As agriculture ministers meet in Montreal ahead of the next round of world trade talks, Denis Staunton, European Correspondent, looks at the implications for Irish farming.
Agriculture ministers from 26 countries meet in Montreal today, seeking common ground on the future of farming in advance of September's World Trade Organisation (WTO) ministerial meeting in the Mexican resort of Cancun.
Many observers are predicting that Cancun could see a repeat of the WTO's 1999 summit in Seattle, which broke up without agreement amid violent clashes between police and protesters. Agriculture forms only one component of the trade talks but it is the area where agreement has proved most elusive since the WTO agreed in Doha two years ago to launch a new round of global trade negotiations.
WTO negotiations are complex and poorly understood outside a small circle of experts and activists, but the consequences of Cancun for Irish farming could be at least as great as those of the reform of the EU's Common Agricultural Policy (CAP) agreed last month.
A senior official at the Department of Agriculture warned last week that failure to maintain high tariffs for some products entering the EU could prove fatal to the livelihoods of Irish beef and dairy producers. "They'd be wiped out, basically," he said.
At Doha, ministers agreed to make substantial reductions to "trade-distorting domestic support" for farmers; to reduce "with a view to phasing out" all forms of export subsidies and to substantially improve market access by cutting tariffs on agricultural products.
The current round of negotiations has been termed a "development round", committed to improving conditions for developing countries by giving them greater access to markets in rich countries.
Uganda's trade minister, Prof Edward Rugumayo, last week expressed succinctly the problem EU and US farm subsidies create for countries such as his. "Poor countries can't afford subsidies so we are saying they should remove subsidies or open up their domestic markets to our exports," he said. "The only thing we can do is to put huge tariffs on their imports but we are not allowed to do that under the WTO."
The EU believes that its agreement to decouple direct payments to farmers from production represents a radical cut in trade-distorting domestic support.
The Agriculture Commissioner, Mr Franz Fischler, has promised European farmers that they will not be asked to "pay twice" for the reform through extra concessions at the WTO.
EU negotiators hope, in fact, to extract a price from Europe's trading partners for CAP reform in the shape of concessions in other areas of the trade talks.
Ms Shefali Sharma, an analyst at the Institute for Agriculture and Trade Policy which campaigns for a fairer trade deal for developing countries, warns that the EU may have to do more to convince its partners.
"The EU cannot prove the impact on world trade of its CAP reform. There is no evidence that the amount of subsidy will be reduced and the whole notion of decoupling is a very deceiving one. There is a lot of flexibility in the deal," she said.
The EU has offered to cut its export subsidies by an average of 45 per cent and to abolish them completely for some products. This falls short of a proposal by Mr Stuart Harbinson, who chairs the WTO agriculture negotiations, to eliminate all export subsidies within nine years.
The argument over export subsidies is complicated by the practice of the United States of offering farmers "export credits", or guaranteed loans at competitive rates. The EU wants these to be classified as export subsidies and to be subject to the same restrictions. The EU is also concerned about the use of food aid programmes to subsidise US exports and wants strict rules to govern food aid to poor countries and to victims of emergencies.
Irish officials are confident that any agreement on domestic support and export subsidies will be manageable in terms of their impact on Irish farmers. However they are deeply concerned about the third element of the WTO farm talks - moves to improve market access by reducing tariffs.
The US and the Cairns Group, which represents agriculture producing countries such as Australia, New Zealand and Argentina, want to harmonise tariffs in developed countries, leading to a maximum tariff of 25 per cent. The EU currently imposes tariffs of up to 74 per cent on beef imports and up to 87 per cent on dairy imports.
The EU has proposed an average cut in tariffs of 36 per cent, with a minimum reduction of 15 per cent on all agricultural products. The Government believes that such reductions represent the limit beyond which Irish producers would no longer be able to compete.
The Minister for Agriculture, Mr Walsh, will press for beef and dairy tariffs to be cut by the minimum 15 per cent in an effort to keep more efficient producers from Australia, New Zealand, Brazil and Argentina out of the EU market.
Developing countries fear that the EU and the US will use today's meeting in Montreal to agree a common position Cancun that will ignore the concerns of poorer countries. They have warned that they will block any agreement that, in their view, benefits rich countries at the expense of the developing world.
Regardless of what happens at Cancun, the Government is aware that the long-term trend within the WTO is to treat agriculture in the same way as other economic sectors and to remove the barriers to a global system of free trade. "We are on the brink of free trade," one official said. "All we can do is to try to slow down the process."