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WTO: Row over
By Shyamal Krishna Shrestha
Multilateral trade talks, which resumed in September after the failure to meet 'July approximations', had to narrow down differences among WTO members to complete the Doha Round launched in 2001. The Sixth WTO Ministerial Conference convenes in Hong Kong on December 13-18, and hectic activity reflects urgency to reach agreement on various issues, including agriculture. Agricultural liberalisation hinges on reforms on market access, domestic support and export competition. The July Package 2004 laid the framework for renewed negotiations after the Fifth WTO ministerial meet at Cancún, Mexico, in 2003 collapsed because of differences over agricultural liberalisation.
Developed countries have made offers on market access and subsidy caps in recent weeks but the proposals on subsidy and tariff cuts by the EU and the US do not go far enough to address the developing world's concerns. Signs of stress in the EU highlight that the providers of largest amounts of farm subsidies are unprepared to reform their agricultural policies. These developments have revived fears that agriculture would again determine the overall outcome at Hong Kong. The EU and the US made public their proposals on the elimination of all trade-distorting agricultural support and tariffs over a 15-year period. US trade representative Rob Portman proposed that during the first five years, it would cut its Amber Box (representing their most trade-distorting domestic subsidies) support by 60 per cent. The offer was not unconditional as the EU and Japan were required to reduce their Amber Box domestic subsidies by 83 per cent and other developed countries promise a 37 per cent reduction.
The EU reiterated that the group's flexibility in agriculture would depend on how far other WTO members would go in non-agricultural market access and services. On October 28, EU proposed to reduce average agricultural tariffs by 47 per cent and reduce the highest tariff rates by 60 per cent and eliminate subsidies for farm exports if trading partners made similar moves but did not give a timeframe for the cuts.
Although these proposals represent a step forward to addressing distortions in agricultural trade, developing countries have rejected them on two grounds. Firstly, these concessions are contingent on similar reforms on market access in NAMA by developing countries, thereby restricting policy for sustainable industrialisation. Secondly, both the EU and US proposals are based on cuts from bound support levels, a fact confirmed by a World Bank study that even a 75 per cent slash in domestic subsidy could lead to a 28 per cent actual reduction for the US and 18 per cent for the EU.
High tariffs in industrialised nations hinder market access for developing countries' farmers whereas billions of dollars and euros worth of subsidies given to developed countries' farmers — where agriculture constitutes only 3 per cent of GDP as compared to 40 per cent of GDP in developing countries — depress world agricultural prices, affecting production, productivity and employment in the developing world. Meanwhile, the unity shown by developing countries over agricultural liberalisation must be stepped up. That has to begin with reforms in the farm sector, representing the livelihoods of millions in the developing countries.