World Trade at the Last Chance Saloon

28 July 2006

World Trade at the Last Chance Saloon

By Gwynne Dyer

When I came out of the house this morning, Jean-Baptiste was standing in the road gazing into the field opposite with a worried expression. He had lost two cows, he said. And he was obviously right, because there were only five cows in the field.

Jean-Baptiste is what polite people no longer call a peasant. He lives in a big farm-house in the Basque-speaking part of France, he is seventy years old, and he has only seven cows. (His wife calls them his “pets.”) But they live well, and all their children and grandchildren still live within reach of them, mostly in very beautiful places.

This is “la France profonde” — deepest France — and fifty years ago it was desperately poor. Now it allows families like Jean-Baptiste’s a modest contentment, and in return they keep France looking like the dream of rural bliss that the urban multitudes expect. And how does he achieve all this with a couple of stony hillside pastures, seven cows, and some chickens? The Common Agricultural Policy, of course.

France has defended the CAP tooth and nail for many years, although it subsidises the European Union’s farmers outrageously. Indeed, BECAUSE it subsidises them outrageously. But at the G8 summit in St. Petersburg earlier this month, the European Union’s trade commissioner, Peter Mandelson, offered a 51 percent cut in EU tariffs on agricultural imports in order to keep the faltering world trade talks alive. French President Jacques Chirac left the meeting fuming.

The US yielded some ground on agricultural protectionism too, offering to cap subsidies to its farmers at $15 billion compared to its previous offer of $22.5 billion. All this will theoretically help developing countries to trade their way out of poverty by exporting food to the rich countries — and in return India and Brazil, representing the developing countries, said they would cut tariffs on imports of manufactured goods to 20 percent from the current average of 30 percent. So the “Doha round” of the trade talks stumbles on.

It has stumbled into the Last Chance Saloon, however. The six negotiators at Geneva, representing the US, the EU, Japan, Australia, Brazil and India, have only a month to reach a deal, because it then has to be taken back and sold to all 149 members of the WTO. And if it doesn’t get to the US Senate before mid-2007, President Bush’s “fast-track” authority expires and it will be pecked to death by a thousand amendments.

At this point in articles on world trade, we are customarily told that the “Uruguay round” of talks on liberalising world trade, concluded in 1993, began the globalisation that underpins our current prosperity, and that the Doha round, under negotiation since 2001, is vital to maintain the momentum. Or else we are told that globalisation has hurt the poor, and that this round must come out differently or they are doomed. This is mostly hot air.

Easier access to European and North American markets would not help most poor farmers in Africa or India; rather, it would allow rich farmers who can exploit those opportunities to buy up their land and turn them into urban poor. On the other hand, lowering the barriers against cheap food imports from the Third World doesn’t have to destroy the lifestyle of people like Jean-Baptiste and the traditional countryside they maintain. Just admit that you are really subsidising lifestyle and countryside, not food, and find a different way of getting the money to them.

In any case, energy prices are soaring and the climate is changing.

In a recent study for the World Bank, Prof Jyoti Parikh of the New Delhi-based Integrated Research and Action for Development institute concluded that a global rise in temperature of only 2 degrees Celsius (3.6 degrees F) would cost India one-quarter of its food production.

That amount of temperature rise is practically inevitable, and similar figures for crop losses probably apply for America, China, Brazil and Australia (though not for Canada, Russia or northern Europe). Even now, shipping more and more food around the world is a questionable proposition. Twenty years from now, everybody will be striving to achieve greater self-sufficiency in food, and the current debate will seem ridiculous.

As for the benefits of freer trade… it was definitely beneficial for the rich countries back when they could set the terms of trade in their own favour, but they are much less enthusiastic about it now that the developing countries can hold their own at the bargaining table. Since China became a full member of the WTO in 2001, the “Group of 22” has coalesced around the four heavyweights, China, India, Brazil and South Africa, and the rich countries don’t win all the arguments any more.

The US has pretty well given up on multilateral trade deals already, preferring to negotiate bilateral deals where it can still use its size to shape the outcome to its advantage. The Doha round will probably not get finished in time, and the future will probably see more protectionism in the older developed economies as they face the challenge from China and India. The world isn’t necessarily heading for 1930s-style trade wars, but the golden age of multilateralism is past.

Never mind. At least Jean-Baptiste found his cows.


To shorten to 725 words, omit paragraphs 9 and 10. (“In any…ridiculous”)