The success of the next round of trade liberalization talks depends on tackling the thorny issue of agricultural tariffs and support. That is no secret; agriculture has preyed on the minds of trade negotiators for decades, but they have successfully delayed consideration of the question for years. The most recent retreat occurred recently at ministerial talks held in Tokyo. The failure to make progress bodes ill for the success of the Doha Round. If future growth and prosperity depend on continued growth in trade, then the agricultural sanctuary must be breached.
Foreign Minister Yoriko Kawaguchi presided over the three-day conclave attended by representatives of 22 nations and regions. Negotiators were trying to meet a self-imposed deadline of March 31 for setting numerical targets on the reduction of tariffs and subsidies, “an awesome challenge,” acknowledged a World Trade Organization spokesman. Instead, they clashed over a draft proposal drawn up by Mr. Stuart Harbinson, chairman of the WTO Agricultural Negotiations Committee.
The Harbinson proposal calls for minimum cuts of between 25 percent and 45 percent as well as average reductions of 40 percent to 60 percent on all farm tariffs. It did not impose ceilings on those duties. In addition, the draft also calls for domestic agricultural subsidies to be cut by 60 percent over five years, while export subsidies would be phased out entirely within nine years. The draft was aimed at navigating between the 36 percent average tariff reduction endorsed by Japan and the European Union on one hand, and the uniform 25 percent ceiling on all farm tariffs sought by the United States and Australia on the other. Yet, by splitting the difference between the two camps, the draft satisfied no one. Representatives could not even agree on whether to use the proposal as a basis for negotiations. So, the talks are back to square one.
Incredibly, after years of discussion, the issues are the same. Is agriculture a commodity like any other, or does it have special social and cultural significance as the Japanese and the Europeans maintain? Their governments argue that agriculture serves as the mainstay of communities, the foundation of social organization and offers seemingly “mystical” (if not mythical) links to the past, as well as other intangible advantages, such as environmental protection.
Mr. Tadamori Oshima, minister of agriculture, forestry and fisheries, retreated to that redoubt again last week, faulting the Harbinson proposal for its disregard of “nontrade” concerns. The more “balanced approach” that Mr. Oshima and his European colleagues endorse would protect those interests — as well as the powerful agricultural lobbies in their capitals.
U.S. Trade Representative Robert Zoellick countered that further market openings would not only benefit Japanese manufacturers and service industries but also provide a much-needed boost for the country’s ailing economy. Liberalization would force the rationalization of Japanese (and other less efficient) agricultural producers, move assets to more productive sectors of the economy, save consumers money and spread prosperity to less developed countries able to compete in the agricultural sector. A failure to liberalize, claimed Mr. Zoellick, holds the Japanese economy hostage to the small and shrinking number of farmers. “They’re sacrificing Japan’s strength at the altar of rice.”
Some Japanese officials recognize as much. Mr. Takeo Hiranuma, the minister of Economy, Trade and Industry, has called for his ministry, Mr. Oshima’s and the Foreign Ministry to work together to make “comprehensive judgments by taking national interests into account.” While Mr. Hiranuma’s comment was in response to a proposal by Mr. Kenji Miyahara, chairman of the Japan Foreign Trade Council — that Japan establish a trade negotiation office like that of the U.S. Trade Representative — there is merit to the proposal. Japan needs to make decisions based on national interest, rather than on narrowly focused political interests. Unfortunately, it too is likely to run aground on the shoals of politics, as it could easily be dismissed as a power grab among the bureaucracies.
Fortunately for Japan, it is not the lone holdout. Working with Europe, it can probably hold off agricultural liberalization indefinitely. The failure to reach agreement last weekend will make it difficult, if not impossible, to meet the March 31 deadline. That could make it impossible to complete the Doha Round, which is scheduled to finish in January 2005. The prospect of failure is likely to be the most powerful spur to compromise. Painful though it may be, Japan needs to start preparing for those decisions now.
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