Africa Showed The Way In Cancun

Amit Sen Gupta

 THE walkout of the African delegates in Cancun signalled the final collapse of the WTO ministerial meeting. While reports about the Cancun collapse have tended to focus on the role played by the Group of 21 countries (which included India) in resisting pressures from developed countries, the unity of the African countries played a role that was as important, if not more, in derailing the Cancun meeting.

Few people realise that the African unity in WTO predates the unity shown in Cancun by the G-21 countries. In fact, among the developing countries, the African countries were much more united even in Seattle in 1999 and also in Doha in 2001. In Seattle, when countries like India dithered and tried to make “common cause” with the US, it was the Africans who held out most strongly against US pressures to compromise. This is indeed a remarkable development given the vulnerable position that many African nations find themselves in, vis a vis bilateral pressures from the US and the EU. But over the years many of them have realised that promises of various kinds made in lieu of compliance with demands made of them by the US in multilateral fora, are never redeemed. This experience and the gross injustice that African countries have had to face in the WTO, have served to forge the unity of the African countries. Nowhere is this more obvious than in the agriculture sector.

‘YOU LIBERALISE, WE SUBSIDISE’

The agriculture sector is a stark example of how the WTO rigged its rules to favour the rich and the powerful. Traditionally, the way the agriculture sector was protected differed among developed and developing countries. The former protected their agriculture by providing subsidies — both in cash and through other incentives — to their farmers. Further subsidies were made available if the produce was exported. Developing countries, not being able to provide such subsidies as they were cash strapped, protected their agricultural market by imposing high duties on imports (tariff barriers) and through quantitative restrictions — that is by specifying a ceiling on the amount of each product that could be allowed to be imported. The WTO agreement was so designed that it targeted the protections of developing countries (by removing quantitative restrictions and reducing import duties) while allowing the developed countries to maintain their subsidies. Even the modest reductions that the developed countries were to make in their subsidies were not adhered to in the last eight years. Instead, the subsidy given by the rich countries to their farmers and agribusiness has grown from about 180 billion dollars then to more than 300 billion dollars now — the equivalent of Africa’s gross domestic product!

Today, Europe is responsible for half the world’s farm subsidies, and the US accounts for a further third of all agricultural subsidies. Such subsidies not only keep a local political constituency happy but also help agribusiness: they are able to buy cheap and capture the global markets, as others cannot compete at these prices. Their ability to capture the global market has nothing to do with efficiency of production or costs: it is simply a reflection of the level of subsidy. Not only are the US and EU not willing to lower subsidies except cosmetically, they also have argued that a large part of their subsidies are non-trade distorting. The Agreement on Agriculture (AoA) divides domestic subsidies into “amber,” “blue” and “green” boxes, in which blue and green box subsidies are held to be non-trade distorting. The “Amber Box” consists of subsidies that are seen as trade distorting, and have to be reduced. The “Green Box” subsidies are for production restructuring and direct payments not linked to production, and “Blue Box” subsidies are not linked to current production but to past production or areas. The unscrupulous and manipulative nature of the GATT negotiations is clear from the fact that the so called trade distorting subsidies were the kind that the developing countries were providing (and hence were phased out) while those that the developed countries provided were supposed to be non-trade distorting (and hence could be retained)! The developing countries were conned into this division of subsidies into so-called trade distorting and non-trade distorting subsidies in the Uruguay round and are only now arguing for bringing all subsidies in agriculture on the negotiating table. Unfortunately, having given up quantitative restrictions then, they have weakened their own bargaining position considerably. Without getting back QRs, they are unlikely to win major concessions or be able to protect their agriculture.

In the run-up to Cancun, the US and EU held their own negotiations in mid-August to try and unify their positions. The entire thrust of their joint proposal was to allow for shifting of their respective subsidies from one box to another. On the other hand, they proposed steep cuts in the tariff protection of the developing countries while making very few concessions on their side. Their thrust was to provide high tariffs to prevail for a few items that will be designate as trade sensitive, allow for steep cuts in tariffs for most other items (non-linear tariff cuts, i.e., the higher the tariff, the steeper the cut) and have zero to five per cent tariffs on certain items. As northern (developed country) agriculture has a less number of varieties, protection of a small number of items would still maintain their high tariffs for their products. Southern (developing country) agriculture spans across a very large number of varieties; they would have to undertake sharp reductions. The motto clearly was: “You liberalise, We subsidise”!

African agricultural markets are already much more liberalised than those of developed countries, and generally more than even in other developing countries. This is because, for more than two decades (i.e. from long before the signing of the WTO agreement), African governments have been forced through structural adjustment policies and bilateral aid and trade conditions to eliminate producer subsidies and reduce tariffs at deeper and faster rates than required by the WTO rules. By 2005, African agricultural tariffs will average 20 per cent, compared to 36 per cent in Northern markets.

CRISIS IN COTTON  PRODUCTION

The case of cotton, sugar and cattle bring out most sharply the effect of the WTO on African agriculture. Under IMF and World Bank pressures, West African farmers had to shift from food cultivation to a commercial crop, cotton, so that this could be exported to pay for their loans.

More than 10 million people in West and Central African countries earn their livelihood from cotton production, which is the main source of foreign exchange and government revenue for several poor countries in West Africa.  The US is the world’s largest exporter of cotton; it is also the world’s largest subsidiser of cotton, spending nearly 4 billion dollars a year on subsidies for 25,000 producers. This is roughly three times the entire USAID budget for Africa’s 500 million people.

American subsidies have driven down world cotton prices to levels not seen since the Great Depression, generating losses to African producers of 301 million dollars in 2001-2002. For the worst hit countries, these losses outweigh the benefits conferred by US assistance or debt relief. West African cotton producers are more efficient, low cost producers than their American counterparts, yet they simply cannot compete with the latter’s access to huge subsidies. There is widespread fear in the region that if cotton prices continue to fall --- as they are expected to --- health and education will become unaffordable, children will drop out of school, and households will be unable to respond to the threat of diseases.

Similarly in sugar, the amount of subsidy that EU gives its farmers to grow beet is higher than the price of the entire surplus sugar of the developing countries. The rich countries pay 2 dollars per head of cattle to its cattle growers, more than the per capita income of the farmers in most of the developing countries keeping life stock.

‘ENOUGH IS ENOUGH’ SAYS AFRICA

Since the launch of the agriculture talks in early 2000 to review the agreement on agriculture under the WTO, the Africa Group of WTO negotiators has submitted two sets of proposals. They are among the most comprehensive and detailed of any country or trading bloc. Many African countries have also submitted individual proposals, or joined with other countries and blocs on specific issues. Many of the African proposals address concerns in three of the areas mandated for reform at Doha: securing “substantial improvements” in market access, reduction (“with a view to phasing out”) all export subsidies provided by developed countries and “substantial reduction” of domestic subsidies by developed countries deemed “trade distorting.”

Given this background, it is not surprising that the African countries, faced as they are with the brunt of the WTO’s iniquitous trade regime in agriculture, finally chose to say, “enough is enough.” The proverbial last straw on the camel’s back was the reported advice by the developed countries, Marie Antoinette like, that if Africans are facing problems in selling cotton they should shift to other crops! It is important that India is sensitive to the real concerns of the African bloc in the WTO. Since the collapse of the non-alignment movement, India has often tended to take them for granted and have at times sided with the US in order to curry favour with the US for its very narrow short-term interests.  In Cancun the African countries showed that they cannot be take for granted any more.