| If you are as mystified as most people are by what the latest trade talks are about, here is a primer (assuming I have got it right): Sugar in Europe costs three times what it costs in India""because of high tariffs. Hiding behind that tariff wall, Europe's sugar growers produce about as much sugar as the world's other two big producers, India and Brazil (over 15 million tonnes each). Drop the tariff walls (as has been promised from next year), and sugar exports from India and Brazil could take off. But would that result in a poverty-reducing redistribution of global incomes? The sugar exporters from other poor countries, who today have preferential access to the European market and benefit from its high prices, fear that reform will deprive them of a lucrative market. So should the rich (in Europe) and the poor (in Africa and the Caribbean) suffer in order to allow Brazilian and Indian sugar producers to prosper? |
| In other words, don't think this is a simple rich vs poor game (though it is that too). For it is equally a game between those who think that they have more to lose and those who think they have a lot to gain, and these categories can't be easily put into rich and poor boxes. Thus, Europe subsidises its agriculture by about 50 billion euros (or Rs 275,000 crore) annually, and the subsidy takes up nearly half the EU budget. The Europeans argue that the US does the same, it only disguises the subsidy better, by calling it food aid (most of which goes to American farmers!). Each says it will not reform till the other does. Note that this is now rich vs rich. |
| Some poor but upwardly mobile (or Puppy) countries like India and Brazil also have slightly different interests from those of the really poor countries. The rich, clever blighters, have realised this and tried to drive a wedge between the two by promising concessions to the poor and not the puppies; and demanded concessions from the puppies on non-agricultural trade. It hasn't succeeded in dividing the ranks, because the rich also want opening up of services sectors, which the poor countries are mortally scared of. |
| While there are criss-crossing interests and trade-offs, the heart of the issue is agriculture. Europe happens to be the world's leading exporter of tomato paste; but only because of a massive subsidy of $350 million each year. American farmers are able to grow corn, because of an annual subsidy of about $5 billion. Europe's thriving fruit juice processors (imagine a continental breakfast without orange juice) get a 300 per cent subsidy. Some 25,000 (yes, the number is in the thousands, not millions) cotton growers in the US get a massive American subsidy, which was at the heart of the failure of the World Trade Organisation's ministerial round at Cancun, and which may torpedo the Hong Kong ministerial as well. Europe's consumers are said to be paying between 25 per cent and 80 per cent more for their food than they would, in an open trading system. And the losers are millions of poor farmers in the developing countries, whose representatives remind everyone that this is supposed to be a "development round". |
| The heavy subsidies may seem unsustainable, even for rich Europe and America, but that is not so. As agriculture accounts for a very small proportion of their GDP (typically 4 or 5 per cent), even a 50 per cent subsidy is a tiny percentage of GDP. Matters get more complicated when conflicts within the EU make reform impossible. France gets the maximum share of the subsidies flowing from Europe's Common Agriculture Programme (22 per cent). Britain gets only 9 per cent, and a budget "rebate" for not getting more. The EU is in the throes of finalising its budget for 2007-13, and Britain is being niggardly about reducing this rebate; it wants the new, poorer members of the EU to take a hit, instead. An angry France in retaliation refuses to countenance agricultural reform. Meanwhile, the mid-term review of the CAP has been postponed. With no agreement on Britain's rebate or the EU Budget or the reform of the CAP, there is little likelihood of the EU coming up with a proper offer in Hong Kong. End of story. |
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