President George W Bush said his country would drastically reduce its farm subsidies if the Europeans were similarly prepared. Australia's Trade Minister Mark Vaile warmly embraced that offer saying aid and debt relief alone were insufficient for reducing poverty without an end to agricultural protectionism. WTO Director- General Lamy spoke of a successful trade deal being the missing piece of the jigsaw in the fight to make poverty history. So did the Hong Kong meeting make ground on development outcomes?
Well despite some real and some likely illusory progress, the real battle to end trade distorting protectionism remains. A number of core trade liberalisation issues in the Doha Round were barely taken up in Hong Kong. With no real discussion in the Green Room of agricultural trade issues apart from setting a possible end date for export subsidies, the Hong Kong meeting did not see the EU pressed to increase its offer to cut farm tariffs by more than an average of 39% - falling far short of Australian and US calls for cuts of up to 75% for which the US in return was prepared to cut its most trade distorting farm subsidies by 60%. This was disappointing for developing countries and Australia.
The European Union did however finally concede to demands from farm exporting countries to eliminate its export subsidies by 2013. This is good news but it is three years later than what Australia and the developing country grouping known as the G20 had been hoping for. Remember that EU subsidies only account for less than 4% of overall EU agricultural support. The big ticket item remains the serious reduction in trade distorting agricultural tariffs. It's also important to bear in mind that this offer on export subsidies is dependent upon agreement by 30 April 2006 on all agricultural negotiating modalities. Deadlines like this have been missed before - modalities now due to be agreed by end-April were originally to have been agreed by the end of March 2003!
On the positive side, Hong Kong saw unprecedented levels of cooperation between developing nations led by Brazil and India. At one stage all developing country groupings within the WTO met to harmonise positions on agricultural. At the end of the day developing countries gained some additional flexibility to exempt special food security products and for the use of a Special Safeguard Mechanism based on import quantity and price triggers.
West African cotton producers secured commitments from the US to major reductions in trade distorting domestic support and to provide for duty-free and quota free access for their crops. While this will curb dumping into West African markets, experts doubt there will be much difference to the competitiveness of the manually-harvested African cotton.
Least Developed Countries will get new access to WTO rich country markets as a result of the decision taken on duty-free and quota free access for all but a small percentage (3%) of LDC exports. This "development-friendly" non-reciprocal "gain" along with well directed `aid for trade' may give LDCs time to develop their supply-side capacity and expertise but there is also a danger that it could backfire if some LDCs conclude that they can now rest on their laurels in a fiercely competitive environment. Continued LDC protection at high levels could undermine their long term competitiveness and trade with other developing countries.
Agriculture is very important to poorer farmers but as a share of global merchandise trade, agricultural output for developing countries has now dropped from 42% to 11% over the past three decades. So the future of trade in services, for example the mobility of temporary workers from poor to rich countries, is crucial. In Hong Kong, the text on services was adopted with some concessions to developing countries and there is a new deadline of 31 July 2006 for revised market access offers on services, but real progress remains painstakingly difficult.
In reality, not much was achieved in Hong Kong although one could argue that there were a few minor steps forward on development and that at least the Doha Round did not slide backwards. The final Ministerial Declaration called for a future balance in negotiations between market access for agricultural and industrial goods to ensure a comparably high level of ambition. This prompted Brazil's foreign minister to comment that the final declaration does provides "a gateway to open up market access negotiations".
So there is hope that trade negotiators will now be able to focus on the real development agenda. First by moving the Doha Round market access negotiations forward by meeting the agreed deadlines set for the end of April 2006. And second, by seriously investing in the capacity of poorer countries to develop their supply-side competitiveness. The trade piece of the jigsaw in the fight against world poverty remains an ongoing challenge - but one that must be embraced.
Jim Redden is the Senior Program Manager and lectures on trade and development policy for the Institute for International Business, Economics and Law at the University of Adelaide.
Published 22 December, 2005, Australian Financial Review
