All Things Considered: Recipe for Failure

Appropriately on July 4 the Globe and Mail ran an editorial subtitled “Doha is dying.” While the Globe didn’t get into the specifics of what happened –
talking about differences between developed and developing nations,the
recently passed U.S. farm bill – which has more to do with vote buying
than farm stability – played a role.

Appropriately on July 4 the Globe and Mail ran an editorial subtitled “Doha is dying.”

While the Globe didn’t get into the specifics of what happened – talking about differences between developed and developing nations,the recently passed U.S. farm bill – which has more to do with vote buying than farm stability – played a role.

Amazingly, the new farm bill promises to prop up grain producer incomes while grain prices surge to record highs.

Or perhaps it isn’t all that amazing. U.S. politicians – like politicians in Canada, Europe and elsewhere – know how to count votes and know that votes in Iowa, Kansas, Montana and Missouri count while those in Africa, Asia and South America don’t.

As a result they decided not to change any of the policies that sparked international interest in a new trade agreement.

They seemingly also decided to ignore international food shortages and sky-high grain prices to continue pouring billions of dollars into grain ethanol subsidies.

If you add to that the reluctance of some European nations to accept substantive change to Europe’s farm policies and the reluctance of developing nations to open up their markets to trade in services, then you have a recipe for Doha failure.

Very soon there will be a round of last gasp negotiations. These negotiations could be very, very dangerous.

Trade negotiators and departing politicians like George Bush and the rest of his administration want to leave a legacy. Perhaps they will cobble together some sort of deal. It would, after all, be deeply embarrassing and perhaps fatal to the future of the WTO, if nothing came from almost seven years of talk.

This makes it a potentially dangerous time for Canada’s supply-managed sector. An easy out for most countries would be to opt for reductions in tariffs and TRQs like the ones that protect Canada’s poultry and dairy industries.

Europe, the U.S. and others would be able to proclaim success while Canada would be left trying to figure out what to do. Canadian farm leaders and politicians are well aware of this risk but may have to work extremely hard to ensure it doesn’t happen.

Meanwhile there has been a lot of talk in recent months about helping Third World nations become more self-sufficient in food.

To its credit Canada changed its food aid program so that Canadian aid money can be used to buy food from farmers in or near the distressed region. This should help.

For too long developed nations undercut farmers in developing nations. If this were the result of superior efficiency it would have been economically excusable.

But it began, not because of efficiency, but because of political expediency in the U.S.

Way back in the 1960s the U.S. decided to make a major change in its farm policy. Unofficially, but accurately, the policy was called “cram it down their throats.”

Under the policy the U.S. adjusted its grain export subsidies daily and set them at levels that undercut both competitors and local producers.

While this made life difficult for Canadian grain growers and the Canadian government, it was absolutely devastating for farmers in poorer nations.

An example of what was happening occurred in 1967. Concerned about rising subsidies and collapsing prices the U.S., Canada, Australia and other exporters signed an international grain agreement, which set a floor price for wheat. Within months the U.S. followed by Australia and others subsidized their way through the floor.

There was a brief respite in the 1970s when the former Soviet Union jumped into the international market with huge purchases and pushed prices up.

But that was temporary and didn’t change policy fundamentals.

U.S. Agriculture Secretary John Block said in 1986: “The idea that developing countries should feed themselves is an anachronism from a bygone era. They could better ensure their food security by relying on U.S. agricultural products, which are available in most cases at lower cost.”

What Block didn’t say was that U.S. prices were lower because of subsidies.

He also didn’t say that the price of cheap grain and other farm products would include political instability as local farmers left the land to search for nonexistent jobs in the cities and greater food insecurity.

Now with widespread food shortages the world is trying to recover what was lost and is reversing Block’s policy and encouraging more food self-sufficiency.

But rebuilding local agriculture is proving devilishly difficult in a time of high fuel and fertilizer prices.

Even the Malawi model of giving small farmers a package of fertilizer and seed at discounted prices is proving expensive. This is unfortunate because in Malawi the result was a dramatic jump in production and self-sufficiency.

It seems to me that the goal of any agricultural trade deal should be to ensure that everyone, everywhere has enough to eat. If that means that some countries have trade barriers to protect their farmers from subsidized, imported products, then so be it.

Maybe Doha is dying – maybe it deserves to.