WTO compromises on farm subsidies.

The police and the public, particularly traders of Hong Kong breathed a sigh of relief that the WTO conference concluded on December18, 2005. Scuffles during the protest brought the city to a standstill, tight security limited the movement in the downtown and many were prompted to go for early Christmas holidays. Politicians hailed it as a wonderful event that they successfully brought the image of Hong Kong worldwide. But the benefits derived from the Hong Kong round are mixed.

The real achievement is that weary trade negotiators at last agreed to end all farm export subsidies sparing themselves the embarrassment of coming up empty handed after six days of deliberations to tear down global trade barriers. The European Union Trade Chief Peter Mandelson described the deal as “not enough to make the meeting a success but enough to save it from failure.’’ ‘This is not a deal, it is a fraud ‘’, the head of Action Aid’s trade justice campaign, Aftab Alam Khan observed .The outcome was ‘’an insult to the world’s 2.4 billion poor people ‘’also remarked Action Aid representative.

Pascal Lamy , DG of Geneva based WTO, expressed satisfaction that Ministers of 149 member states achieved almost 55% of the target through their 19-page statement to bridge the gap separating EU and USA on the one hand and the developed and developing countries on the other .Member States will have to spell out how they plan to cut farm export subsidies by 2013 . EU, however, insisted that WTO should close the scrutiny of US International Food Aid Program that amount to disguised subsidy for US farmers .WTO members shall provide duty-free and quota-free market access for at least 97% of the products originating from the LDC’s.

The anti-poverty campaign group dismissed the likely impact of ending EU farm export subsidy and US Cotton export subsidies. By 2013, the cuts in EU farm export subsidies will be around one billion Euro. This is insignificant in comparison to 55 billion Euro that EU gives as domestic subsidies every year. Trade Ministers agreed to complete a final deal at the end of 2006 in order to start wide ranging trade reforms in 2008 and boost the economies of the poor countries. The elimination of all forms of export subsidies by the end of 2013 indicates skewing farm trade, creating unfair competition for poor countries.

In fact, the negotiations on agriculture were mostly concerned with the export subsidies although the issue of market access of agro-products and domestic support to agriculture were also of prime concern. It was also agreed that member countries which were not in a position to provide duty free and quota free market access shall provide market access to at least 97% of the products originating from least developed countries by 2008. Of course, the selection of agricultural commodities for the exclusion list comprising 3% of the tariff lines will be a difficult one. It was also agreed that there could be three bands of tariff reduction for domestic support. The level of cuts, however, will be decided later.

Hong Kong round allowed satisfactory benefits to West African cotton producing countries specially to Benin, Chad, Mali, etc. The USA subsidises the export of cotton by around US$ 4000 a year. With the withdrawal of this export subsidy, countries like Niger, Cameroon, Uganda, Ghana, Rwanda could eventually be benefited.

The farm subsidy was a matter of major contention since the inception of WTO from 1st January 1995. The number of member countries increased to 150 and about 29 countries like Russia, Romania and Vietnam are waiting to be members. During this period of 11 years, a number of heated discussions took place on the major issue of farm subsidy that appeared as the focal point especially for developing countries. The 3rd Conference of WTO held from 30th November to 3rd December1999 at Seattle, USA, almost ended in a fiasco with the furious demonstrations on this issue of farm subsidy and interest of poor countries confining the WTO agenda of reformation.

On this issue of farm subsidy, 6th round WTO Hong Kong Ministerial 2005 was a successful compromise when Governments accepted the elimination of all forms of export subsidies by the end of 2013 but substantial part of the cuts are meant to be underway by around 2010. That was seen as a compromise between the European Union, which pushed for a later date and Australia, Brazil and the United States wanted a 2010 cut off. In exchange, the EU won a commitment that food aid to offload the US farm surplus and monopoly firms that sell grain and diary products from Australia, Canada and New Zealand will be examined in order to ensure that they do not distort trade.

The outcome was considered by many, especially G-20 countries, to be a success since WTO nations agreed to end all export subsidies to farmers by 2013. The date was a compromise. The United States and the poor countries wanted to see the subsidies vanish by 2010, but the EU balked. This 6th WTO Hong Kong Ministerial Conference also agreed to eliminate export subsidy on cotton by 2006.The US also failed to get the EU to further cut its import tariffs on agricultural goods. India and Brazil secured an end to farm export subsidies but not as soon as 2010, the year they preferred. They also got the exemptions on some agricultural products from WTO tariff reduction plan. The EU offered to cut these tariffs by an average 46%, although developing countries wanted bigger reduction. Some 32 least developed countries secured duty-free and quota free access to rich countries-market.

Chaudhury Muhammad Saeed, President, Federation of Pakistan Chamber of Commerce and Industries, hailed the agreement on farm subsidies. Indian Commerce Minister, Kamal Nath, and the Trade Minister of Brazil were found beaming with pleasure for winning the battle.
In reality, developing countries have been neglecting agriculture since long, although its contribution to GDP is always significant as more than 70 % of the population depends on this sector. There was urgent need to evolve policies to maximize production and grow exportable quantities of fruits and vegetables, horticulture species, pulses, oil seeds, nuts and kernels, floriculture and dairy products. There is a need to develop corporate farming in the country with continuous R & D, to develop new HYV of seed, high value crop and transfer latest technology of drift irrigation, to develop organic products and build up exporters to do most scientific and hygienic packing, polishing, preserving, grading, etc. This must be through government and private initiatives.

We, in Bangladesh, should get ready, invest and diversify our agriculture sector to meet the global requirements of 2013 failing which would be a major disservice and colossal disaster to the nation. We should in no way make the life of our future generation difficult to live in this soil.

By Dhiraj Kumar Nath