Deal or no deal? As the leaders of the world’s leading industrialized nations gather this week at the Group of Eight summit on Germany’s Baltic Coast, an agreement to move forward on the World Trade Organization’s Doha round of multilateral trade negotiations appears to be within reach. Yet any WTO deal on Doha will hinge on the members of the G8 achieving consensus on agriculture and, more importantly, on an end to the tiresome “blame game” between the United States and the leading members of the European Union.
The members of the G8—the U.S, Germany, Great Britain, France, Italy, Japan, Canada, and Russia—need to demonstrate collective global leadership, especially the Bush administration, which has yet to commit to the hard work necessary to push the Doha Round to a successful conclusion. In particular, the administration needs to transform its rhetoric on agriculture into reality to produce real change down on the farm and in world trade.
Without creative and sustained leadership by the United States at home and abroad, we will miss a unique opportunity to move both our nation’s farm and trade policy forward together and complete a final Doha trade and development pact that all members of the WTO can sign. The United States and the EU have the ability to make key policymaking decisions at home that could well spur our trading partners to make similar efforts.
Agricultural tariffs and subsidies are the main sticking points to a final trade accord. These are obstacles that the Bush administration, in league with congressional leaders on both sides of the political aisle, can overcome with creativity and nerve.
Georgetown University Law Center professor Dan Tarullo, a Senior Fellow at the Center for American Progress, made the point recently in his paper, The Case for Reviving the Doha Round, that these are ‘back-to-basics’ trade negotiations focused mostly on tariffs and trade-distorting subsidies, not controversial domestic economic and regulatory policies that have characterized the Uruguay Round and many bilateral agreements. As Tarullo notes, the Doha Round’s modest ambition is a virtue.
The Doha Round’s emphasis on agricultural policies and trade allows Washington to negotiate increased international market access for competitive U.S. farmers in return for limits on our agricultural subsidy programs. A new approach on agricultural support will be beneficial for both domestic and international development reasons.
Budgetary pressures and high commodity prices will likely reduce the inflation-adjusted value of these U.S. farm programs in any case. Additionally, these programs need to be better targeted toward true family farmers, and to promoting sound environmental and energy policies including the next generation of cellulosic biofuels, which are liquid fuels produced from energy crops such as switchgrass and agricultural wastes such as corn stalks and rice hulls.
Advanced biofuels can make a key contribution to diversifying our energy sources and meaningfully reducing greenhouse gas emissions that contribute to global warming. In the United States, advanced biofuels could supply 25 percent of U.S. petroleum needs by 2025 and pump $700 billion into the economy, including a $180 billion boost to farm income, according to a recent study by the University of Tennessee.
Investment in advanced biofuels combined with improved fuel economy, cleaner cars, and stronger conservation efforts will have a profound effect on our energy security, our environment, and our economy. Sustainable energy sources such as biofuels can make an important contribution to help reverse the dire effects of global warming, which is a top priority of the G8 Summit in Germany.
As demand for biofuels increases on a global scale, we will need to enhance environmental safeguards, monitoring, and access to information regarding production processes, carbon management, and land use practices. It is essential that we provide incentives for biofuel producers to conserve land and water resources, maximize life-cycle greenhouse gas reduction methods, and grow energy crops in a sustainable manner.
The use of transparent certification and labeling criteria to encourage sustainable production of biofuels deserves further attention. Developed and developing country farmers must have a central role in this effort. All this is in reach if the G8 can come together around the completion of the Doha Round.
In the United States, Congress has a chance this year to enact creative renewable energy legislation that could break the deadlock in the Doha Round and implement agricultural policies that can contribute to a clean and prosperous countryside in the United States and around the world. The tools needed to craft this new vision of agriculture, energy, and trade, are detailed in a recent Center for American Progress report, Fueling a New Farm Economy. These tools are within the grasp of the 110th Congress as they address energy legislation and prepare to reauthorize our nation’s farm legislation in the 2007 Farm Bill.
How so? Well, for starters, the United States can reinvest a modest portion of its current funding for agricultural commodity programs toward the further development of new renewable energy sources. Specifically, Congress could:
- Reward all U.S. farmers for environmental stewardship on their working lands, including growing dedicated energy crops, by implementing a targeted “green payment” program and encouraging reinvestment of current commodity-based subsidies. Other WTO-member nations must make similar farm tariff and subsidy reductions in their agricultural sectors.
- Move beyond corn as a biofuel feedstock to provide new tax credits and loan guarantees for this next generation of cellulosic biofuels. Boost research and development in advanced biofuels and bio-based technologies through a variety of legislative funding avenues.
- Encourage the use of energy crops grown in a sustainable manner with incentives that reward biofuel producers for efforts to maximize greenhouse gas reduction methods and conserve water and land resources. Reward farmers for agricultural practices that combat climate change by reducing greenhouse gases and storing carbon while enhancing soil quality.
- Encourage farmer-owned-and-operated biorefineries and local-owned biofuel plant cooperatives.
- Reduce gradually the current 54-cent-per-gallon U.S. tariff on imported biofuels to expand the global market in biofuels and take steps towards meeting the Doha Round’s overarching trade and development goals.
Encouraging agriculture to diversify into renewable energy and dedicated energy crops will improve agricultural prices by slowing the oversupply of traditional agricultural commodities on global markets. A sustained and consistent period of improved demand and rising prices will also allow the United States, Europe, and Japan to meet the request of developing countries to improve their commitments to agricultural subsidy and tariff reform, thereby opening one avenue for progress in the stalled Doha round.
International trade challenges to U.S. farm policies, such as Canada’s recent complaint regarding U.S. agricultural support programs and the ongoing cotton subsidy dispute with Brazil, also would be defused. The result would provide a modest foundation for rural poverty reduction around the globe, improve the competitiveness of U.S. agriculture, and strengthen the multilateral trading system.
In support of the original goals of the Doha Development Round, developing countries should receive assistance to promote “behind-the-border” capacities such as education, transportation infrastructure, and access to private capital. A robust “Aid for Trade” program should not focus exclusively on trade efficiency-oriented measures such as new technology for customs and inspection, but also on initiatives to achieve broader economic growth.
Among those initiatives should be an emphasis among developing countries on duty-free and quota-free access for exports from least-developed countries immediately. In return, small-scale farmers in developing countries should be eligible to have specific crops exempt from full and immediate liberalization.
Jump-starting the Doha negotiations to achieve an agreement that advances global economic and development aims would boost U.S. economic leadership at a critical time in our nation’s history. Other countries must do their part, but it would be a serious mistake to pass up the opportunity to seek agreement. As Dan Tarullo makes clear in “The Case for Reviving the Doha Round,” to seize this opportunity, we need:
- President Bush to become personally involved in restarting the Doha negotiations.
- The Bush administration to seek genuine cooperation with U.S. congressional leaders.
- The U.S. to take the lead in expanding trade opportunities to the world’s poorest countries.
The president and key administration officials can begin all of these efforts in earnest this week in Germany. Only then will we know if the Doha Round can be successfully negotiated and approved, and whether we can move both trade and a new farm bill forward together. That effort is well worth making. It is an effort that must transcend political parties and national boundaries. It is an outcome that the world eagerly awaits.
For further details on the agriculture, alternative energy, and trade policy recommendations of the Center for American Progress please see the following reports: