FarmPolicy

December 10, 2018

“Analysis from Washington”- By Dan Morgan- Trade

Trade

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

Officials from a new Paris-based group called the World Organization for Agriculture were in Washington last week promoting a heretical idea:

The Doha round of trade talks, they contend, is the wrong place to address global agricultural issues.

That’s because, in the view of the group, agriculture is “unique.” Markets for farm goods don’t follow the same rules as those for manufactured products. So protectionism and government support—the chief targets of trade negotiators—may be essential in nurturing farmers in poor countries. Next year, the organization promises to unveil a more nuanced and comprehensive economic model of the influences affecting world agricultural prices, factoring in new data on everything from exchange rates to rural road systems. Then it will invite governments to establish “equilibrium prices” for commodities worldwide by “consensus.”

In the age of globalization, the ideas of the World Organization for Agriculture seem decidedly retro. You have to wonder whether it isn’t just a stalking horse for big French agriculture, which is famously resistant to the European Union’s market-oriented reforms. Despite it name, all the top officials are French. Its president, Pierre Pagesse, grows vegetables on 250 acres and heads Limagrain, an agricultural cooperative that is the world’s fourth largest seed company.

But with the continuing failure of global trade talks, this may be a moment for governments committed to a “development” agenda to pause and consider other approaches.

There’s no question that freer trade has brought the world its greatest period of prosperity. Under the Generalized System of Preferences, created in 1974, 131 developing countries export some 5,000 products to the United States duty free.

The goal of the current talks, christened the “development” round, was to add a significant agricultural dimension to this global system of freer trade in order to help the poorest of the poor.

Credible economists, and groups with an interest in improving the conditions of the rural poor, are convinced that breaking down tariff barriers and reducing lavish government support for wealthy farmers in the United States and Europe can yield significant dividends for poor farmers.

A new study prepared for Oxfam by a group of well-regarded economists concludes that the complete removal of U.S. cotton subsidies would raise the world price of cotton by 6 to 14 percent, increasing the prices received by West African cotton farmers and boosting their household income by 2 to 6 percent. Oxfam supports reduced U.S. domestic farm subsidies in a new farm bill as a means to breathe life back into the deadlocked talks.

Oxfam has an uphill battle on its hands.

The politics of an agricultural deal has proven far tougher than many expected. The “development” goal has faded into the background, replaced by brass knuckles lobbying by national agricultural interests on all sides.

In the United States, farmers are enjoying booming demand from the biofuels industry and China, and don’t feel an urgent need to cut a deal that would open up new export markets. Last week Sen. Byron Dorgan (D-N.D.) cheered the fact that President Bush’s trade promotion authority—allowing him to submit trade deals that are not subject to amendments by Congress– was expiring July 1. “Good riddance,” he said.

Commenting on the Doha trade talks, House Agriculture Committee Chairman Collin Peterson has stated emphatically, “We don’t see anything being put forward that’s good for [U.S.] agriculture at this point.”

Disillusionment with the Doha process doesn’t seem limited to rich countries.

Shri Kamal Nath, India’s Minister of Commerce and Industry, and a key player in the trade talks, was generally diplomatic in his comments to journalists, scholars, lobbyists and officials during a visit to Washington last week. But Nath, who represents not only India but the G-22 group of developing nations, said “the U.S. had problems addressing [our] sensitivities.. [U.S. negotiators] wanted to know what they would be paid for stopping doing what they were doing.”

Selfish national interests inevitably come into play in a trade negotiation, but listening to Nath I began to wonder whether the impasse went beyond politics. In the agricultural talks, Nath represents hundreds of millions of subsistence farmers whose physical survival depends on crops, prices and weather. Across the table are U.S. negotiators representing a few hundred thousand commercial farmers cushioned by subsidies that have endured for seven decades. Brazil speaks for developing countries, but 100,000 acre soybean farms and mechanized sugar plantations presumably would derive as much or more benefits from a trade deal as the small farmers who play a minor role in the trading system.

Can the best-intentioned trade negotiators, circumscribed by the narrow rules of the World Trade Organization, create a just system for such different worlds? Some big issues affecting agriculture are beyond the purview of the trade talks, and not on the table. Those include such “subsidies” as the 51 cents a gallon tax credit for ethanol in the United States, and the ready supply of illegal farm labor available to the U.S dairy, fruit and vegetable industries.

Bertrand Munier, chief economist of the World Organization for Agriculture, sees freer trade bringing only limited benefits—and possible disadvantages–to poor farmers. An African maize farmer who lacks a paved road to the nearest market cannot take advantage of higher corn prices brought about by soaring demand for biofuels. In that case, aid has to come before trade.

Munier, who has studied at Yale and Princeton, argues that domestic support and protection, not liberalized trade, is what creates a strong agricultural sector and a thriving class of farmers.

Only when Europe and the United States began heavily supporting their farmers after the Depression did yields of staple crops such as wheat begin to rise rapidly, Pagasse said. Supports and protections were the key to these agricultural success stories, he argues, because they supported farmers’ income, enabling them to withstand the huge price fluctuations. If Detroit produced tomatoes instead of cars, Munier suggested, it too would need a bigger helping hand from government. That’s because, historically, the price of tomatoes is much more volatile than that of Chevrolets.

I have no doubt that a good economist could shred such revisionist views, but the World Organization for Agriculture isn’t alone in proposing a broader debate.

In his new book, “The Bottom Billion,” Paul Collier, director of the Center for the Study of African Economies at Oxford University, argues that trade deals are not a sufficient answer to rural poverty. Cutting tariffs across the board can help the most efficient, low-cost producers (such as Asian manufacturers) and penalize the poorest, unless their products receive special protections, preferences, and exemptions, Collier argues.

This is complicated stuff. With so little progress in the Doha talks, it can’t hurt to at least ponder approaches to development that don’t run through Geneva.

By Dan Morgan