It is history repeating itself as farce.
Negotiators meeting in London, Geneva and elsewhere await an acceptable
agreement between the US and the EC on agriculture, before working out
a deal that would help salvage the next major step in the Doha Round of
trade negotiations: the Hong Kong Ministerial starting December 13. The
US seeks to appear reasonable by putting out an offer that sounds path-breaking.
The offer includes the following: First, in US Trade Representative Rob
Portman’s words (Financial Times, October 10, 2005), the deal should involve
''steep tariff cuts over the next five years, starting from 55 per cent
up to 90 per cent in the highest tariffs in rich countries''. This is
to be followed by a second stage in which tariffs would be brought down
to zero. Further, there should be very limited scope for alternative treatment
of sensitive products, and the creation of this list should not be used
to undermine market access.
Second, ''a 60 per cent cut in "amber box" support - the most
distorting type of subsidies - over the next five years'' and a fifty
per cent reduction in the cap on the less trade-distorting support under
the "blue box", which needs to be further defined. Here too,
there is to be a second stage in which all trade distorting support is
to be eliminated.
And, third, setting a deadline of 2010 for the agreed elimination of export
subsidies, combined with a tightening of ''rules on the donation of food
aid to guard against possible commercial displacement but not at the risk
of further reducing already inadequate food aid for those who need it
most.''
Based on this offer, the US wants the EU to make matching concessions
in agriculture and developing countries to offer substantial concessions
in non-agricultural areas. In fact, the US seeks to achieve two goals:
occupy the moral high ground in talks on trade liberalisation; and use
this position to get developing countries to be more reasonable with regard
to liberalisation of trade in non-agricultural goods and services unlike
the EU on agriculture. It appears that with regard to agriculture, the
US is expecting an EU offer that would involve a 54 per cent minimum average
tariff cut and a reduction in the list of sensitive products to from 10
per cent to 1 per cent of the total.
What is missed, however, is the US offer does not go even part of the
way in meeting expectations that were generated during the Uruguay Round
negotiations. The Blue Box which was expected to have disappeared at the
end of the Uruguay Round implementation period would still remain (even
if trimmed) and the huge support which the US provides its farmers in
the form of ostensibly ''non-trade distorting'' Green Box payments would
not be questioned. The net result is that, as in the wake of the Uruguay
Round, neither would developing countries’ share in global agricultural
trade increase nor would they obtain any benefits in terms of better prices
for their products.
These issues have however disappeared from the debate, and the US offer
becomes the upper bound for the liberalisation that the talks on agriculture
can realise. Needless to say, upper bounds are not realised ever. Negotiations
involve compromise. And in this instance the compromise must be with a
reluctant EU, held back by a recalcitrant France.
Over the last few months, Peter Mandelson, the EU Trade Commissioner,
has been portrayed as a hardworking negotiator cajoling his membership
to accept more liberalisation in order to prevent the Doha ‘Development’
Round negotiations from collapsing, ostensibly with disturbing implications
for the ‘poor’ developing countries. In a first step in this charade,
in early October, the EU made an ''amended'' agricultural market access
offer that envisaged a maximum reduction of 50 per cent for very high
tariffs compared with the 90 per cent proposed by the US. The percentage
of so-called sensitive products, subject to smaller tariff reductions,
was to be cut from 10 to 8 per cent of tariff lines, against the US proposal
of 1 per cent. This would leave 180 EU products in the "sensitive"
category. When recently question as to which products would be covered
by what the US has described as "the large number of exceptions for
so-called sensitive products'', the EU's agriculture commissioner, Mariann
Fischer Boel, replied: "It is obvious that beef, poultry, sugar and
some fruit and vegetables might be in groups that need a sensitive treatment.''
Mr Portman had responded that the EU proposal "doesn't come close
to meeting the expectations all of us have on market access", since
according to US calculations, it implied only an average reduction of
24.5 per cent in EU farm tariffs, which was even less than the 36 per
cent average agreed in the 1986-93 Uruguay round. And clearly the number
of exceptions under the category of sensitive products was seen as too
large.
Since developing countries could not but reject this non-offer, the scare
of a collapse of the Hong Kong Ministerial and of the Doha Round began
to be raised. EU, everybody had to agree, must go much further. But then,
given the distance between what was expected of the EU and what it had
placed on the table, some reduction in ''ambition'' appeared necessary.
In step-two of this drama, at the end of October, Peter Mandelson put
out a revised offer to ''revive'' the Doha Round. The offer promises to
reduce the highest tariffs by 60 per cent, against the 50 per cent cut
tabled earlier, which with other reductions, the EU claimed, would cut
European farm tariffs by an average of 46 per cent. But there was no movement
on the inclusion of 8 per cent of products in the sensitive list. Once
again the US response showed disappointment. In its view, the average
tariff cut would actually amount to 39 per cent, and this level of concession
would mean that agreement in other areas would be short of potential as
well.
But there was no shortage of people to welcome the revised EU offer, especially
since Peter Mandelson appeared to have placed his job on the line by exceeding
his brief to save the Round. A day before the revised offer was made,
Jacques Chirac, the French president, was reported to have told a meeting
of EU leaders that it was "out of the question for us to make another
step", beyond the reform of the EU's common agricultural policy agreed
in 2003. A French diplomat is reported to have said that Mandelson's negotiating
tactics would prove fruitless, since: "A negotiator can only offer
what he can deliver." Above all, the controversial French interior
minister, Nicolas Sarkozy, who seen as an advocate of freer markets, wrote
in the newspaper Les Echos that Mandelson had accepted a "fool's
bargain" and assured French and European farmers that they can count
on his commitment ''to save what is left of one of the first and principal
common policies."
Mandelson on his part argued that " the ticking of the clock is a
very hard constraint'', that it was necessary to ''unblock the round'',
and that he looks forward to being able ''to demonstrate convincingly
to France that what we're doing is negotiating in Europe's, and that includes
France's, best interests."
To read the meaning in this unnecessary last minute drama in negotiations
which have been under way for years now, and which should be informed
by the failures at Seattle and Cancun, we need to return to the events
that preceded the conclusion of the Uruguay Round negotiations. Then too,
agriculture, which like many other areas was being subjected to the discipline
of a multilateral agreement, was the principal bone of contention. Then
too, it was presented as an area in which agreement was first needed between
the US and EU. Then too, a deal was struck between the two in the infamous
Blair House accord of November 1992, in which a range of EU demands were
accommodated. Among other things, it legalized the EC's Common Agricultural
Policy with a "peace clause" that ruled out any attack on the
policy in an international forum for a period of six years.
But then too, France opposed the agreement on a wide range of counts.
It threatened to veto the Uruguay Round negotiations unless Washington
agrees to soften the terms of the accord. E.C. Trade Commissioner Leon
Brittan and U.S. Trade Representative Mickey Kantor eventually took on
the task of seeking a way out of a French-U.S. deadlock over agricultural
subsidies in order to meet a December deadline. Their brief was to work
out a compromise somewhere between the demands of France and the US on
the subsidy issue in order to salvage a GATT agreement. Yet, as late as
December 1993, French Foreign Minister Alain Juppe declared that GATT
negotiators should aim to reach an interim and partial trade accord that
year, leaving out difficult issues such as agriculture and audiovisual
broadcasting.
Finally, the Americans did ''blink first'', in the words of one contemporary
observer. Among other things, they agreed to spread out a 21 percent cut
in subsidized exports over a six-year period, and postpone the year the
cuts are to begin, allowing the EC to export an estimated additional 8.1
million tons of grain. They also extended the six-year "peace clause"
in the Blair House accord by a further three years. To pretend that the
US had not compromised fully, some adjustments were made in its favour.
The point of this exercise was, however, not in the detail. It ensured
two things: first, that US-EU agreement was central to a deal in agriculture
needed to save a round that was seen as collapsing; and second, once this
agreement was arrived at, it put pressure on the negotiators from developing
countries to give more than they needed to in areas outside agriculture
in order to be seen as reasonable and in tune with the global ethos of
liberalisation.
It is precisely this act which is being replayed again. Expectations are
high that the EU would move a little further from its second offer, but
would not just ensure that its agricultural interests would be well looked
after, but also demand that developing countries make major concessions
in non-agricultural market access (NAMA) and services. If they resist
the latter demand, the burden of wrecking the Round would at the last
minute be shifted onto the shoulders of the developing countries. And
the danger is that in the scramble to get as much as they can without
being forced to shoulder that responsibility, countries like India and
Brazil would make large concessions that hurt not just their producers
but those in Africa and elsewhere.
The issue is not to declare that France does not need its protection or
that the US is wrong to use barriers of all kinds in international trade,
as for example its recent initiatives against textiles and clothing imports
from China. The issue is to call the bluff on the myth that trade negotiations
are about free trade, and not about using political and economic power
to ensure reasonable protection at home and substantial market access
abroad. It is also to make clear that a process in which the US and EU
take months and years to work out an agreement on agriculture, declare
at the last minute that they have saved the round and then require developing
to negotiate on areas outside agriculture in a few days, is an unacceptable
farce. It is to say that there is nothing lost if Hong Kong fails.