Photo courtesy of Capitol Records

Developing countries wants U.S. and E.U to even the playing field

By JAYSHAL SOOD

The Indian mango, with its brightly colored skin, hardly looks like something that could incite a dispute. But this small, juicy fruit has become an icon of a two-decade-long agricultural trade row that has reverberated around the world.

Beginning in 1989, the United States prevented Indian farmers from exporting their mangoes to the U.S. because of concerns over pesticide use. The fruit was finally given the import go-ahead last year as part of a larger trade agreement with India.

Bilateral trade negotiations, such as those between the U.S. and India, give developed countries an unfair advantage, according to some experts. International organizations, such as the World Trade Organization, can negotiate multilateral agreements between several countries.

“To the developing countries, the multilateral system is giving the most guarantees to get an equal share of the pie of international trade,” said Ingrid Schaerlaeckens, principal administrator at the European Commission.

In 2001, the WTO began a round of multilateral trade negotiations - dubbed the Doha talks - that were aimed at making trade more fair to developing countries. The Doha round stalled in July 2006 because of disagreements about domestic agricultural subsidies given by developed countries to support their farmers.

The U.S. continued several bilateral agreements at the same time the WTO negotiations broke down, and Schaerlaeckens fears that this was not coincidental.

“They don’t want multilateral discipline and they want the bilateral role because they have been the stronger ones in these negotiations,” she said.

The European Union and the U.S., the two largest economies in the world, are the key players in WTO negotiations. Together they account for about half of the world’s economy; 35 percent of global merchandise trade; 45 percent of world trade in services; and produce 57 percent of world’s total gross domestic product.

The legitimacy of international organizations such as the WTO may rely on their ability to conduct multilateral negotiations, Schaerlaeckens said.

“There will come a moment where the members would realize that the whole organization WTO will die if they don’t continue negotiating like they did for the Doha round,” Schaerlaeckens said.

The Doha negotiations require both E.U. and U.S. to reduce their domestic subsidies to make imports from developing countries more competitive.

Many WTO members, notably the E.U., Brazil, and India, have blamed the meltdown on America’s unwillingness to cut subsidies to American farmers, according to Bridges Weekly, a trade publication by the International Center for Trade and Sustainable Development. However, Europe has its own subsidy problem.

The E.U. maintains average agricultural tariffs of 23 percent, nearly twice the 12 percent U.S. average, and domestic support spending of $33 billion, nearly three times that of the U.S., according to information provided on the United States Trade Representative’s Web site.

The U.S., however, should initiate by cutting down its domestic farm subsidies, even if other nations don’t follow suit, said Sallie James, trade policy analyst for the Cato Institute’s Policy Studies.

The U.S. subsidy policy “is very harmful to the economy. It’s harmful to consumers, to fruit producing industries; a lot of it is against WTO rules,” James said.

From 2000 to 2005, Congress spent an average of $17 billion a year in direct payments to farmers. The Doha negotiations, however, require the U.S. to cut its farm subsidies by more than 60 percent to make agricultural imports more competitive.

Some fruit growers say that they would rather have more access to international markets than relying on government subsidies.

“We would prefer to be reliant on our strong industry rather than being supported by artificial means,” said Shannon Shaffer, spokesman for the American Apple Association.

The apple industry already exports 20 percent of their produce, said Shannon Shaffer, a spokesman for the American Apple Association. “We are not even looking for government subsidies. We want government to do things like help open markets overseas, rather than to give us money.”

Fruit growers in America don’t get any subsidies, said Shaffer.

The issue of subsidies is not that simple, says Jerry Redding, a spokesman for the Agriculture Department.

“Fruit growers do get government money,” Redding said. “Take for instance the citrus growers. They were affected by citrus canker (a bacterial disease for citrus plants). They were given money to replace their trees. So it’s not accurate to say that they don’t receive federal money. And occasionally, just last year, we gave money to the apple growers in New York when they had crop deficiency,” he said.

The Democratic dominance of Congress may dim the prospects for multilateral Doha negotiations, James said.

For example, Rep. Collin Peterson, D-Minn, the new chair of the House Committee of Agriculture, is unlikely to push harder for new trade talks and deals.

“He is not a fan of these Doha negotiation-type trade agreements,” Mark Brownell, a spokesman for the Minnesota Democrat, said.

He said Peterson believes that multilateral trade agreements can short-change U.S. agriculture in favor other sectors of U.S. business.

“I think what has happened, and what U.S. farmers think has happened, is that the U.S. farm policy has been used as a marketing chip by other sectors of U.S. industry that want to achieve certain ends and for trade agreements. So, they have pushed the administration to offer up cuts to U.S. farm programs or else offer up more market access to foreign commodities in exchange for something, let’s say, something which Microsoft wants.”

Brownell said, “Right now, farmers feel that they can do without trade agreements.”

Experts at the American Farm Bureau Federation agreed.

“The reductions called for tariff and the reductions called for domestic support, they would not be positive for the United States’ agricultural factors and that is a part of the reason that the negotiations (Doha Round) are at stall right now,” said Megan Provost, a trade economist at the American Farm Bureau Federation.

The longer the countries delay finding a solution to these negotiations, the less of a chance of success the Doha round has, according to Provost.

The Trade Promotion Authority gives the President the authority to negotiate trade agreements. Congress can then vote on the agreement, but they cannot change it in any way.

“Each country, after they come up with the general agreement, goes back and plans how they would apply the agreement in their country. And in U.S. they need to approve it before the Trade Promotions Authorities expires in summer 2007,” she said.

“Most of the countries will not be interested in having this agreement after the TPA expires because everything which they will agree to initially would be changed. It would be like negotiating with 535 members with the U.S. — it’s hard to go and not very appealing to anybody,” Provost said.

The new players like Brazil and India have also made such multilateral negotiations more complicated, Schaerlaeckens says.

“It’s the first time that developing countries like Brazil and India are important players in negotiations; and China’s role is also crucial in these negotiations. All this has made the negotiations more complicated,” she said.

Bilateral agreements are a quicker route to move negotiations, says Indian Ambassador Ronen Sen.

India does not want to force trade agreements with the United States, Sen said.

“Fundamentally, our interest in agriculture is basically defensive and not aggressive. We tend to move faster in bilateral agreements,” Sen said.

Amidst all these developments, however, the nations are hopeful that the ongoing Doha Round of multilateral trade negotiation would revive.

“I am an optimist by nature. I think, maybe at a less ambitious level, they [the negotiations) will recover. Everybody is expecting too much out of these agreements. And that becomes very difficult because that means that everybody has to give a lot as well.” Schaerlaeckens said.