Politics & Policy

Where The U.S. & Europe Meet

A Hong Kong WTO wrap-up.

The Sixth Ministerial Conference of the World Trade Organization resulted in the easiest kind of deal–one in which each country agreed to what it already planned to do.

The European Union agreed to eliminate its export subsidies for agricultural products by 2013, a move hailed as a breakthrough even though a similar timetable is included in the EU budget.

The United States agreed to eliminate its cotton subsidies by 2006–convenient, because Congress is already planning to eliminate them by August of that year.

The U.S. also agreed to pare down cotton subsidies faster than subsidies for other crops. This seemed like the biggest concession of the conference, because U.S. officials had strenuously objected to treating domestic support for cotton differently from other crops.

In the end, though, this was another case of agreeing to a predictable outcome and then calling it a concession. President Bush and Senator Charles Grassley–an Iowa Republican whose Finance Committee oversees trade matters–have proposed lowering the cap on the amount of subsidies each farmer receives. This would have the effect of reducing cotton subsidies faster than subsidies for other crops, because cotton farmers currently receive the largest per-capita farm payments, second only to rice. Such payment caps would be easier to pass through Congress than overall reductions in subsidy levels, because payment caps tend to divide the farm lobby into groups that caps would affect–rice and cotton–and groups they wouldn’t–corn, wheat and soybeans–and thus dilute its power.

This factor–along with negotiating pressure from the cotton-producing nations of West and Central Africa–made it easier for the U.S. to agree to different rules for cotton. More difficult areas of U.S. farm-subsidy reform–for instance, the loophole for the billion-dollar counter-cyclical payment program–remained untouched by the agreement that emerged from the Hong Kong ministerial. The EU also avoided making any hard choices on controversial issues like the reduction of agricultural tariffs. Instead, its delegation caterwauled about that blasted end date on export subsidies and then agreed to a deadline that was already inevitable.

Hope remains that in the coming months the members of the WTO can negotiate a more ambitious agreement on agriculture, especially as they move the negotiations away from the thousands of journalists, nonprofit workers, and protesters who followed them to Hong Kong. Precedent exists for a comeback. In late 1990, the last round of trade talks almost collapsed because of a similar impasse over agriculture, but the EU and the U.S. resolved their differences and resuscitated the round in a series of discrete agreements negotiated over the course of 1993. The current round of talks has less time to spare (it faces a deadline of mid-2007, when Bush’s negotiating authority expires). But it is also less ambitious. Prior to the last round, global trade agreements had never addressed agriculture.

Food fights block agreements in other areas

In contrast, agriculture has dominated the current round of talks, primarily because the U.S. and EU have offered so much resistance to making further cuts in their billion-dollar farm-subsidy programs. The last WTO ministerial, in Cancun, collapsed when emerging agricultural exporters like Brazil and poorer farming nations like Burkina Faso grew frustrated and refused to deal with any other issue until the U.S. and EU came forward with better offers on agriculture. The U.S. and EU did come forward with some better proposals in 2004. But by now, the group of developing countries that asserted themselves in Cancun has grown bolder. Here in Hong Kong, they blocked any meaningful agreement on industrial goods and services because the EU in particular seemed to retreat from its 2004 proposals, making such a fuss over export subsidies.

As a result, the members focused so much on agriculture here that they did not make progress in the area of industrial goods and services. In their press conferences afterward, developing countries such as India congratulated themselves for this paralysis. India’s commerce minister Kamal Nath crowed, “If anyone wants to characterize this as a giveaway, I would like them to draw my attention to any line of this text that amounts to that.”

But reducing trade barriers create remarkable gains for consumers, who gain access to the best and cheapest products from around the world. Far from being “giveaways,” such reforms are “takeaways” for any country bold enough to defy its protected special interests and undertake them. Developing countries lost a key opportunity to open their markets to global trade flows.

They also lost an opportunity to push for reforms that would have helped their exporters. As Barun Mitra of India’s Liberty Institute pointed out, “The watered-down agreement to continue negotiations on the General Agreement on Trade in Services fails to push more countries toward a concrete series of timetables for reform. As the agreement stands, Indians’ internationally recognized capacity to provide accounting, banking, IT, legal and telecom services will not realize its full potential.”

This goes double for the EU and the U.S., where industrial goods and services compose between 80 and 90 percent of the economy, but whose deference to the politics of agriculture blocked market-opening agreements for their most competitive sectors.

Protesters expose the face of anti-globalism

Agricultural concerns dominated the occasionally violent protests outside the conference as well as the talks inside. A group of farmers from South Korea made headlines with anti-WTO demonstrations demanding that the tariffs and subsidies that protect Korea’s rice market remain untouched by any agreement. Ironically, as delegates from poor countries called upon the developed world to give up its market-distorting farm programs, farmers from a country with a trillion-dollar economy attacked police with bamboo poles in an attempt to break through the police line and disrupt the conference–desperate to keep the poor countries from achieving their goals.

The WTO protest movement began in Seattle in 1999. Although similarly violent, these protesters claimed to act on behalf of the world’s poor who, we were told, are disadvantaged by global capitalism. But all along, the most effective opponents of free trade have been the unions for protected and uncompetitive sectors (along with a contingent of radical environmentalists with their own agenda). In Hong Kong in 2005, these opponents finally revealed their true face, and the world now knows the protest movement for what it is: a group of protected special interests so terrified of competition from the developing world it is willing to resort to violence to preserve its privileges.

The most dissonant moment of this conference came when I realized that the rich countries and the protesters shared a key similarity–both came to Hong Kong to fight for the agricultural subsidies that artificially sustain their uncompetitive farm sectors. If progress is to be made in the current round of trade talks before time runs out, policymakers in the U.S. and EU have to ask themselves if that’s the sort of company they want to keep.

Stephen Spruiell reports on the media for National Review Online’s new media blog.

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