An end-July meeting of trade officials of the WTO's 142 member nations at Geneva, laid bare the constraints to the efforts of those pushing for the launch of a new, ninth round of international trade talks at the Ministerial Meeting scheduled for November at Doha, Qatar. Heading the drive for a new round is the US, which would like to see further reduction in barriers to its exports of industrial goods as well as more progress in the ongoing negotiations on freeing trade in agriculture and services. Any acceleration on trade liberalisation on these fronts it feels can only be achieved by incorporating  negotiations on these matters into a new round of talks that cannot but end with agreement on freer trade.
 
Needless to say, few are convinced by the US' proclaimed commitment to free trade. Not only does it continue to support its agricultural sector with huge transfers that fall outside the scope of the definition of subsidies under the Uruguay Round's Agreement on Agriculture (AoA), but it has buckled under domestic political pressure to provide virtually no concessions to developing country exports of textiles and has unwarrantedly used “anti-dumping” levies to protect domestic producers of commodities like steel, against competition from developing country exporters. The net effect is that movements in world trade are not in keeping with the expectations of the developing countries. Although world trade as a whole as grown much faster that world GDP (Chart 1), this is more true of manufacturing trade and production than of agriculture (Charts 2 & 3). Hence, benefits to developing countries, if any, have been concentrated among the few who are major exporters of non-traditional manufactures.
Chart 1 >> Chart 2 >> Chart 3>>
 
It was the US which initiated in the 1980s the process of substituting measures of support that directly impinge on agricultural prices with income support measures, which are ostensibly “decoupled” from prices. One example of such decoupled support is "deficiency payments" made to farmers when actual prices rule below target prices. Since these payments, which are linked to specific crops and to farm area, allow farmers to remain in production despite incurring higher costs, they do affect the level of production and therefore must influence prices and trade. Yet the Uruguay Round Agreement excluded these payments from the list of subsidies that distort trade.
 
The lead provided by the US was followed by the European Union, which made the shift from price to income support the principal plank of the reform of its Common Agricultural Policy. Not surprisingly, these two powerful forces came together and ensured that these types of support to agriculture, categorised as “green box subsidies”, were excluded from computing the Aggregate Measure of Support (AMS), which nations were committed to reduce under the AoA, on the grounds that they were not trade-distorting. What is more, under the Peace Clause included in the AoA, no disputes could be raised regarding the "green-box policies" and other AoA conforming support and subsidy measures, during the phase when the agreement was being implemented.
 
The OECD, however, periodically computes the total subsidies provided to agriculture by its member countries, which it terms “producer subsidy equivalent”. In practice, while AMS commitments have been met, the PSE has remained at extremely high levels. To quote the WTO: "In 1999, the OECD estimated total support to agriculture at f306 billion, up 5.6% over 1998, a rise explained by ‘low world commodity prices, and the resulting pressure they put on farm incomes, [which] led many OECD countries to introduce new measures or to provide additional support to farmers'. Producer support granted in the area was estimated at f236.7 billion, of which the largest single share is accounted for by the European Union (45%), followed by Japan (23%) and the United States (21%); it should be noted that the OECD figures do not segregate less from more distorting measures of support, notably support in the 18 "green box" categories of Annex 2 of the Agreement on Agriculture. The OECD notes that producer support levels have risen to match previous highs established a decade ago, when the Uruguay Round was under way."
 
What is more, prior to 1986-88, which was taken as the base period for the benchmark figure in the Uruguay Round from which duty reductions had to be implemented, the US and other developed countries had substantially raised the support they provided to agriculture, making the base value extremely high. Thus, the producer subsidy equivalent in the US is estimated to have risen from 8 per cent of the value of agricultural production in 1979 to 45 per cent in 1986, and from 45 to 66 per cent in the EC (10). The net result of such protection has been an extremely slow growth of world agricultural trade during the 1990s (Chart 4).
Chart 4 >>
 
As mentioned earlier, it was not only in agriculture that the US resorts to protection under the veneer of being a votary of free trade. For example, from the point of view of the developing countries, the most visible and "multilaterally" accepted non-tariff barrier arrangement is the Multi-Fibre Arrangement. That arrangement was the end-result of a series of negotiated agreements starting in the 1960s, all of which sought to provide the developed countries with the time needed to restructure their industries so that competitive textile exports from lower-cost developing countries do not "disrupt" their markets. Despite three decades of agreement on that principle and periodic revisions of the deadline for ending import restrictions, textiles still are not permitted free entry in developed-country markets. The case for an immediate end to such restrictions, under a new multilateral trade regime was therefore strong. However, though the Uruguay Round agreement on textiles and clothing provided for the phasing out of restraints stemming from the Multi-fibre Arrangement, it once again delayed the process of liberalisation. The process that was to occur in four stages over a ten-year period starting 1995 was heavily "back-loaded", in the sense that most of the liberalisation was to occur during the last stages. The four stages defined involved the following:

• In the first stage, beginning on the date on which the Uruguay Round became effective, each signatory nation was required to remove quotas only on products that account for 16 per cent of its total volume of imports of four categories of textiles and clothing in 1990 (tops and yarns, fabrics, made-up textiles products and clothing);

• In the second stage, beginning three years and one month after the agreement enters into force, quotas are to be removed on a further 17 per cent of the total volume of 1990 imports;

• In the third stage, which begins four years later, quotas are to be removed on products that account for not less than 18 per cent of the total volume of 1990 imports;

• Finally, after 10 years and one month, all other quota restrictions on imports accounting for 49 per cent of the total are to be eliminated.

This prolonged and back-loaded agreement in a labour-intensive area in which the developed countries had agreed to open up markets four decades back, points both to the relative positions of power of developed and developing countries in the Uruguay Round negotiations as well as to the extent of commitment of the latter to offer greater market access as a quid pro quo for the rapid liberalisation of trade and investment rules in the developing countries. The developed countries have exploited the back-loaded schedule, by liberalising in the initial phases textile products that do not appear in the export basket of the developing countries. As a result even after six years of the start of implementation of the Uruguay Round, the access of developing country textile exporters to developed country markets remains restricted. As Chart 5 shows, the growth of textile exports has collapsed during the 1990s, as compared with the second half of the 1980s. Further, there has been little change in the distribution of textile and clothing exports between major regions (Charts 6 and 7).
Chart 5 >> Chart 6 >> Chart 7 >>