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(9/29/2003 - Prestowitz) Cut the Farm Subsidies |
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Cut the Farm Subsidies?
By Clyde Prestowitz
7 Sept. 29, 2003
The Washington Post
Page A19
English
(Copyright (c) 2002, The Washington Post Company)
The Bush administration has been much criticized for its unilateralist
approach to foreign policy, but in the wake of the collapse of the
World Trade Organization's Doha round of trade liberalization talks in
Cancun there is one unilateral step the president could take that would
not only recoup enormous global goodwill for the United States but also
provide critical support for the troubled global trading system. That
would be to announce that the United States is moving immediately and
unconditionally to phase out subsidies for agricultural production and
export.
The collapse of the talks not only undermines the chances of success of
the Doha round, it also throws into question the whole future of the
World Trade Organization and the global trading system that has been
the main engine of growth of the world economy for the past 50 years.
For some time now there has been a growing trend toward bilateral and
regional trade agreements that inevitably create preferential
arrangements between the parties similar to those that prevailed and
were so troublesome before World War II. As a result of the failure in
Cancun, this trend is likely to accelerate rapidly. Indeed, U.S. Trade
Representative Robert Zoellick has already announced his intention to
adopt such a strategy.
This is ironic, because it is the United States that has, since 1948,
led the effort to create a global economic system based on
nondiscriminatory free-trade principles. In many respects the results
have been spectacular. Average tariffs levied by developed countries on
industrial products have fallen to negligible levels, and soaring world
trade has powered first the Japanese and then the other Asian miracles
(including now China's), lifting hundreds of millions out of poverty.
But despite this success, free trade has not always been the win-win
proposition it is supposed to be. Too frequently, trade has redounded
to the benefit of the richest countries while actually making the poor
poorer.
At the heart of this paradox is agriculture. While the United States
and other developed countries of Europe and Asia have preached free
trade, in the area of agriculture, where 70 percent of developing
countries make their living, they have practiced protectionism and
subsidization. For example, the North American Free Trade Agreement
(NAFTA) was supposed to open U.S. markets to Mexican products so that
Mexican people would not find it so necessary to enter the United
States themselves. Yet as a low-cost sugar producer, Mexico still finds
itself virtually locked out of the U.S. sugar market.
Even more egregious is the case of cotton. In Muslim West Africa it
costs 23 cents to produce a pound of cotton, while in the Mississippi
Delta of the United States the cost is 60 to 80 cents. Yet the U.S.
growers are driving down world prices and literally killing the West
Africans by dumping huge amounts of cotton on world markets at prices
far below their cost of production. How do they do this? By receiving
$3.5 billion in subsidies from the U.S. taxpayer. (Is it any wonder
that extremist Islamic clerics preaching jihad against America are
finding an increasingly warm reception in West Africa?)
The Doha round of trade talks was specifically labeled the "development
round" to emphasize the necessity of addressing this problem, which
primarily afflicts the developing countries. Both the European Union
and the United States expressed a desire to solve the problem and
indicated readiness to make some cuts in agricultural subsidies. At the
same time, however, the administration undercut its own position by
passing a farm bill that dramatically increased the subsidies, and in
the Cancun talks, both the European Union and the United States made
their proposed subsidy reductions conditional on a substantial lowering
of industrial tariffs by the developing countries. In the end, a bloc
of 22 developing countries insisted that the rich countries go first in
making concessions, and when that demand was rejected, the talks
collapsed.
As a former U.S. negotiator in the Reagan administration who was
sometimes labeled a trade hawk, I understand the need as well as the
desire to bargain hard. Moreover, while lowering of developing-country
tariffs on industrial goods would be good for the United States, it
would be even better for the developing countries themselves, which
currently pay far more than necessary for many critical imported items
and whose policies lock their own industries out of trade with one
another while detracting from their desirability as destinations for
foreign investment. Nevertheless, in this case, at this time, the
United States should forget about being a shrewd Yankee trader and just
cut the subsidies unilaterally. Doing so would not only help U.S.
consumers, it would also set a tremendous example that would break the
logjam holding up the Doha round. And it would help preserve the
principles and framework of nondiscriminatory global trade, to which
this country has long been committed.
Clyde Prestowitz, president of the Economic Strategy Institute, was a
trade negotiator in the Reagan administration. He is the author of
"Rogue Nation: American Unilateralism and the Failure of Good
Intentions." |
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