"Multifunctionality - An Obstacle for Trade Negotiations - World Trade Organization, Switzerland - Brief Article

The resumed agricultural trade negotiations at the World Trade Organization (WTO) in Geneva, Switzerland, show the complexities in achieving more open agricultural markets. A new trump card, "multifunctionality," is on the table. Supported by the European Union (EU) and some other countries, it has already caused disputes during the WTO meeting in Seattle last year.

According to the friends of "multifunctionality," the public should compensate farmers for offering people a broad array of benefits, such as preserving the environment and protecting rural communities from the threat of increased urbanization. Proponents argue that these services to the public are not properly recognized in the prices for agricultural commodities and therefore need subsidies and protection.

Rural farming communities, not just in Europe, are facing numerous problems, from the lack of alternative employment to the drop of commodity prices in recent years. However, the conclusion that agricultural production deserves special protection in international trade does not flow from that observation.

If countries want to encourage certain activities by farming communities and preserve the environment, they can and should address those problems directly and without unnecessary trade-distorting measures. In a paper, "The Use and Abuse of Multifunctionality," the U.S. Department of Agriculture's Economic Research Service suggests several less restrictive and possibly more effective policy solutions that are allowed under the WTO agreement.

Of concern are the effects that multifunctionality could have on other countries, in particular, developing countries. Since the EU does not have a good track record in supporting open agricultural trade, many are skeptical about the EU's intentions regarding multifunctionality. While the EU might feel its farmers have a special role to play, developing and other countries also might want to claim the same multifunctionality for some of their "special" sectors. The result could be a rise of protectionism. The misconception of international trade as a zero-sum game is already hard to overcome, but to give rich countries another excuse to drag their feet in fulfilling their commitments under the Uruguay Round agreement holds up further progress. No one wins from a new round of protectionism, especially not the less-developed countries.

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COPYRIGHT 2000 Gale Group