Much confusion around WTO

Nov. 24th, 2005

There has been a torrent of news reports lately about the World Trade Organization talks and the role they may play in a variety of agricultural issues.

The so-called Doha Round of these talks is supposed to reach agreement on agriculture at its Hong Kong meeting in December. The chances for such an agreement are fast fading as countries of all sorts bicker about what should happen.

The average Canadian farmer must be thoroughly confused by the many, widely different opinions he is hearing.

Here are a few:

Governments of large agricultural exporters like Canada, the United States and Australia say a successful agreement will improve the lot of their farmers, while simultaneously lifting poor countries out of the economic mire. They differ dramatically on what they say must happen for such a successful agreement to come about.

Governments of agricultural importers or potential importers like the European Union say that if they give up too much for an agreement, their farmers will suffer unreasonably.

The EU is the only group of countries that doesn’t seem to claim its farmers will benefit. Most farmers in the EU seem to think they have nowhere to go but down.

Governments of poor countries like India say their farmers will benefit by an agreement, but only if rich countries open up their markets and lower tariffs on imports. India says it must be allowed to protect its 700 million-odd subsistence farmers against imports.

Those farm groups in Canada that are composed of farmers appear to have little faith that a WTO agreement will improve their lot. This includes groups like the Canadian Federation of Agriculture, Keystone Agricultural Producers, the National Farmers Union, Wild Rose Agricultural Producers and so on.

Farm groups that are supported by multinational agribusiness, like the Canadian Agri-Food Trade Alliance, claim a WTO agreement, at any cost, will bring nothing but good to Canadian farmers.

Farmers around the world, whether in rich or poor countries, are equally divided.

Via Campesina, a worldwide movement of small and subsistence farmers, believes only harm will come to small farmers the world over if the talks succeed. It says policies regarding food production should be in the control of national governments, not international bodies.

The notion that farmers in rich and poor countries will both benefit is based on some confusing logic.

American farm policy, for example, allows farmers to produce huge volumes of grain and other crops, which are then sold on domestic and international markets at below the cost of production. They can do this since their government essentially picks up the difference.

American farmers are not low-cost producers, no matter how you slice it, so they will be winners only if the rest of the world disarms while they keep their farm programs intact. The current U.S. proposal allows for just that to happen.

Countries like India will be winners only if rich countries reduce production and quit dumping. Though they have low labour costs, poor countries generally have bad infrastructure and so lose their natural advantage.

Of course, most rich countries, the EU excepted, don’t believe a WTO deal will cause them to reduce production.

Canada, like the U.S., is fond of claiming prices will rise if the WTO succeeds. The Australian government says wheat growers will see incomes rise by $26,000 under an agreement.

In a supply and demand dominated market, this can only happen if production drops and demand drives prices up. None of these countries will admit their own production might fall.

In all the uncertainty, one thing is clear. If trade barriers such as tariffs fall, there will be an increase in world trade. This will benefit, perhaps exclusively, the traders.

This is why they, and the governments that listen to them and the farm groups that they fund, are pushing the WTO deal.

Another thing is also certain.

Rich and poor countries have different agendas where trade is concerned.

For rich countries, the deal on agriculture is merely a way to get to the real meat – trade liberalization in goods and services. Corporations in rich countries want to get into the health, education and utilities of poor countries.

Poor countries want access to the agricultural markets of the rich, since these are the goods they produce. Some are willing to give up control over their service sectors to get it.

In all this sound and fury, it is small wonder Canadian farmers are not sure what to believe. In the end, they simply resort to asking, “how will this benefit, or hurt, me?”

An agricultural economist at a recent conference in Saskatchewan called the WTO a race to the bottom in which each country seems to believe its farmers will be the only ones left standing. That is a pretty thin hope to pin your future on.

The Canadian government, however, seems willing to do so.

Perhaps it is because of its inability to conceive of any other solutions.

by Paul Beingessner