Word and deed are always at war when it comes to trade talks. So when two traditional rivals talk peace on the eve of a big trade parley, we should watch what they do, not what they say.
The United States and the European Union made big news Wednesday by announcing a joint agreement addressing the huge problem of agricultural trade tariffs. The trade giants hope their plan, such as it is, will be the basis for agricultural talks at the World Trade Organization meeting in Cancun, Mexico next month.
At first blush, this sounded like good news. The EU and U.S. have had trade wars on agricultural products ranging from bananas to roquefort cheese to fine wines. If these major powers could sort out their differences, then perhaps the Cancun meeting might make real progress in breaking down trade barriers on everything from drugs to investment to copyrights.
We shouldn’t hold our breath.
The EU and U.S. “agreement” on agriculture is a press release masquerading as a deal. The three-page statement merely reiterates support for eliminating agricultural trade barriers, protecting less-developed countries, and little more. There are no target dates, no specifics on the size of tariff reductions, no details on how the farmers and economies of the developing world will fare.
None of this surprises. The U.S. and EU talk a good game on trade, but their deeds are designed to protect their politically powerful farmers at all costs. And the costs are substantial: Despite its free-trade rhetoric, the U.S. last year passed a law that adds $180 billion in farm subsidies over 10 years. The EU announced plans to wean itself from subsidies, but there won’t be cuts in Europe’s $50-billion-a-year common agricultural policy until at least 2013. The largesse puts about $20,000 a year into the pockets of each farmer in the U.S. and EU, according to the Organization for Economic Cooperation and Development.
The fact is, the statement by the U.S. and Europe wasn’t really about agriculture at all. It was about getting ministers of the 167 WTO countries to Cancun, where arms can be twisted and inducements offered on other market-opening measures the two trade giants want.
The gambit seems unlikely to work, and may even backfire. India’s trade minister quickly criticized the deal as “an attempt to pry open the development country markets without clear commitment” to eliminating U.S. and European trade barriers. The misstep gives India a chance to punish the U.S. by rallying support for reducing copyright protections for prescription drugs and to annoy Europe by impeding progress on services, investment and other pet EU issues.
There is a simple solution to this problem, of course. The U.S. and the EU in Cancun can prove the doubters wrong by setting a firm deadline for agricultural trade reform. They can put specific amounts on the size of cuts in tariffs and subsidies. They can spell out a fair formula that protects the economic interests of farmers and economies in the developing world.
Such reforms would require the world’s biggest trading powers to put real action behind their free-trade rhetoric. On agriculture, at least, they haven’t found the will to do so.
