Developing Countries Split over WTO Farm Protection

By | July 28, 2008

The world’s poorer countries are divided over proposals for a new global trade deal, with developing country food importers pitted against exporters pushing for greater liberalization.

The differences turn on two technical measures in the proposals on agriculture in the World Trade Organization (WTO) Doha round talks — “special products” and the “special safeguard mechanism.”

“These safeguards are at the core of the development outcome of the round as they involve the concerns of food security, livelihood security and rural development in developing countries,” several developing-country alliances accounting for half the WTO’s 153 members said in a joint statement.

Developing countries such as India, China and Indonesia have argued for measures at the WTO to protect their millions of subsistence farmers from the impact of trade liberalization.

But developing-country food exporters like Thailand and Uruguay believe increased sales of farm produce to other poor countries are a key source of growth and development.

“India does not have a monopoly on poverty,” said Ronald Saborio Soto, Costa Rica’s ambassador to the WTO. “When an employee wants to keep his job he doesn’t care whether exports go to a developing or developed country,” he told Reuters.

“The North-South distinction is completely artificial at the WTO. It’s the easiest way to justify the very nationalistic protectionism of some countries,” said Saborio, whose country coordinates the Latin American tropical product exporters.

Friday’s delicately balanced compromise, a turning point in talks that started last Monday to save the Doha round, revised proposals on special products and the special safeguard mechanism to strike a balance between importers and exporters.

Under the proposals developing countries can declare products “special” to shield them from full tariff cuts in the interests of food or livelihood security or rural development.
The discussion around special products involves the number of products that could be designated as such, and how many of those would be fully exempt from tariff cuts.

The developing countries, who issued the joint statement, said they could accept the compromise that 5 percent of products would be exempt from cuts in duty if declared special, but wanted to raise the total number of products eligible for this designation to 15 from 12 percent. Developing country exporters had been pushing for no products to be completely exempt.

Speculation swirled in the WTO corridors that China — a vast potential market for rich and poor countries alike — would declare rice, cotton and sugar special products. That would hurt rice exporters like Thailand and cotton exporters from West Africa. The United States has also said it wants China to open its cotton market as a condition for making big cuts in its controversial cotton subsidies.

China’s WTO ambassador Sun Zhenyu told reporters that China reserved the right, like any developing country, to designate some sensitive products as special, some of which would have no tariff cut, but declined to specify which ones.

The special safeguard mechanism would allow developing countries to hike farm tariffs temporarily — in some cases to above their current ceilings before any Doha round cuts — to counter a sudden influx of imports or collapse in prices.

Exporters fear they could actually lose market access, depending on the terms, as the new facility is taken up by countries like India who do not currently enjoy such protection.

Uruguay’s WTO ambassador Guillermo Valles Galmes said current proposals for the special safeguard mechanism would have seen 82 percent of China’s agricultural imports, amounting to some $26 billion, eligible for higher duties. “For a country like Uruguay which depends on the exports of a very few products… it could capture all our export interests,” he told reporters.

(Additional reporting by Laura MacInnis; Editing by Dominic Evans)

IJ Comment: While rice, cotton and bananas may not have much to do with the insurance industry, the success or failure of the Doha round of trade talks now seems dependent on finding acceptable compromises in the agricultural sector. Negotiators have made progress, but a final accord is far from assured. If the discussions, which began in 2001, cannot reach agreement on agriculture, proposals to further open world markets to financial service providers, including insurers and brokers, would also fail.

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