Banana republics

Everyone was happy about the bananas for a while. It is rare that fruit brings such hope to roomfuls of men in suits...

Everyone was happy about the bananas for a while. It is rare that fruit brings such hope to roomfuls of men in suits, but when news broke over the weekend that one of the longest-running of trade disputes was possibly solved, hope spread through Geneva. Europe dropped its age-old preferences for imports from former colonies, and agreed to identical tariffs for banana imports from Central and South America. Bananas are fun but never last: the temporary euphoria dissipated soon, as discussions over agriculture seemed to collapse in a familiar, caterwauling melee of finger-pointing and self-righteous excuses.

Some culprits are familiar. WTO Director-General Pascal Lamy8217;s suggested subsidy cuts by the West are nowhere near as good as they sound: they allow much more breathing room for politicians there than is wise. The European Union and the United States, those bastions of free trade, have accepted those numbers with hypocritical haste; meanwhile, their favoured 8220;no-concentration8221; and 8220;sectoral tariff elimination8221; demands are little more than domestic special-interest politicking run mad. China manages to be stiff-necked and determined in every international arena but trade talks, where again this weekend they were dangerously unreliable.

The real problem is the unfamiliar suspects. It is frequently convenient to caricature WTO negotiations as a North vs South exercise, but this is not the first time that disagreements between developing countries have come close to derailing them. The sticking point currently is what are known as 8220;special safeguard mechanisms8221;, which permit otherwise illegal tariffs if the domestic market looks like it will be flooded with imported agricultural commodities. Naturally, these are not automatic, but discretionary, allowing domestic governments to trade off danger to their entire farm sector with consumer welfare. Wise governments would use these rarely, but India has made a persuasive case that subsistence farmers are deserving of at least the possibility of insulation from catastrophic risk. Many dozens of food importers agree; but some single-crop food exporters from Latin America have joined the US and the EU in strongly supporting dilution of these measures. This is not only ethically dubious in transferring risk from agri-business to subsistence farmers 8212; and since trade negotiations are political negotiations, talk of ethics is permissible 8212; but also myopic. Myopic politically, because permitting the EU and the US to use SSMs to scupper talks would hurt them most; myopic economically because they are passing up an incentive to reduce their national dependence on single, risky crops, such as bananas. The deadline has been extended to Wednesday: India8217;s negotiators must use these extra days to make their case better.