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PART I
General Review

AN OVERVIEW OF THE GLOBAL ECONOMY, COMMODITY PRICES AND EXPORT EARNINGS

Agricultural export earnings drop further in 1999

According to preliminary FAO estimates, the value of trade in the principal primary agricultural commodities1 fell sharply in 1999 for the second year in a row. The value of global exports dropped by some $22 billion from 1998 to $146 billion. This represents a reduction of almost 13 percent and follows a 9-percent decline in the previous year. The export earnings of developing countries fell disproportionately more, by some 15 percent to $68 billion, a drop of about $12 billion (Table 1).

The reduction in the value of commodity export earnings in 1999 reflects a combination of falling prices and flat or declining trade volumes for many commodities. Continuing weak demand growth and ample harvests depressed commodity prices. The most severe declines in the value of export earnings were felt in beverage crops, sugar, rice, vegetable oils and oil meals. Indeed the decline in the value of exports was generalised across most commodities in 1999, with export earnings increasing significantly only for bovine meat.

The declines in export earnings generated by coffee and sugar were particularly acute, falling by 36 percent and 28 percent, respectively, at the global level. Coffee and sugar alone accounted for more than 40 percent of the total reduction in the export earnings of developing countries, amounting to losses of $3.7 billion and $1.4 billion, respectively. Already low prices for these crops were affected further by the 40-percent devaluation of the Brazilian real in early 1999 that stimulated demand for more competitively priced exports in the world market. This, coupled with continuing weak demand growth in a number of traditional import markets caused international prices and export earnings to plummet.

The value of global export earnings from cereals also fell substantially in 1999, by some $4 billion or about 11 percent. Most of this decline was felt in the rice market, where the value of exports dropped some 19 percent in 1999 (from the previous year's unusually high level) on the basis of both lower traded volume and falling prices. Rice production in a number of major consuming countries recovered in 1999, after the previous season's disappointing harvests that had boosted imports in 1998. The value of global wheat and coarse grains trade also fell in 1999, despite lower production world-wide and modest growth in export volumes. Prices for these grains fell in 1999, reflecting the existence of ample exportable supplies in the major exporting countries.

The value of exports of oilseeds, oils and fats, and oilseed meals and cakes fell 13 percent in 1999, by a total of $5.7 billion. Oils and fats represented more than half of the total reduction, some $2.9 billion, reflecting a pronounced decline in prices. Production of oils moved sharply upward in 1999 on the basis of favourable weather and in response to the previous year's unusually high prices relative to meals. Palm oil prices plunged 35 percent.

In the meat market, there was no significant change in overall export earnings, as a moderate increase in the volume of exports was offset by generally declining prices. There were, however, distinct contrasts in the evolution of the different meat categories. While the export value of most meat categories fell, the value of bovine meat exports increased substantially, by 14 percent or some $1.5 billion. Somewhat higher prices and larger traded volumes - supported by food aid shipments to Russia and the resumption of demand growth in Asia - pushed up the value of bovine meat exports. On the other hand, the value of ovine meat, pigmeat and poultry meat exports fell in 1999 for the second year in a row, reflecting generally depressed international prices. Similarly, the value of global dairy exports fell on lower prices and flat or declining volumes, as ample supplies in the main producing areas and reduced purchasing power in some important dairy importing countries combined to keep prices low.

Table 1. Value of exports of major agricultural products in 1999 (`000 million $)

 

World total

 

Developing countries

 

Developed countries

 

1998

1999

% change

 

1998

1999

% change

 

1998

1999

% change

Beverage crops

18.0

12.4

-31.2

 

16.7

12.4

-25.8

 

1.3

-

-

Cocoa

3.2

2.2

-31.2

 

2.8

2.2

-22.0

 

0.4

-

-

Coffee

11.6

7.4

-36.4

 

11.1

7.4

-33.1

 

0.6

-

-

Tea

3.2

2.8

-12.6

 

2.8

2.8

-1.3

 

0.4

-

-

Sugar

10.2

7.3

-27.8

 

6.4

5.0

-21.2

 

3.8

2.3

-39.2

Bananas

3.5

3.0

-15.0

 

3.3

2.8

-15.0

 

0.2

0.2

-14.8

Citrus

5.0

4.6

-6.7

 

2.6

2.4

-5.8

 

2.4

2.2

-7.7

Cereals

34.3

30.4

-11.3

 

12.3

10.7

-13.2

 

22.0

19.8

-10.2

Wheat

14.7

13.5

-8.1

 

2.1

2.0

-6.0

 

12.6

11.5

-8.5

Rice

9.2

7.4

-19.3

 

7.4

6.0

-19.7

 

1.8

1.5

-17.4

Coarse grains

10.4

9.5

-8.8

 

2.7

2.7

-1.1

 

7.7

6.8

-11.5

Cassava

0.6

0.7

22.4

 

0.6

0.7

15.6

 

0.0

0.0

-

Meat

24.9

25.0

0.3

 

6.5

6.1

-6.7

 

18.4

18.5

0.7

Bovine meat

10.0

11.5

14.2

 

2.6

2.5

-3.0

 

7.5

8.5

13.4

Ovine meat

1.4

1.4

-2.2

 

0.1

0.1

-8.0

 

1.3

1.3

-1.8

Pigmeat

6.3

5.9

-5.8

 

1.0

0.8

-19.9

 

5.3

5.1

-2.8

Poultry meat

6.4

5.4

-15.0

 

2.5

2.4

-4.6

 

3.9

3.1

-19.2

Other meat

0.7

0.7

0.7

 

0.2

0.2

-11.0

 

0.5

0.5

8.4

Milk and milk products

12.8

11.2

-12.6

 

1.3

1.2

-4.3

 

11.6

10.0

-13.5

Butter

1.6

1.2

-23.7

 

0.1

0.1

-16.4

 

1.5

1.1

-24.3

Cheese

4.0

3.1

-22.1

 

0.2

0.2

-5.2

 

3.8

2.9

-23.1

Powder & other products

7.3

6.9

-5.1

 

0.9

0.9

-2.5

 

6.3

6.0

-5.4

Oils, oilseeds and meals

42.5

36.8

-13.2

 

23.8

20.8

-12.5

 

18.6

16.0

-14.2

Oilseeds

13.3

12.4

-6.8

 

4.8

4.2

-12.0

 

8.5

8.2

-3.9

Oils and fats

21.8

18.9

-13.1

 

14.0

12.7

-9.3

 

7.8

6.3

-19.8

Cakes and meals

7.4

5.5

-25.3

 

5.1

4.0

-21.8

 

2.3

1.6

-32.7

Agricultural raw materials

15.9

14.7

-7.2

 

6.8

6.0

-12.3

 

9.1

8.5

-6.9

Cotton

8.3

7.5

-10.5

 

2.3

2.4

4.4

 

6.0

5.0

-16.2

Jute

0.1

0.1

-13.0

 

0.1

0.1

-15.5

 

0.0

0.0

-

Hard fibres

0.4

0.4

3.2

 

0.3

0.4

4.3

 

0.0

0.0

-10.8

Natural rubber

3.6

3.0

-17.3

 

3.5

2.7

-24.8

 

0.1

-

-

Hides and skins

3.5

3.8

10.1

 

0.5

0.5

-11.7

 

3.0

3.4

13.9

Total of the above

167.6

146.2

-12.8

 

80.2

68.1

-15.1

 

87.4

77.4

-11.4

All agricultural products 1

308.6

...

...

 

132.5

...

...

 

176.1

...

...

Forestry products

132.3

139.5

5.0

 

19.9

21.0

5.6

 

109.5

115.0

5.0

Fishery products

48.9

...

...

 

..

...

...

 

...

...

...

Note: Export values for 1999 are preliminary estimates, derived on the basis of estimated changes in trade volumes from 1998 and in world market prices. 1998 trade data are from FAOSTAT, except for hard fibres and cassava. The value of exports for developed countries and the world exclude intra-trade of the EC. Oils and fats exclude butter and fish oil. Meals and cakes exclude fishmeal. Wheat includes flour in wheat equivalent. Beverage crops, cotton and rubber in 1999 do not include re-exports. Hides and skins in 1999 do not exclude intra-EU exports. Hard fibres values are FAO estimates and include processed products. Cassava values are FAO estimates. Export values are fob.

1 These include all agricultural products reported in FAOSTAT (the trade data are not available for 1999; for 1997 the corresponding values were: $332 billion for the world, $143 billion for developing, and $189 billion for developed countries).

The value of agricultural raw materials exports fell 7 percent in 1999, by some $1.3 billion, with cotton and rubber accounting for most of the reduction. These markets continued to suffer from the lingering effects of the economic slowdown of 1998, particularly in Asia, which reduced demand from the textiles and automotive industries and put downward pressure on prices for raw materials. Some recovery in demand was witnessed in 1999, however prices remained depressed due to the existence of large stocks that overhang the market, particularly for rubber.

In contrast with most agricultural commodities, world trade in forest products is estimated to have grown 5 percent in 1999 to almost $140 billion, more than recouping the decline suffered in 1998, as renewed demand growth in Asia boosted both traded volumes and prices. In 1998, trade in fishery products shrank by 5 percent to $49 billion. Although complete estimates are not available for 1999, there is some evidence of recovery in fishery products trade on the basis stronger volumes and rising prices, especially in the latter part of the year.

In 1998, the latest year for which complete trade statistics are available, the value of global exports of all agricultural commodities (excluding forest and fishery products) fell 7 percent in nominal terms to $308.6 billion, in contrast with zero growth in 1997 and 6 and 16 percent gains in the previous two years respectively. The contrac-tion in total agricultural export earnings in 1998 affected both developing and developed countries, with declines, respectively, of 3 percent to $132.5 billion, and 6 percent to $176.1 billion. The 1998 decline in the value of agricultural trade can be partly explained by the downward pressure of the Asian economic crisis both on global food demand and on the international prices of most agricultural commodities. Given the continuing slide in most commodity prices, it is likely that total agricultural export earnings fell again in 1999.

Food import bills decline

The decline in value of agricultural exports in 1999 was also reflected in lower expenditures for imports of staple foods (cereals, cassava and vegetable oils). Developing countries' imports of these staple foods are estimated to have fallen by about 7 percent in value terms to about $40 billion on 1999, below that of the 1995-96 cereals price spike. The decline in the value of staple food imports can be explained by the decrease in cereal prices and, to some extent, by the recovery of cereal production in many traditional importing countries, which reduced the volume of import demand. Higher food aid shipments also contributed, to a small degree, to the reduction in food import expenditures.

Table 2. Imports of staple food commodities in 1998 and 1999 (`000 million $)

 

World total

 

Developing countries

 

Developed countries

 

1998

1999

% change

 

1998

1999

% change

 

1998

1999

% change

Cereals

38.8

37.9

-2.3

 

28.5

27.1

-4.6

 

10.3

10.8

4.3

Wheat

17.1

17.5

2.2

 

13.1

13.0

-0.6

 

4.0

4.5

11.2

Rice

9.3

7.9

-15.0

 

7.7

6.4

-16.1

 

1.6

1.5

-10.0

Coarse grains

12.3

12.5

1.2

 

7.7

7.7

-0.1

 

4.6

4.8

3.4

Cassava

0.6

0.8

21.5

 

0.2

0.3

40.6

 

0.4

0.5

11.5

Oils and fats

21.9

18.9

-13.6

 

14.5

12.9

-11.0

 

7.4

6.0

-18.8

Total of the above

61.3

57.6

-6.0

 

43.2

40.3

-6.7

 

18.1

17.3

-4.4

Note: Import values for 1999 are preliminary estimates, derived on the basis of estimated changes in trade volumes from 1998 and in world market prices. 1998 trade data are from FAOSTAT, except for cassava. The import bills for developed countries and the world exclude intra-trade of the EC. Oils and fats exclude butter and fish oil. Wheat includes flour in wheat equivalent. Import values are cif for all the countries, with the exception of the import values for Australia, Bermuda, Bulgaria, Canada, Dominican Republic, Papua New Guinea, Paraguay, Poland, Solomon Islands, South Africa, Venezuela, Zambia and Zimbabwe, which are fob. Cassava values are FAO estimates.

Agricultural prices continued falling in 1999

The index of nominal agricultural commodity prices fell 13 percent in 1999, to its lowest level in more than two decades2 (Figure 1). Prices for all commodity categories in the index fell, with cereals and raw materials prices dropping more than 15 percent; beverage crops, bananas and vegetable oils more than 20 percent; and sugar almost 30 percent. Of the primary major commodities, average prices fell in 1999 for all except bovine meat, jute and abaca.

These substantial price declines occurred because ample harvests boosted exportable supplies of many commodities, with little corresponding increase in demand, pushing prices downward. On the other hand, meat prices firmed somewhat in 1999 in response to the economic recovery in East Asia, because demand for this group of commodities is considerably more sensitive to changes in income. Currency exchange rates played a significant role in the price situation of some commodities, notably for coffee and sugar, where the sharp devaluation of the Brazilian real induced a large increase in export supplies from that country. Similarly, economic difficulties including substantial currency devaluations constrained the purchasing power of several large importers, such as the Russian Federation, dampening demand and depressing prices.

Figure 2 shows the development in nominal and real agricultural commodity prices over the 1990-99 period. Nominal prices have fallen considerably since the mid-1990s. Between 1994 and 1999, the index for aggregate agricultural commodity prices fell by some 23 percent. Over the same period, the index of export manufactures unit values (MUV) also declined, though less sharply than that of agricultural commodity prices. Consequently, the terms-of-trade for primary commodity exporters, fell in the aggregate by less than indicated by nominal prices since 1994.

Export prices of major agricultural commodities for developing countries declined more than for developed countries in 1999 (Table 3). This was largely due to the small share of meat in developing countries' export, and the small price decline for meat in that year. In addition, the declines in the cereals group, and in the beverage crops group were also larger for developing countries as a result of higher weights of rice and coffee in these respective indexes for developing countries, and the large relative declines in the prices of these products in 1999.

Table 3. Export price indices for major agricultural commodities1

 

World

 

Developing countries

 

Developed countries

 

1998

1999

% change

 

1998

1999

% change

 

1998

1999

% change

Cereals

99.4

83.1

-16.4

 

107.7

87.7

-18.5

 

95.4

80.8

-15.3

Beverage crops

136.0

107.6

-20.8

 

136.9

108.1

-21.1

 

121.8

101.2

-16.9

Meats

62.6

61.7

-1.3

 

60.4

58.7

-2.8

 

63.4

62.9

-0.8

Dairy products

115.6

102.0

-11.8

 

115.5

103.1

-10.7

 

115.7

101.9

-11.9

Bananas

93.0

71.2

-23.5

 

93.0

71.2

-23.5

 

93.0

71.2

-23.5

Sugar

71.1

49.9

-29.9

 

71.1

49.9

-29.9

 

71.1

49.9

-29.9

Oilseeds, oils and cakes

138.7

105.7

-23.8

 

153.2

116.8

-23.8

 

116.4

88.7

-23.8

Basic foods 2

80.0

73.0

-8.7

 

82.7

72.1

-12.8

 

78.9

73.3

-7.1

Others

101.0

81.4

-19.4

 

116.3

93.6

-19.5

 

73.7

59.7

-19.0

All agricultural commodities

87.1

75.9

-12.9

 

101.0

83.8

-17.0

 

77.9

70.6

-9.4

In real terms 3

                     

Basic foods

76.8

70.5

-8.2

 

79.4

69.6

-12.3

 

75.8

70.8

-6.5

Others

96.9

78.6

-18.9

 

111.6

90.4

-19.0

 

70.7

57.6

-18.5

All agricultural commodities

83.6

73.2

-12.4

 

97.0

81.0

-16.5

 

74.7

68.1

-8.8

1 The indices used 1992-94 export values as weights, with 1990=100.

2 Basic foods include all commodities represented in the table except for agricultural raw materials, bananas and beverage crops.

3 Real prices were calculated using the unit value of manufacturing exports from industrialized economies, published by the World Bank.

Price variations appear to have increased for a number of commodities during 1999, particularly cocoa, coffee, bananas, maize, rice, palm oil and some agricultural raw materials. These commodities were characterised by unusual supply fluctuations during the year. Maize production, for example, increased substantially despite lower planted area world-wide because unusually favourable growing conditions boosted yields unexpectedly. Similarly, crop damage and supply disruptions caused by natural disasters affected the markets for a number of commodities including coffee, cocoa and bananas. Palm oil prices were particularly volatile in 1999 because good weather boosted production unexpectedly, causing prices to fall from their unusually high levels of 1998.

Table 4. Representative export prices and within-year variation in monthly prices

 

Average annual price

Monthly variation*

 

1996

1997

1998

1999

1996

1997

1998

1999

 

$/tonne

 

percent

Cocoa (ICCO)

1 456

1 619

1 676

1 143

4.6

7.9

4.2

15.3

Coffee (ICO composite price)

2 250

2 952

2 394

1 893

6.0

15.0

12.7

16.1

Tea (1996 London; Mombasa from 1997)

1 761

2 010

1 898

1 794

4.8

13.2

22.7

5.7

Sugar (ISA)

264

251

197

138

6.6

4.1

14.7

11.8

Bananas

618

626

639

489

16.3

4.5

11.1

19.9

Wheat (US No.2 HRW)

210

162

127

117

13.8

9.7

8.4

8.6

Rice (Thai 100% B)

352

316

316

253

5.5

10.6

6.7

9.3

Maize (US No.2 Yellow)

165

118

102

85

19.2

5.3

9.3

14.3

Bovine meat (Australia, Cow 90 CL, cif US)

1 741

1 880

1 754

1 886

4.9

6.0

4.3

5.4

Ovine meat (New Zealand, frozen, wholesale UK)

3 295

3 393

2 750

2 610

13.4

5.2

9.8

3.9

Pigmeat (US frozen, export unit value)

2 713

2 745

2 158

2 066

9.1

10.2

11.0

5.5

Poultry meat (US chicken cuts, export unit value)

978

846

763

599

5.7

5.6

8.6

4.6

Milk SMP (New Zealand, fob)

1 838

1 675

1 430

1 295

8.2

5.6

8.2

8.1

Milk WMP (New Zealand, fob)

1 935

1 897

1 652

1 505

9.1

5.6

5.9

5.0

Butter (New Zealand, fob)

1 877

1 911

1 907

1 412

14.5

11.8

8.2

11.4

Cheese (New Zealand, cheddar, fob)

2 117

2 165

2 008

1 752

1.8

1.0

6.1

3.6

Soybeans

305

297

242

201

4.0

8.5

8.4

4.4

Rapeseed

301

280

294

204

4.4

7.0

9.4

12.5

Sunflower seed

294

275

310

239

7.3

8.8

10.2

7.5

Soybean oil

551

565

627

427

4.3

8.1

4.0

11.3

Palm oil

531

546

671

436

5.0

4.9

3.7

22.1

Sunflower oil

576

580

729

507

6.1

11.0

9.3

8.8

Rapeseed oil

555

565

628

423

4.1

9.4

4.1

12.2

Coconut oil

779

666

656

737

6.6

11.3

9.9

8.3

Groundnut oil

903

1 018

910

788

2.9

8.5

7.5

3.4

Soybean cake

268

276

169

152

3.9

6.4

15.2

9.0

Rapeseed cake

188

169

124

106

4.6

12.8

22.1

12.1

Palm kernel cake

132

91

72

71

11.3

17.6

8.3

5.4

Sunflower cake

153

134

89

81

5.2

8.0

16.5

21.1

Groundnut cake

213

221

116

107

8.7

14.2

12.1

3.6

Cotton (COTLOOK A Index)

1 773

1 741

1 440

1 173

4.9

2.4

7.6

9.9

Jute (Bangladesh, BWD, fibre, fob)

454

302

254

268

13.4

14.7

4.9

8.7

Sisal (Africa, UG)

869

781

823

688

2.5

4.2

4.0

12.9

Abaca (S2)

205

184

147

174

1.1

8.1

3.4

2.6

Rubber (RSS1, cif London)

1 472

1 074

797

744

10.9

16.8

3.4

7.9

Hides and skins (bovine, Chicago)

1 450

1 315

959

754

5.3

8.0

12.2

9.3

*The monthly variation is defined as the ratio (percentage) of the standard deviation of the monthly prices in the year to the average price in that year.




Box 1
Price shocks accelerate industry concentration in pig and poultry sectors

Large price shocks (sharp declines and increased variability) in recent years have accelerated industry concentration in the pig and poultry sectors in both developed and developing countries. In the case of developing countries, this is particularly true since the financial crisis that swept Asia and extended across South America in 1998. In many of the affected countries, large integrated farms, particularly those that produce poultry and pigmeat, were able to adapt to changing market conditions. Due to their relatively lower costs and easier access to credit, such operations have expanded their overall share of the market. By contrast, many small and medium sized producers, which were squeezed between higher feed costs and lower meat prices during most of 1998, went out of business. Concentration is less evident in the cattle industry due to the longer biological cycle for cattle and more extensive system of production.

For example, the trend toward industry concentration has been particularly evident in the Indonesian poultry industry, where the shortage of working capital has prompted many producers to associate themselves with the large breeding companies in order to have a continuous supply of affordable inputs. As a result, only 20 percent of total broiler meat is currently supplied by independent farmers, compared to 70 percent before the crisis. Thailand and Brazil, two major poultry meat exporters, already have highly integrated operations. Both countries benefited from currency devaluations in 1997 and 1998 respectively, which boosted their competitiveness in world markets. Pigmeat production in Thailand, while recovering in 1999, is increasingly located in large plants. Many small farms, with less than 100 sows or less than 500 hogs, reportedly went out of business because of depressed prices, soaring costs of production and a lack of affordable credit.

Meanwhile, plummeting pig prices to 30 year lows over the past 15 months, have accelerated the structural changes already taking place in the EC and US pig industries. In the United States, while pig meat production has expanded 13 percent, to 8.8 million tonnes, between December 1996 and 1999, the number of pig farms declined over 40 percent, with 1999 registering the steepest annual decline of 14 percent. This has been accompanied by increased vertical integration as nearly 25 percent of slaughter pigs are now owned by large packing plants while a further 45 percent are sold through contracts between those plants and producers. Similarly, in the Netherlands, while overall annual output growth of 5 percent has been slower than in the United States, total production since 1996 has been undertaken by 25 percent fewer hog operators, with a 15 percent exodus, mainly small operators, from the industry in 1999 alone.


Global economic outlook strengthens

The global economic situation strengthened substantially during 1999, with real GDP growth estimated at 3.3 percent for the year compared with 2.5 percent for 1998. Factors underlying this performance include particularly strong growth in North America. However, they also include a rebound in most of the crisis-hit Asian economies, a reversal of the downturns in Russia and Brazil, and a resumption of growth after the deep recession in Japan.3 Despite growth in demand and production, inflation has remained subdued in most regions, supporting the outlook for stronger economic expansion through 2000, currently forecast at the rate of 4 percent.

In the advanced4 economies, GDP growth in 1999 was estimated at 3.1 percent and is forecast to continue at a slightly higher rate, 3.4 percent, during 2000. Some slowing of the pace of economic expansion in the United States is expected to be more than offset by an acceleration of growth in the European Union and Japan.

For the developing countries, the pace of economic expansion accelerated from 3.2 percent in 1998 to 3.7 percent in 1999, and the forecast for 2000 is for further acceleration to 5.1 percent. Strong performance in the developing countries of Asia led the recovery in 1999, while growth actually slowed in the other regions. After the financial turmoil in the largest economies of Latin America that slowed economic output to virtually zero in 1999, growth is expected to resume in 2000, supported by comprehensive reform programmes.

For the countries in transition, growth recovered in 1999 and is forecast to continue in 2000 at 2.6 percent, as the long period of economic decline appears to have ended. Economic conditions remain uncertain in Russia following the sharp contraction there in 1998, but output is forecast to expand in 2000 by 1.5 percent.

Asian recovery led growth in 1999 among developing countries

The economic turnaround in Asia was particularly striking in 1999, well exceeding the pace of recovery predicted a year earlier. Japan underwent a dramatic recession in 1998, with a fall in GDP of 2.8 percent, which affected the export prospects for most of developing Asia. In response, the Japanese government implemented a major stimulus package in late 1998 with an emphasis on the implementation of large public investment programmes. As a result, growth picked up strongly in first quarter of 1999, although it fell during the next three quarters. According to the latest IMF forecast, positive growth is foreseen in the Japanese economy throughout 2000 at nearly 2 percent.

In the ASEAN-4 countries - where economic output fell in 1998 by 9.8 percent - every economy posted positive growth in 1999 except Indonesia. The Republic of Korea recovered at a fast pace in 1999 backed by sound macroeconomic policies, a high current account surplus and strong capital inflows. A competitive won is expected to support a further acceleration in growth in 2000. In Malaysia, a strong economic recovery is also underway in response to a significant strengthening of fiscal and monetary policies along with a pegging of the exchange rate at a competitive level, which may enhance the possibilities for growth from the export sector. Indonesia - the worst hit among the countries in the region - now has inflation under control, but still faces severe structural problems, which could dampen growth prospects in the coming years.

Overall for Asia, growth is expected to remain at about 6 percent in 2000. Asia's largest developing economy - China - is experiencing its lowest level of GDP growth in more than a decade, at 6.7 percent in real terms, due to increasing capital outflows and the effective appreciation of its currency caused by the earlier collapse of exchange rates among its major trading partners. In India growth is envisaged to remain robust in the coming years in part as a result of fiscal discipline, and in part because of a stimulus from the external sector, where reform has created a more open trading environment.

Per caput economic growth remains weak

Despite the acceleration of economic growth at the global level, growth in many of the poorer regions of the world remained weak, particularly when measured in per caput terms. Indeed, among the developing countries, only Asia posted a significant expansion in per caput economic output in 1999. Per caput GDP fell by 1.9 and 1.5 percent respectively for the developing countries of the Middle East and Europe and the Western Hemisphere. In Africa it fell by 0.2 percent.

One overarching reason for the weak economic performance of these regions has been the fairly modest growth in world trade, which among other factors placed downward pressure on primary commodity prices and export earnings. Continued economic expansion, particularly if Russia and Brazil recover as expected and if growth in Asia is sustained, should boost import demand and prices for a broad range of commodities in 2000. As trade and commodity prices rise during 2000, so should income growth in the developing countries.

Table 5. World economic outlook: global and per caput real GDP growth rates

 

1994-96

Average

1997

1998

1999

Prel.

2000

F'cast.

 

percent

World output

4.0

4.2

2.5

3.3

4.0

Developed countries 1

3.0

3.2

2.2

3.1

3.4

United States

3.1

3.9

3.9

4.0

3.8

European Union

2.4

2.6

2.7

2.2

2.7

Japan

2.4

1.4

-2.8

1.2

1.8

Other advanced economies

5.0

4.6

1.1

4.4

4.3

Developing countries

6.5

5.8

3.2

3.7

5.1

Least developed countries

5.0

5.0

4.4

5.1

5.3

Africa

3.8

3.1

3.4

2.3

4.2

Sub-Sahara 2

4.3

4.7

3.7

4.1

5.2

Asia

9.0

6.6

3.7

6.0

5.9

China

10.9

8.8

7.8

7.1

6.7

India

7.5

5.5

5.8

6.8

5.8

ASEAN-4 3

7.7

3.6

-9.8

2.2

4.2

Middle East and Europe

3.0

4.5

3.2

0.5

3.8

Western Hemisphere

3.3

5.3

2.2

0.1

4.0

Brazil

4.3

3.7

0.1

0.5

4.0

Countries in transition

-2.6

2.2

-0.2

2.4

2.6

Central and eastern Europe

0.1

3.0

2.2

1.4

3.0

Excluding Belarus and Ukraine

4.2

3.4

2.3

1.5

3.6

Russia

-5.8

0.9

-4.6

3.2

1.5

Transcaucasus and central Asia

-4.4

2.5

2.2

4.4

4.9

Per caput GDP

       

Developing countries

4.7

4.2

1.5

2.1

3.4

Africa

1.4

0.5

0.9

-0.2

3.7

Asia

7.4

5.1

2.2

4.6

4.5

Middle East and Europe

0.7

2.3

0.7

-1.9

1.4

Western Hemisphere

1.6

4.2

0.5

-1.5

2.4

World trade volume (goods and services)

..

9.9

4.0

4.7

7.2

Source: International Monetary Fund, World Economic Outlook, April 2000.
1 Economic groupings are as defined by IMF.
2 Excludes Nigeria and South Africa.
3 Indonesia, Malaysia, Philippines and Thailand.

PROGRESS IN IMPLEMENTING THE AGREEMENT ON AGRICULTURE AND PROSPECTS FOR THE WTO NEGOTIATIONS

Agriculture negotiations began in March 2000

The Seattle WTO Ministerial Conference held from 30 November to 3 December 1999 was intended to mark the beginning of a new comprehensive round of multilateral trade negotiations. This goal was not reached as Ministers were unable to agree on a Declaration defining the scope and goals for the new round of negotiations. It was not possible in Seattle to bridge the differences amongst countries on some traditional trade issues as well as on whether certain new issues such as labour standards and environmental concerns should be brought more fully into the WTO negotiations.

In agriculture, groups of countries coalesced around various positions according to the degree and manner in which they support their agricultural producers; whether they are net importers or exporters of food and agriculture; and the extent to which they perceive agriculture as an inherently "multifunctional" activity requiring special treatment within the WTO.

The Ministers agreed to suspend the work of the Conference and to have the WTO Director-General consult with delegations and discuss creative ways in which to move the negotiations forward. Whether these discussions will ultimately result in a comprehensive round of trade negotiations or in a more narrowly defined agenda is difficult to say at the moment of writing (March 2000). However, at its meeting on 7 February 2000, the General Council of the WTO agreed to go ahead with the mandated negotiations to further liberalize trade in services and agriculture, as provided for in the Uruguay Round Agreements on these subjects. It was agreed that the negotiations would take place in special sessions of the Committee on Agriculture, the first of which was held on 23 and 24 March 2000.

The Special Session agreed a programme of work which implies two phases to the negotiation process. The first phase, which will last for about a year, will in essence be devoted to submissions and discussions of technical papers and negotiating proposals by participants within the framework of paragraphs (a), (b), (c) and (d) of Article 20 of the Agreement on Agriculture. This phase will end with a stocktaking meeting in March 2001. Thereafter, a second phase would involve the negotiations proper to reach a new agreement. The schedule for the first phase calls for the submission of negotiating proposals by the end of December 2000, although there will be flexibility to submit proposals after this date provided they are done well in advance of the March 2001 stocktaking exercise covering all proposals submitted. Special Session meetings to discuss technical papers and negotiating proposals are planned to be held back-to-back with the regular meetings of the WTO Committee on Agriculture in June, September and November 2000, with the possibility of a fourth meeting provisionally set for the last week of January 2001.

The Seattle Draft Ministerial Declaration indicates areas for negotiations

A draft Ministerial Declaration that emerged on the final day of the Seattle Conference provides some insights on the major issues at stake in the negotiations. Concerning agriculture, the draft Ministerial Declaration deals with matters pertaining to the implementation of the UR Agreements, such as measures to facilitate access of developing countries to tariff quotas and the development of internationally agreed disciplines to govern export credits, credit guarantees and insurance programmes. It also addresses issues relating to future negotiations, including whether the objective of the upcoming negotiations should be to integrate agriculture fully into GATT 1994, the extent to which export subsidies should be reduced in the next round, and whether the concept of multifunctionality should be considered in the context of non-trade concerns. 5

Implementation issues

Many countries, most of which developing, stated that implementation issues need to be adequately addressed, before any further liberalisation is undertaken. A proposal was made that a thorough assessment be conducted before initiating negotiations in line with the provisions of the Agreement on Agriculture (AoA), in order to provide both developed and developing countries a clearer picture of the impact of agricultural trade liberalization under the existing WTO agreement so as to identify priorities for further negotiations. Such a review would also need to cover particular problems faced by WTO members in implement-ing the WTO Agreements in addition to their effects on trade.

ˇ Imbalances in the existing agreements

Many developing countries pointed out that imbalances existed in several areas (e.g. domestic support, export subsidies and use of the special safeguard), which if not corrected precluded fair and truly competitive trade. For example, of the total base period value of the Aggregate Measurement of Support (AMS) of $198 billion, over 90 percent was accounted for by OECD countries. For 13 out of 17 developed countries or country groups, the total value of AMS was in excess of 20 percent of their agricultural GDP. Given the "standstill and roll back" principle underlying the AoA, this implies that developed countries have "rights" under WTO to use their remaining high levels of support and protection, while developing countries' "rights" to similar support and protection are constrained to their considerably lower levels.

A similar situation exists with regard to export subsidies. Over 90 percent of the WTO-permitted total outlay on export subsidies is "accessible" to developed countries. Yet another example is regarding the special safeguard. The special agricultural safeguard (or SSG) can be used for about 80 percent of the tariffied products of the OECD countries, thus providing additional border protection.

ˇ Technical assistance and compensation

Many developing countries also expressed dissatisfaction with inadequate implementation, in their view, of the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed Countries and Net Food-Importing Developing Countries. One of the proposals called for the revision of the Decision (before the beginning of 2001) in order to ensure its effective implementation through the incorporation of concrete, operational and contractual measures, including provisions for technical and financial assistance. Provisions for technical assistance in the SPS/TBT Agreement were also explicitly noted in several proposals.

Issues for negotiations

Implementation issues have also been central to many of the proposals for negotiations on agriculture. Broadly, two aspects were stressed: the need for correcting the various imbalances, as noted above; and assessment of the experiences to date with the implementation of the Agreement on Agriculture, as called upon in its Article 20. The quantitative benchmarks established in the UR, such as those relating to reductions in bound tariff rates, in the volume and value of export subsidies and in trade-distorting domestic support measures, provided a concrete basis for correcting some of the imbalances in these key components of the AoA, while reviews were called for to improve the situation regarding imbalances in other areas. As regards the actual experience with the implementation of the AoA, the developing country proposals have focussed on two points. First, there was a need for reviewing the difficulties experienced with implementing the provisions of the AoA. Many of these difficulties have been brought to the attention of the WTO Members largely in the meetings of the WTO Committee on Agriculture and in its Analysis and Information Exchange (AIE) process. Second, there was a need for an assessment of the impact on trade, which should identify difficulties faced by these countries in accessing import markets, with regard to both tariff and non-tariff measures.

The following outlines briefly some of the other prominent proposals on agricultural negotiations:

Agricultural disputes at the WTO in 1999

One of the results of the Uruguay Round was the Understanding on Rules and Procedures Governing the Settlement of Disputes, which provides a complete updating of the dispute settlement arrangements that had developed in the GATT over the preceding half-century. It contains detailed coverage of the initiation and conduct of the dispute settlement, in order to ensure that the rules-based system of the GATT/WTO works effectively and to enhance the predictability of the multilateral trading system. This section highlights some of the most recent agricultural disputes at the WTO. It is important to note that although the commodities concerned are agricultural and therefore the Agreement on Agriculture applies, the disputes nearly always cite inconsistencies with other agreements and GATT Articles as well; some of the cases do not even mention the AoA.

By mid February 2000, the total number of disputes brought to the Dispute Settlement Body (DSB) of the WTO since its formation in 1995 amounted to 189, thus averaging around 38 per annum, compared to only six cases per year prior to 1995. The most-often cited Agreements in these disputes are the Agreement on Sanitary and Phytosanitary Measures (SPS), Technical Barriers to Trade (TBT), Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Agreement on Agriculture.

Two recent issues, which relate closely to the Agreement on Agriculture, are discussed in the boxes below. Several other disputes cite one or more articles of the AoA, but the main concern

seemed to be with other agreements and GATT 1994. The first box deals with export subsidies and the second with market access. The boxes provide detailed information on these cases and their situation at the time of writing.

The first box discusses two disputes regarding Canadian dairy export policies. In Canada: Measures Affecting the Importation of Milk and the Exportation of Dairy Products, a case brought by the United States, inconsistencies are cited between the export subsidy rules of the AoA and Canada's commitments on export subsidies (plus some rules on tariff quotas). Canada: Measures Affecting Dairy Products, brought by New Zealand, also cites articles on export competition, in addition to GATT Article XI on quantitative restrictions. The second of these boxes highlights some salient features of the banana dispute (European Communities - Regime for the Importation, Sale and Distribution of Bananas), which has received considerable attention during the 1990s. It cites, among others, GATT Article XI on the general elimination of quantitative restrictions. Likewise, the administration of tariff quotas, widespread in agriculture, has been at the core of several disputes involving agricultural products (notably GATT Article XIII). The Agreement on Import Licensing is almost always cited together with complaints on tariff quotas, as quotas are usually administered with license (e.g. in the banana dispute).



Box 2
Canadian dairy policies

The disputes

a) Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy Products, complaint by the United States. The United States contended that export subsidies allegedly granted by Canada on dairy products and the administration by Canada of the tariff-rate quota on milk distort markets for dairy products and adversely affect US sales of dairy products. The US alleges violations of Article II, X and X1 of GATT 1994, Articles 3, 4, 8, 9 and 10 of the Agreement on Agriculture, Article 3 of the Subsidies Agreement, and Articles 1, 2 and 3 of the Import Licensing Agreement.

b) Canada - Measures Affecting Dairy Products, complaint by New Zealand in respect of an alleged dairy export subsidy scheme commonly referred to as the "special milk classes" scheme. New Zealand contended that the Canadian "special milk classes" scheme is inconsistent with Article XI of GATT, and Articles 3, 8, 9 and 10 of the Agreement on Agriculture. In 25 March 1998, it was decided that the same panel established (see above) should examine this dispute.

The decisions

The Panel, established on 25 March 1998, found that the measures cited were inconsistent with Canada's obligations under Article II:1(b) of GATT 1994, and Articles 3.3 and 8 of the Agreement on Agriculture by providing export subsidies as listed in 9.1(a) and (c) of the AoA. The panel report was circulated on 17 May 1999. On 15 July 1999, Canada notified its intention to appeal certain issues of law and legal interpretations developed by the Panel.

The Appellate Body reversed the Panel's interpretation of Article 9.1(a) and, in consequence, reversed the Panel's finding that Canada acted inconsistently with its obligations under Article 3.3 and 8 of the Agreement on Agriculture. However, the Appellate Body upheld the Panel's finding that Canada was in violation of Article 3.3 and 8 of the Agreement on Agriculture in respect of export subsidies listed in Article 9.1(c) of the Agreement on Agriculture. In addition, the Appellate Body partly reversed the Panel's finding that Canada acted inconsistently with its obligations under Article II:1(b) of GATT 1994. The report of the Appellate Body was circulated on 13 October 1999. At its meeting on 27 October 1999, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.

At the DSB meeting of 19 November 1999, Canada stated its intention to comply with the recommendations and rulings of the DSB. On 23 December 1999, Canada informed the DSB that, pursuant to Article 21.3 of the DSU and after having agreed to extend the time periods set forth in Article 21.3(b) of the DSU, Canada, the US and New Zealand reached an understanding on four discrete periods for the "reasonable period of time" to be accorded to Canada for an implementation process to comply with the recommendations and rulings of the DSB. According to the agreement, Canada must complete the last stage of the implementation process no later than 31 December 2000.

Market implications

Under its URA commitments, Canada will still be able to subsidize the export of a range of dairy products, although in terms of specific dairy products and total milk equivalent, this could be less than was exported under the "special milk classes" scheme. The main products affected are anticipated to be skimmed milk powder and cheese. In world terms, Canada accounts for less than 2 percent of dairy exports, therefore, should a reduction in exports occur as a result of this ruling, it would not have a significant impact on world trade; rather, the effects would be most apparent on Canada's domestic market, where production is limited by quotas, and would be dependent on growth, or otherwise, in internal demand for milk and dairy products and the level at which quotas were set.

The Canadian dairy industry (as of February 2000) was involved in developing an operational system to comply with the WTO ruling. Until such as system is in place, industrial milk production is expected to remain at pre-existing quota levels. In a parallel measure, in Ontario, the main milk producing Province, the introduction of export contracts between farmers and processors is being examined. The milk producer's organization in Ontario believes that such a system could be WTO compliant and could allow exports in excess of Canada's URA commitments on subsidized exports.




Box 3
EC banana imports

European Communities - Regime for the Importation, Sale and Distribution of Bananas, complaints by Ecuador, Guatemala, Honduras, Mexico and the United States. The complainants allege that the EC's regime for importation, sale and distribution of bananas is inconsistent with GATT Articles I, II, III, X, XI and XIII as well as provisions of the Import Licensing Agreement, the Agreement on Agriculture, the TRIMs Agreement and the GATS.

Following a ruling by the Dispute Settlement Body of the World Trade Organisation (WTO) in 1997 against the EC banana import regime, the European Community (EC) adopted a new regulation aimed at bringing those elements of the import regime found to be incompatible with WTO rules into line with their WTO obligations. This modified regime entered into force on 1 January 1999.

The WTO Dispute Settlement Body then found that the revised regime was not fully compatible with WTO rules. The Panel condemned two elements of the new regime in particular. Firstly, it was found that using the historical reference period of 1994 to 1996 for the distribution of import licences perpetuated the distortions of the previous EC regime. Secondly the separate quota for countries of Africa, the Caribbean and the Pacific (ACP countries) was considered to be in violation of Article XIII of the GATT (i.e. Non-discriminatory Administration of Quantitative Restrictions). The Panel also ruled that the EC Banana Import regime had caused damages of US$191.4 million per year to banana interests in the United States (US), and authorised the US to remove tariff concessions from the EC for that amount. The US therefore withdrew import tariff concessions (equivalent to an increase of 100 percent in import duties) for several products originating in the EC to compensate for its losses.

Outline of the Commission's proposal

On 10 November 1999, the EC Commission adopted a proposal for modifying its banana import regime. The Commission's proposal for the modification of the existing import regime for bananas is based on a single tariff after a transitional period during which a tariff quota system would apply, with preferential tariff access for ACP countries. The level of the tariff would need to be negotiated under Article XXVIII GATT (i.e. Modification of Schedules). A mandate for such negotiations is therefore part of the proposal of the Commission. A flat tariff system would be introduced by 1 January 2006.

The proposed transitional system envisages three Tariff Rate Quotas (TRQs). The first is a quota of 2.2 million tonnes at a rate of EUR 75/tonne, which is bound in the EC WTO Tariff Schedule. To this quantity of 2.2 million tonnes, a second TRQ of 353 000 tonnes at the same tariff rate would be added. A third tariff quota of 850 000 tonnes would also be opened. This quota would be open to both ACP and Most Favoured Nation (MFN) bananas but, for ACP access, a preference of EUR 275/tonne would be accorded (implying that the tariff on ACP bananas would be zero as long as the tariff within the quota did not exceed EUR 275/tonne). The proposed system for the latter quota would resolve both the level of the tariff and the distribution of licences to operators as it would produce automatically a balance between the number of licences requested and the available quantities. This quota would be characterised by a bidding procedure through which the lowest level of bidding at which the quota can be fully filled would be applied to all operators for the quantities for which they have put forward a bid (striking price system).

The methods of distributing licences giving access to tariff quotas under consideration, and which have been most frequently cited in discussions within the WTO, are traditional/newcomer based on a historical reference period, first-come/first-served, simultaneous examination, and auctioning.

Implications for negotiation of the successor to the current Lomé Convention

The proposed changes to the banana import regime could have some implications for the current negotiations on the successor agreement to the present Lomé Convention, which expires on 29 February 2000. According to the Commission, the results to date of these negotiations, as far as trade is concerned, indicate a consensus on the need to proceed to new, WTO-compatible arrangements after an appropriate preparatory period (e.g. five or ten years) during which the existing Lomé preferences would be maintained. Continuation of these preferences would require a new waiver covering the whole of the envisaged preparatory period.


Implementing the AoA commitments on meat products

The following review of the impacts of the implementation of the Uruguay Round Agreement on Agriculture (AoA) is provided to illustrate the relationship between trade policy measures and market developments.

The AoA contains provisions on market access, export subsidies and domestic supports for meat products. The Uruguay Round Agreements were expected to strengthen global demand for meat products and lift international prices, driven directly by the market access and export subsidy commitments under the AoA and indirectly by stronger income growth stimulated by the Agreements. Of the various meat products, the global market for beef was expected to feel the most direct effects from the AoA, because both export subsidies and market access barriers were more prevalent for beef than for other meat.6

Although some policy commitments under the AoA have affected global markets for meat, other unforeseen market developments have intervened to offset these effects. Two factors in particular - the emergence of food safety concerns in Europe and Japan and the recent financial insecurity in many of the most promising import markets - have slowed the demand for meat, putting downward pressure on prices.

Disciplines on export subsidies for meat

Based on AoA commitment levels, slightly over 3 million tonnes, about 24 percent of global meat trade, were permitted to be exported with subsidies in 1995. This total ceiling includes 1.5 million tonnes of beef, 700 000 tonnes of pigmeat, 800 000 tonnes of poultry meat and 30 000 tonnes of sheep meat. The total ceiling level for meat export subsidies is scheduled to be reduced to 2.3 million tonnes, an estimated 15 percent of world trade, by 2000. It is likely, however, that a significantly lower percent of world exports will be subsidized because many countries are shipping less than their ceiling level.

Of the 15 countries that have export subsidy commitments in their WTO schedules, the EC, the second largest meat exporter in the world, accounted for 70 percent of the 1995 global subsidy commitment ceiling. Nearly all EC beef exports are supported by export subsidies, compared to only about half of their pork and poultry exports (See Box 4 on the EC's policy reforms for beef). EC beef exports are currently constrained by these export subsidy commitments both in terms of volume and value. Subsidized pork exports from the EC in the 1998-99 WTO year exceeded their 482 000 tonne AoA ceiling by more than 200 000 tonnes. This was made possible because the EC had been allowed to carry over unused portions of commitments from the previous year.

Export subsidy ceilings for beef also appear to have been binding in the case of Hungary, although its original obligations on export subsidies were renegotiated in July 1997, extending to 2002 the period over which it is to reduce subsidies to the originally scheduled levels. Other countries having export subsidy commitments for meat currently export less than their ceilings, thus their reduction commitments under the AoA have not been binding. For example, the United States has not subsidized meat exports, except for small amounts of frozen poultry, since May 1998. Some of the other exporting countries which have relatively high export subsidy base levels for meat are Brazil, the Czech Republic, Poland, Romania, the Slovak Republic and Turkey. Budgetary constraints in most of these countries appear to have been the main reason for their subsidized exports remaining below the ceiling commitments. If these countries are permitted to roll-over the unused portions of their commitments from previous years, their future use of export subsidies could exceed their scheduled ceilings, maintaining the downward pressure on prices.

Table 6. Export subsidy ceilings for meat

 

Global trade

WTO subsidy ceiling

Share of total trade

Share of 1995 subsidized exports

 

1995

2000 1

1995

2000

1995

2000

West Europe

US

Total meat

12 681

15 836

3 031

2 307

24%

15%

74%

2%

Beef

4 822

5 413

1 513

1 129

31%

21%

81%

1%

Pork

2 374

2 983

688

560

29%

19%

81%

0%

Poultry meat

4 600

6 483

802

594

17%

9%

55%

6%

Sheep meat

646

691

28

24

4%

3%

97%

0%

1 FAO estimates

             

Market access provisions for meat

Tariff quota access opportunities for beef exceed, by far, those for the competing types of meat taken together.1 Consequently, improved market access commitments through expanded use of tariff quota arrangements were expected to boost both trade and prices for beef. The most significant market access opportunities for beef were expected primarily in the United States and the Republic of Korea.

As a result of commitments under the AoA, the United States repealed its Meat Import Law in 1995 and established a tariff rate quota (TRQ). The TRQ was initially set at 656 620 tonnes, the "meat trigger level" under the old Meat Import Law, excluding imports from Canada and Mexico. Imports from these two countries are governed under the provisions of the North American Free Trade Agreement (NAFTA) and thus are not counted against the TRQ under the AoA. The TRQ was subsequently expanded in 1998, as agreed under the AoA, by 20 000 tonnes each for Uruguay and Argentina when they achieved Foot and Mouth Disease-free status. An assessment of the trade gains realized since 1995 reveal that the 30-percent increase in United States beef imports over the 1995-1998 period originated primarily from Canada which, being outside the TRQ, can-not be attributable to access agreements under the AoA.

The Republic of Korea's AoA minimum access quota commitments for beef increased from 123 000 tonnes (carcass weight) in 1995 to 225 000 tonnes by 2000. However, actual imports by the Republic of Korea have fallen well short of the quota for a variety of reasons including the recent economic difficulties, problems with quota allocation and a differential pricing system for imported beef.

The increase in global pork trade, which is above trend for the period since implementation of the AoA (1995-1998), can be partially attributed to the AoA and in particular to Japan's reduction in minimum import prices ("gate prices") and tariffs. The surge in Japanese import volumes in 1996 triggered the special safeguard clause, however, resulting in a sudden increase in the gate price and lower imports in 1997. In July 1997, the Republic of Korea, in line with its AoA commitments, ended its preferential access quota system for frozen pork and poultry and made all imports subject to tariffs. Meanwhile, the Philippines introduced a new TRQ system in 1998 to allow market access for imported pork and poultry meat. Economic conditions in both countries have, however, limited the impact of these increased market access commitments.

Among the meat sectors, poultry is perhaps the least protected and is consequently characterized by the fewest new market access opportunities under the AoA. Canada and Mexico contribute the main share of TRQ access opportunities. Additional marginal gains in trade may be attributed to TRQ commitments by several Central American countries, including Costa Rica and Guatemala. The poultry sector over the 1995-1998 period has witnessed above trend growth for production, trade and prices, but for the most part, this favourable performance cannot be attributed to the AoA. Rather, growing demand from Russia and China - neither is a member of the WTO - accounted for nearly 80 percent of the increase in poultry trade over the 1995-1998 period.

For sheepmeat, market access opportunities in this sector under the AoA reflect almost entirely the conversion of the EC's previous access agreements. Some boost to trade as a result of the AoA appears to have occurred in the United States following the abolition of the Meat Import Law.




Box 4
Policy Reforms in the EC: Implications for the Beef Sector

The EC beef reforms as implemented under the Agenda 2000 continue a trend of replacing price supports with direct payments. The main features of the recently agreed reform package are the reduction of beef price supports over three years, with compensation in the form of higher direct payments or "premia" under existing programmes and the creation of two new slaughter premia. The EC beef sector has witnessed a decline since 1995 because of the BSE crisis, which led to a considerable decline in consumption and the implementation of more restricted production control measures, mainly slaughter regimes. The new beef policies aim at avoiding the accumulation of surpluses that might arise because beef output - no longer constrained by restrictive BSE animal slaughter guidelines - is expected to exceed consumption over the next few years.

Intervention prices for beef, that is, the prices which trigger the operation of government support buying, will be cut by 20 percent over three years, starting on 1 July 2000. At the end of this period, private storage aid will be the main market intervention measure with private traders paid by the Commission for their storage costs when average Community market prices drop below 2 291 euro/tonne. However, the option will remain for additional safety-net procurements when average bull/steer prices drop to 1 560 euro/tonne. To compensate producers for potentially lower market prices, existing premia will be increased and two new slaughter premia, for both adult cattle and calves, will be introduced. These new payments will be made directly to the farmer upon proof of slaughter or export to a third country and will be subject to national ceilings. Under existing programmes, the special beef premium (paid only for male animals of beef breeds) and the suckler cow premium (paid annually on cows of beef breeds kept to rear beef calves ) will be increased in three annual increments, starting in 2000. The number of these animals on which a producer can claim a supplemental payment is limited by a stocking density of two livestock units/forage hectare which, combined with increased extensification premia, encourages extensive animal production. In addition, "national envelopes", or funding from member states, for direct aid to the sector have been increased to allow member states the flexibility to compensate for regional differences in production practices.

Despite the reduction in intervention prices, it is not clear that market prices will fall in 2000. Intervention stocks are very limited (see graph) and output is expected to be stable, thus market prices are likely to remain above intervention levels in the near future. In the longer term, however, as beef output recovers and domestic consumption resumes its downward trend, market prices are expected to decline, especially with export subsidies limited by WTO ceilings. Thus stock levels are likely to increase over the medium term despite the measure implemented to avoid surpluses. The EC reforms under Agenda 2000 do not include any measures specifically directed at other meat sectors. Nevertheless the beef reforms have the potential to indirectly impact the competitiveness of the other meats through changes in relative prices.




Box 5
E-Mail Commodity Information Exchange Services

The Commodities and Trade Division has established e-mail based commodity networks for the exchange of information on developments in the global dairy, meat, oilcrops, pulses, rice and non-apparel fibres markets. To subscribe to these networks (which are free-of-charge), leave the subject blank and send one of the corresponding messages to:

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The primary purpose of this service is to provide a forum for the discussion of issues relevant to the national and international markets for the above commodities. Registered users are invited to supply articles, publications and statistical reports on these sectors in their own countries/regions. They are also encouraged to post questions and answers on topics of interest to the commodity of concern. Users can send their messages in English, French or Spanish.

In summary, the objectives of this new FAO service are:

a. The exchange of information on the above commodities between list members via the FAO mail server;

b. The circulation of FAO's commodity-specific reports dealing with current developments in the respective world commodity markets.

Begin your participation in this exchange system by forwarding some information on the sectors to which you have access and which you consider of potential interest to others. After subscribing, you can address your contributions to the appropriate commodity networks listed below.

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1 The value of commodity export earnings reported here for 1999 are preliminary FAO estimates and cover only the principal primary commodities listed in Table 1, amounting to between 55 and 60 percent of total trade in all agricultural products. The changes in the total value of agricultural exports in 1998 include all agricultural products that are covered by the FAOSTAT data base. Export earnings for forest and fishery products are reported separately.

2 This index is calculated as the weighted average of export prices where weights are determined from average export values in the period 1992-94.

3 All macroeconomic estimates are derived from the International Monetary Fund, World Economic Outlook, April 2000.

4 All regional and economic groupings in this section are as defined by the IMF.

5 As the general terms of the debate have been well documented in the press, the emphasis here will be on the various perspectives of developing countries as gleaned from the WTO documentation and from FAO's ongoing programme of technical support to developing countries in trade-related issues. For more information about FAO's technical assistance in WTO issues, see the FAO website: www.fao.org/ur.

6 "Summary of the Results of the Uruguay Round in the Meat Sector", World Trade Organization, Geneva, February 1995.

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