The collapse of the World Trade Organization’s round of trade talks in Cancun last weekend is hardly the end of hopes for a world with fewer barriers to trade. But it demonstrates that the path to freer trade, as always, is hardly without detours.
It should serve as a wake-up call to developed countries like the United States and those in the European Union that massive subsidies to farmers can have unpleasant consequences.
The issue that caused more than 20 countries led by Brazil to walk out of the talks was the subsidies developed countries give to agriculture, which can make agricultural imports cheaper in some countries than homegrown food.
The less-developed countries are being pressured by the WTO to reduce protective tariffs and other barriers, and had hoped to get a commitment from the more industrialized countries to reduce agricultural subsidies in return. When it became apparent, in their view, that the United States and European Union wouldn’t budge on the issue, they walked out.
“I commend the less-developed countries for walking out in protest at the developed countries subsidizing rich farmers,” Joe Cobb said; a former staff director of the congressional Joint Economic Committee, he now teaches economics at a couple of Southern California colleges.
Agricultural subsidies, Cobb explained, are largely a function of the political dynamics in each country. In Europe, the United States, Japan and Korea, agricultural interests have disproportionate political influence, so subsidies remain. They are more likely to change when internal politics change rather than as a result of external pressure from groups such as the WTO.
More important than agricultural subsidies, at least in the United States, in undercutting Third World farmers are large-scale factory-farm techniques and putatively humanitarian food aid. Getting rid of the subsidies would be good public policy, but might not help Third World farmers as much as many hope.
U.S. trade representative Robert Zoellick said that in the wake of the collapse the United States would concentrate on more bilateral and regional trade agreements. That might be a more effective approach than seeking a comprehensive approach from 146 countries who are obviously far from agreement.