WTO Public Symposium 2003: Session IV - Agricultural Trade Reform

Organized by the Agricultural Trade Task Force of the World Economic Forum

A strong outcome on agriculture is critical not only to the success of the Doha multilateral trade negotiations but also to the future of global poverty alleviation. A unique coalition discusses the imperative of agricultural trade liberalization and capacity building. The World Economic Forum advocates equitable agricultural trade beyond the unfulfilled agreements thus far promised by developed countries. These promises have constituted mere rhetoric, demonstrating little real commitment to agricultural capacity building in developing countries. In response, leading multinational corporations, international agencies and other NGOs have come together as signatories to a Communiqué of Recommendations drafted by the World Economic Forum Agricultural Trade Task Force. The Communiqué calls for the OECD countries to drastically reduce their market-distorting export subsidies, subsidies on export credits, import tariffs, import quotas, other non-tariff barriers and direct payments as an initial step towards reduced trade barriers to be secured at the upcoming WTO Ministerial Meeting in Cancun. Trade reform should be actively and explicitly linked to the commitment made by world leaders at the UN Millennium Summit and the 1996 World Food Summit to cut absolute poverty and hunger in half by 2015. Acknowledging that any agreement on the Doha Development Agenda regarding agricultural protection and subsidies relies upon the unlikely but necessary ability of the deadlocked European Union and United States policymakers to take action at the global level, the WEF Agricultural Taskforce is encouraging all groups to intensify their work in the few months remaining before the Cancun Ministerial. The onus is upon not only national governments, but also municipalities, companies, donors and NGOs alike to evaluate their own practices and engage in constructive partnerships for agricultural trade reform and capacity building.

Panelists and Viewpoints

Panel Moderator: Richard Samans, Director, Global Issues, Associate Member of the Board, World Economic Forum, Geneva

Herbert Oberhaensli, Manager of Economic and International Relations, Nestlé SA, Switzerland

Mr. Oberhaensli’s presentation addressed the topic of liberalizing agriculture from the perspective of a multinational company, making the points that agricultural markets are local and fragmented, often difficult to access from the outside, and affected dramatically by national policies for domestic support and food security. Food security will become more important as food demand increases with the world’s growing population. As prosperity rises, people will no longer want just rice, but meat as well. About 300,000 farmers in the developing world currently participate in supplying milk to Nestlé, but sub-Saharan African farmers could have a high potential to produce for this projected increased demand.

The present levels of subsidies should be reduced, but even in an open market, some farm support will be necessary to sustain, for example, farmers in mountainous areas. In industrialized countries farmers in general should be responding to consumers’ needs and wishes rather than focusing on playing the politics of securing more support. In developing countries, assistance programs should be refocused on rural development; and stabilization should be sought for the export incomes of poor farmers, perhaps via a renewed Stabex system.

Rasmus Kjeldahl, Executive Director of the Danish Consumer Council, Denmark (Consumers International)

The trade policies now in place around the world work to protect a small number of wealthy farmers in developed countries. This practice draws significant rents on the rest of the world and harms consumers everywhere. Even subsidized farmers themselves do not benefit in the long run, since they too are consumers. Though these farmers can buy subsidized food for less, their net flows are negative when they receive lower prices for their own produce while also funding other subsidies via taxes.

The “equitable reform” advocated by Consumers International and presented in their report, "Cultivating a Crisis", would seek to balance the concessions to be made by developed and developing nations, rather than to perpetuate a system constructed such that benefits accrue disproportionately to the rich world. Liberalization should be a common objective of actors in the economy, and businesses should seek ways to operate responsibly.

Dhruv Sawhney, Chairman and Managing Director, Triveni Engineering & Industries Ltd, India

Three issues relate to the fact that hunger and poverty would be helped by liberalization in agriculture. First, this is a win-win situation. Second, what happens if we fail? And third, isn’t this the fair thing to do? If there were liberalization in sugar, for example, prices for the commodity would rise by 40%. The total benefit to consumers worldwide would be $6 billion. We are frequently reminded by those who deny the harmful effects of agricultural protection in OECD countries that, even if the liberalization of agricultural trade were to occur globally, much of its benefits would return to producers and consumers in the developed world anyway. According to the WEF, however, the total estimated benefit of US$ 250 billion by 2015 would actually divide into approximately US$ 150 billion for the developing world and US$ 100 billion for the developed world. As consumers, we need to become more active, promoting the kind of competition that works toward improving standards of living according to preferences expressed in the market.

What happens if we fail, and what would be the social consequences of inaction? Tariffs levied in developed nations on agricultural goods are sometimes around 250%. This high level of tariff would never be accepted if it were by developing countries and on industrial goods. We need to attend to the structure of tariffs on both fronts. Some 70% of the world’s poorest inhabitants live in rural areas, and about 85% of this population relies upon agricultural production for a living. High tariffication and subsidies on agricultural products therefore have the result of subtracting from jobs available in developing countries. Unemployment and stagnation not only reduce the world’s chances of achieving the Millennium Development Goals, but also generate a recipe for turmoil in today’s international political environment. Perpetuating such a system would work contrary to all other efforts by OECD countries to help developing countries enter the world order.

Finally, reducing tariffs and subsidies is the fair thing to do, as liberalization of agriculture would give way to one side’s comparative advantage just as free investment would yield to another’s. The $311 billion in support paid by OECD countries in 2001 was equal to six times the total amount of aid given that year by the same countries to the developed world. Farmers in these countries need to work toward becoming efficient and not rely upon receiving handouts. India is happy that the WEF is pushing for agricultural liberalization, but we all must seek other means of finding support and enthusiasm for the initiative from the pubic.

Kel Currah, Senior Policy Advisor, World Vision International, United Kingdom

World Vision International is a Christian relief and development organization currently working in over one hundred countries. The organization engages in advocacy toward governments, and it is seeking the support of businesses and other associations to join this combined effort with other NGOs. The international community has thus far failed to make the increased agricultural support undertaken by the EU and US a big issue. We need to inform and motivate consumers, because it is unlikely that governments will otherwise bring about such changes on their own. It is doubtful, for instance, that the EU will arrive at a compromise on the Common Agricultural Policy (CAP) before 2006 because of the tension between France and Germany. A similar failure came to pass at the G8 meeting in Evian – Whereas the host country usually sees its key concern for reform addressed at these meetings, playground politics prevented France from having the agricultural issue resolved.

The coalition organized by the Agricultural Trade Task Force of the WEF is diverse (see page 3 of the Communiqué for a list of the original signatories). Among others, business members include Coca-Cola, GM, Kraft Foods, Nestle, Sara Lee and Unilever; NGO partners include CAFOD, CARE, Consumers International and Save the Children; and International Organizations include the World Bank, FAO, IFPRI and the Overseas Development Institute. How can we best proceed to use this multifaceted coalition to cut into the difficult issues of trade policy?

Further Comments by Panelists and Delegates

The European Union’s Common Agricultural Policy (CAP)

Panelist Rasmus Kjeldahl commented that consumers and taxpayers do not get what they pay for with the CAP, but they believe the program to promote a certain vision of agriculture that it does not. Instead of helping the poor man, the CAP for the most part helps large, wealthy farmers. Furthermore, there are quite a few people who are not yet aware that they will soon lose out because of the CAP. Polish farmers, for instance, will suffer losses after EU enlargement draws Eastern Europe under the CAP too.

Agricultural Policy Change

Noticing that the businesses having signed to the Communiqué seem interested for the most part in policies affecting food, one delegate raised the question of what the scope might be for agricultural policy change on commodities other than food crops. Panelist Herbert Oberhaensli commented that businesses involved in sectors outside of food have not historically bothered to make long-term efforts toward policy change.

Another delegate, observing during an earlier session for members of parliament that the question of agricultural liberalization was not raised even once by any MP from a developing country, suggested that this might indicate that the MPs do not consider agricultural liberalization important, or that they have out of frustration given up trying to force other countries to negotiate the issue. A delegate who was currently a member of parliament in a developing country responded that they have just about given up, realizing that they cannot influence agricultural policy and yet also cannot process or add value to products for export because of tariff escalation.

Referring to one complaint made frequently by the developing world that donors tend to each roll in with their own solutions and neglect to make efforts to work closely with other organizations already involved in the area or sector, a delegate from a Canadian NGO representing farmers in developing countries and around the world asked whether the coalition was already working with organizations like his. He also remarked that the panel’s critique of European farmers was too harsh. As these farmers will soon see massive changes, and many will go bankrupt as new members enter the EU, the European farmer is not the enemy anymore.

Private Investment

Panelist Dhruv Sawhney commented that private investment far exceeds multilateral investment in today’s economy, largely because private interests have little incentive to invest in capacity building in developing countries where profits seem far off. It is for this reason that the estimated US$ 2 billion in investment that is needed in the sugar industry has not materialized. Recognizing this market failure, the question that follows is how we might build from the foundation of our coalition and gain political support in the WTO for trade policies amenable to the interests of developing countries.