Dear Editor,
Two of the world’s economic powerhouses will shortly ask the World Trade Organisation (WTO) to determine the legality of US agricultural subsidies in a move that can have a lasting impact on the world’s agricultural sector.
Brazil and Canada will request the WTO panel on November 19, 2007 “to decide if Washington is violating international trade laws with the billions of dollars it gives to American farmers”, according to an Associated Press (AP) internet report last Friday.
The US has, for a long time, been propping-up major crops such as rice, cotton, corn, soya-bean and wheat to the tune of more than US$20 billion annually in subsidies.
Resultant from this massive subsidy is the crowding out of domestic producers from their own traditional markets. In the case of rice, Guyana and Suriname have both been significantly affected by the import of subsidised US rice in the Caribbean. The implementation (or non-implementation?) of the Common External Tariff (CET) on extra-regional rice imports by member states of Caricom, has not had the desired effects in protecting the regional rice industry. Often times it is not charged on US rice imports despite its significant negative impact on the rice sectors of member states.
Complaints, mainly by Guyana, to the Council for Trade and Economic Development (COTED) on the lack of co-operation of Caricom member states in charging the CET on US (and other extra-regional) rice imports have been incessant yet Caricom-approved sanctions have not been forthcoming and the business of importing US subsidized rice to the detriment of the Caribbean rice industry continues.
A WTO ruling in favour of Brazil and Canada will also be a ruling in favour of the poorer and vulnerable nations of the world whose economies have been crippled as Washington continues its massive programme of agricultural subsidization.
According to the AP, the Brazil/ Canada case “complements efforts over the last six years to persuade Washington to reduce subsidies as part of a new global commerce pact.”
Unfortunately, this has not worked and Washington is being charged by Brazil and Canada that it “has exceeded the $19.1 billion that it is permitted under WTO rules to spend on the most trade-distorting forms of subsidies – those linked to distribution, export credits, marketing assistance loans and price guarantees.”
Unlike the Guyana and Suriname rice farmers, their US counterparts are guaranteed prices for crops not yet planted.
Quite recently, the US subsidy on rice was pegged at almost US$300 per metric tonne. Present US rice prices are well above US$400 per metric tonne, FOB US load ports.
Canada’s Agriculture Minister Gerry Ritz is reported by AP as saying that “we are trying to level the playing field for Canadian farmers who have to compete against the large distorting agricultural subsidies provided by the US.”
Such agricultural subsidies are instrumental in driving down prices thereby making it impossible for small farms to compete in international markets and even worse, poorer countries cannot develop their economies by selling agricultural produce abroad.
The push by Brazil and Canada to the WTO panel can be attributed to Washington’s failure to honour its pledge made two months ago to the WTO in Geneva, Switzerland to limit the subsidy payment to between $13 billion and $16.4 billion annually as part of a larger, overall agreement.
“While the pledge was seen as constructive, countries such as Brazil demanded more,” the AP reports.
“The debate over farm subsidies has been perhaps the biggest sticking point in the WTO’s Doha round of trade talks, which has repeatedly stalled since its inception in Qatar’s capital in 2001”, according to the report.
At the level of the US Congress, it is unlikely that any further concessions aimed at the reduction of agricultural subsidies will succeed especially at a time when the very Congress is “still negotiating a five-year US$286 billion farm bill that would leave subsidy programmes for major crops largely unchanged.” Added to this is the fact that US elections are due in 2008 and the Bush administration is unlikely to undertake any initiative which can be seen as detrimental especially in the highly agricultural swing states of Louisiana, Arkansas, Texas and Florida.
Further, the Bush Admin-istration wants the subsidy programme to be flexible “in case world agricultural prices fall and American farmers need greater assistance. It blames the impasse in the Doha talks on Brazil and other emerging countries for refusing to open up their manufacturing markets”, according to the AP.
As reported by the AP, Jagdish Bhagwati, an economist at the Council of Foreign Relations in New York, believes the US could be forced to make rash changes by WTO legal panels if it fails to negotiate an agreement through the Doha round.
Guyana has extremely friendly, diplomatic, economic and social ties with both Brazil, our neighbour, and Canada. Perhaps it may be prudent for our country to join, as well as others in the region, to support this push to the WTO panel by these two powerful nations.
After all, a favourable WTO ruling may redefine the agricultural path ahead.
Yours faithfully,
Mahadeo Panchu
Managing Director
Demerara Imports &
Exports Inc.
