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By Martin Krause : BIO| 03 Oct 2020
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The Group of 20 (G-20) includes those countries that supposedly do not subsidize agriculture, but they subsidize everything else. They came together in order to push for a reduction in agricultural tariffs and subsidies from Japan, Europe and the US, mentioned in order of protectionism in this area.

The truth is, they do subsidize and protect at least some kinds of agricultural production, as Brazil does, for example, with its production of ethanol out from sugarcane, or Argentina with "regional" agricultural products such as tobacco.

As is well known, the Doha Round of negotiations has entered a kind of limbo. There are certainly many reasons for this, of which the resistance of Europe and Japan are only some. But another source of the Doha collapse came from the G-20 countries, themselves.

The G-20 thought they had a bargaining chip in resisting the opening of their markets to the industrial products of developed countries. Turns out that was nonsense. Of course, they are right to demand the abolition of tariffs in agricultural products -- something that will certainly benefit consumers in developed countries who are supporting a minor and small number of producers through higher prices. Nevertheless, they hoped to avoid opening up their markets to industrial products -- which amounted to shooting themselves in the collective foot. It meant blocking the introduction of the latest technologies and granting privileges to well established and inefficient local "industrialists" whose only competitive advantage is access to government for favors.

On top of this, the US is announcing it will eliminate the benefits of the Generalized System of Preferences (GSP) for 8 of the 20 countries of the group, in a clear retaliation for the role they played during the negotiations. The argument is that this program should be helping the poorest countries. But the political punishment is clear.

The GSP are tariff preferences the developed countries grant to the underdeveloped ones, reducing or eliminating the import duties other developed countries have to pay. These were introduced in the 60s and 70s as a way to help improve the access to these large markets.

Such have never been a panacea, of course. The preference is usually small, since developed countries already have very low tariffs for manufactured products, and the GSP does not include agricultural preferences, which could make a real difference to the poor countries. But the system helped several industries -- not in the poorest but in "emerging" countries such as India, Brazil or Argentina.

What are these countries going to do? Retaliate in some way?

Actually the GSP are preferences the giving countries grant unilaterally, and in this way, they can remove them at will. They embody a very interesting principle to help poor countries: trade, not aid. It is also true that rich countries should open up their agricultural markets, but in this sense the G-20 and the US are more allies than enemies. They should push together for the end of protectionism in Japan and Europe.

Once this is achieved and we get real free trade for all products in all countries, the G-20 should go for US subsidies; in this case, with the help of a deteriorating fiscal situation. They should think: let's compete and make your subsidies a larger burden.

Martin Krause is the Professor of Economics and Dean of ESEADE Business School in Buenos Aires, Argentina.

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