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Vol.
XXVII No. 41
October 12,
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Africa
Showed The Way In Cancun
Amit
Sen Gupta
THE
walkout of the African delegates in Cancun signalled the final collapse of the
WTO ministerial meeting. While reports about the Cancun collapse have tended to
focus on the role played by the Group of 21 countries (which included India) in
resisting pressures from developed countries, the unity of the African countries
played a role that was as important, if not more, in derailing the Cancun
meeting.
Few
people realise that the African unity in WTO predates the unity shown in Cancun
by the G-21 countries. In fact, among the developing countries, the African
countries were much more united even in Seattle in 1999 and also in Doha in
2001. In Seattle, when countries like India dithered and tried to make common
cause with the US, it was the Africans who held out most strongly against US
pressures to compromise. This is indeed a remarkable development given the
vulnerable position that many African nations find themselves in, vis a vis
bilateral pressures from the US and the EU. But over the years many of them have
realised that promises of various kinds made in lieu of compliance with demands
made of them by the US in multilateral fora, are never redeemed. This experience
and the gross injustice that African countries have had to face in the WTO, have
served to forge the unity of the African countries. Nowhere is this more obvious
than in the agriculture sector.
YOU
LIBERALISE, WE SUBSIDISE
The
agriculture sector is a stark example of how the WTO rigged its rules to favour
the rich and the powerful. Traditionally, the way the agriculture sector was
protected differed among developed and developing countries. The former
protected their agriculture by providing subsidies both in cash and through
other incentives to their farmers. Further subsidies were made available if
the produce was exported. Developing countries, not being able to provide such
subsidies as they were cash strapped, protected their agricultural market by
imposing high duties on imports (tariff barriers) and through quantitative
restrictions that is by specifying a ceiling on the amount of each product
that could be allowed to be imported. The WTO agreement was so designed that it
targeted the protections of developing countries (by removing quantitative
restrictions and reducing import duties) while allowing the developed countries
to maintain their subsidies. Even the modest reductions that the developed
countries were to make in their subsidies were not adhered to in the last eight
years. Instead, the subsidy given by the rich countries to their farmers and
agribusiness has grown from about 180 billion dollars then to more than 300
billion dollars now the equivalent of Africas gross domestic product!
Today,
Europe is responsible for half the worlds farm subsidies, and the US accounts
for a further third of all agricultural subsidies. Such subsidies not only keep
a local political constituency happy but also help agribusiness: they are able
to buy cheap and capture the global markets, as others cannot compete at these
prices. Their ability to capture the global market has nothing to do with
efficiency of production or costs: it is simply a reflection of the level of
subsidy. Not only are the US and EU not willing to lower subsidies except
cosmetically, they also have argued that a large part of their subsidies are
non-trade distorting. The Agreement on Agriculture (AoA) divides domestic
subsidies into amber, blue and green boxes, in which blue and
green box subsidies are held to be non-trade distorting. The Amber Box
consists of subsidies that are seen as trade distorting, and have to be reduced.
The Green Box subsidies are for production restructuring and direct
payments not linked to production, and Blue Box subsidies are not linked
to current production but to past production or areas. The unscrupulous and
manipulative nature of the GATT negotiations is clear from the fact that the so
called trade distorting subsidies were the kind that the developing countries
were providing (and hence were phased out) while those that the developed
countries provided were supposed to be non-trade distorting (and hence could be
retained)! The developing countries were conned into this division of subsidies
into so-called trade distorting and non-trade distorting subsidies in the
Uruguay round and are only now arguing for bringing all subsidies in agriculture
on the negotiating table. Unfortunately, having given up quantitative
restrictions then, they have weakened their own bargaining position
considerably. Without getting back QRs, they are unlikely to win major
concessions or be able to protect their agriculture.
In
the run-up to Cancun, the US and EU held their own negotiations in mid-August to
try and unify their positions. The entire thrust of their joint proposal was to
allow for shifting of their respective subsidies from one box to another. On the
other hand, they proposed steep cuts in the tariff protection of the developing
countries while making very few concessions on their side. Their thrust was to
provide high tariffs to prevail for a few items that will be designate as trade
sensitive, allow for steep cuts in tariffs for most other items (non-linear
tariff cuts, i.e., the higher the tariff, the steeper the cut) and have zero to
five per cent tariffs on certain items. As northern (developed country)
agriculture has a less number of varieties, protection of a small number of
items would still maintain their high tariffs for their products. Southern
(developing country) agriculture spans across a very large number of varieties;
they would have to undertake sharp reductions. The motto clearly was: You
liberalise, We subsidise!
African
agricultural markets are already much more liberalised than those of developed
countries, and generally more than even in other developing countries. This is
because, for more than two decades (i.e. from long before the signing of the WTO
agreement), African governments have been forced through structural adjustment
policies and bilateral aid and trade conditions to eliminate producer subsidies
and reduce tariffs at deeper and faster rates than required by the WTO rules. By
2005, African agricultural tariffs will average 20 per cent, compared to 36 per
cent in Northern markets.
CRISIS
IN COTTON
PRODUCTION
The
case of cotton, sugar and cattle bring out most sharply the effect of the WTO on
African agriculture. Under IMF and World Bank pressures, West African farmers
had to shift from food cultivation to a commercial crop, cotton, so that this
could be exported to pay for their loans.
More
than 10 million people in West and Central African countries earn their
livelihood from cotton production, which is the main source of foreign exchange
and government revenue for several poor countries in West Africa.
The US is the worlds largest exporter of cotton; it is also the
worlds largest subsidiser of cotton, spending nearly 4 billion dollars a year
on subsidies for 25,000 producers. This is roughly three times the entire USAID
budget for Africas 500 million people.
American
subsidies have driven down world cotton prices to levels not seen since the
Great Depression, generating losses to African producers of 301 million dollars
in 2001-2002. For the worst hit countries, these losses outweigh the benefits
conferred by US assistance or debt relief. West African cotton producers are
more efficient, low cost producers than their American counterparts, yet they
simply cannot compete with the latters access to huge subsidies. There is
widespread fear in the region that if cotton prices continue to fall — as they
are expected to — health and education will become unaffordable, children will
drop out of school, and households will be unable to respond to the threat of
diseases.
Similarly
in sugar, the amount of subsidy that EU gives its farmers to grow beet is higher
than the price of the entire surplus sugar of the developing countries. The rich
countries pay 2 dollars per head of cattle to its cattle growers, more than the
per capita income of the farmers in most of the developing countries keeping
life stock.
ENOUGH
IS ENOUGH
SAYS AFRICA
Since
the launch of the agriculture talks in early 2000 to review the agreement on
agriculture under the WTO, the Africa Group of WTO negotiators has submitted two
sets of proposals. They are among the most comprehensive and detailed of any
country or trading bloc. Many African countries have also submitted individual
proposals, or joined with other countries and blocs on specific issues. Many of
the African proposals address concerns in three of the areas mandated for reform
at Doha: securing substantial improvements in market access, reduction
(with a view to phasing out) all export subsidies provided by developed
countries and substantial reduction of domestic subsidies by developed
countries deemed trade distorting.
Given
this background, it is not surprising that the African countries, faced as they
are with the brunt of the WTOs iniquitous trade regime in agriculture,
finally chose to say, enough is enough. The proverbial last straw on the
camels back was the reported advice by the developed countries, Marie
Antoinette like, that if Africans are facing problems in selling cotton they
should shift to other crops! It is important that India is sensitive to the real
concerns of the African bloc in the WTO. Since the collapse of the non-alignment
movement, India has often tended to take them for granted and have at times
sided with the US in order to curry favour with the US for its very narrow
short-term interests. In Cancun the
African countries showed that they cannot be take for granted any more.
