Bernard Gordon at the Wall Street Journal criticizes India’s trade representative, Kamal Nath, in a recent Op-Ed:
Surprise, surprise, the WTO talks in Geneva are “suspended.” But in truth, hardly a surprise, since in May France’s agricultural minister said, “I would prefer that the negotiations fail rather than . . . raise questions about . . . agriculture.” At the G-8 summit this month President Jacques Chirac backed him up: “Only Europe has moved [and] gone to the extreme limits.”
Both were responding to America’s insistence that Europe do more to match its offer to cut farm subsidies — in order to break the logjam at the heart of the now-collapsed Doha Round. But Europe had a partner in its “my way or the highway” approach. India’s Commerce Minister Kamal Nath, presumably speaking for the developing nations, said more “flexibility” was needed, and then gave his definition of the word: “We can’t negotiate subsistence and livelihood . . . we should not even be asked to do that.”
Mr. Nath had walked out of earlier trade talks, arguing “there was no point” in continuing, which prompted the press at home to fault him for throwing a “temper tantrum.” Not a bad label in this case, since India in 2004 accounted for less than 1% of world trade. And speaking after the collapse, which Mr. Nath characterized as “between intensive care and the crematorium,” he sharply singled out the U.S. as the sole culprit: the “mind-set” of the Americans was “inverted . . . they’re thinking only of market access.” (link; subscription required)
(Note that he’s not inventing the phrase “temper tantrum,” only citing the Indian media’s use of the term approvingly.) Gordon goes on to try and poke holes in Nath’s criticism of the U.S. for the fact that the Doha round has gone aground. Gordon mentions that the Brazil representative was actually more critical of Europe than the U.S., and cites President Bush’s promise to reduce U.S. farm subsidies by 60% in keeping with the opening of U.S. markets.
While the intricacies of world trade agreements and the workings of the WTO are, admittedly, not my area of expertise, one does note that Kamal Nath actually has plenty of company in blaming the U.S. primarily for the collapse of the talks. The most vocal critic of the U.S. role in the Doha collapse is the European WTO representative Peter Mandelson, who has argued that the loopholes in the U.S. subsidies reduction were so big as to make Bush’s “60%” figure meaningless. Mandelson also cites the election year and the current Republican troubles as a probable factor:
But led by Peter Mandelson, chief negotiator for the European Union, many foreign trade officials asserted that the U.S. offer was deceptive. The real cuts, Mandelson said, were far less.
A senior British political figure close to Prime Minister Tony Blair, Mandelson suggested that the Bush administration was loath to make a trade deal in an election year with farmers’ votes crucial to Republicans. By doing so, he angered U.S. officials, who accused him of hypocrisy.
“I understand the politics of this situation,” Mandelson said during an interview after the collapse of the talks. “Coming from Europe, I understand agricultural politics quite well.” (link)
Of course, the U.S. negotiator, Susan Schwab, has countered the European argument by pointing out that Europe’s own agricultural subsidies are currently even higher than the U.S.’s, and also states that Europe’s promise to cut subsidies had its own loopholes.
The Toronto Globe and Mail has a statistic that supports the European point of view on the U.S. loopholes:
While U.S. negotiators said the administration’s agriculture proposal would have resulted in a 60-per-cent reduction in subsidies, a WTO analysis concluded that loopholes might actually have permitted farm supports to American farmers to rise to $22.7-billion (U.S.) a year from the current $19.6-billion. (link
Nath’s own point of view is pretty well represented in an interview he did with Outlook this week. In the interview, Nath does come across as somewhat arrogant, though he’s undoubtedly highly articulate in his defense of India’s interests:
The developed countries must understand that the rules of trade and the leverage that they got from trade have always been in their favour. And these countries, which are the champions of globalisation, are now realising that they are no longer globally competitive, whereas countries like India, which are becoming globally competitive, have started demanding that there should be no curb on globalisation. So they (the developed world) are looking at various ways and means to ensure that there is no change in this balance of leverage. So I said where industrial products are concerned, I am going to protect my infant industries, protect my automobile industry because no more can you make automobiles in Detroit and Stuttgart and sell them in India. You have to make your automobiles in India.
A time will come when the automobiles will be made in India and sold in Stuttgart and Detroit. This is how the trade winds are changing. So my position on industrial products is clear: tell me how much of your duties and tariffs you will reduce and as per the WTO principle, I will reduce it slightly less. If they say they will reduce it by 50%, then I will do so by 40%. But it canÂ’t be that they do (reduce their tariffs) by 20% and expect us to reduce it by 70%. (link)
A couple of notes: Nath’s invocation of car-making is probably somewhat besides the point, since as I understand it this round of the Doha talks was primarily dedicated to discussion of agriculture. Also, I believe he’s contradicting himself in his first paragraph when he states, first, that the developed nations are no longer competitive and that he has to protect India’s “infant industries.” (Perhaps I’m simply not following him.)
I also wonder about his confidence in saying that no matter what the developed countries offer by way of subsidies reductions, he’ll offer less. That is a bit of a strong-arm position to take, is it not?
The Christian Science Monitor has a nice think-piece on Doha:
How did it get to this?
The short answer is that agricultural lobbies enjoy a political clout that far outweighs their economic weight, economists say. Their influence is often felt in every region of nations such as France and the US, with corresponding influence in legislatures. So once farmers have won government entitlement benefits, they’re often very hard to remove.
“You take that cotton land down in Mississippi…. That land would probably drop in value by half” without subsidies, says Gary Hufbauer, a trade specialist at the Institute for International Economics in Washington.
Thus, it takes a formidable argument on the part of free-traders to overcome the opponents to big cutbacks in farm supports.
Similarly, developing nations such as India and China often have their own political resistance to free trade in farm goods. The concern, Dr. Hufbauer says, is that “if the liberalization is too fast, too many rural people will leave the farm life too quickly … and disrupt the political system.” (link)
India has 650 million farmers, some of whom are desperately poor. They could benefit if the U.S., Europe, and Japan lowered their agricultural subsidies. Meanwhile, between 1% and 2% of the U.S. population is in agriculture — which comes out to maybe 5 or 6 million people. Isn’t it possible that the potential benefit to 650 million Indians outweighs the potential losses to 5 million Americans? By this logic, isn’t Kamal Nath right to throw a temper tantrum?
Of course, some on the Indian left are opposed to the WTO in blanket terms, following the statistics offered on this website:
Moreover, the distortions and imbalances in agriculture trade have also drastically affected the prices, incomes and livelihoods of small farmers in India. Since the inception of the WTO, there is a steep decline in the prices of agricultural commodities internationally. From 1980 to 2000, world prices for 18 major export commodities fell by 25% in real terms. During this period the decline was especially steep for cotton (47%), coffee (64%), rice (61%), cocoa (71%) and sugar (77%). For example international cotton prices came down from 128 cents per pound in 1981 to 38.7 US cents per pound in 2002. Similarly rice prices came down from 565 US$/tonne in 1981 to 160.8 US$/tonne in 2002 and sugar prices came down from 18.11 US cents per pound in 1981 to 5.68 US cents per pound in 2002.
The world prices of the agriculture commodities have gone down mainly because of the high domestic and export subsidies attached to the developed countries’ commodity exports. For example the OECD data shows that in the 25 OECD countries the Total Support Estimate (TSE), a measure of domestic support, rose from US $275.6 billion (annual average for base period 1986-88) to US $326 billion in 1999, while US has given a fresh subsidy of US$190 billion in 2002 under the US Farm Bill 2002. (link)
That’s sobering. But the statistics on the dropping prices for agricultural goods may not be caused by the WTO even if it correlates to the years the WTO has been in existence. Rather, one would argue that it’s the trade-distorting subsides the developed nations that keeps international prices low. The WTO in the Doha round might have been able to resolve that in India and other poor nations’ favor, if the U.S. and Europe were willing to sacrifice a little pork.