Thursday, April 19, 2007

Life after WTO talks

California farmers say exports are part of survival strategy

Even though the World Trade Organization talks in Cancun, Mexico, broke up in discord over the weekend, international trade talks will resume in a variety of venues, with California agricultural interests helping to lead the way, experts said Monday.

Going into Cancun, agricultural reform was considered key to unlocking other trade agreements on issues such as intellectual property rights and new rules for investment, chiefly because farming is important to every nation and virtually no reform in farm policy had been achieved in earlier rounds. Now with the collapse of the talks, trade negotiators will have to take another whack at agricultural policy.

The stakes in agricultural reform are too high for state farmers to stay out of future hard bargaining, they said. One of the nation's largest farm states, California is also the country's largest exporting state, with food --

from juice oranges, to rice, to walnuts, raisins and wine -- ranking high among the Golden State's exports.

The talks in Cancun failed when developing countries refused to bargain on a range of trade issues without first seeing dramatic cuts in farm subsidies doled out by rich nations and organizations, such as the United States, Japan and the European Union. Washington and Brussels did offer to phase out their subsidies, but a trading bloc of two dozen nations led by Brazil rejected the offer as inadequate.

California already exports 20 percent of its farm goods, and that number needs to go higher in order for the state's farmers to prosper in the future, said Hollister grower Joe C. Zanger, who sits on the trade committee of the California Farm Bureau. In order for that to happen, developing countries will have to drop often-high tariffs of their own on imported food.

"Every day, farmers and growers are struggling not to go out of business, '' Zanger said. "We maximize our production on every acre we have, and there's always an oversupply of food.''

These days, Zanger said, five supermarket chains control much of the domestic U.S. market, giving supermarkets wide leverage to set prices. The only way for farmers to harvest more revenue and dispose of their surpluses is to export the extra food, he said.

However, farmers in developing countries object to U.S. exports which are,

in some notable instances, subsidized by the federal government. Corn, soybeans and wheat draw big federal subsidies.

However, many important California crops such as grapes, nuts and vegetables do not enjoy subsidies from Washington, putting California farmers and growers at a disadvantage when competing with their rivals in the European Union, which heavily subsidizes these crops. In the developing world, where California farmers hope to find new, open markets, high tariffs make California produce expensive.

Horticulture -- the cultivation of fresh fruit and vegetables -- is the California sector with the most room to grow from exports, said Lisa Dillabo, the national affairs director at the California Farm Bureau, who attended the talks in Cancun.

As a global body, "The WTO offers a good deal of opportunity for us,'' Dillabo said. And while the California Farm Bureau was disappointed that no agreement on agricultural reform was forged in Cancun, future talks could resume under WTO auspices at WTO headquarters in Geneva and focus on specific sectors of agriculture.

Even before Cancun, she said, the Farm Bureau, which represents 90,000 state farmers, has joined with other interests, among them the California Walnut Commission, Sunkist and Blue Diamond Growers, to form the Hort Alliance,

a lobbying group. That alliance is considering what to do next, with sectorial talks focused on horticulture alone one possible next move, she said.

Such targeted talks under WTO auspices in Geneva could proceed without the constant glare of publicity, perhaps making it easier to do real bargaining, she said, rather than the public posturing more evident in Cancun.

Despite the failure of the WTO in Cancun, the 148-member world body is far from finished as a player in setting the rules of global trade, said Stephen Cohen, co-director of the Berkeley Roundtable on the International Economy.

"Cancun wasn't as much a catastrophe as the press seems to have made it, '' Cohen said. "They (the WTO) will keep talking over there in Geneva, as they always do.''

After the failure in Cancun, Cohen said, the United States will push even harder for bilateral trade agreements such as those recently concluded with Singapore and Chile, and try to sign ambitious regional pacts like the proposed Free Trade Area of the Americas. However, Cohen cautions, Washington would do well not to abandon the WTO, a sometimes-unwieldy body with 148 members that operates by consensus. "At some point, we must have a basic, international set of agricultural rules.''

But before the major trading blocs of the rich world can ask poor, developing countries to slash their high tariffs, Cohen said, the United States, the European Union and Japan will have to drastically cut farm subsidies and confront the powerful domestic lobbies that support them.

E-mail David Armstrong at