December 3rd 2005

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Articles from this issue:

COVER STORY: HIGHER EDUCATION: Top university accused of elitism

EDITORIAL: Trade talks: smoke and mirrors

CANBERRA OBSERVED: Workplace changes set to change societal fabric

SCHOOLS: Vouchers for schools - giving parents choice

PRIMARY PRODUCTION: Advantages of single-desk for Australian wheat

SUGAR DEREGULATION: Beattie to abolish single selling-desk

STRAWS IN THE WIND: Working women and pensions / One hand washes another: European-style / Those were the days, my friend / The burning Bush

ABORTION PILL: Part of the disease, not part of the cure

OPINION: The difficult dilemma of Australia's Muslims

FOREIGN AFFAIRS: Why North Korea got one more chance

CULTURE AND SOCIETY: Great Russian writers on the riddle of humanity

CINEMA: Three Australian films fall flat: The Proposition, Jewboy and Little Fish

BOOKS: The Lost Executioner: A Story of the Khmer Rouge, by Nic Dunlop

BOOKS: Victoria Cross: Australia's Finest and the Battles They Fought, by Anthony Staunton

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Trade talks: smoke and mirrors

by Peter Westmore

News Weekly, December 3, 2005
The Australian Government refuses to acknowledge that the promised European Union and United States' cuts to export subsidies will still leave intact the EU and US's massive trade-distorting domestic subsidies, writes Peter Westmore.

The European Union has been blamed for the possible imminent collapse of WTO trade negotiations.

The recent meeting of Asia Pacific leaders in South Korea called on developed nations to break "the current impasse in agricultural negotiations", with a particular focus on eliminating the European Union's export subsidies.

Ministers from 148 World Trade Organization member-states will meet in Hong Kong in December this year to try to conclude an agreement to cut export subsidies and other impediments to free trade in agricultural goods.

The APEC leaders, and particularly Australian Prime Minister Mr Howard, said the talks may founder if the EU doesn't agree to cut export subsidies.

The strange thing is that last May, and again last October, the European Union offered to cut them.

Last May, the European Union Trade Commissioner, M. Pascal Lamy, wrote to WTO members, offering to halt subsidised farm exports if other WTO countries, including the United States, Canada and Australia, did likewise.

Proposal criticised

Although the proposal was criticised by one of the EU's largest members, France, it was supported by other countries, including the UK and Germany.

However, according to recent EU figures, export subsidies account for just 6 per cent of the EU's total support for its farmers.

According to official EU figures, subsidies on farm exports were €2.8 billion ($US3.3 billion) in 2001, a fraction of the €48 billion ($US57 billion) in its 2003 agricultural budget. (BBC News, May 10, 2004).

In other words, the EU's concession of removing export subsidies would make relatively little difference to the direct subsidies being paid to keep European farmers on the land, and in fact, export subsidies could be replaced by direct subsidies.

The United States, which also subsidises its agricultural industries heavily, last October offered to end its farm subsidy export programs by 2010 and cut its domestic subsidies by 50 per cent - provided the EU did the same.

Just how genuine was this offer? One development agency described the American proposal as "smoke and mirrors", saying it would cut US subsidies on agriculture (which are 50 per cent greater than the EU's) "by only 2 per cent - from $74.7 billion to $73.1 billion at the end of the Doha Round implementation period".

Céline Charveriat from Oxfam said, "If this offer goes ahead, trade-distorting domestic subsidies will remain almost completely unchanged and dumping will continue. Meanwhile harsh concessions on market access will be wrung from developing country members in exchange for illusory progress [in trade liberalisation]."

In the Australia-US Free Trade Agreement negotiated last year, Australia gave American agriculture unfettered access to Australia. However, the US insisted that its barriers to major Australian agricultural products, including sugar, dairy products, beef and wine, remain.

Further, Australia agreed to make quarantine negotiable, in other words, to water down the existing strict controls which prevent the entry of many exotic diseases into Australia.

In making its offer to the WTO last month, the United States knows that Europe will not abandon its farm subsidy program, which it judges necessary to preserve both a way of life, and social stability.

The riots in France last month, which centred on Arab and black youths living in urban ghettos, will ensure that European nations maintain policies which prevent the development of a rural underclass.

In any event, according to the Organisation for Economic Co-operation and Development, EU and US agricultural subsidies exceed $100 billion, and the farm lobby is an extremely powerful lobby in the US Congress.

The US Department of Agriculture is proud of its role in subsidising US farmers.

Its web site states: "The 2002 Farm Bill provided a total of $176 billion in farm-related assistance, a 74-percent increase over the assistance the previous Farm Bill would have provided in the absence of any additional emergency assistance."

It further makes clear that reductions currently being implemented are owing to rising prices, making existing subsidies less necessary.

What all this means is that, at the next round of trade negotiations in Hong Kong, the United States and the European Union will offer trade "concessions" which have only a marginal impact on the massive subsidies that they will continue to provide to keep their farmers on the land.

Asian nations which support their farmers - including South Korea, which hosted the recent APEC meeting, and Japan, which heavily subsidises both rice and beef - mainly produce for their respective domestic markets, and so are unaffected by multilateral plans to reduce export subsidies.

The end result of this charade will be that the US and the EU will be able to claim the credit for a breakthrough in world trade liberalisation, while making insignificant concessions in both overall agricultural subsidies and market access.

It seems that the Australian Government is oblivious to the fact that we are being taken for a ride ...

  • Peter Westmore is national president of the National Civic Council.

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