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December 8, 1999 - International Trade News

In the Wake of the Seattle WTO Ministerial; Talks on Agriculture and Services Will Continue; The Case for Multilateral Sugar Liberalization

Attempts to launch a new "millennium round" of global trade talks failed last week in Seattle. Trade Ministers were unable to agree on several key elements, including agriculture, and a joint declaration launching a new round of WTO negotiations did not materialize. Going into Seattle, the EU had been seeking a comprehensive round dealing with agriculture, services, industrial goods, competition and investment, as well as labour and the environment. The EU needed gains in other areas to offset concessions in the agriculture-sensitive sector. The US, on the other hand, continued to insist on a narrow agenda.

Views differ on what actually scuttled the Seattle meeting. The press emphasized civil society issues (such as labour and the environment) and President Clinton's comments. Others were quick to note the unwillingness of the US to agree to special concessions for the world's least developed countries. Others are promoting the idea that it was non-agriculture issues, such as the US refusal to discuss anti-dumping rules, that doomed the talks. Whatever the case, it is true that there was no agreed mandate on agriculture. The EU continued to resist calls to eliminate export subsidies, one of the key elements of the Cairns Group/US position. At the end of the day, the US broke from the Cairns Group position and tried, unsuccessfully, to forge a watered down agriculture text with the EU.

Talks on Agriculture and Services Will Continue

Because the Uruguay Round Agreement includes a built-in agenda to continue the process of reform in agriculture (Article 20), negotiations in agriculture will proceed in Geneva in January 2000. Unfortunately, expectations for an agreement in agriculture are not high if they are not part of a larger trade package. According to some reports, the progress made in Seattle on a detailed agricultural text is simply "frozen", not lost, but the EU apparently has said that anything agreed in Seattle is now "off the negotiating table". Without an agreement in agriculture, there is little hope that the EU will stop subsidizing its sugar exports and little hope that protectionism in the US, EU, and Japan will be curbed (see related article below). Given this, the near to medium term prospects for improved access to the US markets for Canadian sugar and sugar-containing products are not great.

The Case for Multilateral Sugar Liberalization

In a paper presented at a Geneva conference on Agriculture and the New Trade Agenda in the WTO 2000 Negotiations, (Oct. 1-2, 1999), Economist Brent Borrell explained the economic case for full trade liberalization in sugar. The Global Sweetener Market (GSM)model was used to measure the effects of full and partial liberalization for 24 regions analyzing sweetener trade flows and barriers between regions. Here are a few highlights:

  • compared with other agricultural products, sugar is one of the most highly protected commodities
  • protection in tariff equivalent terms is huge compared with average tariffs of less than 5% in those economies as a whole
  • this reflects the failing of the Uruguay Round to produce real reductions in tariffs and other trade distorting practices
  • it is the size of disparities in protection between products and countries that cause costly distortions in the market
  • reducing the disparities by decreasing the highest level of protection offers the greatest gains; reducing already low levels of protection may be politically easier to achieve, but this can widen the disparities