Proposed specific changes needed in WTO Agriculture Agreement

THE World Trade Organisation (WTO) Agriculture Agreement is now coming under severe criticism from many quarters and its deficiencies are becoming more glaring. What needs to be done to correct the deficiencies? In this article, the international trade expert Bhagirath Lal Das makes specific proposals on how various aspects and parts of the Agriculture Agreement should be revised, particularly to take into account the need for food security and to protect small farmers in developing countries. These proposals will be especially useful as inputs for the negotiations in the WTO.

1. Domestic support and export subsidy in developed countries

The developed countries undertook commitments to reduce their domestic support, budgetary outlay for export subsidy and the quantity of export covered by export subsidy by 20, 36 and 21% respectively over the period of 1995-2000. Thus the bulk of their domestic support and export subsidy will continue to be applicable even beyond 2000.

The farmers of developed countries have enjoyed protection and support for a long time in the past. They are much more endowed with resources and enjoy a much more favourable environment of production and export, compared to farmers in developing countries.

The domestic support and export subsidy provided by the governments in developed countries are further enhancing the unfair advantage which the farmers in developed countries have over those in developing countries.

Developed countries should totally eliminate their domestic support and export subsidy immediately, latest by 2005. They should accordingly provide schedules for their domestic support and export subsidy applicable from 2001 onwards until 2005, by the end of which the levels should be zero.

2. Tariffs in developed countries

In the process of tariffication, developed countries have recorded very high tariffs in their schedules. Their farmers have benefited from protection for a very long time, earlier through direct import control measures and lately by prohibitive tariffs. In fact, they undertook a commitment to reduce the tariffs only by 36% during the period 1995-2000. Continuation of such a high level of protection of agriculture in developed countries is patently unfair.

Developed countries should reduce their tariffs significantly during the five years beyond 2000. There should be a rational ceiling on their tariff peaks.

3. Domestic support and export subsidy in developing countries

The developing countries, which were not applying domestic support and export subsidy measures earlier, have naturally not recorded them in their schedules; and thereby they have been debarred from applying these measures in future beyond the de minimis levels. This is highly inquitous. As their farmers generally are in disadvantaged positions, compared to those in developed countries, it is only fair to lift this restriction.

In the context of Article 3 of the agreement, there should be an understanding that developing countries will not be subjected to this restriction. Similarly the developing countries, having given their schedules of reduction of domestic support and export subsidy, should be allowed flexibility to enhance the levels of these measures or to lessen the pace of reduction of the levels. If an understanding on Article 3 is not considered enough for this purpose, there should be a specific additional provision in Article 3 towards this end.

4. Lifting of restrictions for encouraging food production

It will be dangerous for developing countries to depend on imported food, as their foreign exchange position is often not comfortable, and the provision of food for the population is essential.

Hence, what is needed is that developing countries should be encouraged to produce food for their domestic population. The current disciplines on import control and domestic support may hamper their efforts in this direction.

The food products in developing countries should be excluded from the disciplines of import control and domestic support. It should be done, either through a clarification of Articles 3 and 4 of the agreement, or, if need be, through an additional provision in the agreement to this effect.

5. Removal of iniquity in Article 13

The 'due restraint' provision in Article 13 is unbalanced and iniquitous. Subsidies covered by Annex 2, which are generally prevalent in developed countries, have been made immune from countermeasures and countervailing duty action; whereas subsidies which are generally prevalent in developing countries, eg., investment subsidy and input subsidy, covered by Article 6, do not have this dispensation. This discrimination is patently unfair and it should be removed.

The subsidies of developing countries, covered by Article 6, should be made immune from countermeasures and countervailing duty action. Article 13 should be modified accordingly.

6. Support to household farmers and small farmers

In a large number of developing countries, many farmers take to agriculture not as a commercial venture, but as a family activity passed down over generations. This is the nature of subsistence cultivation at the household level.

Also, many developing countries have a large number of small farmers, whose farming activity will not be able to stand up to a large scale of international competition. They need protection, otherwise there will be large-scale unemployment and spread of poverty in these countries.

Developing countries should have flexibility regarding import restraint and domestic subsidy for the protection of and support to household subsistence farming and small-scale farming. There should be requisite clarification in Articles 3 and 4 for this purpose. If considered necessary, there should be an additional provision for this purpose.

7. Removal of unpre-dictability about domestic subsidy

A country can modulate the choice of product and the rate of subsidy to match the ceiling of domestic support in a particular year. This causes uncertainty in the minds of exporters in other countries, who do not know which products will be covered by the reduction and to what extent. Hence, exporters in other countries may have difficulty in planning their export. There is a need to remove this uncertainty.

Countries should plan out the products and the levels of support a few years in advance and it should be notified. There should be an understanding in this regard.

8. Relief to net food-importing countries

The current provision regarding relief to the net food-importing developing countries does not contain specific and concrete action for the relief. In fact, hardly anything has been done in this regard.

There is a need for some specific action to provide relief to these countries. There should be more operational and effective provisions for this purpose.

One way could be to have a fund for this purpose, to which contributions should be made by the developed countries which are major exporters of agricultural products. Specific criteria for the contributions to the fund should be worked out and made enforceable in the agreement. (Third World Resurgence No. 100/101, Dec 98/Jan 99)

Bhagirath Lal Das was formerly India's Ambassador and Permanent Representative to the General Agreement on Tariffs and Trade (GATT). Later, he was Director of International Trade Programmes in the United Nations Conference on Trade and Development (UNCTAD).