Simon McKeon

November 17, 2006

Poverty in Africa, where US policy keeps cotton prices 20 per cent lower than they should be.

I AM glad it is not my job to tell a fifth generation American cotton farmer that, from a world perspective, he is hopelessly uncompetitive, and that there is no justification for his enterprise. But someone must.

I am also glad it is not my job to explain to an African cotton farmer that his cotton price would be about 20 per cent higher if not for US policy.

As I write, I happen to be in a G7 country. Australia barely rates a mention. The developing world, with the exception of the rapidly developing and recently industrialised BRIC (Brazil, Russia, India and China)

economies, is not on the radar. When you are a small fish, it is hard to be noticed.

And the news from home is that just as the G20 is about to meet in Melbourne there is, breathtakingly, some sort of movement designed to interfere with and obstruct this important annual event.

It is well accepted that a more liberalised international trade regime would not only enhance the world economy but make a very real difference to the third world. The World Bank has estimated that a positive outcome to the recently stalled Doha Round would lift global real income in 2015 by about $US100 billion ($A130.7 billion). Of this, 20 per cent would accrue to developing countries and have a material impact on the lives of millions of the world’s poorest.

But with the Doha Round now described by India’s Trade Minister, Kamal Nath, as being “between intensive care and the crematorium”, it is vital that developing nations have an opportunity to push the case for free trade very hard. And this weekend, the G20 gathering provides the perfect opportunity for countries such as South Africa, Mexico, Turkey and Indonesia. And if they are successful in steering Doha back on course, they not only help themselves but all the world’s developing nations.

Time is of the essence. As one would expect, the US is the most important player. World Bank president (and US citizen) Paul Wolfowitz recently said: “The US needs to accept further cuts in its spending on trade-distorting agricultural subsidies.”

While in the lead-up to last week’s mid-term elections it was unrealistic to expect any positive initiative from the US, a window has opened. There are just a few months before the US legislature must review farm budget spending and consider extending special, and necessary, powers to the President to lower tariffs and subsidies without further recourse to Congress.

In these few short months, the other major players, namely the European Union, Japan and the BRIC group, need to resolve their differences. This will enable a strong and united position to be put to Congress which, with more Democrat influence, should be a little less under the farm lobby’s thumb.

And this is why we all, especially those concerned with social and economic justice, need to encourage the G20 to work hard this weekend. It is the most effective forum to reignite Doha. It may be our last chance.

Australia, through our Treasurer, is an important voice at the G20 table. Not only have we been a consistent free trade advocate, but we can share our experiences at weaning industries such as dairy off economically irrational subsidies. Reform is seldom painless, but it must occur.

I am glad it is not my job to travel around Louisiana or Mississippi with tough news. But a decade ago, the US spent almost $US10 billion in subsidising its cotton industry. Today the amount is twice that. This enables US growers to export cotton at one-third of what it costs to produce.

Indeed, to place agricultural subsidies in some context, their cost to the US, the EU, Japan and Canada is six times greater than the entire world’s development aid budget. This is unsustainable, unjustifiable and obscene.

And in the meantime the sad irony is that it is the cotton farmers, the labourers and their communities in countries with names like Benin, Burkina Faso, Chad, Mali and Togo that suffer and suffer and suffer.

I would love to have a job telling them their suffering was at an end.

Simon McKeon is executive chairman, Macquarie Bank — Melbourne Office, chairman of Melbourne Cares and a director of World Vision International’s micro credit operation.