WTO Tricks
By
Devinder
Sharma
ZNet
Aug. 25, 2004
Back to Alternative Reader Index
After 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.
Zoellick’s 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
U.S. 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. U.S. 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 U.S./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.
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.
(Devinder
Sharma is a New Delhi-based food and trade policy analyst. Responses can
be emailed at
dsharma@ndf.vsnl.net.in)
Bulatlat
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