Last week, the Irish Farmers Journal reported on the submission by the EU and Brazil to the World Trade Organisation (WTO) of proposals on global supports for agriculture. What does this mean for Irish farmers?

Answering this question means delving into how trade between different countries and different groupings of countries is managed and how it has developed over the past seven decades.

From GATT to WTO

Up until the middle of the last century, trade agreements were bilateral affairs between two countries. The tendency was for each country to protect its main areas of economic activity by granting very limited quotas to other countries with competitive products.

Global trade was in its infancy and often restricted to importing produce that couldn’t be produced in the home market. In the UK, for example, there was no issue importing citrus fruits that couldn’t be produced at home or beef and lamb that weren’t produced in sufficient quantities to match consumer demand. In return, the UK exported the leading technology products of the time such as tractors, cars and communication technology.

In the aftermath of World War II, 23 of the world’s most developed countries came together in Geneva, Switzerland, and produced a General Agreement on Tariffs and Trade (GATT). The purpose of this was to drive post-war economic recovery through the elimination or reduction of tariffs, quotas and subsidies on traded products while maintaining meaningful regulation of standards.

GATT evolved into the WTO as a result of the prolonged GATT Uruguay round of trade talks that started in the mid 1980s. The 123 members of GATT established the WTO in Tokyo in 1995.

Since then, this has been the forum to address global trade issues and resolve disputes.

Hormone-treated beef

One of the most relevant to Irish farmers was the US referring the EU to the WTO for its ban on the sale of beef produced with the assistance of hormones. The WTO found against the EU, but agreement of a significant quota for non-hormone beef satisfied the US at the time. The issue re-emerged at the end of last year.

In the year 2000, international trade was 22 times greater than it was in 1950

The history of GATT and subsequently WTO may seem to be endless negotiations with little apparent progress. That perception is inaccurate as the global trading environment today is transformed from what it was at the end of World War II. In the year 2000, international trade was 22 times greater than it was in 1950.

WTO and agriculture

Achieving trade liberalisation in agriculture has proved the most difficult of all at the WTO. This is further demonstrated by the fact that agriculture is always the sticking point in any trade discussion.

Most recently, the EU-Japan agreement went to the brink of collapse over access to the Japanese market for EU produce. Similarly, even after quotas were agreed, the CETA agreement between the EU and Canada still has issues to resolve around management of the 18,000t dairy quota granted to the EU by Canada.

CAP constraint

The main issue for Irish and EU farmers is how current WTO rules constrain the level of support permitted for farming. These have shaped recent CAP reforms as support is now categorised by its impact on production.

If direct production support is paid, it is categorised in what is known as the “amber box”. If it is related to a programme that limits production it gets “blue box” classification. Non production-related support programmes, eg environmental ones, are classified as “green box” and unrestricted.

The headage payments of the McSharry reform in 1992 would be classified as amber box. The Fischler reforms and introduction of decoupled payments in 2005 moved the majority of CAP support out of the restricted amber box. Today, the EU only uses a fraction of its permitted level of amber box support, but that is not the case worldwide.

EU-Brazil proposals

The EU and Brazil may seem an unlikely alliance in the context of support for agriculture. However, the fact that they can combine to submit a joint proposal to the now 164 members of the WTO for consideration in Argentina in December reflects the distance the EU has travelled in providing direct support for farm production.

The EU is, like Brazil, a major global exporter of agricultural produce and finds itself in competition with countries that continue to provide strong production support. The US is a renowned advocate of free trade yet US farmers have been among the most protected in the world with the farm insurance programme – essentially a market guarantee.

The reality for Irish and EU farmers is that over the past decade, in particular, the EU has liberalised agricultural support to the detriment of the productive farmer. They remain constrained by EU production rules on welfare, the environment and use of growth promoters. The latter fall foul of WTO rules, yet Irish farmers must comply with them.

The challenge for the EU is to find a formula that stops working against its own productive farmers

The challenge for the EU is to find a formula that stops working against its own productive farmers. In 2005, the EU unilaterally disarmed by ceasing the provision of export subsidies on produce to third countries – yet, in 2016, Argentina introduced a 5% export subsidy on beef sales.

Historically, the CAP was unapologetic in supporting its farmers and food production as Europe recovered from shortages in the aftermath of World War II. That has long since ceased and farmers in the EU now have to compete globally.

If that is to be EU policy, then least they need is a level playing field.

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