Cap Reform

Don’t imag­ine that the EU deci­sion on changes to the Com­mon Agri­cul­tur­al Pol­i­cy mean a new deal for world agri­cul­ture mar­kets. To real­ly open up world food mar­kets and help the world’s poor­est peo­ple achieve bet­ter incomes and greater food secu­ri­ty we need a new approach to the WTO agri­cul­ture nego­ti­a­tions but his­to­ry says the EU won’t give it to us. Euro­pean Agri­cul­ture Com­mis­sion­er Franz Fis­chler claims this week’s deci­sion will be a break-through for the world trade talks. That’s just spin. Aus­tralian farm­ers, for exam­ple, will see no ben­e­fit from this week’s EU deci­sion on changes to the CAP because it does not direct­ly change Europe’s restric­tive import tar­iff-quo­tas or destruc­tive export sub­si­dies. Farm­ers in the world’s poor­est coun­tries will still find their prices depressed by EU export sub­si­dies and Euro­pean con­sumers will go on pay­ing too much for sug­ar, dairy, meat and cere­als. As the French farm min­istry said, the EU deci­sions make no changes to the CAP’s ‘fun­da­men­tal prin­ci­ples’. Expe­ri­ence tells us that allow­ing the EU’s farm pol­i­cy czars to set our ambi­tions for open­ing up world food mar­kets does­n’t lead to real change. It’s like allow­ing the fox to run the hen house. Just look at what hap­pened the last time lead­ing up to the 1994 WTO agree­ment. The world wait­ed two years after the planned end of the nego­ti­a­tions in 1990 for the EU to sig­nal how far it would move and then watched from the side­lines as the EU and the USA craft­ed a flawed deal that found their mutu­al ‘com­fort zone’. The big break­throughs in the agree­ment were in fact secured years ear­li­er dur­ing the 1988 ‘half way’ meet­ing of the trade round when the Aus­tralian-led Cairns Group called a halt to all nego­ti­a­tions unless the EC put its export sub­si­dies on the table for the first time and the USA start­ed talk­ing about prac­ti­cal ways of cut­ting mar­ket access bar­ri­ers. With­in weeks the focus of the talks changed; it was the per­for­mance that was delayed. What has changed most dra­mat­i­cal­ly in the WTO since then is is the great­ly increased influ­ence of devel­op­ing coun­tries who make up more than 100 of the 146 mem­bers of WTO. Their inter­ests are nom­i­nal­ly the focus of the Doha round of nego­ti­a­tions and they have the pow­er to call the tune on an agri­cul­ture agree­ment that is in their inter­ests, if they act togeth­er as a group. Up to now, they haven’t found the incen­tive to do that because of the skewed dis­tri­b­u­tion of gains from open­ing up world food mar­kets. Cuts to agri­cul­tur­al pro­tec­tion will have more impact on poor coun­tries’ economies than any oth­er WTO trade agree­ment because farm­ing is such a big employ­er, but not all of the impacts on them will be pos­i­tive. Eco­nom­ic mod­el­ers in the World Bank and in think-tanks in Europe, Aus­tralia and North Amer­i­ca have shown that prices for meat, sug­ar, wheat, dairy, rice and oth­er prod­ucts that devel­op­ing coun­tries pro­duce, but also import, will shoot up when world trade is reformed. The net gains are huge—at least bil­lion a year says the IMF, for full liberalization—and on aver­age every­one is bet­ter off. Prob­lem: although every­one gains some­thing, some of the poor­est devel­op­ing coun­tries will see their import bills rise faster than their income gains from high­er prices for their own pro­duc­tion and exports. They wor­ry, too, about their food secu­ri­ty in a new high­er-priced world mar­ket. Solu­tion: there is ample room for the win­ners to com­pen­sate the losers, still leav­ing every­one bet­ter off. The eco­nom­ic mod­els show that the income gains to EU and USA from real trade lib­er­al­iza­tion are hun­dreds of times greater than these loss­es to poor coun­tries: as much as 400 times accord­ing Den­mark’s Research Insti­tute of Food Eco­nom­ics which mod­eled the mod­est com­pro­mise trade lib­er­al­iza­tion pro­pos­al put for­ward by Stu­art Harbin­son, the Chair­man of the WTO agri­cul­ture nego­ti­a­tions. It seems obvi­ous that there’s the mak­ing of a much big­ger glob­al oppor­tu­ni­ty than the EU has in mind if the deal can be struc­tured in a busi­ness-like way. Sad­ly, none of the nego­tia­tors is yet think­ing out­side the same old box. The devel­op­ing coun­tries as a group must be the focus of the deal and a bro­ker is need­ed to con­sol­i­date their inter­est in the lib­er­al­iz­ing world food mar­kets by set­ting up a mech­a­nism for the win­ners (most­ly rich coun­tries) to com­pen­sate the losers (some of the world’s poor­est coun­tries). The WTO and World Bank act­ing togeth­er can sup­ply the mech­a­nism. Can the Aus­tralian gov­ern­ment be the broker?

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