/ 6 August 2004

Crop subsidies could be scrapped

The initial euphoria at the rescue of the world trade talks last weekend may prove to be premature.

But at least the Doha round of negotiations — vital to boost world trade and jump-start the economies of the poorest nations — is still alive. A repetition of the disastrous failure to agree at Cancun last year could have killed the talks for years to come. In theory, there ought to be celebration because rich countries have agreed to scrap agricultural subsidies — the main source of bitterness among developing nations.

Organisation for Economic Cooperation and Development figures show that industrialised countries spend a staggering $350-billion a year bribing their farmers to produce crops, many of which could be produced more economically in developing countries.

Abolishing these subsidies — 32% of all revenues — is the best thing that can be done to help poor countries, and it would also be in the interests of rich countries as they would have $350-billion to spend elsewhere.

In these circumstances it is very good news that rich countries have at least agreed to end their export subsidies (the worst part but not the totality of subsidies).

The trouble is, they have not agreed on a starting date — and when it does happen (and that is anybody’s guess) the initial cut will only be 20%. Some of the poorest African states were delighted to have wrung special concessions on cotton out of the United States at the last minute. But this need not have happened because the World Trade Organisation is reported to have ruled that US cotton subsidies are illegal, anyway.

US taxpayers shell out $3-billion a year to cotton growers — a mind- boggling subsidy of 100%, which has enabled the US to capture 40% of world cotton exports at the expense of Third World growers.

Another section of the latest deal enables concessions to be made to countries with special needs. Does this mean that Japan, which imposes an almost unbelievable tariff of nearly 500% on imported rice, will be allowed an escape clause?

The optimistic scenario looks like this: having bought time until the US elections are over (no one is realistically expecting President George W Bush to confront his farmers before then), the US administration may be more susceptible to agreeing to attack subsidies before Washington’s ”fast-track” powers (limiting the power of Congressional special interests to obstruct) expire in 2007.

The trouble is that it is difficult to imagine Bush, who increased protection to farmers when he came into office, suddenly seeing the light — and, judging by his speeches, John Kerry won’t do much better, either.

But at least the show is still on the road. The agricultural gravy train is starting to run out of steam even if the brakes have not yet been applied. — Â