Tuesday, July 11, 2006

New scenes... old problems...

As the Doha Round of the WTO negotiations wends its way toward extinction, there is a lonely and vaguely familiar voice out there in the wilderness.

That voice is none other than Paul Wolfowitz, now leader of World Bank.

At the time of writing (7/10/06 1800 EST) I can find very few US publications reporting his letter to the G8 Summit. NYT is there (typically as some might say), Reuters has an article out that should get published over the next 12 hours, All Headline News copies on it, as does NZ Herald and ABC.

Why is this worth posting then?


What kicked me off on this slight addiction of reading international affairs seriously was the influence that other nations have on NZ's ability to trade. Always in the background to the debates, the negotiations, and the rhetoric has been the subsidies paid by "wealthy countries", the barriers both legal and illegal to market access.

This is how stupid it gets.

In Fiji, there are cane sugar growers who have abandoned their land and have diversified into other crops. In Australia, Northern Queensland, the area in cane sugar three years ago when I was last there was only 15% of what it had been 20 years before. The last remaining mill was enough to supply NZ and Australia.

The reason? EU states who subsidise over 70% of the cost of production for their farmers to grow sugar beet. Think about that; the total cost of sugar in Germany could be about 1/3rd of its present cost (if you include potential tax savings).

The only market that keeps the Australians in large scale wheat production is Iraq. They are on the cusp of losing that (news-google Australian Wheat Board to find out why). It is possible that their wheat would be considerably cheaper than that produced in US and Canada and heavily subsidised by the respective governments.

France pays farmers to keep as few as two milk cows in production. By paying those subsidies, they can block access of imported product to both French and EU markets.

But then consider this.

I mentioned Fiji as an opener to the sugar example. In fact, Fiji could land raw sugar in NZ at 2/3rds of the price of Australian and could produce enough to supply both NZ and Australia. That competition for the Australians is the next step.

Afghanistan could grow almost enough wheat to supply Europe. The false markets created by subsidies makes their entry to the market impossible.

Some 90% of Zimbabwe's production of fresh vegetables and fruit went to Europe. Well, it did before Mugabe went mad.

The list is not endless, but there is an important principle at hand. It has its impact upon NZ, not least because it is going to increase the level of competition against us.

If the US wants to make a success of Afghanistan, or Iraq for that matter, then ONE way to help would be to give the people, the farmers, the land and opportunity to produce AND ACCESS TO THE MARKETS necessary to provide economic return.

That is the fundamental that lies behind the Doha round. The reality is that no French government has ever won power without the support of the farming sector; I suspect that no state or federal government in Canada would survive without agriculture support; the US?

"With time running out, our collective efforts can make the difference," he said in a letter to leaders of the Group of Eight industrialised countries and five major developing economies, due to start meeting in Russia on Saturday.

The meeting of leaders from the United States, Japan, Germany, Britain, France, Italy, Canada and Russia comes two weeks after trade ministers met in Geneva but failed to resolve differences over farm and industrial goods which, with services, make up the three pillars of the talks.

"We can work to lift millions from poverty, boost developing country income, improve global market access and reduce taxpayer and consumer costs for all, or allow the whole effort to collapse, with harm to everyone," Wolfowitz said.

The really BIG problem Wolfie, is the harm that would be done to electoral prospects of the leaders of the G8 if the Doha round were to succeed.

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