In Global Agriculture Arena, Its G-22 v/s G-25

Written by Malcolm Subhan | Brussels, Nov 9: | Updated: Nov 10 2003, 05:30am hrs
The future of the WTO negotiations on agriculture will depend on G-25 and not G-22, the group of around 20 developing countries, led by India, China and Brazil, that came together at Cancun, during the meeting of the WTOs 148 trade ministers. It was G-22s blunt rejection of the concessions on agricultural subsidies offered by the European Union (EU) and the United States (US) that led to the collapse of the Cancun negotiations, according to the Europeans.

The resumption of the negotiations on agriculture in Geneva, in the framework of the Doha Development Round, will witness the G-25 and G-20 going head-to-head. Just as Cancun made G-22 famous, Brussels will make G-25 famous.

Not to make a mystery of it any longer, G-25 is in fact the enlarged EU, which will formally come into existence in six months time, on May 1, 2004. The EUs 10 new member states will include such major exporters of agricultural products as Poland, Hungary and the Czech Republic. (The other new members are Cyprus, Estonia, Latvia, Lithuania, Malta, Slovac republic, and Slovenia.)

Poland is the leading exporter of agricultural products to the EU, with exports of around $2 billion in 2001. Polish exports to the EU probably will have jumped by around 45 per cent this year, thanks to the elimination of tariffs on January 1. And Poland, with two million farmers, as compared to just over six million for the entire 15-nation EU, is already making its weight felt in the run-up to full membership of the EU.

The 10 new entrants accounted for just over 11 per cent of the EUs imports of agricultural products in 2001. Once full members, they will fight even harder to increase their share of the European market. They are much poorer, to begin with: their average per capita GDP is just one-fourth that of the present 15-nation EU.

And their farmers face two major problems. The first is that six of the 10 new entrants, including Poland, Hungary and the Czech Republic, are having a very difficult time adapting to the EUs tough and detailed Common Agricultural Policy (CAP). Unless they meet the EUs stringent sanitary and phytosanitary regulations, for example, they will not be able to sell their farm products within the enlarged EU.

A large part of Polands milk production for example fails to meet these standards, and cannot be exported to the EU even now, according to the European Commission, the EUs executive arm.

Once full members, countries such as Poland will insist that the EU apply these sanitary and phytosanitary measures with great severity. But they will also insist that the EU make no further concessions to its WTO partners in the agricultural negotiations.

This is because of key provisions of the reform of the CAP which the present 15-nation EU carried out in June of this year, ahead of its enlargement. Under these reforms, the EU has put a ceiling on its total expenditure on agriculture. In other words, the money currently being shared out among 15 countries will have to be shared out among 25.

What is more, the EU has already undertaken to impose stricter discipline on the use of the export subsidies and export credits designed to promote EU exports to non-EU countries.

The CAP reform also provides for the partial elimination of export subsidies on certain agricultural products of interest to developing countries.

This reduction in export subsidies should mean that EU agricultural surpluses will be less of a threat to the agricultural exports of developing countries. World agricultural prices should be higher as a result.

The other key feature of the EUs agricultural reform programme, delinking agricultural production and subsidies, should in fact lead to a rise in EU imports of agricultural products.

None of this favours poor farmers in the EUs new member states. Once inside the EU, they can be expected to resist any attempts by their fellow member states to improve the terms on offer in the Doha Development Round of trade negotiations. Once these negotiations resume in Geneva, G-22, already weakened by defections, can expect to meet the EU-25 head on.

Finally, Polish and Hungarian farmers will find allies in southern Mediterranean countries such as Morocco. The fact is that Morocco has just concluded an agricultural agreement with the EU, under which 95 per cent of the countrys traditional exports will enjoy preferential treatment.

Tomatoes, a major export from Morocco, do not present a threat to Indian exports. The real threat will come from the creation of the Wider Europe, the Pan-Euro-Mediterranean area, covering the enlarged EU and the 10 southern Mediterranean countries, many of whom are exporters of agricultural products.

Given that the Doha Development Round is not expected to finish before 2006, G-22 may well find themselves facing a Wider Europe grouping of up to 35 countries.

The sound you hear is that of knives being sharpened on both sides!