The global trade talks showed a shift in the power balance towards economies in Asia
IRISH FARMERS may be celebrating the failure of the global trade talks in Geneva this week but farmers in some of the world's poorest states will suffer severe hardship as a result.
Spare a thought for cotton farmers in Chad, a country where the Irish Defence Forces are currently attempting to bring peace and stability after years of war. Its farmers are being pushed to the brink of economic ruin by a $1 billion subsidy that the US pays every year to 12,000 large cotton farmers based in the politically important southern US states.
Global cotton prices hit a new low of just under 46 cents per pound in May 2007 as US farmers flooded export markets with cotton produced with the help of US farm aid. This rapid decline in price threatens the livelihoods of about 10 million people who depend on cotton farming in four poor states in west Africa: Chad, Burkina Faso, Mali and Benin.
"We can hardly control our anger," said Burkina Faso's trade minister Mamadou Sanou on hearing that the World Trade Organisation (WTO) talks had collapsed. "We are most disappointed that the rich countries, champions of liberalisation who urge us to liberalise our markets, those very countries are afraid to trade with us on an equal footing."
The collapse of the WTO talks means the US will not be bound into a global deal that would have forced it to set a limit of $14.5 billion on the subsidies it pays to its farmers, which is 70 per cent below the current subsidy ceiling.
Neither will the EU have to cut its own ceiling on agricultural subsidies by the 80 per cent that it promised or cut the import tariffs that it levies on farm imports from developing states by 60 per cent.
It is little wonder that humanitarian aid agencies described the breakdown of the WTO talks as a major disappointment. "Rich countries should have shown the political leadership to deliver trade reform that reduced poverty. Instead they defended vested interests and put poor countries under intense pressure to make concessions that have no place in a development round," said Oxfam international director, Jeremy Hobbs.
The main cause of the collapse in the talks was a dispute between the US and India (and to some extent China and Indonesia) over a special safeguard mechanism that would have enabled developing countries to raise the tariffs they levy on farm imports in the event of a surge of imports.
The US argued that this mechanism should not be used to close off markets to its farm exports given that it was cutting subsidies to its own farmers. India said it needed the mechanism to defend the livelihoods of millions of subsistence farmers.
According to one senior diplomat involved in the talks, the US policy seemed to revolve around ensuring that its farmers could make back every dollar they lost in subsidies by exporting to developing states. Pressure exerted by the US farm lobby ahead of the presidential and congressional elections in November probably played a role in hardening the attitude of US trade negotiator Susan Schwab. But the US position ran counter to the declaration made by WTO ministers in November 2001 when they launched the talks to "place the needs and interests" of developing states at the very heart of the Doha round.
This promise was made in the wake of the terrorist attacks on September 11th when world attention was focused on the link between poverty, development and terrorism. But there is little doubt that the current economic downturn is prompting politicians to align themselves with advocates of protectionism, who stand to lose from liberalising trade. Yet one of the big ironies in the collapse of the WTO talks is that developed economies such as the EU and US had managed to defend large swathes of their agricultural sectors.
For example the US offer to set a ceiling on subsidies at $14.5 billion would have no immediate effect as rising commodity prices mean its subsidies fell to $7 billion last year. The EU's reform of its common agricultural policy in 2003 also means that its proposal to cut its subsidy ceiling by 80 per cent would also have little effect on farmers.
It is true that Irish beef and dairy farmers would have faced increased competition in the event of a successful WTO deal as tariffs imposed on foreign imports into the EU would have fallen. But the Irish Farmers' Association (IFA) claims that the industry would be devastated were far-fetched given specific safeguards negotiated by the EU's negotiating team at the talks.
The tariff cut for beef would have amounted to just 23 per cent rather than the 70 per cent for most farm products as it would have been labelled a sensitive product. Rising food prices have also given Irish beef farmers more room to manoeuvre and a WTO deal would also have opened up new export markets for quality beef.
Ireland's services and manufacturing sectors, which make up about 95 per cent of the Republic's economy compared to just 5 per cent for farming, will rue the lost opportunity of getting a WTO agreement. No deal to liberalise trade means they will continue to face high tariffs and a mesh of complex regulations when they try to access the fast growing developing economies such as China, India and Brazil.
Business consultancies, financial services firms and electronics firms, which employ thousands of Irish staff, will now not be able to expand outside the EU as quickly or as profitably as they would have liked.
The EU estimates that the world economy has lost the opportunity to boost global income by as much as €100 billion every year. And this at a time when the economy could do with as much help as it can get. But the full implications of this week's breakdown in the WTO trade talks, particularly on other multilateral negotiations, will take time to assess.
Peter Sutherland, former head of the GATT, the forerunner to the WTO, has warned that a failure of countries to agree on something as obvious as world trade does not augur well for international talks aimed at tackling climate change.
A successor to the Kyoto Protocol agreement to curb greenhouse gas emissions needs to be thrashed out late next year and these talks will also require the US, China and India to agree to a grand compromise.
The breakdown at the WTO highlighted a shift in the global power balance towards emerging economies in Asia such as India and China. But it also highlighted an unwillingness by Washington to accept any deal that requires sacrifices to be made by its own citizens.
With diplomats predicting that talks to revive the Doha round cannot begin for at least a year, and in fact may never be restarted, this week's events in Geneva could point to the start of a turbulent period for the global economy and the entire concept of multilateralism.
Jamie Smyth is European Correspondent of The Irish Times