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Weekly Comment

WTO's failure is food industry's loss

31-Jul-2006

The short sighted failure of greedy WTO trading partners to achieve any sort of meaningful agreement on global agricultural tariffs is bad for Europe's food industry.

The failure to create a more equitable global trading environment will be most keenly felt in developing countries, which have yet again been denied fairer access to lucrative markets.

But the inability to reach a compromise, and the subsequent suspension last week of the Doha Round of negotiations, will also affect businesses closer to home.

 

The Doha Development Agenda, launched in November 2001, in the Qatari capital, Doha, aimed to free global trade by cutting industrial and agricultural tariffs and by reducing farm subsidies, with a special focus on achieving concrete benefits for developing countries.

 

The CIAA, the European food and drink industry's voice in Brussels, has continuously supported the Doha development agenda since the beginning of the round, five years ago.

 

It has consistently argued that this multilateral process was the best means of delivering a level playing field through more harmonised agricultural policies and enhanced trade opportunities for everyone.

 

Indeed most European food sectors have long recognised the need for internal reform for example in the sugar industry, where the EU has significantly cut subsidies - and accepted short term pain for long term gain i.e. better access to emerging markets.

 

In other words, European food associations accepted that changes were needed as the basis of achieving a reciprocal agreement at WTO level. These concessions were necessary if a liberalised world market was to be established.

 

But intransigence and self-interest, especially from the US, has put paid to this. Talks were suspended last week after certain WTO members refused to budge on certain issues such as lowering tariffs.

 

Many food sectors now feel betrayed they have accepted concessions but have got nothing back.

 

No deal means that both the US and the EU will be able to continue subsidising their agricultural production, thereby artificially enhancing their competitiveness. But it also means that both these blocs will lose new access to the markets of emerging economies such as China and Brazil.

 

An opportunity to achieve a fairer basis for global trade has been missed, and this failure benefits no one.

 

Such inequality in global agricultural trade is both morally wrong and economically unsound. Developing countries represent 81 per cent of the global population but just 30 per cent of global trade. The entire continent of Africa captures just 2.6 per cent of global trade.

 

This underlines not only how unequal current trading practices are, but also the untapped potential that exists. Food companies recognise these global opportunities. They also realise that pulling up the drawbridge ensures not only that the developing world is unable to penetrate your markets it also means that your own avenues of expansion are severely limited.

 

Equitable global trade is a moral issue. It is also an economic issue. For such a no-brainer, a number of WTO members have shown a remarkable lack of brains.