Speech

Geneva, 18 June 2003

Speech to the WTO Public Symposium

Celso, Ladies and Gentlemen

I am pleased to have the opportunity to speak today at this WTO Public Symposium.

At this stage of the WTO negotiations, when questions are being asked about how we will complete the Doha Development Agenda by 1 January 2005, it is more important than ever that we encourage community support to help achieve our goal of assisting developing countries through trade.

The issue of agricultural reform is at the heart of the Doha Round.

It is commonly said that the current round of agriculture negotiations is a once-in-a-generation chance to secure agricultural trade reform. But I see this as a last chance.

This is a sobering thought, because if the approach favoured by the agricultural protectionists is adopted in this Round, then we better get used to the gross unfairness which characterizes global agricultural trade because it will be with us for a very long time.

Not only will our producers all have to compete with heavy subsidies, but some developing countries will find themselves locked into the extremely limited and insecure future of preferential trading arrangements. The remaining developing countries will be frozen out of preferential markets.

That is why the Cairns Group market access approach offers the only prospect of delivering the Doha Development Agenda.

Domestic support - no real change

It is simply unjust that, every day of the year, the farmers of developing countries must concede their competitors in developed countries a subsidy "head start" of US$1 billion a day.

Agricultural subsidies in the developed countries, involves a massive annual transfer of well over US$300 billion.

Instead of promoting development in the world's poorest countries, support programs under the EU's CAP and the United States' Farm Bill encourage over-production, depress world market prices, and lower the return to farmers the world over.

The World Bank president said last month that phasing out these agricultural subsidies worldwide would lead to increases in annual income in developing countries of the order of $150-$400 billion, within five years of completing the reforms.

Not only is this a worthy goal - it is a moral obligation for the developed world.

So what has been the response from the world's wealthiest countries? The EU has put forward a proposal that would keep up to US$40 billion annually in trade-distorting domestic support in the EU alone, not to mention the unlimited amounts allowed for blue box expenditure.

The United States' proposal would also see it still able to spend US$30 billion annually in trade distorting support.

Japan and South Korea have not proposed any cuts. They would do nothing to reduce the staggering $8 or more out of every $10 earned by their rice farmers from consumer and taxpayer handouts.

Norway and Switzerland are in a similar position at the bottom of the reform spectrum.

In summary, the richer the country, the more determined to maintain high subsidy levels all of which is a recipe for depressed global commodity prices and continuing poverty in developing countries.

Export subsidies - EU backtracks on the Doha mandate

We agreed at Doha to reduce, with a view to phasing out, all forms of export subsidies.

It's not surprising. After all, why should developing countries have to accept subsidised exports into their own markets or as competition in third markets?

Export subsidies on industrial products were eliminated over 40 years ago.

Despite the agreement at Doha, the EU is only talking about "foreseeing cuts" to the current level of export subsidies.

EU leaders know that export subsidies are highly damaging to the welfare of developing countries. What they have so far failed to concede is that we need a genuinely global solution to this global problem.

Market Access - a failed formula

The picture on market access is similarly bleak. Many developed countries simply do not want to open up their markets to competition from more efficient producers.

The EU, Japan and others continue to back the failed Uruguay Round formula, which - according to recent research - would deliver no more than a measly 8 per cent cut to effective levels of agricultural tariffs.

Of course, we know why this is the formula of choice for protectionist countries - because this is the failed approach which has left in place tariffs of up to 1,000 per cent!

The Uruguay Round negotiations failed to fix the problem of tariff escalation which prevents developing countries from shifting from basic farming into more rewarding downstream activities.

A study by officials of the IMF and World Bank in 2001 estimated that in Japan the average applied tariff on semi-processed and finished agricultural products was triple the average applied tariff for raw agricultural materials. Cocoa bean farmers can export beans to Japan duty free, or to Korea at a 2 per cent tariff. But if the same farmer wants to set up a factory and export chocolate, he or she will face tariffs of up to 30 per cent in Japan , or up to 40 per cent in Korea.

Market Access - the facts

The EU claims it is already doing enough to help the developing countries by importing more from developing countries than other countries, so why should it undertake agriculture reform and allow further access to its markets?

The reality is that 70 percent of the EU's imports from developing countries are soy products, tropical products, and fruits and vegetables: products which the EU cannot produce, or can produce only in limited quantities.

Where imports might represent real competition for local produce, the EU employs a range of protectionist and support measures.

It restricts imports severely while using export subsidies to dump surplus EU production of the very same products onto global markets.

It is also seeking to export its cumbersome system of protecting geographical indications (GIs). Compared to the benefits of dealing with tariff escalation, GI's offers little potential benefits for developing countries. And, unless developing countries are prepared to institute costly registration systems which are equivalent to new EU regulations, they won't even be able to protect their GI's in the EU.

The Cairns Group approach

As chair of the Cairns Group, I am well aware that the Cairns Group is often characterised as a group of competitive agricultural exporters who would capture for themselves any benefits from improving market access.

I am the first to acknowledge that agricultural trade reform would benefit Australia as well as other Cairns Group members.

But our interests coincide with those of developing countries, who unquestionably would also benefit greatly from improved market access for agricultural products.

We are not hiding as my French colleague suggested recently in a French newspaper behind the interests of developing countries.

After all, along with New Zealand, we have the lowest levels of support in the OECD.

The Cairns Group has taken very seriously the need to deliver the Doha mandate for agriculture. That mandate calls explicitly for:

• Substantial improvements in market access
• Substantial reductions in trade-distorting domestic support
• Reductions in, with a view to phasing out, all forms of export subsidies.

The Cairns Group has proposed a market access approach which would deliver pro-development reforms.

We have proposed the application of the Swiss formula with a coefficient of 25, for developed country tariffs.

This would reduce tariffs to 25 percent and make real inroads into the problems of tariff peaks and tariff escalation.

At the same time, with 14 of the Cairns Group's 17 members being developing countries, we understand that developing countries need more flexibility in their own tariff commitments.

So the Cairns Group members have proposed developing countries undertake much lower tariff reductions phased in over a significantly longer time frame.

On subsidies, we have proposed that developed country trade-distorting domestic support be reduced to zero over five years and that de minimis support provisions be reduced with a view to phasing them out.

Again, developing countries would have greater flexibility, with nine years to phase out trade-distorting domestic support and no requirements to reduce de minimis amounts.

The Green Box would provide sufficient flexibility to cover almost all developing country support programs.

Elimination of export subsidies is a core Cairns Group position, and we have called for export subsidies to be eliminated over three years for developed countries and over six years for developing countries.

Preferences - the limited deal on offer

A key defence used by those who want to avoid market access reform is the desire to preserve preferences.

The history of preferences is a sorry one - a tale of arbitrary termination and graduation, of tariff escalation, and of discrimination.

Preferences limit recipient countries to producing particular unprocessed commodities, because tariff escalation means there is no prospect for developing countries to begin value-adding activities.

Preferences discriminate in favour of some developing countries at the expense of others.

In theory, preferences can work as transitional mechanisms, although in practice the network of preferences developed by the majors has not promoted reform, or sponsored competitive agricultural sectors in developing countries, or helped developing countries to diversify economic development.

Indeed, the EU - which makes much of its imports from developing countries - is a net exporter of agricultural products to no less than 79 developing countries.

And almost 40 of these 79 countries are Europe's Cotonou partners, those who are meant to benefit most from the EUs preferences schemes.

And if that wasn't a sufficient indictment of preferences, there are worrying clouds on the horizon.

As the EU converts its unilateral preferential arrangements into reciprocal preferential trade agreements, developing countries will increasingly be asked to liberalize their trade with this huge, technologically-sophisticated, subsidy-driven competitor.

A study by a World Bank official, released two months ago, says that for a group of the poorest countries, it is clear that under current trade structures, preferences are of no real value, since almost all exports are concentrated in products for which the EU external tariff is zero.

Furthermore, as UNCTAD studies show, the evidence simply does not support the view that preference erosion will lead to important losses for developing countries.

In fact, the revenue benefits of trade preferences represent only a fraction of the gains possible from broader elimination of developed country agricultural trade distortions.

We estimate that revenues saved by preferences represent approximately one per cent of the value of LDC exports, or about 350 million US dollars - a figure dwarfed by estimates of the benefits of MFN liberalisation.

Some countries currently benefiting from preferential access would, however, face adjustment costs as a result of preference erosion.

That's why the IMF and World Bank provide funds for structural adjustment and most developed countries offer targeted technical assistance programs to help developing countries increase their productive capacity and diversify their export base.

The Bank and the Fund are also looking at other ways to address the compensation necessary to help developing countries adjust to liberalisation and to changes to preferential access arrangements.

This is vitally important work and I want to urge that this work be further developed- Australia will certainly be supporting this.

Promoting Growth and Trade in Africa

Developing countries are at the heart of the Doha round, and nowhere is the need for reform more urgent than in Africa. One thing we can all agree about is the need to help Africa's problems.

Australia is seeking to complement its trade efforts with aid programs to alleviate poverty in Africa.

The Australian Government is now establishing a new program designed to enhance Africas agricultural competitiveness - part of an estimated A$25 million in Australian development assistance to agriculture in Africa over the next two years.

This new African initiative will focus on the sustainable use of scarce water resources and on improving soil fertility - with the aim of maximising and sustaining productive agricultural capacity in Africa.

This program will include practical training courses in Africa and Australia for senior agricultural scientists.

It will also include high-level scholarships at Australian universities with expertise in agricultural production techniques and best-practice land management policies.

Although a relatively modest program, it is designed to have a real impact on African agriculture, capitalising on Australia's well regarded expertise in the farm sector.

Conclusion

The United Nations Secretary General told G8 Ministers earlier this month that the importance of tackling the distortions of trade in agricultural products could scarcely be exaggerated.

Seventy-three per cent of the world's poor live in rural areas and depend on agriculture for their survival.

Yet protectionists continue to claim the moral high ground in terms of the effects of their policies on developing countries.

What is really happening is that they are protecting their highly-subsidised agriculture sector, and trying to guarantee export markets for their own farmers.

My message today is simple.

Let's stop making excuses. Let's deliver on the mandate set down for us in Doha on trade and agriculture.

This is an opportunity we cannot afford to squander.

Our strong commitment to a fairer and more balanced global trade regime is the biggest contribution we can make to developing countries and the two billion people estimated to be living in poverty.

Thank you