The forgotten trade agreement

Failure of the Bali conference could spell the collapse of the WTO multilateral trade liberalization process

October 12, 2013

Joe-RosarioEDMONTON, AB, Oct 12, 2013/ Troy Media/ – While the Canada EU Comprehensive Economic and Trade Agreement (CETA) and, more recently, The Trans Pacific Partnership (TPP) negotiations are receiving some press coverage, the same can’t be said for the  forthcoming Doha World Trade Organization’s (DDA) Ministerial conference to be held in Bali, Indonesia, in December.

The Bali conference will be attempting to conclude a few parts of the original commitments of the WTO’s Doha Round of Trade Negotiations.

Few countries are as dependent on international trade as Canada. In fact, trade accounts for as much as 61.1 per cent of its GDP.

Agriculture and food, important to Western Canada in particular, account for $60.4 billion or 13.3 per cent of Canada’s total exports in 2011. Canada is the world’s 5th largest exporter of food and agriculture.

International trade policy in agriculture and food commodities has been plagued by protectionism more than most other sectors of economic activity and it is the one most influenced by politics rather than economic factors. Whilst trade in other politically sensitive commodities like textiles, footwear, steel etc. has long since been liberalized through a series of multilateral trade negotiations under the auspices of the GATT –The General Agreement on Tariffs and Trade — agriculture remains an exception. It was not until April 1994 when the Uruguay Round of trade negotiations were completed  that agriculture was first meaningfully drawn into the GATT framework.

Modest reforms of domestic and export subsidies and reduction of tariffs were made in the Uruguay GATT negotiations. Their major contribution was making transparent the magnitude of protection in the agricultural sector. Complex tariff restrictions were required to be converted to their tariff equivalents, and to identify the kinds and magnitude of subsidies. This transparency showed the irrational extent to which most advanced countries protected their agricultural sector.

Canada was no exception though we had huge export interests in agricultural products. Canada converted tariff equivalents for certain dairy and poultry products to between 182.1 per cent for turkey to 351.4 per cent for butter ; even for our leading exports we created tariff equivalents of 57.7 per cent for durum and 90 per cent for other wheat.

Canada proudly acknowledged these as “prohibitive levels” to maintain a high level of protection for supply managed products, especially in Quebec and Ontario. These levels, however, did not approach the ridiculous tariffs of Japan’s  rice tariff of over 700 per cent, or those of the Europeans and the U.S. with their own versions of tariff equivalents, and the magnitude of their subsidies, which would have made Professor Gottfried von Haberler whose GATT report on the effects of protectionism in agriculture and their impact on developing countries roll over in his grave.(These tariff equivalents are apart from constraints in the form of technical barriers, (TBT’s), standards, sanitary and phytosanitary measures which frustrate agriculture like GMO’s, animal growth promotants, etc.)

The parties to the Uruguay agreement recognized the need to continue the reform of agriculture trade starting a year before the full implementation of the Uruguay commitments in 2000. Thirteen years have elapsed since this commitment to reform agriculture trade.

Negotiations within the Doha agenda led to a package of impressive liberalization and rules based trade reforms in the Agreement on Agriculture (AoA) by the time of the Hong Kong WTO meeting in 2005. Across the board tariff reductions of 50 to 70 per cent, depending on existing tariff equivalents; overall trade distorting subsidy cutbacks of up to 80 per cent, elimination of export subsidies, minimal exceptions for so called ‘sensitive’ products and various other disciplines, were proposed.

However, the AoA fell victim to the Doha declaration which required the entire package be completed simultaneously to give a so-called “balanced outcome” for all parties to the negotiations. There were differences in other elements such as on industrial products and Intellectual property. This ignored the longstanding imbalance of the past 50 years between agriculture and industrial goods. The negotiations remained dormant till 2009 for various political reasons until revived by the G20 and the G8 Heads of State and the 2008 financial crises.

The agriculture package remained intact till the WTO’s 2009 Ministers meeting when a dispute over a technical price trigger for “Special Safeguard Measures” on food import surges erupted between the U.S.  and India and China. In actual practice, the measure, if implemented, would cause temporary short term and infrequent trade disruption (An unfortunate aside was the Canadian insistence on flexibility for the number of ‘sensitive’ tariff lines—read dairy products).

The art of political compromise, a hallmark of earlier GATT negotiations, was abandoned for short-term political considerations and personality conflicts. The U.S. led addition of various new elements of international trade in Services, Intellectual Property, the Environment, State Owned Enterprises, etc. only added to the stalemate.

Ostensibly to “modernize” and make the agreement more “ambitious,” this only served to increase the division between developed and developing countries, in particular the so called BRIC countries — Brazil, Russia, India and China, now South Africa and Indonesia. Given their impressive growth and exports, these emerging markets were called upon to assume greater responsibilities. The 2009 meeting ended in disaster. The negotiations have remained in limbo since.

Dr. Joe Rosario recently retired as Director, Planning Secretariat, Alberta Agriculture, Food and Rural Development. He served as the most senior policy advisor, economist and trade policy advisor for Alberta Agriculture for a career spanning 35 years.

Next: What’s at stake if the WTO Doha Round of trade negotiations fail

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