Loopholes undermine deal for the world's poor

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August 2004

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Loopholes undermine deal for world's poor
The United Kingdom's Catholic Agency for Overseas Development (CAFOD) charges that a deal reached at the World Trade Organization in Geneva on August 1 will do little to help the world's poorest countries.

CAFOD pointed to lack of movement by rich countries on their damaging farm subsidies. Although the agreement committed the European Union to eliminate export subsidies, CAFOD Policy Analyst Matthew Griffith said, "There is no agreed end date to the cuts. This is likely to allow the European Union to continue damaging poor countries' agriculture for years to come."

WTO officials were more enthusiastic about the new agreement. Describing it as "truly historic," Director-General Supachai Panitchpakdi told reporters: "For the first time, member governments have agreed to abolish all forms of agricultural export subsidies by a date certain. They have agreed to substantial reductions in trade distorting domestic support in agriculture.

"As part of this agreement we have achieved a significant breakthrough in cotton trade which offers great opportunity for cotton farmers in West Africa and throughout the developing world.

"Governments have agreed to launch negotiations to set new rules streamlining trade and customs procedures. We have assigned ourselves ambitious guidelines for opening trade in manufactured products and we have set ourselves a clear agenda for improving rules that are of great benefit to developing countries."

CAFOD officials saw the agreement otherwise. "Rich countries can drive a horse, cart and several herds of well-funded cattle through this agreement," according to CAFOD's analysis. "The deal includes major loopholes that allow developed countries to continue subsidising at very high levels," said CAFOD's Griffith. "After last year's half-hearted reform of the Common Agricultural Policy, the European Union in particular will see minimal requirements for any further change."

Developing countries are trying to ensure that their much larger and poorer farming population aren't flooded with cheap subsidized exports. But in the WTO deal, Japan and the EU have achieved much stronger wording for protection of their agricultural sectors than developing countries, despite less pressing needs.

"Throughout this agreement the one striking feature is that economic power bends the applicability of WTO rules. Poor countries face the twin obstacles of chronic poverty and weak promises as they try to increase their share of global trade," said Griffith.

On cotton subsidies, West Africa countries have won a guarantee that cotton will be handled as a separate issue within the agriculture negotiations, but this has yet to lead to any commitment by the US to reduce their highly damaging levels of spending on cotton.

The new agreement still permits "obscenely unfair subsidies that hurt some of the world’s poorest people," according to CAFOD.

Griffith said, "West African countries have achieved some progress on cotton. But the new agreement still permits obscenely unfair subsidies that hurt some of the world’s poorest people.

"There is a vital difference between nice words about development and achieving a meaningful and binding agreement that delivers for developing country. A dangerous reality gap remains between development rhetoric and likely development outcomes."

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