Most observers would argue that, technical and natural considerations apart, the most positive development favouring the stabilisation of global food prices in the long run would be the successful conclusion of the long drawn-out process of global trade reform. Its most recent post-WTO phase this started with the Doha Declaration of 2001, and was originally scheduled for completion by 2005. In that declaration member states committed themselves to embedding development needs and priorities into the rules, regulations, and other modalities of the WTO. Importantly also, they gave recognition to the fact that the global trading arena still covers a very uneven playing field and therefore elements of special and differential treatment should be afforded to developing and least developed countries (LDCs) in the WTO.
Over the years, many disputes have emerged. These have largely centred on which countries should qualify for special and differential treatment as well as the level and manner of enactment of this treatment. In the course of events agriculture has turned out to be perhaps the most contentious of the areas facing negotiators. Indeed, many participants in the negotiations have declared that the “pace and level of ambition” of the negotiations will be driven by agreements on agriculture.
Collapse
As noted last week a special Mini-Ministerial Conference of WTO members was convened on June 20, with the objective of clearing outstanding hurdles towards concluding the Doha Round of negotiations by December this year. This has since collapsed. There is now little expectation that these negotiations will be concluded by the end of this year. The question that now faces us is: does this collapse spell disaster for poor countries or a reprieve?
I had singled out three of the many impediments to the success of the negotiations are issues in the area of agriculture in last week’s column. The first is the extensive use of subsidies and other forms of domestic support for agriculture by the rich and powerful member states at the WTO, especially the USA, the European Union and Japan. The LDCs, other developing countries, and the emerging economies of Brazil, India and China see these subsidies as giving to the rich and powerful countries an artificial competitiveness in global agricultural trade.
Because of this stark reality and from all reports at the conference also there is little doubt that such issues contributed heavily to the breakdown of talks. It should be noted, however, so powerful is the comparative and competitive advantage of the developing countries as a group that, despite the extensive use of official trade distorting support measures by the rich countries, the axis of global food production is tilting in favour of the poor developing countries as each year passes. Without extensive subsidisation I would predict that much of the agricultural production in the rich industrial states would go under.
Safeguard measures
Next to extensive subsidies and domestic subsidisation of food production in the rich countries, the poor countries are concerned that if they did liberalize their markets for food, by for example reducing import tariffs, the rich countries could flood these markets with subsidized food, causing serious injury to their economies, their agricultural sectors, and the farmers who make their livelihoods from domestic food production. They therefore have demanded that for these negotiations to be successful, they must enjoy a largely unfettered and automatic discretion over protecting their domestic markets from any serious injury or disturbances caused by import surges. This would require, among other things, the possible reinstatement of tariffs.
As readers may well imagine this demand has proven to be fertile ground for disputation. It contains many controversial elements. Consider for example: 1) Who determines when the serious injury occurs? 2) Does serious injury have to occur before action is taken or would the threat of its occurrence be enough? 3) What are the trigger mechanisms for taking protective measures? 4) What should be the duration of the protective measures employed? 5) How often can this process be repeated ― and so on?
Other trade defence instruments
Linked to this area of disputation are several other trade defence instruments, which poor countries want to have when dealing in a trading environment so heavily distorted with subsidies paid by rich governments to their farmers. One of these instruments is how to treat with predatory dumping coming from the rich countries with their subsidized agriculture. Another, is how to deal with what is termed as ‘special products’ and items placed on exclusion lists (as not being subject to the trading rules of the WTO). In all these cases similar complex issues arise. For example: What proportion of a country’s tariff lines should be allowed to fall in these categories? What tariffs, if any, are to be applied to these items? How are these products to be designated ― and so on? Naturally, the developing countries would prefer self-designation for these items and maximum discretion.
Linkage
The two impediments considered so far, subsidies and safeguard measures are closely linked. Subsidies and other forms of domestic support make liberalized trade in agricultural products with the rich countries, a very risky proposition for poor developing economies. The need therefore for safeguard mechanisms rises proportionately with the risks poor countries encounter after trade liberalization.
At the WTO, the G33 Group of developing economies and the Small Vulnerable Economies (SVEs) grouping have declared they have “defensive interests” in the agricultural negotiations. They strongly champion safeguard measures. As declared their priorities are food security, the stabilisation of the livelihoods of their farming populations, and rural development to be fully reflected agricultural trade reforms.
Next week, I shall conclude this discussion of global trade (agriculture) reform and begin to wrap up this rather extended discussion of issues related to rising food prices, which I commenced eleven weeks ago on May 25.
