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Japan's farmers outstanding in their
field
By Jamie Miyazaki
On
Wednesday, trade ministers from146 nations will descend
on the Mexican resort of Cancun to thrash out the
pressing issues in international trade. Cancun
represents the midpoint for the current World Trade
Organization (WTO) Doha Round of trade talks, named
after the Qatari capital where the current trade agenda
was set. The objective? To formulate a comprehensive
agreement covering all trade sectors by 2005.
Tokyo will be pushing a number of issues in
Mexico. Alongside many developing nations, it will be
looking to address the United States' protectionist
abuse of anti-dumping legislation. It will also be
lobbying for WTO guidelines on investment, competition,
cross-border transportation and transparency in
government contracting - the "Singapore Issues", named
after a 1996 WTO ministerial summit. But undoubtedly the
most important issue for Tokyo will be the
liberalization of agricultural trade.
For many
nations, agriculture is the barometer by which the Doha
Round and Cancun's success or failure will be gauged.
Agricultural markets represent probably the purest form
of distorted trade practice at the behest of pernicious
special-interest groups in existence. The developed
world's agricultural markets lie hidden behind a morass
of subsidies, tariffs and export subsidies and credits.
The World Bank estimates that developed nations bail out
their farmers to the tune of US$1 billion per day. And,
although there are few saints in world trade, the
European Union and Japan stand out as the two biggest
sinners in agriculture.
In order to get the
developing world to the table at Doha and Cancun, Japan,
the EU and the US pledged to liberalize trade in
priority areas such as agriculture, textiles and
apparel. Unfortunately, every deadline for an agreement
on liberalizing these areas under the Doha Round has
been missed. As it stood, the Cancun talks looked dead
before they had even begun.
Last month's
much-trumpeted US-EU compromise on agricultural
liberalization signaled that the talks might yet have
some life. The compromise proposed a maximum ceiling on
agricultural tariffs and an expansion of low-tariff
import quotas on products for products whose tariffs are
above the ceiling. While the US-EU compromise was
condemned by agricultural-exporting nations, Japan
cautiously welcomed the proposal but voiced its strong
opposition to tariff ceilings. Agricultural Minister
Yoshiyuki Kamei signaled he had no intention of joining
talks to liberalize rice markets, instead suggesting
that countries should be allowed to continue imposing
high tariffs on certain products and offset this by
increasing imports of others.
Tokyo's opposition
to tariff ceilings stems from the highly protected
nature of its agriculture sector and the political clout
of the agricultural lobby. The US media have made much
of EU cows receiving $2.50 a day in subsidies while
billions in Africa survive on less, but this pales next
to the $7.50 per day Japanese cattle receive. Total
support for Japanese rice producers equals 700 percent
of production costs. Moreover, beef and rice are not
unique in the protection they receive - wheat, barley,
sugar beet, peanuts, dairy products and pork are all
heavily sheltered.
Like the EU, Japan defends
its punitive tariff policy on agriculture's
"multifunctionality". This argues that agriculture is
not an economic sector in the traditional sense because
it provides certain public services. According to
Japan's Ministry of Agriculture, Forestry and Fisheries
(MAFF), these "values are not tradable and cannot be
reflected in their market price", like "the preservation
of the natural environment", "development of natural
landscapes", therefore "agriculture cannot be
sufficiently managed by market mechanism [sic] alone".
With the lowest level of agricultural self-sufficiency
in the Organization of Economic Cooperation and
Development (OECD), Japan additionally justifies its
policy on food-security grounds, stating that "the
supply and demand of food in the world [tend] to be
unstable due to the special features of agricultural
trade".
However, these arguments are
disingenuous. If the objective of agricultural price
support were land stewardship, then this would be more
economically met by paying directly for these services
rather than via the roundabout mechanism of subsidizing
farmers. After all, current agricultural policies in
both Europe and Japan also do environmental damage as
well as good.
In terms of supporting rural life,
production-linked subsidies are actually the least
effective means of doing this. Most of the economic
"benefits" of price support are soaked up by
agricultural produce distributors and suppliers rather
than producers themselves. Payments not linked to
production are far more effective at raising rural
incomes. However, this may be a moot point in Japan,
where the average farmer's income is higher than the
average household's.
As for food security,
nearly all open markets are open to price fluctuations.
The price of semiconductors can be highly volatile, but
this hasn't resulted in nations rushing to build and
protect their own semiconductor industries on the
grounds of "semiconductor security".
One of the
aggravating factors in Japan's low level of agricultural
self-sufficiency is the inefficiency of its farmers.
US-instigated land reforms after World War II in effect
banned corporations from agriculture and favored small
producers, inhibiting Japanese agriculture from
realizing economies of scale. A legal revision of
current anachronistic farming and land laws would allow
consolidation and drive prices down.
The MAFF
needs to look clearly at its underlying objectives in
affording farmers such heavy protectionism. Preservation
of rural incomes, maintenance of certain rural "public
services" and food security could all be met far more
efficiently and economically than under the current
regime.
In return for their fiscal largesse,
Japanese taxpayers have the privilege of paying
exceptionally high prices for rice and other foodstuffs
- disproportionately hitting the poor. Moreover, by
locking up excess labor and capital in the agricultural
sector, productivity growth is inhibited, preventing
shifts in employment and investment to more productive
areas of the economy. Every quota, tariff and subsidy
received by agriculture strengthens the agricultural
lobby further and further crystallizes its dependence on
protectionism.
This reliance on protectionist
agricultural policies has stymied any number of free
trade agreements (FTAs) between Japan and other nations.
It is telling that Japan's main FTA is with the
city-state of Singapore, and a proposed FTA with South
Korea is only really possible because that country is
one of the few where subsidies and tariffs represent a
higher percentage of gross farm output than in Japan.
Such intransigence on agricultural issues may
well cost Tokyo dear at Cancun. The EU and Japan's
jointly coordinated mercantilist policy of maintaining
trade barriers to their agricultural markets in the face
of developing world opposition could well scupper any
chance of passing their cherished aim of securing WTO
legislation on the "Singapore issues" and undercut their
case for challenging US use of anti-dumping laws. Not
only would this be a major blow, if not a death knell,
to the Doha Round, it would also represent a huge
setback for free trade globally.
Given the
colossal task at hand and the dynamics of negotiating an
agreement among 146 nations, any agreement from Cancun
will be a very long-drawn-out affair - assuming anything
gets decided at all.
(Copyright 2003 Asia Times
Online Co, Ltd. All rights reserved. Please contact content@atimes.com for
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