Alive, alive Doha

Letter to the editor:You are right to argue that OECD agricultural subsidies (particularly in Europe and the US) always seem to be a stumbling block in the multilateral trade negotiations (“Farming support: the truth behind the numbers”, by Stefan Tangermann, see OECD Observer No 243, May 2004). This is the reason why free trade in agriculture is often considered a pipe dream.

Are consumers in these major OECD countries prepared to pay the price? It seems in some cases they are. After all, free trade is not always popular in Europe, where the French in particular seem proud of their rural traditions and will pay a high price to support them. According to a poll by the German Marshall Fund, 16% of French voters oppose free trade, though as many as 10% in Germany and the US. Similarly, a high proportion of French voters at 54% had an “unfavourable” view of globalisation, though Germany was not far behind, at 51%. Both countries were much more unfavourable than the US at 39% and the UK at 35%.

Thankfully, in a recent round of WTO meetings, the EU announced that it is prepared to negotiate on the issue of agricultural subsidies, and the multilateral talks are back on the rails again. There is reason for cautious optimism.

First, it is good news that the parties are actually negotiating at all, after the breakdown of the WTO talks in Cancún, Mexico last year. The mistake was made of asking for cuts in agricultural subsidies before a procedure was worked out. Fortunately, that problem has now been rectified.

Second, now that the EU has expanded its membership, it has had to devise a two-tiered system of subsidy, which is surely unsustainable. As a result, the average subsidy in the EU budget will probably have to be reduced.

Third, the bilateral and regional trade agreements around the world are in fact a success, because the WTO has had to prove that multilateral negotiations are worth something. Australia has been a strong advocate of bilateral trade agreements – for example, those with Singapore, Thailand and the US – not just for their own sake, but to push for more progress at the multilateral level.

What happens next? The Doha development round has been expanded to twelve months (instead of the original six). This will enable the parties to prepare submissions on market access as well as have time to prepare adjustment packages to deal with the reductions. But most importantly, the multilateral negotiations are still alive and kicking, with some hope for future trade liberalisation on a global scale. Let’s hope European and US farmers will see sense and buy in, rather than keeping the rest of the world waiting until the cows come home.

Tim Harcourt,, Chief Economist, Australian Trade Commission, Sydney

www.austrade.gov.au/economists corner

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