High noon in Cancun

The Americans and the Greeks stood side by side as a massive force lined up against them. There had been some minor skirmishes and a lot of pushing and shouting, setting the scene for the main event. The French and the Germans had gone over to the other side. But who would have expected the British and the Dutch, two former colonial powers, to take the side of the former colonies against the United States and their own EU partner Greece? The Americans and Greeks might have thought of the glorious battles of the past when their soldiers fought side by side – two world wars, Korea and smaller conflicts. They were always on the same side, from the Greek War of Independence onward. Or perhaps now they were too busy thinking of the home front and did not quite realize they were holdouts on the same battle, standing back to back. And then, fortunately for them, the battle was called off before the enemy overwhelmed them. Everyone packed up and went home. Was this a movie or was it fantasy? Neither, it was the World Trade Organization (WTO) conference in Cancun which collapsed on September 14 when delegates from industrial and developing nations failed to reach a compromise on subsidies provided to farmers in the United States and the European Union. It was subsidies for cotton production that united the United States and Greece, the champion of every Third World movement that ever defied the US. While we were all busy sniping at the government’s pre-electoral handouts (and wondering how to use them to our best advantage), examining what the opposition New Democracy had to offer apart from promises that it can do everything PASOK does (but better), no one here noticed the lonely and important battle Greece was waging in Mexico. D.G. Papadocostopoulos, an intrepid financial reporter for Kathimerini, revealed details of this war in a most interesting piece this week. The Greek delegation was led by the general secretaries of the ministries of finance and agriculture. Obviously, the Greek government thought the talks would be a formality and that it did not need to send ministers as other countries had done. As the WTO talks developed into the usual ritual of North vs South, our team must have felt as cozy as a crab on the seabed as a hurricane thundered overhead. But suddenly our team found itself in the eye of the storm as it became clear that the battle would be about cotton. The African nations of Burkina Faso, Chad, Mali and Benin raised their demand for an end to cotton subsidies in wealthy nations, warning that otherwise they would lose $250 million a year in exports. West and Central African countries say that, because of the American and EU subsidies, they lose a total of $1 billion in lost exports and related revenues annually. France helped get the issue on the agenda and Britain and the Netherlands backed the Africans. When a German deputy minister also voiced support, the Greek delegation called Alternate Foreign Minister Tassos Yiannitsis in Athens. He complained to the German ambassador and the Germans changed tack, Papadocostopoulos reported. With the collapse of the talks, Greece was spared having to appear – alone with the United States – as the cause of Third World poverty. The WTO talks are going to continue in Geneva, and cuts in subsidies for cotton, tobacco and olive oil will probably be on the agenda. Greece might have gained some time but this is a war that will not have a happy outcome for our farmers. Cotton and EU subsidies are an obscure issue that only concerns the public and government when, in a seasonal ritual similar to ploughing, planting and harvesting, farmers rev up their tractors and prepare to block national roads because they are unhappy with cotton prices and subsidies. Unfortunately for them, despite the political clout that they wield and which paralyzes governments, the arithmetic is against them. The European Union is the world’s seventh-largest producer of cotton with a global share of 2.5 percent. Greece produces about four fifths of this and Spain the rest. China is first with 22.6 percent, followed by the United States with 20.1 percent. Greece produced 1.35 million tons in 1999 and cotton accounts for 9 percent of the country’s agricultural output. Cotton is dominant in the regions of Thessaly (accounting for 60 percent of arable land) and Sterea Ellada (about 50 percent) and less so in Macedonia-Thrace. EU figures show that there are some 71,600 cotton holdings (i.e. farmers) in Greece, with farms averaging 4.9 hectares. Each year, the EU spends an average of 800 million euros in subsidies for Greek cotton farmers. This translates into a guaranteed price of 747 euros per ton of cotton in 2002-3, when the world price was 238 euros per ton. (Consider also that because of the complicated subsidy system, Greece has been penalized for overproduction and would have got an average of 22 percent more had it stuck to the mandated levels). So, a large section of the population in the heartland is entirely dependant on cotton subsidies and the smallest change in the system causes major social and political turbulence. Highlighting this, the conservative New Democracy party has consistently aligned itself with the Communist Party in backing farmers’ protests. With an election looming, all parties will be pandering to every special interest group (and will certainly not want to antagonize one with the power to cut the country in two) so cotton subsidies will not be on the agenda. But our politicians, and the farmers, will have to try to deal with the problem sometime because the situation is untenable and Greece cannot afford to be isolated in the EU if cotton remains the touchstone for progress in the WTO. The American situation is very different from that of Greece and its small cotton farms. According to the UN Development Program, America’s 25,000 cotton producers receive $10.7 million per day. The relief organization Oxfam says this is three times more than the US budget for aid to Africa’s 500 million people. But as the cotton lobby is very powerful in America as well as in Greece, we can expect no change ahead of the presidential elections. Worldwide, cotton subsidies amounted to about $5.8 billion in 2001-2, almost equal to the amount of cotton trade over this same period. US subsidies made up $3.7 billion of this. EU officials argue that the EU does not subsidize exports and applies a zero tariff on cotton imports from African, Caribbean and Pacific countries as well as from the world’s 49 poorest countries. «The EU has no border protection. And therefore has little or no impact on world cotton prices,» Trade Commissioner Pascal Lamy and Farm Commissioner Franz Fischler said before the Cancun talks. They might have been doing the crab on the seabed routine but the numbers suggest they are right. The EU produces 2.5 percent of the world’s cotton, it imports 5.4 percent and provides 3.3 percent of global exports. The United States produces 20.1 percent, imports 9.5 percent and provides 30 percent of global exports. The EU, in other words, produces its own cotton but is also a net importer. What third countries are losing is the opportunity to sell to the EU the amount that EU members (i.e. Greece) produce. The United States is a huge net exporter. Yet we are in the same camp, in one of the quirks of globalization which, because of cheap and effective transportation, seems to be an extension of the industrial revolution. The upheaval that was caused in Britain in the mid-1980s now exists across the world, with the benefits and dangers that open markets bring. The eternal problem is that some people, or countries, invariably use the system to their own advantage (as in not opening their borders while demanding that others open theirs). The irony is that the Greek farmers feel aggrieved when they see the profligate spending on other kinds of farming, such as dairies, who form a stronger lobby in more powerful EU countries. But the Africans and others, unprotected by subsidies in the real world of unpredictable weather and fickle markets, see the Greeks as part of the EU and therefore responsible for their problems. In Europe and the US, subsidies are a political issue. In Africa and elsewhere, cotton sales mean the difference between progress and disaster. But there is further irony in the fact that African farmers are where the Greeks were decades ago, when the promise of a lucrative export crop prompted farmers to abandon subsistence farming. Now the survival of 10 million people in Burkina Faso, Chad, Mali and Benin depends on cotton. For countries in the developed world, this all comes down to jobs and prices – politics, in other words. This is an issue that is becoming more and more urgent in Greece and the EU. Can we afford to stop subsidizing farmers in order to import cheaper products, and force tens of thousands of farmers into unemployment? Can we allow industrial productivity to be so low, and therefore so expensive, that it makes more sense to import goods at the expense of even more jobs? If we believe the EU will continue to bankroll us and to ignore the distortions this causes (in Greece, the EU and internationally), then we can delay introducing reforms that will make Greece more competitive, allowing political and social costs to accumulate. This would lead to people being paid for not working and it would probably be cheaper in the long run. This is not so far-fetched: Our university professors achieved it for a large part of last year and are trying to do the same this year. This bubble of complacency has to be pierced with care and with national consensus. Not only for the good of Africa but for the survival of the Greeks.