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Comment: Trade talks will never be the same after Cancun; Wash Post: 5 Powers Agree at WTO on Farm Talks

Editor's note: Two Washington Post stories about trade follow this commentary.

by Paul Beingessner
Canadian farmer, writer

(Thursday, July 29, 2004 -- CropChoice guest commentary) -- When talks on the liberalization of world trade began a couple decades back, the U.S. and the European Community set the agenda. Smaller players like Canada were mostly confined to supporting roles as they kowtowed to the big guys and bought all the fertilizer they doled out in the form of promises. Poor countries had little to say and were largely ignored in the process. As a result, the Uruguay round of trade talks gave the advantage to rich countries and, by the admission of the Food and Agriculture Organization of the U.N., hurt poor ones.

The silence of the lambs changed dramatically in September, 2003, with the collapse of the WTO talks in Cancun, Mexico. That meeting saw a group of developing countries, calling itself the G21 and led by Brazil, India and China, demand an end to the dumping of subsidized agricultural goods by rich nations. The G21 simultaneously asked for access to the markets of rich countries, while refusing to countenance lowering their own tariffs against agricultural imports.

Cotton became the subject of one of the major battles at Cancun, and a symbol of the problems with agricultural trade. With American cotton farmers receiving an average of $230 per acre in subsidies, cotton from the U.S. has driven down the world price of a commodity that was the backbone of the economies of some of the world's poorest countries.

It must have been a rude awakening for the world powers when upstart Third World countries began to flex their collective muscle. But it was inevitable.

The notion of global trade and a global economy have become inextricably linked with the concept of Intellectual Property Rights. Progress at trade liberalization has been linked to the adoption by countries of a patent and property rights regime like that of the U.S. and the E.U.

Patent laws have done little to benefit poor countries. The most striking example of this involves the AIDS epidemic. Multinational pharmaceutical companies hold patents on drugs that can bring immense relief to AIDS sufferers. While these drugs can be produced for pennies, the companies that control the patents charge thousands of dollars a year to those who can afford to buy them. Millions of Africans are dying from what is now a treatable disease because the cost of AIDS drugs is vastly beyond the modest means of their governments. Counties that have signed international treaties on patents are told they must watch their citizens die, even though they possess the resources to make cheap copies of AIDS drugs.

Trade liberalization is about opening the world up to the control of multinational companies and removing the control of governments. If it worked in practice as it does in theory, that might, at times, be a good thing between developed countries. (It rarely, however, works that way, as Canadian lumber producers and cattle ranchers have found out.)

When applied between poor and rich countries, the practice is even further from the theory. Recognizing that multinational pharmaceutical companies were not about to save the lives of millions of AIDS victims, countries like India began to make their own AIDS drugs, and were subject to immediate pressure from the likes of the U.S. and Britain.

I suspect that their experience with AIDS taught many poor countries that they better begin to speak with a united voice at world forums. Hence the unexpected turn at Cancun.

Nor is this likely to change soon. India declared recently that it would not allow the livelihood of its 600 million small and subsistence farmers to be destroyed by concessions at the WTO table. This is a practical move on India's part. What would it do with the 550 million farmers that could be driven off the land if food grown with large government subsidies were allowed free access to Indian markets?

The WTO talks on agriculture are close to stalling completely. Rich countries still have a few tricks up their sleeves, however. One is the American model. When global talks fail, negotiate separate agreements with countries. Use your economic power to get your way where diplomacy fails. Before those counties sign on the dotted line, they should consult with Canada. We could tell them a few things about how the U.S. honors trade deals.

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net

5 Powers Agree at WTO on Farm Talks
Details Secret but Deal Could Break Logjam

By Paul Blustein
Washington Post Staff Writer Friday, July 30, 2004; Page E01

GENEVA, July 29 -- The chances of reviving stalled global trade negotiations rose Thursday as top officials from five major powers agreed on how to handle the talks concerning the hotly disputed issue of farm trade.

The deal emerged after extended meetings between U.S. Trade Representative Robert B. Zoellick and his counterparts from the European Union, Brazil, India and Australia. It was greeted cautiously by diplomats at the World Trade Organization's headquarters here as the most hopeful sign yet of avoiding a second, potentially fatal, collapse of the Doha Round of negotiations aimed at lowering trade barriers worldwide.

The breakup of a similar meeting in Cancun, Mexico, last September severely set back the negotiations, which began in 2001 and now have little chance of producing a final agreement by the end of this year as had been planned.

Participants in the talks warned that new sticking points have arisen, chiefly involving trade in industrial goods, and there is no guarantee that even the deal on agriculture among the so-called Five Interested Parties will be acceptable to all the WTO's 147 member countries.

Still, the agreement among the five is significant, because those nations represent a diverse and influential group of interests on the central issue of subsidies to farmers in the developed world. India and Brazil have led a group of developing countries in insisting that agricultural subsidies be lowered in the United States, Europe and elsewhere, while U.S., European and other negotiators have been hesitant to cut benefits for domestic producers.

"I welcome the agreement among five key members on the agriculture text," WTO Director-General Supachai Panitchpakdi said in a statement conveyed by a spokesman. "It is an important input into our negotiations and gives momentum to our efforts at completing negotiations. But I must caution that no agricultural framework deal is possible without the consensus of all WTO member governments."

So fluid was the situation tonight that sharply conflicting accounts of what the five had agreed upon circulated, with some sources saying that it included a potentially significant promise by the developed countries for a "down payment" that would cut certain types of farm subsidies by 20 percent. But it was unclear what sort of subsidies that would involve, and what sort of escape hatches would remain for products that the countries want to protect.

The precise wording of the draft was still being debated and the text was being rewritten late into the evening by a small group that included Supachai and Tim Groser, a New Zealand trade diplomat who chairs the agriculture negotiations.

After predicting yesterday that a text would be available this morning, and later predicting that it might come out late Thursday night, Keith Rockwell, the WTO's chief spokesman, said shortly before midnight that the draft was still "hours and hours away" because "a lot of revision, a lot of effort is going into this."

A deadline of midnight Friday had been set for this week's talks, but many participants are angry that the delay in producing a new text means they will have no time to consult with their governments on matters of potentially explosive political concern. Accordingly, officials glumly acknowledged this evening that the deadline could be extended by 24 hours.

Spokesmen for the five powers were silent on the substance of the agreement for fear of fueling resentment among the other WTO members left out of the elite group.

The talks among the five "were very useful and constructive," said Arancha Gonzalez, the spokeswoman for European Trade Commissioner Pascal Lamy. Officials of the five nations emphasized that Groser is consulting with and briefing as many other WTO members as possible before finishing the text, and that, practically speaking, a small group of countries needed to seize the initiative to lead the rest to compromise.

Despite all the haggling, an agreement this week -- should one be struck -- would not change a single tariff, quota or subsidy. The goal of the talks this week is to forge a "framework" that would set the boundaries of future negotiations leading toward those more substantive decisions. Yet at the same time, failure to get even that far would be a setback to the WTO's efforts to promote more open commerce among nations.

Just as optimism surged about the agriculture text, officials said a number of developing countries are balking at a proposed formula for cutting tariffs on industrial goods. The formula would require countries with high tariffs to reduce them much more sharply than countries with low tariffs.

That is a major goal of the United States and the European Union, which hope to swap concessions in agriculture for concessions that would help their big industrial exporters sell their products more easily around the world. But the prospect of freer trade in manufactured products unnerves many developing countries that fear being overwhelmed by competition from China.

Source: http://www.washingtonpost.com/wp-dyn/articles/A25797-2004Jul29.html

Trade leaders meet to patch differences between rich and poor nations

Paul Blustein, Washington Post, 07/28/04: GENEVA, July 27 -- Ten months after a global trade meeting in Cancun, Mexico, collapsed in acrimony between rich and poor countries, senior world trade officials have gathered here to warnings that the fate of the international trading system is on the line if they can't compromise this time.

The four-day meeting at the World Trade Organization's headquarters is intended to advance negotiations for a far-reaching agreement to lower trade barriers and reduce other forms of government interference in global markets. Inaugurated in the Persian Gulf city of Doha, Qatar, in two months after the Sept. 11, 2001, attacks on the United States, the discussions began in a mood of international cooperation and were scheduled to produce a final agreement by the end of this year.

But hanging over the proceedings is the specter of last year's fiasco at Cancun. That meeting broke down when the United States and other wealthy nations clashed with Brazil, India, and a group of developing countries over several issues, including the reluctance of rich nations to dismantle their farm-subsidy programs. Another impasse, many trade experts contend, would threaten the viability of the WTO, which polices much of the commerce among nations, resolves most international trade disputes and serves as the main forum for market-opening initiatives.

"A second such failure could severely undermine confidence in the Doha Round and even in the WTO and the system it oversees," WTO Director-General Supachai Panitchpakdi wrote in a commentary published in Tuesday's International Herald Tribune.

Such admonitions by WTO officials are standard before important meetings, but observers echoed the sentiment. "This is more than just about the round," said Naotaka Matsukata, a trade specialist at the law firm of Hunton & Williams and a former adviser to U.S. Trade Representative Robert B. Zoellick. "The real issue at the Geneva meeting is about the relevance and future of the WTO."

To a considerable degree, negotiators are trying to paper over differences with vague language that leaves the toughest issues to be resolved later. But even some carefully drafted provisions are jeopardizing the talks. One particularly nettlesome proposal concerns how far rich countries will have to go in lowering barriers that protect "sensitive" farm products -- for example, rice in Japan, South Korea and Taiwan, and dairy products in Norway and Switzerland.

"That's an issue that could bring the whole thing down," said a WTO official who spoke only on the condition of anonymity because of the sensitive nature of the discussions. "The G-10 are going ballistic," he added, referring to a group of wealthy food importers, including Japan, Korea, Taiwan, Israel, Norway and Switzerland, that strictly limit foreign competition to shelter their farmers. Although those countries are pleased with a part of the draft agreement that would allow them to designate a large number of products as "sensitive," they are upset over another paragraph that would require them to make "substantial improvement" in the openness of their markets in each product area.

This week's meeting is not intended to complete a deal to lower tariffs or change trade rules. It is supposed to forge a "framework" that would set the parameters for future negotiations. For example, before jointly agreeing to cut tariffs in a certain sector, negotiators must decide on what formula they will use -- whether, for example, all countries will cut more or less equally, or whether countries with the highest tariffs will cut substantially more.

But as Cancun vividly showed, even the seemingly modest goal of agreeing on a framework is laden with obstacles. The WTO has 147 member countries and operates by consensus. To strike an agreement, each government must perceive that it stands to gain more in the form of enhanced global opportunities for its industries, companies and farmers than it stands to lose by exposing its producers to international competition.

Broadly speaking, the main goal of many developing countries is a significant cut in the subsidies that the United States, the European Union, and other rich-country governments give their farmers. Those subsidies can cause crop surpluses that depress prices worldwide and hurt farmers in developing countries. Such a change would fall hard on American cotton growers, European sugar farmers and others that receive direct government support.

In return, the United States and the European Union demand that the developing countries cut tariffs and scrap quotas on agricultural and industrial goods, which would help U.S. and European exporters because products could be shipped more freely and at lower costs across national borders. About 32 of the poorest nations would be exempt from such requirements under the current draft accord.

Zoellick drove home the point in a written statement issued Monday before leaving for Geneva: "We will not accept a deal to put the round back on track simply for the sake of a deal. . . . There must be substantial new openings for trade in agriculture, goods and services."

At a news conference here, Kamal Nath, India's minister of commerce and industry, took a hard line against the idea that countries like his should cut tariffs simply because rich countries reduce their domestic subsidies. "To say, 'I'll do the right thing provided you give me market access' I think is very ill-conceived," he said.

In some areas, general accord has been reached, raising hope that posturing will give way to compromise by the end of the week. The current draft would mandate the elimination of all subsidies that go directly for exported farm products "by a credible end date," leaving open the precise time. Similarly, in response to pressure from developing countries, the E.U. and Japan have abandoned their demand that this round of talks produce new WTO rules concerning issues such as international investment.

Yet other major disagreements remain. France is adamant that European concessions on agriculture have gone too far, and haven't been repaid with adequate compromises from other countries. Since the European Union represents its 25 member nations on trade, Paris can't veto a deal single-handedly, but it has substantial influence.

Another significant issue involves farm subsidies that don't go directly for exported products. "Developing countries feel there is an escape clause [in the current draft], allowing the U.S. in particular to continue with certain types of subsidies" that support crop exports indirectly, said Martin Khor, director of the Third World Network, a group critical of rich-country trade policies.

Accordingly, no one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."

That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."

Source: http://www.washingtonpost.com/wp-dyn/articles/A19432-2004Jul27.html