Overcoming thorny farm issues a key challenge in regional free-trade talks

Overcoming thorny farm issues a key challenge in regional free-trade talks

Martin Abbugao, Agence France-Presse, Singapore

Overcoming thorny farm issues will be a key challenge as the United States and Japan take on their developing Southeast Asian allies in free-trade negotiations, analysts said.

Criticisms of the U.S.-Australia free trade agreement underscore the potential minefields awaiting negotiators as they attempt to weave a web of free-trade pacts across a region where agriculture is the mainstay in several economies.

The U.S.-Australia accord came under fire in Australia because it excludes sugar, largely maintains U.S. protection on dairy and beef produce, and gives U.S. pharmaceutical firms the right to appeal measures designed to keep the cost of medicines down.

The United States is due to start trade negotiations with Thailand this month, with Malaysia seen as next in line, possibly next year.

Japan has begun FTA talks with Thailand and the Philippines in among the many upcoming or current FTA negotiations in the region.

In the United States' free trade accord with Singapore, Washington's first with an Asian country, agriculture was not an issue because the city-state does not have a farm sector.

Kathie Krumm, a World Bank expert on trade and regional integration, said one danger of the web of bilateral and regional FTAs is that they may have "extensive provisions" for excluding sensitive sectors like agriculture.

This would "substantially reduce the potential for welfare gains from such arrangements," said Krumm, who co-edited East Asia Integrates, a recently published World Bank book.

But should regional negotiators succeed in resolving farm issues, it would result in opening up the sector on a wider scale, Krumm told AFP.

"Regional agricultural markets are already large. If agriculture can be liberalized in a regional setting, then a favorable political dynamic can be set in place that will lead to more open agricultural sectors overall," she said.

But some analysts said political lobbies could result in watered down agreements.

Others fear protectionist moves in the United States to stem the flight of hundreds of thousands of jobs to Asia would not sit well with America's regional trading partners.

"I think the political lobby and how strong they are will determine the outcome of the negotiations," said Jose Tongzon, an economics professor at the National University of Singapore who does consultancy work with the Association of Southeast Asian Nations (ASEAN).

The U.S.-ASEAN Business Council, an influential business lobby group, said despite protectionist rhetoric, it will push Washington to deepen its trade engagement with ASEAN.

"Despite the furore over outsourcing and the kind of negative signals against trade, we believe that the trade agenda will move forward past the U.S.-Singapore FTA," council president Ernest Bower told reporters here recently.

The council said Washington should aim to pass the U.S.- Thailand FTA by 2005, prepare for free-trade talks with Malaysia, normalize trade ties with Laos and help Vietnam enter the World Trade Organization.

Bower acknowledged that reaching agreement on farm issues will be a key challenge in the U.S.-Thailand negotiations, which could serve as a "template" for future accords if successful.

"The stakes are very high and we will be lobbying for the U.S. to give a very comprehensive offer to the Thais on agriculture. We will also be asking the Thais to give a lot," Bower said.

He criticized recent moves by the United States accusing Vietnam and Thailand of dumping shrimp exports on the U.S. market, calling them "absolutely protectionism in its worst form."

"These were our worst fears that in a political year in the United States, protectionism can rear its ugly head and we think that it's a terrible mistake."

FTAs lead to increased market access as economies, including the financial and services sectors, are opened up. But they also allow the influx of possibly cheaper and higher quality products that would compete with locally made goods.

This is why negotiators must deal with entrenched vested interests.

In the Philippines for example, a small but vocal left-wing movement has made an uncompromising stand against globalization.

Thai negotiators will have to contend with a powerful political lobby if they want Washington to phase out sugar quotas faster than the 12-year time frame under the U.S.-Chile FTA, the Thailand Development Research Institute said in a study.

Negotiators would also have to work on a mutually acceptable sanitary and food safety standards to ease the entry of Thai tropical fruits and vegetables to the U.S. market.

Hefty government subsidies to U.S. farmers would affect the competitiveness of Thai rice exports, the study said.

Krumm of the World Bank suggested lessons can be learned from the "early harvest" approach contained in the ASEAN-China FTA now under negotiations.

The approach calls on both parties to liberalize trade in certain goods well ahead of the full completion of the accord as a goodwill gesture.

However, the main objective should still be an overall pact.

"If you allow yourself to get stuck with early harvest, that will be a disaster for Southeast Asia," Bower said.