Commentary

Big Powers Fail to Resolve Differences at WTO

Despite coming to a last-minute deal that was reported to have dealt with disputes over agricultural subsidies, the world’s big powers were unable to resolve their differences at the WTO talks held in Hong Kong from December 13-18. The deal on agricultural subsidies, reached in the final hours of the meeting, is so vaguely worded that it is difficult to determine who has actually promised to give up what. Furthermore, it falls far short of the kind of commitments that negotiators said they were looking for heading into the talks.

The current round of WTO negotiations was launched in Doha, Qatar in 2001 and is scheduled to conclude in 2006 with a treaty that all 150 member-nations must sign. When the Doha round of negotiations began, the Americans and Europeans hailed the process as an important step towards ensuring full global trade liberalization. However, while both the U.S. and the EU have said repeatedly that they would reduce their agricultural export subsidies in exchange for greater market access to other member countries, both have consistently refused to do so, creating an impasse that so far has been insurmountable.

Seizing on this impasse, the Group of 20, led by China, India and Brazil, has consistently refused to sign any deal that does not include substantial agricultural subsidy reductions. Indeed, the G20 scuttled the deal that the Americans and Europeans cobbled together during the previous round of WTO negotiations two years ago in Cancun, pointing out that the subsidy reductions being promised in the deal were microscopic while the concessions being demanded from other countries were steep.

In previous WTO negotiations or those of its precursor, the General Agreement on Tariffs and Trade (GATT), the Americans would simply have forced other countries to accept their deal by threatening economic sanctions, withholding aid or even military intervention. The Americans, however, have been unable to bring this kind of pressure to bear while they are embroiled in Iraq and the Europeans are content with the status quo because European agri-business stands to lose even more than American agri-business without generous production and export subsidies in place.

While both claim their subsidy programs are designed to protect the livelihood of European and American farmers, in fact over the past 60 years the number of farms has steadily decreased, while the level of agricultural production has increased. The average farm size has risen dramatically, with subsidies paid out going directly from farmers to chemical and equipment companies. At the same time, smaller family farms, unable to afford the millions required to operate large-scale farm operations, have folded and have been bought out by increasingly large agri-businesses.

Agricultural production has become so efficient, with such high yields (in Europe through massive investment in development of different varieties of crops and in the U.S. through the use of genetic modification technology) that North American and European production of corn, soybeans, wheat, cotton, lentils, pork, beef and poultry could satisfy global demand in any average crop year. Thus the focus of both the Americans and Europeans has been the destruction of competing agricultural production in other regions of the world, particularly Asia, Africa and Latin America. Export subsidies, paid to the larger European and American conglomerates such as Cargill, ADM, Louis Dreyfus and Bunge, are used to enable these companies to sell their agricultural products in other countries below the price of indigenous production. Removing this ability would mean either the Americans or the Europeans would need to accept drastic reduction of their agribusiness industry, which neither seem prepared to do at present.

This subsidy policy also supports other capitalist interests in Europe and the U.S. While 60 years ago the big imperialist powers exploited Asia, Africa and Latin America for their agricultural products and raw materials while exporting manufactured goods, today these regions are rapidly becoming major manufacturing centres. Destroying the peasantry guarantees a pool of cheap labour for the global capitalists to exploit.

Unless the Americans and Europeans can reach some agreement on how to move forward on the question of agricultural subsidies, a WTO agreement is impossible, and without such an agreement, the existence of the WTO is in jeopardy. Given this, it is interesting to note that the deal reached on December 18 has been characterized less as a meaningful deal and more as an attempt to “lay the groundwork” for future negotiations. It seems that neither the Americans nor the Europeans are willing to accept the collapse of the WTO and the deal reached on subsidies buys them some time without requiring them to implement any substantial changes. Their differences, however, remain unresolved.

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