Egypt will need to play its hand skilfully to ensure a satisfactory agreement on agriculture emerges from the World Trade Organisation's multilateral trade talks, writes Niveen Wahish As delegations prepare to meet for the World Trade Organisation's (WTO) ministerial conference in Hong Kong it is agriculture, once again, that threatens to make or break negotiations. Developing countries are pushing hard for industrial nations to open up their markets and abandon the agricultural subsidies that distort trade and impact so disastrously on the livelihoods of many of the Third World's poorest inhabitants. A recent study by Sahar Tohami, senior macro-economist at Assistance for Trade Reform, a US Agency for International Development project, concludes that farmers in developing countries account for 43 per cent of global farm labour, 60 per cent of global farming GDP and more than 70 per cent of poverty around the world. Egypt's agricultural sector, according to Tohami, contributes 16.6 per cent of the GDP, worth LE64.5 billion, and exports $1.3 billion of agricultural goods. Should WTO negotiations result in greater liberalisation of agricultural markets in developed nations Egypt's export figures are expected to grow considerably. As long as Egypt is competitive it stands to make gains from any liberalisation of the sector, says Sherif El-Maghrabi, chairman of Maghrabi farms. "With all the restrictions and obstacles currently in place we are already successful. If these distortions to trade are lifted our exports are bound to increase." Egypt's leading agricultural exports now include cotton, rice, potatoes, oranges, grapes, onions, sugar and vegetables. But overall Egypt remains a net importer of agricultural goods. Wheat tops the list of the $1.8 billion agricultural import bill, followed by oils, corn and meat. Tohami estimates that food accounts for 30 per cent of the expenses of the average family. Should developed countries end farming subsidies prices will rise, resulting in a larger food import bill for Egypt. Most experts agree, however, that any detrimental effects will be more than offset by the increase in export revenues. Indeed, the Ministry of Agriculture's strategy for the period 2004-2017 includes increasing agricultural exports to $5 billion. Rachid Mohamed Rachid, minister of foreign trade and industry (MFTI), believes the benefits of increased liberalisation will become apparent in the medium term. As subsidies are reduced in the developed world prices will rise, leading Egyptian farmers to diversify production and cultivate new crops as well as expand the production of existing staples. "Higher prices will spur the cultivation of crops the set-up costs of which are currently prohibitive," says Rachid. Abdel-Salam Gomaa, head of research at the Agricultural Research Centre, believes Egypt should explore the possibility of increasing the cultivation of premium crops -- such as medicinal herbs -- in which it enjoys a competitive advantage. It could also capitalise on virgin land in Toshka to produce organic crops, for which there is a growing demand in European markets. Sherine El-Sabagh, head of the General Department of Trade in Goods at the MFTI, is adamant that developing countries will be able to protect their interests during negotiations. In addition to the provision of support measures to net food importing countries like Egypt, she points out that the impact of the negotiations will not be felt immediately since measures will be phased in over a 10-year period. Developing countries are negotiating hard to ensure that the tariff reductions they will be required to make are lower than those of developed countries. They will also, says El-Sabagh, be entitled to adopt measures to protect local crops or processed foods should they feel there is a need to do so. While there is a consensus on the necessity of formulating mechanisms to protect sensitive projects the percentage of products that qualify has yet to be agreed. Currently there is a standoff between the US, which wants sensitive products to be restricted to one per cent of tariff bands, and the EU, which wants them to qualify for up to eight per cent. Developing countries also have an option to classify products deemed essential to the livelihood and food security of a large portion of their populations as special. Cotton is among the crops expected to benefit most from greater liberalisation. Egypt exported $482 million worth of cotton in 2004. Egyptian growers, though, continue to suffer from the heavy subsidies the US provides its own cotton farmers, which result in artificially high production and depressed prices. The US spends an estimated $4.2 billion on supporting cotton growers. Following its recent dispute with Brazil over cotton, however, Washington announced that it would discontinue Step Two subsidies from August 2006. As subsidies are lifted prices will increase, enhancing export opportunities for other countries. Step Two subsidies, valued at $328 million, compensate US farmers for differences between the international and local price of cotton. Egypt is expected to benefit from the decision to end the practice since the bulk of Step Two support goes to long-staple cotton, in which Egypt enjoys a competitive advantage. According to MFTI statistics US subsidies resulted in American Pima cotton being sold at $1.01/libra compared to $1.18/libra for Egyptian produced Giza 70, $1.12/ libra for Giza 88 and $1.09/libra for Giza 86. Although the US has decided to do something about Step Two support it remains to be seen what it and other cotton subsidisng countries will do about their remaining subsidies. A study by the World Bank Food and Agriculture Organisation reveals that some countries -- including the US, Brazil, China, Greece, Mexico, Spain and Turkey -- provide direct subsidies to cotton growers. Whether developing countries will be able to insist on talks over cotton be divorced from other agricultural negotiations in an attempt to end distorting practices more quickly, though, remains unclear. There are various initiative within the WTO related to cotton. First the cotton initiative by the four African countries prior to Cancun. It had wanted a solution during Cancun, cancelling support by the developed world in three years that the cotton initiative is treated separately from agriculture negotiations. And that these four countries must be compensated for their losses since 1999 to 2002. But the draft Cancun ministerial declaration came out ignoring the initiative, which was among the main causes for the failure of the conference. Since then the July package was presented, it more or less reiterated the initiative. The Cairo declaration in June 2005 came along the same lines. In the meantime, the developed world, the US and the EU refuse to treat cotton separately and insist that it will automatically benefit from the support lifted off agriculture. Should it be agreed that cotton will be treated separately, cotton support could then be phased out quicker than the support for agriculture. This will depend on the pressures exerted by developing countries. Asia is the highest importer of Egyptian cotton followed equally by the US and the EU.
