Keep Your Eyes on the Price: WTO Remains Blind to Agricultural Dumping

Originally published by Food Tank on 12/15/2017

 

Farm leaders from around the world converged in Buenos Aires this week. They traveled to pressure the trade ministers attending the biennial World Trade Organization (WTO) Ministerial Conference to stop unfair trade practices that are hurting farmers. Once again, they went home empty-handed.

 

Some farmers lobbied delegates inside the heavily fortified Hilton Hotel, where the WTO trade ministers huddled for four days. More took to the streets, where their “Agriculture Out of the WTO!” banners waved in a week of peaceful protests.

 

The talks closed Wednesday evening with a whimper, as Director-General Roberto Azevêdo conceded that little progress had been made, and none on agricultural issues. Notably, and egregiously, U.S. Trade Representative Robert Lighthizer refused to engage in promised negotiations on a permanent solution on the use of food reserves by India and other countries for food distribution systems. India and other developing countries would not make concessions on any area without resolution on this issue, and the talks ended without even a perfunctory formal declaration.

 

Neither farmers nor WTO member governments were expecting much from Buenos Aires. As it turned out, no expectation could have been low enough.

 

The return of dumping

 

Lighthizer’s open indifference to the concerns and priorities of other poorer member states is an insult to farmers and a threat to global food security. Agricultural prices have fallen from their 2008 peaks. Grain traders are again flooding international markets with surplus production grown in the United States and other agricultural export powers. Low-priced exports are a disaster for poor farmers, who see their crop prices dragged down to unsustainable levels in local markets.

 

Exporting a product at a price below what it cost to produce is one definition of dumping, an unfair trade practice that is supposed to be disciplined by the WTO. According to new research by the Institute for Agriculture and Trade Policy (IATP), in 2015 the U.S. was exporting major agricultural commodities at dumping-level prices: corn at 12 percent below production costs, soybeans at 10 percent, cotton at 23 percent, and wheat at 32 percent. There is little indication that prices are likely to rise any time soon.

 

The food price spikes of 2008 brought new attention to the need for developing countries to reduce their dependence on imports and invest in their small-scale food producers. Many are doing that. African governments, for example, committed to raising their levels of agricultural development support to 10 percent of government budgets.

 

When those small-scale farmers start growing enough food to sell their surpluses on local markets, they need to get a decent price. When crop prices were high, many did, which put more money in the hands of rural people. Since 2014, however, the world has created what Reuters called a “global grain glut,” driving down prices.

 

In such conditions, farmers desperately need protection from below-cost imports. They need structures that limit the risks they cannot control and to protect them from the highly concentrated market power of seed, farm input, and commodity trading companies. Many developing countries need active and engaged governments to build and develop stable and profitable markets for farmers.

 

First, do no harm

 

The WTO was established to provide a fair, rules-based, and transparent international trade system. Poor and irresponsible management of subsidized agricultural surpluses from Europe and the U.S. plagued international markets in the 1980s. The WTO Agreement on Agriculture was meant to stop that. It is still the only institution that can credibly claim a mandate to do it, and the only trade agreement that seeks to discipline agricultural subsidies.

 

Yet the global grain glut was barely noted in the negotiations, even though it is precisely the kind of economic coordination a global trade body should engage in. Worse, the Buenos Aires summit refused to agree on a longstanding set of proposals from developing countries to help them protect themselves from dumping:

  • Public stockholding—The U.S. government has called out India and other developing countries for excessive subsidies to their farmers under ambitious government programs that pay support prices to farmers to build food reserves, which are then drawn upon to distribute to the poor. In India, that program is intended to reach 840 million people. The support price protects farmers from dumping-level prices. Despite a WTO commitment four years ago to resolve the issue in 2017, U.S. negotiators nixed any agreement. (See Wise’s two-part series on India’s food security program here and here.)

  • Special Safeguard Mechanism—Rich countries already have the right to impose protective measures when imports surge and threaten prices for domestic producers. A proposal to allow developing countries the same rights has languished for years, and it was not even discussed in Buenos Aires.

  • Relief for cotton farmers—Since 2004, the WTO has promised expedited action to reduce rich country subsidies to cotton producers—mainly in the U.S.—that were found to be in violation of WTO rules against dumping. Millions of small-scale farmers, in West Africa and elsewhere, depend on cotton for their livelihoods. Thirteen years later, they are still waiting for the WTO to act, as U.S. negotiators continue to block actions that could reduce U.S. cotton dumping.

  • Reductions in trade-distorting domestic support—One of the stated goals of the current Doha Development Agenda, adopted in 2001, was to end rich country policies that harm importing countries. The issue has scarcely been mentioned since negotiations on it collapsed in 2008, and it got barely a mention in Buenos Aires.

Eyes on the price

 

Does this diplomatic merry-go-round matter any more? Why would farm leaders expect this intergovernmental organization to resolve problems that the WTO agreements themselves have partly caused? An institution that was the pride of a generation of U.S. government officials, together with the international companies they allied with, has today become a favored whipping post for President Donald Trump and his trade officials.

 

Without a commitment from the world’s largest economy, it is very hard to see how the multilateral institution will function, at least in the short term. One year into his administration, Trump does not even have a confirmed WTO ambassador in place.

 

If the WTO is to fulfill its mandate to support development and reduce unfair trade, it has to keep its eyes on the prize of fair prices. In Buenos Aires, member governments instead put their heads in the sand.

 

What farmers and civil society organizations are after is accountability and congruence with multilateral obligations, especially the sustainable development goals. The multilateral trade system urgently needs to adapt if the world is to respond to the challenges of climate change, economic inequality, social exclusion, and the growing monopoly control of transnational firms across the food system.

 

There are enough rules telling countries what they may not do. It is time for trade rules that give countries a positive agenda to promote development and food security while protecting farmers from dumping.

 

Sophia Murphy is Senior Adviser, Institute for Agriculture and Trade Policy.

 

 

 

 

 

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