WTO deal seen having little impact on food prices

By Jonathan Lynn and Missy Ryan - Analysis

GENEVA/WASHINGTON (Reuters) - Soaring food prices have surfaced as a big concern in the delicately poised agriculture negotiations at the World Trade Organisation (WTO).

But because any WTO deal will have an impact only in the long term, the Geneva talks will not offer a solution to the immediate crisis, diplomats and officials say.

A doubling of the prices of major cereals on international markets since mid-2007 has sharply increased the risk of hunger and poverty in developing countries where many people spend the bulk of their household income on food.

Already food riots and protests have been seen across Asia and Africa, and Haiti's government has fallen. International aid agencies are struggling to feed people in their care.

The response of some nations, to slap export duties or other restrictions on food, has raised questions at the WTO, and also in the minds of economists looking at the impact of such moves.

"There's no question the price of food ... puts pressure on the agriculture negotiations," said Marietta Bernot, global trade and customs adviser to U.S. confectioner Mars.

Bernot was representing Mars, a major buyer of sugar, on a big delegation of U.S. business lobbyists to the WTO this week.

NO QUICK FIX

WTO Director-General Pascal Lamy told the lobbyists that the WTO could tackle the systematic distortions to the international market for food arising from tariffs and subsidies, but could not do anything to fix the immediate crisis, she said.

The WTO's Doha round was launched in November 2001 to boost the world economy and help developing countries export their way out of poverty. Hopes are high a deal can be done this year.

Agriculture is the key to any deal because of its importance to developing countries, who have been urging rich importers like the European Union to cut tariffs to open their markets and rich exporters like the United States to cut subsidies that squeeze poor country producers out of the market.

The surge in prices has led some countries to slash tariffs, even if they had resisted sweeping cuts in the talks. But Gawain Kripke of Oxfam America noted a difference between autonomously cutting duties under pressure, and locking in liberalization.

Arguably the rise in food prices should make it easier to persuade exporters to dispense with subsidies as farmers don't need them and importers to lower tariffs as they want to dismantle barriers to letting in food.

"It should make a deal easier to get," said Kim Elliott of the Center for Global Development, a U.S. think-tank. "It should make a deal easier, but food prices are just historically incredibly volatile. I don't think any farmer in the U.S. is counting on them staying where they are," she said.

In fact, apart from one technical issue involving the rules for developing countries to stockpile food as long as this does not distort trade, the surge in prices has had barely any impact on the substance of the talks.