December 13, 2005

Hong Kong Chronicles: Damn farmers

Well, it's day 1 of the WTO ministerial conference, and my first Hong Kong insight comes in the form of a question - how did farmers get so damn powerful?

It's really strange...we're here in this super high-tech city, surrounded by ultramodern skyscrapers, chips, factories, computers, and you gather 149 of the most powerful people in the world to talk about the sparkling, gleaming hyperglobalized world economy of the 21st century and what do they talk about? They talk about Cain and Abel's profession! They talk about a business that's reached maturity roughly 3000 years ago!

The whole organization has been stuck on the agriculture issue for years. Big agricultural producers in the third world want much better access to first world markets - particularly Europe and Japan. Europe, Japan, and to a lesser extent the US want to continue protecting their farmers with subsidies and high tariffs. The issue has been festering in the trade negotiating world for at least 30 years...but only since 1999 has it become clear that big third world food producers are willing to block everything until the rich countries liberalize their food markets.

The silly thing is that food makes up a small and shrinking portion of world trade. Think about globalization and you think computers! Biotech! Information technology! New, shiny things made in fancy factories and flown all around the world. Not a sack of potatoes! Alas...the sack of potatoes is what the negotiations are about.

What's clear is that farmers worldwide are incredibly powerful in their own countries. Coming into the conference I'd assumed that countries that import most of their food would not be particularly interested in being allowed to continue agricultural subsidies. Wrong! This morning I went to a press conference by the G10 group of net-food importing countries. The Mauritius trade minister made an impassioned speech against moves to liberalize the sugar market, describing the role of sugar cane farming in traditional society. This is Mauritius we're talking about, a bunch of tiny islands in the middle of the Indian Ocean that imports virtually all its food...even their delegation is basically held hostage by the farm lobby. The Norwegian and Swiss delegates made similar arguments about dairy farming.

The funny thing is that, in the end, all countries take more or less the same position on farm talks: lets liberalize everything...except my traditional sector! It's a sort of twist on NIMBYism...Not in My Traditional sector! Of course, every agricultural market is a market in the product of someone's traditional sector, and ministers are amazingly touchy on proposals that threaten their ability to protect their traditional producers. Not surprisingly, the overall result of so much aggregated touchiness is inaction.

How did it come to this? I think the reason is that agriculture has always been the most difficult issue, and since the Tokyo Round, back in the 70s, negotiators have been avoiding it. For thirty years now, serious negotiations on liberalizing agriculture have always run into major trouble, and the fall-back position has always been "well, farm issues are hard, so lets set them aside for now and concentrate on issues we can agree on."

The problem is that, by now, they've dealt with the whole rest of the agenda! Manufacturing tariffs are low worldwide, anti-subsidy and anti-dumping agreements are well developed, Intellectual Property Rights has its own side agreement, even Investment Measures proved easier to negotiate. There are still negotiations on each of those issues, but clearly those markets are nowhere near as distorted as farm trade. When it comes to major liberalization opportunities, agriculture is all that's left - and the mismatch between the general liberalism in most markets and the massive distortions still in place in farm trade are increasingly glaring. But every delegation here seems to be totally under the foot of its domestic farm nobody here seems to think the meeting is going to succeed...