Mark Magnan, a Fairfield, Vt., dairy farmer, planted corn last month.

 
July 27, 2006

Failure of Global Trade Talks Is Traced to the Power of Farmers

By STEVEN R. WEISMAN and ALEXEI BARRIONUEVO
WASHINGTON, July 26 — For months, the Bush administration had tirelessly warned farmers to prepare for the possibility of a global trade deal. At the Indiana State Fair last year, Charles F. Conner, the deputy agriculture secretary, told listeners not to expect “anything close” to the subsidies they had been used to for decades.

But the collapse of world trade talks this week has again proved that a small number of farmers in the United States — as well as Europe, Japan, India and other trading partners — have the power to resist lower agricultural tariffs and subsidies, even though a global trade deal might ultimately benefit most of them.

In Congress and among farm lobbyists, though, the breakdown of the trade talks was viewed as a dodged missile.

“We are proud that the U.S. stood up and held the line,” said Bob Stallman, president of the American Farm Bureau Federation. “No deal is better than a bad deal.”

Trade officials now fear that in the wake of the failure this week, there will be a proliferation of nasty disputes in the World Trade Organization and that the momentum for growth of trade might slow from its period of recent growth, expanding to $9.12 trillion in 2004 from $6.45 trillion in 2000.

At the same time, many experts say, the big multinational corporations that have gained the most from globalization did not push all that hard for a deal, apparently convinced that they would continue to prosper even if further progress toward an open trading system faltered.

American and European officials say the real cost of the failure will be borne by the poorest countries, in whose name the failed round of trade talks was begun in Doha, the capital of the Persian Gulf emirate of Qatar, after the attacks of Sept. 11, 2001.

The central idea behind the trade round was ostensibly to help poor farmers in Asia, Africa and Latin America export their products to richer countries, while also opening developing countries to more goods and services from the advanced economies.

Last October, the United States proposed a cut of more than 60 percent in tariffs and subsidies by Europe and the United States, and something less for poor countries. American officials say that their farm tariffs are already half the levels of those in Europe and that American trade-distorting farm subsidies are $12.5 billion compared with $33 billion in Europe.

But led by Peter Mandelson, chief negotiator for the European Union, many foreign trade officials asserted that the American offer was deceptive. The real cuts, Mr. Mandelson said, were far less.

A senior British political figure close to Prime Minister Tony Blair, Mr. Mandelson suggested that the Bush administration was loath to make a trade deal in an election year with farmers’ votes crucial to Republicans. By doing so, he angered American officials, who accused him of hypocrisy.

“I understand the politics of this situation,” Mr. Mandelson said in an interview after the collapse of the talks. “Coming from Europe, I understand agricultural politics quite well.”

In response, Susan C. Schwab, the United States trade representative, and Agriculture Secretary Mike Johanns asserted that Mr. Mandelson and the Europeans were themselves proposing cuts that contained loopholes and exceptions for “sensitive” commodities like dairy and beef because of their political role.

“The catch is it takes two to tango and 149 to reach a consensus,” Ms. Schwab said. “Unfortunately, several key developed countries and developing countries have not bellied up to the bar to play their role.” She said she could not have gone along with further concessions, even though the United States stood to gain more than most countries, without more flexibility from Europe.

At a time when the United States and the Europeans have come together on diplomatic issues like Iran, this trans-Atlantic rift and the charges on both sides of deliberate distortions of their proposals threaten to become increasingly bitter.

The seeming paradox is that in Europe, the United States and Japan, farmers now account for only 1 or 2 percent of the work force and little more of the overall economy. But they have become the pivot of global trade talks because farmers everywhere exercise power beyond their numbers.

And among large developing nations like India, Brazil and Indonesia — which have benefited from integration into the global economy — farmers are such a large voting bloc that they can insist on being exempt from trade rules that benefit manufacturers and outsourcing services in their countries.

“Agriculture has always had enormous influence in trade talks because of a central truth,” said Stuart E. Eizenstat, a former under secretary of state for economic affairs under President Bill Clinton. “Constituents who feel disadvantaged by trade deals can always outmaneuver those constituents, or the general public, that benefits from them.”

Another factor affecting the usual trade-offs on trade this year is that American manufacturers of machinery, computer parts and the like, and the banking and insurance industries that have spread throughout the world, stood back from the Doha round, many experts say.

In the 1990’s, trade deals that stirred opposition in the American textile industry and other areas hurt by imports were countered by those benefiting from trade. But since big banks, insurers and manufacturers are already enjoying the benefits of globalization, there are signs that they have become complacent.

“The dynamics of trade have changed,” said Mickey Kantor, a top trade envoy under President Clinton. “The least developed countries like India are asserting themselves like never before. Second, if industrial and service don’t have as much a stake, they’re not going to put the pressure on to counter agriculture or textiles.”

Though the Europeans say that the United States had to improve on its offer of last October to keep the talks going, there was no political support for doing so.

Indeed, last month 57 Republican and Democratic senators urged President Bush not to make further concessions in agriculture to the Europeans until they showed flexibility in return. In private meetings over the last two weeks, the message was delivered bluntly to Ms. Schwab and Mr. Johanns, trade officials say.

Indeed, the political situation is so fraught that some experts wonder why the Bush administration scheduled a make-or-break session on the trade talks knowing it could not make a major compromise at a time when Mr. Bush and the Republicans are fighting an uphill battle to avoid heavy losses in November’s elections.

“This has been badly handled,” Mr. Kantor said. “To have a trade negotiation at this point, and try to get the Bush administration to make very difficult choices before an election doesn’t make sense.”

For all their diminished role in the economy, farmers in the pivotal battleground states of the Midwest still have a strong appeal to the American conscience. But that same appeal also works in Europe, where politicians see farmers as the backbone of their societies.

“Agricultural is so emotional and so cultural for many nations, including ours,” said John Engler, president of the National Association of Manufacturers and former Republican governor of Michigan. “We were all agrarian societies once upon a time.”

By all accounts, the biggest supporter of farmers in Europe is France, where even the offer by Mr. Mandelson drew criticism as “unacceptable.” Ms. Schwab, who took office only in June, tried to orchestrate European opposition to French intransigence, and to orchestrate global opposition to the European stance on farm supports.

Asked what happened to that strategy, an American trade official shrugged and said: “If it’s a toss-up between French farmers and the rest of the world, apparently it’s French farmers who will win.”

Steven R. Weisman reported from Washington for this article and Alexei Barrionuevo from Chicago.