INTERNATIONAL TRADE: by Colin TeeseNews Weekly
Behind the WTO talks
, August 14, 2004
One of the drawbacks of writing on public policy is that when issues make headlines the hapless commentator is required to provide some analysis of them with only limited time to understand what has actually happened and what might be the consequences of the new development.
In the week beginning August 2, this commentator has been confronted with two such developments within 24 hours.
First was the announcement from Geneva that negotiators in the World Trade Organisation (WTO) had reached an understanding on how they might open discussions which could ultimately lead to some kind of agreement on the reduction of subsidies on agricultural production.
Second was the announcement that the Australian Labor Party would support the government-negotiated so-called Free Trade Agreement with the US. This second proposition is not unrelated to the first, but its analysis must be put aside for another time.Irresponsible euphoria
As to the first proposition, it is important for the farm sector to understand that, despite the quite irresponsible euphoria displayed by sections of the media towards the news from Geneva, nothing of substance has been agreed; only the way has been opened for talks about whether there is a basis for the reduction of some
level of subsidy on some
The Australian Financial Review
has been right up there with the most irresponsible. "Global trade deal to cut subsidies," shouted its headline, "Doha round rescued" and, worst of all, "$900 billion gain in sight". All three assertions are wild, misleading and quite without foundation. If they say anything, it's about the paper and its correspondent rather than what has happened in Geneva.
It is worthwhile reflecting on why we have got to the point where so much misinformation is disseminated? It starts with the media. Over the last 20 years, the process of international trade negotiations has been discovered - and to a large degree sensationalised - by the media.
Politicians have assisted in this process. As a result, the privately conducted backroom discussions needed to advance a delicate balance of give and take between nations is introduced into public debate long before the negotiating process can cope with it.
At a practical level, this tends to paralyse the negotiating process. At a policy level it almost compels politicians to embrace media exaggerations about possible outcomes from the very beginning of negotiations (as is already happening with the Geneva outcome) and so to corrupt the negotiating process.
Here's how it happens here. In an attempt to gain political advantage, our government will encourage interested parties, such as farm groups, to expect much more from the negotiations than will be possible to deliver. Worse still, at some point the pressure of unrealistic expectations will infect the negotiating process itself and actually diminish rather than enhance the possibility of a successful outcome.
And, of course, politicians who have built up expectations, cannot afford to admit failure. In the end, no negotiation can be allowed to conclude in obvious failure. Invariably, where failure is imminent, a contrived outcome is engineered which can present the illusion of success, even if nothing real has been gained.
It is only afterwards that true position is revealed.
This appears to be what has happened with the so-called Free Trade Agreement our Prime Minister has negotiated with the United States.
Mr Howard gained almost nothing of what he said at the outset Australia must have in any agreement and, from our side, concessions have been made which he said would never be conceded. Thus expectations had been so raised that failure could not be contemplated. Mr Howard had to have an agreement, even if this meant giving up all his stated objectives for almost no return.
And somehow the end result had to be presented to the public as a negotiating triumph.
Much the same happened under a Labor government - and for the same reasons - in the previous round of multilateral negotiations a decade ago, which set up the World Trade Organisation.
That series of negotiations was rescued from imminent collapse on the basis of a so-called breakthrough that promised - above all else - a meaningful outcome on agriculture.Gains never materialised
The talks were finally ended, and heralded as successful. The outcome on agriculture, which Australia's politicians - speaking on behalf of the farm sector - described as a breakthrough. Mention was made of possible gains to our exporters worth billions in new exports, without any supporting data. What was not explained was that these so-called gains were to be "phased in" over more than a decade. In fact, they never materialised.
What did materialise, however, was Australia's contribution to the deal. In return for the so-called concession, we agreed not to contest the continuation of the remaining illegal (in WTO rules) subsidies in the WTO.
We did not because we could not, and it is those same subsidies which are to be the subject of the resumed Doha Round in Geneva. The very best we can hope is for some real reduction in agricultural subsidies; and even if we get that outcome we can expect to be asked for some balancing concessions in return. In which case we would have paid twice (once in the Uruguay Round a decade ago and again in Doha).
Not much of a bargain.Fantasy
But farmers should beware. We may not get it so good. What exactly is on the table for negotiation in the Doha Round?
Perhaps first, we should be clear about what is not
up for negotiation. And that is farm import policy, including total
subsidy policy in any of the major developed farm producing countries.
The idea that the European Union, Japan, the United States and Korea, to name some, intend to throw open more than a tiny fragment of their markets to imports should be regarded as fantasy - no matter what might be said to the contrary, by politicians.
The Europeans have made that abundantly clear to us over the last 40 years. We should take them at their word. As to the US, we know at first hand what they are not prepared to give from the FTA negotiations. Don't expect Japan or Korea to be more forthcoming.
What we do know is that a large part of US agriculture cannot survive without heavy subsidy. For example, each US cotton grower needs US$250,000 a year. And they aren't the only ones. We also know that, while the farm vote is important, the subsidies are also in place to prop up US banks to whom farmers are heavily and permanently indebted. Don't count on US subsidies disappearing.
And that's not all. We know further that any liberalising of the US market cannot be multi-lateral because of the inescapable commitments the US has to Latin American countries under various bi-lateral agreements.
It's much the same for the EU. It, too, has import commitments to various associated developing countries - though, unlike the US, fewer of these commitments involve products of interest to Australia. There's another point. To the extent that the survival of key EU agricultural sectors cannot survive without subsidy, don't expect to see these given up.
And remember, any commitment to cut subsidies allows for sensitive industries to be excluded. And most of these, whether we are talking about the EU, the US, Japan or Korea are in product categories of interest to Australia. Some producer organisations in Australia have been wise enough to recognise this already.
So farmers beware. When any politician tries to tell you about the benefits you can expect from Doha, keep all of the above in mind.
And never stop reminding them that, whatever happens in Doha, more could be done for our farmers simply by looking after their interests in their own domestic market.
- Colin Teese is former Deputy Secretary of the Department of Trade.