03-17-2001

ECONOMICS: They're Making Headway in Geneva

Fifteen months after hopes of launching a broad new round of international
trade negotiations were left gasping in a fog of tear gas on Seattle's
streets, more-narrowly-defined talks aimed at lowering barriers to farm
trade are making surprising progress at the World Trade Organization in
Geneva.


So far, 93 countries have filed 36 negotiating proposals, and WTO members
are scheduled to meet from March 26-28 to take stock of their efforts.
During that meeting, they'll launch phase two of the
negotiations-wrangling over tariffs, the levels of permissible domestic
farm support provided by governments, and the latest outburst of
food-safety scares.


These talks, which will take at least a couple of years to complete, could
easily be derailed by the U.S. farm bill now under consideration, the
recalcitrance of the Japanese, or shifting European farm politics. But
compared with the Uruguay Round-the last set of trade negotiations, which
did not turn to agricultural issues for more than four years-the current
talks are on a fast track.


Farm trade is big business, valued at more than $544 billion in 1999. As
the world's largest exporter of agricultural products, accounting for
about one-eighth of the world total, the United States has a huge stake in
the outcome of the Geneva talks.


Traditionally, agricultural deliberations have been face-offs between
Europe and the United States. But this time, "people are picking
their dance partner based on the issue," said Audrae Erickson,
international trade director for policy and negotiations at the American
Farm Bureau Federation, one of the largest U.S. farm lobbies.


Worldwide agricultural tariffs have been lowered by a third in recent
years, but Washington wants them cut further. Most countries are reluctant
to go too far too fast. Reducing export subsidies, which underwrite
foreign sales and are used widely by the European Union, is a major
American, Australian, and Canadian goal. These three countries maintain
that Europe's subsidies undercut their agricultural exports.


Another big challenge facing WTO negotiators is reducing domestic farm
supports. Washington wants to do away with current aid that encourages
production. Brussels wants to keep some subsidies.


Negotiators must also wrestle with a range of other farm-related issues,
including rural development and environmental aid. The European Union now
seems willing to break with its history of using such subsidies, and
Brussels is calling for this aid to be in the open, narrowly targeted on
specific farmers, and designed so it doesn't depress world commodity
prices.


Two other big challenges face negotiators in Geneva: Europe's response to
the mad-cow disease scare and the shape of the U.S. farm bill to be
drafted by the American Congress over the next year.


The Germans, the Swedes, and the Danes, blaming recent outbreaks of
disease on large-scale farming, are pushing to increase organic farming in
Europe. Such a shift could cut European overproduction, because organic
farming is less productive. This, in turn, would reduce the need for
Brussels' market-distorting export subsidies. But a greater reliance on
organic farming would also raise already-high food prices in Europe.
Because consumers would likely howl over having to shell out more money
for food, taxpayers could be asked to subsidize farmers to an even greater
extent. How Europeans structure those subsidies will bear watching. And
how Europeans try to protect their high-priced organic production from
foreign competition will be a major Washington concern.


The next U.S. farm bill is equally troubling to the rest of the world.
American farm support reached record-high levels last year-nearly $27
billion-and is now about a quarter higher than it was before the Uruguay
Round. Washington asserts that all such support is legal under WTO rules.
Legal or no, its sheer volume is a growing irritant to other commodity
producers.


After the March stock-taking in Geneva, WTO negotiators will probably
spend nearly a year deciding how they will structure future talks. In
part, they will be biding their time until mid-2002, when the U.S.
government presumably will have completed its work on a farm bill and when
France will be past its presidential election season. The negotiators will
then rush to finish before a self-imposed deadline at the end of 2003.
After that point, all existing farm subsidies are subject to international
challenge and possible trade sanctions.


"The outlines of an agreement are there," said Peter Scher, a
partner at the law firm of Mayer, Brown & Platt, and the Clinton
Administration's chief farm trade negotiator. "The question is
whether the Europeans and the Japanese are willing to make real
concessions on export subsidies and tariffs."


Brussels, Canberra, and other capitals share that optimism. But they
suggest that Washington will also have to be more flexible. Are members of
the House and Senate Agriculture Committees, who are writing the farm
bill, and officials in the Bush Agriculture Department, who will decide on
new farm aid, listening? It's their actions that could ultimately
determine the success or failure of the talks in Geneva.


Bruce Stokes

National Journal