Peru is divided into three topographic regions: the coastal plains, the Andean highlands and the tropical rainforest of the Amazon. As a result, it is among the most ecologically diverse countries in the world. An estimated 1.3 million hectares are under farming (but amounting to only one percent of total land area), contributing 12.5 percent of GDP, while the agricultural sector accounts for over 30 percent of total employment. Agriculture in the Andean Mountains is of a subsistence nature; the bulk of output comes from river valleys in the coastal zone. The agricultural sector is vulnerable and is regularly hit by weather anomalies, such as El Niño.
Peru's major agricultural products are sugar, potatoes, rice and bananas. In 1994, Peru was the largest producer of coca leaf in the world; estimates of the value of output range from US$500 million to US$1 billion. At the end of 1998, an estimated 50 000 hectares were under coca cultivation, down from 70 000 in 1997, which reflects the high degree of fluctuation in cropped area. Important export products include fishmeal, sugar, coffee and cotton. Peru imports large amounts of food products, notably wheat, soy, maize and other basic foodstuffs. It is classified by WTO as a net food-importing developing country (NFIDC).
Peru undertook sweeping economic reforms in 1990 under the Fujimori administration. The main economic policy changes included: (i) trade liberalization (over 90 percent of all imports pay 12 percent duty, the rest pay 20 percent); (ii) unification and liberalization of the exchange rate and abolition of restrictions on capital flows; (iii) reductions in government expenditure; and (iv) privatization of state-owned companies. One feature of the reforms in agriculture was that they were an integral part of the wider macro-economic reforms, and thus were not specifically targeted at the agricultural sector only. For example, the reduction of tariff levels and their dispersion, the elimination of quantitative restrictions on imports, the elimination of subsidies and price controls, etc. were part of the overall macro-economic reforms.
The major challenges facing the agricultural sector include a relatively high rate of poverty and food insecurity, due in large part to the dualistic nature of agriculture, with a large subsistence sector, on the one hand, and a commercial sector, on the other. The incidence of undernourishment - as measured by FAO on the basis of availability of food energy, its distribution among population groups and requirements - is relatively high, at 19 percent in 1995-97. This also complicates agricultural policy formulation and implementation because the winners and losers of specific policies, e.g. reduced border protection, are likely to be different - it is often the poor who get hurt most. It is in this context that Peru needs to assess its recent experience with trade liberalization and to contemplate policies for the coming years, including positions in and commitments to WTO in the context of agricultural negotiations.
In the UR, Peru offered to bind all agricultural tariffs at 30 percent ad valorem, with the exception of 20 products for which tariffs were bound at 68 percent (Table 1). The latter were all basic food products and were presumably considered to be "sensitive" from the poverty and food insecurity standpoint. There were no other commitments in the area of market access.
Table 1: Uruguay Round commitments on market access
Market access components |
Commitment |
· Bound tariffs |
|
All agricultural products |
30 percent ad valorem |
except for (number of tariff lines in parentheses) wheat (2), maize (2), rice (4), sorghum (1), wheat flour (2), milk powder (3), butter (1), sugar (3) and food pastries (2) |
68 percent ad valorem |
· Additional duties or charges |
None |
· Specific tariffs |
None |
· Special agricultural safeguards (SSGs) |
None |
· Tariff rate quotas (TRQs) |
Not offered |
As in many developing countries, however, applied rates during 1995-98 have been quite different. Subject to variation, they have mostly been much lower than the bound rates. In April 1997, for example, there were five base rates in the tariff schedule: i) 12 percent on inputs, machinery and equipment; ii) 20 percent on sensitive products; iii) and iv) categories made up by including an additional 5 percent on the rates applied to categories i) and ii); and v) 8 percent on products imported by CETICOS (Centers for Export, Transformation, Industry, Commercialization and Services). All these applied tariffs were within the bound rate of 30 percent.
For agricultural products, there were typically three sub-categories: 60 percent of the products faced an applied rate of 12 percent; a further 31 percent faced a rate of 17 percent (on account of an additional 5 percent surcharge); tariffs on the remaining 9 percent ranged from 20 percent to 30 percent. The unweighted average applied rate was about 13 percent, having fallen considerably over time, from 26 percent in 1990.
Thus, on the whole, the tariff structure is simple. The exception is with products that are covered by Peru's version of the price band scheme, applied through a variable specific duty (VSD) or sobre-tasa (see Box 1 for a brief description of the scheme).
Table 2 shows the structure of applied tariffs in recent years for 20 tariff lines that have WTO bound rates of 68 percent and face additional surcharges. Besides base tariffs of between 12 to 20%, these products face a 5 percent fixed surcharge on an ad valorem basis, pushing the total duty to between 17 and 25 percent. On top of this, imports are subject to VSD, which are specific duties (i.e. expressed in US$/tonne). The VSDs can vary from period to period, depending upon changes in world market prices and domestic floor prices.
Box 1: Peru's scheme of price-bands (Sobre-tasas)
Peru's scheme of sobre-tasas is a variant of the typical price band scheme whereby a floor and a ceiling entry price are determined first and imports charged additional duties if the import price falls below the floor price, while no additional taxes are levied if it exceeds the ceiling price. Unlike the typical scheme, as practised, for example, by the Andean Group or by Chile, that of Peru has no ceiling entry price. Thus, additional duties are charged only when the import price falls below the floor price; otherwise, the normal duty is levied, i.e. no duty exemption is provided if import prices exceed the ceiling price as in other schemes.
The Peruvian scheme was introduced in 1991 and modified several times thereafter. For example, the surcharge on maize was removed in October 1992 and replaced by a flat 10 percent tariff, but it was re-instated a few months later, in July 1993. In August 1998, the surcharge on wheat and wheat flour was removed. Its original stated purposes were: i) to minimize negative effects on the covered import-competing domestic sectors from short-run fluctuations in import prices on account of changes in world market prices; and ii) to maintain profitability for domestic producers.
Although the scheme has been modified from time to time, the following two expressions provide the basis for determining the surcharge:
Determination of the floor price:
where
FP = floor price
PFOB = international price (FOB) quotation
IPCUSA = US consumer price index for the commodity
a = factor of discount or increase of standard deviation
x = standard deviation
Determination of the surcharge:
where
S = surcharge (US$ per tonne)
FP = floor price
PFOB_REF = reference price (FOB)
b = import-related costs
Table 2: Applied tariffs and other duties on 20 "sensitive" agricultural products having a WTO-bound rate of 68 percent
Products(number of HS lines) |
Base rate(ad valorem %) |
Fixed surcharge(ad valorem %) |
Other duties 1 |
Milk powder (3) |
20 |
5 |
VSD |
Butter (1) |
20 |
5 |
VSD |
Wheat (2) |
20 |
5 |
VSD 2 |
Maize (2) |
15 |
5 |
VSD |
Rice (4) |
20 |
5 |
VSD |
Sorghum (1) |
12 |
5 |
VSD |
Wheat flour (2) |
20 |
5 |
VSD 2 |
Sugar (3) |
12 |
5 |
VSD |
Food pastries (2) |
20 |
5 |
- |
1 Variable specific duty (VSD) or sobre-tasa.
2 The VSD on wheat and flour was withdrawn in August 1998.
Table 3 shows for a recent period the effect of the VSD in terms of the total charge on imports. For example, in April 1998, that for wheat reached 46 percent while for sugar it was 54 percent, roughly twice the fixed rates of 25 percent in both cases. As said in Box 1, although there are other factors in the formula, it is the world market price that has the most effect in determining the variable duty.
Table 3: Examples of total applied tariffs, including variable specific duties
|
Product |
VSD 1 |
|||||||
Period |
Floor price (US$/ tonne) |
Reference import price (US$/ tonne) |
Specific tax (US$/ tonne) |
Ad valorem equi-valent % |
Base plus fixed tariff2 % |
Total tariff % | ||
Wheat |
98-04-06/ 98-04-12 |
155 |
132 |
28 |
21 |
25 |
46 | |
Maize |
95-12-26/ 96-01-01 |
112 |
108 |
6 |
6 |
20 |
26 | |
Rice |
95-12-26/ 96-01-01 |
259 |
252 |
10 |
4 |
20 |
24 | |
Sugar |
98-04-13/ 98-04-19 |
316 |
254 |
74 |
29 |
25 |
54 | |
Milk |
98-03-23/ 98-04-19 |
2 049 |
1 750 |
298 |
17 |
25 |
42 | |
|
1 Variable specific duty (sobre-tasas). 2 i.e. including the 5 percent surcharge. Source: El Peruano/Ministry of Agriculture, Peru. | ||||||||
This "experience" with tariffs during 1995-99 is interesting because it shows that Peru "needed" duties as high as 54 percent at certain periods, in order to stabilize domestic market prices and/or provide some protection to its "sensitive" import-competing sectors. Obviously, the 30 percent bound tariff on most other agricultural products would not have been adequate for these products. In retrospect, Peru's decision to bind tariffs for these products at 68 percent appears consistent with the policies that were followed subsequently. While the 68 percent limit was not breached, the extent of flexibility was at times very small, with the total import charge for sugar, for example, reaching as much as 54 percent. Peru may face difficulties in pursuing domestic and border policy along the current lines if bound tariffs are markedly reduced as a result of further rounds of negotiations.
Another issue is the legality of the price band policy itself. There was some debate within the WTO and in other fora on whether this scheme is compatible with the AoA rule of a "tariff-only" border regime. One argument is that the scheme is not compatible because Article 4, paragraph 2, of the Agreement explicitly proscribes this practice. The scheme may also be incompatible with some other WTO provisions, e.g. with GATT Articles dealing with customs valuation and the principle of non-discrimination. The other argument put forward by some observers is that the existence of the scheme itself does not matter as long as the total duty paid does not exceed the WTO bound rate. It is obviously in the interest of Peru to follow this debate closely.
In the UR, Peru did not submit detailed commitments on domestic support measures, essentially claiming that all such measures fell under one of the categories exempted from reduction commitments - e.g. the green box and SDT, or else involved outlays below de minimis levels in the case of trade-distorting support measures.
Peru provided some information on its domestic support measures in its WTO notifications for 1995-97 (see Table 4). Expenditures on green box measures tripled from US$80 million in 1995 to US$223 million in 1997. However, in relative terms these are very small amounts (5 percent of the total value of production in 1997). Almost all outlays were concentrated on general services, notably research and development (R&D) and infrastructure. A notable change in the pattern of support was a sharp increase in the outlay on infrastructure, which more than quadrupled from 1995 to 1997. On the other hand, there was virtually no change in outlays on R&D, which consequently amounted to only 14 percent of total green box support in 1997, down from 40 percent in 1995.
As regards trade-distorting support measures, i.e. those that fall under the amber box and are incorporated in the AMS, while Peru did not submit AMS levels for the base period, it notified estimates for current years for non-product-specific AMS component only. Two specific measures were mentioned: promotion of production and tax exemptions (Table 5). The total outlays involved amounted to roughly 5-6 percent of the total value of production, and so fell well within the 10 percent de minimis level for developing countries.
Table 4: Green box expenditures, 1995-1997 (US$ million)
Type of measure |
Programme description |
1995 |
1996 |
1997 | |
General services |
R & D for agricultural productivity and environmental protection |
30.0 |
31.3 |
32.2 | |
Marketing services: price information system |
0 |
5.3 |
4.3 | ||
Infrastructure: irrigation, electricity, water and sewage, and marketing infrastructure |
39.7 |
60.8 |
170.2 | ||
Phytosanitary services |
3.4 |
5.3 |
4.9 | ||
Diffusion and advisory services; agricultural information network |
0.3 |
0.2 |
0.3 | ||
Structural adjustment |
Land improvement, land acquisition and distribution, small farmers' credit (fertilizer, seeds, pesticides) |
0.4 |
5.2 |
10.5 | |
Total |
80 |
109 |
223 | ||
% of agricultural GDP |
2.0 |
2.4 |
5.0 | ||
Source: Notifications to WTO. | |||||
Table 5: Non-product-specific Aggregate Measurement of Support, 1995-97 (US$ million)
Type of measure |
1995 |
1996 |
1997 |
Promotion of production |
14.0 |
16.4 |
46.9 |
Tax exemption |
201.6 |
232.0 |
230.4 |
Total |
215.6 |
248.4 |
277.3 |
% of agricultural output |
5.4 |
5.4 |
6.2 |
Status |
de minimis |
de minimis |
de minimis |
Source: Notifications to WTO. | |||
As regards the consequences of the AoA for policies, there are none because no reductions are required in green box outlays. As for the future, so long as the reported measures continue to be classified under the green box category and exempted from reductions as now, there are also no consequences, i.e. these outlays are not constrained in any way.
As regards amber box measures, it is quite possible that the outlays could increase in the future, depending upon Government policies. In that event, the non-product-specific AMS, which is already relatively high, could exceed the 10 percent de minimis threshold, which would be a breach of the current AoA provision. Consequently some developing countries have proposed that the threshold be raised, e.g. to 15 percent, a matter which is clearly of great interest to Peru.
Peru did not declare any export subsidies in its WTO Schedule. It is not clear whether it had any during the UR base periods of 1986-90 or 1991-92, but the wide-ranging economic reforms undertaken since 1990 would have eliminated most of these supports, if indeed there were any. The 1995 UR commitment most probably reflects this new reality that export subsidies are basically an irrelevant trade instrument for Peru at its present stage of economic development. Peru also declared that it had no quantitative restrictions and no taxes on exports.
From an economic standpoint, the consequence that Peru will be not be permitted to subsidize exports in future is unlikely to be of any practical importance. However, if the Government wishes and is able to provide some support to agricultural exports, it would still be able to do so inasmuch as the AoA allows a developing country to provide subsidies aimed at lowering internal transport and marketing costs and external freight costs.
Special Agricultural Safeguards
Peru does not have access to the special safeguard (SSG) provisions of the AoA and so has no experience in this area.
Since the tariffication approach was not followed in the UR, Peru was not required to open any TRQs and accordingly has no experience of their administration. As regards its experience with TRQs accorded by others, this mainly applies to sugar exports to the United States. Since these were quotas specifically allocated to Peru, little additional experience was gained in terms of accessing the quotas, in contrast to a situation where quotas are not allocated to specific countries and exporters have to compete for them.
Peru is a net food-importing developing country (NFIDC) in the context of this Decision. With very little progress made in implementing it, Peru obviously has no experience in this area. Peru's experience with food aid has been that the volume of food aid received has fallen sharply over time.
Peru has some experience of the WTO dispute settlement process, but not in connection with agricultural products. In a 1997 case on Taxes on Alcoholic Beverages, where the EC lodged a complaint against Chile, Peru (along with Canada, Mexico and the United States) reserved third-party rights in the panel process. In another 1997 dispute, Countervailing Duty Investigation against Imports of Buses, Peru itself was a defendant to a complaint brought by Brazil in the context of the Agreement on Subsidies and Countervailing Measures.
Peru has some experience in this area. The Peruvian SPS authority (SENASA) has imposed bans for some time on imported rice originating in countries that are endemic areas for Kaphra beetle, notably in Asia. Work has also been going on to establish improved quarantine controls on products in general imported by Peru. On the export side, the Ministry of Agriculture is in the process of upgrading SENASA in an effort to stimulate the export of fresh fruit, vegetables and other agricultural products. For example, one of these programmes has been instituting heat treatment process for mangoes in Piura, the northern region of Peru, for export to the United States. Similarly, PROMPEX, the agency that provides assistance to agricultural exports, played an important role recently in defending Peruvian farmers when the Spanish sanitary authority determined that it had found two cases of botulism caused by canned Peruvian asparagus. On a related matter, the Government has not as yet impeded imports of any agricultural products due to "biotechnology" concerns; nor has it expressed any inclination to do so.
In 1985-87, Peru's agricultural imports averaged an annual US$528 million and its exports US$325 million, resulting in a deficit of US$203 million. The deficit more than tripled in 1996-98, reaching an annual average of US$720 million as exports just over doubled while imports rose by almost three times. Food products during these same periods accounted respectively for 88 percent and 84 percent of all agricultural imports. By contrast, food products have been a growing proportion of exports, rising from 25 percent of all agricultural exports in 1985-87 to 42 percent in more recent years. The main export products are cotton, sugar, coffee, fish meal and fish oil. The export of fruit and vegetables has been growing rapidly in recent years. The main imports are cereals, dairy products, vegetable oils, sugar and miscellaneous processed products.
Over the ten years from 1985 to 1994, agricultural imports increased steadily, with a marked rise from 1992 onwards (Figure 1). The average value of agricultural imports in 1995-98 was 67 percent higher than in 1990-94, but only 25 percent higher on the basis of the extrapolated values, since the trend was positive (Table 6).
Table 6: Agricultural trade in 1990-1994 and 1995-1998 (annual average, in million US$, and percentage change)
Period |
Imports |
Exports |
Net imports |
1990-94 actual (a) 1995-98 actual (b) 1995-98 extrapolated (c)1 (b) - (a) 2 (b) - (c) 2 |
824 1 374 1 104 550 (67%) 270 (25%) |
332 663 370 330 (99%) 293 (79%) |
492 712 734 220 (45%) -23 (-3%) |
1 Extrapolated value based on 1985-94 trend. 2 Numbers in parentheses are percentage changes over (a) and (c) respectively. Source: Computed from FAOSTAT data. Agriculture excludes fishery and forestry products. | |||
Figure 1: Agricultural trade, 1985-98 (in million US$; thick lines are actual values, thin lines are trends for 1985-94 extrapolated to 1998)
Source: FAOSTAT
Agricultural exports, roughly half the value of agricultural imports, barely increased during 1985-93. In 1994 alone, they shot up by 75 percent (US$200 million). They rose a further 9 percent in 1995, followed by a roughly 25 percent increase in 1996 and again in 1997, before falling by 22 percent in 1998 due to El Niño. Reflecting these changes, the average value of exports in 1995-98, at US$663 million, was twice that of 1990-94. The export performance is even more impressive (an increase of 128 percent) if the two outliers in both periods (1994 and 1998) are excluded from the period averages. Since the positive trend during 1985-94 was very weak, the actual 1995-98 value of exports was still 79 percent higher than the extrapolated trend value. Thus, overall, Peru had a positive experience with agricultural trade during 1995-98.
The overall outcome in terms of net agricultural trade was negative. Net agricultural imports in 1995-98 were 45 percent higher (US$220 million) than in 1990-94. However, since the trend was strongly positive during 1985-94, the 1995-98 performance was slightly positive when measured against the trend, i.e. net imports were 3 percent (US$23 million) below the trend value.
Further analysis would be required to identify which particular commodities or commodity groups and what factors contributed to the surge in agricultural imports in the post-1994 period, as well as in agricultural exports. Undertaking such analysis is important also because it would help Peru to articulate commitments to WTO in the area of market access in further agricultural negotiations.
As noted above, food products dominate Peru's agricultural imports (over 80 percent of the total), but are of less importance in exports. The overall trend in food imports during 1985-94 was strongly positive, rising from about US$500 million to reach almost US$1 billion by 1994 (Figure 2). Food imports rose particularly sharply in 1994-96 and remained at a peak in the following two years. Reflecting these changes, the average value of imports in 1995-98 was 57 percent higher than in 1990-94 (Table 7) and it was still 18 percent higher than the extrapolated trend value, despite the strong positive trend.
Food exports were on a steady modest upward trend during 1985-93 (Figure 2). They rose sharply in 1994 and again in 1996, but fell in the following two years. Because of the relatively stable performance of food exports during 1990-93, the value of exports in 1995-98 was 78 percent higher than in 1990-94, but still 30 percent higher than the extrapolated trend value for 1995-98.
Nevertheless, because food exports are much smaller than food imports, the net food import bill in 1995-98 was 52 percent higher than in 1990-94 (an additional US$300 million) and 15 percent (US$114 million) more than the extrapolated trend value.
Table 7: Food trade in 1990-94 and 1995-98 (annual average value, in million US$, and percentage change)
Period |
Food imports |
Food exports |
Net food imports |
1990-94 actual (a) 1995-98 actual (b) 1995-98 extrapolated (c) 1 (b) - (a) 2 (b) - (c) 2 |
737 1 159 983 422 (57%) 175 (18%) |
154 275 213 121 (78%) 62 (29%) |
582 884 770 301 (52%) 114 (15%) |
1 See note 1 to Table 6. 2 Numbers in parentheses are percentage changes over (a) and (c) respectively. Source: Computed from FAOSTAT data. Food excludes fishery products. | |||
Figure 2: Food trade, 1985-98 (in million US$; thick lines are actual values, thin lines are trends for 1985-94 extrapolated to 1998)
Source: FAOSTAT
In the final analysis, what can be said of the experience with total food imports relative to total agricultural exports? Figure 3 shows the evolution of this ratio. In 1985-87, it averaged 1.5, i.e. food imports were roughly 50 percent higher than agricultural exports. During 1985-93, the overall trend for the ratio was positive, but far from smooth. The ratio peaked in 1993, but steadily declined thereafter. As a result, the average value of the ratio for 1995-98 was 1.8, some 20 percent lower than in 1990-94, and substantially lower than the average trend value. There was thus a clear and significant improvement over previous years in the balance between food imports and agricultural exports during 1995-98.
Figure 3: Ratio of the value of total food imports to that of total agricultural exports, 1985-98
Based on the review in the preceding sections, this section summarizes some of the key issues for Peru in the WTO negotiations on agriculture and provides an indication of the areas where further analytical work may be required, as part of the preparation for these negotiations.
In Section II it was concluded that the Agreement on Agriculture had not directly constrained Peru's domestic and border policies. On domestic support, the one instance where the Agreement's disciplines came closest to being binding was that of non-product-specific AMS, which represented 6 percent of the value of agricultural production compared with the permitted level of 10 percent. On border measures, it was seen that there were only a few instances where total applied tariffs came close to the bound rate of 68 percent applicable to "sensitive" products (the bound rate for other products being 30 percent). Similarly, it was considered very unlikely that export subsidy discipline has had any effect on actual policy. This situation may be summarized in either of two ways, both of which would be correct: Peru has complied fully with the AoA provisions or those provisions have so far had no direct constraining impact on domestic and border policies.
What is important at this point is to consider what may happen in future negotiations, particularly in two areas. First, there is the possibility that the current non-product-specific AMS of 6 percent will rise if the Government has more resources and decides to grant more input subsidies to agriculture, where the needs are immense. It is in the light of this possibility in other developing countries also that proposals have been put forward for raising the de minimis threshold, e.g. to 15 percent. Second, the experience of the past five years showed that if Peru were to continue with the current set of policies to support its "sensitive" sectors, it would require the flexibility to apply border tariffs ranging anywhere from 25 percent to 60 percent, given fluctuations in world market prices. It is for these reasons that Peru needs to undertake serious policy analysis as part of the preparation for the next round (see below).
Lack of in-depth policy analysis on the links between protection and support, on the one hand, and the competitiveness of key agricultural sectors, on the other, was identified above as a lacuna in terms of preparations for the next round. While Peru's negotiating interests in agricultural exports and export markets are relatively clear (see below), the situation is more complicated on what would be the most appropriate range of commitments on domestic support measures and border protection. A number of considerations are critical here, notably the dualistic nature of its agriculture and the high incidence of poverty, the existence of regional integration initiatives, supply-side difficulties, the relative effectiveness of price and non-price factors and the effectiveness of border protection in strengthening domestic competitiveness. Peru's dairy sector provides an interesting case where, despite some protection and support and the strong desire of the Government, self-sufficiency in milk production has hardly increased. The sector increasingly faces stiff competition from imported milk powder, exports of which are often subsidized. The issues facing several other import-competing food sectors are similar, raising difficult policy issues. In the WTO context, given the legally binding nature of commitments, countries need to develop a strategic vision and clear positions as regards what specific commitments they can reasonably make, e.g. on issues of domestic support and border protection. It is for these reasons that more attention needs to be given to in-depth policy analysis of these sectors before fresh commitments are undertaken.
This is an area where there is much at stake for Peru. The Government has been encouraging the export of these products for some time, with much success. Total exports of fruit and vegetables increased during 1985-98 by 17 percent per annum in volume terms (from an average of 24 000 tonnes in 1985-87 to 160 000 tonnes in 1996-98) and by 18 percent in value (from US$30 million to US$222 million), compared to a 7 percent growth of the total value of agricultural exports. Asparagus, in both primary and processed forms, has emerged as one of the most dynamic export crops, mainly destined for industrial countries. Exports of grapes and mangoes are also growing and other fruits are likely to follow. Fruit and vegetables are among the commodities that face high import barriers in industrial countries, including both tariffs and non-tariff measures, and improving market access should be a major area of focus in WTO negotiations on agriculture. How other trading partners implement border measures as regards SPS/TBT rules is equally critical, because the relevant standards generally tend to be applied more rigorously on perishable products like fruit and vegetables.
Peru is likely to remain an active participant in regional trading agreements, which provides both opportunities and challenges. One potential difficulty could be harmonizing Peru's specific surcharge scheme with the common price band system of the Andean countries, when Peru fully participates therein. Should such harmonization lead to an increase in Peru's tariffs, as some experts believe, complications could arise in terms of compensating trading partners. Peru accords preferential tariffs to imports from its bilateral and regional trading partners. For example, crude soybean oil imports from Bolivia are duty-free, from Paraguay attract only a 1.5 percent tariff, and from Argentina enjoy an 80 percent reduction from the MFN rate (since Argentina is a signatory to the Latin American Integration Agreement. These schemes, especially when they proliferate, are complicated to administer and have trade creation and trade diversion effects. Peru may also face some difficulty in regional groups because of its net food-importing status in WTO while most other countries concerned are already, or likely soon to be, members of the Cairns Group, with a different approach to the WTO negotiations.
Failure to implement fully this Decision has been a disappointment for all its intended beneficiaries, including Peru. The justification for the Decision remains valid. If fully implemented, it should alleviate some of the food supply-related transitional problems of adjustment to the new trading environment. Peru needs to join others in the WTO in demanding its implementation. It would also be helpful if some analysis were undertaken on whether the Decision should be revised so as to contribute more effectively to raising the level of food self-sufficiency.
Peru also needs to play an active role within the WTO system on the issue of technical and financial assistance to the developing countries. Various Uruguay Round Agreements contain such provisions, including those on agriculture and SPS/TBTs, but it is generally felt that since they are of a "best endeavour" nature, they are not given due attention. Peru could benefit from many of these provisions, e.g. in upgrading its SPS/TBT standards, in strengthening the supply-side capability of the agricultural sector, and in adapting some of its legislation to WTO requirements. Unless potential beneficiaries make a proactive effort, the implementation of these provisions will remain inadequate.
1 Based on a background study prepared for the FAO Commodities and Trade Division by C. Quiroz, Lima.
2 Food, as defined in this subsection, excludes fishery products.
