THE STATE OF THE ART

Countries with major agricultural exports, such as Australia and

Argentina, have formed the ``Cairns Group'' to press for freer trade.
While the US is officially committed to this, American protection and
subsidy of domestic agriculture is very high, and it could be very difficult
politically to achieve reform. Japan and the European Union (EU) are
also hag-ridden by subsidy arrangements that protect their largely
inefficient farming. The prospect of expanding the EU by admitting
some Eastern European countries with vast, but vastly inefficient, farms
is recognized as a looming policy problem.

The EU is pressing for the inclusion of three additional agenda items

for the next trade round: competition, environment, and investment.
Suspicions abound amongst other member states about the motives
for broadening the agenda, particularly regarding the environment.
While the EU says that it merely wants to clarify the WTO's rules on
matters such as eco-labeling products and genetically modified foods,
there are fears among the developing countries that the EU will use
environmental issues as a pretext for blocking agricultural imports. The
liberalization of food tariffs would transform the economies of many
poorer countries.

The EU's politicians are under heavy pressure from their voters

to keep food clean following the outbreak of mad cow disease and
other scandals, and they point to the USA's resistance to agreement over
global warming as evidence of a lack of American will for environmental
reform.

Another problem is in agreeing anti-dumping rules. ``Anti-dumping''

is where a WTO country may impose high tariffs on items that it
believes are being ``dumped'' (sold below cost) in its territory by
another nation. Manufacturing nations such as Japan and South Korea
are worried that anti-dumping rules can be misused to prevent imports
of their goods to the US and Europe, while many poorer countries are
starting anti-dumping investigations. China, which is the major target
of anti-dumping tariffs after the US, is to participate in WTO for the first
time, and negotiations are expected to be difficult.

Much is at stake here for the prosperity of individual businesses,

nations and the world at large. For the first time in decades, the