How will the world create an agricultural trading system that is fair to China - and everyone else?
 Agriculture is where international trade disputes fester the most because the sector encompasses the poorest yet the most politically volatile constituencies - especially now that an ever more prosperous world is making greater and greater demands for food as prices rise.
Time was when farmers, except for the richest, were far down on the economic and social scale. Time was when food was a plentiful renewable resource the world over. But times have changed. Ratios between rural and urban dwellers have reversed themselves in the developed world since 1970 and pretty much everywhere else since.
But while times have changed in some respects, they have not in others. In the developed world, far greater political representation was given to the least populous agricultural regions, partly because they were the most populous at one time - most glaringly in the US Senate where Wyoming (pop 600,000) is entitled to the same two senators as California (pop 40,000,000).
Over the years, other difficult differences have emerged over time: China and India today have space programmes and throw military might around as any imperial power might do. Yet they still cling to a "third world" status, pleading poverty in world councils, for all the privileges and exemptions such status confers.
Partly to maintain an air of superiority over once weak and impoverished nations, and partly out of kind regard to their efforts in escaping "third world" status, the developed world has allowed an increasingly untenable situation pass unremarked - until now. One step taken in refusing to extend special privilege was taken by Europe in denying China "market economy" status earlier this year as state intrusion in the market appeared to be growing more pronounced. To which we add the long-brewing trade war with US that has since manifested itself in salvos of reciprocal tariffs.
To be fair World Trade Organisation (WTO) does allow domestic subsidies. But developed countries agreed to reduce theirs by 20 per cent over six years while allowing poorer developing countries to cut subsidies 13 per cent over 10 years - carrying half the load half the distance.
It's not just China that is accused taking advantage of a status it once genuinely had, but not longer does. Broken and bleeding after World War II, Europe was quite accepting of US troops and money for defence against Soviet aggression in the Cold War, when communism was winning the yards of the global football field, having taken Cuba, Tanzania, Angola, China, North Korea, Vietnam and Cambodia. But that has ceased to be case.
Non-Communist Russia, with an economy with less clout than Canada's, may be authoritarian and dictatorial, but is not ideologically aggressive and its territorial ambitions do not threaten western Europe and only seek to add lands over which it controlled not long ago. So while this little to do with agriculture, it is the same special pleading of having a richer party shoulder a burden that arguably the poorer party should carry now that the poorer party is as rich as the richer party.
So when WTO agriculture discussions move into "substantive phase" they work out terms for reciprocal tariff reductions. And the same old game is played. US proposals and joint submissions by China/India and Paraguay/Uruguay, as well as papers from the intercountry agricultural trade affiliations are thrashed out between supposedly rich and supposedly poor countries, largely ignoring the closing economic gap between them.
The US market access proposal calls for “serious negotiations” to unlock an ongoing stalemate in agriculture talks and examines “six areas of the tariff regime” with a view of accomplishing “reciprocal” tariff reductions.
Of course, US agriculture has been a main target of several countries’ retaliation against US Section 232 duties on steel and aluminum, as well as China’s retaliation against US Section 301 tariffs. The Americans argue for further tariff reduction and more open markets and highlight six areas: the gap between bound versus applied tariffs; complex tariffs (such as mixed tariffs); tariff peaks; tariff-rate quotas; agricultural safeguards; and regional/preferential free trade agreements.
The US said the exercise would help members understand various tariff regimes’ impact on global agricultural trade. It also invited other members to put forward their own such analyses and requested the WTO secretariat to compile the most recent available tariff and trade data, asking members to “ensure timely notifications”.
Typically, what happens is that China and other members said say more time is needed to examine the US paper as it “caught many by surprise”.
Different proposals by various WTO members are charged with technical details and analysis on market access and trade-distorting domestic support. Members “actively responded” to the call by committee chairman John Ronald Dipchandra Ford of Guyana to discuss domestic support, cotton, market access, export competition, export prohibitions and export restrictions.
China’s and India’s joint paper outlined four incremental steps for developed members to eliminate “unfair” agricultural subsidies - entitlements beyond de minimis limits known as the aggregate measurement of support (AMS). But the US, EU, Canada and Australia are not impressed, saying it didn’t include anything new compared to China’s and India’s position before the WTO’s Eleventh Ministerial Conference (MC11) in December.
The United States, EU, Canada and Australia said it is unrealistic to suggest “only a small set of countries” make contributions to reducing agricultural support.
Generally, countries are expected to abide by de minimis limits for agricultural price supports, which is capped at five per cent of agricultural production for developed countries.
The 32 WTO members that had larger subsidies than the de minimis levels at the beginning of the post-Uruguay Round (1994) reform period, including the US, Canada and EU, committed to reduce those amounts to de minimis levels. Twenty-eight developed countries currently enjoy the right to provide AMS support to their farmers.
As one can see from the above - a typical exchange of views on the uses and abuses of tariffs - efforts to reject them it well nigh impossible for reasonable men to come reasonable agreements - at least from a layman's perspective - given the intractable political pressures they face in their homelands.
Which makes it all the harder to design an overall fair trading system that will increase market access and improve the livelihoods of farmers worldwide. The WTO Agreement on Agriculture, which came into force in 1995, represents a significant step towards reforming agricultural trade and making it fairer and more competitive, but it is hard to see how it works much less how it can work out to a minimum level of general satisfaction. |
