TCS Daily

Jacques in the Box

By Alan Oxley - June 24, 2003 12:00 AM

The WTO negotiations have just got serious. Australia and France, long-term foes over reform of global agricultural trade have started making threats: the latter to block the negotiations in the WTO; and the former to block negotiations inside the EU on reform. Is a failure looming for the WTO ministerial conference in Cancun in September? Maybe. A certain sort of failure may be just what is needed.

When WTO Ministers set up the Doha negotiations to reduce global protection of trade in November 2001, they agreed to set targets to cut protection of agriculture by March 2003. But that milestone has come and gone. They can't reach agreement. The key reason is that Jacque Chirac and Gerhard Schroeder won't allow EU agriculture officials to consider how to reduce EU farm subsidies until 2013.

The Cancun meeting was meant to be a mid-term stocktake on the way to conclusion in 2005. Prospects now for it finishing on schedule are bleak. At a WTO seminar in Geneva in mid June, Australia's trade Minister opined that if no progress is possible on agriculture, then maybe negotiations should be suspended until it is.

Who is the Australian Trade Minister to make this threat? There is some history here. Australia is the head of the 17 member Cairns Group of agricultural exporters. It was formed during the Uruguay Round negotiations over a decade ago to force the pace on reform of farm trade.

At a similar critical point when those negotiations stalled in 1988 (because no progress in agriculture was possible), the six Latin American members of the Cairns group, lead by Argentina and Brazil, blocked the negotiations for four months until the European Community agreed to get serious about agriculture. Is history about to repeat itself? It is in other ways. The Uruguay Round was launched over the objections of France because agriculture was even on the table. It was finally pulled into line by the rest of the EC.

France is the spoiler again. Eurocrats in Brussels know EU farm subsidies must be reformed if the ten new members are to be integrated into the EU. It cannot afford to extend its expensive farm subsidies to them all. However Chirac and Schroeder blocked work on reform at the EU Summit in November, famously snubbing Blair who had no inkling this was on.

The farm eurocrats reverted to a more modest reform effort. Instead of reducing subsidies, they have proposed a package to rejig them. Big farmers get less, farm aid is expanded and subsidies would not be tied to production. France will not have this either. It stalled review of that package by EU agriculture ministers last week and Jacques Chirac tried again to get EU Leaders when they met in Thessalonika to block this process. He failed but has announced that France will anyway filibuster the EU agriculture talks.

Eurocrats evidently hoped a modest rejigging would give them something to trade in the WTO. A vain hope. By EU assessments the package would reduce EU agricultural production by only 3 percent. Global traded negotiations are not set up to secure such paltry results.

Where is US Trade Representative Bob Zoellick in all this? He faces two choices at Cancun. Try to finesse an impression of progress on agriculture, or use the event to stand the EU up. Expect Pascal Lamy to attempt to persuade him nothing is to be gained by putting the EU in the dock. But Lamy would just be playing the good cop to Chirac's bad cop.

If Lamy is serious about improving the effectiveness of the global trading system he will privately counsel Zoellick to generate a crisis at Cancun and concede nothing to the EU. This would not be too hard. The reality of the EU position is that improving the lot of the world's poor is not a priority. It has made a big show of removing barriers to imports where there is little trade and committing not to pay subsidies in insignificant markets. It is more interested in using the WTO to push a costly, first world environment agenda on developing countries.

Zoellick is in a comfortable position to do this. His bilateral trade agreement program has momentum. He would do everyone, including Brussels, a favor if he lined up with the Cairns Group and told the EU not to bother to come back to the table until they were ready to negotiate. The only thing that will enable the rest of the EU to put Jack Chirac back in his box is global pressure.

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