Workshop - WTO Topic A: Agriculture and trade barriers

Dear MUNers, 

One of this week's topics is agriculture and trade barriers. The following article is from WTO official website. It will help you quickly get through the agriculture negotiation in WTO. Down below the article are some explanation of terms frequently used in this issue. The last part lies the questions to be discussed. Please try to think about it and be prepared to share your thoughts during the workshop. 

WTO Agriculture Negotiations-

The issues, and where we are now

Source: WTO Official Website

UPDATED 1 DECEMBER 2004  

This briefing document explains current agricultural issues raised before and in the current negotiations. It has been prepared by the Information and Media Relations Division of the WTO Secretariat to help public understanding about the agriculture negotiations. It is not an official record of the negotiations.

INTRODUCTION

The present reform programme

Up to 1995, GATT rules were largely ineffective in disciplining key aspects of agricultural trade. In particular, export and domestic subsidies came to dominate many areas of world agricultural trade, while the stricter disciplines on import restrictions were often flouted. The 1986–1994 Uruguay Round negotiations went a long way towards changing all that.

Numerical targets for cutting subsidies and protection

The reductions in agricultural subsidies and protection agreed in theUruguay Round

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                                                                            Developed countries    Developing countries 

                                                                            6 years: 1995–2000     10 years: 1995–2004

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Tariffs

     average cut for all agricultural products             –36%                       –24%

     minimum cut per product                                 –15%                          –10%

Domestic support

    cuts in total (“AMS”) support for the sector            –20%                       –13%

Exports

    value of subsidies (outlays)                               –36%                        –24%

    subsidized quantities                                         –21%                        –14%

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Notes: Least-developed countries do not have to reduce tariffs or subsidies. The base

level for tariff cuts was the bound rate before 1 January 1995; or, for unbound tariffs,

the actual rate charged in September 1986 when the Uruguay Round began.

Only the figures for cutting export subsidies appear in the agreement. The other

figures were targets used to calculate countries’ legally binding “schedules” of

commitments. Each country’s specific commitments vary according to the outcome of

negotiations. As a result of those negotiations, several developing countries chose to

set fixed bound tariff ceilings that do not decline over the years.

Agriculture trade is now firmly within the multilateral trading system. The WTO Agriculture Agreement, together with individual countries’ commitments to reduce export subsidies, domestic support and import duties on agricultural products were a significant first step towards reforming agricultural trade.

The reform strikes a balance between agricultural trade liberalization and governments’ desire to pursue legitimate agricultural policy goals, including non-trade concerns (see below, on page 70).

It has brought all agricultural products (as listed in the agreement) under more effective multilateral rules and commitments, including “tariff bindings” — WTO members have bound themselves to maximum tariffs on nearly all agricultural products, while many industrial tariffs remain unbound.

For the first time, member governments are committed to reducing agricultural export subsidies and trade-distorting domestic support. They have agreed to prohibit subsidies that exceed negotiated limits for specific products. And the commitments to reduce domestic support are a major innovation and are unique to the agricultural sector.

The current negotiations

The Uruguay Round agreement set up a framework of rules and started reductions in protection and trade-distorting support. But this was only the first phase of the reform. Article 20 of the Agriculture Agreement (see below, on page 7) committed members to start negotiations on continuing the reform at the end of 1999 (or beginning of 2000). Those negotiations are now well underway. They began using Article 20 as their basis. The November 2001 Doha Ministerial Declaration sets a new mandate by making the objectives more explicit, building on the work carried out so far, and setting deadlines.

The negotiations are difficult because of the wide range of views and interests among member governments. They aim to contribute to further liberalization of agricultural trade. This will benefit those countries which can compete on quality and price rather than on the size of their subsidies. That is particularly the case for many developing countries whose economies depend on an increasingly diverse range of primary and processed agricultural products, exported to an increasing variety of markets, including to other developing countries.

The objective: continuing reductions and other issues

Further substantial reductions in tariffs, domestic support and export subsidies are prominent issues in the negotiations. In addition, some countries say an important objective of the new negotiations should be to bring agricultural trade under the same rules and disciplines as trade in other goods. Some others, reject the idea for a number of reasons (for example, see “non-trade concerns”, below on page 70).

This is sometimes translated into conceptual differences, reflecting the importance that members attach to the major issues in the negotiations. Some countries have described the mandate given by Article 20 as a “tripod” whose three legs are export subsidies, domestic support, and market access (these are more commonly called “the three pillars” of agricultural trade reform). Non-trade concerns and special and differential treatment for developing countries would be taken into account as appropriate. Others say it is a “pentangle” whose five sides also include non-trade concerns and special and differential treatment for developing countries as separate issues in their own right. So far, these differences of approach have not delayed the discussions.

The negotiations are now in their fifth year, but under a reformulated mandate — the Doha Declaration that ministers issued in Doha, Qatar, in November 2001. Negotiators missed the 31 March 2003 deadline for producing numerical targets, formulas and other “modalities” for countries’ commitments. A revised draft “modalities” paper was put on the negotiating table in March 2003 and although it was not agreed, it was used to discuss technical details in subsequent months. A number of “framework” proposals dealing with main points of the modalities were submitted and discussed before and during the Fifth Ministerial Conference in Cancún, Mexico, September 2003, but it was not until 1 August 2004 that a “framework” was agreed. The next stage is to agree on full “modalities”, which will in turn be used to work out the final agreement on revised rules, and individual countries’ commitments. Some members have suggested the negotiations might unofficially aim to complete the “modalities” by the Hong Kong Ministerial Conference in December 2004, but without making a formal commitment. The Doha Declaration had envisaged that countries would submit comprehensive draft commitments, based on the “modalities”, by the Cancún Ministerial Conference — but without modalities, this target was not met either. Meanwhile, the final deadline for completing the negotiations, 1 January 2005, was officially postponed on 1 August 2004, without a new date set.

To assist the negotiations, the WTO Secretariat has so far produced 22 background papers at the request of members. Most of these can be found in the G/AG/NG/S and TN/AG/S series of official documents
(see http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm)

What does this mean for …?

Market access: tariffs, tariff quotas and safeguards

What would this mean for wheat, rice, beef, sugar, milk, cheese, potatoes, pineapples, etc? How deep the cuts in their tariffs would be depends on:

• how high the current tariff is: higher tariffs have higher cuts, ranging from 50% to 70% subject to a 54% minimum average for developed countries, 33.3% to 46.7% for developing or less if they meet a 36% average cut
    
• whether the product is “sensitive” (all countries) or “special” (developing): sensitive products would have cuts of only 1/3, 1/2 or 2/3 of the normal cut but with a quantity allowed in at a lower quota; special products would also have smaller cuts, and some might be exempt completely
    
• whether the applied tariffs are lower than the bound tariffs. Cuts are made from legally bound rates. Tariffs actually charged can be lower. If a developing country has a bound tariff of 100% but only charges 25%, the bound tariff would be cut by 42.7% ie, cut to 57.3%. That means no change in the 25% tariff actually charged, with room to more than double the tariff
    
• the country’s status: least-developed countries would make no cuts on any products, developing countries in general would make smaller cuts and have more flexibilities than developed, small and vulnerable economies would make even smaller cuts with even more flexibilities, and countries that recently joined the WTO and some individual countries would also have special terms
    
• … including if imports increase sharply or their prices fall a lot. Although the tariff will be cut, developing countries will be able to use a “special safeguard mechanism”, allowing them to increase the duty temporarily.

Support for farmers and for agriculture

Support that “distorts” markets would be cut but not eliminated. This is the type of support that depresses world prices and discourages production in poorer countries because it encourages farmers to produce more in the richer subsidizing countries than elsewhere. In times of plenty it has even created wasteful surpluses described as “wine lakes” or “beef mountains”. Examples of this type of support include price guarantees or support that is based on how much is produced. Countries providing large amounts of support would cut these the most; many are already reforming their programmes. They and the rest would still be allowed a small or “de minimis” amount limited to 2.5% of the value of production for developed countries, 6.7% for developing. The amount of support a country can give to individual products would also be limited.

But a wide range of support for agriculture as a whole would be allowed without limit under the “Green Box”, ie, for development, infrastructure, research, agricultural extension, structural adjustment, etc. Conditions would be tightened to prevent direct income supports, etc, from stimulating production.

Export subsidies

These would be eliminated by 2013, including subsidies hidden in credit, non-emergency food aid and the activities of exporting state trading enterprises.

(see http://www.wto.org/english/tratop_e/agric_e/ag_modals_dec08_e.htm)

Questions to be discussed:
1. Do you agree with the idea that agriculture trade is now firmly within the multilateral trading system? Why or why not?
2. According to your opinions, does the international community benefits from getting into the multilateral deal as the negotiation in Doha round? Or should it start from bilateral deals before the negotiation? Which one will the world benefit the most? Explain the reasons.
3. Try to simulate standing in different country positions. How to improve the negotiation on the issue of agriculture and trade barriers within the international community?