It has always been argued that trade in agriculture is good for developing and least developed countries (LDCs) since these countries have comparative advantage in agriculture. However, after ten years of rule-based multilateral trade in agriculture, most of the developing countries have not benefited to the desired extent. Who is to blame for this? Is there something wrong with the rule-based multilateral trading regime in agriculture per se or in its practice?
The problems faced by developing countries in relation to agricultural trade relate both to the rules for international trade in agriculture – set out in the WTO Agreement on Agriculture – and the way in which these rules are followed, or abused, by some of the largest agricultural exporters and importers.
However, the fundamental problem lies in the starting premise that only a few developing countries have any comparative advantage in agriculture under the existing regime. These countries include Brazil, Argentina and a handful of others. In a system of deregulated agricultural exchange, where border barriers such as tariffs are lowered and production levels are not managed, developing countries cannot benefit from the international trading system.
You have always advocated against developed countries dumping their agricultural produce in developing and least developed countries. What are the possible ways in which agricultural dumping could be targeted? What, besides reduction in export subsidies, are the plausible options to counter agricultural dumping in poor countries?
The key is to first assess cost of production in the country where the produce is grown so as to have a reference. This is what the Institute for Agriculture and Trade Policy (IATP) has done with five of the big United States commodities in our dumping report (wheat, maize, soya beans, cotton, and rice). The US does not use export subsidies, although it does have a few more disguised ways to support its exports of food. But the transnational companies that buy US grains and export them definitely dump, because they do not pay the US farmer what the commodity is worth and they export it below the cost of production as well, creating downward pressure on all producers of that commodity.
Ideally, an export tax should oblige the companies to charge at least the cost of production and a normal profit for any commodity that leaves the port for export. The second best option would be that the Organisation for Economic Co-operation and Development (OECD) or a similar body could formally publish comparable cost of production figures for the major dumping countries, and developing countries should impose tariffs in order to ensure that the commodities entering their borders were priced at least at the level of the cost of production.
Do you look at the Appellate Body reports on cotton and sugar as a shot in the arm in the campaign to amend the unfair rules in agricultural trade? Has the Appellate Body, through these two rulings, clarified some of the ambiguous subsidy disciplines in the Agreement on Agriculture (AoA)?
I do see the outcome of the disputes on cotton and sugar as positive. I think the rulings have shown the existing AoA rules to be tougher than what NGOs and many governments thought, and just the fact of the disputes was enough to shape the negotiations that followed the collapse of Cancun and led to the establishment of the July framework last year. However, I think developing countries missed an opportunity to drive a harder bargain in the light of the rulings. To allow the US, for example, to use the new negotiations on agriculture to legitimise some of the payments that the Dispute Settlement Body ruled illegal, was an extremely disappointing outcome from the last July framework’s proposal.
How do you look at the recent ‘alleged’ breakthrough on conversion of specific duties into ad valorem equivalents (AVE) on agricultural products? Do you think this decision has paved the way for future negotiations on agriculture?
If you think the AoA negotiations are headed in the right direction, and I do not, then the AVE breakthrough was, of course, welcome. You cannot discuss tariff reduction without first finding a way to make the tariffs that you are talking about comparable. Many EU tariffs in particular were opaque, and the solution would have been a decent attempt to make those transparent. Without this breakthrough, any further discussion on market access was held up.
What possible shape would negotiations on agriculture have in the run-up to the Hong Kong Ministerial? Do you foresee the possibility of a breakthrough or deal in agriculture before or in Hong Kong?
It is always hard to predict where negotiations are headed, since so many unforeseen events can both knock them off, or put them back on course. I would say that there is a considerable momentum in the agricultural negotiations right now, and there is some hope among delegates (hardly ever expressed out loud in Geneva for fear of breaking the spell) that a deal on agriculture would be one of the things the delegates take to Hong Kong for their ministers.
Sadly, there is very little sign that dumping will be addressed in any way. Some of the developing countries’ defensive interests will probably be taken into account, but the presence of large volumes of commodities at less than cost of production prices in world markets will not be disciplined. Nor will perhaps the biggest trade distortion of all – the oligopoly power of transnational food and agriculture companies, a small number of whom dominate most agricultural commodity markets at the international level. We still have a lot of work to do to build a fair, rules-based multilateral trading system. |
