The WTO agricultural peace clause has ended. We're in that Wile 'E' Coyote classic moment when he's run off the cliff and is feeling around with his foot, realizing that there's no ground under him. He hasn't fallen yet, and he hasn't looked down so isn't yet sure that there is a painful fall ahead but he suspects.
The non-subsidizing food exporters that make up the Cairns group in the WTO have no doubt been waiting for this date. In a way, the 1/1/2004 expiration of the special rules on agriculture guaranteed failure at the recent Cancun meeting. After all, why negotiate from a position of weakness when your hand will be immeasurably strengthened in a few short weeks.
Now that normal rules on subsidies and quotas apply, there is little doubt that countries will give negotiations one last chance and then file their WTO complaints for adjudication. At that point the clock starts running. Exactly as on the steel tariffs, the WTO will rule in the complainants' favor and uphold the judgment on appeal. The one difference is that the Cairns group trading levels might not be enough of an incentive to swallow the domestic pain of cutting agricultural subsidies.
The free market solution to this uncomfortable fact might be to create a trading market in tariff rights. It would certainly be a novel market idea. It would also empower smaller countries and poorer countries that, in a barrier free world, would export much more than they import. The idea is somewhat counterintuitive as tariffs are considered counterproductive, "cutting off your nose to spite your face". Then again, pollution is counterproductive too, yet we have a market in trading pollution credits. Perhaps trading tariff credits, creating a liquid market for them, would transform the thin reed that a Honduras or Ghana has to whip the big boys into shape into a collective 2x4 that will truly get their attention.
Posted by TMLutas at January 3, 2004 10:11 AM