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Garrido <br><br>The Group of Eight (G8) summit in Evian was not the only gathering of global importance this month. At the same time as the heads of state of eight of the world's richest countries convened in Evian, France, trade ministers from 39 of the world's poorest nations met in Dhaka, Bangladesh. <br><br>While the Evian summit concerned itself with global economic recovery, the conference in Dhaka appealed to developed-country governments to remember their commitments to development, particularly when it came to trade. The delegates issued a statement to be presented at the World Trade Organization (WTO) ministerial in Cancun. The Dhaka declaration calls on developed countries to remove restrictions on products from poor countries and import more from them on a regular basis. <br><br>The call from Dhaka coincided with a similar call from Bangkok. The Association of Southeast Asian Nations Business Advisory Council met in Thailand to prepare its position for the WTO ministerial. As in Dhaka, the foremost issue on the table was trade: getting developed countries to dismantle their enormous agricultural subsidies and open their markets to developing nations. <br><br>If the statements from Dhaka and Bangkok sounded an urgent note, it is merited. The Doha Round of trade talks launched in November 2001 seems to have run aground on the question of agriculture. Not only have trade negotiators failed to meet a March 31, 2003, deadline on deciding how to cut trade-distorting farm subsidies, the negotiations overall appear to have reached a deadlock. This is bad news for developing countries, many of which had to be persuaded to go along with the Doha Round in the first place. Many poor countries had felt shortchanged after the Uruguay Round of trade talks concluded in 1994. To entice their participation in Doha, rich countries dangled the prospect of significant trade concessions in agriculture. <br><br>Although the talks are not scheduled to conclude until 2005, if at least some sign of progress on trade reform does not materialize in time for the ministerial in September, not only the Doha Round but the faith of many developing countries in the WTO process could be in jeopardy. <br><br><b>G8 inaction on global trade</b><br>For their part, the G8 nations have made a show of affirming their commitments to the Doha development agenda. The Action Plan on Global Trade unveiled in Evian pledges to promote "improved access to markets for all WTO members ... particularly the poorest, to ensure their integration into the multilateral system, and their development more broadly". To this end, the G8 nations commit "to delivering on schedule, by the end of 2004, the goals set out in the Doha development agenda". <br><br>Their resolve would be more convincing if it came accompanied with concrete measures. There was, of course, talk of action, and even a specific proposal by the French to suspend subsidies temporarily on food exports to Africa, but, perhaps predictably, nothing came of it. It is hard even to say whether the proposal was made in earnest, considering that France is one of the most ardent supporters of the European Union's Common Agricultural Policy (CAP), which provides for lavish subsidies to EU farmers. French recalcitrance in reforming the CAP - even, in fact, providing for its unmodified extension until 2013 - is one reason the Doha talks have so far foundered. <br><br>In perhaps a continuation of the politics that characterized the trans-Atlantic rift over Iraq, the French may have been counting on the United States to object. Which, of course, the US did, balking at the EU demand that the proposal cover agricultural export credits and food aid, of which the US is the biggest user. Not to be outdone, however, Washington countered by saying it would support the French proposal if subsidies were to be suspended for all developing countries and not just for Africa. Not surprisingly, nothing came of this either - which may have been the intention behind the offer all along. <br><br><b>Trans-Atlantic rows over agriculture</b> Despite the unabashed rhetoric of solidarity coming out of Evian, the differences that have deadlocked the Doha Round show no signs of abating. These differences pit the US against the EU and Japan (which tends to hide behind the EU's position) and come down to the question of reforming the way agricultural trade is conducted. <br><br>While agricultural trade is not the only contentious issue, it is the main one. In keeping with the Doha Round, the United States has offered to scrap agricultural export subsidies over a five-year period, to cut domestic subsidies to 5 percent of the value of farm production, and to cap tariffs at no more than 25 percent. The EU has refused to go along with these cuts and has instead proposed a far more gradual scheme for farm subsidy reform. Efforts at compromise have so far failed: the EU sees the US proposal as going too far; the US sees the EU scheme as not going far enough.<br><br>The EU has long pledged to reform its Common Agricultural Policy. It seemed particularly ready to do so at the Doha ministerial in 2001. EU Trade Commissioner Pascal Lamy declared that "Europe has listened, Europe has moved, and Europe is willing to go the extra mile" to make Doha a development round. Now it seems that promise has largely dissipated; instead of the extra mile, the EU has settled for a few shuffled footsteps. Just last week, EU Farm Commissioner Franz Fischler vowed to reject a proposal calling for the overhaul of the CAP's subsidy regime, peddling a more moderate reform package in its place. <br><br>As it stands, the CAP spends US$50 billion in agricultural subsidies annually. These subsidies can be highly trade-distorting. They contribute to overproduction and, as a result, export dumping (exporting at prices below the cost of production) in developing countries. Despite this, the EU did not hesitate to send a representative to the Dhaka conference to soft-sell its more gradual scheme for CAP reform to the Least Developed Countries (LDCs). An envoy from Brussels tried to win over the LDCs by employing, in the words of the Zambian trade minister, "divide and rule tactics". In a bid to weaken developing-country-bloc pressure against the CAP, the LDCs were offered special access preferences to EU markets not being extended to other developing countries such as India and Brazil.<br><br>The United States is not blameless in this matter either. Last year US President George W Bush signed into law a farm bill increasing government spending on agriculture by 80 percent. Conservatively, that comes out to an additional $82 billion for US farmers over the next decade. Not only is the amount of new farm aid massive, its coverage is extensive. The new bill reintroduces subsidies on a host of farm products and invents new payments related to pricing and production that prove highly trade distorting, so much so that some predict the US will break its Uruguay Round commitments, never mind its Doha Round promises. <br><br>In view on this, one cannot help but wonder whether the US proposal to keep the Doha Round on track is entirely feasible given the political clout of farm states. Bush's trade negotiator Robert Zoellick thinks so, arguing that the US is ready to let the ax fall once the EU agrees to cut back its own subsidy program proportionately. But this kind of hedging fails to inspire confidence, either in the EU, whose own commitment to trade liberalization will waver with US backsliding, or in many developing countries, whose disaffection with the multilateral trading system will continue to deepen.<br><br>The EU and the US also knock heads on the issue of genetically modified organisms (GMOs). Last month, Bush accused the EU of hindering the "great cause of ending hunger in Africa" by continuing to ban GM foods. Bush argued that the moratorium discouraged Africans from investing in GM technology because they feared the EU would block their GM food exports as a result. The EU has maintained that its moratorium is simply a measure of precaution, arguing that the absolute safety of biotechnology crops, which have been genetically altered to become more resistant to pests, have yet to be confirmed. Despite the high-toned rhetoric on both sides, there is little question that this dispute has a lot to do with the billions of dollars in agricultural trade at stake. As the main producer of GM foods and technology, the US is keen on finding new markets for GM products. The EU is equally keen on keeping its markets to itself and keeping US products, GM or otherwise, out.<br><br>These rows, however acrimonious, are not entirely unproductive. Aileen Kwa, development think-tank Focus on the Global South's WTO observer, notes that developed country infighting, particularly between the US and EU, may be part of a negotiation process that keeps power within their circle. "This stalemate is not foreign to trade negotiations: it is part and parcel of the negotiation strategies of big players - to hold extreme positions, to negotiate on the side with equals (the US and EU will come to their own private deals), offer some carrots and wave some sticks to developing countries, and mix in a large dose of personal contact with ministers, with heavy servings of persuasion and coercion." While the WTO mandates consensus among its members, controlling the process of getting consensus can be instrumental in achieving the "right" outcome. And certainly by keeping the debate largely on their terms, developed countries manage to frame the terms of consensus. <br><br><b>The real losers</b><br>Poor countries lose the most from rich-country squabbling. According to the United Nations, developing countries lose about $100 billion a year through protectionist policies. That's twice as much as they receive in aid. Since their Uruguay Round commitments, developed countries have increased, not reduced, the amount they spend on agricultural subsidies to $350 billion a year.<br><br>Moreover, rich countries restrict poor countries from having fair access to their markets. The international aid organization Oxfam claims that tariff barriers in rich countries are four times as high for poor countries as they are for other rich countries. In fact, some of the highest barriers are leveled against the poorest countries of all, the LDCs. Considering that, according to Oxfam, "96 percent of the world's farmer's live in developing countries, where agriculture provides the main source of income for 2.5 billion people", the full scale of suffering caused by unfair trading practices on the part of developed countries becomes apparent. <br><br>Tragically, while international trade has the potential to generate enormous wealth (and it surely has for rich countries), the modalities by which it operates have, in the cases of many poor countries, led to a squandering of that potential and even to the entrenchment of poverty. The problem inheres in the regime governing international trade. The Uruguay Round Agreement on Agriculture (AoA) legalizes trading practices that enable rich countries to skew the benefits of trade in their favor. Through various rationalizations, the AoA allows rich countries to subsidize their agriculture to the point of gross overproduction and dump the resulting surplus in developing-country markets. Export dumping has the pernicious effect of displacing local producers who can't compete with the artificially depressed prices of the subsidized imports.<br><br>For example, US cotton subsidies have devastated the cotton industries in Central and West Africa. If trade were free, countries such as Burkina Faso, Mali and Benin would dominate the world market in cotton. According to the World Bank, these countries are among the lowest-cost producers of cotton. It costs US cotton farmers three times as much to produce a kilogram of cotton than it does farmers in Burkina Faso. However, while Burkina Faso may have the comparative advantage in terms of efficiency, the United States clearly enjoys the advantage in terms of subsidies. How can Burkina Faso possibly compete when, according to Oxfam, the US spends more on subsidies for its 25,000 cotton farmers than the entire GDP of Burkina Faso? Every hectare of cotton farmland in the United States is subsidized by $570. US cotton farmers received a total of $3.9 billion in 2001-02. These government transfers exceed the actual value of the output, so cotton in the US is produced at a net cost. As a result, world prices for cotton are kept artificially low. This has a debilitating effect on nations dependent on cotton production: Burkina Faso loses 1 percent of its GDP and 12 percent of its export earnings as a consequence. Hence, more than half of its 2 million cotton farmers remain mired in poverty.<br><br>Another example: When half the world's population lives on less than $1 a day, according to Oxfam, the EU spent 16 billion euros in 2001 to subsidize its dairy industry - an amount that comes out to $2 per cow per day. EU dairy subsidies undercut the livelihoods of small farmers in Jamaica, the Dominican Republic and Kenya in much the same way that US cotton subsidies wreak havoc on Central and West African economies. However, unlike US cotton subsidies, much of the EU's dairy subsidies go not to production, but to promoting its dairy products abroad. Export subsidies aimed at expanding market shares have the effect of fostering import dependence in developing countries (for goods that can be locally produced) and undermining these countries' own capacity to export.<br><br>Although developed countries like to portray agricultural subsidies as a way to protect their small farmers, large traders and transnational corporations are really the ones who benefit the most. According to Oxfam, three-quarters of US cotton subsidies go to the largest 10 percent of cotton farms. In 2001, 10 of these farms received payments totaling $17 million. The same is true for EU dairy subsidies. Although the CAP provides for the protection of farm incomes, since the EU's dairy subsidies exist largely to promote exports, they go directly to dairy-processing and trading companies. Every year these companies receive more than a billion euros just in export subsidies. Meanwhile, Europe's small farmers are left to suffer lower dairy prices. In a telling sign of the effect these subsidies are having, while the number of EU dairy farmers has diminished by 50 percent over the past decade, the average herd size has increased by 55 percent. <br><br>Moreover, while protecting their own markets, developed-country members of the WTO invoke the AoA to force developing country members to open their markets. Oxfam provides the example of Haiti: "Under pressure from the IMF [International Monetary Fund] and US, Haiti cut its tariff on rice to a mere 3 percent. As a result, rice imports - mostly subsidized rice from the US - have increased thirty-fold. The price of rice in Haiti has hardly fallen [as liberalization advocates argue], and malnutrition now affects 62 percent of the population, up from 48 percent in the early 1980s." Certainly, developing countries do not enjoy similar access to developed-country markets. <br><br><b>Cheap tricks and inimical aid</b><br>The basic problem is that rich nations set the global trade rules. That these nations go to great lengths to disguise their self-interest only confounds this problem. Being able to expound upon the virtues of free trade on the one hand while subsidizing one's agriculture to the point of deliberate surplus on the other is simply a marvel of doublespeak that the EU and the US have perfected. George Monbiot writes in The Guardian that the AoA, while designed to limit the amount of subsidies developed countries could confer, is so riddled with loopholes that all these countries have to do to keep within its letter is call their subsidies by new names. <br><br>Instead of paying farmers production subsidies, for example, the EU has taken to giving them direct grants based on the land they own and how much they produce. The level of subsidization remains the same, but while production subsidies are considered "trade-distorting", direct grants are not. Hence the EU would seem to abide by the terms of the AoA. The US has been similarly ingenious in repackaging its subsidies. Through "export credits", the US can depress the cost of its exports by providing cheap insurance for exporters. <br><br>The world trade system makes for contradiction on another level as well: foreign aid. While G8 leaders in Evian remained vague about trade, they did not hesitate to pledge higher amounts of overseas development assistance (ODA) to Africa as a show of their commitment to development. The delegates in Dhaka, however, had a different idea: "We need market access more than anything else," said Bangladeshi Commerce Minister Amir Khasru Mahmud Chowdury. "The motto now is 'trade not aid'." <br><br>The difference, of course, is that aid affords developed countries more control. It can be granted and withdrawn at their pleasure and can be directed toward sectors that complement their own interests. In any case, the damage caused by unfair trade outweighs the benefits of aid. While Mali received $37 million in ODA from the US in 2001, it lost $43 million as a result of lower export earnings due to competition from subsidized US cotton. In fact, according to Oxfam, the US spends three times as much in cotton subsidies as the entire USAID (United States Agency for International Development) budget for Africa. <br><br>These subsidies have the effect of making aid seem meaningless. In the face of unfair trading practices, aid can also seem irrational. While the EU has spent millions of euros helping to develop the Indian dairy industry over the past 30 years, its own dairy subsidies undermine this effort. <br><br>But the most insidious use of aid is when it does coordinate with trade, when it becomes, in effect, a kind of subsidy. Monbiot writes how aid is being used by the United States as a way to penetrate developing-country markets. While most major donors give aid in terms of money with which aid organizations can buy food in local markets, the US insists on sending its own food. The US Department of Agriculture (USDA) is unabashed in admitting that this program is "designed to develop and expand commercial outlets for US commodities". Consequently, those nations that "demonstrate the potential to become commercial markets" receive the most aid. According to Monbiot, "this is why, for example, the Philippines currently receives more US food aid than Mozambique, Malawi, Zambia, and Zimbabwe put together, all of which, unlike the Philippines, are currently suffering from serious food shortages". <br><br>Even worse, food aid is sent when it is least needed. Oxfam has produced a graph showing how the volume of US aid rises when world food prices fall. Such flagrant agricultural dumping seems aimed less at aiding developing countries than at gaining access to their markets. <br><br><b>A flagging faith</b><br>International trade as it now operates is neither fully free nor fair. The record of cases that attest to this saps the credibility of the free-trade rhetoric perennially coming out of such forums as the G8 summit. At the same time, it makes backing that rhetoric with genuine reform all the more urgent. <br><br>If the deadlock in the Doha Round talks remain, the Cancun ministerial in September could end up another empty exercise. Nicholas Stern, chief economist at the World Bank, warns that "movement of sufficient scale and speed has yet to materialize, and Cancun is at serious risk". <br><br>Of course, some groups, because of either cynicism or self-interest, would see the collapse of Doha as predictable and even opportune. Anti-globalization activists would find confirmation of their larger indictment of the WTO as an irreparable institution designed to subjugate developing-country economies. Certain agricultural and industrial lobbies would read evidence of the ineffectualness of the WTO process, if not of the WTO itself. US lawmakers sympathetic to the domestic steel industry have already called for the United States to withdraw from the organization. <br><br>But should Doha fail or fall short, the most serious casualty would be the faith of many developing countries in the WTO process. As it is, this faith is flagging. Many developing countries are concerned that while the ministerial will behold them to open their markets even further, their efforts will not be reciprocated by developed countries in terms of greater market access and the reduction of trade-distorting subsidies. Philippine Trade Secretary Manuel Roxas expressed ambivalence about whether he wanted the ministerial to even push through. "We will not be unhappy if there was no new WTO round at all," he said. <br><br>Developing countries are caught between cynicism and hope. The Doha Development Round holds out the promise that agricultural trade can be made to work better for poor countries. But it is a promise that, while consistently affirmed in the rhetoric of G8 leaders, needs to be fulfilled in order to be fully believed. <br><br>(Copyright 2003 Asia Times Online Co, Ltd. All rights reserved. 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