The green barrier to free trade
C. P. Chandrasekhar
Jayati Ghosh
As the March 31 deadline for completing the "modalities" stage of the proposed new round
of negotiations on global agricultural trade nears, hopes of an agreement are increasingly waning.
In this edition of Macroscan, C. P. Chandrasekhar and Jayati Ghosh examine the factors and the
players constraining the realisation of such an agreement.
AT THE END of the latest round of meetings of the agricultural negotiations committee of
the
WTO,
the
optimism
that
negotiators
would
meet
the
March
31
deadline
for
working
out
numerical
targets,
formulas
and
other
"modalities"
through
which
countries
can
frame
their
liberalisation
commitments
in
a
new
full-fledged
round
of
trade
negotiations
has
almost
disappeared. That target was important for two reasons.
First,
it
is
now
becoming
clear,
that
even
more
than
was
true
during
the
Uruguay
Round,
forging an agreement in the agricultural area is bound to prove extremely difficult.
Progress in the agricultural negotiations was key to persuading the unconvinced that a new
`Doha Round' of trade negotiations is useful and feasible.
Second,
the
Doha
declaration
made
agricultural
negotiations
one
part
of
a
`single
undertaking'
to
be
completed
by
January
1,
2005.
That
is,
in
a
take
`all-or-nothing'
scheme,
countries had to arrive at, and be bound by, agreements in all areas in which negotiations were to
be
initiated
in
the
new
round.
This
means
that
if
agreement
is
not
worked
out
with
regard
to
agriculture, there would be no change in the multilateral trade regime governing industry, services
or related areas and no progress in new areas, such as competition policy, foreign investment and
public procurement, all of which are crucial to the economic agenda of the developed countries.
The factors making agriculture the sticking point on this occasion are numerous. As in the
last Round, there is little agreement among the developed countries themselves on the appropriate
shape of the global agricultural trade regime.
There are substantial differences in the agenda of the US, the EU and the developed countries
within
the
Cairns
group
of
agricultural
exporters.
When
the
rich
and
the
powerful
disagree,
a
global consensus is not easy to come by.
But
that
is
not
all.
Even
if
an
agreement
is
stitched
up
between
the
rich
nations,
through
manoeuvres such as the Blair House accord, getting the rest of the world to go along would be
more difficult this time.
This is because the outcomes in the agricultural trade area since the implementation of the
Uruguay Round (UR) Agreement on Agriculture (AoA) began have fallen far short of expectations.
In the course of Round, advocates of the UR regime had promised global production adjustments
that would increase the
value of world agricultural
trade and an increase in developing country
share of such trade.
As
Chart
1
shows,
global
production
volumes
continued
to
rise
after
1994
when
the
implementation of the Uruguay Round began, with signs of tapering off only in 2000 and 2001. As
is widely known, this increase in production occurred in the developed countries as well.
Not
surprisingly,
therefore,
the
volume
of
world
trade
continued
to
rise
as
well
after
1994
(Chart 2). The real shift occurred in agricultural prices which, after some buoyancy between 1993