Read the other Global Envision blogs from Hong Kong:
December 12, 2005 – Why Free Trade?
December 13, 2005 – Opening Session
December 13, 2005 – Aid For Trade
December 14, 2005 – Results of Day One of WTO Negotiations in Hong Kong
December 15, 2005 – The Joy of the Press Conference
December 16, 2005 – The Word of the Day is Deadlock
December 17, 2005 – Wrapping Up in Hong Kong

On the second day of talks, a food fight has broken out at the Hong Kong Convention Center.There are three similar but distinct issues bundled into the heated discussion taking place between the U.S. and the EU.

Food Aid

Should donor countries send cash or actual food as aid to countries facing food shortages? Currently, the U.S. sends aid donations to developing countries in the form of domestic corn, wheat and other commodities. The EU insists that cash is quicker, more effective and less likely to affect the delicate balance of local trade.

There are three similar but distinct issues bundled into the heated discussion taking place between the U.S. and the EU: --Should donor countries send cash or actual food as aid to countries facing food shortages? --What is the date when will WTO member countries eliminate export subsidies? --What is the date when will WTO member countries will eliminate agricultural subsidies?

Export Subsidies

The second issue is the proposal to eliminate all export subsidies by 2010. Export subsidies are when a government gives money directly to businesses to help them reach international markets. This gives companies from rich countries advantages because poor countries do not have the money to subsidize or create multinational corporations. The EU has many export subsidies in place and doesn't want to get rid of them, while the U.S. doesn't use them and can score free political points with developing countries by favoring their elimination.

Agricultural Subsidies

The third issue is a proposal to cut, and eventually eliminate, trade-distorting agricultural subsidies. Agricultural subsidies are when governments give farmers money to grow their crops. This causes trade distortion because the farmers in rich countries can sell agricultural products such as cotton, peanuts and rice at an artificially low price, undercutting the ability of developing countries to export these crops. The U.S. and the EU heavily engage in this practice, as does Japan and other developed nations. The U.S. has offered to eliminate all export and agricultural subsidies by 2010. But that position is widely viewed as an empty promise, since there is little risk of it actually happening because of opposition from EU and Japan.

"He Says …"

The EU seems adamant about keeping their export subsidies in place. At the EU press conference Tuesday afternoon, its Commissioners got into a shouting match with audience members about why there is no date on the table to remove export subsidies. European Trade Commissioner Peter Mandelson scoffed at a Wall Street Journal editorial by U.S. Trade Representative Rob Portman, in which he offered to eliminate by 2010 all export subsidies as well as phase out agricultural subsidies for U.S. farmers. "If the U.S. Trade Representative would get rid of his fake food aid and other trade distortions," Mandelson said sharply, "then it would be a much more interesting discussion.”

The EU press briefing included such gems as the trade minister from The Netherlands saying she was “a bit bored and a bit disappointed with all of the comments against the EU on agriculture.” She said that the EU is the biggest importer of products from least developed countries, so what more can anyone want from them?

Mr. Mandelson called for the U.S. to “radically reform” its current food aid practices. “Food aid for poor countries and emergency relief can be a tool to advance development and for humanitarian relief," Mandelson told the audience. “But the U.S. program is designed to give support to U.S. agricultural producers.” He went on to criticize a U.N. newspaper advertisement in the Financial Times, which said that restrictions on donations of food to the United Nations could take food out of the mouths of hungry children. “I find it shocking that U.N. agencies should be financing an advert ... that is designed to support U.S. trade-distorting policies on food aid,” he said.

"… She Says"

In the Aid for Trade panel discussion, Portman used his time at the microphone to question the EU “obsession” with food aid. In a tit-for-tat reaction, the EU said that the U.S. promised to reform food aid last year and has not done anything on the issue.

A government minister from the Netherlands in the audience then asked Mr. Portman to "untie" food aid as soon as possible. Tied aid is aid given on the condition that the beneficiary will use it to purchase goods and services from suppliers based in the donor country. “Untying aid” therefore means opening up those purchases to suppliers based elsewhere, not just in the donor country. Mr. Portman again questioned the European "obsession," this time with "cash-only aid," arguing this is not a productive line of discussion. He argued that less than 1% of U.S. agricultural trade is food aid and that, as a result of the EU cash-only disbursements, the EU's overall food assistance has actually gone down. “Let’s have more food not less food going to the countries with chronic food shortages – there is no need to throw the baby out with the bath water.”

The UK Secretary jumped in to clarify that the discussion on food aid needs to address the idea of not only preventing starvation, but also getting rid of dependencies. The EU wishes to steer the discussion towards the question of appropriate assistance and appropriate timing when people are hungry.

We Say

As for the rest of us here at the conference, the general consensus is that both the U.S. and the EU are engaging in unfair, un-free trade practices while at the same time asking that developing countries greatly liberalize their economies. Both the U.S. and EU hope to get the best deal for themselves so they are engaging in public brinkmanship on these issues to make it seem like they are really trying to negotiate. The truth is that all of these issues -- tied food aid, export subsidies and agricultural subsidies -- are the antithesis of what the WTO stands for in the long run. Eliminating barriers to trade is the goal, not stretching them out or making them smaller and more complex.






Photo credit Laura Guimond, Mercy Corps Director of External Relations.

Blog by Erin Thomas, Managing Editor Global Envision. Erin and Laura are in Hong Kong with other global NGOs advocating for free trade policies that are fair. Please send them any comments or questions and stay tuned for the inside scoop on negotiations.

Read the other Global Envision blogs from Hong Kong:
December 12, 2005 – Why Free Trade?
December 13, 2005 – Opening Session
December 13, 2005 – Aid For Trade
December 14, 2005 – Results of Day One of WTO Negotiations in Hong Kong
December 15, 2005 – The Joy of the Press Conference
December 16, 2005 – The Word of the Day is Deadlock
December 17, 2005 – Wrapping Up in Hong Kong

Some good background reading on the subject:
Food Aid in the Context of the WTO Negotiations on Agriculture

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