The U.S. has “a lot of work to do” if American agriculture is to take full advantage of international trade, including overcoming several major global agricultural policy distortions, says Ambassador Rita Derrick Hayes, who is Deputy U. S. Trade Representative and U.S. Permanent Representative to the World Trade Organization (WTO).
“While the WTO has made a good first step in bringing certainty, transparency, and competition to world agricultural trade, in too many countries and for too many products, market barriers and extravagant subsidy policies are defining terms of trade, rather than competitiveness and consumer choice,” Hayes told Agricultural Outlook Forum 2001 representatives at Washington.
“Compared to some of our major competitors, the openness of our American market is high and our trade barriers are low — so when we negotiate free trade agreements with our counterparts, we almost always open other markets more than we must change our own.”
Some of examples of global agricultural policy distortions:
In agriculture, the average tariff that can be levied on imports is around 60 percent, while the U.S. average is only about 12 percent.
The European Union, which accounts for over 90 percent of expenditures on direct export subsidies, spends $7 billion on subsidized exports each year, while the U.S. spends only about $100 million.
Trade-distorting domestic supports (policies that reward producers for increasing production) are still too prevalent. The European Union can provide over $60 billion annually and Japan over $35 billion annually. The maximum the U.S. can spend is $19 billion.
“The effect of these distortions is astounding,” Hayes says. “The USDA's Economic Research Service has reported that global agricultural policy distortions have reduced world agricultural prices by over 12 percent. Over the long term, these distorting policies would reduce consumer purchasing power by $56 billion annually.”
To address these distortions, the U.S. has taken the lead in WTO negotiations underway in Geneva, Switzerland. With broad bipartisan consensus and strong industry support, the U.S. submitted the first comprehensive agricultural proposal last June, focusing on bringing down high tariffs and trade-distorting subsidies worldwide, calling for elimination of export subsidies, substantial reduction or elimination of tariffs, and substantial reductions in trade-distorting domestic support.
“The proposal was very well received,” Hayes says. “I've heard from a number of other countries that a strong, principled U.S. Proposal was just the right way to get agriculture negotiations moving. The U.S. is determined to work with all WTO members to achieve our objectives.”
WTO members are wrapping up the first phase of negotiations, with over 30 proposals on the table, and “extensive background work has provided a solid analytical base for countries to move forward into a more intensive phase of the negotiations. We're expecting to close the first phase of negotiations next month in Geneva and members will take stock of progress and lay out a work plan for the next phase. I expect members to intensify these technical discussions and begin the work of building consensus for specific reforms.”
Hayes says developing countries “have been very active” in the negotiations, “a marked departure” from previous General Agreement on Tariffs and Trade (GATT) negotiations, and have “joined the call for substantial reforms. We have reminded them that we expect reforms from all countries, and that we view a number of these countries as key markets for our products.”
The European Union has also taken a very active role in negotiations, Hayes notes. “On the positive side, they recognize that reforms through tariff reductions and subsidy cuts cannot be avoided. This is a far cry from European approaches in previous negotiations. On the negative side, they are not nearly as ambitious as we are in calling for reform, and we feel the EU is trying to use these negotiations to gain legitimacy” for such concepts as animal welfare rights, “which could open the door to new trade barriers.” The EU is also “doing its best to focus reforms on U.S. agricultural policies, using the old adage that the best defense is a good offense.”
While the U.S. has yet to see “any helpful reform offers from Japan,” Hayes says, “their government has taken a very systematic approach to the negotiations, recognizing that it will come under serious pressure to make difficult reform commitments.”
It all “adds up to good progress” after a year of work in the WTO, Hayes says. “The range of views are on the table, countries are focusing on reform proposals, and the challenges each country faces to reaching an agreement are becoming evident. Our task over the next year is to intensify the work in agriculture, clarifying positions and beginning to narrow the differences.”