Impasse at WTO casts shadow

by Morton I. Sosland
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In a crop year like the present 2014-15, when global crops and supply totals are at or near all-time records, many of the hugely important supply-demand nuances that may affect positions are neglected. For instance, this is not a time when much, if any, attention is paid to the agonizing negotiations being conducted largely by government officials in cities like Geneva, Switzerland, to come up with acceptable language that could in the long run have a powerful impact on a flour miller or grain merchant almost anywhere in the world. When it is realized that these negotiations often seek to define how individual countries support their domestic grain producers and set out what is acceptable trade and what is subject to international action, and whether even specific transactions are acceptable or not combine to explain why constant awareness of such activities is worthwhile.

Alertness along these lines might be considered a bit of a stretch these days, because international trade negotiations conducted by the World Trade Organization (WTO) have reached the point where even their most powerful advocates are beginning to doubt if anything may be accomplished. “We have not found a solution to the impasse,” said Robert Azevêdo, director-general of the WTO. He goes on to opine that this means the important Trade Facilitation Agreement will not be completed in time to implement the Doha Round by the end of 2014. He describes this as “the most serious situation this organization has ever faced,” adding weight to this warning by suggesting the need to turn attention “to our next step.”

Even such a light hint of the collapse of the WTO mechanism has implications extending into every corner of an industry like grain-based foods, no matter where located. The agreement, primarily agreed to in a series of post-World War II negotiations, does everything from impose limits on domestic price supports affecting crop sizes to steps that individual nations may take to limit grain imports and to stimulate exports of surplus supplies. At one time, the agreement even imposed maximum and minimum prices for wheat in global trade, but that has long been abandoned, although not forgotten at times like those of several years ago when the global market exploded.

While the current impasse in negotiating a revised Trade Facilitation Agreement centers on the demands of a single nation — India — the arguments have far-reaching implications. That is especially the case in counting governmental actions that might and might not influence prices. India refuses to accept an agreement that includes its domestic purchases of wheat and other food grains, which are mainly seen as supplies for feeding large sectors of that nation’s population deemed without access to needed food. India resists limits being placed on those purchases, and other countries consider such a change a near fatal effect for the entire agreement. No one has come up with a way of resolving India’s unique approach to assure adequate food for its massive population during a lengthy period of intense discussion extending over the past year or longer.

Having the WTO see its future threatened by an issue such as India’s domestic food relief program is remarkable in light of the organization’s considerable success through the last half of the 20th century and into the 21st. For the most part, it has had to deal with trade negotiations between single countries and blocs of nations that often reflected the ease of non-multilateral over multilateral negotiations. Current trade talks under way between the United States and the European Union, with many ups and downs, underscore how the world’s favor has changed from wanting to enter only into agreements that extend to every nation. It is easy to make the case that trade in grain and grain foods is among the great beneficiaries of these successes. While it is early to assess the meaning of the present breakdown, it is a stretch to call it positive for the industry.