France Can’t Prevent World Farm Trade
France has just warned the world it will block any liberalization of farm exports in the current Doha trade round. French presidential candidate Nicholas Sarkozy says farm trade liberalization would end “Europe’s status as an agricultural power.”
Sarkozy is kidding himself. French farmers aren’t a power in anything except bleu cheese. But he’s right that France, through the European Community, has been blocking U.S. farmers from reaching new export markets for 150 years.
No longer.
The key reason is that the World Trade Organization’s “peace clause” has ended. The Uruguay Round of trade talks gave the WTO more power to settle trade disputes back in 1994-but installed a ten-year “peace clause” for farming. WTO countries were barred from suing other members for trade losses caused by their farm subsidies-until 2005.
Well, guess what long-distant date has arrived? Now, any of the WTO’s 148 member countries can sue over farm subsidies, and they’re doing it. Even a little Third World country such as Mali, which grows cotton, can sue farm subsidy giants like Europe or America. Charity groups like Oxfam are eagerly offering Mali free legal advice on how to succeed in WTO dispute settlements.
From here on out, WTO suits will assault rich-country farm subsidies like trial lawyers on a tobacco company. It won’t matter whether the subsidies are paid in francs, euros, yen or dollars. Already, the United States lost a cotton case and the European Union lost a sugar case.
From here on, any Third World country angered by rich countries’ farm import barriers or export dumping is likely to take its complaint straight to the WTO. And win.
The WTO exists to foster free trade, and it has already driven down the average tariff on non-farm products from 40 percent to 4 percent. The average tariff on farm products is still a ruinous 65 percent.
The EU tried to preserve farming jobs for its own farmers, with high price supports, import barriers, and export dumping. But the EU farm subsidies depressed farm prices world-wide. Densely populated countries installed import barriers-boosting food costs in land-short Asia.
The WTO has now let loose a global farm trade free-for-all.
The turmoil will be enhanced by biotechnology. Pest-resistant biotech cotton favors tropical countries with low labor costs. Drought-tolerant biotech wheat, along with moisture-saving no-till, will let food grain grow where it used to be too dry.
The prize in the midst of this turmoil will be Asia’s food markets. Three billion poor Asians are rapidly becoming 4 billion affluent consumers. The Asian economies outside Japan grew 7.4 percent in 2004. India’s thriving industries are investing $3 billion in poverty-ridden Bangladesh next door. Chinese consumers are buying millions of autos.
Asia’s growing demand for meat, milk and eggs is straining the capacity of Asia’s farms—even at prices far higher than world market levels.
American farmers would be unwise to put their future prosperity at the mercy of a federal budget that will be dominated by Social Security and Medicare for the retiring Baby Boomers.
Not when they have the world’s biggest chunk of prime farmland, the world’s best farming technology, and the world’s best set of rivers and rails to reach Asia’s newly affluent customers with their food and feed exports.
And surely not when the world’s farm subsidies have just become fat targets for pro-bono lawyers.
