Agreements change trade-offs that impact competitiveness With colorfully costumed protesters stealing media headlines at the last World Trade Organization talks in Seattle, the agricultural trade issues being addressed by governing bodies around the world have had a tendency to get lost in the shuffle.
These trade agreements, however, significantly impact agriculture, and we are in the middle of a World Trade Organization negotiation round. "Trade agreements change trade-offs that impact the competitiveness of farm groups," says Larry Martin, chief executive officer of the George Morris Center, an independent agricultural think tank in Guelph, Ontario, Canada.
In the last World Trade Organization round in Seattle, agriculture finally came under the same rules as all other sectors of trade, according to Martin, who recently addressed a large contingency of bankers at the North American Agricultural Finance Conference in Winnipeg, Manitoba, Canada.
"The international rules established by the WTO for agriculture eventually mean that no country can manipulate the international intent under their own biased laws. They give everyone some equity in dealing with things like trade dispute matters.
A multi-lateral treaty that addresses and makes rules for market access, tariffs, import quotas, domestic and export subsidies, sanitary and phytosanitary regulations, rules and processes for resolving disputes, the WTO plans to re-examine the agriculture agreement in 2003.
At the last round of talks in Seattle, the WTO eliminated agricultural commodity import quotas and converted quota protection into equivalent tariff protection. It mandated a 36 percent reduction in export subsidies over the next six years and required the use of science in the development of sanitary and phytosanitary regulations to harmonize standards and prevent them from being used as non-tariff trade barriers. World Trade Organization decisions in all trade disputes were also made binding, with the parties to any dispute required to accept the outcome.
In addition, the WTO defined at the Seattle talks what is an acceptable type of subsidy for things like agricultural research and how much a country can have of other types of programs such as direct payments to farmers. Some exceptions to this rule were made for the United States and the European Union, Martin says.
A six-year phase-in was established for developed countries and less-developed countries were given eight years to adopt all of the agreed-upon changes.
In the next round of World Trade Organization talks set to take place in 2003, Martin says, other non-agricultural trade aspects could be re-examined, but he's projecting that won't happen for a number of reasons.
First, he says, there's not great support for moving ahead on non-agricultural components of the WTO trade agreement, except by non-government organizations that are demanding labor and environmental issues be added into the mix. "In my mind, there's something wrong with these demands by never-been-elected, non-governmental organizations to increase democracy in the WTO," Martin says.
Other complicating factors, according to Martin, are the entrance of China into the WTO and the lack of pressure for liberalized trade rules by the business sector, especially in the United States. "I think there is a fair amount of resistance to opening markets up more than they are now."
Even without non-agricultural issues on the menu, there will be plenty of conflict to resolve in the upcoming WTO talks, Martin says. The issues up for debate include tariffs, export subsidies, state trading authorities, domestic subsidies and food safety concerns.
"Everyone wants to reduce or eliminate tariffs, but there is great variation on how to do that. Some parties want to reduce tariffs with the use of special tariffs, others want to reduce them rapidly, and still others want to reduce them by expanding other programs," he says.
When it comes to export subsidies, Martin says most of the countries involved in the WTO talks want to reduce export subsidies, either by reducing them substantially or by phasing them out over time. "The European Union is much more interested in reducing other forms of support that are more trade distorting than export subsides," he says. "On the other hand, Japan doesn't want to give up anything in agriculture unless it gets something somewhere else changed in the WTO agreement.
"We need to remove subsidies so our competitors have to earn their way into customer markets and aren't able to buy their way in. Free access and a lack of subsidies should give the low-cost and environmentally-best production pattern. It will also give us the opportunity to export to other countries. If we have a competitive cost advantage, then production will occur here in North America instead of in the protected country that had the tariff or quota," Martin says.
While the United States and the European Union want major changes made to state trading authorities, like the Canadian Wheat Board, Canada doesn't.
Disagreements are also anticipated over domestic subsidies, sanitary and phytosanitary regulations, and state trading authorities, especially between the United States, Canada and the European Union.
The improvement of food security for less-developed countries is another hotly contested issue. "Developed countries want more food aid, and less-developed countries say the best way to help them is to remove export subsidies, drop protection measures and stop food aid," Martin says.
In the end, Martin says, it isn't clear what will take place in the next round of World Trade Organization talks. What is clear, he says, is that agricultural interests in North America need to pay close attention to the next round of negotiations. "What can be lost in this whole thing is that you can't deal with market access by itself. It has to be dealt with in the big picture of international trade."