The Christian Science Monitor
08-04-06
Getting stuck in the mud down on the farm
The Christian Science Monitor
The collapse of global trade talks last week shows that, despite decades of
pulling down trade barriers for other goods and services, rolling back farm
subsidies remains as difficult as ever.
This round of trade negotiations, launched in 2001 in Doha, was supposed to be
the one that finally tackled agriculture, and 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 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.
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.
For decades agriculture has remained highly protected, with tariffs, import duties,
and subsidies restraining the free flow of cotton, sugar, and other crops.
Despite years of serious work, the latest effort fell apart like a comedy of errors.
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.
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.
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 programmes 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.
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.
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.
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."