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Think Local, Trade Global |
by Merfyn Williams |
In the last edition of Rural Wales, we mentioned briefly the
(then) imminent negotiations of the World Trade Organisation (WTO) in Seattle, USA - the Millennium Round.
As things turned out, the summit did not happen and the whole brouhaha has now died down. However, the WTO will not go away and the ramifications for the future of our countryside could be quite alarming.
Let's make no mistake - it was big business in Seattle.
There were 5,000 delegates attending the conference and about 150,000 protestors! Those two figures alone give a measure of the globalisation process we are now locked into. Here lies the pros and cons of the process of globalisation. It ties into one system, agreements on trading on a world-wide scale and so the stakes are huge and vested interests in terms of the multinational companies are doing their utmost to benefit. At the same time, the globalisation process also allows for protest to be made at the same scale and multinational Non-Governmental Organisations ensured a world-wide profile for environmental concerns.
| So what about the Welsh countryside and CPRW with its small band of dedicated members and its four full time staff at Head Office? |
To begin with, let us be clear as to what the WTO is.
It is here to stay and whilst the fears of loss of independence for countries is a genuine one when the WTO decrees on who sells bananas to whom, for example, that should not hide the fact that countries are clamouring to be members. It might be uncomfortable inside but it's intolerable outside! In the case of the WTO we are not talking Wales or the UK but the European Union.In the aftermath of the Second World War, the winners came together to lead the establishment of a world-wide system of multilateral trade liberalisation (it used be called free trade). Thus we had
WTO was founded in Geneva in 1995 as a successor system to the General Agreement on Trade and Tariff (GATT)
. GATT was a fairly ad hoc operation and agreements were not always binding but after the Uruguay Round was completed in 1994 (after starting in 1986), the participating states together established the WTO.
In the WTO, agreements are legally binding and permanent. In other words, the whole business is being tightened up considerably and from now on all participating states will be legally bound to any agreements reached (apart from France perhaps!)
| And this is the time that agriculture came to the centre of the arena. |
In this arena, there are three main powerful protagonists :
the European Union (EU),
USA
and the Cairns Group.
The Cairns Group, led by Australia, New Zealand and Canada, want to liberalise agriculture completely - no trade barriers at all, no support system at all. In other words, free world trade in agricultural produce. The EU wants to put forward its 'European Model' whereby support can be given to farmers operating under environmental constraints - yes that's right, in Less Favoured Areas (LFAs)! The USA is not sure and seems to want it both ways. There were many reasons why the Seattle summit failed but one of them was the inability to agree an agenda for changes in agricultural trade.
In fact, there is currently an agricultural agenda being worked through and the Seattle failure has not stopped it or affected it in any way. When the WTO was established, developed countries had formulated 'The Agreement on Agriculture' at the completion of the Uruguay Round. The Agreement included commitments to:
- reduce domestic support - improve market access - cut export subsidies
In approximate terms, they agreed to cut Domestic Support by 20%; trade tariffs by 36% and export subsidies by 36% between 1995 and 2000 in anticipation of the Seattle Round which could take these cuts further.
As the EU accounts for 85% of world subsidies for agriculture, it was rather alarmed at the prospect of going back to the Member States to tell them that there was a legally binding agreement to reduce all types of subsidy and support by about one fifth in six years. It would have taken a brave person indeed to announce such news to the beleaguered stock farmers of Britain and even braver one to say the same to les pays of the Massif Centrale!
| To stave off the inevitable and allow for re-adjustment, the EU won a concession called the 'peace clause' |
. This meant that such measures for developed countries could be held in abeyance until 2003 when negotiations to agree cuts would start in earnest - and there will no turning back! And we thought that it was all about Agenda 2000 and new countries joining the EU - the real driver is the WTO!
This is where boxes come into the picture. In the current agreement, agricultural support is allowed under three measures which are called:
Because these measures can distort trade, they are subject to WTO discipline.
| The Amber Box allows for domestic support in terms of direct payments. |
| The Green Box comprises measures with no link to production, such as environmental payments which do not distort trade. |
| The Blue Box covers area and headage payments applied to limited amounts of production such as livestock premiums. |
The Amber Box is targeted for reductions and the CAP Reforms are addressing this. Now for the European Model to apply, the EU wants to retain the Blue Box measures or equivalent but the Cairns Group does not and the USA, as has been said, is not sure.
The pressure is on the Blue Box and, of course, if the Blue Box goes completely so do headage payments. On the other hand, if the EU cuts the connection between payments and production such as making area payments in LFAs (called 'decoupling'), these could be the categorised as Green Box measures and could survive.
In other words, we could be facing a severe loss of production-based payments and we must, must look to alternatives. (See Clive Myhill's article pages 8/9)
| Back to the WTO............ |
The EU has conceded that it's going to lose out on agriculture (to what extent is another matter) and so it wants the WTO to embrace agreements in services as well material trade in exchange. Now that the Seattle Round has fallen, the EU is faced with the prospect of the end of the peace clause without a mechanism in place to extend the argument and look for concessions. Concessions or no concessions, as things stand, prospects are not good for the LFA farmers or for the quality of our Welsh countryside if the Blue Box goes.
| Back to the EU............ |
Now we enter the world of 'modulation'. As part of the restructuring to take place during the period of the peace clause, the EU is allowing Member States to divert up to 20% of their CAP payments to rural diversification (including agri-environment schemes - Tir Gofal) - this is called 'modulation' (thus taking money out of the risk area of the Blue Box question).
The actual percentage allowed for each state depends on how much that state has been drawing down historically. France has taken the bull by the horns (excuse the expression) and is going for the 20% but the UK can only draw less than 5%.
| What does all this mean?............ |
It means that we, in Wales, are in danger of falling between two stools.
At present, farmers are deeply suspicious of modulation but it seems to be about the only way forward to maintain the small farms, maintain biodiversity and maintain an active rural community.
| What can we do? |
We must be more aware of the WTO Agenda. The 'peace clause' has to be extended to allow more time for restructuring. We must make our politicians aware of what is happening. CPRW can be part of that process and Clive Myhill's 'Vision' in this edition is a valuable contribution. Would not a system based on such ideas provide the type of countryside we would want? The clearer we make our case, the easier it will be for our politicians to take it up. We must unfetter our thinking from the chains of commodity payments and integrate environment, community and agriculture to shape a 'new' countryside for Wales.
What we must not forget though is that our situation in Wales is but a small part of the world-wide picture.
In that picture, the developing countries are getting more and more frustrated by being excluded by the powerful. Of the 135 members of the WTO, over 100 of them are developing countries (the poorer ones), and they are beginning to flex their muscles. Another reason why the Millennium Round failed was because those developing countries rebelled as what they saw as a 'stitch up' between the USA and the EU. Many are fed up of seeing our supported agricultural produce dumped on them. Their voices are going to grow stronger and they want greater freedom to enter the EU.
| Yes 'trade is global' but landscape is local - that's the challenge. We have to work out how we can protect our bit of the earth whilst we make sure that all the other bits are treated fairly so that we can begin to walk on the path to sustainable development. |  |
Merfyn Williams