LONDON, 7 September 2003 — Two out of every three bushels of corn grown in the world are grown in the US, the president of the American National Corn Growers’ Association confirmed to a Senate committee in June. This is thanks to subsidies worth hundreds of millions of dollars.
Now for the other side of the coin. As British Trade Secretary Patricia Hewitt pointed out last Thursday, coffee producing countries can’t process the beans they grow and so fail to make profits on a commodity that has halved in value in the last three years. Why? Tariffs make it lucrative for Europe and America to process coffee instead.
US and EU taxpayers fork out $400 billion in subsidies to their farmers: Eight times the total of global aid to developing countries. These are the make or break issues at vital trade talks in Cancun, Mexico this week.
Today the global trading system guarantees destitution for the developing world as cheap Western foodstuffs are dumped in poor countries. To compound the problem, trade barriers thwart exports from low income countries into Europe and America. In effect, rich countries say to the rest of the world: You liberalize, we subsidize. So much for free trade. If no precise farm subsidy reductions are agreed at Cancun the talks will fail. So too will poverty reduction and global economic stability.
“If we fail it will be a disaster for the world economy,” said Hewitt. “We will have failed to give a boost to confidence, failed to offer a real prospect of moving people out of poverty and failed to provide an economy to underpin the coalition against terrorism we’ve been trying to construct since Sept. 11.”
Two years ago at Doha, what was dubbed a development trade round in the wake of the Sept. 11 terrorist attacks has been anything but. Europe and America agreed to cut subsidies to farmers. In fact they have increased. George W. Bush last year rubber-stamped his Farm Bill, ratcheting up subsidies by $180 billion. Last June the EU said that its Common Agricultural Policy would remain in place until 2006 and reductions to it would be minimal. The beneficiaries are not smallholder farmers but huge multinational agribusinesses.
The British government says its priority this week is to frame a better deal for the developing world, but agreement depends on America. With an election just 14 months away and his popular support falling, Bush cannot alienate US cotton and wheat producers. So a U-turn on the Farm Bill is inconceivable. What’s more, key US business interests are desperate to open up new markets in the southern hemisphere.
But there is a growing militancy and confidence among developing countries. Their combined debt to banks — running into hundreds of billions of dollars — is beginning to be seen as a potential weapon.
A strengthening alliance between India, Brazil and China has the potential to act as a magnet for poorer countries to get a better deal or to walk away. This could blow a hole through the World Trade Organization, which needs to get final agreement on a new trade round by the end of next year.
A high level source involved in negotiations said: “I think the fundamental question will be how far the developing countries and the Cairns group (Australia, New Zealand, Canada and 14 others) are willing to push EU, US to the point of saying it’s not worth a deal if nothing more substantive is offered in return.
New rules allowing companies to sue governments over laws or regulations that harm their business are among controversial proposals to be discussed by the WTO this week.
Opponents fear the threat of legal action will deter governments, particularly in developing countries, from tightening up environmental protection.
“It’s not true that governments couldn’t legislate for the environment, but they would be increasingly limited to rules that were trade compatible,” said Liana Stupples, policy director for Friends of the Earth.
Four issues put on the agenda by the EU this week on investment, competition, government procurement and trade facilitation have angered developing countries who believe they water down the idea that Cancun will launch a “development round”.
Known as the Singapore issues, they have been driven forward by Pascal Lamy, the EU’s trade commissioner, principally at the behest of the UK government, although Patricia Hewitt has been recently distanced herself from the proposals.
Another controversy is the barring from WTO meetings of representatives from UN “conventions” or international action plans such as one on biodiversity. The EU and US have accepted the representatives could get observer status, but campaigners want fuller participation. Their concern is that these conventions can be overridden by the WTO. For example, said Tom Crompton, trade policy adviser for World Wildlife Fund, it could prevent the EU taxing products from American companies, which do not have to pay carbon tax because the US refused to sign the Kyoto agreement on tackling climate change. “It would lead to a direct conflict between what some countries believe are their obligations under Kyoto and the laws about free trade.”
The World Trade Organization is said to be the most democratic of the global finance institutions. Formed in 1995, all 146 members must agree deals, otherwise progress in ensuring a free flow of trade stops.
The reality, however, is that agreements are stitched up in private. Behind closed doors, the moves used at the last WTO meeting in Doha included calls by United States and European Union negotiators for the dismissal of so-called unfriendly ambassadors to the WTO from poor countries, threats of trade embargoes, and cuts in aid if developing countries failing to toe the line.
