In a desperate bid to ensure that the ongoing negotiations on the critical issue of opening up trade in agriculture do not lead to a collapse of the forthcoming WTO Ministerial at Hong Kong in December, the United States and European Union have come up with proposals promising 'drastic' cuts in farm subsidies. On the face of it, the proposals look very promising. After all, the US has offered to cut its ceiling on trade-distorting subsidies by 60 per cent prompting the EU to reciprocate the gesture with an assurance of 70 per cent reduction in the same category.
But this needs to be clarified; the US and EU proposals do not mean reductions in farm subsidies by 60 to 70 per cent, but only a reduction in the 'ceiling' on trade-distorting subsidies. As far as the actual reduction is concerned, it does not translate into more than two per cent of the domestic support being provided. The US proposal, for instance, will only bring down the level of support by a figure that is less than a statistical error - down from $74.7 billion it spent last year to $73.1 billion. For the EU, it does not mean any reduction in the existing farm support to its farmers. These promised cuts, moreover, are based on an expectation that developing countries will open up their markets still further.
In reality, what the US Trade Representative Robert Portman and the EU Trade Commissioner Peter Mandelson have proposed is a merely an eyewash. It is perhaps the biggest hoax that the two countries have played before the 148-country theatre. These proposals are even more absurd than the letter the former EU Trade Commissioner Pascal Lamy (now the director general of WTO) had written to the WTO some years back promising to make a drastic cut in domestic support provided the US were to reciprocate. The WTO theatrics, matching the histrionics of Janet Jackson or Brittany Spears, has all the ingredients of a Hollywood blockbuster. Selling a utopian dream, the Agreement on Agriculture also seduces developing country farmers by promising them an opportunity to be like an American or European farmer once they open up their markets.
The clever manipulation is the outcome of an economic jugglery that hides more than what it reveals. It is all the handiwork of trade negotiators who continue to fool the world with faulty images of projected growth outcomes. All that has been done is to move the subsidies from one box to another - from the trade-distorting 'amber box' to 'blue box' and subsequently to the 'green box' - where all the direct payments to farmers are locked. In America, the huge subsidies doled out by President George Bush under the notorious Farm Bill 2002, equalling $180 billion to be provided in a ten-year period, have for instance been shifted from the 'amber box' and placed under the 'blue box'. With the definition of the 'blue box' now revised under the July Framework 2004, US farmers (read agribusiness corporations) have nothing to fear.
Interestingly, while Portman tries to convince the world of the 'honesty' of his subsidy reduction proposals, the US is expected to provide a record federal support to farmers this year. The outlook for such a record spending on farm subsidies has been triggered by the latest forecast by US Department of Agriculture for corn, soybeans and cotton, thereby signalling that crop prices will sink low enough for many farmers to receive far bigger federal checks than they did last year.
The EU on the other hand has always been a master in statistical jugglery. The well-known French agricultural analyst Jacques Berthelot says that the EU has been cheating with its false calculations on subsidies. Since the reforms initiated in 2003-04 under the Common Agricultural Policy, the EU has already transferred the bulk of its 'blue box' subsidies to 'green box' thereby ensuring that its non-trade distorting subsidies are kept at a bare minimum. Green box subsidies include direct payments and single farm payments and these are considered to be non-trade distorting. The EU therefore has already ensured that the 'drastic cut in subsidies' it speaks of actually means no change for its agriculture.
The theatrical absurdities however have not made any impact on the developing country positions. Instead of exposing the rot in negotiations, - which for some strange reasons the WTO chief, the Frenchman Pascal Lamy, refuses to see - the G-20 group of large developing countries have come out with a paper outlining new proposals on market access and domestic support. G-20's proposal on market access is contrary to the existing ground realities. The developing countries have already met the obligations enshrined under the WTO on phasing out the tariffs and removing the quantitative restrictions. Unfortunately, G-20 countries, led by India, Brazil and Argentina, appear more eager to open up their already open markets thereby putting at stake the very survival of millions of small and marginal farmers.
Any further movement in the ongoing negotiations of the Doha Development Agenda should be targeted only at disciplining the agricultural subsidies. To make a meaningful cut in domestic support, developing countries must insist on the following:
Agricultural subsidies should be classified under two categories: one which benefits small farmers and the remaining which goes to agri-business companies and the big farmers/landowners.
Since only 20% of the US $1 billion farm subsidy being doled out every day benefits genuine small farmers, the remaining 80% of the subsidies needs to be outright scrapped before any further on agriculture negotiations take place.
Civil society organisations demanding that agriculture be kept out of the WTO regime are justified in their view; developing countries must keep the fundamental issue of food security, livelihood security and the exacerbating hunger in their lands in sharp focus before committing to opening up their markets. Failure to do so will only result in a political backlash, the outcome of which would be detrimental to the multilateral trade regime. Since the US and EU continue to be the spoilers of the multilateral trade negotiations, having no agreement at this stage is better than a bad agreement.