Global Policy Forum

by R. Nolan

This week, FPA speaks with Bruce Stokes, adjunct fellow at the Council on Foreign Relations and a columnist for the National Journal. Stokes is also the author of the FPA Great Decisions article International food wars: growing controversies. He spoke with FPA about the possible impact of the war with Iraq on international food policy, the latest round of trade talks in Doha, and the future of genetically modified foods.

What kind of impact do you think the diplomatic build-up and disagreement over the war with Iraq will have on transatlantic food policy and food relations over the next few months?

The delay in the U.S. filing a Genetically Modified Organism (GMO) case against the European Union (E.U.) at the World Trade Organization (WTO) was because of the war. The administration had internally decided to proceed and file a WTO case against Europe's restraints on imports of U.S. GMO products, but due to an impending war that case was postponed. That restraint is obviously now gone. However, there will be a continuing restraint – the level of anti-Americanism in Europe, and whether the U.S. wants to worsen that by going to the WTO. The argument made in the administration by foreign policy specialists was to stress the importance and necessity of European allied power in fighting the war on Iraq. We are no longer on hold anymore, so I believe we are one step closer to filing the case on GMO's than we had been pre-Iraq.

How will the accession of ten countries into E.U. contribute to global food wars, as you refer to in your ‘Great Decisions' article?

The impact will be indirect, in the sense that the E.U. is under pressure to reform its Common Agriculture Program (CAP) before it expands to twenty-five countries. The Union cannot afford to provide the same level of benefits for its farmers following the accession, so any improvement in the current global trade negotiations really hinges on some progress in reducing subsidies to farmers both in the U.S. and the E.U. Any advancement on that issue depends on what the Europeans are willing to do about the CAP. Therefore, quite indirectly, the expansion puts pressure on the E.U. to reduce their subsidies sooner rather than later.

We should caution readers and members of the Foreign Policy Association (FPA) that we in the U.S. have repeatedly thought that the CAP would implode because it was economically unstable. I recall at least two occasions when knowledgeable Americans have predicted this occurrence. The Europeans have an infinite ability to re-jigger the system to continue it for another four, six, or eight years. We shouldn't expect this to be some kind of situation where circumstances force them to do things that the U.S. cannot get them to change. By June 2003, the E.U. is supposed to make certain interim reforms to the CAP. As of now, only five of the fifteen countries support this revision. Having just returned from Brussels, I noticed that the Commission's policy makers are very gloomy about CAP progress by this deadline.

How can developing countries compete with the world's two largest economies – the U.S. and the E.U. – when rich nations call for open markets for their own goods, but also practice protectionism, and provide these massive subsidies to their own farmers?

What you appear to have highlighted is a real equity issue, which these economies will have to adjust if developing countries are to realize the true potential of free trade. We should caution ourselves and note that from the World Bank's studies, South-South trade (inter-developing nations) would bring the majority of benefits to these countries should they open their markets to each other. That said and done, we have little control over this happening. We do, however, have control over opening up our markets, which is where the focus should lie. The U.S. position has completely advocated free trade – the elimination of barriers and the reduction of subsidies. The European Union position calls this stance too extreme and unrealistic. The present voice from Brussels claims that developing countries gain more from the preferential trade access they have to the U.S. and E.U. markets, especially with the latter, as the E.U. has special arrangements with its former colonies. They go on to say that those countries would lose their preferential access and suffer under a revised trade regime.

There is a transitional problem here, as some countries would undoubtedly suffer. Under any new WTO deal, they would probably be worse of, in terms of access to the European market for certain goods, assuming that completely free trade did not exist. Having said that, the European Union argument fails to acknowledge that it's forcing developing countries to specialize in particular products so that they can get preferential access to the European market. Effectively, this distorts their comparative advantage and ties them unnaturally to the E.U., giving the Union all kinds of leverage over them. It belies the fact that if there were totally free trade in all countries – not just between the E.U. and these developing nations – there would be other markets where these developing countries could sell their products. So, while the E.U. has identified one of the transitional problems, it has been using that as an excuse not to reform.

The U.S. also has its own imponderable political problems. Mary Landrieu, the democrat who won the special senate race in Louisiana last December campaigned very strongly on a platform of protecting the sugar market in the U.S., which, I think underscored the importance of the sugar program to sugar growers and certain sugar processors, and showed how hard they would fight to keep it. If we proceeded with free trade in agriculture with developing countries, we would not just have to abandon our sugar program, but also programs in cotton, tobacco, and oranges, which our farm lobby would be extremely reluctant to give up. To be honest, no one has played out the strategy of how you would get rid of these programs.

The latest round of trade talks in Doha tried to cover a lot of ground in leveling this playing field, at least in terms of rhetoric. Which policies have been implemented and which have not? Actually, there have been no breakthroughs on any of the food issues in the Doha Round, because it has not yet reached any conclusions on this policy. There have been certain development related initiatives, which have failed, such as the earlier agreement on pharmaceuticals for developing countries for the use of AIDS, Malaria, Tuberculosis, and other infectious diseases. In fact, I was just in Geneva, and I noticed a rather disturbing fact that the trade types as opposed to the development types feel that this development agenda is not progressing, but is actually slowing down the Doha Round. So, already divisions are starting to form between the trade-oriented and development-oriented policy makers. We should pay attention to that, because I think that the development part of the development round may be losing steam.

Could you discuss why certain Sub-Saharan African policy makers have rejected GM maize as food aid from the U.S. at a time of severe regional famine?

There were a variety of reasons. One of them concerns Zambia – the greatest opponent of GM maize in Southern Africa, – which trades a lot of livestock with the E.U. in large part due to the preferential agreement plan I mentioned earlier. They were afraid - given E.U. consumer contention with GMOs and the temporary moratorium since October 1998 - that the cattle they sold to the E.U. would be rejected because of livestock carrying traces of GM maize. The U.S. argued that this food aid is purely for human consumption. Realistically, some of the food aid would be replanted or leak-out into the animal feed population.

The controls placed on GMOs in developing countries and even in the developed world are questionable. We know from our own experience that GM food has entered the market and has been mixed up where it should not have. There was this fear that the E.U. would some how penalize Zambia, if their livestock had been fed with U.S. GM maize. One should not necessarily reject the idea that there could have been some correspondence and cajoling from the European Commission to the Zambian government, in reaction to the U.S.-E.U. trade war on agriculture. However, it is hard to know with certainty.

From a U.S. perspective, the rejection of GM maize by Zambia showed them the potential third party implications of this dispute it has with the Europeans. It also explains why the U.S. may proceed with the WTO case against the E.U. on GMOs even though if we won the ruling, we would not sell much more GM produce in the European Union because consumers would just refuse to buy it. The U.S. desperately wants to send a signal to the rest of the world to illustrate that these kinds of barriers to our agricultural products – considered to be unscientific and protectionist – will not be permitted. You may see the U.S. proceed on the case even if they fail to sell much more grain in Europe, as they want to transmit this message to the developing countries, but also, to the Chinese, and the Japanese. A multi-faceted chess game is taking place, where nations are using GMO concerns as a means of keeping out these American products. Rumor has it, that the Chinese may be attempting to develop their own GM products, and are resisting U.S. GMOs as a delaying tactic for creating their own genetically engineered seeds, which they can then reap the benefits of, and compete with the U.S. in their own market or maybe, another market.

How would a case on GMOs that the U.S., bring up against the E.U. proceed?

The WTO procedures exist such that, once you file a case there is a period of consultation. After this period of renewed dialogue, there would be a hearing before a panel of the WTO. They would then have a month to make a ruling. The ruling could then be appealed by the loser, which would take more months, and involve another hearing before reaching a decision. Generally, settling these cases could take up to eighteen months or more. If the U.S. were to file a suit by mid-2003, it would be early 2005 before we get a final result. Therefore, before the loser – let's say the E.U. - would have to comply it could be the beginning of 2005. Even then, you have a growing number of instances of non-compliance. For example, the U.S. has yet to comply on a ruling against the way it taxes American multinational corporations overseas. The E.U. has yet to comply on a ruling against their ban of hormones in beef; they pay compensation instead. So, even if you reach the end of the WTO process you will still not have an open market.

The European response to GMO's is to say they are in a process of internally going through an approvals procedure that will allow more and more GM products to enter the E.U. market. The U.S. just has to give them more time for decision making and rule making, and so forth. The E.U. claims that if the U.S. files the case, all political will to continue to open up their system will stop, and this would actually be counterproductive. The U.S. argues that it's willing to wait, even though the E.U. approval process is taking forever, and does not have its heart in it.

You write that, ‘Much of humanity is never more than one or two bad harvests away from a food crisis'. We talked a lot about the trade impacts of the food issue here. However, what nations do you feel are in that vulnerable position of being just one or two poor harvests away from an imminent food crisis?

I think that much of Africa continues to be the focus of attention when famine is concerned. Given the multitude of problems that the continent faces with the likes of civil war, and economic and political disruption, one could always fear the possibility of famine. If food aid or fertilizer have to be delivered or farmers must get their produce to market, these drawbacks only exacerbate a famine crisis. So, parts of Africa would not necessarily experience famine solely due to uncertain weather spells, but instead, in large part due to internal strife in particular nations or inter-nations.

India has had rising stocks of grain in recent years as opposed to periods in the 1960's when they experienced famine themselves. Their produce has even gone onto the world market. However, they continue to have a rapidly growing population - set to overtake China, and rising personal incomes which both increase the demand for food. Although, I am not as worried about India as I am about Africa.

A new issue has emerged from the WTO negotiations called Geographic Indicators. This term states that if a particular food or drink product is tied to a place name, e.g. Basmati rice, Roquefort cheese, Parma ham, Parmesan cheese, Idaho potatoes, etc, then should producer nations of these goods deny other countries from using the names. The E.U. is pushing this issue very strongly. They claim that if their farmers must give up commodity production – for instance, other countries turning to Brazil to buy wholesale beans, or to the U.S. for wholesale wheat – then they should be allowed to specialize and find niche markets. Furthermore, they say it would be unfair if some farmer in Wisconsin, for example, decides to call his/her cheese Parmesan, drawing on the good name from Italy to market his/her cheese.

Their exists here a slippery slope of protectionism in the sense that the makers of Parma ham in Parma, Italy complain that the way the meat is slaughtered and cut by the butcher affects its taste. Therefore, the ongoing case between a British supermarket chain that decided to cut the ham itself, and Parma illustrates how this protectionism may be extending beyond its narrowly intended purpose of protecting the farmer, not the butcher. There is certainly a political rationale to this, where farmers should be allowed to specialize, and if they develop a particular product, wouldn't this constitute an intellectual property right of some sort? The issue will be fought out at WTO negotiations, and will be interesting to watch as both the E.U. and U.S. have somewhat of an argument to present.

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