The Uruguay round of the General Agreement on Tariffs and Trade, supplanted by the WTO in 1995, included an agricultural package that dealt with market access, domestic support programs and export competition. The goal was to diminish trade-distorting subsidies and establish uniform rules, thus improving predictability and stability for importing and exporting countries. Ottawa embraced the ruling and has urged other nations to follow suit. That is the least of all OECD countries. Attempts to lead by example and moral suasion clearly have failed.
Subsidies lead to an increase in supply because inefficient producers are kept in business.
Ever expanding supply causes a downward pressure on prices and, consequently, profits. The failure of the WTO ministerial meeting in Seattle makes it unlikely that there will be an agreement on lowering agricultural subsidies in the near future. In theory, progress could be made at the July 2000 G-8 meeting to be held in Japan. It is unlikely, though, that a breakthrough will occur because of the limited number of participants. Also, Japan is protectionist on agriculture matters and as chair of the summit is not likely to countenance serious discussion on reducing subsidies.