Dec 3, 2009

WTO Ministerial diary - 2

Jacques Berthelot of France-based Solidarite has been one of the most vocal critics of the EU agricultural subsidies. He is perhaps the lone voice in the civil society who has meticulously been researching, and analysing the hidden subsidies. Professor Tim Josling of the Stanford University has now come out openly in support of Jacques analysis.

For us in the developing world, it is time to revise our stand on OECD agricultural subsidies given this understanding. We have to demand stringent real cuts in the subsidies that are being doled out under the Common Agricultural Policy (CAP). The talks on agriculture should not be allowed to proceed ahead unless EU and US agree to make real cuts in their monumental farm subsidies.

Here is a Solidarite press release

Geneva, Dec 1: Professor Tim Josling, of Stanford University, is one of the most distinguished experts in the field of agricultural trade. He is in particular the "father" of the OECD indicators of agricultural trade, devised in the early 1980's, among which the PSE (producer support estimate).

Professor Josling was one of the 4 panelists of the seminar on "Options for Pursuing Agricultural Trade Liberalization" organized by the International Food and Agricultural Trade Policy Council (IPS) the 1st December 2009 at the World Meteorological Organization in Geneva during the WTO Ministerial Conference. Reacting to a question asked from the floor by Jacques Berthelot, from the NGO Solidarité, Professor Josling has acknowledged that the market price support component of the AMS (Aggregate Measurement of Support, or the amber box of the agricultural trade-distorting domestic supports) is meaningless and should be eliminated altogether from the calculation of the AMS.

This statement is of the utmost importance for the agricultural negotiations if we know that the European Union (EU) and the United States (US) have agreed to cut, at the end of the Doha Round implementation period, by 70% and 60% respectively their average AMS of the base period 1995-2000. Indeed, in that period, the average EU market price support component of its AMS has been of €43.603 billion or 90% of its €48.425 billion of notified AMS so that the actual subsidies component has been of only €4.822 billion or 10%. And the average US market price support component of its AMS has been of €5.914 billion or 57% of its €10.408 billion of notified AMS and the actual subsidies of only €4.494 billion or 43%.

These figures show that the EU would not have to cut any subsidy in its AMS and could to the contrary double its authorized AMS subsidies from €4.822 billion to €9.706 billion (14.528 – 4.822). However the US would have to cut its authorized AMS subsidies of the base period by $331 million (4.163 – 4.494), that is by only 7.4% instead of 60%. This conclusion that the EU and US offers to cut drastically their trade-distorting subsidies in the Doha Round are empty promises holds if we take the EU and US notifications at their face value, as the WTO Members are doing and as reflected by the Revised Draft Modalities for Agriculture of 6 December 2008.

This conclusion is even clearer if we realize that the EU and US have hugely under-notified their AMS – putting in the blue box or the green box the subsidies which should have been in the amber box (the AMS) – as well as the other components of their "overall trade distorting domestic supports" or OTDS, particularly their product-specific de minimis and non product-specific de minimis.

In that context, the WTO Members of developing countries should reconsider their present position that these Modalities as a good base to pursue and finalize the Doha Round.

Meanwhile, a Reuters report of Dec 1 says:

But a study by the Washington-based International Food Policy Research Institute said that poor countries stood to gain little from the global free trade pact which was meant to help them find new markets for their exports.

The IFPRI study calculated that the proposals on the table in Geneva would have a negligible impact on the state of the global economy, improving world real income by only 0.09 percent -- about $70 billion -- as an annual gain.

"World trade and the world economy have changed profoundly since 2001," IFPRI said, noting in particular the emergence of Brazil, India and China as economic and trading powers.

Sharp swings in commodities and staple food markets were not factored in to the original Doha agenda, and climate change is treated only on the margins of the talks, which focus on cutting tariffs and subsidies on traded goods like cars and meat.

Economist estimates of the benefits of a Doha deal vary widely, ranging from negligible to hundreds of billions of dollars. A full calculation is impossible until a deal is signed and it is clear what goods will remain shielded from external competition.

But developing countries have been the loudest at the WTO conference in calling for a Doha deal, which they believe will remove the worst distortions in global trade.

The WTO ministerial in Geneva, on the eve of a climate change summit in Copenhagen, was not meant to be a negotiating session for the Doha Round but officials stressed the need to turn that deal into an economy booster.

Environmental issues are already moving up the trade agenda even as the Doha talks appear mired in rancour.

Britain's minister for trade and development, Gareth Thomas, said that countries should voluntarily cut import duties on "green goods" at once in order to encourage business in environmentally friendly technology.

"Why hold back now, just because we are waiting for the Doha Round to be done?" he told Reuters.

It is quite obvious that the Doha Development round is a dead horse. The sooner we bury it the better it will be for the world.

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