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Agriculture talks, new round, and continued talks

by Chakravarthi Raghavan

Geneva, 7 Feb 2001 -- The special session of the Agriculture Committee was making slow progress at its meetings this week in discussing the various negotiating proposals put forward by countries, and groups of them, and the discussion would be continued in March, on 22-23 and if needed on the 24th, trade officials reported Wednesday.

After a stock-taking exercise on 29-30 March, the negotiations are to enter a one-year second phase, but with no agreement yet on what should be done or covered in this second phase.

But there is a general view that the next phase will look in depth at the issues raised in the proposals so far - export subsidies, domestic support, market access, non-trade concerns, special and differential treatment (S&D) for developing countries etc.

The EC suggested at an informal meeting Wednesday morning that this second phase discussion should enable the negotiators to move to achieve some compromises in the third phase.

The United States and several others (principally the Cairns group) are pushing for a one-year second phase, while Japan and Korea wanted the one-year second phase deadline to be subject to reconsideration after the 4th Ministerial at Doha.

There have also been some discussions at the informal meeting Wednesday on the relationship between the agricultural negotiations and the 4th Ministerial meeting at Doha and any new round that may be launched at that time.

According to trade diplomats, several countries said they favoured a new round, but were very cautious whether in fact a new round could be launched at Doha.

Some like Brazil said that if a new round is to be launched at Doha (and agriculture is to be a part of it), then the agenda for agriculture negotiations must be ‘more ambitious’ than the present mandate, namely the continuation of the reform process as per Article 20 of the Agreement on Agriculture.

However, while wanting a new round (and new issues like investment to benefit their corporations), the agriculture protectionist group like Switzerland, Norway and Japan warned against any redefinition of the mandate for further agricultural negotiations.

Hungary for its part felt that the ministerial meeting at Doha should rather undertake the task of setting a deadline for completing the agriculture negotiations under the present mandate.

The Committee in meetings this week, has been hearing explanations of proposals in papers tabled by participants (individual or groups of countries) and comments by others. It has so far covered the papers of the EC, Japan and Switzerland; proposals addressing some aspects from Canada, the Mercosur and some other Cairns group members; and the proposals from Swaziland, the Small Island Developing States (SIDS), and Mauritius—several of them in effect trying to ensure continuance of the special preferential arrangements under which they have access to the European markets and at better prices than on the world markets.

But the EC itself has been saying in the meetings and in comments on these proposals that it cannot guarantee the MFN levels and thus the preferential margin of favourable access.

Meanwhile, more countries have put forward their negotiating proposals including by Turkey, Egypt, and Morocco.

In its comprehensive proposal, Egypt said the negotiations should based on a number of fundamentals: Any agreement reached within the WTO should benefit all Members. Due consideration should be made for goals, needs and aspirations of developing and least developed countries. Trade is and will remain for the foreseeable future a suitable engine for growth in all areas and for all members. Fair competition and realization of each Member’s comparative advantage are the main pillars of the Multilateral Trading System.

In this view, the main objective of the negotiations should be to contribute to the further integration of agriculture in the multilateral trading system; increase the market orientation of trade in agricultural productions by removing distortions; “level the playing field” to enable all Members to compete more equitably on the global market; and make operational previous commitments undertaken in favour of the developing countries and LDCs, whether net-food importing or otherwise.

The negotiations should result in improved market access for developing countries. A regime to achieve this would need:

·        agreement to substantially reduce tariff and other entry-point charges currently applicable to agricultural trade;

·        elimination of other trade distorting measures such as specific duties, reference prices, minimum entry prices, variable levies and compound rates;

·        expressing all tariffs and similar duties and charges on an ad valorem basis;

·        eliminating all tariff escalations, tariff peaks and tariff disparities;

·        strengthening the disciplines on tariff quotas and their administration, and making TRQs product specific rather than aggregated;

·        tariff reductions by developed countries should be on applied tariffs, rather than bound, while developing countries should reduce tariffs on a basis consistent with their development needs; and

·        undertake a review of the Special Safeguard Positions (in Article 5 of the AoA) with a view to eliminate such SSGs.

The provisions of the WTO safeguards agreement should suffice to protect their local markets from sudden surges of imports.

In the area of domestic support, Egypt proposed that:

·        developed countries, currently utilizing extensive domestic support mechanisms, should agree to substantially reduce such support, and provide support on a disaggregated product-by-product basis, thus adding to clarity and transparency, rather than the current aggregate support (which enables support to be shifted from product to product);

·        the domestic support reductions by developed countries, with a substantial up-front down payment, should be across the ‘colour gamut’ of boxes (blue, green and amber), and the measures allowed under Annex 2 of the AoA should be reviewed for their compatibility with non-trade distortions;

·        there should be an urgent review of the ‘due restraint’ provisions in Art. 13 para a (i) of the AoA (more popularly known as the peace clause) which has proved to be an ‘additional window’ for some Members to unfairly support their agriculture sectors.

As for export subsidies, Egypt proposed that all forms of export subsidization should be phased out over an agreed period of time. The Egyptian paper said there was a general consensus that export credits, export credit guarantees and insurance are some of the trade-distorting instruments still allowed under the AoA, and represented an inequity in the distribution of rights among members. They allowed the more developed and financially rich to discriminate in favour of their production to the detriment of the less endowed.

On the issue of Net Food Importing Developing Countries (NFIDCS) and the LDCs, Egypt said that in the five years since the Marrakesh decision on this was made, the NFIDCs and LDCs have had no concrete actions, but only good will messages and fine rhetoric. Lately, however, a number of more substantive efforts and initiatives were being made to fully operationalise that decision. Egypt hoped such operationalization should be non-trade-distortive. Towards this end, Egypt suggested:

·        an urgent review of the decision to strengthen its language and make it mandatory;

·        increased level of technical and financial assistance to NFIDCS and LDCS, with the aim of improving their capability to produce their own food requirements locally;

·        creation of a Fund for support of NFIDCS and LDCs so that the beneficiaries can get a rebate on their food import bills after they had purchased their requirements on the open market at unsubsidized prices. The Fund should be financed from a number of sources, including prominently by the International Financial Institutions, specialized UN agencies, developed country donors and major exporters.

In the area of S&D, Egypt proposed a strengthening of the provisions of the AoA and their expansion, in a least trade-distortive way, giving developing countries more flexibility to assist their agriculture sector and actively compete in the world economy. Towards this end, Egypt proposed:

·        giving developing countries greater flexibility to re-evaluate and adjust their tariff schedules, in order to overcome the negative effects of cheap, subsidized agricultural imports;

·        tariff reductions by developing countries from their bound rates;

·        developed countries should enhance their capital and technical investments in the agricultural sectors of developing countries in order to support rural development and incomes;

·        technical assistance to include study of effects of further liberalization of agricultural trade, in order to minimize the negative effects of such liberalization;

·        greater flexibility to developing countries to enable them to increase their levels of domestic support within the framework of the 'green box' (Annex 2 of the AoA) measures.

In their paper on market access, the CARICOM Community has noted that in a large number of developing countries, agriculture is characterized by dual production and trading systems: the majority of exports, employment and investment resources are oriented to production of products that are marketed under preferential arrangements. A significantly smaller, yet rapidly growing proportion of diversified exports of value-added and processed products is traded on non-preferential markets.

But because of the highly integrated nature of the agricultural production and marketing systems in small developing economies, the earnings from exports to preferential markets as against those to non-preferential markets constitute an important source of investment and infrastructure support.

In general, trade preferences continued to be an integral feature of the agriculture trading system with preferential trade in the world increasing from 40% of world trade in 1988-1992 period to over 42% over the 1993-1997 period. During this last period, preferential agricultural trade grew faster than preferential trade in industrial products - with the Western hemisphere, eastern Europe and Africa being the regions where the share has increased the most.

The smaller developing economies have a significantly larger share of agricultural products traded under preferences, but they account only for a small share of global trade in agricultural products less than 2.75% in 1993-1998. In particular, the share of CARICOM members was less than 0.4% over the 1995-1998 period. The net effect of their preferential access has been small and contributed little to the global market distortion.

For an overwhelming number of them, the agricultural production and trade structure has evolved in an environment significantly determined by preferential trading arrangements (PTAs). However, several factors over the past years have threatened both the context and the environment for the preferences. These include multilateral trade liberalization within the framework of the AoA, reducing the MFN tariffs and thus the preferential margins; and the tendency towards regional trading arrangements leading to a proliferation of regional preferential access arrangements covering both a greater share of agricultural trade and a larger number of countries, thus diminishing the marginal benefits of preferences.

As a result, many of these small developing economies are presently involved in the process of diversification and adjustment. They however need adequate time for such adjustment and meaningful and flexible policy instruments to facilitate the transition.

Outlining several of the difficult structural adjustment and transformation problems of the small economies, the CARICOM paper has made several proposals including:

·        substantial cuts in bound tariffs of developed countries, particularly for products of export interest to developing countries, using a formula approach that discounts higher tariffs and tariff peaks relatively more than lower tariffs and eliminates tariff escalation:

In general, further tariff reductions should be linked to ‘genuine’ reductions in levels of domestic support, and developed countries committing themselves to greater reduction in the level of domestic support and tariffs.

. examination by members of options at rendering the market access concessions offered to developing countries through trade preferences under the GSP, reciprocal or non-reciprocal arrangements, stable, transparent and predictable.

This will facilitate adjustments which these economies will be required to undertake in transitioning to more liberalized trade in agricultural markets. Binding preferential schemes and arrangements within the framework of the AoA should be accorded considered attention.

·        small developing economies should have different commitments and modalities, as appropriate, including possibility of exemption from further tariff reductions, particularly where substantial liberalization has already been undertaken;

·        mechanism similar to the SSG arrangements in Article 5 of the AoA should be available to facilitate the adjustment of small developing economies;

·        for developing countries, market access depends not only on tariff rates but non-tariff measures too and the negotiations must deal with such measures so that real export opportunities are created and not denied to developing countries through unjustified use of technical barriers and SPS measures;

·        simplification of tariff structures and making them more transparent through elimination of variable and complex tariffs and tariff dispersion, and conversion of seasonal and specific tariffs to ad valorem tariffs, with adequate time given for conversion to developing countries who have such tariffs;

·        stricter disciplines and improved transparency in administration of tariff rate quotas (TRQs), with their reforms not resulting in diminution of market access opportunities, particularly to small developing economies;

·        developed countries should explore ways of ensuring that ‘non-substantial’ suppliers from small developing economies are provided with meaningful access to market opportunities with TRQs;

·        while undertaking further reduction commitments in market access, measures should be taken to ensure that non-tariff measures are not substituted - thus undermining emergence of ‘genuine’ market opportunities.

There should be a routine mechanism set to facilitate close scrutiny of all measures in effect that result in nullification or retardation of market access opportunities.

·        appropriate provisions should be developed with respect to products of interest to developing countries for inclusion in disciplines in the area of geographical indications.

Mechanisms for effective implementation and enforcement, particularly for developing countries, must recognize that cooperation and assistance of developed countries within their territories is essential.

·        due recognition and flexibility to developing countries establishing or operating Regional Trade Agreements (RTAs) and applying common external tariff regimes;

·        establishment of a technical assistance fund to support initiatives of developing countries aimed at complying with standards, market norms and other import regulations, required for entry to agricultural product markets of developed countries. – SUNS4831

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

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