Agriculture And The WTO At Cancun

 Jayati Ghosh

IF there is a single issue in the World Trade Organisation which currently agitates all developing countries, it is agriculture. Indeed, the “success” or “failure” of the Cancun meeting of the WTO depended on the extent to which it could deliver to developing countries at least the minimum of demands that they had made with regard to agriculture.

This is ironic, because when the Uruguay Round agreement was signed in 1994, developing countries (especially those that could export agricultural commodities) were seen to benefit primarily from the agreements on agriculture and on textiles and clothing. It was in return for these supposed gains that they were persuaded to give up on many areas of real concern, such as in the areas of intellectual property rights, services and trade-related investment measures.

At that time, the problem for developing countries was perceived in this way: world trade in agriculture was very badly distorted because the developed countries (especially the United States, the European Union and Japan) gave very high subsidies to their farmers and also protected their markets from imports from developing countries. This kept international prices of agricultural goods artificially low, and also prevented developing countries from being able to grow by exporting agricultural commodities.

The notion that exporting primary products can provide a way out of poverty and underdevelopment for most developing countries is one that has been repeatedly disproved by history and recent reality. Nevertheless, developing countries felt that, since they were competitive in such goods, more trade in this area with the developed world reducing its barriers and its subsidies, would be a way of increasing exports and allowing in more imports for investment and consumption.

In all the previous rounds of the GATT treaty, agriculture had been kept outside the negotiations.  When the US government took the initiative to persuade the Europeans to bring agriculture under the GATT and WTO, it was presented as a great concession and victory for developing countries.

AGREEMENT ON AGRICULTURE

According to the Agreement on Agriculture, developed countries were supposed to reduce their domestic support and subsidy measures as well as gradually eliminate export subsidies. In addition, they were supposed to provide much greater access to their own markets for exports of developing countries, by cutting tariffs. Developing countries also had to make similar concessions, but to a lesser extent.

At least, that was how most governments and people - in developing countries interpreted the agreement. At that time, the concerns were much more about food security and the impact of rising prices upon food importing countries and those people in other developing countries who were net buyers of food. Hardly anyone anticipated that precisely the opposite trends would be experienced: that in fact, prices of most agricultural commodities would fall in international markets.

And yet, that is actually what has happened. Between 1996 and early 2002, international prices of most primary commodities - and agricultural goods in particular - fell. They have since been increasing, but not by very much. One important reason for this is that developed countries have not reduced their aggregate support for their own farmers, which are supposed to be back to the levels of before the formation of the WTO. Also, developing countries have as much difficulty as before in exporting their agricultural products to the developed countries, because problems of high tariffs and other barriers to import persist.

Developing countries found to their dismay that the Agreement on Agriculture contained a number of loopholes which have actually allowed all this to be quite legal within the treaty. With regard to domestic support for agriculture, the damage was done in the 1994 agreement when the different kinds of farm subsidies were divided into three types. The first, called “Amber Box”, consists of subsidies which are seen as distorting trade, and which have to be reduced. But other kinds of subsidy were allowed: “Green Box” subsidies which are for production restructuring and direct payments not linked to production, and “Blue Box” subsidies, which are not linked to current production but to past production or area.

Developed countries simply shifted their subsidies to “Green” or “Blue” box categories, and did not cut them down in the aggregate. This has meant that farmers in the North are heavily subsidised, often to the tune of as much as $3,000 per hectare, and therefore their products can be sold at much lower prices in international markets. These products then compete with crops produced by small cultivators in developing countries, who get the benefit of hardly any subsidies.

UNFAIR COMPETITION

In fact, cultivators in most developing countries now faced quite the opposite problem. They have been facing higher costs because governments have been raising user charges on water and electricity and cutting subsidies on inputs like fertiliser. And, because the WTO forced developing countries to liberalise agricultural trade, move from quota import controls to tariffs and reduce tariffs on agricultural products, these cultivators have had to compete with the threat of highly subsidised imports even in their own domestic markets.

The extent of the consequent agricultural crisis across the world is truly mind-boggling. Across the developing world, including in India, farmers are in distress. The threat of import competition has sometimes even affected the viability of subsistence cultivation. Thus, in Central America small subsistence farmer who used to produce beans for own consumption, are finding that import beans from the US are selling for lower prices such that their own cultivation is no longer viable.

It is no wonder that developing countries have realised that in the present circumstances, there is a real possibility of cultivation becoming unviable. Since agriculture still accounts for a significant part of the labour force (more than 60 per cent in countries like India) this means there is a problem of livelihood security, in addition to the other problem of food security.

The attempts to resolve this extremely contentious issue through negotiations at the WTO in Geneva have failed. The European Union is determined to preserve “Blue Box” subsidies for its agriculture, which it says is not just about production but also about a culture, and a way of life and of preserving the environment. The US will carry on using and increasing “Green Box” subsidies, as the Farm Bill introduced last year by George Bush showed.

NO TO US-EU PROPOSAL

The US and the European Union put forward a joint proposal which more or less allowed the present level of Northern subsidies to continue, but asked for large cuts in tariff rates from developing countries. In response, a group of 14 developing countries, led by India, China and Brazil, put forward an alternative proposal. This asked for large cuts in subsidies and tariffs of developed countries, and lower tariff cuts for developing countries. It also had a category of “Special Products” which are important from the food or livelihood security point of view.

The WTO secretariat had prepared a “Draft Ministerial Declaration” for Cancun, in which the discussion on agriculture broadly followed the lines laid down by the US-EU draft. This reflected the power balance in the WTO, but was fundamentally against the interests of developing countries. The meeting at Cancun ended without adoption of a substantive declaration as developing countries refused to give in. This is being seen as a major victory for the developing countries. Even in future unity among the developing countries has to be maintained because at stake are the material conditions and even the very lives, of more than a billion small cultivators in the developing world.