Smith Faculty Opinion Article - November 3, 2005

Do the Europeans Want to Scuttle the Doha Round?
By Dr. Peter Morici, Professor of International Business

As I read the news from the Doha Round of World Trade Organization negotiations, I am starting to doubt an equitable deal is possible.

On the table are efforts to cut tariffs on manufactured products, create better rules to encourage global commerce in services, and end age-old and ruinous agricultural protectionism.

Of the three, agriculture is the most protected and distorted, and holds the greatest promise for the worlds poorer nations. To accomplish this, the Europeans, Americans and others would have to take some painful adjustments but as the negotiations wind down, it is becoming apparent the EU just is not interested, or at least politically, capable of getting the job done.

Most recently, the EU has offered to cut agricultural tariffs by 35 to 60 percent, and many of the farm supports that sit behind them. Sound like a lot? Not really, when you consider that the EU has tariffs of 80, 90 and even more than 100 percent. Magnanimously, it has agreed to cap at 100 percent its highest tariffs but wants to exempt 8 percent of its sensitive products from the process. By way of contrast, the EU favors a 10 percent limit on tariffs for manufacturers with no exceptions. Hence, European trading partners cut tariffs on BMWs to no more than 10 percent but accept Herculean barriers on farm sales in France!

Even though the EU offer falls short of the expectations and offers of the United States and other farm exporters, French President Chirac has stated it would be totally out of the question for us to go one step further. France has warned its 24 partners in greater Europe and participants in Doha from around the world, it reserves the right to veto whatever deal Brussels reaches on behalf of Europe.

None of this should come as any surprise to anyone given the recent history of EU agricultural negotiations and trade disputes. In the Uruguay Round, after a carefully balanced deal was struck including agriculture and many other issues France forced a rewriting on the EU and Clinton Administration.

More recently, there is the case of hormone treated beef. In the 1970s, synthetic growth hormones were developed for practical use in the livestock industry. In 1989, the EU, citing consumer concerns about food safety, banned the sale of beef from cattle treated with growth hormones, essentially shutting out imports from the United States, New Zealand, Canada, and other beef producing nations. In a 1997 WTO challenge, the EU could not table satisfactory scientific evidence, and ultimately the Appellate Body directed the EU to remove the ban and bring its import regime into compliance. The EU has not acted.

Food safety advocates might have some sympathy for EU precautions after all, just because no problem has yet been found with hormone treated beef doesn't mean we wont find any. However, the EU permits hormone use in pork production, where, unlike beef, it has no little surplus production and import competition to worry about. Apparently the health problem is more related to how much of a surplus EU farmers produce and whether the meat is imported or produced by EU farmers.

To make matters worse, the Europeans cannot even agree on common internal standards for basic foods, creating a maddening maze for American exporters to navigate. For example, Kellogg is forced to sell four different varieties of corn flakes in the EU because, among other things, Dutch officials believe cereals fortified with vitamin D could overdose and damage the livers of citizens taking multiple vitamins and the Finns want extra Vitamin D to compensate for long dark winters. In America, the good folks at Battle Creek have been serving up the same blend in California and Maine for generations, and do you see school children suffering deficiencies or with hepatitis?

As a former U.S. trade official, I know full well Americans have many sins to repent. We have steep protection for citrus, sugar and well afford very substantial cuts in protection for temperate zone crops too. However, negotiating a reasonable agreement with the EU is nearly impossible when France prohibits Brussels from making a deal that sticks and the Europeans are unwilling to apply reasonable standards of science to the rules for trade in food products.

The French and others have strong political motivations for their actions, even if they hide behind the pretensions of preserving the rural culture, public health and the like. The problem is without political will trade agreements, no matter how economically beneficial, are just not possible.

A Doha Round without agriculture makes little sense for many developing countries, and until the EU, and in particular France, are ready to get serious, we are all wasting our time.

Without agriculture, developing countries are not likely to make meaningful concessions on issues important to both the United States and EU in manufacturing and services. Or worse, everyone but the EU will pay to play, while the EU gets a pass.

Without real European resolve there is no deal, and it is doubtful the Europeans can muster it.

Maybe it is just time to quit the game.