September 8, 2003

September 8, 2003 | News Releases on Foreign Aid and Development

Trade Reform Necessary to Rebuild Credibility

WASHINGTON, SEPT. 8, 2003-Both the United States and the European Union should come to this week's World Trade Organization talks in Cancun, Mexico, ready to make radical changes to improve the flow of free trade, help the developing world and end counterproductive tariff and export subsidy programs, says a new paper from The Heritage Foundation.

According to the paper, "Achieving Trade Liberalization: Why the U.S. Should Challenge the EU at Cancun," many proposals have emerged to afford developing countries more access to agricultural markets in the west-one from the United States, one a joint U.S.-European Union proposal and one from the EU only. The U.S. proposal would reduce average allowed farm tariffs from 62 percent to 15 percent globally, cap trade-distorting subsidies at 5 percent of total agricultural production and phase out export subsidies over time. According to Heritage analysts Sara Fitzgerald and Nile Gardiner, it holds the best hope for bolstering Third-World economies.

The worst of the lot, say Fitzgerald and Gardiner, is the EU proposal to the WTO. While the EU recently has announced reforms to its Common Agricultural Policy (CAP), this proposal would "preserve the essential principles" of the CAP, according to the French agricultural ministry. Currently, the CAP consumes more than half the EU budget, forces consumers to pay 44 percent more food and accounts for 85 percent of all world economic subsidies.

These subsidies and tariffs shackle the developing world, which depends on agriculture for economic growth, by denying it access to lucrative markets here and in Europe, Gardiner and Fitzgerald say. The Cancun meeting is the time to decide on targets and deadlines for tariff and subsidy reductions. U.S. Trade Representative Robert Zoellick should push for an agreement that resembles his July 2002 proposal as closely as possible. He should insist that the plan that passes calls for eliminating export subsidies, not merely reducing them.

Similarly, he should push for an end to-rather than the proposed expansion of-so-called "geographic indications," which serve only to perpetuate protectionism. For instance, feta cheese could be produced only in Greece, even if farmers in Denmark can do it cheaper. Beyond wine and spirits-everyone recognizes that Bordeaux wine can be produced only in Bordeaux-such measures have no place in modern trade arrangements, the authors say.

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