TOPICS > Economy

Trade Talks Collapse Highlight Differences Between Developing, Developed Worlds

July 30, 2008 at 4:45 PM EDT
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Opposition from increasingly important China and India derailed efforts to negotiated a global trade deal Tuesday. With the talks stalled, two economic experts assess the impact on American and international businesses and farmers.

PASCAL LAMY, World Trade Organization Chairman: I think it’s no use beating around the bush. This meeting has collapsed. Members have simply not been able to bridge their differences.

RAY SUAREZ: That sober statement from the World Trade Organization chairman in Geneva yesterday essentially ended this week’s negotiations and marked the failure of seven years of work by WTO member countries.

More than 150 countries had been trying to find the right recipe for a broad agreement that would have lifted trade barriers on goods and promoted global commerce.

PASCAL LAMY: What members have let slip through their fingers this time is a package worth more than $130 billion a year in tariff savings.

RAY SUAREZ: The deal was blocked by developing nations, led by China and India. Their concern was agricultural tariffs and whether they can feed their own people at a time of soaring costs worldwide for food staples. Both nations said they need to protect their farmers from greater competition.

The high price of some tariffs

For years, tensions between the U.S., Europe, and developing countries over agriculture subsidies have hindered progress on trade talks. Farmers from India and Africa have said the disproportionate subsidies make their work extremely difficult.

The NewsHour's Fred de Sam Lazaro saw this in Mali, one of the world's poorest countries.

HAMIDOU COULIBALY, Farmer (through translator): What I get is not enough. We have to pay taxes, and I have to pay for clothes and medicine. I have children who go to school. I have to pay for their clothes and their school supplies.

FRED DE SAM LAZARO, NewsHour Correspondent: Coulibaly has had to resort to borrowing money to support his extended family of 40 members. Many neighbors are even worse off.

Kalifa Coulibaly, who's not related, has had to sell some of his cattle used to plow his fields. On this day, he borrowed the equivalent of $30 to buy medicine. That's more than 10 percent of his earnings last year.

RAY SUAREZ: Farmers in India battled weather and the global marketplace without much success. As crops failed, many were left with no good options.

Fred de Sam Lazaro reported on the grim reality there in 2006.

FRED DE SAM LAZARO: In an unmarked grave some two miles from where he lived, Dalap Tekham was laid to rest. He added one to a grim tally. Here in the Vidarbha region of central India, some 1,300 cotton farmers took their own lives in 2006. That works out to a suicide rate of one every eight hours.

To find out what's driving so many farmers over the edge, we talked to Thulsiram Mandre, who says he is close to that edge.

THULSIRAM MANDRE (through translator): At the most from cotton, I may make 60,000 rupees this year. That's not enough to pay for fertilizer, for family expenses, then loan payments. There's nothing left. I didn't pay back one penny to the bank last year.

RAY SUAREZ: The U.S. and Europe wanted greater access to developing markets in exchange for lowering their own farming subsidies and tariffs.

In recent years, a number of other U.S. manufacturers have complained of an uneven trading field. Jock Nash, a textile lobbyist, spoke about that problem in a 2002 NewsHour story.

JOCK NASH, Textile Lobbyist: If you want to protect what we have here, then you're going to have to tell anybody that wants to sell here, to make it here, exist under those laws, the only level playing field that exists. And that's how it works.

RAY SUAREZ: After the WTO meeting ended, U.S. Trade Representative Susan Schwab said those demands were unreasonable. She said, "It's unconscionable that we could have come out with an outcome that rolled the global trading system not by one year or five years, but by 30 years."

For now, with talks at an impasse, trade officials think direct country-to-country negotiations could replace a larger global agreement to keep goods moving in the world market.

Differing takes on the collapse

Now we get two perspectives on the collapse of the talks. Anthony Smallwood is head of press and public diplomacy for the Delegation of the European Commission to the United States; and Raj Patel is a visiting scholar at the University of California, Berkeley, and the author of "Stuffed and Starved: The Hidden Battle for the World Food System."

Anthony Smallwood, let me start with you. Seven years of negotiations end with no agreement, negotiations that much of the people of the world didn't even know was going on. Was this a setback for them? Should they regard this as bad news?

ANTHONY SMALLWOOD, European Union Spokesperson: Oh, I think they should regard it as very bad news. I mean, it's not a question of a lack of time. As you say, we've been negotiating in good faith and many of the other parties, also, for a very long time on this issue.

There was an absolutely heroic attempt last week under Pascal Lamy, when we had a very successful week, which in a sense closed nearly 90 percent, 95 percent of all open position. I think it's an absolute tragedy that at the very last fence the negotiations failed.

RAY SUAREZ: Raj Patel, a tragedy?

RAJ PATEL, Author, "Stuffed and Starved": Not really. I think that this is actually quite a positive outcome. It's not the best outcome. The best outcome would have been the removal of agriculture from these discussions altogether.

But farmers in developing countries have won something of a reprieve here. India in particular took a very strong line against the liberalization that the European Union and the United States were asking for, in terms of access to the Indian markets.

India, of course, is heading towards an election year. And it is very concerned to protect the farmers that we heard about in the report, the farmers that are on the brink of suicide.

And, unfortunately, the United States and the European Union were not ready to give the concessions that developing country farmers wanted. And I think India was perfectly reasonable to walk away from the negotiating table.

The impact down on the farm

RAY SUAREZ: Well, Raj Patel, the original reason for these talks to exist, we were told, was to give farmers in the developing world greater access to world markets. Absent an agreement after these seven years of talks, what will now happen? What happens, for good or ill, to those farmers we saw in the report?

RAJ PATEL: Well, unfortunately, they continue to be at the mercy of the large agricultural subsidies that are given to United States corporations and also the European Union agricultural sector.

I mean, it's important to remember that farmers in Europe and the United States are not of a piece. The subsidies that Europe and the United States give are subsidies to large corporations.

Small farmers in the United States, such as the National Family Farm Coalition, are united with farmers in developing countries in thinking that the way agricultural development happens under the existing World Trade Organization rules is unjust and discriminates against the poor.

And if you ask farmers in developing countries what they want, in terms of access to markets, you'll hear, "Access to markets, yes, we'd love access to our own markets." And that's something that these World Trade Organization talks have been denying small-scale farmers since they started through the Uruguay Round in the 1980s.

RAY SUAREZ: What about the farmers, Anthony Smallwood, in North America and Europe who produce big surpluses and export those surpluses around the world? Will their lives change at all?

ANTHONY SMALLWOOD: Well, I'm sure they will, but I would like to correct a very important issue here. These talks, the Doha talks, were not just about agriculture. They were about access, world trade, and much more than agriculture.

And I absolutely agree with Raj. Raj said it's a shame in a sense, or he implied that it was a shame that the whole agenda was rather hijacked by the agricultural issue.

But we must not forget that this is not just an agricultural issue. It's also access to markets for industrial goods and services, also.

And I think that the very fact that -- I can only speak for what we on the European side did -- but we're talking about a 60 percent cut in farm tariffs. We're talking about an 80 percent cut in trade-distorting subsidies.

We're talking about industrial tariffs, from our point of view, reduced to nearly 2 percent, with a maximum of 6 percent. We're talking here about a very wide package which, if it had gone through, would not only have done very much to stimulate South-South trade and trade generally for people in the agricultural sector, but also for all those not in the agricultural sector.

And what we've lost here is an opportunity to actually close a package which would have set these things down for the foreseeable future. And I quite appreciate that some parties may have elections next year or the year to come, but what's happened now I think is going to reverberate way past that.

It's going to reverberate, we would say, at least a decade. I think Susan Schwab talked in terms of 30 years.

A connection to food prices?

RAY SUAREZ: What about consumers, Raj Patel? If you are heading out into the market to buy food somewhere in the developed world -- excuse me, in the developing world, in Africa, in Asia, in Latin America, is your life going to change because these talks failed without an agreement?

RAJ PATEL: I don't think so. In fact, the reason that we're seeing a food price spike -- I mean, there are many basic background factors, but one of the reasons that we're seeing a rise in food prices lies precisely in the adoption of the existing World Trade Organization rules, which have militated against having things like grain stockpiles and agricultural policy that can support farmers and invest in developing a farming sector and a private sector, even an industrial sector.

Those kinds of policies have been ruled out of court by the WTO. So the reason or one of the reasons that people shopping in developing countries right now will find food more expensive is because their governments have been forced to auction off and to get rid of the grain surpluses and the grain stockpiles that might have prevented the magnitude of the food crisis that we see today.

RAY SUAREZ: And, Anthony Smallwood, again, keeping in mind what you said, that this wasn't all about agriculture, but agriculture was what this ran aground on, what's going to change for the consumers of the world, taking into account what Raj Patel just said, because this did not move forward?

ANTHONY SMALLWOOD: Well, I think that it's quite true that the policy of very large stockpiles was revised, nothing to do with the WTO and the world trade talks, by the way, but it's quite true that stockpiles as, if you like, a policy, very large, very large stockpiles, was revised, but that was years ago.

What we're seeing now is a rise in food prices from very different factors. That's the first point I'd make.

But, secondly, what would European food consumers, for instance, see as a result? Well...

RAY SUAREZ: They're already paying a lot of money for food, aren't they?

ANTHONY SMALLWOOD: They're already paying. We are all paying. I mean, there are a whole set of factors that are quite -- you know, irrespective of what the trade talks are going on -- the whole set of factors, weather and energy most notably, affecting both crop outputs and inputs into agriculture.

But there is absolutely no doubt that world trade and an improvement in world trade would have made it better, would increase the choice of European consumers of foods imported, and by the same token improved access to the European market, which is what we were offering.

We already offer a very open market, by the way, to developing country food producers. We account for something like 80 percent of all imports from these countries already.

It would have stimulated this, I think, very useful, very advantageous to both sides, stimulation of world trade. This is what it was all about, not just in agriculture, but in other areas, too.

Remember, from the very beginning, we have seen these Doha talks as trade and development. Development has been the constant theme from the very beginning.

RAY SUAREZ: Anthony Smallwood, Raj Patel, gentlemen, thank you both.