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Agriculture Committee discusses reform proposals

by Chakravarthi Raghavan

Geneva, 25 March 2001 -- The Special Session of the Committee on Agriculture, which discussed last week the various country and group proposals that have been put forward, is due to undertake a stock-taking exercise of the outcome of the first phase of negotiations, and agree on what should be done in the second phase.

The informal consultations on the work for the second phase, heard views of  the EC, Japan and the Cairns Group  trade diplomats said.  While the consultations focussed formally on the number of meetings and subjects to be discussed, it seemed that the EC and Japan (and their supporters) are trying to delay things.

One of the suggestions before the group is that the second phase, after the stock-taking, must proceed to agree on the guidelines and modalities for the negotiations, and that the various options should be fleshed out and drawn up in the second phase.

Japan is however opposed to any formulation of options. There is also resistance to the formulation of guidelines and modalities for the negotiations.

This is apart from the EC-Japan attempts to roll the mandated agricultural negotiations for further reforms to be rolled into a new round, with new issues, which they seek to launch at Doha in Qatar at the 4th ministerial meeting.

The Committee in the discussions on the various proposals on the table, continued the discussions on the proposals by India, and on which discussions had begun at the last meeting.

Turkey and Egypt have broadly similar proposals, but with some variations in the detail. They make a clear distinctions between the obligations of developed countries to get rid of market-distorting subsidies and supports, and allowing developing countries more leeway in using subsidies to support subsistence farming and tackle rural poverty.

The Indian paper also  calls for immediate “down payment” - - reductions by the rich countries by end of 2001. Egypt proposal includes provisions to operationalise the Marrakesh decisions on net food importers. The Egyptian proposals calls for assistance to the NFIDCs (net food importing developing countries) to adjust. The proposal emphasises the need for the rich industrial countries to eliminate rich their agricultural  export subsidies, which Egypt views as handicapping domestic production in the net food importers.

Several of the proposals or elements in papers presented by other developing countries, while making points similar to that India and others, also stress the need to preserve trade preferences they enjoy.  In effect they are arguing for the developed countries retaining some tariff barriers so that developing countries can enjoy preferential exemptions or to give developing countries time to adjust (as the Caribbean countries suggest) as preferences are eroded.

Some of the proposals from net food importing developing countries suggest an international revolving fund to help their food security by ensuring food supplies are available.

Several of the developing countries have also said in their proposals that they only start considering the opening of their markets if developed countries agree to steep cuts in export subsidies. They see high import duties as a way of protecting their own farmers against competition from imports that are cheap because the exporting countries subsidize production and export.

Given this preliminary stage, developing countries generally welcomed each others’ proposals, and did not focus too much on points of difference.

The comments from the developed countries, particularly the Europeans and Japan, made some sympathetic noises in favour of various aspects of developing country proposals (including trying to present their own non-trade and multi-functionality arguments as similar to the concerns of developing countries). However, generally the developed countries objected to proposals that they saw as setting different rules for the rich and poor countries.

At the last meeting, with some nuances, developing countries had given broad support to the thrust of the Indian proposals, making a clear distinction between the further reforms in agriculture to be undertaken by developed countries, and the needs of developing countries, particularly those with large rural populations to undertake measures to support their agriculture and enable rural development and attack rural poverty.

In the discussions this time, Canada and Australia (both in the Cairns Group) argued that along with  the further phase of agricultural reforms and cutbacks in protection in the industrialized world, the developing countries also should reduce their protection and their tariffs.

The Australian argument was more nuanced and less candid than Canada’s or for that matter some of the Cairns Group developing country members too, who are eyeing the markets of the other developing countries, particularly the large ones.

Australia is the self-avowed leader of the Cairns group. Though it spoke for itself in the meetings, it was not clear whether it was merely speaking for itself, or was also voicing views of some of the developing country Cairns members, who for various reasons are unwilling at this time to take on some of the major developing countries, but  would like countries like India (and other big developing countries like Indonesia, Egypt and some others) to reduce their ‘barriers’ and enable them to sell.

Any event, Australia cited some data to say that developing countries were increasingly exporting their agricultural commodities and products to other developing countries, and therefore the tariff and other barriers in the developing countries should also be lowered, and there should be no trade-distorting subsidies. Australia, also  argued repeatedly that 50% of developing countries’ exports go to other developing countries, and that keeping developing country markets closed or less open, hurt other developing countries.

Canada was blunter. It said that reform of agriculture in the industrialized countries should not result in protection of agriculture in developing countries. In this view, developing countries should not be allowed, without careful scrutiny and on individual country basis, to use ‘trade instruments’ even to promote rural development or attacking poverty. This could not be left to the judgement of the individual developing country.

Australia and Canada were also critical of the use of the argument about ‘food security’.

The special session also discussed the proposal from the Mercosur on state trading enterprises and need for rules and disciplines for their functioning in the agricultural sector.

The United States and the European Union were among those that welcomed the proposal for disciplines o such enterprises.

But, Canada, Australia and New Zealand - - all of which have state trading enterprises and use them to promote their exports, including through export credits (with the state enterprises being able to borrow funds from the market at more advantageous rates because Que of their state-ownership, and thus implicit or explicit state guarantees), and shield their own  farming sectors - -  were among those arguing that distortion and monopoly power can also exist with private trading companies and hence the specific situation (of monopoly and its abuse?) should be the issue rather than the ownership of the enterprises.

Japan and Korea called for more balance between rules that apply to importing state enterprises and those that apply to exporting state enterprises.

The Mercosur countries said they were stressing rules for those enterprises that receive subsidies or enjoy monopoly power.

The proposal by Nigeria calls for regular information or notification about the activities of private sector transnational corporations (which have a monopolistic or oligopolistic sale power and monpsonic and olipsonic purchasing power vis-a-vis small farmers) and are engaged in the agricultural trade.

The committee also discussed the proposal from 10 countries - the four members of the Mercosur,  Bolivia, Chile, Costa Rica, Guatemala, India and Malaysia—for negotiations at the WTO and in the agriculture talks on export credits and rules and disciplines to govern them.

The 10-country proposal complains of the failure to implement Article 10.2 of the Agriculture Agreement (on establishing disciplines on export credit) and calls for an agreement within the WTO.

The US, one of the largest users of the export credit loophole for subsidising exports, small in terms of the actual subsidy itself, but enough to make a difference in the market for potential buyers, and thus, according to a recent OECD analysis, ‘trade-distortive’.

At the WTO, the US  has been trying to hold up the Art.10..2 negotiations, pointing to the OECD talks on this and the desirability of that being concluded first. At the OECD itself, the positions of the US and the EC are so apart that no conclusions seem possible.

The main US objective is to negotiate rules within the OECD (and find ways of accommodating each other), and try to transfer it to the WTO, and get others to accept it, or as in the case of the subsidies agreement to frame WTO rules, but except the OECD arrangements from the WTO rules.

Several of the ten cosponsors in the talks at the WTO have insisted that the talks should take place in the WTO and that they would not allow any agreement at the OECD to be transposed into the WTO.-SUNS4863

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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