Conflicts over agriculture once again stalled World Trade Organization
negotiations, which took a few halting steps in Hong Kong in December. Rich-country
promises to reduce poverty and underdevelopment at the event, which representatives
from 149 countries attended, gave way to minor face-saving reforms and a promise to
keep talking. Developing countries came to the table, and they walked away with
crumbs.
Though the Hong Kong talks did not collapse as they had in previous sessions in
Seattle and Cancún, that was the best that could be said for them. Militant
protests dogged the talks, with over 1,000 arrested on the next to last day. Many of
the protestors were farmers, from South Korea, the Philippines, and other countries,
demanding an end to rich country dumping of low-priced grains and respect for each
country's "food sovereignty"--the right to apply food policies without WTO
interference.
U.S. officials were quick to place the blame for the ongoing stalemate on the
European Union for failing to make concessions on farm subsidies. In the end, the EU
salvaged the talks by agreeing to eliminate agricultural export subsidies, but not
until 2013. The United States gave an inch by pledging to eliminate export subsidies
on cotton next year, but left the meetings with no firm commitments to end its other
cotton subsidies, which have already been ruled illegal and which West African
nations consider far more damaging to their farmers.
The talks will now continue, with an extended deadline of April 30. More
concessions are likely, such as limited reductions in farm subsidies and agricultural
tariffs by rich countries in exchange for developing countries opening their markets
more to foreign manufactured goods and services. Few experts are counting on
significant benefits for the world's least developed countries from what is billed as
the "Doha Development Round" of trade talks.
When the round was launched in 2001, a new trade deal was considered crucial to
achieving the international community's Millennium Development Goal of halving
poverty by 2015. What happened to that promise?
In part, the free-trade juggernaut has lost momentum because most developing
countries have little or nothing to gain from further liberalization, even if rich
countries make more significant concessions on their farm support programs.
Meanwhile, developing countries have seen their own proposals to address farm issues
shoved aside by more powerful nations in the rush to open the world economy.
Shrinking Gains from Trade
New projections from the World Bank highlight the shrinking gains from trade for
poor countries. Shortly before the Hong Kong meetings, the World Bank released
updated forecasts of the economic benefits from further global trade liberalization.
Under a scenario of significant cuts to agricultural subsidies and tariffs as well as
industrial tariff reductions--reforms that now seem ambitious--Bank researchers
projected income improvements of just $96 billion for the world community in 2015. Of
that, $80 billion would go to rich countries, leaving just $16 billion in gains for
the large majority who live in the developing world.
Billions always sound like a lot of money, but these are just crumbs from the
world economy's table. The developing-country share is less than the annual U.S. food
stamp budget. It amounts to less than a penny-a-day per person. It's a 0.16 percent
one-time gain that would marginally boost income a decade from now.
How small is that?
If you were a typical poverty-level farmer or worker in the developing world
making $100 per month (roughly $4 per day), your gains from a successful WTO
negotiation would be a raise of sixteen cents a month--$100.16. Following
negotiations that are purportedly focused on developing country needs, rich countries
are projected to receive an embarrassing 25 times the per-capita gains of developing
countries. That's right: we get $79 each a year, they get $3.
And that is just the average. A small number of large countries--Brazil,
Argentina, China, India, and a few others--capture the bulk of the projected gains
for developing countries. Sub-Saharan Africa would get almost nothing. Bangladesh
would end up worse off.
But won't big concessions from developed countries on their protective tariffs and
farm subsidies yield large benefits for farmers in developing countries? In Hong
Kong, U.S. Trade Representative Rob Portman justified the talks' strong focus on
agricultural reforms, invoking bank robber Willie Sutton's oft-quoted line that he
robbed banks because "that's where the money is." Isn't agriculture where the WTO
money is?
No. Even the world's poorest countries aren't rushing to grab the paltry sums in
the WTO's agricultural vault. Sure, the majority of gains are in agriculture, but a
bigger share of a tiny pie won't feed the hungry. The World Bank estimates that the
most ambitious current proposals for agricultural trade reform would provide just $9
billion for developing countries, just a penny every other day per person.
Selling the Trade Agenda
These meager sums did not stop the World Bank or U.S. trade officials from
strengthening their call for deep reforms. Rather than cite the lower, more realistic
projections from their model, they cited the World Bank's estimate of $287 billion in
potential gains from "full" trade liberalization, a figure that negotiators and the
press dutifully reported in their calls for ambitious reforms in Hong Kong.
What's wrong with that estimate? First, it is derived from the entirely
unrealistic scenario in which all countries eliminate all tariffs, subsidies, and
other trade barriers. While Bank researchers acknowledge the abstraction, they most
often present these more encouraging numbers in the lead-up to WTO meetings, even
though their lower numbers are more realistic.
Second, $287 billion is still not much of a gain--a one-time gain in 2015 of less
than one percent in income for the world economy.
Third, the $287 billion figure hides the embarrassing finding that the majority of
the gains--60 percent--go to rich countries. So much for a "development round."
In other selective presentations of its projections, the World Bank raised alarms
that any exemption of agricultural goods as "special and sensitive products" due to
their importance to a country's food security, rural development, or farmer
livelihoods would wipe out the gains from trade for developing countries. Indeed,
their economic models showed just that: The $9 billion in projected
developing-country gains from agricultural trade reform would disappear with even
modest exemptions for such products.
But developing countries have gotten more sophisticated about such estimates.
That's one of the reasons the talks have lost momentum. The exemption for special
products, such as rice in the Philippines and other Asian countries, can be a key
anti-poverty buffer for the poorest subsistence farmers, by protecting producers from
market distortions such as the rampant rich-country dumping of agricultural
commodities. If it costs less than a penny-a-day per capita to keep such protections,
that is a small price to pay for retaining sovereign control over key food
resources.
Getting Serious About Poverty
The obvious conclusion from the World Bank's economic projections is that trade
liberalization is likely to contribute very little to reducing world poverty, the
supposed goal of the ongoing round of global trade negotiations. Just two years ago
in Cancún Bank researchers used their older projections for full trade
liberalization to talk encouragingly about trade lifting 144 million people out of
poverty. Now, with their revised and more realistic numbers, the Bank projects that
just 2.5 million people in the developing world would move above the $1-per-day
threshold for extreme poverty, only 0.5 million from agricultural reforms alone.
That's 2.5 million out of 622 million extremely poor people. In Sub-Saharan
Africa, just 500,000 people out of 340 million poor would move out of extreme poverty
with a successful negotiation, a reduction of well under one percent in 2015.
If the world community takes seriously the goal of halving global poverty by that
year, trade will be only a tiny part of the solution.
To have any meaningful impact, rich countries would have to make good on their
commitment to, as the Doha Declaration states, place developing countries' "needs and
interests at the heart of the Work Program adopted in this declaration." That would
mean recognizing in practice the need for "special and differentiated treatment" for
developing countries, to leave them the policy tools to industrialize and develop. It
would mean accepting developing-country proposals to let countries exempt sensitive
food crops such as rice, maize, and wheat from liberalization.
For its part, the U.S. government could make an important contribution by simply
implementing the standing WTO ruling that its cotton subsidies violate existing
rules. West African cotton farmers would see tangible benefits from such measures.
Instead, the U.S. has cynically offered compliance with the ruling as a possible
concession in exchange for developing country trade openings in manufacturing and
services. That is the kind of hypocrisy--"We'll follow the rules we've already agreed
to, but only if you give us more"--that undermines Doha progress.
Another reform that could make a difference came from a coalition of African
countries, including Kenya, Tanzania, Uganda, and Rwanda. They called for WTO actions
to address their most pressing agricultural issue: chronically low and falling prices
for farm products. The group has proposed reining in transnational commodity traders
and buyers, which squeeze farm profits. They also call for greater international
cooperation to manage world production, so prices will stay at reasonable levels.
Those actions, which would remove important distortions from the world economy,
could make a significant difference to poor people in commodity-dependent developing
countries, but they are nowhere near the center of the official WTO agenda. If they
were, maybe we would see more widespread enthusiasm for a Doha agreement.
Instead, as the April deadline for a WTO deal approaches, look for continued
exhortations for deeper and faster trade liberalization from the United States and
other rich nations, amid hand-wringing about lost opportunities to capture billions
of dollars in gains. Expect renewed U.S. pressure to reduce exemptions for key food
crops. And look for continued hypocrisy from U.S. officials unwilling to follow the
existing trade rules, much less make them fairer for developing countries.
In other words, look for more crumbs for development from the WTO negotiating
table.
Timothy A. Wise is Deputy Director of the Global Development and Environment Institute at Tufts University in Medford/Somerville, Massachusetts .
