Agricultural trade negotiators spent June and July of this year, 2006, frantically trying to conclude negotiations on a major agreement to govern agricultural trade as part of the WTO Doha “Development” Round of trade talks. Despite their efforts, the talks collapsed in late July and are now suspended indefinitely.

The immediate trigger for the collapse was the refusal of the United States to commit to reducing its domestic agricultural subsidies according to what the other major players, the European Union as well as India and Brazil, had been calling for. The European Union, however, had earlier refused to reduce its tariff barriers on imported agricultural products, drawing sharp criticism from the United States. While it may be tempting to interpret the difficulty of reaching an agricultural trade deal as part of the longstanding agricultural trade disputes between the United States and the European Union, a distinct North-South dynamic is now an integral part of the politics of global agricultural trade.

Both the United States and the European Union have been reluctant to agree to provisions that developing countries would like to see in an agricultural trade deal. But if the Doha Round is to be revived and still be considered a “Development Round,” it must include measures to rectify the current agricultural trade imbalances that have had especially harmful effects on developing countries. Although the United States and the European Union called the shots and leveraged their bilateral bargaining power on developing countries in the previous round of agriculture talks, this strategy is increasingly untenable. The political landscape today is very different than it was in past trade rounds, with developing countries playing a much more prominent role.

The Need to Rectify Current Imbalances in Agricultural Trade

The current imbalances between rich and poor countries in international agricultural trade stem from substantial protectionism in the sector in rich countries, as well as from inequities introduced as part of the 1994 Uruguay Round Agreement on Agriculture (URAA). From the perspective of developing countries, the playing field is far from level, and their main objective is to restore a more equitable and balanced trade of agricultural products.

Agriculture is the most highly distorted sector in the global economy. Rich country governments in particular have a long history of supporting their farmers with a complex menu of subsidies to bolster prices and production at home, as well as to finance exports abroad. Most countries apply high tariffs on agricultural imports in order to protect domestic producers.

The impetus for bringing agriculture under global trade rules as part of the URAA was the high cost of protectionism. In the 1980s, subsidies paid to farmers in the rich industrialized countries totaled some US$300 billion per year, and tariffs on certain products were prohibitively high. Years of agricultural protectionism in industrial countries had especially harmful effects on developing countries. Rich country markets were virtually closed to developing country exports, and world market prices for basic staples like rice, maize, and wheat dropped significantly because they were highly subsidized in rich countries, threatening developing countries’ local production and lowering their export income.

Although the URAA sought to reduce these distortions, it is widely seen by rich and poor countries alike to be woefully inadequate. The deal was secured only following a pact made in private by the United States and the European Union which was seen to have broken the deadlock in the talks, and the other members were pressured into accepting it. Although the stated aim was to reduce distortions in the areas of domestic subsidies, export subsidies, and tariffs, there were major loopholes in each of these three areas which allowed the United States and the European Union to maintain significant levels of protection.

A substantial portion of domestic subsidies were exempt from cuts and the reductions to export subsidies were minimal. The agreement also included a “Peace Clause,” which prevented WTO members from challenging continued subsidies of the industrialized countries for a period of 10 years, in order to give adequate time for policy adjustment. This meant that developing countries had no recourse if they felt that the industrial countries were subsidizing their agricultural sectors beyond what the agreement allows. And because tariff reductions were averaged, rich countries were able to continue the common practice of applying very high tariffs—referred to as “tariff peaks,” which in some cases were up to 900 percent—on certain products, typically those goods exported by developing countries.

The result was a weak agreement which only exacerbated inequalities between rich and poor countries. Rich country agricultural subsidies actually increased to US$330 billion by the year 2000. Poor countries experienced surges in imports of cheap, subsidized agricultural products from industrial countries, while at the same time they continued to face high tariff barriers for their exports to rich countries.

The limitations of the URAA were acknowledged at the time it was negotiated, and provisions were included for its improvement in the next round of trade talks. Agriculture was thus made a centerpiece of the “Doha Development Agenda” when the round was launched in late 2001, as developing countries were supposed to be the main beneficiaries of an improved agriculture deal.

A Changed Political Landscape for the Doha Agriculture Negotiations

The Doha agriculture talks faltered from the very start. While in the previous trade round the United States and the European Union called the shots, the dynamics of trade negotiations have shifted markedly since then. Concerned about both the process and the content of the agriculture negotiations, developing countries have increasingly made their voices heard through the formation of several trade coalitions. The Group of 20 (G-20), a group of developing countries with a broad range of trade interests, has successfully become a third major force in the negotiations. This group, led by India and Brazil and including members such as China and South Africa, represents over two-thirds of the world’s population and the bulk of the world’s farmers. Led by key emerging economies, the G-20 is a coalition that the United States and the European Union cannot ignore.