4 de marzo de 2009
After having followed your work and read your studies with great interest for many years, it is a pleasure to finally be at ABARE! ABARE’s work on complex agricultural policy issues, fisheries and forestry, minerals, energy and climate change have been particularly instructive to us all. It is think-tanks such as ABARE that allow the WTO’s work to go forward; that help the WTO make sense of the complex landscape of issues that constitutes its day-to-day work.
The WTO, as you know, did not succeed in reaching a final agreement on modalities for agriculture and industry — two key pillars of the Doha Round — at the end of last year. Such an agreement would have paved the way for the complex, and quite tedious process, of turning guidelines into legally binding obligations — or “scheduling” as we call it in our jargon.
And, just as importantly, it would have paved the way for the completion of other areas of the Doha Round, such as the services negotiations, the reduction of harmful fisheries subsidies, or trade and the environment. These subjects would have no doubt gained steam had we been successful last year; but, to our great dismay, agreement proved elusive.
Australia played an extremely constructive role in the negotiation, throughout its various stages, in particular through the Cairns Group coalition. Australia, and the Cairns Group, saw and understood the value of the deal that was being proposed until the very end. But we did not manage to close the gap on issues such as the Special Agricultural Safeguard Mechanism and the market opening of specific industrial sectors.
Today, we find ourselves in the midst of a financial crisis and a global economic recession of unknown proportions. Some are already beginning to regret the opportunity they lost last year to conclude the Doha deal. Global output and trade plummeted in the final months of 2008, and global growth in 2009 is expected to fall further.
Of particular note is the World Bank’s forecast of a drop in global export volumes of 2 per cent in 2009, the first decline since 1982. Developing countries — who are most in need of economic growth — will be particularly badly hit, with their export opportunities fading because of the recession in high-income countries, the shortage in export credits, and the rising cost of export insurance. This, coupled with reduced foreign direct investment, reduced remittances from migrant workers abroad, and further falls in commodity prices, is likely to be a serious strain on many of their economies.
As a veteran WTO negotiator has put it to me, rather than creating new trading opportunities, the WTO now finds itself struggling to preserve the status-quo.
WTO members are concerned about beggar-thy-neighbour policies and this is why we have switched on the WTO “radar screen”, to track measures that countries are adopting in the context of the current crisis.
While the first indications are that there has been “limited evidence so far” of isolationist moves, some trade measures have indeed been taken, and are documented in the first report I produced for the membership. We must remain vigilant, nevertheless, in particular as the crisis starts to bite. A new radar picture will appear a fortnight from now.
But herein lies a complex issue, that few have bothered to think about, and which many had underestimated in valuing the Doha deal. Several new barriers to trade, in terms of increases in tariffs or in trade-distorting subsidies, can be perfectly legal in the WTO. Why? Because countries may not have been using, in the past, their tariff and subsidy entitlements to their fullest capacity. But, in the midst of the financial crisis, many are certainly contemplating doing so!
These unused entitlements, if used, could set the world economy and world trade back several years. And it is much of these unused entitlements that the Doha Round would have helped eliminate.
Let me clarify this picture to you further since, as I am sure you can appreciate, it is critical to properly assessing the value of the Doha deal. Today, countries can more than double their agricultural tariffs from their current level, while remaining within the boundaries of their WTO commitments. The same can be done with industrial tariffs, again while remaining perfectly WTO-legal. Can you begin to imagine what that would mean for world trade if it were to materialize?
But, of course, as we were negotiating up until the end of last year, many sought a Doha accord that would deliver “substantially new trade flows”. I do not blame them, new flows are indeed desirable. But it was certainly unfortunate to have underestimated the value of preserving existing trade flows! Yes going forward — over and above what we have today — is good. But we must start by eliminating the possibility of going backwards.
A recently released study by the International Food Policy Research Institute (IFPRI) has tried to assess the “Cost of a Non-Doha”. In a scenario where the tariffs that are currently applied by major economies rise all the way up to their legal ceilings in the WTO, it finds that world trade could shrink by up to 8 per cent, reducing global welfare by up to US$ 350 billion. I leave those numbers for all of you to contemplate.
In the midst of the financial crisis and the economic recession that we are now experiencing, turmoil in the world’s agricultural markets has persisted. But I need not demonstrate this turmoil to you, since no one knows better, or feels this turmoil more, than you here in Australia. I was struck by the fact that in 2007, agriculture’s contribution to Australia’s GDP fell by a full 10 per cent. And while the sector’s contribution to GDP picked up again in 2008, it may have to see its rate of growth fall once again due to the current economic crisis, and swings in commodity prices.
But these, of course, are not the only factors involved. Drought, which you know about all too well, and forest fires have also taken their toll. A reminder for us all of how dependent we continue to be on climate, despite the latest technology at our disposal, and of the potential threats of climate change to our wellbeing. In fact, I take this opportunity to offer my condolences to all the people of Australia afflicted by the fires of this past month. My thoughts are with you.
Within the span of the last two years, the world has moved from a situation where ordinary citizens were protesting on the streets due to rising food prices to one where food prices have fallen, and agricultural producers are the ones protesting instead.
A debate now rages on whether the factors that have created the recent food crisis have disappeared. While the autumn 2008 report of the OECD/FAO on the world’s agricultural outlook for 2017 argued that food prices would shortly resume their long-term price decline, this conclusion is debated by various research groups. Some of the latter argue that population growth, rising demand, high energy costs, increasing pressure on farm land and water, and climate change may all cause prices to go the other way.
Irrespective of these forecasts, I would argue that any element of stability that can be brought to this picture must be pursued. The Doha Round’s agricultural package, which reduces tariffs, reduces harmful internal subsidies that prevent in particular the developing world from fairly competing, and which eliminates export subsidies altogether, is no doubt worth pursuing.
Quite surprisingly, in the midst of the food crisis, we have heard calls for “food self-sufficiency”, with some portraying import-substitution as the answer to food security. What this forgets is that international trade can be exactly the sort of vehicle, or “conveyor belt” if you will, that would allow food to travel from parts of the world with a surplus to parts where there is a shortage. In so doing, it can bring down food prices — something which the world’s poor would certainly thank you for.
In the Doha Round’s agricultural package, the monopoly power of State-Trading Enterprises is under discussion. Some would like to see these monopoly powers go, and consider them an export subsidy. I do not intend to meddle in Australia’s domestic affairs, and note that some change was in any case made at the end of last year, but would simply offer the following comment. Changes to some of the practices of STEs, in my view, are a relatively small price to pay for an economy whose agricultural products account for about 16 per cent of its total exports, and which would benefit tremendously from the overall Doha deal.
Let me now turn to the environmental chapter of the Doha Round negotiations.
I am convinced we must all invest in this chapter of the negotiations, not least because it would usher in a new beginning for the WTO. This is the first time ever in the history of Rounds of trade negotiations that environmental issues have been so explicitly placed on the agenda. Were these negotiations to fail, there would be little that the WTO could do in the environmental sphere in future. Hence, the importance of making them succeed.
So far, they cover three main issues: ensuring greater harmony between the rules of the WTO and those of Multilateral Environmental Agreements; opening trade in environmental goods and services; and reducing environmentally harmful fisheries subsidies that deplete our oceans.
Ladies and gentlemen, we cannot afford to let the environment be yet another casualty of the financial crisis. And I would like to commend Australia on the green provisions of its stimulus package; in particular, I am told, the AD$ 3.8 billion that have been allocated for household insulation and the solar hot water programme.
Were we to bring the Doha Round’s environmental negotiations to shore, the WTO may be able to turn to much more complex issues like the interface between WTO rules and climate change.
Australia is of course in the process of setting up its emissions trading scheme, as are several other countries such as Japan and New Zealand. Trade rules will need to be leveraged in the fight against climate change, no doubt, and the sooner the better. The trade agenda must respond to the Copenhagen agenda, and to the environmental aspirations of the very membership of the WTO. Climate change, and the irreversible havoc that it may wreak, cannot afford to wait.
We need to finish the Doha Round now, so we can turn to the even higher mountains that we must still climb. I count on Australia’s leadership to deliver these messages to the upcoming G20 leaders summit in London.
Thank you for your attention.
Director General OMC