By Walden Bello
GENEVA – During his State of the Union address on January 20, President Bill Clinton announced his support for new negotiations in the World Trade Organisation (WTO) beginning in late 1999. But whether Clinton meant "comprehensive negotiations," as proposed by the European Union and Japan, or a more limited round, is still unclear.
The answer to this question will have major implications for the upcoming review and negotiations on agriculture and services — the two areas for which new negotiations were mandated by the Marrakesh Accord. According to observers in Geneva, one of the reasons that the EU and Japan staked out a position in favour of comprehensive negotiations that would cover areas other than agriculture and services is that this would increase the possibilities for horsetrading: they could trade liberalisation in some areas, such as lower industrial tariffs, in exchange for limited concessions in agriculture, or vice versa.

EU-Japan-South Korea: A Common Front?

With the mandated review of the Agreement on Agriculture due to begin later this year (see below Aileen Kwa’s position paper for developing countries on the AOA) the EU, Japan, and South Korea have apparently staked out a common initial negotiating position against further liberalization. While a number of countries have started a process called the "Analysis and Information Exchange" (see also below for summaries of AIE papers) in preparation for the negotiations, these three economies are not actively participating, their position being that there is no need to conduct this preparatory exercise prior to the formal start of new negotiations.

The three have also advocated bringing in new considerations in the negotiations, including biodiversity, food security, "regional landscape," "cultural heritage," and rural development. In order words, agriculture is "multifunctional": it performs more than just productive functions for society, and these are just as vital as the economic one. Free traders scoff at the idea of multifunctionality, seeing it as but another fancy defence against liberalisation.

The US-Cairns Group Alliance

While a de facto, if not working, alliance exists among the EU, Japan, and South Korea, there appears to be developing an active alliance between the United and the Cairns Group, which is made up of 15 developed and developing agro-exporting countries. The key points of unity appear to be around the elimination of export subsidies and the so-called "Blue Box" of the Agreement on Agriculture, the key section of which is the provision of income support to farmers in return for their withdrawing land from cultivation. This measure, which is intended to keep prices up, is seen both by the US and the Cairns Group as benefiting mainly European farmers now that the US no longer engages in this form of subsidisation. The US, however, continues to maintain other mechanisms of subsidisation: direct payments for farmers, though these are no longer tied to price levels but are a flat rate, and export credits extended to importers to buy US grain. However, the Cairns Group does not appear to be challenging the US strongly on its maintenance of these mechanisms.

The agenda of the Cairns Group is to increase market access, do away with export subsidies, and decrease production subsidies. The Group sees the EU as the main obstacle in the negotiations, according to one observer, who feared that the new negotiations will be "hostage" to the outcome of the current revision of the Common Agricultural Policy (CAP) that the EU is currently undertaking ("CAP 2000").

Within the Cairns Group there are differing nuances—though not differences—in approach. Among the developing country members, Argentina is apparently the most hardline in terms of the global liberalization agenda, with little sensitivity to the "special and differential status" concerns of many of the poor, especially the net food importing countries. Argentina has teamed up with the US to call for time limits for completing steps within the negotiation process; indeed, it has even gone beyond the US to demand that the negotiations should conclude by December 31, 2002, instead of the end of 2003, which is the stand of most of the rest of the Cairns countries.

ASEAN: Is It a Bloc?

As for the ASEAN (Association of Southeast Asian Nations) bloc within the Cairns Group, one observer said that Thailand is singlemindedly concerned with more trade liberalisation, and categorised it along with Argentina as among the countries that "negotiated and benefits from the Agriculture Agreement along with the US and EU."

Indonesia, however, is displaying hesitations. While one of its representatives repeated the government’s official commitment to further liberalisation, he nevertheless asserted that owing to the country’s current crisis, it had to take measures to subsidise certain commodities, such as fertiliser and rice, and to keep the distribution of rice under the control of the government monopoly, Bulog. Such measures were allegedly "temporary." There was also an interesting contradiction between the official’s claim that government policy is to achieve "self sufficiency in food products" while opening up to increasing food imports.

The ambivalent government position appears to reflect the fact that, as the price of its financial support, the International Monetary Fund (IMF) is pressuring Indonesia to radically liberalise its trade beyond its current WTO commitments, and this is creating a lot of social dislocation and unrest. Owing to these difficulties, some analysts claim that Indonesia is the "weak link in ASEAN" when it comes to further trade liberalization.

The Less Developed Countries: Will They Make a Difference This Time?

The less developed countries—aside from those that are members of the Cairns Group—are largely apprehensive about further liberalisation. Most countries from sub-Saharan Africa have not yet submitted their notifications under the Uruguay Round, so they are concerned that a new round of negotiations is beginning while they are still faced with so many problems of implementation related to the last round. Some countries, invoking the "special and differential status" of developing countries that is supposed to be a principle of the WTO, question the prohibition on less developed countries to introduce domestic and export subsidies beyond a 10 per cent de minimis level, especially since they did not have such measures before the Uruguay Round. Invoking the same principle, some governments demand that preferential treatment in market access be given to exports from net food importing countries to allow them to gain foreign exchange to meet the higher cost of food imports. Some also demand, under the same principle, that SPS (sanitary and phytosanitary) standards be relaxed with respect to the exports of less developed countries owing to great difficulties in adjustment.

Food security has become the rubric around which many concerns have been raised — among them, that further liberalisation will threaten access of net food importing countries to cheap subsidised food from the big agricultural exporters that they need badly; and that less developed countries with scarce foreign exchange should be allowed greater flexibility to subsidise their farmers to maintain food production and thus guarantee food security for the whole population. India and to some extent South Africa have come to the forefront to try to articulate these apprehensions of the vast majority of developing countries from the South.

The non-Cairns Group developing countries were not key players during the Uruguay Round, partly because of the domination of the process by the agricultural trading powers, partly owing to their own lack of cohesion and unity. Whether they can play a bigger role this time depends on the dynamics of the struggle between the US-Cairns Group alliance and the EU-Japan-South Korea grouping. "It’s going to be trench warfare," says a WTO Agricultural and Commodities Division insider. If the conflict does polarise, then the role of the developing countries could become more significant, either in breaking the deadlock toward further liberalization or holding the line against it.

* Walden Bello is co-director of Focus on the Global South and a professor of public administration at the University of the Philippines