Peter Gallagher

What deter­mines the atti­tude that any gov­ern­ment takes towards the nego­ti­a­tion of global agri­cul­tural mar­ket lib­er­al­iza­tion? You might as well ask: “what affects the pric­ing of equi­ties in the stock mar­ket?”. At any given point in the talks, the fun­da­men­tals—inthis case changes in the com­pet­i­tive­ness of agri­cul­tural production—may have less impact than sen­ti­ment; changes in the per­cep­tion of competitiveness.

Take, for exam­ple, Japan. Fol­low­ing the Koizumi cab­i­net reshuf­fle, and the replace­ment of the un-reconstructed for­mer Agri­cul­ture Min­is­ter (Iwanaga), there seems to have been some sort of change in the atmos­phere, although no change in fun­da­men­tals of this tiny (< 1% of GDP) sec­tor of the Japan­ese economy.

“Newly appointed farm min­is­ter Shoichi Nak­a­gawa says Japan needs to make com­pro­mises where it can to con­tribute to progress in market-opening talks under the World Trade Orga­ni­za­tion.”(The Japan Times Online)

This atti­tude con­trasts with that of France, which remains ready to throw up the bar­ri­cades against the impacts of ‘glob­al­iza­tion’ on French agri­cul­ture. But guess which econ­omy leads world agri­cul­tural trade? Europe. That lead­ing posi­tion is not due mostly to export sub­si­dies at all. Only dairy, among the major export prod­ucts of the EU, con­tin­ues to receive sub­stan­tial export sub­si­dies and even in dairy, sales of the most valu­able prod­ucts (e.g. cheese) are unsub­si­dized now in many markets.

More alarm­ing, still, is the story of USA com­mod­ity groups’ work to entrench mas­sive tax­payer funded sup­port in the next Farm Bill (2007). Bob Thompson’s paper on “The U.S. Farm Bill and the Doha Nego­ti­a­tions“ (.pdf file from the IPC—thanks to Ben Muse for the pointer) points out that there is a mas­sive jump in the USDA’s pro­jected pay­ments under the cur­rent Farm Bill between 2004 and 2005. He argues that this fund­ing, com­bined with a per­sis­tent ‘export pes­simism’ on the part of U.S. com­mod­ity pro­duc­ers, is a bad augury for the 2007 Farm Bill—and for the Doha round.

I agree Thomp­son on both counts. United States com­mod­ity groups are gloomy about their export prospects in soy (Brazil­ian com­pe­ti­tion), dairy (prob­lems on price com­pet­i­tive­ness due in large part to sup­port struc­tures), beef (BSE prob­lems), and some grains (exchange rates). But, look again at the chart. The USA has an out­stand­ing agri­cul­tural export record and plenty of oppor­tu­nity to expand shares of Asian and Middle-East mar­kets, par­tic­u­larly for processed food prod­ucts, if it can main­tain price-competitive com­mod­ity supply.