EU Agricultural Subsidies And The WTO Round

I am getting even more worried about the WTO Doha Development Agenda negotiations.  The rise in protectionist sentiment in major economies is unhelpful to the conclusion of the negotiations.  But structural issues inside the EU are also proving unhelpful.

I haven’t seen any of the MAF or MFAT internal reporting on the agriculture component of the negotiations for over four years so i may be wrong here.  But the impression i had was that New Zealand (and Australia) believed that the world had gone through a fundamental change.  Subsidies were no londer as important to the operation of the EU’s common agirculture policy.  So when I called for the world to accept a minimilast outcome from the current negotiations based around agreement to abolish export subsidies once and for all, coupled with some modest action to trim levels of domestic subsidisation, I was told that I was a fool and that this was not nearly good enough.  EU agreement to end export subsidies was going to happen anyway and EU domestic subsidies were too expensive to sustain.  What I was suggesting was therefore non-meaningful.  What was needed was progress on market access also.

Well has the world changed?  According to my research we don’t just have a resumption of EU export subsidies but we have an increase in domestic subsidies and a return of our old friend the “butter mountain”.  There is also a “skimmed Milk powder mountain” developing.  The EU has just agreed to buy 30,000 tonnes of butter at a guaranteed price of 2,299 Euro a tonne and 109,000 tonnes of SMP at 1,698 Euro a tonne (the current world price is around 1,400 Euro a tonne).

Why am I worried about the Doha Round?  Because we are going to be lucky to hold the exisiting text, let alone improve upon it.  The Round haas floundered so far because countries like New Zealand, the US and Australia have been saying that we need to secure more commitments, particularly on market access.  In current circumstances expectations of further improvement to the text looks to be highly optimistic.

I don’t believe that the Round is necessarily dead, but I suspect that business as usual is not going to be an option.  I think that a fundamental re-think is going to be needed about a strategy for getting the negotiations completed.  This is only going to come at the political level.  In this context, next week’s discussions at Davos are well timed.  These won’t achieve a breakthrough, but they could start some new ways of thinking about this negotiation in the run up to the G20 meeting in April.

My suggestion would be for Ministers to stop looking at the negotiation in terms of the pillars – agriculture, non-agricultural market access, services etc.  and instead look at what can be realistically be achieved in current market circumstances.  What will need to be done in other areas to keep the EU to its current position on the abolition of agricultural subsidies and cuts to domestic subsidies?  The answer will be some modest cuts in industrial tariffs and some modest forward movement on services.  Countries can leave expectations of substantial improvement in market access conditions to bilateral and regional trade negotiations.

This formula has hope of achieving an outcome, maybe before the end of this year.  It will achieve a meaningful outcome and allow the WTO to consolidate its functions.  Continuing along the current negotiating track carries the risk of failure.  That will be a disaster for the global economy.

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