Europe's farms vs. free trade

Farm subsidies have become the major sticking point at this week's free trade summit in Hong Kong.

As trade officials from around the world haggle in Hong Kong this week over how far to liberalize trade rules, it is Europe that is coming under the heaviest fire, from both its rich and poor trading partners, for blocking a deal designed to pull developing countries out of poverty.

The European Union's rejection - largely at France's behest - of calls from all sides to open its market wider to cheaper foreign food means "it will be very tough for the EU to avoid being branded as the bad player" at the World Trade Organization (WTO) summit, says Aurore Wanlin, a trade analyst at the Centre for European Reform in London.

At stake is the success or failure of the four-year "Doha round" of WTO negotiations, aimed at a deal that could add $300 billion a year to the world economy and help lift 140 million people living on less than two dollars a day out of their plight.

"Unless the EU moves on market access, I don't see anyone else moving," US Trade Representative Rob Portman told reporters in Hong Kong Wednesday, urging Brussels to offer deeper cuts in the customs tariffs it slaps on agricultural imports.

EU Trade Commissioner Peter Mandelson insisted that he could improve his offer only if developing countries pledged to open their markets more to industrial goods and services. "We will not succeed ... if we continue to focus on only one part of the round," he told the meeting Wednesday. "We need more to negotiate about."

With antiglobalization protesters nipping at its heels and its credibility in question, the WTO desperately needs a success. Its last two summits in Seattle and Cancun collapsed in chaos, and unless the 149 members reach a deal next year they never will. In July 2007, President Bush's fast-track trade authority expires.

Mr. Mandelson tried to relieve the pressure on him Wednesday by saying that some wealthy countries were reluctant to follow the lead of the EU, which gives tariff-free access to all imports from the world's 50 Least Developed Countries. The US and Japan were said to be balking at such a blanket deal. European officials say reducing tariffs on food imports from emerging agricultural powerhouses such as Brazil and Argentina would increase competition against tariff-free imports from the poorest countries, and thus hurt their interests.

But Mandelson will not be able to silence demands from the US and large developing nations like Brazil that the EU stop protecting its farmers so heavily.

Last October, the EU offered to cut its agricultural tariffs between 35 and 60 percent, except on a range of what it calls "sensitive" products such as beef, chicken and sugar. Washington is pressing for EU cuts of between 55 and 90 percent.

Both the US and the EU have agreed in principle to end all export subsidies, which encourage their farmers to dump surplus crops on world markets at give-away prices and drive poor country farmers out of business (see sidebar below). But they have set no date for this move.

When it comes to domestic farm subsidies, which both encourage farmers in the US, Japan, and Europe to overproduce so as to sell their surplus abroad, and allow them to grow crops for sale at home that would not be economically viable without subsidies, Mandelson's hands are tied by demands by some EU members, led by France, that he give no ground.

"We are prepared to go so far as to veto" any deal that Mandelson might negotiate if it meant a reduction in farm support, French Agriculture Minister Dominique Bussereau reassured a group of French farmers on Monday. "We will defend the essence of our way of life," he added, referring to the central place that high-quality, locally grown food holds in France's national identity.

Mr. Bussereau also pointed out that behind French agriculture is a large agro-food industry, which employs 13 percent of the French workforce.

"We will fight for real measures to help the poorest people, but we prefer to help the peasants of Burkina Fasso or Mali to sell their produce rather than big landowners in Latin America to flood our market with low-cost goods that would threaten the very existence of our agriculture," he said.

That approach sets strict limits on Mandelson's negotiating strategy, says Wyn Grant, a professor of politics at Warwick University in England. "In the end it's about France and what it is prepared to tolerate, and that is not much," he says.

The same issue, meanwhile, is complicating EU efforts to set a new seven-year budget at a summit that opens in Brussels Friday. British hopes of reforming the EU's agricultural policy, which devotes 40 percent of the budget to farm support, have foundered on the French refusal to countenance any changes until 2013.

Meanwhile, in Hong Kong, there is a fear that unless the WTO can reach a satisfactory deal, perhaps at a specially convened meeting next spring, its most powerful members might lose faith in multilateral trade negotiations altogether and revert to bilateral and regional agreements.

If so, the losers would be the developing countries, says Ms. Wanlin. "The least developed countries with nothing to offer would not be invited to do any deals, and the emerging nations would be much more vulnerable dealing directly with superpowers."

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