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Battle for Free Trade Tuesday, 23 November, 1999, 22:17 GMT
Free trade flashpoints
Agricluture is always controversial
The Seattle talks have a modest aim of setting the agenda for what's called a 'round' of negotiations - to agree what to talk about. But that is proving to be hard enough, as BBC economics correspondent Andrew Walker explains.

Over a hundred and thirty countries are in the World Trade Organisation. And all have their own ideas about what should be on the agenda.

The battle for free trade
The only subjects agreed for sure are agriculture and services - and that is because there is commitment to further talks on these areas built in to earlier agreements.

Agricultural issues

Agriculture is likely to be the most sensitive. It nearly broke the previous round, called the Uruguay Round. It will be just as contentious this time.

Genetically modified crops could come under scrutiny
Much of the food exporting world has two markets in its sights - the European Union and Japan.

The EU's subsidies and import levies make it harder for farmers in the rest of the world to compete in what should be a very lucrative market.

Japan's farmers are also heavily protected against competition from imports. In addition a few of the smaller countries also give extensive protection to their farmers, including Norway, Switzerland and South Korea.

These countries all know that there is no escape from further liberalisation of agriculture.

But they will face serious political problems with their own farmers if they make further concessions. During the Uruguay Round, European farmers took to the streets. It will surely happen again. The big farm exporting countries, like Australia, Brazil and Canada have little sympathy for their political problems.

But the EU will hit back by trying to make food safety, and food labelling, an issue. It knows that many European consumers do not want to eat genetically modified food or hormone-treated beef, even if the WTO says they are safe, and wants safeguards to strengthen consumer choice.

Services become important

Services will also be on the post-Seattle agenda.

The word covers a real rag-bag of activities; banking, insurance, telecommunications, transport and more. It is also controversial.

It was on the agenda for the Uruguay Round for the first time - these rounds had previously been about trade in goods. And the issue was not resolved until some time after the main Uruguay Round agreements had been signed.

Many developing countries were reluctant to give the much easier access in these sectors that the rich countries wanted.

And it is a hugely important area. Services account for sixty per cent of global economic output, and that proportion is sure to grow. But only a fifth of world trade is in services.

Certainly some services can't be traded easily - haircuts and restaurant meals, for example. But many can. Recently services trade has been growing slightly faster than goods trade. That process would get a real boost from a new trade liberalisation agreement.

New areas of controversy

Beyond these two built-in areas, different countries have their own shopping lists of things they want from a new trade round.

Many developing countries, especially but not only in Asia, want better access to the clothing and textile markets of the rich countries. They face quotas on how much they can export. True, these are being phased out, but over a painfully long period. And there are high tariffs on some of these goods.

The United States would like an agreement on labour rights. That presumably could lead to trade sanctions against countries with poor labour rights. The poor countries want none of this. They see it as an attack on the main competitive advantage they have in world trade - low labour costs.

The European Union would like as wide ranging a round as possible. It wants to have progress to show in many areas to count against the losses its farmers are likely to suffer. The EU is keen in particular on agreements on the treatment of foreign investors and on basic standards of anti-monopoly policies.

The case for the latter is this: if there are extensive enough restrictive business practices in a country, it can still be hard to import, no matter how few government barriers there may be. But there is little support for either of these.

Taking the pain Trade negotiations always require governments to accept political pain. Most economists will tell you that removing your own trade restrictions is good for you, even if others don't reciprocate.

But there are losers within countries who can see very clearly that their problems are due to the removal of trade barriers. The gains are often spread more thinly among many people who don't necessarily know that trade may be raising their standard of living.

So Seattle will be hard. And the negotiations that follow will be even harder. The target is to finish them within three years. But don't bet your shirt on it. The Uruguay Round overran by three and half.

Links to more Battle for Free Trade stories are at the foot of the page.

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