Trade talks in ruins — powerful farmers win; most others lose

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This has been a big news week. Israel's campaign against Hezbollah in Lebanon continues into its third week, and Secretary of State Condoleezza Rice continues to resist calls to negotiate a cease-fire. Rep. Mike Pence and Sen. Kay Bailey Hutchison brought forward an immigration bill, with border enforcement and guest worker provisions, which may form the basis of a bill that is passable in both the House and the Senate. I've commented on Pence's approach before.

And the trade talks in Doha, Qatar have collapsed. Today, I'll concentrate on that last story.

"Collapsed" is a strong word, and news accounts stress that WTO trade talks have been revived after collapsing in the past. But things look pretty bleak. As yesterday's Wall Street Journal account (subscription required) put it,

India's commerce and industry minister, Kamal Nath, said the Doha Round is "definitely between intensive care and the crematorium," and negotiators predicted it would be months, or even years, before talks were restarted.

Trade negotiations are inevitably very complex, and I can't claim to be an expert at the details. But it appears to me that the chief sticking point has been agriculture. Business interests in the United States and the European Union want lower trade barriers in less-developed countries. But those countries, whose cause has been led by sophisticated negotiators from Brazil and India, want to export more farm products to the United States and the EU, and so have been seeking reductions or elimination of farm subsidies in those countries. The United States and the EU did make some concessions here; as the Journal account notes:

The breakdown in the talks could prevent poorer nations from cashing in on promises made to them since the Doha talks began. If a deal was reached, the U.S. and EU had agreed to end farm export subsidies by 2013, removing some of their advantage in competition with products from poor countries. The U.S. and EU agreed to admit imports from the world's poorest nations almost duty free. The EU said Monday it will honor this second commitment; the U.S. hasn't yet decided.

But the EU, at the insistence of France, refused to reduce agricultural subsidies enough to please Brazil and India. The United States agreed to more cuts, but again not enough. Here's a summary from an editorial in the Financial Times:

The stumbling block was a disagreement over agricultural protection: the U.S. was pressing for big reductions in tariff barriers, but others, fearing a flood of subsidised food, were unwilling to accept this unless the U.S. reduced its farm subsidies. The deeper cause is that the few who enjoy trade protection have proved far more politically effective than the majority who stand to gain from liberalisation and often do not realise it. If there is a future for free trade, that will have to change.

The tail wags the dog: Farming interests, although only a small part of the economy, have effectively killed a trade agreement that would have been beneficial to many more people. The persistence of farm subsidies in this country, and the much larger farm subsidies in Europe, are an example of how interests of the past have more political clout than interests of the present and future. Farm subsidies were created in the United States in the 1930s when 1 in 4 Americans lived on farms; they were created in post-World War II Europe, at the behest of the French, when a similar percentage of people lived on farms in France. They persist, even though there are far fewer farmers. To this day, in the Iowa caucus campaigns, you hear presidential hopefuls of both parties swear up-and-down that protecting the family farm is a national priority. In France, the talk is how farm subsidies preserve the lush open countryside that covers so much of the country.

But anyone who gets to know Iowa or la France profonde learns that most of the people living in the countryside actually commute to jobs in small towns or cities; farming is just a sideline, and what looks like farmland is functionally a vast horizontal suburb. However,interests of the past are typically better organized than interests of the future. Their arguments are familiar; all they have to do is hum a few bars and politicians will sing the whole tune.

You can see this in one of the worst policy mistakes of the Bush presidency?the 2002 farm bill. House Agriculture Committee Chairman Larry Combest, a representative from a cotton-growing district in west Texas, together with other Southern Republicans from subsidized-crop districts, put together a bill heavy on subsidies. The Senate Agriculture Committee chairman, Tom Harkin, spread federal money around by expanding conservation reserve programs that give money to producers of traditionally unsubsidized crops. George W. Bush decided to sign the mishmash that resulted, presumably on the grounds that nothing better could be expected from a conference committee run by Combest and Harkin. As it happened, Combest quit Congress a year later because his wife had some kind of conflict with her employer in Northern Virginia. If that conflict had been precipitated sooner, we could have saved billions in farm subsidies.

Now the House Agriculture Committee chairman is Bob Goodlatte, a free marketeer from a Virginia district with little in the way of subsidized crops. If Republicans retain their House majority, he'll keep that post when the farm bill comes up for renewal in 2007. Unfortunately, the Senate Agriculture Committee chairman is Saxby Chambliss of Georgia, a state with a lot of heavily subsidized cotton. And with the Doha round apparently off the table, the pressure to reduce subsidies will be off. Here are the last, disheartening paragraphs of the Wall Street Journalstory:

The suspension of the Doha talks takes steam out of a move to overhaul the way the U.S. subsidizes farmers. Many farm-state legislators have been dreading next year's debate of legislation that dictates which crops are subsidized and by how much. It would have pitted their loyalty to Mr. Bush's free-trade agenda —with the administration's offer to slash subsidies by 60% to win a trade agreement —against short-term interests of politically well-connected farmers.

Some farm-industry officials say the death of Doha — or a long delay in restarting the talks — greatly diminishes pressure on Congress to make big changes in farm programs next year.

Largely because of the trade stalemate, Rep. Mike Conaway, a Texas Republican, said Monday he expects to see "very little change in the mechanics" of crop subsidies. Mr. Conaway, who has many cotton farmers in his district, said that they "aren't unhappy with this result."

Sigh. That may be good news for affluent Texas cotton farmers, but it's dreadful news for farmers in beleaguered Third World countries and bad news for consumers in America and other advanced countries.