Party Daily on “Barriers” for Vietnam’s Agricultural Products After Joining WTO

Text of report by Vietnamese newspaper Nhan Dan website on 6 January

Trade relations among various countries have been established through global organized structures, starting with the General Agreement on Tariff and Trade (GATT) and then the World Trade Organization (WTO). All national economies do business with each other through negotiations aimed at the signing of trade agreements, while the Disputes Settlement Body, or DSB, acts as an international referee to arbitrate whenever trade conflicts arise.

Up to now, there have been eight major rounds of negotiation regarding world trade. The Ministerial Conference on November 2001 in Doha, Qatar, bore the name of the Doha Development Agenda to calm the developing countries. But, fundamentally, it involved trade negotiations aimed at opening the agricultural market and agricultural processing products. The people who support the Doha agenda said that this round was aimed mainly at fairer trade in developing countries. Those in opposition said that the round of negotiations round had created more disadvantageous regulations for development and interfered too much in the developing countries’ policies.

The Doha trade negotiations are at a standstill due to the failure of the United States and the EU to meet the requests of developing countries to reduce price subsidies for export agricultural products and subsidies for farmers and to cut tax tariffs for developing countries, allowing them to enter their markets.

The core issue of the Doha round is the barriers, which include protective taxes and subsidies imposed by the developed countries on the developing countries.

The subsidies from the rich countries in the agricultural field have been estimated at $300 billion per year, which is not actually true. This amount is not the entire amount of state money given to the farm owners. According to the Organization for Economic Cooperation and Development, or OECD, a large part of that $300 billion, which the OECD called the Total Subsidies Estimates, or TSE, is not only state payments, but also includes the amount earned by farmers through tax barriers, which prevents imported products from competing with the local ones and allowing domestic farms to raise their prices.

According to the OECD, in 2001 (the most recent year with available data,) the TSE reached $282.9 billion, including $114.7 billion from the 15 countries of the European Union, $56.9 billion from Japan, $95.1 billion from the United States and other countries such as Australia, Canada, New Zealand, Norway, and Switzerland. At the same time, the total states’ direct payments to farmer owners amounted to only $74.9 billion. According to the OECD, the amount of money affecting world trade was $77.5 billion. This means that for agriculture, reducing taxes is more important than abolishing subsidies.

Over the past 10 years the subsidies for farms in the United States has reached a total of $143.8 billion. Approximately 72 per cent ($104 billion) has fallen into the hands of 10 per cent of the biggest farms. But for 2005, those subsidies reached $19 billion. The Washington Post said that since 2000, the US Government has paid $1.3 billion to the people who actually do not know how to farm, simply because they own land that was once farmland.

Agriculture is very important, even for the most industrialized countries. For instance, the United States is the number one industrially powerful country. At the same time, US agriculture is very developed, and the United States is the world’s largest exporter of agricultural products. The export value of US corn is higher than that of cosmetic products; the export value of wheat is higher than that of coal; and the export value of fruits and vegetables is higher than that of household electronic products. The United States exports almost half of its wheat and rice, one-third of its soybean and meat, and 20 per cent of its total corn production. Twenty-seven per cent of its income from agriculture is from exports.

Agricultural exports have generated nearly one million jobs for Americans. The exportation of farm products also stimulates other economic activities throughout the country. In 2004, the United States exported farm products worth $62.4 billion. At the same time, these products generated added values of $162 billion for the agricultural economy in general, such as those from chemical farming products, machinery, and farm businesses…

The United States is the world’s top exporter, and receives the most benefit through a powerful global trade organization. Thanks to the reduced tariffs in recent several decades, US export is now marking up one quarter of economic growth in this country and generating about 10 per cent (approximately 12 million jobs) of the total work in the United States. If the Doha round is successfully completed, as the United States has requested, then each US family will make $2,000 more each year.

The US Government uses WTO regulations to eliminate trade barriers for US goods, and at the same time sets up barriers to prevent goods from developing countries entering the US market.

Tax is a very vital tool for protecting domestic production. The Japanese rice market is a typical case of politics in an economy. Japanese rice producers, despite their small scale, have a powerful political influence on the ruling power wielded by the Democratic Party. Therefore, the government prudently considers every measure regarding rice imports into Japan. The United States is the biggest rice exporter to Japan, averaging around 200,000 tonnes per year. The high tax rate of 490 per cent discourages US and Australian exporters, who want to sell rice in excess of the tax-free current quota of 770,000 tonnes. The Japanese people have to pay six times more than the international market price for rice. However, according to the Japan’s rice data bank, the Japanese Government provides a production subsidy of three to four billion yen per annum.

The United States is the third largest rice exporter in the world; despite that, the rice production cost in this country is twice as high as what it is in Thailand and Vietnam, the two top rice exporting countries. This is because of the government’s subsidies for rice farms – in 2003, the US Government provided a subsidy of $1.3 billion for rice farms. In reality, the US budget shoulders up to 72 per cent of rice production costs.

The EU also does not want to play second fiddle.

The EU contributes 18 per cent of world sugar exports, 28 per cent of milk exports, and approximately 8 per cent of wheat exports (which are increasing rapidly). Although costs for its finished products are higher than those of other countries, various forms of subsidies by the Common Agricultural Policy, or CAP, allows products such as sugar, milk, and wheat flour to be sold to other countries at lower prices than the production costs. According to a survey by Oxfam, wheat flour, powdered milk, and sugar are sold below the production costs of 34 per cent, 50 per cent, and 75 per cent respectively. In 2001, France was the country that received the most subsidies from the CAP’s budget of 41.53 billion Euro or 21 per cent, Spain at 14.8 per cent, Germany 14.1 per cent, and Italy 12.8 per cent (EC Website, October 1, 2002.) Farm subsidies increased to 46.5 billion Euro, making up close to one half of the EU budget.)

Those subsidies were distributed very unfairly. Among 4.5 million farm owners in the whole of the EU, less than 2,000 large farms receive the whole of the nearly one billion Euro subsidies. At the same time, 95 per cent of Portuguese farms receive financial support of only 5,000 Euro per year, and 43 per cent of farmers in England receive the same amount. However, almost 380 large plantation owners in England receive more than 300,000 Euro. That situation has led to a reduction in cultivated areas, and the number of farm workers in countries with large farmland areas like Spain, Italy, and Greece are down to one-fifth of the number in 1950. Consequently, many farmers in the developing countries look for jobs in urban areas, putting pressure on the current factory workers.

The Doha Round’s deadlock in the WTO is due to a contradiction in the area of agricultural issues. The barriers listed below relate to certain goods that are worth our concern when entering the huge WTO supermarket: Japan taxes rice 886.7 per cent, wheat 214.4 per cent, sugar 227 per cent, and beef 38.2 per cent. Norway taxes rice 29.1 per cent, wheat 208.4 per cent, and beef 222.7 per cent. The EU taxes rice 110.8 per cent; and the United States taxes sugar 24.2 per cent. If we add the taxes and subsidies together, then the Japanese barrier for rice will add up to 1,023.1 per cent and the EU barrier 137.8 per cent. Norway’s barrier for beef equals 284.9 per cent, while for wheat it is 237.8 per cent. The US taxes are 26.8 per cent on rice and 30.6 per cent on milk.

This is only in reference to food and food products. If other areas such as textile cotton are included, then the United States is the country that deserves most to be condemned, because after abolishing the 1996 Farm Law, from 1997 to 2003, US textile cotton was sold at an average price of less than 48.7 per cent of the production cost. In other words, almost one half of US cotton exports were dumped, and the United States has boosted its world market share from 17 per cent up to 42 per cent from 1998 to 2003.

Vietnam’s admission to the WTO comes at the time when this organization is facing an extremely difficult challenge: in July 2006, the 9th Doha Round of trade negotiations was postponed for an indefinite period.

On one hand, Vietnam has to face subsidized import goods, on the other hand, by joining the WTO, we immediately have to reduce or cut the subsidies and price assistance for our products. It is always a problem for developing countries. This is also the case for milk in India, textile cotton in West Africa, and coffee, cacao, and tea in tropical countries like Vietnam, Colombia, Brazil, and Ivory Coast.

The average agricultural tariff barrier amounts to 63 per cent worldwide; the United States and Canada are 110 per cent (not counting the “incredibly high” tariffs in Japan, Norway, and Switzerland). However, a 13 per cent rate is imposed on us. The struggle between the developed countries and the Third World countries in the agricultural field remains both very complicated and long-lasting.

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