How Agriculture Blocked the Uruguay Round

HOW AGRICULTURE BLOCKED THE URUGUAY ROUND Robert L. Paarlberg W1hat explains five years of sluggish progress in the Uruguay Round of GATT negotiations? These multilateral trade negotiations, which began in 1986, deadlocked for the first time in December 1988, at the MidTerm Review Conference in Montreal. They then deadlocked a second time in December 1990, at the final ministerial conference in Brussels which was supposed to close the Round. The negotiations were extended, but remained blocked throughout 1991, and into early 1992. The reason for the deadlock, everyone knows, has been "agriculture." Ever since the Round began, the U.S. and the EC have disagreed over how much to reduce subsidies to their agricultural producers. The U.S. has called for large subsidy reductions, while the EC has sought to defend its politically powerful farm sector against large cuts. Japan, with powerful farmers of its own to worry about, has been happy to see this deadlock continue. These differences over agriculture have recently been narrowed. At the unsuccessful December 1990 Brussels ministerial conference, the U.S. was still demanding a 75 percent reduction in aggregate measures of internal farm support (over ten years), and a 90 percent reduction in export subsidies. The EC, supported by Japan, was only offering an imprecise 30 percent overall support level reduction. By November 1991 both U.S. and EC negotiators seemed to be moving toward a compromise , discussing terms such as a 30 to 35 percent reduction over a Robert L. Paarlberg is Professor of Political Science at Wellesley College and an Associate at the Harvard Center for International Affairs. 27 28 SAIS REVIEW five-year period. Still, major differences remained over key issues such as which policies should be included in the reductions (should some cash payments conditioned on acreage reductions be exempted?), over the base years from which to measure reductions (should credit be given for reductions already undertaken unilaterally?), over whether to measure export subsidies by volume or by value, over whether to permit some subsidies to increase while others were decreasing ("rebalancing"), and over whether to commit to the negotiation of additional cuts beyond five years. So long as such disagreements over agriculture persist, larger elements ofthe Uruguay Round will unfortunately remain in jeopardy. The agricultural deadlock has tended to discourage serious efforts in other negotiating areas, such as intellectual property, services, government procurement, investment, tropical products, textiles, market access, customs valuation, and dispute settlement. And the significant progress that has nonetheless been made in some of these other areas will not be ratified so long as the agricultural deadlock continues. Perhaps $5 trillion in potential economic growth worldwide might then be lost.1 How could trade discussions of such wide-ranging importance be blocked for so long by a sector as small as agriculture? Agriculture is only one of the fifteen separate negotiating groups in the Round, and agricultural trade makes up only about 10 percent oftotal world trade. Farming represents less than 4 percent of GDP in most industrial countries, and less than 2 percent of GDP in the U.S.2 The blockage can be traced, in large measure, to an early insistence by U.S. trade officials that agriculture be given a central place in the Round.3 This grew partly from a laudable desire to create a negotiating agenda of greater interest to important developing countries like Brazil, Argentina, and Thailand, which had long been complaining about the farm subsidies of the industrialized countries. But a more circumstantial set of domestic concerns also played a role. Reagan Administration officials took the farm problem into GATT, in 1986, partly because of the 1.This is the estimate used by Heinrich Weiss, Chairman of the Federation of German Industries (BDI), a strong supporter of the Uruguay Round. See Inside U.S. Trade, February 1, 1991, p. 18. 2.Agricultural Situation in the Community: 1986 Report, Commission of the European Communities, Brussels, 1987; Western Europe: Agriculture and Trade Report, U.S. Department of Agriculture, ERS, RS-89-2, July 1989, Washington, D.C.; Japanese Agricultural Policies, Australian Bureau of Agricultural and Resource Economics, Policy Monograph No. 3, Canberra, 1988. 3.This was understood, at the time, as a...