The revised WTO draft for farm negotiations will not be able to solve the current food crisis, but will rather accentuate it, contrary to the claims made by the director-general, Pascal Lamy

The draft released by the chair of the agriculture negotiating committee, Crawford Falconer on May 19, fell short of addressing the food crisis, both on short-term and long-term basis. Distribution problem is one of the short-term measures that could have been addressed if the draft could have cared to ensure free and fair trade.

On the contrary, the draft has attempted to protect the high subsidy and tariff regime in the developed world, not calling for the desirable level of cuts. It doesn't provide for conversion of all the complex and specific tariffs in the developed countries into their ad valorem equivalent, which is necessary for transparency and effecting realistic reduction. Rather the draft has sought to weaken the defence of the developing countries in agriculture in relation to their demand for special products (SPs) and special safeguard mechanism (SSM).

Although it has recognised the developing countries' right to self-designate their special products based on food and livelihood security and rural development, it has outlined the minimum limit of 8% of the tariff lines. A maximum limit of 20% of the tariff lines has been proposed in square brackets, implying the need for future negotiations.

Capping SPs at a percentage of tariff lines may help some countries that grow few crops to protect their agriculture, but not many tropical countries, which grow multi-crops. Therefore, invocation SSM can be a solution for preventing any possible import surge. But the draft has weakened the SSM for developing countries by saying that it can be triggered only when the prices fall below 30% and that it cannot be invoked for more than three to eight products a year. The conditions for invoking SSM on volume-based triggers is so stringent that it becomes almost ineffective.

While the developing countries use of SSM is weakened, the developed countries continue to enjoy their protection through SSG accorded to them.

However, there is a political ambition in both the NAMA and agriculture drafts to divide the unity of the developing countries. The sensitive products of the developed countries have been carefully streamlined to enable developing countries like Brazil, Argentina and Uruguay apart from Australia and New Zealand to export beef, pork, poultry, dairy, rice, sugar, fruits and vegetable to EU, US, Japan, Canada and Switzerland.

The NAMA draft has given extra flexibilities to some developing countries like South Africa, Venezuela and countries in the customs unions like SADC and Mercosur, while in respect of the majority of developing countries, it has ignored the Doha mandate of less than full reciprocity in tariff reduction and has linked the tariff reduction coefficients with the flexibilities for developing countries.

If the Doha mandate is to be followed then the issue of flexibilities for developing countries should be treated separately and not in the way the NAMA chair Don Stephenson has put. The developing countries should, therefore, be careful in dealing with the attempts to disrupt their unity.

The WTO farm draft has ignored the genuine concerns of the developing countries who are the major producers of food. It has done nothing to address the current food crisis. If the draft is implemented in its present form it would increase the volatility of food prices with no benefits to the farmers in the Third World. It would strengthen the hold of a few multinational food Companies to manipulate global prices. The world's dominant grain traders like Cargill, Archer Daniel Midlands, Bunge have recorded huge profit margins in this period of food crisis. The farm draft has no provision to regulate these dominant food Companies.

The WTO has no provision to regulate speculations in the commodity exchanges even though FAO and UNCTAD in their reports have identified high level of financial investment in commodity Markets as a major cause for the increase in volatility in food prices. The meltdown in the global equity market and the subprime crisis in the developed world have caused the investors to shift their investments to commodity Markets.

Another plaguing issue is the bio-fuel programme in Europe and North America, which has used food crops for fuel. This contributed to the phenomenal rise in food prices almost linking it to the volatility of fossil fuel price. In many countries, at places, non-food crops for fuel have displaced food crops. The WTO has no provision to regulate this.

'Lack of proper distribution causes food crisis'

The present food crisis is due to lack of proper distribution and the trading system impeding free flow of food, according to the vice chairman of International Chamber of Commerce (ICC), Victor Fung.

He said that as a short-term measure it was essential to address the problem of distribution and as a long-term strategy the global community should take up measures for raising the productivity of food crops to feed the rising population. "There is also a need to review the bio-fuel programme which uses food crops for fuel and displaces food crops for cultivation of non-food crops for fuel," he said.

He also said that the world has to work out strategies for efficient use of energy.

Fung who is the chairman, of the Li & Fung group of Companies, which includes major subsidiaries in trading, distribution and retailing, also addressed the industry at a meeting organised by Ficci on Monday He also is the chairman of the Greater Pearl River Delta Business Council, Hong Kong Airport Authority and Hong Kong University Council.

Fung also said that China was also facing the challenges of rising prices, growing disparity in incomes, environmental problems and weak infrastructure. "There is a debate in China on how to address these challenges. That the Chinese government cares for its people is evident from its rapid response following the earthquake in Sichuan," he said.

He called for a free and fair multilateral trade for addressing the problems of global poverty. He said that bilateral trade and free trade agreements between countries and trading blocks cannot be a substitute for a meaningful free and fair multilateral trade. He said that there was a need to see that anti-dumping measures under WTO do not lead to protectionism.

He proposed that Indian Companies can invest in IT sector in China. He said that Chinese production will continue to move offshore in Asian, African and Latin American countries.

- ASHOK B SHARMA

Saturday, May 31, 2008

Source: www.westender.com.au