The Foreign Service Journal, May 2009

34 F O R E I G N S E R V I C E J O U R N A L / M A Y 2 0 0 9 Korea FTA has yet to come into force, China and New Zealand started im- plementation of free trade agree- ments with Seoul on Oct. 1, 2008. The structure of the negotiations and the need for consensus lead some to believe the Doha Round may be impossible to conclude. And if that process fails and multilateral agree- ments can no longer change with the times, the WTO could have a gloomy future. Still, none of this is inevitable. If the United States can build consensus at home and a cooperative relationship with other key WTO players, Doha can be saved. The Downside of Globalization Agricultural trade also faces challenges from the suc- cess of globalization. As production systems, supply chains and corporate ownership have all become international- ized, it becomes increasingly difficult for governments to define a successful national agricultural trade policy. Similarly, increasingly complex trade and investment relationships between countries are making it difficult to define and promote U.S. products. Products are often shipped abroad for processing and re-exported, and U.S. companies have growing overseas investments. It can also be difficult to decide what sectors to support through market promotion or trade policy. When a U.S. company sells an agricultural product sourced outside the United States, how is it treated? How is a product made overseas from U.S. materials defined? If a major Ameri- can firm sells candy with U.S. brand names in Southeast Asia, will Washington only support the U.S.-made brands and reject the others? For that matter, is there a value in promoting American brands? Increasing U.S. imports. Another challenge for trade is the large and increasing volume of imports. In 2005, imports made up 15 percent of total food volume con- sumed. According to USDA’s Economic Research Service, the United States imports 80 percent of its seafood, 45 per- cent of its fresh fruit and 17 percent of its fresh vegetables. It is heavily dependent on imports for bananas, coffee, chocolate, apple juice, wine, beer, nuts and spices. And while we are less dependent on imports than most other countries, problems overseas can still significantly affect American consumers. As the food safety issue illustrates, import security counts, too. Issues such as bioterrorism, salmonella in 700,000 cantaloupes grown in Mex- ico and Costa Rica, and melamine in Chinese pet food all affect FAS rela- tionships overseas. National security and food se- curity. After the end of the Cold War, it was hoped that food would become a normal commodity traded on international markets. But despite the sound econom- ics behind open trade, food remains a national security issue because insecurity can cause instability and war. During a period of high food prices in 2008, the World Bank reported unrest in 33 countries, including Haiti, Bangladesh, Egypt, the United Arab Emirates, Senegal, Morocco, China and India. Many countries see domestic food production as a strategic goal. The WTO Group of 10 is dominated by countries such as Iceland, Israel, Japan, South Korea, Nor- way, Switzerland and Taiwan that resist further agricultural trade liberalization. The G-10 members heavily subsidize agriculture and keep food prices high domestically not only to preserve rural lifestyles, create jobs and support domes- tic constituencies, but to ensure their supplies are never cut off. This thinking has played a role in their decisions to keep large and noncompetitive agricultural sectors alive. It has also impeded progress in the Doha Round. Recent history has also shaken confidence in the trad- ing system as a reliable supplier. During the 2008 food price spikes, many countries limited exports. India, In- donesia, Vietnam, China, Cambodia and Egypt all limited rice exports to keep domestic prices low. This cut tradable supplies by 3.5 percent. These “beggar thy neighbor” poli- cies undermined reliability of imports as a source of food while preventing farmers from benefiting from high ex- port prices. This reduced the incentive to increase food production and undermined faith in export markets. The biotech revolution. The final challenge to trade is changing technology. Despite resistance in many quar- ters, the FDA approved the sale of milk and meat from cloned animals in January 2008. However, the creation of modified animals could be very controversial because mammals generally attract sympathy from the public. With that in mind, current biotech research has mostly focused on increasing productivity. For example, the use F O C U S Prospects look grim for the current Doha Round negotiations, launched with great fanfare in 2001 to deepen global trade.