Export subsidies are still an issue

9 November 2001

Export subsidies are still an issue

This weekend trade representatives

from 142 countries will descend on the

tiny Middle East state of Qatar – their

objective, to launch a new round of

WTO trade talks. Events of recent

weeks have raised the stakes, as

Europe editor Philip Clarke explains

WHEN bosses at the World Trade Organisation chose Qatar for their fourth ministerial meeting, which kicks off today (Friday), they must have thought they had the perfect location.

The Encyclopaedia of the Orient describes it as "mostly flat and stony, with one of the harshest climates in the Persian Gulf" – just the sort of place to put off your average anti-globalisation activist.

Two years ago in Seattle, attempts to launch a new trade round were brought to a premature halt by protestors. The organisers were determined to avoid a repeat.

Little did they know that, by the time the meeting started, Qatar would be on the margins of a war zone. However, a decision was made last month to press ahead regardless, with the aim of setting the agenda and some broad targets for trade negotiations which could last several years.

In the run-up to Qatar, or Doha as the meeting has been dubbed after the capital city, the positions of the main protagonists on agriculture are as well known as they are entrenched.

For the EU, trade commissioner Pascal Lamy and agriculture commissioner Franz Fischler are happy to see further moves towards market liberalisation, subject to certain conditions.

These include the maintenance of the so-called green and blue boxes, established in the last GATT round to protect direct payments to farmers.

They are also willing to see further reductions in border protection as long as these are targeted to benefit the worlds poor.

The most contentious issue, however, remains export subsidies. As Dr Fischler is fond of saying, by the time the Agenda 2000 reforms are complete, expenditure on price support and export subsidies will have dropped from over 90% of the EU budget in 1992 to just 20%.

He is prepared to go further, so long as other forms of trade promotion, such as export credits, abuses of food aid and state trading bodies, are brought within the disciplines of the WTO.

But thats not good enough for the US and the Cairns group, both of which want the total elimination of all export subsidies. Their line is taken up in a "draft ministerial declaration" that will form the basis of discussions in Doha, calling for "reductions of all forms of export subsidies, with a view to phasing them out".

This draft also calls for "substantial" cuts in import tariffs and trade-distorting domestic supports for agriculture.

On this latter point, the EU sees a glaring hypocrisy in the US position. For over the past four years Washington has granted over $32bn in emergency aid to the countrys farmers.

This gives the EU a lever with which to negotiate. In particular, it wants to include a broader range of "non-trade" subjects on the agenda of a new trade round, notably environmental protection.

Many developing nations, such as India, are deeply sceptical about this, seeing it another ruse by the EU to pay its farmers more subsidies, while blocking products from countries with a poorer track record.

The EU counters that society has moved on. Consumers attach as much importance to these non-trade issues as to sourcing their food cheaply.

On the face of it, then, little appears to have changed since the last abortive attempt to launch a trade round in Seattle in 1999. But there again, everything has changed. The horrifying events of Sept 11 in New York and the backlash in Afghanistan have put even more pressure on the delegates to deliver.

That will require compromise and flexibility, especially in the tricky field of agriculture. But, ultimately it is in the best interests of all who rely on international trade to launch a new trade round. &#42

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