With each new event or international conference in 2008’s saga of economic and food crises, there are calls to complete the long-running Doha Round of World Trade Organization negotiations. The international players all act as if achieving a Doha agreement, seemingly any agreement, will help solve one or more aspects of these crises.
The latest such conference was the G-20 Summit, Nov. 14-15 in Washington, D.C., called to coordinate actions on the financial and consequent economic crises that have spread from the U.S. to much of the world. The joint statement released at the conclusion of the G-20 Summit called for trade ministers to try to finally conclude the Doha Round.
That is not about to happen before the Obama administration takes office. Events of the past five years amply demonstrate that fundamental differences in perspectives about the roles of agriculture in trade can no longer be glossed over.
Leaders of the 20 participating countries released a 16-point statement at the conclusion of the G-20 Summit on Nov. 15. Point 13 reads as follows:
We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.
Free traders on both sides of the Atlantic have been urging one last push for resolution of remaining Doha Round issues during the remainder of 2008. At this point, that seems to be more wishful thinking. The WTO’s Doha Round, ongoing now for seven years, has had a turbulent history [PDF]. Doha represents the first round of negotiations under the WTO, which was created as part of the 1994 settlement of the Uruguay Round — the last round of trade negotiations under the WTO’s predecessor General Agreement on Tariffs and Trade framework. The Uruguay Round was the first to bring agriculture fully into the multilateral trade-negotiating framework, and the intention was to further “liberalize” agricultural trade in the first round of negotiations under the new WTO structure.
WTO negotiations got off to a rocky start. Surrounded by anti-globalization protests, a 1999 Ministerial Conference in Seattle failed to settle on a negotiating agenda. After finally settling on a negotiating agenda in Doha, Qatar in November 2001, negotiations then fell apart in dramatic fashion in Cancun, Mexico in 2003. A number of "developing" and "emerging" countries aligned themselves with some industrial countries that had already eliminated most of their agricultural subsidies to block trade proposals by the U.S. and the European Union, who previously had been accustomed to calling most of the shots in multilateral trade negotiations. Of particular concern to developing countries were the huge U.S. and E.U. domestic farm subsidies that, together with various U.S. and E.U. import restrictions, put developing country farmers at a competitive disadvantage. Not only was it extremely difficult, if not impossible, for many agricultural products from emerging and developing countries to gain access to U.S. and E.U. markets, but the structures of agricultural subsidies in the U.S. and E.U. were such that they essentially led to "dumping" into developing country markets, thereby undermining incomes and production incentives of farmers in those countries. In Cancun, trade negotiators from India and a number other developing countries finally said "enough," and they demonstrated sufficient negotiating power to block major U.S. and E.U. proposals!
There have been repeated attempts since Cancun to reach an overall agreement, the latest major, failed attempt being this past summer. However, the fact that the U.S. had just completed passage of a new five-year Farm Bill earlier in the summer did not help the credibility of U.S. negotiating positions. The new Farm Bill kept all the existing farm subsidy structures in place, and even added some new ones. At the time of passage, commodity prices were extremely high, and proponents of continuing the subsidy programs argued that they were merely a safety net, and actual subsidy outlays might be quite modest in comparison to years past. However, commodity prices have since fallen, and the U.S. could be facing some major subsidy outlays in the years ahead. E.U. subsidies under its Common Agricultural Policy also remain high, but reforms in the CAP subsidy structure over the last decade give some credence to the argument that E.U. agricultural subsidies are less harmful to farmers in developing countries than are those of the U.S.
Another blow to reaching a Doha Round agreement in 2008 was soaring commodity and world food prices through the first half of the year. After years of U.S. sermonizing to the world to rely on world markets for food supplies, the fallacy of heavy reliance on global markets became abundantly apparent. World food reserves became extremely low, and countries with inadequate internal production capacity faced exorbitant prices in world markets — if they could access supplies at all. A number of countries that normally export a portion of their crop production implemented export restrictions in order to protect their own citizens from food shortages. Food security, something either ignored or downplayed in the push for trade liberalization, suddenly took on great importance.
After seemingly coming very close to an agreement, negotiations fell apart at the end of July without an agreement. The final stumbling block supposedly was U.S. disagreement with India and China over terms of a “special safeguard mechanism” to protect farmers in poor countries from economically damaging import surges.
But it would be delusional to think that Doha negotiations stumbled simply because of disagreements on details. In reality, there is a fundamental impass about how agriculture should be treated in multilateral trade agreements. Led by the U.S. trade negotiators, one view has been that agricultural trade should be completely liberalized. Never mind the fact that the U.S. government does not practice what it preaches in this regard, and shows no intention of doing so!
An alternative view — implicitly held by many developing and some individual European countries and various NGOs — is that the principle of ‘"food sovereignty" should guide agricultural trade negotiations. Under this principle, individual countries need to set their own food and agricultural priorities. For most countries, one of those priorities includes some degree of food self-sufficiency. This certainly does not exclude agricultural trade, by any means. But it does recognize that most countries (or blocks such as the E.U.) want to preserve some internal capacity for production of staple foods, as well as a sensible food reserve system. Many countries also want to protect other agricultural functions, as observed in the European emphasis on “multifunctionality” [PDF], which includes preservation of valued agricultural landscapes.
Those pushing for a resolution to the Doha Round do have a legitimate concern about a worldwide slide into overall protectionism, as we get ever deeper into the current economic recession. But that concern need not override the necessity to step back and totally reassess our economic philosophy about agricultural trade. This will take at least the first couple years of the Obama administration, not just the couple remaining months of the Bush administration.