Agricultural Issues

The WTO and the Ag Industry
Patrick Kirchhofer - Peoria County Farm Bureau

World Trade Organization (WTO) negotiations and the 2007 Farm Bill seem to have many interlocking pieces. There always seems to be an eye on the WTO and its rules and regulations as ag policy is cemented for future farm programs.

I came across an article on the University of Illinois web site (“farmdoc”) that was written by Bob Thompson. He gives a very thorough explanation of the history and importance this organization plays in world trade—including U.S. agriculture. Here’s a sampling from Thompson on the WTO and its impact on agriculture.

The World Trade Organization is a voluntary association of 149 countries that meets periodically—in what are known as “rounds” of negotiations—for the purpose of setting the rules of the road of international trade by which all of its members agree to behave. The purpose of each round of negotiations is to review existing rules and revise them if there’s perceived to be a need for change. The Doha Round of negotiations has been underway since 2001. It’s the most recent series of meetings in which countries that belong to the WTO are reviewing.

The WTO has its headquarters in Geneva, Switzerland, and has three basic functions: it organizes and staffs periodic rounds of international trade negotiations, it organizes a dispute settlement process when one member country accuses another of violating one or more of the rules of international trade that all had agreed to abide by in the most recent round of negotiations, and it organizes periodic reviews of every member country’s trade polices to be sure they’re consistent with the existing international trade rules.

Having a rules-based international trading system benefits all countries by keeping trade flowing as smoothly as possible without unfair impediments or facilitation by government interventions. It’s also important to have an international trade dispute settlement procedure with real teeth when a member country is violating the rules of the game.

Having a fair and well-functioning international trading system is extremely important to the economic wellbeing of Illinois agriculture, which sold $3.4 billion worth of its production overseas in 2005. Corn and soybeans led the way. Exports provided the market for 44 percent of everything Illinois farmers grew in 2005. Exports also are important to the state’s entire economy, having provided the market for $35.9 billion worth of goods and services produced in Illinois in 2005.

Who started the WTO and why? At the end of World War II in 1944, some leading economic thinkers from the Allied powers concluded that the world was in need of several new institutions to deal with problems that had prolonged and deepened the Great Depression and probably contributed to the outbreak of World War II, in particular the cycle of increasing protectionism that had put international trade into a downward spiral in the 1930s. At an international meeting in Geneva in 1944, the principle post-war economic powers, including the United States, agreed upon a set of basic rules for international trade, which came to be known as the General Agreement on Tariffs and Trade (GATT). GATT is the predecessor organization of the WTO. IBI