The Relationship between Doha Round and 2007 Farm Bill - Essay Example

Business and Policy/Politics Relationship The Relationship between Doha Round and 2007 Farm Bill (US) The dynamics of international trade continue tochange as the world becomes more globalised. Global business has grown more competitive as new countries in the developing world continue to push for equal trade opportunities with their more developed counterparts. This situation has led to a number of international negotiations which are aimed at leveling the playing ground for international business. The Doha Round is one of the most notable of these negotiations (Hufbauer, Schott and Wong). Individual countries that are facing competition from new comers in the world market have been formulating their own national policies that are aimed at protecting and promoting their international trade interests. Agriculture is an important part of the economy in the United States and in other parts of the world as well. Since there are too many players in the international agricultural market, the US, like other developed countries, has put in place several policies to safeguard its interests in the global agricultural trade arena (Cho). The Doha Round The Doha Development Round, also known as the Doha Development Agenda is a trade negotiation that was initiated by the World Trade Organization back in November 2001. The overall aim of these negotiations is to increase global trade by lowering trade barriers. This trade was supposed to benefit agricultural as well as manufacturing markets (World Trade Organization). The negotiations have not been a smooth sail. There have been major differences between the key players that are involved in the talks. This has led the talks to stall since 2008. The negotiations came to a standstill after the parties involved failed to come up with a solution to the problems facing the global agricultural market (Cho). Even after the stalling of the Doha Round, politicians from individual countries that are WTO members have tried to come up with their own policies that are meant to push for the development of trade. Although the Doha Round touches on some sensitive policies and agricultural trade issues for many countries, there have been many proposals that could actually help global agricultural trade (Muse). If the proposals that have so far been brought forward in the Doha Round are to be effective, each of the WTO member countries has to agree to commit to a certain level of liberalization (Josling, Summer and Laney). Some of the commitments of WTO member countries who were present during the Doha talks are aimed at: Market access resulting from substantial reductions in trade barriers Reductions of export subsidies with the objective of phasing them out in the long run Domestic support whereby there will be reduced support for trade that is not liberalized and free (WTO). During the 2008 talks, the ministers present agreed to start negotiations which would push for the reduction of tariffs on all non agricultural products. The 2007 US Farm Bill Since the mid 1980s to the 90s, the United States government strived to initiate policy reform in the country’s agricultural sector and this included liberalization of global agricultural trade. The first time during which the US seemed to make headways towards market orientation was after passing the Farm Bill in 1996. The Farm Bill is a United States Policy that is passed once every five years. The current 2007 Farm Bill was passed on the 18th of June 2008 and it was given the name Food, Conservation and Energy Act (Hufbauer, Schott and Wong). This Bill is a continuation of the country’s agricultural subsidy history. It also pursues areas of rural development, conservation, energy and nutrition. One of the initiatives of the bill is Food Stamp benefits that target the whole country. This bill contains three main components (Leger): A program known as the Average Crop Revenue Election that is meant to assist farmers to in choosing some market oriented and revenue based protection as a substitute for subsidy payments which are normally politically set A $4 billion funding for working lands and conservation programs Local food programs funding Factors that facilitated the US Farm Bill of 2007 Deficit in the Federal Budget: deficits in the federal government’s budget necessitated that the introduction of new subsidies in the Farm bill. This was to cushion the effects of this deficit on the agricultural sector in the country. Inequities in Farm Payments: some crops in the United States fetch a higher income than others. The Farm Bill of 2007 was created to ensure that no one left out in the market. This was one of the reasons why there were many subsidies allowed in the bill. Inter Commodity Solidarity Breakdown: it was felt that there was need for some solidarity in the production and selling of different farm commodities. In creating a Farm bill that gave many subsidies to different farmers, congress believed it would anointer commodity solidarity (Josling, Summer and Laney). It is clear that the many subsidies allowed by the 2007 Farm Bill were meant to solidify the position of the US on the world market. However, this bill was not well received on the international scene, with the WTO accusing the US of not being seriously committed to the objectives of the Doha agenda (Leger). Is the US Farm Bill a Stumbling Block to the Doha Round? Several of the Doha Round participants have declared that the Farm Bill is a clear impediment to the talks’ efforts in reaching a worldwide trade deal. Some think that the bill will entrench some subsidies that might be too high. There are fears that the bill negates the commitment of the US towards making concessions that will lead to balanced trade (Murphy and Suppan). According to Murphy and Suppan, The WTO has been critical of agricultural policies that are followed by the United States. The body insists that the Farm Bill does not reflect the commitment of the United States to free and fair trade environment. The bill allows for too many subsidies which run counter to what the Doha Agenda was trying to achieve. From the perspective of the United States, any agreement that will be reached upon from the Doha talks will lower spending limits for some domestic support and eliminate subsidies on exports. All the while, the US agricultural products will enjoy a wider market access around the world. The Farm Bill allows for considerable subsidies and this will have to be considered if and when the Doha talks come to a conclusive end (Murphy and Suppan). There are many things that can be gained from the Doha negotiations. The Doha round does not have to jeopardize the Farm Bill and vice versa. One of the good things that will come out of these talks for the Americans is the control of export financing (Markheim and Reidl). Conclusion The Doha Development Agenda has been critical in addressing the issue of inequality when it comes to issues of international trade. The developed nations normally have an upper hand and they have the mechanism of changing or shaping the world trade dynamics to their own advantage. Unfortunately, as much as this might translate into billions of dollars in revenue for the developed states, it also spells doom for those countries that are still developing. in bringing forth the Doha talks, the WTO paved the way for negotiations that will hopefully lead to a more levelled trading environment in the global picture (Thompson). Markheim and Riedl have said that agricultural trade barriers only add burden to US households. The barriers would also hinder agricultural trade for developing countries. However, as much as the United States are for free trade policies, it still refuses to get rid of those policies that are an impediment to economic liberalization and free trade (Markheim and Reidl). Markheim and Riedl also argue that if developed countries would help the developing nations in their free trade endeavors, these (developed) countries would not have to spend so much money in aid transfers. A free trade environment will help the US generate about $500 billion more in annual income than it normally does. This is equivalent to about $5000 for every household every year. The Farm Bill should deal with two issues that are at stake. These are: limiting the size of government as well as advancing world trade. The expansion of global trade is key to the development of a strong national economy and the promotion of better relationships internationally. Most countries see the Farm Bill in US as a great burden for the Doha talks (Thompson). If the controversial subsidiary issues are to be reviewed the Doha talks will have a reprieve, and may be they will be concluded this time round. If they are brought to a successful conclusion, the US will be able to enjoy more annual income. The country will also be able to assist other developing countries in the free trade arena, thus promoting its international relations (Markheim and Reidl). Trade was definitely a casualty of the financial crisis that rocked the world. Supporting the Doha Round is now more important than ever. If the United States and other developed nations show some political goodwill to a multilateral trade system, may be they can avert a financial crisis like the one experienced in the recent past. All is needed is a joint concerted effort from the countries involved in the negotiations and the talks will end sooner rather than later. This means that if the Doha negotiations come to an end in the near future, all the parties involved will be able to enjoy equal opportunities of marketing their products, including agricultural products. Works Cited Cho, Sungjoon. A Long and Winding Road: The Doha Round Negotiation in the World Trade Organization. Web 27 June 2010. HufBauer, Gary, Schott, Jeffery and Wong, Woan. “Figuring Out the Doha Round.” VOX, 22 February 2010. Web 27 June 2010. Josling, Tim, Summer, Daniel and Laney, Kara. “The Farm US Farm Bill: Implications for Developing Countries.” September 2007. IPC Issue Brief 25. Web 27 June 2010. Leger, Daniella. “Navigating the 2007 Farm Bill, Biofuels, and the WTO Doha Round.” 19 Jan. 2009. Center for American Progress. Web 27 June 2010. Markheim, Daniella and Riedl, Brian. “Farm Subsidies, Free Trade and the Doha Round.” 5 Feb. 2007. The Heritage Foundation. Web. 27 June 2010. Murphy, Sophia and Suppan, Steve. “The 2008 Farm Bill and the Doha Agenda.” 25 June 2008. Institute of Agriculture and Trade Policy. Web 27 June 2010. Muse, Ben. The Doha Round and the 2007 Farm Bill. 26 October 2005. Web 27 June 2010. Thompson, Robert. “The US Farm Bill and the Doha Negotiations: On parallel Tracks or a Collision Course.” IPC Issue Brief. September 2005. Web 27 June 2010. World Trade Organization. The Doha Round Explained.Web 27 June 2010. Read More