Developing world should submit clear proposals for next Round

by Chakravarthi Raghavan

Geneva, 29 Apr -- A negotiating agenda for the trade negotiations likely to be launched at Seattle could be designed to become a "thematic" or "development round", and developing countries need to formulate and submit clear proposals for a positive agenda before August, UNCTAD Secretary-General Rubens Ricupero has said.

In opening an expert meeting this week on agricultural trade, Ricupero stressed that it was an opportune time to prepare for the agricultural negotiations to be initiated at the Seattle WTO ministerial meeting. Between now and Seattle, he said, the negotiating agenda would be designed for what could be a "thematic" round or "development round". It was therefore crucial that in the coming months, issues relevant to developing countries need to be formulated into proposals for a positive negotiating agenda to be submitted to the WTO General Council before August, Ricupero said.

Underscoring the importance of the agriculture sector in developing countries (30% of GDP and 70% of labour force in low-income countries), Ricupero said it was hence necessary to pay close attention to the development impact of agricultural reform in the forthcoming negotiations. The Marrakesh Ministerial Decision on LDCs and net food importing countries had not led to any tangible benefits, and it was necessary to translate the decision into operational commitments.

There was also need to pay attention to the dominant role of TNCs in the world wide production, marketing and distribution of some agricultural products. This role has sometimes held back the expansion of agricultural exports of developing countries, particularly those with high-retained added value.

It was also necessary to examine whether the provisions for "special and differential treatment" for developing countries were adequate and well-designed. "In fact," added Ricupero, "a major drawback of the current review process is that it lacks a framework for systematically examining such questions of special and differential treatment."

Sanitary and Phytosanitary measures had also recently become an important new area for possible non-tariff barriers. While these rules were supposed to ensure that SPS measures did not become disguised protection, successful challenges to bans by importing countries were rare. Developing countries should consider how to increase their capacity to use the provisions of the SPS agreement, and maximise their possible gains from the Agriculture Agreement.

A secretariat document for the meeting said that a detailed examination of exports of agricultural processed products shows that the growing share of developing countries was found mainly in products at the primary processing stage, and exports of products with a high value-added, requiring significant blending, processing and marketing activities, are dominated by developed countries. These products include tropical beverages and spices, based on commodities primarily produced in developing countries. Supply-side problems continue to be an important obstacle to export expansion for some developing countries, notably in Africa. Other problems include difficulties in meeting market requirements. "The dominant role of TNCs in the worldwide production, marketing and distribution of some products has also sometimes been a constraining factor."

In looking at the framework for negotiations, UNCTAD secretariat document noted the argument that incorporating the built-in agenda into a broader "millennium round" (advocated by the EC Commission) might yield far-reaching results. But such an approach could also provide an opportunity for more powerful trading partners to exact a price from developing countries in unrelated fields for further substantial liberalisation in agriculture.

Among the factors likely to shape the agricultural negotiations would be the changes in US farm legislation replacing deficiency payments with decoupled payments (rendering the 'blue box' exemptions unnecessary for the US), EC's Agenda 2000 reform of the CAP involving further reductions of EU price support levels for major commodities combined with semi-decoupled (blue box) direct payments to farmers, and Japan's decision to tariffy its rice import restrictions.

Another factor would be the expiry at end of 2003 of the socalled "peace clause" (art. 13 of the Agriculture Agreement) providing protection from challenges within the WTO for domestic support and export subsidies that conform with the Agreement. To prevent endless disputes in WTO, participants were likely to have an incentive to conclude agriculture negotiations before end 2003 and extend the peace clause to cover the new implementation period.

In the area of market access, the secretariat notes that in addition to high tariffs, there was a continuing problem of tariff escalation. The profile of post-Uruguay Round tariffs in agriculture have become more complex, due to an increase in number of tariff lines, and use of non-ad valorem tariffs that weighed more heavily on low-priced imports.

The tariff quota administration (to assure existing or minimum market access), leaving much to discretion of importing countries also had a significant impact on effective market access.

There have also been use of special safeguard measures (triggered by variations in price due to currency fluctuations) that could be used for "tariffied" products. Of 37 countries eligible to use them, seven took such actions between 1995 and 1997.

The UNCTAD document advocated transparency of tariffs, through conversion of non-ad valorem duties into ad valorem ones; reducing or eliminating multiple tariffs for the same products (associated with seasonal and other tariffs), and tackling tariff peaks and excessively high tariffs through a tariff-cutting formula with a tariff-harmonizing effect through for e.g. the "Swiss formula" used in Tokyo Round.

In the area of export subsidies, despite the UR agreements, substantial export subsidies remain for those permitted to use them. And some WTO members have the right to use export subsidies (within bound levels), but most developing countries can't use them.

As for domestic support, the developed countries were allowed $146 billion in domestic support or 90% of that for all WTO members. Only 10 developing systematically calculated their base period AMS. For the majority, the AMS amounts claimed were below the 20% level of their individual agricultural GDP.

Referring to the horizontal and other issues like non-trade concerns and the multi-functionality of agriculture, meaning public goods, environmental benefits etc, UNCTAD said that while some major developed countries have raised these, the US and Cairns group members have argued that non-trade concerns should not become a new obstacle to substantial future reduction commitments. But the socio-economic roles of agriculture in the developed and developing countries were quite different, and need to be addressed clearly in the case of the developing countries including through clarification of the concept of S&D treatment. (SUNS4426)

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

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