidies remain one of the last major holdouts to free trade. As long as governments feel that feeding their populations is a high priority, they fear exposing their farmers to competition with cheaper goods on the world market. Food is the ultimate strategic resource (yes, even more than oil), and the ability of a nation to feed itself has always been a cornerstone in geopolitics. Imagine the power that a country can wield by holding food as its bargaining chip. Look at what Saudi Arabia gets away with for being America’s gas station.
According to some studies, the European Union provides an average of $17,000 to its farmers, while the United States doles out $16,000 to its growers. In fact, European subsidies are so large that Europe’s Common Agricultural Policy rivals the GDP of Spain. Worldwide, subsidies are greater than four times as much as foreign aid to poor countries. Some individual farm animals in Western countries make more money from subsidies than do people in sub-Saharan Africa. Policymakers claim that the subsidies produce huge surpluses of grain that is sold cheaply to developing countries. But that’s like selling oil “cheaply” to the Middle East. Farming is the most basic of human industries, and the global South is interested in moving beyond farming, as developed countries did a few centuries ago during the industrial revolution. Third-World farmers want the opportunity to compete with First-World farmers in a fair arena.
During earlier ministerial meetings of the Doha round, the United States and the European Union agreed to lower their subsidies, but have so far been reluctant to agree on concrete numbers. Europe fears losing its status as an agricultural powerhouse, even though the proportion of farmers in Europe has greatly lessened during the past century due to increased productivity. In both the United States and Europe, large tracts of farmland have consolidated into the hands of a very few exceedingly wealthy farmers.
This dispute over agricultural policy also highlights the more fundamental problem of sovereignty of member nations that may continue to plague the European Union. Dismantling the CAP and trade barriers to agricultural goods will inevitably affect some EU nations more than others. This tension manifested itself this week in a clash between France and EU Trade Commissioner Peter Mandelson. France claims that Mandelson exceeded his mandate at the negotiating table by offering 70-percent subsidy cuts, up 5 percent from the figure the European Union agreed upon. In response to the U.S. offer, Mandelson made clear his broad interpretation of his mandate. While addressing ministers recently, he expressed his strategy “to be pro-jobs in Europe and to be pro-poor in the world.”
Indeed, these two goals may not be contradictory. In return for an opening of agricultural markets in developed countries, poor countries would open their markets in the service industry, allowing for greater imports from rich countries. Thus, there is a strong push from Europe’s service sector to gain access to these markets. Free trade negotiations are in many ways similar to arms control talks. Convincing everyone to give up their weapons is difficult, but the world becomes a much better place once everybody begins cooperating. It is past time for the developed world to dismantle their inefficient and harmful agricultural protections. However, the longer Mandelson is caught between the powerful farm lobby and his broader goals for trade policy, the harder it becomes to envision a successful end to Doha.
Slade can be reached at bslade@umich.edu.