Who's feeding who in this trade fiasco?

Dan Atkinson|Mail13 April 2012

PETROL prices are soaring, mortgage rates are rising and June, far from bustin' out all over, looks more likely to prove the cruellest month. But, funnily enough, the next few weeks ought to bring hope of a welcome boost to British family budgets.

One qualification - 'ought to' does not mean 'will'.

On June 18, the World Trade Organisation will rule on the legality (or otherwise) of annual US subsidies of nearly £2 billion to the American cotton industry. As subsidies exceed the market value of the cotton produced, you can see how this is of more than passing interest to 25,000 mollycoddled cotton farmers.

At first sight, this is not, perhaps, of overriding importance for Britain. But if Washington's ultra-generous cotton regime is given the red card by WTO referees - and the signs are that it will be - many equally dirty players could also be sent on their way, not least being large parts of Europe's Common Agricultural Policy (CAP).

At issue is not the principle of subsidy, which the WTO accepts on social or other grounds, but what is called 'trade-distorting subsidy'. This is where Western taxpayers' money keeps the agricultural produce of developing countries out of our markets while allowing us to dump our surplus on them, thus wiping out their own farmers and turning poor countries into destitute ones.

Were the cotton ruling to start a domino effect, so the thinking runs, trade in food would be liberalised, subsidies would tumble in the West and everyone would be a winner, not least the British consumer.

The Department of Trade & Industry estimates that between £8 and £9 a week would be cut from the average family food bill. What better antidote to the misery of petrol prices - especially if the fuel rises proved temporary and cheaper food was permanent?

Not so fast. Defeat for the US cotton regime would make big headlines and generate much-needed good publicity for the WTO after the ignominious collapse of its recent ministerial trade-liberalisation summit in Cancun, Mexico. And the prospect of imminent 'reform' of the CAP to cut food bills may do something to repair the European Union's battered image, not least in Britain. But when the great and good start talking up an 'historic' decision, the alert citizen should smell a rat.

First, the WTO cotton hearing is quite narrow in scope, referring only to subsidies paid between 1999 and 2002 and their effect on Brazil. This leaves potential for later argument by America's army of trade dispute lawyers.

Second, the EU's ruthless attitude to trade 'liberalisation' makes President George W. Bush look like the British eco-campaigner George Monbiot by comparison.

The most disgusting statement about the Cancun collapse came from EU trade negotiator Pascal Lamy, who declared: 'We in the EU have fed the beast'. The 'beast' in question is the world's poorest nations.

Third, reform of the CAP, bringing cheap food in its wake, is a hardy perennial of pro-EU British politicians, dating right back to the day we joined in 1973. It hasn't happened yet.

Fourth, there is nothing Britain can do about any of this, given that we are not allowed our own trade or agricultural policies and have to be content with a 25th share of Mr Lamy and his colleagues.

Fifth, the WTO ruling will coincide with a meeting of the United Nations Conference on Trade and Development (UNCTAD) in Sao Paulo in Brazil. There is much talk of streamlining UNCTAD and other international bodies such as the International Monetary Fund and the World Bank.

Amazingly, the developing countries don't like the sound of this. They seem to have got it into their heads that the rich countries will use the shake-up to sideline the poor ones.

All a terrible misunderstanding, no doubt. But, coincidentally, a defeat for the US on the last full day of the conference may well keep the developing countries quiet for a bit.

So do not start spending that extra £9 a week just yet. Like the much-vaunted 'benefits' of EU membership, the claimed gains of free trade, WTO-style, may take some time to filter down to you.

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