After the embarrassment of last years’ failed summit at Seattle, the World Trade Organisation has been making steady progress away from the glare of the media spotlight and, the hothouse atmosphere sparked by the riots involving environmental protestors.
Criticised for being remote, dictatorial, confusing and ineffective after failing to agree a programme for food and drink the WBO has formally launched a new round of talks with a deadline of next March for negotiating proposals.
An arena has been set and a programme and timetable for discussions has been established and, most surprising of all firm and realistic discussion texts have already been suggested by the EU, US and developing countries – the show is back on the road.
The EU is under intense pressure to reduce its farming subsidies and tariff protection because of its plans to expand eastwards, taking in new former communist states and, given the inefficiency of much of this regions’ agriculture, granting handouts under current agreements could prove expensive.
This was a problem highlighted by Poland, which asked for subsidies and was told Brussels couldn’t afford them and Warsaw reported as saying, if we can’t have them, nobody should.
It isn’t just internal pressures pushing the EU to abandon its agricultural protectionism. There is growing feeling by Europe’s foreign ministries that the Common Agricultural Policy is a diplomatic millstone that undermines initiatives by the EU to reduce global tariffs and subsidies in other areas of the economy.
Elsewhere, developing countries are very clear that liberalisation is in their export interests, especially given that they have never been able to afford many subsidies anyway.
The Cairns Group of exporting nations such as Australia, Canada, New Zealand and many Latin American and south-east Asian countries long ago concluded that the reduction of tariffs on food and supports for producers can only be sweet medicine.
The USA has been relatively quiet, but its’ initial proposal has shown it too is in favour of serious liberalisation.
Another pressure towards reaching an agreement is the imminent demise of the so-called ‘peace clause’ at the end of 2003. This will prevent WTO member countries from imposing countervailing duties on goods, which have been produced with the help of certain subsidies, such as direct payments to farmers currently considered not to distort the market.
It also prevents governments from launching WTO dispute proceedings when they lose markets in third countries because they have to compete with foreign food exporters who get paid subsidies.
After 2003, the gloves will be off and dispute hearings could be launched regarding these issues and it is odds on that the world’s trading nations will prefer to negotiate an agreement that removes such subsidies by consensus, rather than being forced to scrap them by a binding disputes panel ruling.
Taking all this into account, it is no surprise that optimism has broken out at the WTO and this is good news for the downstream food industry, which should be able to exploit lower prices at home and abroad and more accessible export markets.
Given that the last two WTO agricultural agreements following the Uruguay round scrapped most forms of non-tariff protection, tariffs will be the natural target of these latest negotiations.
It will also be reasonable to assume that high tariffs will get the most attention.
As a result, it can be expected that the EU will come under pressure to lower its dairy and beef tariffs; the US and its’ dairy, tobacco, cotton and peanut duties; Canada with its dairy protection and Japan, Norway and Korea with almost everything.
The Americans have proposed some duties could be scrapped altogether for particular products by means of bilateral deals on the margins of the talks, the so-called zero for zero idea.
However, many delegates have been critical of this idea regarding it as potentially de-stabilising for the international food trading system.
There has been more support for an agreement that provides for a general reduction in tariffs across the board and this has also been suggested by the US, in a rather contradictory paper because, if many countries scrapped oil seed tariffs, but cereals remained subject to tough tariffs, problems would arise.
There are other signs that this new round will yield new thinking and in the Uruguay discussions, the learning curve for all parties was very steep with some developing countries unclear about what was going on, but according to sources now they know.
One small poor country has recently proposed to take on WTO rules on discrimination suggesting because poor countries were never able to afford food production subsidies, agreements that tell developed countries to reduce these handouts are unfair.
Instead, this country has proposed it should be abolished entirely, but time will tell if such radical thought will take root.
Fresh ideas are also afoot in Brussels with EU negotiators suggesting payment of some subsidies to farmers (where they are compensated for the additional costs of producing in an environmentally friendly manner) should be protected from ever being subject to disputes hearing action at the WTO.
Brussels’ say this type of payment would be consigned to the so-called ‘green box’, trade jargon for subsidies that do not distort the market, where they could not be challenged by member countries seeking a purer free market system.
Officials at WTO headquarters in Geneva have told just-food.com the European proposals may cover organic farming, which would therefore produce more affordable supplies for the food industry, because its’ additional costs would be met by governments.
Similar proposals have been made by Brussels regarding extra measures taken by the food industry to ensure better welfare for farm animals and poultry, meaning that free range produce could become as cheap as factory farmed products.
This proposal has upset some developing countries, which resent allowing industrialised countries to take advantage of their wealth, to pay for pigs to live in better quarters than some humans and, still be able to command a good price on the market.
They also fear this proposal could be the thin end of the wedge and it could open the way for proposals allowing rich nations to ban the import of goods that have been made in a way that developed country governments do not approve of.
Seattle, failed in part, because the US wanted to force labour standards down the throats of poor countries, arguing that countries should be able to ban imports of products made by cheap sweated labour.
This received short shrift from the developing world and the same for animal welfare standards, where poor countries fear being forced out of food markets by tight ethical trade rules which ease the lives of chickens, but leave African peasants hungry because they cannot export factory farmed eggs.
GM products could be another spanner thrown into the works which another US proposal has suggested must be considered in the round, with delegates discussing health and labelling issues.
Officials think that it is likely the WTO will set up a working group with a limited mandate and life expectancy, to make proposals for the final new agricultural agreement.
Washington has already gone further than anyone else on GM. In Seattle it suggested there should be a WTO agreement on rules governing the approval of GM products as safe to bring to the market.
WTO watchers do not think the current round of talks will lead to such an ambitious plan being written into world trade law, but it is a possibility nonetheless.
While the round on the trade in food products progresses, the WTO has also launched a round of talks on the trade in services, which could also impact on the food business.
It is likely that shipping will be discussed, although maybe not until next year and also delegates will almost certainly be forced to consider E-commerce.
The problem with E-commerce is that the WTO has not adapted its’ rules to take account of internet trading and at the moment discussions are currently focusing on whether E-commerce is a matter for WTO rules on goods or services.
Some delegates have suggested it should be considered a hybrid matter, goods and services together, prompting some officials to throw their hands up in horror.
The WTO has no rules on regulating ‘hybrid’ trade, so if the delegates approved this idea, member governments may be tempted to raise tariff barriers sky high for food and other products bought on-line.