The story of Europe’s pampered cows is a familiar one but always worth retelling. Each head of cattle in Europe gets a subsidy from the taxpayer worth $2,20 a day at a time when half the world’s population — three billion people in all — scrapes by on an income of less that that. Rightly, the comparison has been a cause of outrage, and is one of the reasons why the European Union has been under pressure in the current round of global trade talks to make deep inroads into its absurd protectionist regime for agriculture.
Well, here’s the stop press: the cows have had a pay rise. Calculations for 2003 by Duncan Green, of the NGO Oxfam, show that the average cow in the Dordogne (France) or Lower Saxony (Germany) can expect to have $2,62 a day lavished on it. The latest figures for 2003 show that the number of cows is down by two million but the total support for producers is up by $1-billion to almost $19-billion.
To be fair, Europe’s herd has almost certainly suffered a pay cut since 2003, because with the accession of 10 new countries in May last year the decision was made that the gravy train would stop at the old iron curtain.
To have offered the same CAP (EU agricultural policy) terms to the big agricultural economies of Eastern Europe would have broken the bank. It’s also the case that similar stories can be told of the handful of cotton farmers in the United States South, who receive massive federal handouts to the detriment of poor producers in West Africa.
Dismantling these barriers is the prime demand of developing countries ahead of the World Trade Organisation’s ministerial meeting in two months’ time. Last week, Washington and Brussels said they were prepared to break the logjam in the talks by making big concessions on agriculture. The Americans said they would cut the support that distorts trade the most by 60%, while the EU said it would reduce support by 70%. Brussels made it clear that it wanted to restrict market access in ”sensitive areas”, including dairy — an indication of how difficult the endgame of the round that began four years ago next month is going to be.
Old trade hands who know the way these negotiations work raised an eyebrow at the coordinated EU-US move, pointing out that Brussels and Washington pulled the same stunt in advance of the Cancun meeting two years ago.
On closer inspection, the pre-Cancun accord allowed the rich West to carry on largely as before, so it came as no surprise to find that last week’s ”breakthrough” was another case of smoke and mirrors. Such is the complexity of agricultural support that it is easy for countries to shuffle subsidies from one pot to another. Oxfam calculated that the US offer would lead to a cut in spending on agriculture from $74,7-billion a year to $73,1-billion; the EU would not need to cut support by a single euro.
The response to last week’s events has come in three waves. Initially, the mood was one of relief; somebody was at last putting offers on the table in an attempt to get the moribund talks moving again. Quite quickly, however, the developing countries saw through the offer and made it clear that it failed to meet their aspirations for the round. Finally, France has orchestrated opposition to the plan within the EU, claiming that the trade commissioner, Peter Mandelson, has exceeded his mandate.
All of which leaves matters looking pretty tense at the WTO’s general council meets in Geneva this week. The importance of this get-together can hardly be exaggerated. In Seattle in 1999 and in Cancun in 2003, the main reason the talks collapsed was that there was too much for trade ministers to do and too little time for them to do it. This time, it is seen as crucial that ministers arrive in Hong Kong with a text all but agreed. This week’s general council is the last real opportunity for the sort of progress that would make it possible for Pascal Lamy, the new WTO director general, to feel confident about the outcome in two months’ time.
Lamy said last week he was more confident that a deal could be done in Hong Kong, but, even so, the chances of another failure remain high. In truth, that might be no bad thing. Many developing countries are saying no deal is better than a bad deal, and on balance they are probably right.
The dangers involved in a collapse should not be underestimated. There would be a risk that, if Hong Kong joined Seattle and Cancun in the pantheon of WTO fiascos, the organisation would wither on the vine. For those who see the WTO as the Great Satan, this would be welcome; the downside would be that the rich, powerful countries — like the EU and the US — would use their clout to negotiate one-sided bilateral or regional trade deals with their weaker neighbours. Anybody who thinks the terms of WTO agreements have been onerous for the poor should take a look at some of the bilateral deals the US has been cutting. Better a flawed multilateralism than the law of the jungle.
Optimists say the movement shown by the EU and the US last week is more important for the display of political will than it is for the details of what’s on offer. The negotiations are more fluid, they argue, with the possibility of more concessions over the coming weeks. The political pressures on the Europeans and the Americans suggest that Mandelson and the US trade representative do not have a lot more to offer. Unless the developing countries fold under the pressure, that makes a meaningful deal in Hong Kong difficult to envisage.
When he was the EU’s trade commissioner, Lamy expressed deep frustration at the mechanics of the WTO, calling it, on numerous occasions, a medieval organisation. The WTO now has almost 150 members, not the handful of countries that signed the General Agreement on Tariffs and Trade at the end of World War II. What’s more, the willingness of the bigger developing countries — China, India and Brazil — to flex their muscles, has meant it is no longer possible for the US and the EU to cut their own private deal and then foist it on the rest of the world. Unfortunately, neither Washington nor Brussels seems to have woken up to this changing reality.
Over the next few weeks, the crucial role will be played by the G20, a group of developing countries including China, India and Brazil, which has provided the political backing for the poor countries in Africa, Asia and Latin America they have previously lacked. The hope of the EU and the US is that they can fracture this uneasy coalition, especially since the Chinese will not want talks they are hosting to end in collapse.
Should the big two succeed in cracking open developing country markets while protecting their own, it would be a double tragedy. It would be a repudiation of their own history; Britain, the US, Germany all used protectionism when their industries were too weak to face the full blast of competition. And it would mean subsidising cows has a higher priority than lifting half the world’s population out of poverty. — Â