Trade barriers are tumbling down – whether we like it or not

The food-crisis summit being held in Rome by the United Nations Food and Agriculture Organization (FAO) this week reminds us that the protectionist policies of the industrialized countries are having harmful consequences on the well-being of the world population.

FAO director-general Jacques Diouf emphasized in his opening speech that the solution consists primarily of boosting agricultural production.

He also stated that « OECD countries (are) distorting world markets, spending $372 billion US in 2006 alone to support their agriculture. The problem of food insecurity is a political one. It is a question of priorities in the face of the most fundamental of human needs. And it is the choices made by governments that determine the allocation of resources. »

The Doha Round, which began in November 2001 and has focused on liberalizing agricultural trade among the 152 member countries of the World Trade Organization (WTO), aims specifically to reduce the perverse effects of these trade distortions. Despite the difficulty in reconciling the positions of industrialized and developing countries, the Doha Round is far from buried. Many global trade negotiations (notably those of the Kennedy, Tokyo and Uruguay rounds) approached collapse before succeeding at the last possible moment.

Both to improve the situation of Canadian consumers and to pose a gesture of effective humanitarian assistance, the Canadian government must facilitate the progress of the talks. It is now or never, with many observers suggesting that if no agreement is reached before a new tenant arrives at the White House in January, the Doha Round will go into hibernation for several years, regardless of who wins the U.S. election. In the context of a food crisis, we cannot allow ourselves to block agricultural trade and to continue excluding developing countries from the realm of globalization.

Influence compromised

Canada’s influence at the WTO is compromised by farm-producers’ lobbies. Every party defends supply management, which limits local production through quotas and holds back imports through duties on certain products.

Canada, the world’s fourth-largest exporter and fifth-largest importer of agricultural products, must show its goodwill by reforming some of its programs that harm trade. This is possible if the interested parties understand that it will help save Canada’s agricultural industry by making it more competitive and efficient.

The Canadian Wheat Board’s monopoly on the international sale of barley and wheat must end. The board’s current structure and organization are incompatible with a 21st-century economy.

An ability to respond quickly and resolutely to changes in market conditions is as important strategically as the merchandise being produced and sold.

Canada clearly does not have the same weight as the more powerful economies when it comes to seeking concessions in bilateral trade talks. We must focus our efforts on multilateral trade liberalization as proposed in the Doha Round. This is the best option for medium-sized, trade-oriented economies such as ours.

Failing this, Canada could reduce most of its existing customs duties unilaterally. As with all other products, reducing trade barriers would help Canadian and foreign consumers much more than it would penalize agricultural producers.

Citizens who are less well-off would benefit greatly from the lower prices resulting from competition with imports.

Canada’s farm industry cannot be competitive as long as it continues to receive subsidies that keep many small farms on artificial life-support. In a globalized context, economies of scale become crucial.

This is why agricultural policy must help farms grow, innovate and prosper. Hiding behind protectionist customs duties and staking the future on a domestic market that has already reached maturity is a recipe for disaster.

Demand for agricultural products is growing quickly in several parts of the world, and we have to take advantage of these opportunities. Canada will inevitably have to adapt and make concessions if it wishes to continue benefiting from the advantages of being part of the world trading system.

It is better to prepare for it now. Change is coming, whether we like it or not.

Sylvain Charlebois est professeur agrégé en marketing à l’Université de Régina et chercheur associé à l’Institut économique de Montréal.