New WTO Trade Round A Major Opportunity For U.S. Agriculture
WASHINGTON, DC – The trade ministers of 140 countries just handed American farmers their first realistic chance to end the European Union’s predatory export dumping, and gain major food and feed sales in densely-populated and newly-affluent Asian countries. November 14, 2001, in the Persian Gulf city of Doha, may well go down as one of modern farming’s most important dates.
The World Trade Organization agreed to a new three-year round of negotiations that singles out agriculture for trade liberalization. The ministers agreed on “reduction, with a view to phasing out,” for farm export subsidies, which have been the key element of the EU farm policy and a major reason for low world farm prices.
The WTO ministers also agreed to work for “substantial improvement in market access” for farm products. That means opening huge new markets such as India and China for America’s competitive farm exports. The Doha WTO meeting also awarded WTO membership to China, bringing in one-fourth of the world’s population and what will soon be the world’s biggest economy.
The WTO pledged to work for a “substantial reduction in trade-distorting domestic farm subsidies.” Western Europe’s high farm price supports have stimulated roughly a 20 percent annual farm surplus that has been dumped in world markets.
Mandated high farm prices in India and China keep food prices in those countries 50 to 300 percent above the world market. Thus, domestic farm subsidies in countries that block farm imports also help create the farm surpluses that prevent export profits for North American farmers (among others).
U.S. agriculture might well double its current $50 to $60 billion in farm export earnings during the first decade of fully liberalized farm trade. Earned essentially from the land, labor, and equipment American farmers already own, such an increase in export earnings would net American farmers far more profit than any federal subsidy program is likely to provide.
The Combest farm bill currently stalled in the Congress is called a “major increase” in U.S. farm subsidies, but it would give farmers only $15 billion per year above ongoing farm spending. Even the Combest bill may be too costly in light of the current economic slowdown and “war on terrorism” spending. Written when the lawmakers expected a $200 billion federal surplus, it now faces a federal deficit of at least $50 billion this year.
Ironically, U.S. farmers didn’t do much to earn their new trade liberalization opportunity. The 18-member Cairns Group of nations (led by Canada and Australia) campaigned hard for the new trade round, but most American farm groups had given up on the possibility of beating down EU opposition.
The EU fought hard at Doha against the farm subsidy phase-out language. The French trade minister called it a “deal-breaker.” However, the rest of the world has become heartily sick of European farm protectionism and not a little angry about U.S. farm subsidies as well. More than half the countries represented were reportedly willing to walk out if the farm subsidy phase-out requirement was modified.
However, after Japan and South Korea gave in on the farm subsidy phase-out, the EU was forced to capitulate too. Neither the EU nor Japan dared to risk a failure of the WTO round. Both were counting on it to encourage investors and strengthen their slow-growing economies.
Trade has long been regarded as an economic growth stimulant, but the WTO had been stalled since President Clinton invited environmental and labor activists to disrupt the organization’s first attempt to launch a new trade round at Seattle nearly two years ago. At Doha, anti-trade activists were crippled by the obvious reality that poor people (in Moslem countries and perhaps elsewhere) bear a deadly jealousy of affluence they cannot share. U.S. labor unions publicly renounced their trade opposition shortly after September 11, and activists who journeyed to Doha found little response to their street-theater tactics.
The new WTO will not offer a quick fix for U.S. farm income problems. It will take all of the scheduled three years to hammer out specific agreements in the fact of reluctant protectionists in Europe and in the United States, India, and other countries. There will also be a phase-in period for the new agreement, probably at least five years.
However, the new WTO round offers American agriculture its most promising income opportunity since Europe closed its doors to farm imports in the 1870s.
Among the other big potential beneficiaries of farm trade reform are likely to be:
1) The EU, a major farm exporter already, is in the process of admitting such potentially significant farm exporting countries as Poland, Hungary, and Romania;
2) Consumers in China and India, who are currently forced to pay sharply higher prices for their food; and
3) Poor farmers in Third World countries, who typically earn less than $5 per day because they lack the seeds, fertilizer, and good roads to earn more than a bare subsistence from their farms. They will either increase their productivity, or get better off-farm jobs.
This article was published by Knight Ridder Tribune
Dennis T. Avery is based in Churchville, Va., and is director of global food issues for the Hudson Institute of Indianapolis.
