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Agriculture text appears to revise WTO agreement mandate

by Chakravarthi Raghavan

Geneva, 8 Oct 2001 - The informal text on the mandate for agriculture negotiations, presented to some 20-odd key delegations Thursday by the General Council chair, Mr. Stuart Harbinson, appears to have raised the hackles of France and the EU, for contemplating the eventual phasing out of export subsidies in agriculture.

The WTO Director-General Mike Moore is due to visit Paris this week, when he can expect to face the French wrath on this, even as the origins of the revised text, and who had cobbled it together and given it to Harbinson is becoming a mystery - like other mysteries at the WTO these days.

There is very little doubt that the secretariat has had a hand. Mr. Moore himself has now some advisors around him, including some of the old GATT hands who have retired, who had blamed him for the Seattle fiasco by not having up his sleeve compromises to spring on the membership in green rooms at the opportune moment. They are now busy producing such drafts.

The publicly aired differences (of the EC, Cairns Group) on the text, has not removed the views of several developing countries that a small group outside the WTO, including the US and others are working on various compromises that are being put forward by Harbinson, and that the agriculture draft is a compromise text to accommodate the EC and Cairns group, and that it has been in fact a compromise ‘brokered’ by the US.

Meanwhile other experts, after a careful study of the new agriculture draft, have noted that the latest Harbinson draft has selectively quoted from the preambular part of the Agreement on Agriculture (AoA), leaving out some important parts, making the new text not only imbalanced, but leaving the impression that in a subtle the mandate of the agriculture talks, in terms of the objectives and principles was being changed..

Some suspicion that this is also aimed to achieve the US objectives is borne out by the news from Washington that the House of Representatives has adopted a bill for massive expansion of support for the US farms, an increase in support of $50 billion - to help sugar and peanut growers to corporate hog operations and horse breeders. Despite the administration’s objections (and asking Congress to hold off such support for a while), the bill has passed the lower House, and the key Democratic leadership in the Senate promise to quickly adopt it.

The Washington Post reporting on the House action quoted a GOP aide as saying that “An undercurrent in the debate was that you can’t be going to war and beating up on farmers at the same time.” The House measure has some $73 billion in added agricultural spending, with $50 billion for traditional commodity groups, such as growers of grain and cotton. Those farmers are to have the same wide latitude they have under the existing farm legislation (which is expiring) to decide what and how much to plant. If they guessed wrong about the needs of the market, the Washington Post report explains, they will have an array of federal supports to come into play to protect them. “In good years and bad, they would continue to receive fixed annual payments. A new group of soybean farmers would also qualify. A major new provision would authorize the Agriculture department to make automatic payments to producers of basic staple crops to offset the price - a provision that the Congressional Budget Office estimates would cost taxpayers $37.3 billion through 2011.”

Hog farmers and their corporate owners would be eligible for tax-payer financed assistance under a $1 billion-a-year expansion of the Environmental Quality Incentives Programme; and peanut growers would be eligible, for the first time, for an estimated $3.5 billion in government payments under a revamping of the peanut Programme, while horse-breeders could apply for a government loan if 30% or more of their mares fail to produce live, healthy foals.

Against all this background, the Harbinson draft (of Thursday) (text in SUNS #4982) on long-term objectives has only this:

“We recall the long-term objective agreed at the mid-term review of the Uruguay Round to establish a fair and market oriented trading system through a program of fundamental reform with specific commitments in order to correct and prevent restrictions and distortions in the agricultural markets. We confirm our commitment to this program.”

By using the word ‘through’, instead of the words ‘and that a reform process be initiated’, in fact the entire objective and principles of the AoA and the further reform processes have been distorted.

According to Mr. Bhagirath Lal Das, a trade expert (and former Indian Ambassador to GATT and Director of UNCTAD Trade Programs division), the AoA preamble (a very carefully negotiated text) does not express the reform process as the sole means of achieving the objective of the process. By using ‘through’ instead of ‘and’, the new text appears to do that.

The agriculture agreement and the reform rest on three pillars - market access, export support and domestic subsidies, and all the three pillars have been subtly changed in the draft.

In other respects too, whether intended or not (and it is difficult to believe that in such a contested area, words would be put in without intent), the formulation in para 3 mentions substantial improvement in market access, but appears to leave out an important qualification on market access found in the preambular para 5 of the AoA, Das notes.

This preambular para says “the developed country Members should take fully into account the particular needs and conditions of developing country Members, by providing for a greater improvement of opportunities and terms of access for agricultural products of particular interest to these Members....” By picking out some parts of important decisions and leaving some significant qualifiers, “there is a risk of the qualifier being forgotten,” says Das.

On the issue of export subsidies, where the text now calls for ‘reduction of with a view to phasing out all forms of export subsidies’, an important qualifier in the AoA preamble has been left out.

Points out Mr. Das, the fourth preambular para of the AoA, spoke of “commitments in export competition”. An export subsidy is a part of export competition, but export competition has several other aspects too - e.g. monopolisation and cartelisation in agricultural trade (as brought out in several recent studies).

Another aspect that other experts point to is that apart from export subsidies, export credits and the terms of such credit, and other export assistance programs of industrial countries (the US uses this much more than the EU) also raise questions about export competitiveness.

On domestic subsidies, the latest draft only talks of “substantial reduction of ‘trade-distorting’ domestic subsidies.” This is a dangerous formulation, says Das, and prejudges the severe differences on the perception of the effects of domestic subsidy in the industrial world.

By restricting the negotiations to the reduction of ‘trade-distorting’ subsidies, it gives immunity to the socalled ‘green box’ subsidies of the major developed countries. The developing countries have labouriously brought these subsidies of major developed countries into focus for the past two or three years, and now this formulation in the Harbinson text will remove it from the table.

By introducing the words ‘trade-distorting’, there is a subtle attempt to prevent the developing countries in the further negotiating process from raising their complaints and issues about the ‘green box’ subsidies of the developed countries. – SUNS4983

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

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