- The Washington Times - Wednesday, September 10, 2003

This week’s trade round in Cancun, Mexico has been widely described as an ongoing clash between poor and rich countries, with the rich winning. More accurately, poor countries are pitted against specific rich countries, located in Europe.

European nations are reticent to substantively decrease their tariffs and agricultural subsidies, which generate overproduction and lower global prices — wreaking havoc in poor countries. The United States also pays hefty farm subsidies, which have been fairly criticized, but is willing to dramatically reduce these in tandem with others. U.S. farmers are understandably unwilling to give up their supports unilaterally.

Last year, the United States approved a 10-year, $100-billion-plus farm bill. Europe’s roughly $50 billion yearly farm payments are more than double America’s. In August, the United States proposed an overhaul of global agricultural policy that would commit countries to cut production-linked farm subsidies to 5 percent of their total farm output. Also, a trade-liberalization formula would reduce the global average tariff to 15 percent from 62 percent and establish a cap of 25 percent. Europe shot down the plan, but failed to propose an alternative.

Last month, U.S. trade negotiators met with their European counterparts in an effort to break the impasse over farm policy. That meeting produced an agreement which reflects how far Europe, not America, is willing to go. Negotiators agreed that countries with the highest subsidies must reduce them the most. Countries would keep their trade-distorting subsidies within an unspecified range. These would mostly apply to subsidies tied to production. A cap would be put on subsidies that are not considered trade distorting. The deal didn’t envision elimination of farm export subsidies, as America and poor countries had hoped. The agreement would require rich countries to eliminate tariffs on a certain percentage of products from poor countries and establish a cap on others.

The vagueness of the agreement allows developing countries to press for more reform. In doing so, governments should focus squarely on Europe, since the continent will respond only if isolated by the world.

America had been criticized for its wariness in allowing generic versions of patented drugs to circulate in the global market. It has now agreed to allow these generics to be sold in poor countries, provided that they are barred from entering rich markets. This important caveat was highlighted by the presidents of Ghana, John Kufuor, and Uganda, Yoweri Museveni, in an op-ed in The Washington Times Aug. 29. If generics are resold in the wealthy West, pharmaceutical companies will have less incentive to innovate.

The breakthrough on drugs gives poor countries more leverage to focus on Europe and makes the continent feel the pressure of the world.



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