Trade. Sour subsidies

Date: 17/04/04

Without big cuts in farm subsidies, the Doha round of trade talks will drift into insignificance

LAST September in Cancn, poor countries left the bargaining table at the World Trade Organisation (WTO) talks because they felt that they were getting a raw deal. The walkout, and their refusal to compromise, was short-sighted. And yet, they had a point. After all, the European Union, America and Japan have erected massive trade barriers that impoverish farmers in poor countries. Europe spends billions of euros every year through its common agricultural policy (CAP) to subsidise its own farmers. America's farm bill means that taxpayers pay Americans to produce things such as cotton that could be grown far more cheaply in Africa. Rich-country farm subsidies and tariffs are outrageous by any rational measure. However, in the months since the Cancn meeting, America and the EU have put far too little effort into making concessions, and they are now trying to bypass the Doha round of talks with bilateral trade deals, which threatens to undermine the entire multilateral trading system.

This would be a tragedy for the poor. Rich-country farm subsidies prevent the poorest countries from selling some of the only goods, other than illegal drugs, that they are able to export, keeping millions of people miserable. Consumers in rich countries pay over the odds for food. And for what? So that a tiny number of farmers and a few large agricultural firms in rich countries can continue to benefit at the expense of the world's poor. For example, a report published this week by Oxfam, a campaigning group, describes in detail how EU subsidies for European sugar growers enrich a lucky few firms and make poor countries worse off.

Such subsidies have a long and ignoble history, but today reducing them is more urgent than ever, for they threaten the chance of any further progress in multilateral trade negotiations. The debacle in Cancn has inevitably pushed back the timetable for reaching a new agreement to liberalise world trade. No one now expects any deal until well after the American presidential elections in November. Yet if not even a framework for discussing cuts in agricultural tariffs and subsidies is in place by this summer, efforts to conclude the Doha round are likely to slip well into 2006 or beyond.

Since Cancn, America has stepped up its existing efforts, in word and deed, to pursue bilateral trade deals. But while these can often lead to progress in manufacturing and services, they are less successful at reducing farm subsidies, as America's recent trade deal with Australia, which excluded sugar and barely touched beef and dairy, demonstrated. Now there are troubling signs that the EU is seeking to use bilateral trade deals to divide the concerted international opposition to its own farming subsidies by offering expanded import quotas to a handful of carefully selected farm exporters, such as Brazil and Argentina. If such bilateral deals succeed, they could entrench the CAP and similar rich-country schemes and so remove any hope of cuts in the kind of subsidies that are doing so much damage.

Pascal Lamy, Europe's trade commissioner, and his opposite number in Washington, Robert Zoellick, have often declared their determined support for the WTO. But all their high-minded expressions of respect for multilateral negotiations will ring hollow without real cuts in farm subsidies and tariffs. If rich countries are unwilling even to trim the support given to cosseted rich-world farmers and big agri-businesses, the Doha round will be seen rightly as a farce.

Editorial says that without big cuts in farm subsidies, the Doha round of trade talks will drift into insignificance.

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