AGRICULTURE: by Patrick J. ByrneNews Weekly
WTO rules permit assistance to agriculture
, December 2, 2000
World Trade Organisation (WTO) rules have not required Australia to radically deregulate agriculture, as politicians and bureaucrats claim.
American, European and Japanese farmers sell 80 percent plus of their products into highly protected domestic markets. The remaindered of their subsidised products is emptied onto the world markets and has a destabilising effect on the world commodity market.
Australia is in just the opposite situation. Over 80 percent of our major export commodities are sold on world markets and only 20 percent are sold domestically.
Large fluctuations in the price, supply and demand for commodities on the world markets mean that Australian farmers have often had to do it tough in the export markets.
To give Australian farmers some stability, over the past 100 years domestic market support schemes and various domestic and international marketing schemes were established.
However, the ideology of free trade and globalism has changed all that dramatically. Agriculture is being systematically deregulated.
Successive Federal governments have cut tariffs, overseen the weakening of quarantine restrictions on imports, and paid billions of dollars to State governments if they did away with domestic market support schemes.
As News Weekly has previously pointed out, in the advanced nations of the Organisation for Economic Cooperation and Development, government support makes up 40 percent of a farmer's income compared to only six percent of an average Australian farmer's income. Government support for farmers is actually going up in the USA, EU and Japan.
National Competition Policy has driven deregulation, not World Trade Organisation rules, as many politicians and bureaucrats claim.
A study of the WTO Agreement on Agriculture tells a different story. It shows that the rules were written by the major world economies to give themselves access to international markets, at the same time providing plenty of loop holes by which to continue supporting their domestic industries.
The two requirements of the rules is that government support should not, in general, be in the form of transfers from consumers to farmers and should not provide direct price support to producers.
Other than that, there is much governments can still do for farmers.
For example, the rules permit domestic market support schemes for farmers up to the value of five percent of the industry's annual output.
Annex 2 of the agreement is entitled "Domestic Support: the basis for exemption from the reduction of commitments".
First, government can provide a range of "programs, which include but are not restricted to the following": product and environmental research; pest and disease control services; extension and advisory services; marketing and promotional services; training services; and a host of infrastructure services.
Second, direct payments can be made to producers for various reasons such as farmers suffering low incomes. The payments must be on the basis of their income and not proportional to their production.
Third, governments can participate in income insurance and safety-net programs, again related to the farmer's income and not production levels.
Fourth, payments can be made - directly or by way of government financial participation in crop insurance schemes - for relief from natural disasters.
Fifth, government's can provide structural adjustment programs that see the retirement of farmers, or the movement of farmers into non-farm production activities, or the retirement of land from agricultural use.
To these ends, investment aid can be provided by governments.
Sixth, governments can provide payments for environmental schemes as part of environmental or conservation programs.
Seventh, governments can buy up and hold stockpiles of food for security purposes, and provide domestic food aid to sections of the population in need.
Annex Five even allows "designated products" being "subject to special treatment reflecting factors of non-trade concerns, such as food security and environmental protection".
The clear message of these rules is that governments are not required to simply abolish preferential treatments for agriculture in the name of free trade.
If there is the political will, then the WTO rules give governments an array of means by which to give preferential treatment to Australian agriculture.