TRADE: by Colin TeeseNews Weekly
After Qatar: AustraliaÂ’s limited options
, December 15, 2001
The wheat industry is experiencing boom prices and, in most states, is set for a wonderful season.
If the industry listens to the National Farmers Federation, and to those in the Department of Foreign Affairs and Trade, the good times are certain to get better as a result of dragging the European Union to the negotiating table on agricultural trade subsidies. From that, they hope to see the end of export subsidies, and also our farm products gaining access to the protected markets of Europe and North America. But the question is: how likely is the new round of negotiations within the World Trade Organisation (WTO) to confer these advantages on Australiaâ€™s farm sector?
Previous portents are not encouraging. In the Uruguay Round, which ended in 1993, farmers were persuaded to believe that, at last, we had some kind of handle on agricultural subsidies.Concessions
Certainly, farmers were told, not much was given away by the Europeans - or for that matter the United States and Japan - but there was hope for the future. Subsidies were to be contained, and by 2003 there was agreement on a new Round of negotiations to set about reducing them.
It was this very commitment that the Europeans tried so hard to avoid a couple of weeks ago in Qatar. Meanwhile, subsides have been going steadily upwards over the last eight years. The EU hasnâ€™t bothered to explain why in its case. The US, however, has managed to define its subsidies out of reach of the negotiation. Its subsidies - Washington maintains - are non-trade distorting, and therefore beyond the reach of WTO rules.
In the Uruguay Round, Australia gambled on possible future gains on agricultural subsidies a decade ahead, though it paid an immediate price. We were obliged not to contest EU agricultural subsidies in the WTO in the period up to 2003. And, of course, that meant we could not, without appearing discriminatory, contest those of any other subsidiser - including the United States and Japan.
Are the portents for the upcoming negotiations, including wheat, any more promising? Almost certainly not.
First, our negotiators do not seem to be prepared for the fact that the Qatar Round, like all of its predecessors, will be a negotiation - not a forum to advance the interests of economic fundamentalists. Neither will the advantages of unilateral gestures of trade liberalisation be debated.
The WTO, like the GATT before it, remains a market place where trade concessions are bought and sold. Concessions by one nation may only be secured by offering benefits of like value to another.
In this context, the question Australia - and its farm sector - should be asking both the NFF and Australiaâ€™s negotiators, is what will Australia give to the EU, the US and Japan in payment for the agricultural concessions we will be asking for?
The fact is that - under the influence of economic fundamentalists - Australia has unilaterally reduced its barriers to trade to insignificant levels, not only for manufactures, but also in the area of agricultural and processed food products. Our trading partners already have most of what they want from us in terms of access; at least to the Australian market for goods.
This major impediment to our international bargaining position has been creeping up on us since the Whitlam years - to this writerâ€™s certain knowledge.Tariff cuts
In the first months of the incoming Whitlam government in 1973, Australia was facing the prospect of the Tokyo Round of trade negotiations. One of the first gestures of the new government was to announce a 25 per cent across-the-board cut in industrial tariffs to take immediate effect. This decision was taken with minimal input from the then Department of Trade and Industry.
And no amount of argument could persuade the Prime Minister - who seemed to be running everything at that time - to hold back the tariff cuts so that they could become a bargaining coin during the course of forthcoming trade negotiations. (We were then, as now, trying to obtain better outcomes for agriculture.)
Of course we were unsuccessful, though almost certainly our efforts were not helped by our precipitate action in unilaterally cutting tariffs. We tried to argue that we should be given credit for the unilateral cuts in tariffs ahead of the negotiation. Our negotiating partners insisted that the unilateral tariff cuts were taken for our own domestic reasons and had nothing to do with the negotiations.
This was fair enough, because that is precisely what the Government had said publicly, in announcing its decision.
Exactly the same happened before the Uruguay Round, again as a result of cuts introduced by an incoming Labor government.
Again today we enter the Qatar Round of trade negotiations with an almost empty cupboard of concessions - at least in so far as the trade in goods is concerned - and with the same ambitious wish list so far as agriculture is concerned.
Assuming the US, EU and Japan were to now put agricultural concessions on the table - a highly unlikely prospect in the view of this writer - how are they to be paid for? All of the possibilities are unattractive - whether one considers the broader national interest or, indeed, that of the specific sector.
First, there is the matter of agriculture itself. Here there are a number of options. We will be looking for better access and lower subsidies on wheat and sugar. At the very least our adversaries - especially the US - will want us to concede the single selling desk for our wheat. The same will be true of sugar.
Even those concessions - difficult though they may be for us to contemplate - may not be enough. The US has already signalled its concern about our quarantine regulations, even though WTO rules separate quarantine from trade negotiations.
Here serious problems arise. Say wheat concessions become available, but the US requires us to give up the single selling desk, and, possibly, to relax the quarantine on US grapes.
We have already faced this question in bilateral negotiations with Canada over our quarantine restrictions on Canadian salmon. We were threatened with restrictions on our access to Canada for canned fruit if we persisted with the salmon restrictions. In fact we gave in on the salmon issue, though it is unclear whether or not that was due to the threat to our trade in canned fruit. And there have been other examples.
The fact is when we allow quarantine matters to be brought into the trade equation, we open up the possibility of this kind of blackmail.
Anti-dumping action is another area where we could easily be blackmailed. Again, consider wheat. We have already been required to open our market for wheat and processed food containing flour.
If we are not able to stem the flow of low-cost imports, by resort to anti-dumping action, we could find our domestic market undermined. And while the domestic market for wheat may not account for such a high proportion of our wheat industryâ€™s total sales as for some other farm products, it is still important.
The political problems for any government which has to settle trade bargains by bartering one agricultural industry against another, in the end, become unmanageable. But even that may not be enough.
We may be required to find further bargaining chips outside agriculture - for example, in the areas of trade in services or in intellectual property. And here again, as with anti-dumping and quarantine, some of those trade-offs might be counter-productive for agriculture.
Perish the thought, but there may well come a time when the government of the day will be hoping that the negotiations on agriculture do not succeed, because the benefits will require sacrifices exceeding the value of any market access gains.
Pity the government trying to explain that to farmers - especially when their expectations have been raised to such high levels.
- Colin Teese was Deputy Secretary of the Department of Trade