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Business

EU Moots Lowering (Some) Trade Barriers

As crucial WTO talks on trade liberalization get underway in Mexico next week, the EU has stressed that reaching agreement on dismantling trade barriers is its top priority. But critics remain skeptical.

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Citrus riot - an activist protests against the EU food subsidy program outside the European Commission.

Delegates from the 146-nation World Trade Organization (WTO) will be meeting in Cancun, Mexico on September 10 to get crucial trade talks back on track after they have been bogged down by simmering disagreements on key issues such as agricultural subsidies and farm reform.

It’s expected to be an acrimonious round, with trade ministers facing a daunting task of securing a deal after a string of delays and missed deadlines. The foot-dragging of the industrialized world on agriculture has also provoked the ire of non-governmental organizations over broken and failed promises on lowering trade barriers in a sector of key importance to developing countries.

Global economy at risk

Ahead of the summit, the EU has stressed the importance of delegates making headway on trade talks launched at the WTO in November 2001 in the Qatari capital of Doha and concluding the discussion on time to meet the end of 2004 deadline.

EU Trade Commissioner Pascal Lamy told reporters at a joint press conference with agriculture commissioner Franz Fischler on Thursday, "A bad result in Cancun would be bad news for the world economy."

But the going is not likely to be easy. The Cancun round is expected to deal fundamentally with eliminating trade barriers such as tariffs and subventions. The World Bank reckons that if rich countries lower tariffs on their agricultural products by ten percent and developing countries by 15 percent, then worldwide extra goods totalling between $190 to 520 billion could be sold -- a fact, which all, but particularly poor countries, could profit from.

EU: A better deal for developing nations

But easy as it sounds in theory, most countries remain reluctant to part from their comfortable subsidy system fearing a backlash in the form of local job losses and disgruntled interest groups at home.

EU Agriculture Minister Fischler, said this week that the EU was very flexible and that no other industrial nation such as the United States or Japan opened its doors for developing nations as much as the European Union did. Fischler, who together with Lamy, will head talks for the EU’s member states in Cancun, added that developing nations too needed to do their bit and dismantle trade barriers, not just towards the industrial world, but also towards each other.

Pointing towards a framework agreement reached with the U.S. last month, Fischler said the EU’s position centered on giving developing countries a better deal. "In our joint initiative with the U.S., a special safeguard is envisaged for developing countries to protect sensitive products from excessive imports. We also propose lower tariff cuts and longer implementation periods for these countries."

Fischler, however, dimissed the complete elimination of agricultural exports subsidies, a step sought by developing countries such as India and Brazil. "When I see the extreme proposal co-sponsored by Brazil, India and some others, I cannot help get the impression that they are circling on a different orbit." Fischler added, "If they choose to continue with their space odyssey, they will not get the stars, they will not get the moon, they will simply end up with empty hands."

"A travesty of the development round"

However, the EU’s allegedly pro-poor stance has failed to convince many critics, who point out that the huge level of spending on farmers in Europe and the United States, the world’s biggest subsidizers, distorts trade by allowing the trade heavyweights to export at prices well below world market levels.

Mann mit Sense

"This is a travesty of the development round. The two big subsidy powers are allowed to keep much of their huge subsidy arsenal in place and continue export dumping," Celine Charveriat of Oxfam told Reuters.

According to pressure group, Actionaid, the U.S. has been selling cotton on the world market at between 20 to 25 percent of the cost of production over the last ten years and EU wheat had recently been off-loaded at 30 to 35 percent of the price it cost the farmer to produce. "Dumping can have a devastating impact on developing country farmers, depriving them of their livelihoods and forcing them to leave their lands," Actionaid said recently.

A new report by U.S. think-tank the International Food Policy Research Institute said that protectionism and subsidies by industrialized nations cost developing countries about $24 billion annually in lost agricultural income. The report in particular points towards the EU as the biggest culprit of "trade-distorting measures" that displace agricultural exports from developing countries.

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