WORLD TRADE ORGANISATION - by Colin TeeseNews Weekly
Why Australia couldn't win in Seattle
, December 18, 1999
Australia's Trade Minister, Mark Vaile, was among those Ministers who had gone to Seattle hoping to launch a new Round of trade negotiations.
As it turned out, Mr Vaile understandably was trying to put the best face upon the outcome. Speaking specifically about agriculture, he insisted that progress had been made, and that those advances would be carried forward to a resumed session in Geneva.
Echoing those sentiments, the Age's Tim Colebatch was also positive. He insisted that the Seattle collapse wouId not affect further negotiations on agriculture which were, in any case, part of a loose commitment attached to the Uruguay Round.
The two Australians were quickly disabused of any such hopes by no less an authority than the Commissioner for Agriculture of the European Union, Mr Franz Fischler.
Speaking to the question of resumed talks in Geneva, he thundered ominously: nothing is carried forward, we start again with a clean sheet of paper. Fischler, who articulates farm trade policy of behalf of the thirteen EU Agriculture Ministers, should know.
Australia may well maintain that farm protection policies are unacceptable. And we are reminded that the EU spends about A$200 billion p.a. on protection for its agriculture. The US and Japan each about A$75 billion. Australia about A$2 billion.
Getting rid of half the subsidies of the big players will, our officials have apparently calculated, improve the lot of Australian farmers by A$1.5 billion - based on the assumption that reduced subsidies will permit our farmers to export more at a higher price.
Unfortunately, that assumption is questionable.
Such is the nature of commodity trading that for exporters the reality is that increased export volumes invariably come at the expense of price.
Moreover, without knowing the value judgements behind the A$1.5 billion calculation of gain, it cannot be taken on trust. Wildly extravagant estimates of the gains yielded from the Uruguay Round were publicly announced, only to be later significantly reviewed downwards.
But where will any of this get us? Are these subsidies really up for grabs? Of course not.
All of the heavy subsidisers - and they don't stop at the EU, the US and Japan - are protecting domestic farm production for purely political reasons. To contest that reasoning merely engages our negotiators in an exercise in futility, and raises false hopes in the minds of our farmers.
Such agricultural protection is not to the slightest extent concerned with efficiency, still less with trade policy. In the EU and Japan, its purpose is to maintain farm populations. Since that purpose is not negotiable, neither are the protection mechanisms necessary to support it.
For Europe, it has been policy since the EEC was formed forty-three years ago. Membership of the WTO, and before it the GATT was, and still is premised on the acceptance of that policy. In different degree, the same attitude also infects the US and Japan.
There is another consideration. Any relaxation of agricultural protection would have to be paid for. Those giving will demand some equivalent advantage of their choice in the Australian market. That is still the nature of negotiations in the WTO.
And here lies the difficulty for Australia. Much of our negotiating coin in the form of industrial protective tariffs has been given away.
Many, if not most, industry tariffs are already at lower levels than we are required to maintain under WTO rules; consequently, they are quite useless for bargaining purposes. And those few remaining with protective effect are part of a well-publicised and planned reduction.
Put simply, tariffs, no longer service a protective purpose - and ours don't - and are useless as a negotiating instrument.
It follows, therefore, that any bargains struck - in pursuit of access benefits of perhaps questionable value to farmers - will almost certainly come outside the tariff, and, indeed, outside trade areas. Some such bargains could carry with them crippling political disadvantages for whatever party is in government.
Suppose we were asked to accept unlabelled genetically-modified imported food as a trade off for agricultural access into a particular market. Two difficulties could arise. Granting such a concession might actually deny us access to another market. And what might be the domestic political cost of such a bargain?
And how would we respond to a demand for agricultural access to a particular market for which the balancing concession was permanent storage in Australia of that country's uranium waste?
Pity the government confronted with the dilemma of trying to sell to the Australian public any such deal. Even more so if the agricultural concessions happened mainly to benefit, not small farmers, but a large international agribusiness that happened not to pay tax in Australia!
It may turn out, after all, that what we can do most to help our farmers is to emulate, rather than contest, what others do; and first and foremost assure them of a pre-eminent place and secure them high returns, in their home market.
So much for the agriculture negotiations, which, whatever their importance to Australia, may not be the main focus of others. What happened, or did not happen, in other areas in Seattle, assures WTO watchers of interesting days ahead.
.c1.- Colin Teese was Deputy Secretary of the Department of Trade;