Cito calls for fairness in food trade

WASHINGTON DC – Agriculture Secretary Cito Lorenzo called for fairness from the developed countries in the formulation of the international standards on food issues. Otherwise, the secretary warned, we end up with those standards being regarded as "impositions on the South [the poor countries] by the North [rich countries] over conditions of production and consumption."

Speaking before an international conference on food safety, food security and trade sponsored by the International Food Policy Research Institute and the Center for Transatlantic Relations at the John Hopkins University in Washington, DC, last June 21, Secretary Lorenzo warned that "unless a fair trade environment, driven by balanced rules and tight disciplines against distortions and circumventions" is established, "food aid and technical assistance to developing countries would remain limited in their effectiveness."

In fact, he observed, things would be worse, because current policies of G8 countries "could consign recipients to dependence on the altruism of donors which are not inexhaustible and often accompanied by great political costs." In other words, Cito is saying, if the G8 countries are sincere in their desire to help third world countries fight poverty, they should open up their markets to allow for more real free trade, not just so called foreign aid.

The remarks of Secretary Lorenzo echoed the position taken by Trade Secretary Mar Roxas in the recent Doha trade talks. The Doha round of trade talks have all but stalled as developed countries continue to insist on their massive subsidies to their agricultural sector, effectively making Third World exports uncompetitive.

Curiously, the Hopkins conference Cito addressed, came as European agriculture ministers announced that they have reached an agreement on how to phase down massive subsidies being given to their agricultural sector. After three weeks of haggling, according to The Economist, "Europe’s farm ministers do appear to have accepted the need for radical change, albeit with little enthusiasm in some cases."

The problem with the so called compromise agreement however, is that it is so full of loopholes, The Economist wondered "if the reforms they have now embraced will be enough to break the deadlock in the Doha round of world trade talks."

The impetus for the agreement is also suspect, coming as it did, at the eve of the entry into the European community of poorer eastern block countries. Giving subsidies to the agriculture sector of these nations is an expensive proposition for Europe.

As it is, Europe’s common agricultural policy or CAP already costs around euro43 billion ($50 billion) a year. That’s about half the total budget of the European Union.

CAP is "hugely unpopular around the world," The Economist notes because "it subsidises European farmers to such an extent that they can undercut farmers from poor countries, who also face trade barriers that largely exclude them from the potentially lucrative European market.

It was in that light that Cito told the Hopkins conference that "developing countries should be allowed to acquire the capacity to attain international standards in food safety, food security and trade before being subjected to foreign competition that is heavily supported by governments of rich nations." Cito warned that tariff liberalization without commensurate reforms by developed countries on trade distorting domestic and export subsidies and market access, would burden the poor because of their obvious vulnerability."

In stark contrast to the lavish subsidies G8 countries give their agriculture sector, Cito cited the case of the Philippines that has been forced to cut its budget for the agriculture sector by 15 percent, with an additional 15 percent obligated for savings. Such belt tightening measures have become necessary, he explained, because of the adverse effects of the Asian regional currency crisis and the financial needs of other priorities, like fighting terrorism.

Consequently, Lorenzo declared, "international agreements on trade and food safety must commit to a capacity-building program for developing countries to acquire standards harmonized with international norms." Cito is right. If only to help fight poverty that afflicts the majority of mankind, rich nations should even bend over backwards and allow the third world greater preferential treatment to allow significant capacity building to take place. Otherwise, the rich nations can stop all these sermons on free trade, globalization and concern for poverty. They only exposes the hypocrisy of it all.

Cito plainly said that "the majority of the poor in developing countries – small farmers, fisherfolk and landless workers, both producers and consumers – must not be unduly exposed to heavily supported competition. After all, whatever support and protection these sectors receive cannot and do not significantly distort world markets, given development country budget constraints and small market shares."

Well said. Let us see where that takes us.

Kitchen sink economics

CNN Money has called the economy here, kitchen sink economics. Policy makers, CNN observed, have thrown all but the kitchen sink at the US economy. The question is, will it help in the second half? The US economy grew just 1.4 percent in the first quarter and probably about as much in the second. With the tax cuts and the rate cuts, gross domestic product (GDP) is expected to grow at a rate of 3.4 percent in both the third and fourth quarters.

If this were the Philippines, the economists would probably be jumping up for joy at this promise of three-to-four percent growth in the manner of Romy Neri’s recent behavior. But even as most economists here concede a stronger second half this year, many are still worried that the danger of deflation isn’t quite gone. That’s why the Federal Reserve decided on another rate cut last week even when many economists publicly expressed the view that it may not be necessary.

According to CNN Money, Citigroup chief economist Robert DiClemente thinks that, even if GDP grows at a four-percent rate in the near future, as he expects it will, that still won’t be strong enough to take up the slack in the economy and keep inflation from falling to zero, setting the stage for future deflation. The prospect does not materially alter chances that inflation will also remain well anchored.

CNN Money points out that too many companies still have way too much production capacity – the buildings, computers and equipment with which they make stuff. "They loaded up on it in the late 1990s, when demand was strong and the future seemed bright, and now they’re stuck with it, giving them little reason to invest in more."

CNN Money explains that "all this excess capacity and slack in the labor market means there’s little demand, which is keeping wages and prices low. The Fed’s nightmare is that the economy might keep growing, but never fast enough to stay out of the spiral of deflation, an unstoppable drop in prices that sinks corporate profits."

We, dependent as we are on the health of the American economy, will watch nervously how things turn out for them.

Physics experiment

Now, here’s Dr. Ernie E.

The wondrously stacked blonde appeared at her door in a strapless evening gown that defied gravity.

"Terrific!" said her admiring escort. "I don’t see what holds that dress up!"

"Play your cards right, dear, and you will," she murmured.

Boo Chanco’s e-mail address is [email protected]