The importance of export markets to the income of U.S. farmers is clear. Recent declines in U.S. agricultural exports from $60 billion in 1996 to $49 billion currently due to increased global production and reduced foreign demand meant U.S. agriculture looked to the World Trade Organization (WTO) negotiations in Seattle to continue to expand world trade. But those talks collapsed and many farmers wonder what will be the implications for U.S. agriculture?

This article looks at the Seattle talks and speculates on the future of trade liberalization in agriculture. It begins by highlighting the difference between the image and the reality of the past Uruguay Round. Then it covers the Seattle talks and considers why those talks broke down. Finally, it speculates on the future of agricultural trade negotiations.

The Uruguay Round: Image versus Reality

The events in Seattle really begin in the Uruguay Round completed earlier in the 1990s. That round of multilateral trade negotiations made many positive accomplishments for U.S. agriculture. Yet, there was a great difference between the image of what was achieved and the reality.

The image was that non-tariff barriers were to be converted to tariffs and reduced by 36 percent in developed countries and 24 percent in developing countries. The variable levy of the European Union was abolished. No new export subsidies were allowed and existing export subsidies were to be cut on a volume basis by 21 percent and on a value basis by 36 percent. Domestic farm programs were on the negotiating table and the aggregate measure of support was to be lowered by 20 per-cent. Technical, sanitary, and phytosanitary barriers to trade were to recognize an acceptable risk and to be based on science. Dispute settlement procedures were strengthened.

The reality was that these accomplishments were subject to exceptions that undercut the effectiveness of the agreement. Within the rules of calculating tariffs and tariff equivalents countries could use price data that inflated the tariff ceilings beyond the level of the actual tariff. Thus, even after the Uruguay Round reductions many of these inflated tariff ceilings were higher than the actual tariffs imposed. While the European Union’s variable levy was prohibited, the European Union (EU) could calculate a tariff equivalent high enough to allow it to run a fluctuating tariff. Presently the EU tariff changes at least every two weeks, making it function like a variable levy.

Negotiators, aware that nations could avoid liberalizing trade policies, imposed minimum access rules using a new policy, the tariff-rate quota. In theory, the quota marks the difference between a low and high tariff. In practice, it can be used to operate an import quota, just like before the negotiations. Some issues, like export credit programs and state trading, were put off for later negotiations.

Implementation problems arose with the requirement that technical and health trade barriers be based on science because science is not always clear cut and independent of political pressures. Developing countries felt that developed nations have used technical and health barriers instead of tariffs and quotas to continue to exclude their products. The new dispute mechanism had problems as well. The idea was that under the new Uruguay Round rules one nation could not block an adverse judgment. However in two important cases, bananas and beef, the European Union has chosen to ignore the WTO rulings.

Aware that there would be implementation problems, the Uruguay Round negotiators added a mandate to conduct more negotiations for agriculture and services beginning in the year 2000. That provision required a meeting by the end of 1999, which is what led to the meet-ing in Seattle.

In Seattle

While negotiations for agriculture were required under the Uruguay Round, the task confronting negotiators in Seattle was to develop an agenda for the talks. Would the next talks be confined to the specific areas laid out in the Uruguay Round or would they be broader? Agricultural interests in the United States were in favor of broad negotiations that would allow the trade-offs among sectors which had helped bring the Uruguay Round to an agreement. Agricultural interests feared that countries not wanting further agricultural liberalization would paralyze the talks if there were not other areas where they could benefit. Ironically the European Union, which the United States believed did not wish to liberalize agriculture further, also wanted broader negotiations, including inclusion of environmental issues and labor rights. Other nations, many of them developing nations, sought more narrowly defined negotiations. Placing labor standards and environmental issues in the negotiations was seen as disguised protection by developed nations.

The Seattle talks were ministerial talks where trade ministers represented their nations. In normal situations trade ministers come together to work out the details after the majority of the text has been agreed upon. This did not happen in Seattle. Prior to the Seattle ministerial there was no draft text with most of the issues resolved. One reason for the lack of an agreed text was that the top WTO staff was inexperienced since many had been appointed only shortly before the meeting. Also the climate supporting the negotiations was poorer than that in the Uruguay Round. Neither the United States nor the European Union had strong advocates for another round. In the Uruguay Round U.S. farm and business interests were strongly behind the negotiations with labor interests opposed, but weak. At Seattle the roles were reversed. Partly this reflected the increase in regional trade agreements that generated many of the benefits anticipated in a multilateral negotiation. Partly it reflected the gains made in the Uruguay Round. The European Union’s attention was also diverted to other issues, eastern expansion, farm pol-icy reform, and regional trade agreements.

Another feature of past trade negotiations was that the big players: the United States, the European Union, and Japan, usually cut a deal among themselves, and then presented it to the other members for them to accept. This was the case in the Uruguay Round where little progress was made until the United States and the European Union came to a separate agreement on farm issues, the Blair House agreement. Once that happened the Uruguay Round was quickly wrapped up. In contrast, in Seattle developing countries were not willing to play this game. They had been left sitting on the bench during the Uruguay Round game. Threats by the United States to convene a smaller group of nations to hammer out a deal produced a backlash of anger.

A serious problem in Seattle was the debate over including labor rights and environmental issues in the negotiations. Environmental groups believe that several WTO decisions have under-cut the rights of nations to enact laws protecting the environment. Groups also worry that encouraging trade promotes the exploitation of labor in developing nations while causing job losses in developed nations. These groups and others took to the streets in an effort to stop the meetings. The street demonstrators cannot be given credit for the collapse of the talks, but they were certainly disruptive and made difficult negotiations more difficult. When the U.S. President appeared to side with the concerns of the demonstrators, developing country representatives were appalled. They saw the effort to place labor and environmental concerns on the agenda as an attack on their chances for economic growth.

Prior to the actual meetings in Seattle agriculture was seen as having the potential to wreck the negotiations. In the end that was not the case. While agricultural differences were not resolved, progress was being made as the meeting collapsed. It appears that the immediate causes of the failure in Seattle came from other forces, the lack of a solid draft text, the insistence of the United States to play by the old rules, and the unwillingness of developing countries to do so, and the drive by the United States and the European Union to broaden the negotiation to include labor and environmental issues.

What is Next?

In the aftermath of the debacle in Seattle a critical question for U.S. agriculture is what happens now? Does the collapse in Seattle result in the end of efforts to liberalize agricultural trade? Or is this only a delay as has occurred before?

There are reasons to believe that Seattle represents only a delay. Within a month of the collapse the United States and the European Union had pledged not to walk away from the negotiating table. They formed two working groups to dis-cuss the troublesome issue of trade in genetically modified organisms (GMOs). A biosafety protocol was negotiated in Montreal Canada during January which includes GMOs.

The United States and the European Union disagree on much, including whether the commitments made in Seattle are still binding, but neither appears willing to scuttle the negotiations.

At the same time there are concerns that efforts to further liberalize agricultural trade have been dealt a serious blow. It is hard to see how negotiations on only agriculture can progress. President Clinton does not have “Fast Track” negotiating authority, and it appears unlikely he will get it from Congress. Election years do not usually lead to bold policies. It is hard to see progress occur-ring if the United States continues to link trade liberalization negotiations to labor rights and environmental issues. The absence of “Fast Track” authority illustrates the lack of support in the United States for further multilateral trade negotiations.

How these forces will play out is pure speculation at this point. I expect the United States and the European Union to continue their bilateral discussions on agriculture, but the speed of progress will largely be determined by how fast the Euro-pean Union can reform its own farm policies. As the European Union negotiates over the membership of nations in Central and Eastern Europe, pressures for internal farm policy reform will build. These forces will be resisted by EU farmers fearing a reduction in subsidies in a world market with depressed agricultural prices. By the summer of 2001, with a new U.S. President, we will have a better sense of whether the failure in Seattle was an end or a delay. Much will depend on whether farm and business groups can rekindle the support needed to counter interests opposed to further trade liberalization.