Arguably the greatest gaping hole in the WTO rules and norms is the Agreement on Agriculture (AoA). One of the three pillars that holds this agreement in place is the domestic support system; with the other two being market access and export subsidies. On paper, this agreement seems sound — global market access and competition is preserved through a multilateral reduction of subsidies and tariffs on traded agricultural products (exception of LDCs getting more leeway), with subsidies still being provided for minimally trade-distorting producers. However, it is here in the vagueness of judicial parlance that lies a fundamental cleft; how do we measure trade-distortion effectively? The parameters and methodology used to define the domestic support system are flawed, the system is broken down into three box categories — green box or minimally trade-distorting subsidies, blue box or semi trade-distorting subsidies, and amber box or directly trade-distorting subsides.

The Uruguay Round was seen as a compromise for both developed and developing countries, but the consensus was too rosy to have effective practical substance. From liberalization of services and agriculture to the new and improved dispute settlement mechanisms put into place, members of the GATT decided on a full overhaul that would result in the birth of the WTO. Although laissez-faire of agriculture was promised through the three pillars outlined in the AoA, the domestic support system’s opaqueness allows developed nations to still actively distort trade patterns by cloaking subsidies under the green box category while themselves reducing and enforcing a global reduction of amber and blue box payments. With bills and lobby groups dating back to the Great Depression era and deeply rooted in American policy, the U.S. is perplexed in an embedded liberalism compromise where its farmers reap massive benefits from subsidies.

However these funds don’t flow to the organic family farmer with a small scale production and substantial exposure to exogenous market shocks. They line the pockets of big corporations like Tyson, Perdue Farms, McDonalds, General Mills and etc., who effectively flood the international market with cheap food products. In effect, this is dumping. The World Bank reports that more than half of E.U. support goes to 1% of producers and 70% of U.S. subsidies go to 10% of producers. In a similar vein of U.S. policy with non tariff barriers (NTBs) in the 20th century, green box policies allow the Occidental nations to bend, but not break the rules. In aggregate, the E.U and U.S. spend upwards of $380 billion on agricultural subsidies alone.5 The reason we’re seeing an increase and not decrease in agricultural subsidies is because where previously $1 under amber box subsidies directly influenced market price, now more than $1 is required to achieve the same effect on price using green box policies. Consequently, the “law of constant protection” as coined by Bhagwati continues to confine U.S. and E.U. trade policy.

Unfortunately for the developing world, their journey up the income ladder requires efficient production and allocation of resources that obeys the laws of comparative advantage. Under real conditions, most LDCs and developing countries have a comparative advantage over developed countries in agricultural products. While the flip side to this notion is that the U.S. and E.U. are providing the world with below market level prices; billions of dollars of government budget could be freed up and made disposable for more worthy causes. Moreover, it pushes countless developing country farmers out of business instead of fostering their own domestic agricultural sector, which in turn creates a dependency on the West just to fill up one’s belly. An extreme example of this is Haiti. While Haiti was once self-sufficient and maintains a real comparative advantage in most agricultural products, it now imports 60% of it’s food products (primarily from the U.S.) and is one of the poorest nations after heeding Western advice to liberalize.

Firstly, the domestic subsidy system, especially green-box policies, need to be completely revamped and redefined under the AoA. Similar to the process of tariffication that was a result of the the Uruguay Round, all subsidies need to be explicitly stated as such and converted into bound subsidies. Bound subsidies will have a ceiling beyond which they cannot be increased and the goal will be to decrease these subsidies over time. Subsidies can and still should be provided for small-scale farmers, however agri-businesses earning profits above a certain level with minuscule vulnerability to exogenous shocks need to be cut out. Since none of this will come free, the developing world will have to reciprocate and give something back in return. This can take the form of a reduction in bound tariff rates for services, agriculture, and manufactured goods, with LDCs once again getting more leeway. Agricultural subsidies on one end and tariff bound rates on the other should be removed in a fragmented fashion, giving all parties a chance to frequently evaluate the performance of other members. Since liberalization of agriculture was promised after the Uruguay Round yet U.S. and E.U. subsidies have only increased ever since, it’s not unexpected that the developing world is dubious of the developed world’s commitments towards change. For this reason, fragmented reductions are vital in preserving the integrity of the negotiations, albeit in a tedious manner.

Fragmented reductions also serve as a signalling mechanism for domestic actors, who in response begin to shift their labor and production accordingly. Considerable dissent by agricultural lobbyists is expected in the West, however one may also predict strong support by the services and manufacturing sectors. Certain developing countries may also not fully agree with this agreement since it could potentially trap a vast share of their population in the agricultural sector. Nonetheless, estimates of increases in global welfare from reductions of trade barriers in agriculture, services, and manufacturing range from modest figures of $80 billion to more extreme calculations of $3000 billion per year, most of which would flow to the developing world.9 Though state security makes agriculture a fragile matter, there is a paradox to its sensitivity. Increased food interdependence may actually be a foolproof way to stabilize the world order. If there’s a dependency on several parts of the globe to fill one’s stomach, the chances of war breaking out and leading to mass scale destruction are causally reduced too.

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THE PERFECT RIBEYE STEAK

Ingredients:
-Ribeye steak
-Coarse sea salt
-Garlic
-Olive Oil
-Black pepper

1. Thoroughly marinate steak with 1tbsp of coarse sea salt and allow to sit in refrigerator for 1 hour.
2. Prepare garlic paste by crushing a few peeled garlic pieces. Mix the garlic paste with as much olive oil as seen fit.
3. Remove steak from refrigerator and lather with garlic paste and olive oil combo.
4. Add black pepper to the heart’s desire.
5. Preheat oven to 425 F.
6. Insert steak into oven using a baking pan and aluminum foil in order to preserve juiciness and flavour.
7. After 5 mins in the oven, remove the steak and flip it over. Turn down the heat to 335 F.
8. Allow to cook for 4-8 more minutes depending on preferred degree of doneness.