April and May 2007 Trade Commentary

The long over-due Ambassador Falconer ‘challenges’ paper was released on the last day of April.  Although the paper had much of the same thing everyone has been talking about for the past year, or more, it has promoted some thought provoking discussions.  The big question still remains will negotiators actually reach an agreement?

Here are a couple issues from within the paper that may result in a no deal situation.

First, in the domestic support area the Falconer paper outlines how the U.S. will have to lower their overall trade distorting allowable spending to a level under $22 billion.  Falconer predicted that at the end of the round allowable overall trade distorting spending in the U.S. will have a spending ceiling in the teen, $13 to $19 billion.  The problem with that is the U.S. has rarely ever spent more than an amount in the teens (a few years have been exceptions).  The result is the U.S. wouldn’t really have to change the way they spend their money or just put spending caps on the programs… which was evident in the Bush Administration’s Farm Bill Proposal.  The result, not too many countries could come back to their governments and say we have agreed to open up our markets to the U.S. and in turn the U.S. has agreed to continue spending in ways similar to the past.

Second, the market access provisions relating to sensitive products have a few issues surrounding them.  The selection of what amount of products that can be classified as sensitive seems to be dropping on an account of the EU and U.S. to between one percent and five percent of total products.  Every country in the world has sensitive products and asking countries like Japan and Switzerland, who have between ten percent and fifteen percent, to tell half of their farmers that they’ll be competing in an open market just isn’t reasonable.  The other issue within the sensitive product discussion is that there is only mention of cuts to tariff reductions and a big question marks still surrounds market access expansion.  WTO members aren’t stupid, differing amounts of tariff reduction will call for differing amounts of market access expansion.  The result, the negotiations are still a significant distance away from dealing with sensitive products and numerous countries are not in positions to agree on the range of amount of sensitive products, let alone what to do with them.

Although I have painted a simplistic view of the current status of the WTO it can be boiled down to, ‘What will my country gain from this round and at what cost?’  If a large number of countries find there is limited gain for large costs, we’re likely to stay in this negotiation for some time with no agreement.

This will be the last trade commentary from me as I will be leaving the Canadian Federation of Agriculture at the end of May to pursue a career with the Saskatchewan poultry industry.  All the best to everyone and enjoy the spring planting season,

Clinton Monchuk