Empathizing with France and Pakistan on agricultural subsidy issues in the Doha Round.

• Author: Bhala, Raj

ABSTRACT

Among the most contentious issues (if not the most contentious issue) in the Doha Round negotiations are agricultural subsidies. Developed countries stand accused of selfish adherence to domestic support and export subsidies that impoverish farmers in developing countries.

Developing countries are blamed for self-inflicted wounds, caused by stubborn adherence to protectionist policies, covering both agricultural and industrial sectors. Agricultural subsidy cuts, as well as increased market access, are politically impossible for developed countries to concede without reciprocal access from developing countries, not only on farm products, but also in non-agricultural markets and service sectors.

There has been, and continues to be, plenty of dialogue among the trade officials of WTO Members. Is it a dialogue of the deaf? Do developed countries appreciate that poor countries face daunting challenges in reforming their trade regimes? While the challenges must be faced sooner or later, do developed countries understand the fine line in some developing countries between aggressive trade liberalization urged by moderates and descent into a failed statehood dominated by autarkic extremists? Conversely, do developing countries appreciate that developed countries may have legitimate concerns about the economic and non-economic functions of their farm sector? Do they appreciate the progress made in reform to this sector?

This Article explores these questions in two steps. First, Pakistan and France are case studies of the Group of 20 (G-20) developing countries and the European Union (EU), respectively. The problems faced in each country, in respect of agriculture, are presented. For Pakistan, special attention is paid to rural poverty in the context of overall economic reform pushed forth by President Pervez Musharraf. For France, emphasis is placed on how the EU Common Agricultural Policy (CAP) works and has been altered since the 1992 MacSharry Reform. Second, the G-20 and EU negotiating positions in the Doha Round on agricultural subsidies are explained and analyzed. These positions relate directly to the difficulties faced by the likes of Pakistan and France in their agricultural sectors.

Empathy is the theme underlying this Article. Neither side should demonize or be demonized by the other. Both sides have legitimate concerns, not the least of which is food security, a constant worry in front-line states on the "War on Terror," and a founding principle of the CAP.

TABLE OF CONTENTS I. FROM THE FARM TO THE NEGOTIATING TABLE II. ECONOMIC REFORM AND PAKISTANI FARMING A. Diagnosis of Major Economic Problems B. Initial Treatments C. Trade and Agriculture III. FRENCH FARMING AND THE CAP A. Multi-Functionality B. Social Justice C. Operation of the CAP D. The 1992 MacSharry Reform, Agenda 2000, and the 2003 De-Coupling IV. PROPOSALS ON AGRICULTURAL SUBSIDIES A. From the G-20 B. From the EU. V. EMPATHY We recall the long-term objective referred to in the Agreement [on Agriculture] to establish a fair and market-oriented trading system through a program of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this program. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively [sic] take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture. WORLD TRADE ORGANIZATION, DOHA DECLARATIONS, Ministerial Declaration [paragraph] 13 at 6 (adopted 14 November 2001) (emphasis added).

1. FROM THE FARM TO THE NEGOTIATING TABLE

   The economic position of farmers in a country--coupled with attitudes in the country about the social role agriculture should play--shape, and even determine, proposals put forth by negotiators from that country in world trade talks. That is the simple proposition that this Article explores, with particular reference to agricultural subsidies and the Doha Development Agenda (DDA, or Doha Round). There ought not to be anything controversial about this proposition. Countries negotiate out of perceived (or misperceived) self-interest on agricultural trade, just as they do on matters of war and peace. Surely, if trade officials are tabling offers on cutting "Amber Box" subsidies, restricting overall outlays, or re-defining the "Blue Box," the details of those offers should be consistent with their national agricultural interests. (1)

   What if, however, countries do not really seem to understand the aspirations and fears of other countries? If the economic position of farmers and attitudes about the social role of farming are so important, then why is the Doha Round foundering over agricultural subsidy (as well as market access) issues? After all, the positions and attitudes of the principal cohorts (developing countries, coalesced by the September 2003 Cancun Ministerial Conference into the Group of 20 (G-20); (2) the European Union (EU); and the United States) are readily observable, widely reported, and endlessly studied. (3) There should be no surprises as to what impels bargaining positions on farm subsidies; certainly, negotiators can expect what is coming to the table and map out points at which proposals might intersect.

   Manifestly, that has not been the case, nor has it been the case ever since the DDA was launched in November 2001. (4) Indeed, contrary to what might be the conventional wisdom, it is questionable whether the principal cohorts empathize with each other's economic positions and social attitudes. That is not to suggest that representatives of WTO Members are dullards; quite the opposite. Regardless, exceptional intelligence does not always translate into empathy, which, in turn, can lead to compromise. It is worth inquiring whether economic positions of farmers, social attitudes toward farming, and the linkages to negotiating proposals might be better understood. That is also true for food security and multi-functionality, which are important concepts animating these positions, attitudes, and proposals. (5)

   More specifically, Parts II-IV below discuss the G-20 developing countries, the EU, and agricultural subsidy controversies in the Doha Round. The point for debate is whether the offers are grounded in different economic status quos in the agricultural sectors of developing and European countries, as well as contrasting attitudes about the roles of agriculture in a modern society. Particular attention is given to facts about Pakistan as a case study for the G-20 and data about France as a predicate for the Common Agricultural Policy (CAP). In keeping with the opening proposition, it is suggested that links between economic positions and social attitudes, on the one hand, and subsidy proposals, on the other hand, do, indeed, exist. (6)

   Put simply, as Part II explains, Pakistani farmers cannot compete in the long run with the European (or for that matter, U.S.) treasury. Pakistan remains highly dependent on its agricultural sector. (7) Food security matters to this front-line state in the War on Terror. (8) Pakistani society is largely agrarian, and rife with divisions. (9) However, Pakistan aspires to be the first modern Islamic industrialized country, and not to be outdone by its arch-rival, secular India. (10) Pakistan has had this aim ever since it was led to independence from British colonial rule by the Quaid-I-Azam (great leader), Mohammad Ali Jinnah, while Mahatma Gandhi and Jawaharlal Nehru brought India through the turmoil of the Partition of 15 August 1947. (11)

   As Part III discusses, French--yes, French--farmers are increasingly worse off, at a time when the European public demands that agriculture play a multi-functional role in European society. The demands of the public, coupled with the difficulties French farmers face, are the latest chapter in the history of the CAP, which was founded centrally on food security. (12) Much scorn has been heaped on the CAP by developing and least-developed countries, as well as by the United States. Yet, the founding purposes and actual operation-as distinct from deleterious effects--of the CAP are not well understood. Accordingly, Part III also offers an economic discussion of the workings of the CAP.

   The two sides--Pakistan and France, or more generally, the G20 and EU--have been talking past one another in the Doha Round. (13) That is clear from the huge demands placed on the EU by the G-20 proposal for subsidy cuts and the comparably modest reductions offered hesitatingly in the October 2005 EU Proposal. Special attention in Part III is given to how the CAP operates.

   Part IV turns to an analysis of the G-20 and EU proposals. (14) An explanation of the proposals highlights the realities of farming in countries like Pakistan and France. Finally, Part V provides concluding observations.

2. ECONOMIC REFORM AND PAKISTANI FARMING

   1. Diagnosis of Major Economic Problems

      Perhaps no country has been at the front line of the War on Terror, for a longer period of time and at greater...