Theater of Cruelty

Free trade in crisis

Who stands for what in the WTO negotiations, and what consequences will a collapse have?


Agriculture accounts for only three per cent of global production and ten per cent of world trade, but at the same time agriculture is the most distorted sector of the world economy. Removing trade barriers and cutting subsidy schemes will thus have major benefits for poor countries. Nobel laureate in economics, US professor Joseph Stiglitz, believes that the EU and the US lost a golden opportunity for a fairer trade when they chose to start negotiations in Doha from the ground after the collapse in Seattle in 1999. He believes a binding agreement on full market access is the solution. According to the World Bank, 60 percent of the benefits envisaged during the Doha ministerial meeting will come from agriculture.

Great distance

The Americans, through their trade representative Rob Portman, have come up with a fresh proposal. He proposes a 90 per cent tariff cut on agricultural products, and will cut the most trade-distorting subsidies by 60 per cent. The EU has responded by proposing heavy cuts on trade-distorting subsidies, but the proposal involved such modest tariff cuts that it was not received as seriously by most dealers. EU Trade Commissioner Peter Mandelson has presented a new plan in which he proposes to cut tariffs by an average of 46 per cent, against the US proposal which would give an average cut of 39 per cent. At first glance, the proposal looks better than the US, but it is not. The Americans have put together a much more ambitious package and will go much further in a number of areas.

In addition, the EU wants to be able to define up to eight percent of all agricultural products as "sensitive", and thus have other rules for these. According to World Bank analysts, this proposal neutralizes any benefits poor countries would receive from the agreement. The G20 and the United States have rejected the proposal from the EU. The G20, which consists of a number of large agricultural exporting countries such as China, Brazil and India, has in turn come up with a proposal to cut tariffs by 75 percent. Another problem that makes it all very confusing is that in the different packages you operate with different definitions. This means that individual goods, after being redefined to another group, are not covered by a given downward adjustment of the tariff.

Mandelson is struggling with a lot of opposition internally, and among others the President of France, Jacques Chirac, believes that Mandelson has already promised too much. Chirac has threatened to veto any proposal that requires more changes than have already been agreed. Mandelson, unlike the other trade representatives, can only negotiate on the mandate he has from the EU. Other representatives are freer, but must "sell" the agreement with their respective governments and populations.

No licenses

The G20 has refused to grant any kind of concessions in industry or the service sector until they see real progress on agricultural products. It is precisely in the service sector that the EU has gone the furthest in offering incentives. To succeed in Hong Kong, the EU must give in to agricultural tariffs while the G20 must offer something in industry and services. A number of meetings have been held ahead of Hong Kong to ensure this. They have not led. Failing that in Hong Kong could actually be the end of the WTO as a negotiating forum.

Now there are more parties than the EU, the US and the G20 in these negotiations, and other groups may end up driving the WTO into the ditch as well. Norway and Japan, for example, are at least as protectionist as the EU in agricultural policy, but they are happy to let the EU fight this issue in the WTO. However, it is uncertain what these will do if the EU goes further in meeting demands from the G20 and the United States. Many poor countries that have special agreements with the EU are also afraid of losing the European market if their benefits disappear.

The distance seems long to the 90s, where people talked warmly and positively about "globalization" and how this should solve all possible problems. Today, the pendulum has swung back towards protectionist politics. President George W. Bush has until mid-2007, when a negotiated trade agreement will be expedited by Congress. After this, the normal procedure will have an effect, which will almost certainly ensure that the agreement will at least not be approved until after the US presidential election in 2008.

Stiglitz believes that there is a high risk that the WTO negotiations in Hong Kong will collapse. He believes that rich countries need to make a symbolic gesture to show that they are interested in real negotiations, and do not want to impose a bad deal on the poor countries.


Rich countries today advocate the liberalization of trade in industrial goods through the WTO system, while at the same time hindering a similar policy on agricultural goods where Africa has a so-called comparative advantage. In addition, powerful institutions such as the IMF and the World Bank are pushing African authorities to remove modest support for poor small farmers and a nascent industry. The industrialized countries themselves have built up their industry through a protectionist policy. A similar strategy is currently impossible for the African authorities to follow under the current international regime.

Stiglitz is in England to promote his new book Fair Trade for All, which deals with the WTO negotiations. In an interview with the English newspaper The Independent he says that the rich world has betrayed the poor by going back on promises to remove subsidy schemes on agriculture. These subsidies indirectly lead to millions of people living in poverty. Stiglitz sees the biggest single challenge in US subsidies for cotton producers. These subsidies help 25.000 American farmers, but harm almost one million people in Africa. Stiglitz says that this one case could lead to negotiations going off the rails. He believes that the United States, and to a lesser extent the EU, represents a problem in this case.

The 148 members of the WTO have until December 2006 to reach an agreement. More and more people think they will not be able to do it, and a growing group believe that they should not be able to do it. Focus on the Global South says in his activist handbook:

"Any agreement that emerges from the ongoing negotiations will help strengthen the major national and multinational companies' control over the world's capacity in agriculture, industry, technology and infrastructure."

In any case, a collapse in the negotiations could lead to an even more protectionist policy worldwide.

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