The World Trade Organization negotiations have broken down once again, ostensibly because “developing” countries want to protect their farmers. Imagine that.
As representatives of 40 nations left the failed talks July 29, developing and developed countries were pointing fingers at each other for causing the collapse of the “mini-ministerial” meeting in Geneva, Switzerland.
Negotiators for China and India accused the developed countries of refusing to make sufficient reductions in agricultural subsidies to justify opening their markets to more agricultural exports.
The United States, European Union and other members of a group of seven leading countries said they could not accept language from China and India that would have allowed developing countries to raise tariffs on ag imports.
The argument was much more complex than that as such negotiations often are. Some said the U.S. cotton program was one of the sticking points; others blamed U.S. soybean exports to China; and others, the new farm bill.
When China was admitted to the WTO in 2001, a pre-condition was that it would establish a new quota system that would permit increased imports of U.S. cotton. The U.S. cotton industry says China has only done so during times of shortages in its domestic supply.
Under Chinese rules, imports coming in through the quota system are subject to a 1 percent duty. Imports above the quota system incur duties on a sliding scale that ranges from 6 percent to 40 percent.
China came into the latest ministerial demanding the United States eliminate its cotton subsidies, which it claimed have reached $3.5 billion a year, before it would reduce its cotton import tariffs or open more quotas.
“Lowering or eliminating cotton import tariffs for China would result in a flood of U.S. cotton on the Chinese market, which would cause the loss of millions of jobs among Chinese cotton growers,” one Chinese analyst said.
The Chinese government has been more flexible on soybean imports, reducing the tariff several times to lower the price of cooking oil. One cut appeared to be aimed at keeping prices low around the Olympic games.
But Chinese negotiators took a different tack in Geneva, siding with India on demands the new agreement allow developing countries to raise tariffs on commodities such as soybeans when the economic livelihoods of their farmers were threatened.
That's an increasingly novel concept among “free traders” who care little about what happens to individual farmers as long as multi-national companies can increase sales of agricultural commodities and industrial goods.
They cite study after study showing that a successful Doha Round agreement would increase global income by $2 trillion to $3 trillion per year, but have no figures on how many farmers might lose their livelihoods in the process.
The WTO must somehow find a way to improve trade while keeping millions of the world's farmers from slipping further into poverty. That can't be any more difficult than negotiating a new trade deal.