1. INTERNATIONAL TRADE POLICY1

2. Agriculture Trade Policy
Module 3
Agriculture Trade Policy
The Changing Role of
Agriculture in Trade
Negotiations 2

3. Objectives
Understanding why agricultural trade enjoys special treatment in the WTO
Reviewing the special provisions on agriculture and the Uruguay Round Agreement on Agriculture
Introducing the major Doha issues
Understanding the special links between agriculture trade, poverty and gender issues.

4. Why has Agriculture been separated Treatment?
Central characteristic of agriculture – shedding of labour
Technology driven
Continual over more than a century
Across all countries
More critical in developing countries
Key role of agriculture in most developing countries.

5. Why has Agriculture been separated Treatment?
Domestic agricultural policy – particularly in North America and Europe – has been focused on “slowing the exit of farmers.”

6. Why has Agriculture been separated Treatment?
In the WTO there is a general acceptance of the proposition that trade liberalization is welfare enhancing.
Protectionism is a recognition of political reality
In agriculture, trade policy was harnessed explicitly to the domestic goal of retaining farmers
Exports are “good” – means more farmers Imports are “bad” – means fewer farmers

7. Separate Treatment of Agriculture in Trade Law
GATT Waivers from general GATT disciplines granted for agriculture
Waivers
Use of export subsidies allowed
Domestic subsidies exempt
Market access – tariffication ignored, quantitative restrictions, export levies, etc. explicitly allowed

8. Separate Treatment of Agriculture in Trade Law
By the 1980s, taking advantage of the GATT waivers had led to significant problem in international markets for agricultural products
Market access blocked for the competitive exports of developing countries
Rich countries use of domestic agricultural subsidies limited international opportunities
Export subsidies drove down international prices

9. URUGUAY ROUND

10. The Uruguay Round –
Agreed that agriculture should no longer receive separate treatment
Not because of a general acceptance that trade liberalization is welfare enhancing
More directly related to specific goals of the Round.

11. The Uruguay Round – 1986-94 Negotiations were extremely different
To save the Uruguay Round an interim Agreement on Agriculture (AoA) was reached (Jan 1, 1995).

12. The Uruguay Round –
The AoA provided an appearance of liberalization.
In reality it was only a pause in the war and recognition of the current differences in negotiating position.

13. Agreement on Agriculture
Special and differential treatment was officially included.
Developing countries only agreed in anticipation of improved market access to developed country agricultural (and textile) markets.
Disappointed in the outcome.

14. Agreement on Agriculture
Implementation Issues
Tariffication methods (dirty tariffication)
Subsidy shifting (into the green box)
High initializing periods
Averaging
Developing countries do not feel they received the promised benefits.

15. Agreement on Agriculture
AoA provided for renewed negotiations by 1999 whether or not there would be a new general Round.
These were to continue the process of full integration of agricultural trade into WTO disciplines.

16. “Built in Agenda”
Agenda of these negotiations was largely pre- determine
Improved market access
Reduced export subsidies
Reduced domestic support
‘Non-trade’ Issues

17. The Doha
Development Round

18. The Doha Development Round
1999 – Failed Ministerial in Seattle
2001 – Successful Ministerial in Doha
2003 – Failed Ministerial in Cancun
2005 – Little Progress at Ministerial in Hong Kong
2006 – Doha Round talks suspended end of July
2008 – Talks resumed, leading to…..?

19. The Doha Development Round
Suspension – What does it mean?
Technical-level negotiations have now resumed, but with no substantial progress
Meanwhile, Uruguay Round agreements remain in place

20. The Doha Development Round
Developing countries raise issues of implementation
Non-Trade Concerns – multifunctionality, geographic indicators (part of TRIPs work plan)

21. The Doha Development Round
The agricultural agenda is centred on the “three pillars” of the Uruguay Round
Export Subsidies
Domestic Support for Farmers
Market Access
The negotiations thus far have added layers of complexity to already complex systems.

22. Export Subsidies The pillar where the most progress has been made
All export subsidies will be removed by 2013 – agreed in Hong Kong
Open issues
The path of implementation
Disciplines on alternatives to export subsidies

23. Alternatives to Export Subsidies
Export Credit Programs
No longer than 6 months
Added disciplines on remaining programs
Food Aid
“True need” not surplus disposal
An independent agency

24. Alternatives to Export Subsidies
Exporting through State Trading Enterprises of developed countries
No direct subsidies or government guarantees
Transparency
Monopoly powers

25. Export Subsidies – The Bottom Line
A major concession has been made – full integration into general WTO disciplines by the end of 2013.
Don’t worry too much about the path – the commitment to the end point is important
EU and US export subsidies are a major concern of developing countries – the reality is the gains will be modest.

26. Domestic Support for Agricultural Producers
Currently support can be provided by:
Actionable subsidies capped by AMS to be de minimis: reduced to below < 5%.
Blue box subsidies not capped
Green box subsidies not capped

27. Proposals: Domestic Support
Special and Differential Treatment
Developing Countries
Exempt from de minimis reductions if paid to subsistence and resource poor farmers
Lower reduction commitments
Longer implementation
Least Developed Countries
No reductions required

28. Domestic support – Impact of Proposals
With no cap on the size of the Green Box (i.e. Non-Actionable subsidies), members would be able to switch the method by which they pay farmers to comply with the Green Box requirements.
All subsidies are trade distorting in the long run so payments originating from the Green Box will not yield significant economic gains.
Governments are not prepared to accept total subsidy caps.

29. Market Access Negotiations in DDA
Most important area for liberalization – where largest gains from liberalization will be found
This will be the most difficult area for the negotiations
Complexity will make offers difficult to assess
Bound tariffs will be the starting point, not applied tariffs

30. Sensitive Products Sensitive Products An extremely important issue
Open to all Members
This is where developed countries will try and protect their most politically difficult products
Number of products that can be selected is very important – the longer the list the less liberalization
There is still supposed to be substantial liberalization, but less than tiered general reductions in tariffs
TRQ liberalization – increase Q versus decreased above quota tariffs

31. Market Access Issues Special Products Only for Developing Countries
Used in cases of:
Food security
Rural development
Livelihood security (protectionism??)
What will be reductions once selected?

32. Market Access Issues
Tiered Reduction in Tariffs for non- sensitive and non-special products
Average agricultural tariff > 60% (industrial tariffs 5%)
How many tiers (could be different for developed and developing countries)
Boundaries of tiers
Tariff maximum
Length of implementation period
Paths of implementation
Form of Special and Differential treatment for developing and least developed countries

33. Market Access Issues Special Safeguard Mechanism
To deal with import surges
Could induce a higher level of tariff reduction by developing countries
What are the trigger mechanisms going to be?
Only available to developing countries

34. Market Access – The Bottom Line
Sensitive and Special Product lists are important
Sensitive and Special Products must not take on permanent status – there must be reduction commitments
Even with strong commitments on Market Access liberalization may be limited because:
Anti-dumping
Countervail
Sanitary and Phytosanitary Barriers
Technical Barriers to Trade

35. Conclusions
Progress is more important than speed or even potential size of commitments
Keep attention on the goal of moving agriculture toward WTO norms
Tactical posturing in the negotiations should not become ideological positions from which no compromise is possible
For developing countries the central issue is Market
Access
Already agreed that export subsidies will be eliminated
Limits on domestic subsidies not possible – there is always the Green Box

36. Conclusions
Increased complexity will require more and better trained people to evaluate alternatives
There are lessons from the experience of agriculture in developed countries – do not go down the road of treating agriculture as special. It was a convenient “short run” fix that turned into a major “long run” headache
Establish agricultural programs with the WTO norms in mind, not the agriculture rules – it will lead to fewer future policy problems

37. Conclusions
While having the options created by Special and Differential treatment is politically convenient, there is a cost in terms of benefits of liberalization and ultimately growth and development
Least Developed Countries may not be well served by total exemptions
Failure is dangerous – without a strong WTO there will be no rules – that only benefits the powerful
Alternative is regional trade agreements – they only benefit the powerful