The Hindu : A unique alliance at WTO

Online edition of India's National Newspaper
Friday, Aug 22, 2003

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A unique alliance at WTO

IN A REMARKABLE display of unity at the World Trade Organisation, a group of 14 developing countries, which includes large economies like India, China, Argentina, Brazil, South Africa and Thailand, has formulated a cogent proposal on trade in agriculture. The new formulation on domestic support, import duties and export subsidies effectively counters another package on agriculture unveiled last week by the two most powerful members of the WTO — the European Union and the United States. What is significant about the new platform is that perhaps for the first time a developing country coalition at the WTO has been able to marry the interests of exporting economies with those more concerned about protection of domestic production. It is now virtually certain that the developing country proposal is going to have a major say in the outcome of next month's ministerial meeting of the WTO in Cancun, Mexico, which will review the ongoing Doha round of trade negotiations.

The most important issue in the Doha round of talks is agriculture. It has also turned out to be the most difficult to negotiate an agreement on. The main issues at stake are the $300 billion of annual subsidies that the rich countries provide to their agriculture and the high import duties they impose on specific farm products. A failure to show even a modicum of progress on agriculture before, or at, Cancun would have spelt disaster for the meeting and perhaps for the larger Doha round itself. The E.U.-U.S. initiative was meant to break the logjam, but it was instead viewed with suspicion as nothing more than an attempt at mutual accommodation. The E.U.-U.S. proposal allows the two trading powers to continue with their large subsidies, to maintain high import duties on the products they want to protect, to cut customs duties on products of export interest to them, and to only promise a gradual reduction of export subsidies. At the same time, it does not offer incentives to the farm exporters among the developing countries or concessions to those anxious to protect their large rural populations from import competition. The developing country proposals, however, call on the rich countries to cut all the subsidies they provide in different forms to agriculture. They also ask that tariffs on products of export interest to the developing countries be lowered. And they give the poor countries of the world the freedom to protect an identified set of crops from import competition. In this manner, the developing country proposals comply with the Doha mandate for a balanced reform of world trade in agriculture. The E.U.-U.S. package fails in comparison.

The innovation in the developing country alliance is that it brings together under one umbrella many of the members of the Cairns group of agricultural exporters along with countries like India and China, whose first concern is protecting the livelihood of their large agricultural communities. The coalition has been built around a package that gives the farm exporters from the South (like Argentina, Brazil, South Africa and Thailand) an opportunity to increase exports to the developed country markets. At the same time it offers countries like India and China sufficient manoeuvrability to maintain their largely defensive positions in world trade in agriculture. It will therefore not be possible for the E.U. and the U.S. to push aside the developing country package at the WTO. The challenge now for the new alliance is to stand firm and prevent the E.U. and the U.S. from successfully using the old strategy of dividing the developing countries by offering specific concessions.

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