FarmPolicy

July 16, 2019

Doha’s Demise

Stephen Castle and Keith Bradsher reported in today’s New York Times that, “Some blamed soybeans. Others blamed cotton. And many pointed a finger at America’s election-year politics.

“But the collapse of negotiations to open world markets gave way Wednesday to resignation that a shift in the global economic hierarchy had darkened the prospect any time soon of a new accord to further open markets.”

The authors indicated that, “The negotiations foundered on the right of India and other developing countries to protect critical agricultural products from competition in exchange for cutting tariffs on imported industrial goods.

“China and India have seldom shared the same views on free trade in recent years, but they were on the same side when the talks collapsed here on Tuesday because China made an abrupt about-face, signaling it may have leavened its interest in free trade with concerns about food security.”

And the Times article noted that, “The issue was whether China and other countries can impose tariffs on some foodstuffs. Of particular interest was soybeans, of which the United States is a major exporter. The United States trade representative, Susan C. Schwab, argued that with certain measures in place, China could have increased tariffs on soybeans in 8 out of every 10 years.

“Critics argued that the United States had forced the issue because other problems remained unresolved, including the level of United States cotton subsidies.”

U.S. Trade Representative Susan Schwab held a press briefing yesterday regarding the breakdown of the Doha negotiations. An audio replay of the entire briefing, which lasts about 40 minutes, is available here, while FarmPoliy audio clips from yesterday’s press conference can be heard here (MP3- 1:30- Amb. Schwab, general overview), here (MP3-1:30- Amb. Schwab on why the talks broke down) and here (MP3-3:30- Q and A with Amb. Schwab on the Farm Bill).

Dow Jones writer Meena Thiruvengadam, who reported on yesterday’s press briefing with Amb. Schwab, noted in part that, “The World Trade Organization talks fell apart after the U.S., China and India failed to agree on the Asian countries’ right to impose emergency tariffs to protect their farmers.

“‘In the face of a global food price crisis, we simply could not agree to a result that would raise more barriers to world food trade,’ Schwab said.

“India and China demanded a rule that would allow them to impose special tariffs if imports surged in certain products like sugar, cotton and rice.”

Andrew Batson, writing today at The Wall Street Journal Online, reported that, “China’s willingness to let the latest round of global trade talks collapse is a sign of how the emerging giant’s ties with other developing nations are growing in importance.

The talks at the World Trade Organization in Geneva foundered after member countries couldn’t agree on a proposal to allow developing nations special ‘safeguard’ tariffs to shield their farmers from low-price imports. Wealthy nations led by the U.S. heaped blame on India and China for blocking a global deal over a narrow point. The poorer countries, chiefly India, blasted the rich nations for coddling their farmers at a time of record food prices.

“Some analysts said an unfavorable political calendar — with the U.S. president a lame duck and India’s coalition government facing elections by May — was the real culprit. Domestic political constraints prevented them from compromising on an issue that affects their powerful farm lobbies, observers said.”

The Journal item added that, “‘The Chinese leadership has tried to adopt a strategy to sacrifice economic interests to win the goodwill of developing countries,’ says Henry Gao, a former WTO official who now teaches trade law at Singapore Management University.

“As the world’s second-largest exporter after Germany, China has little in common with the smaller developing countries that struggle to break into rich-country markets. With an average nonfarm tariff of 9%, China’s market is also relatively open: India’s average rate, by contrast, is more than 16%.

“In that respect, China’s interests are closer to the wealthy countries who were trying to bring down tariff barriers in developing nations. Publicly, however, China has cast its lot with the developing countries. The state-run Xinhua news agency blamed ‘selfish and short-sighted actions’ by rich countries for the collapse.”

Also posted today at The Wall Street Journal Online was a lengthy editorial on the Doha talks and trade. In part, this opinion item stated that, “The U.S. political class also bears a substantial part of the blame. In its waning months, the Bush Administration has less power to persuade. But part of that weakness goes back to the original trade sins of its first two years. With its steel tariffs and overstuffed farm subsidy bill of 2002, the Administration sent a signal that domestic politics took precedence over U.S. global trade leadership. Its credibility never recovered.

Democrats in Congress have also spooked the world with their blatant protectionism — from their recent veto override of a farm bill jammed with trade-distorting subsidies, to their refusal to ratify bilateral trade deals even with such vital U.S. allies as Colombia and South Korea. Barack Obama’s promise to repudiate Nafta if Mexico and Canada won’t go along with his ideas was also a trade shock heard ’round the world. For all their talk about listening to America’s partners, Democrats are the world’s biggest trade bullies,” the Journal item said.

The Associated Press reported yesterday that, “France’s agriculture minister said Wednesday that ‘big emerging countries’ were to blame for the collapse of World Trade Organization talks on opening up the global economy.

“The president of a leading French farmers’ union, meanwhile, hailed the outcome of the talks. ‘It’s reason that won out,’ Jean-Michel Lemetayer of the FNSEA union said.

“Agriculture Minister Michel Barnier said on France’s RTL radio that China, India and Brazil thwarted a ‘balanced accord’ at the talks in Geneva by ‘blocking imports and wanting to export to us.’”

Dow Jones News writers Gaurav Raghuvanshi and Mukesh Jagota reported today that, “India is willing to be flexible in World Trade Organization talks if the concerns of developing economies are addressed, Commerce and Industries Minister Kamal Nath said Thursday.

“‘We are ready to be on the negotiating table again but would not compromise on the interests of poor countries,’ Nath said at a news conference.”

The Dow Jones article stated that, “The Geneva world trade talks collapsed Tuesday after the U.S., China and India failed to agree on Asian countries’ right to impose emergency tariffs to protect their farmers. ‘The lack of consensus on SSM (special safeguard mechanism) was not an issue affecting only India. It affected more than 100 of the least developed and developing countries,’ Nath said.

China and India demanded the special safeguard mechanism, a clause that would have let them impose special tariffs on certain products such as sugar, cotton and rice if there were a sudden surge in imports. The U.S. said that could hurt farmers all over the world.

“The two sides couldn’t agree on where to set the threshold for any import surge that would trigger the clause. The U.S. wanted to set the trigger at a 40% jump. China and India wanted the trigger set at a 10% increase.

“‘Developed countries have safeguard mechanisms for the past 14 years, and when we want a safeguard measure there’s an issue,’ Nath said.”

Meanwhile, Bloomberg writers Toko Sekiguchi and Stuart Biggs reported yesterday that, “Japanese farmers welcomed the collapse of global free trade talks that had threatened to boost food imports into their country.

“‘We’re breathing a sigh of relief for now,’ said Hiroyuki Kominami, a spokesman for the local farmers’ association on Japan’s northern island of Hokkaido. ‘Ever since the liberalization talks began in 2001, we’ve felt like we were being slowly choked to death.’”

The Bloomberg article added that, “Japan is the world’s largest net food importer, producing only 39 percent of its annual consumption. Japan’s farmers receive 53 percent of their income in subsidies and support.

“In Hokkaido, a center of dairy production, domestic farmers benefit from tariffs on imports of as much as 706 percent, according to WTO statistics. Overseas butter, milk or yoghurt sold in Japan is all subject to import tariffs. Dairy goods are the only agricultural products without a duty free quota.”

And Reuters writer William Schomberg reported yesterday that, “The European Union’s trade chief Peter Mandelson said on Wednesday the United States helped to bring down global trade talks this week when its negotiators shunned a compromise proposal at a key juncture in the talks.

“The United States hit back and accused the EU of having tried to undo a carefully crafted set of compromises because it was under fire from European governments including France.

“The proposal in question was drawn up by the EU on Tuesday in a last-gasp bid to unblock an impasse over an agricultural trade issue being discussed by seven powers at the centre of the World Trade Organization (WTO) talks.”

The Reuters article noted that, “Mandelson initially declined to point fingers, calling the collapse of the talks a collective failure. But his frustration at Washington was clear in a weblog he wrote on Wednesday, describing the events of the previous day when the talks failed.

“‘…when WTO chief (Pascal) Lamy reconvenes the Group of Seven negotiators at midday, the Indians and the Chinese express reservations and the U.S. rejects the proposal outright, much to Lamy’s understandable frustration,’ Mandelson said.

“‘It seems that the issue on which we have diverged is more important for some than agreement as a whole. Instead of reaching out for help to solve the problem, they are digging in,’ he said.

“After that, a U.S. official ‘simply does not show up’ when negotiations resume and U.S. trade chief Susan Schwab, heading into the finale of the negotiations, stopped off in the press room ‘to get her rebuttal in first,’ Mandelson wrote.”

With respect to the U.S. response, the Reuters article indicated that, “‘The EU’s anger is misdirected, misguided and being misused,’ said Gretchen Hamel, a spokeswoman for Schwab.

“The trade official who missed the resumption of negotiations was in consultations with Schwab at the time, she said.

“‘To deflect from their own domestic concerns, the EU self-appointed their own official to renegotiate something that had already been agreed upon.’

“Hamel was referring to compromise proposals drawn up by Lamy on Friday in a bid to save the talks and which several of the WTO powers, including the EU and the United States, accepted as a way to take the negotiations forward.”

Brazil

In a more specific look at Brazil, Alexei Barrionuevo reported in today’s New York Times that, “Brazil, South America’s largest economy, is finally poised to realize its long-anticipated potential as a global player, economists say, as the country rides its biggest economic expansion in three decades.”

The article noted that, “It [economic growth] has also given Brazil new swagger, providing it, for instance, with greater leverage to push for a tougher bargain with the United States and Europe in global trade talks. After seven years, those negotiations finally broke down this week over demands by India and China for safeguards for their farmers, a clear sign of the rising clout of these emerging economies.

“Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected to lead Brazil in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia.

“Instead, he has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasília.”

The Times article added that, “The momentum of its economic expansion is expected to last. As the United States and parts of Europe struggle with recession and the fallout from housing crises, Brazil’s economy shows few of the vulnerabilities of other emerging powers.

“It has greatly diversified its industrial base, has huge potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade.”

Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “Brazil will likely take a hard line against U.S. agricultural subsidies at the World Trade Organization now that the Doha talks have collapsed, trade specialists said on Wednesday.”

The article noted that, “As one of the world’s farming giants, Brazil had hoped that a successful conclusion to the talks would have resolved many of its outstanding objections to U.S. agricultural subsidies and tariffs, most notably in the areas of cotton and ethanol.

“‘With U.S. cotton subsidies, there does not appear to be any way out — retaliation is the only option for the government now,’ said Pedro Camargo Neto, who was instrumental in forming Brazil’s WTO challenge against U.S. cotton aid.

“Earlier this year, the WTO upheld its original ruling against U.S. cotton subsidies in favor of Brazil in the final appeal process lodged by the United States.

“‘There was some kind of agreement that Brazil would not retaliate because Doha was supposed to solve the cotton problem. But now there is no hope of such a solution,’ Camargo said. ‘The government won’t like it but the rule is, if you win the appeal, trade sanctions are the only option.’

Camargo said he did not see U.S. farm policy changing without Brazil imposing trade sanctions against U.S. products, including intellectual property rights.”

With respect to ethanol issues, the Reuters article stated that, “With the collapse of the Doha Round, litigation against the United States’s ethanol import tariff at the WTO also seems more likely.

“Brazil’s Sugar Cane Industry Association (Unica) had hired lawyers to study the compatibility between the U.S. tariff and WTO rules but decided to give the Doha talks a chance before deciding whether to press the government to back a challenge.”

And on the prospect of future WTO litigation and American farm subsidies, the Reuters article concluded by saying, “Camargo added that U.S. farm subsidies will also likely face a renewed challenge at the WTO from a joint action opened some months ago by Brazil and Canada, which questions whether the recent U.S. Farm Law exceeds WTO subsidy limits.”

***

In a broader look at the Doha breakdown and trade, Reuters writer Laura MacInnis reported yesterday that, “The collapse of World Trade Organization (WTO) talks has raised divisions of opinion about whether the Doha round push was simply trying to tackle too much at once.

“Some negotiators suggested a series of smaller accords may be salvaged from the wreckage of Doha, which was designed to pry open global markets for agricultural and manufactured goods as well as cross-border services.

“But others insisted that the all-in-one package approach was essential to satisfy everybody’s needs.”

The article noted that, “Kenya’s deputy prime minister, Uhuru Kenyatta, agreed it could be dangerous to carve up the negotiations into separate areas that could leave some countries out of the picture.

“‘We cannot separate the issues,’ he told a news conference. ‘Everything has to come in one package in order to satisfy the needs of all members.’”

Meanwhile, Greg Hitt reported in today’s Wall Street Journal that, “In the U.S., critics of free trade are pushing for stiffer efforts to combat unfair trading practices, and have put the brakes on further trade liberalization.

“Less noticed is the U.S. shift on enforcement. The U.S. has filed five complaints in recent years at the World Trade Organization. The complaints cover a range of issues, including concerns that China is imposing restraints on media companies that specialize in financial news.

“The Bush administration also reversed a two-decade-old policy in March 2007 that prevented U.S. companies from seeking protection against unfair government subsidies of goods produced in ‘nonmarket’ — usually Communist — countries.

“After that reversal, the number of complaints soared, covering both unfair pricing, a practice known as dumping, and unfair government subsidies. Twenty-one complaints were filed in 2007, up from five in 2006. So far this year, 13 complaints have been filed.

“China has been the biggest target of complaints, figuring in all but two of the cases since the beginning of 2007. Most of the complaints are still being investigated or have already resulted in the imposition of tariffs.”

Keith Good

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