US-Cairns Group alliance against subsidies

by Marcela Valente

Buenos Aires, Aug 30 (IPS) -- Ministers (and farmers) from the Cairns Group of 15 agricultural exporting nations are under no illusions that their fight to eliminate subsidies will be easy. But they are confident that U.S. backing of their cause will provide a major boost to their demands.

That at least is the message that rural producers and official delegates to the 19th ministerial meeting of the Cairns Group took home from Argentina after the weekend.

U.S. secretary of agriculture Dan Glickman - whose country is not a member of the Cairns Group - was a key guest at last weekend's ministerial gathering in Buenos Aires.

From now until November, Cairns Group nations and the United States will attempt to move towards common ground in an alliance that could enable progress towards the liberalisation of trade in agriculture in the next round of trade talks.

The so-called Millenium Round is to be launched at the Nov 30 to Dec 3 ministerial meeting of the World Trade Organisation (WTO) in the U.S. city of Seattle, Washington.

At a meeting held parallel to the gathering of ministers in Buenos Aires, agribusiness representatives from Cairns Group nations took a hard-line stance towards subsidies, while admitting that total removal of subsidies was next to impossible in the short-term without U.S. support for their cause.

Created in 1986 in the framework of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the Cairns Group is comprised of Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay, and accounts for 25% of global farm output. The group's aims - to put the elimination of agricultural export subsidies and of assistance for farm production on the multilateral agenda, and ensure free access to markets - have at times coincided with those of the United States.

According to the Paris-based OECD, the European Union (EU) subsidised agriculture to the tune of $142 billion last year, the United States $100 billion and Japan $55 billion - which in a context of rock-bottom commodity prices and a flooded market has had a heavy impact on Cairns Group nations.

At the Buenos Aires meeting, which concluded with the release of a communique outlining the Cairns Group's position with respect to the next round of WTO trade talks, the ministers and Glickman agreed that it would not be easy to break down the barrier of subsidies, which instead of shrinking has grown in recent years.

French minister of agriculture Jean Glavany, who also visited Buenos Aires over the weekend, said that while the US called for liberalisation and continued to subsidise, the EU openly assumed its protection of farmers. "Don't mistake your enemy," he warned in a message to the Cairns Group.

Providing a foretaste of the hard-line position that France is expected to take in Seattle, Glavany said that "if Europe did not subsidise, there would be 100,000 to 200,000 farmers left in France instead of 700,000.

"Whether or not to provide subsidies is a political, democratic and sovereign decision of each government," he stressed.

Nevertheless, the members of the Cairns Group believe the challenge is worth the effort.

And the developing nations in the Cairns Group, under pressure from their farmers, who receive no assistance despite an average 30% crash in farm prices over the past two years, see it as absolutely essential.

The ministers themselves repeatedly pointed out that the group was not a monolithic bloc, but an alliance made up of both industrialised and developing nations. The developed members - Australia, Canada and New Zealand - have the means to defend their farmers with aid that in theory does not distort international prices.

While admitting that not all member nations could afford to subsidise, Canadian minister of agriculture Lyle Vanclief said the crisis shaking agriculture worldwide forced governments to help farmers. But he stressed that any measures taken should have the least possible impact on prices.

Vanclief's position was very much in line with that of Glickman. The U.S. official insisted on an association with the Cairns Group, and said small farmers should be supported, although with the understanding that such aid should have the slightest possible impact on trade.

Meanwhile, a $6 billion package of aid measures for farmers is currently being discussed in the United States.

Glickman tried in vain to calm the members of the Cairns Group, reassuring them that the aid package was still just a bill, and that if it was passed it would be implemented in full respect for WTO rules.

The industrialised members of Cairns have government agencies that purchase grains at prices which are often higher than market value, in order to ensure stability for farmers at times of poor harvests or price slumps.

Vanclief said that if some of the aid measures applied by his country hurt free trade, even though they were in line with WTO rules, he would keep an eye on them. But he added that he felt no commitment to refrain from applying protective measures if the crisis of overproduction and low prices continued.

Australian agriculture minister and chairman of the Cairns Group Mark Vaile took a similar position, assuring that the state grain boards in his country would be administered in a transparent manner that did not distort prices on the global market.

On the other hand, the developing countries that are in a majority in the Cairns Group defined their position in no uncertain terms.

Argentina and Brazil warned that without an agreement on agriculture, there would be no agreement in any sector in the next round of talks, and threatened to implement their own protectionist policies.

A representative of Chile's farmers pointed out that in his country, small farmers already received a monthly social subsidy.

A study by Argentina's foreign ministry claimed that Latin America - where six nations are in the Cairns Group and three others are seeking to join - failed to export $200 billion in farm products in the past 15 years due to subsidies shelled out by industrialised nations.

In 1988, two years after the creation of the Cairns Group, five South American members demonstrated their influence by blocking a consensus in the multilateral trade talks for four months, until they got certain targets set for freeing up trade in agriculture.

[Trade observers in Geneva, however, note that while the five South American Cairns members blocked the mid-term accord at Montreal in 1988, and to a more limited extent at Brussels in 1990, they were able to do so only because the US found it to be in its interest. But in 1993, when the Dunkel text (presented in Dec 1991 as a package and 'reopening any part requires consensus') was modified by the US and the EC (in their Blair House accord, and later in other areas of interest to the two), the Cairns group members remained quiet. The US negotiated with the EC and struck a deal, that enabled the two to continue support, through socalled non-distorting green and blue box subsidies, and protect their own markets with dirty tariffs, with Australia and New Zealand getting some small benefits in the Far East. The South American Cairns Group members gained little or nothing - except some 'promises' of future reforms.

[Also, in South-east Asia, farmers engaged in commercial crop exports and farmers in food crops for domestic consumption have different views that the governments are being forced to reckon with. And, Cairns group member Indonesia's is now raising issues about domestic agriculture and food security, not too different from those of countries like India, who are raising questions about rural unemployment and agricultural development issues needing market-related state support]

The document adopted by the meeting in Buenos Aires called for a lifting of subsidies, while rejecting the theory of "multifunctionality" of agriculture as merely a new argument to justify the use of subsidies.

According to the theory, now in vogue in Europe, agriculture guarantees employment opportunities in the rural sector, boosts environmental sustainability, and preserves the rural landscape.

An Argentinian delegate who preferred to remain anonymous admitted that the document took a softer tone that many developing country representatives had hoped for, given the need to reach a consensus. But he maintained that "just a few courageous" countries in the group could suffice to turn things around in the coming trade talks.

Brazilian agriculture minister Marcos Pratini de Moraes alluded to the possibility of a new deadlock in the multilateral trade talks if the Cairns Group's demands for equal conditions for agriculture and targets for the liberalisation of trade in the sector were not met. Pratini warned that if developing countries failed to sell their - mainly agricultural - products, they would be unable to pay their bills, and a new wave of protectionism would break out at the start of the new century.

The minister said the negotiations with the EU would be tough and would demand a coordinated stance among farming countries, including the United States, which accounts for 13 percent of world agricultural trade.

He added that Glickman's presence in Buenos Aires was a sign of interest in the coming talks.

The progress made by the Cairns Group's demands depends largely on the U.S. position in the trade talks, said Pratini, who added however that the real extent of U.S. commitment to its strategic Cairns Group "partners" would only become clear in Seattle.

The above article by the Inter Press Service appeared in the South- North Development Monitor (SUNS) .