Trade Liberalization Again Threatened by Agricultural Special Interests

Trade Liberalization Again Threatened by Agricultural Special Interests

Statement of Frances B. Smith, Adjunct Fellow, Competitive Enterprise Institute
October 20, 2005

<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Washington, D.C., October 20, 2005— The world's best hope for eliminating poverty – the continued liberalization of global trading rules – faces great risks in the next few weeks.  The next Ministerial Meeting of the World Trade Organization is only a few months away (in Hong Kong in mid-December), and there has been little progress in the last few years in fulfilling the promises made for this round of negotiations – the Doha Development Agenda. A central goal of the Doha Round is for the European Union, the United States, Japan, and other rich countries to begin dismantling their protectionist agricultural policies to allow greater trade opportunities for developing countries.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

 

Trade liberalization is too important to be held hostage to a small band of pampered agricultural interests in the U.S. and Europe.  U.S. Trade Representative Robert Portman seems to recognize this.  His far-reaching WTO proposal announced last week would mean significant reductions in U.S. agricultural tariffs and support programs that distort world trade, increase prices for consumers and taxpayers, and restrict the ability of poor countries to compete.

 

The EU’s Trade Commissioner, Peter Mandelson, and most EU countries appear ready to meet the U.S. challenge with their own set of proposals. Unfortunately, they may be hamstrung by France – by far the largest beneficiary of EU farm support and the most resistant to change.

 

The farm battle is one that must be won. In both the U.S. and Europe, farmers constitute an ever smaller fraction of the economy. In the U.S., agriculture accounts for 1.5 percent of GDP and 2 percent of employment, yet in 2004 government support for farm production totaled $46.5 billion, according to the Organization for Economic Cooperation and Development. We all pay more to sustain a small group of agricultural producers at non-sustainable levels. For example, U.S. sugar producers account for less than 1 percent of U.S. farm cash receipts, but end up costing U.S. consumers and taxpayers an additional $1.9 billion per year, according to a 2000 General Accounting Office report.

 

But the greater victims of this travesty are the poor of the world who cannot compete against highly subsidized farm products in the world trading system. Their lack of access to many rich countries’ markets reduces their opportunities for economic growth.

 

With its proposals to significantly reduce tariffs and increase access to its markets, the U.S. has taken a leadership role in calling for reform of its own system of trade-distorting agricultural subsidies, price supports, and import restrictions.  As one of the most trade-distorting programs for U.S. consumers and taxpayers, as well as people in developing countries, sugar reform should be high on that agenda.  At this critical time when the future of multilateral trade cooperation can move toward greater liberalization or remain mired in squabbles over antiquated agricultural policies, both the U.S. and the EU have an obligation to break through the morass.