Hopes of WTO deal look slim

A few weeks ago the Hong Kong ministerial meeting of the WTO was being flagged up as the “end game” following four years of negotiations under the Doha Development Round.

EU agriculture commissioner Mariann Fischer Boel had made her “final offer” to cut tariffs and phase out export subsidies, while other trade blocs had tabled their counter proposals.

But it soon became apparent that deep divisions remained, and so the level of ambition for Hong Kong had to be scaled back.

At the very best, next week’s meeting is likely to result in an “interim agreement” on agriculture.

It will be many more months before a final deal, with exact numbers and timetables, will emerge.

What is important is that some progress is made and, with that in mind, chairman of the WTO’s agriculture committee Crawford Falconer has drawn up a report summarising where things are.

On domestic support he notes that there is a “strong convergence” of views that those countries with the highest levels of support – the EU, Switzerland and Japan – should face the greatest cuts.

Developing countries should be treated more leniently.

On export competition, the EU has already offered to eliminate its export subsidies, but has not set a deadline.

The report notes that there are still “major differences” on the extent to which other forms of export aid, such as export credits, should also be contained.

The greatest divergence, however, is on market access.

While there is general agreement that a tiered approach should be used to cut tariffs, there is bitter disagreement over how much markets should be opened up.

The EU has offered to cut its highest tariffs by 60%.

But the USA is demanding 90%.

And, while the EU wants to see extra import protection for 8% of the most sensitive product lines, the USA says that 1% is enough.

But what does this all mean for farmers?

According to NFU chief economist Carmen Suarez, British farmers have little to worry about in terms of domestic supports.

The big cuts being talked about – of between 70% and 83% – refer to the maximum spending allowed on the most trade distorting subsidies, not actual spending.

Since CAP reform, the vast majority of EU payments are now non-trade distorting, which exempts them from any cuts.

“There may be concerns for Mediterranean products, which are still production linked, and for those member states with partial decoupling. But UK farmers should not be affected,” she says.

Ms Suarez is also quite relaxed about the impending demise of export supports.

“The UK is not a major user of export subsidies,” she says.

“But we do need to keep an eye on the Irish.

Without export subsidies, we could see more of their products competing in our markets.”

The greatest threat by far, however, is on market access.

This is borne out by recent analysis from the EU Commission which shows that, if the EU’s latest offer to cut tariffs was accepted by the WTO – which clearly it will not be – there would be significant price falls for many farm products.

Beef in particular would suffer from a near doubling of imports, dragging prices down from 2.7/kg (1.85/kg) to 2.3/kg (1.56/kg).

Pork would suffer a similar 10% price drop, while poultry would fall 25% to just 1/kg (68p/kg).

Meat industry representatives have warned that this would have a catastrophic impact.

The European Meat Platform recently warned that over 600,000 jobs could be lost from farmers leaving the industry, feed manufacturers laying off staff and meat processors going out of business.

EU farmers’ leader Rudolf Schwarzbock described the commission’s assessment as “horrifying”.

“The future of millions of family farms is at stake.

If they disappear it will not only create unemployment, it will change the whole face of the countryside.”

Despite these concerns, many WTO members – in particular the USA, the Cairns Group and the developing countries – say the EU offer on market access does not go far enough.

Worryingly, this is the one area where the EU has most scope to improve its offer.

On domestic supports, its hands are tied by the negotiating mandate that says it must go no further than the 2003 CAP reforms.

But no such restrictions apply to market access.

The question is how much of a fight EU trade commissioner Peter Mandelson will put up against these powerful forces.

Encouragingly, he recently told the European parliament that “agriculture will never be completely liberalised – the consequences would be disastrous”.

But what he says and what he does have not always been one and the same.