The Christian Science Monitor
07-27-06
How farms stymied Doha
Powerful local agriculture may have buried the WTO's latest trade talks. Will the
Doha Round's lofty goals persist?
By Mark Trumbull
Staff writer of The Christian Science Monitor
In the end, negotiators learned, all trade politics is local - and agricultural.
The collapse of global trade talks this week shows that, despite decades of
pulling down trade barriers for other goods and services, rolling back farm
subsidies remains as difficult as ever.
No one ever imagined that reconciling local syndicates with national interests
was going to be easy. But this round of trade negotiations, launched in 2001 in
Doha, Qatar, was supposed to be the one that finally tackled agriculture - and the
one that focused more than ever before on making trade a force for progress in
developing nations from Africa to Latin America.
The goals of the so-called Doha Round, while noble in the view of many analysts,
were flummoxed by farming politics that went beyond traditional arguments about
national culture and "food security."
"It was arguably ... the big agricultural traders" who sank hopes for a Doha deal,
says Chad Hart, an agricultural economist at Iowa State University in Ames,
Iowa. In a few key nations, he says, farm interests "see that they could be on the
short end of the agreement."
The United States, Japan, and members of the European Union - all of them rich
nations that are food importers or exporters - were willing to cut some of their
farm-support spending as a concession to developing nations. But the deal
collapsed, analysts say, in part because the rich nations didn't win enough
concessions in return to counterbalance the weight of opposition from their own
local farm lobbies.
The breakdown doesn't mean a new global trade accord won't happen. But it
could take months or years to jump-start the dead talks.
"We have seen stoppages like this in the past," Dr. Hart says. "Eventually there
was a breakthrough, and an agreement was reached."
Those past agreements have cut trade barriers worldwide. The result,
economists say, has been new commercial activity that has added several trillion
dollars to the world economy in the past few decades.
But throughout it all, agriculture has remained highly protected, with tariffs, import
duties, and subsidies restraining the free flow of cotton, sugar, and other crops.
With so many areas of trade already liberalized, the Doha Round could hardly
avoid putting farm goods at the forefront when talks began in 2001.
But despite years of serious work, the effort fell apart like a comedy of errors.
The US and European Union are now trading jabs at each other for not offering
deep enough cuts in farm protections. India refused to stop shielding its farmers
from global competition. And the agriculture minister for Japan, which has long
protected its rice farming industry - complained that "I was not given the
opportunity to show all of my cards" in negotiations.
How did it get to this?
The short answer is that agricultural lobbies enjoy a political clout that far
outweighs their economic weight, economists say. Their influence is often felt in
every region of nations such as France and the US, with corresponding influence
in legislatures. So once farmers have won government entitlement benefits,
they're often very hard to remove.
"You take that cotton land down in Mississippi.... That land would probably drop
in value by half" without subsidies, says Gary Hufbauer, a trade specialist at the
Institute for International Economics in Washington.
Thus, it takes a formidable argument on the part of free-traders to overcome the
opponents to big cutbacks in farm supports.
Similarly, developing nations such as India and China often have their own
political resistance to free trade in farm goods. The concern, Dr. Hufbauer says,
is that "if the liberalization is too fast, too many rural people will leave the farm life
too quickly ... and disrupt the political system."
For the Doha Round, these obstacles proved too great, dashing for now the
hopes of nations from Brazil to West Africa that foresee significant gains from
freer farm trade.
More broadly, though, most economists say that all nations stand to benefit from
more open trade.
A World Bank study eight months ago estimated that the abolition of tariffs,
subsidies, and domestic support programs would add $300 billion a year to the
global economy by 2015. Nearly two-thirds of the gains would come from farm
reforms, since that's the sector most distorted by current government policies.
But the more limited the scope of reform, the smaller the gains. It matters a lot,
for example, whether a deal removes tariffs on imports as well as subsidies for
exports. "Deep reductions in agricultural tariffs would deliver 12 times the gains
that would be achieved by abolishing export subsidies and trade- distorting
domestic support to agriculture," Will Martin, a World Bank economist, said when
the study was released.
In the Doha Round, the niggling over details blocked substantial changes.
Antoine Bouet, an economist at the International Food Policy Research Institute
in Washington, says that if the talks restart, one answer could be a three-way
compromise. The goal would be for the US to cut more domestic supports, the
EU to cut more import duties, and the G20 nations (which include China and
India) to cut more industrial tariffs.
All would benefit together, he says, but the costs for some sectors would be
significant. American sugar producers and fruit growers, for example, would no
longer be as competitive against imported goods. For those within any nation
who lose from free-trade deals, the change can be hard.
And while trade promises significant gains, it is not a simple recipe for
development in Africa or elsewhere, Bouet says.
Trade can help transform economies, by fostering new industry and the transfer
of technology. But he says the most important development policies for any
nation are domestic, starting with basic elements such as the rule of law and
secure property rights. "The decisive reform," Dr. Bouet says, is "political stability
and creation of good institutions."