Thursday, July 27, 2006

Sleepless in Doha: The Takehome

By now, nearly everyone except a few people who've been locked up in a submarine under the polcar ice cap know, the Doha round of World Trade Organization talks foundered on the subject of farm subsidies and whether they could be eliminated or mitigated, so as to free up market access for third world farmers.

There are as many levels of complexity to this debate as there are uninformed opinions on the subject. There are first, definitional problems. What is a 'subsidy' anyway? Is it a cash payment to sit on the porch and watch the sun go down over the barn, or is it a price support system such as those on commodities in the U.S.? How do we establish a level of equalness that allows us to negotiate meaningfully with the Europeans (read the French)? And if that modus vivendi can ever be reached, what are we negotiating for and what are we giving up?

It's easy to say Free trade si! Subsidies no! but the notion that a decline in subsidies will automatically produce an equal and opposite benefit for the downtrodden third world farmers in their loincloths is a mistaken one.

One of my colleagues in India informs me that because of the generally small holdings there, the average farmer sells the grain he produces to a middleman, who pays as little as he can get away with, rather than whatever the CBOT says that number 2 hard wheat should bring today less transportation. Oftentimes, the middleman buying the grain is also the village moneylender, who holds the smallholders in thrall with ruinous interest rates that would make one of Joe Profaci's loan sharks blush.

This situation is not conducive to bringing benefits to the small farmer in the third world, and if that's the objective, agricultural law reform in the third world should be the order of the day, but it's not on the table.

Another point not considered in the debate is that we have world markets for grain and commodities. The price is the same in the pit in Chicago as it is on the dock in Marseilles as it is on the dock in South Africa as it is on the wharf in India. Because the agricultural sector is so powerful in the US, when we sneeze the world catches cold, like it or not. Anything that supports prices in the US tends to support world prices as well, and that means everyone benefits from the largess of the U.S. government farm programs-unless they're in thrall to the village moneylender who isn't inclined ot share the wealth.

Parallel to this is the apparent issue of whether we in the west ought to put this on the table without getting anything in exchange from the developing world, such as access to markets for our industrial products and the reduction of tarriffs in those countries.

I'm not entirely sure where this whole subject is taking us, but we will be watching it closely.


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