Lies my newspaper told me: preference erosion

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One thing I’ve discovered is that it’s useless trying to get a handle on the WTO negotiations from what you read in the press. The subject is too technical, the journalists too harried and clueless, and so the inaccurate cliches flow thick and fast. It’s not surprising that the quality of public debate on trade is so low: the media really fall down when it comes to covering this stuff.

One particularly pervasive and pernicious lazy-journalist ruse is the tendency to portray the negotiations – and especially the agricultural negotiations as a contest between rich and poor countries. The story-line goes something like this: the poorest farmers in poorest countries get systematically screwed by rich-country agricultural policies. The EU and the US spend tens of billions of dollars subsidizing their fat-cat food industries, unfairly pricing African farmers out of the market. The WTO agriculture negotiations are basically about getting the rich countries to give up unfair farm subsidies so that the poorest countries can compete.

It’s not exactly surprising that this story line has taken hold. It’s a clear, compelling narrative, and do-gooder NGOs (as well as negotiators themselves) often portray the negotiations in these terms. Trouble is, it’s deeply misleading…to the point of mischaracterizing the fundamental dynamic at play.

This lazy-journalist-version leaves out two closely-related facts that undermine it fatally:

  1. Subsidies as such account for only a small part of rich country farmers’ effective protection – the bulk of their policy-generated edge (as much as 90% according to some studies) comes from high tariffs on farm imports, and
  2. Most of the very poorest countries already have preferential, tariff-free access to rich country markets, through things like the European Everything-but-Arms agreement (EBA) and the US African Growth and Opportunities Act (AGOA).

In fact, the poorest countries not only get a pass on the biggest trade barrier protecting rich country markets (tariffs), but once their products reach rich country markets, they sell at the higher, articially inflated prices produced by those high tariffs.

Effectively shut out of this deal are poor (but not very-poor) country farmers, who don’t get preferential access. The reality is that doing away with rich country subsidies and tariffs would tend to hurt the poorest countries by eroding the value of their trade preferences. The more overall tariff levels fall, the less things like EBA and AGOA are worth to the poorest countries. The main beneficiaries from liberalization would be still-poor-but-not-quite-destitute countries which would see their farm exports suddenly becoming competitive. In other words, this is not about Mali vs. France; this is about Mali vs. Brazil.

This problem, known as “preference erosion,” is now at the center of the talks.

Obviously, this story line is wayyyy too complicated (and morally unappealing) for lazy journos to pick up, so you’ll struggle to find it in the press. But the main fault line in the WTO’s agricultural negotiations is not poor countries vs. rich countries. It’s a coalition of the poorest countries’ farmers and the richest countries’ farmers against a coalition of somewhat-less-poor countries’ farmers and rich country consumers!

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