PART ONE
SYNTHESIS OF THE COUNTRY CASE STUDIES
This part summarizes the findings of fourteen country case studies commissioned by FAO in the summer of 1999 to review national experience with the implementation of the Uruguay Round (UR) Agreement on Agriculture (AoA) and changes in trade flows and other effects of the reform programme. This work was part of a broader FAO project on Agriculture, Trade and Food Security.
The purpose of these studies was to review country experience, both positive and negative, in adapting border and domestic policies to the AoA provisions and national commitments and the effects so far on trade flows. Article 20 of the AoA calls upon WTO Members to review the experience with implementing commitments and their effects on world agricultural trade and to take this experience into account in the new negotiations. These studies contribute to that process and should also help identify particular areas where technical assistance would be useful, as regards both analysis and policy formulation, as developing countries seek to adapt policy to the new trading rules.
The selection of the 14 countries was based on a number of considerations, such as broad geographical balance, inclusion of different categories of countries, such as least-developed countries, net food-importing developing countries and agricultural exporters, and availability of national consultants to complete the studies by a specified deadline.1
Agriculture plays a central role in the economies of all the countries covered, as may be seen in Table 1, which also provides an indication of the nutritional status of their populations. For example, in 1995-97, more than 15 percent of the population was undernourished in 10 of the 14 countries. The table shows that agriculture in these countries generally:
Table 1: Indicators of the importance of agriculture in the economy and the food security situation (percentage shares in 1995-97)
Country |
Share of agriculture in GDP1 |
Share of total population engaged in agriculture |
Share of agricultural produce in total merchandise exports |
Percentage of population under-nourished | |
Bangladesh |
30.0 |
59.6 |
3.4 |
37 | |
Botswana |
3.4 |
45.3 |
5.0 |
25 | |
Brazil |
14.0 |
18.7 |
29.9 |
10 | |
Egypt |
16.0 |
39.3 |
13.8 |
4 | |
Guyana |
n.a. |
19.3 |
41.0 |
16 | |
India |
27.0 |
56.8 |
16.5 |
22 | |
Jamaica |
8.0 |
22.2 |
21.0 |
11 | |
Kenya |
29.0 |
77.1 |
54.5 |
41 | |
Morocco |
20.0 |
40.3 |
17.9 |
5 | |
Pakistan |
26.0 |
52.6 |
13.4 |
19 | |
Peru |
7.0 |
32.0 |
9.4 |
19 | |
Senegal |
18.0 |
75.0 |
10.3 |
17 | |
Sri Lanka |
22.0 |
47.5 |
20.8 |
25 | |
Thailand |
11.0 |
52.0 |
14.1 |
24 | |
Memo item |
|||||
Developing countries 2 |
26.3 |
50.4 |
27.3 |
18 | |
Developed countries 2 |
3.0 |
8.7 |
8.3 |
n.a. | |
|
1 Share in 1997. The share is likely to be underestimated for countries with high levels of subsistence farming, insofar as it does not capture the totality of non-marketed output. "Agriculture" as defined in this column includes forestry, hunting and fishing. 2 As defined by the World Bank in the source. Source: GDP: World Development Report, 1998/99, World Bank; population and exports: FAOSTAT; population undernourished: The State of Food Insecurity 1999, FAO. | |||||
Agriculture also supplies the bulk of the population's basic food requirements and provides subsistence and cash income for large rural populations.
It is essential to stress at the outset that given the central role agriculture plays in these economies, significant progress in promoting economic growth, reducing poverty and enhancing food security cannot be achieved in most cases without developing more fully the potential capacity of the agricultural sector and enhancing its contribution to overall economic development. From a historical perspective, very few countries have been able to successfully transform their economy into a developed one without first developing their agriculture.
The rest of this chapter is organized as follows: Section II summarizes national experience in implementing the main provisions of the AoA and country commitments, notably with respect to market access, domestic support measures and export subsidies. It also deals briefly with experience related to the Marrakesh Ministerial Decision and the SPS/TBT Agreements. Section III reviews the experience with food and agricultural trade since 1995. Finally, Section IV presents some additional findings on the effects of trade liberalization on agriculture and farming populations. Each case study also has a concluding section that presents specific interests and concerns of the particular country in the context of the new trade negotiations on agriculture.
The focus of this section is on the experience with implementing commitments on market access, domestic support and export subsidies - and not on the effects of their implementation. The experience with trade flows is reviewed in Section III.
2.1 Market Access
The approach taken to reviewing implementation experience with respect to market access commitments is based on the following two criteria:
Information for the 14 countries on their respective WTO bound tariffs and applied rates in one of the post-UR years is summarized in Table 2. The numbers in the table are, in several cases, approximations. One of the lessons of the analysis undertaken was that there are practical difficulties in computing even simple, unweighted, averages for the bound rates because of the coexistence of specific and mixed rates; the difficulties are even greater for applied rates, which may change frequently even within a year. Nevertheless, a number of conclusions can be drawn from the information contained in the table and from experiences documented in the individual case studies.
Table 2: WTO bound tariffs and applied rates on agricultural products
Country |
Bound rates |
Applied rates 1 |
Bangladesh |
200% average (except 50% for 13 lines) plus 30% Other duties or charges (ODCs) for all products |
25% average |
Botswana |
Average n.a. (mostly in the range of 0-100%) |
Average 6% (typically 0-35%); formula duties for 6 lines |
Brazil |
36% average (0-55% range) |
11% average |
Egypt |
28% average (in 2004) |
19% average |
Guyana |
100% average plus 40% ODCs |
Average n.a. (maximum rate mostly 40% - the CARICOM CET rate) |
India |
116% average (about half of tariff lines at 100%, and one third at 150%) |
26% average (83% of tariff lines at least 50% lower than bound rates) |
Jamaica |
100% average plus 15% ODCs (higher ODCs on 55 lines and 3 HS Chapters) |
Average n.a. (maximum applied rate mostly 40% - the CARICOM CET rate), additional stamp duties |
Kenya |
100% average |
17% average |
Morocco |
65% average (34% for 71% of the tariff lines) plus 15% ODCs |
n.a. |
Pakistan |
101% average |
Maximum rate 35% |
Peru |
30% average (68% for 20 food products) |
13% average (variable for 20 products) |
Senegal |
30% average + 150% ODCs |
Maximum rate 65% |
Sri Lanka |
50% average |
Maximum 35%, with some exceptions |
Thailand |
36% average |
32% average |
1 In 1999 or the most recent year for which data are available. Source: The country case studies and (for applied rates) WTO Trade Policy Reviews. | ||
First, it is clear that applied rates are, on average, much lower than bound rates. The simple average of the applied rates for 12 of the 14 countries is 22 percent, whereas for the bound rate it is 90 percent.2 A number of factors were found to explain this difference. First, all countries had gone through a series of trade policy reforms prior to the conclusion of the UR and had consequently eliminated most non-tariff barriers (NTBs) and reduced applied rates considerably, in many cases capping them unilaterally. By contrast, the bound rates which were typically set as ceiling bindings during the UR are generally higher, but not so for all countries. Second, for some of the countries, the lower applied rates were due to the adoption of a Common External Tariff (CET) of a customs union. Third, some countries with large populations at or near-poverty levels have not found it politically feasible to maintain high domestic prices through tariffs. Additionally, there is some evidence that some developing countries were obliged to set applied rates much below their WTO bound rates due to loan conditionality. One of the lessons to be drawn is that it would not be to the advantage of the developing countries to support a proposal that calls for binding rates (e.g. in the new round of negotiations) at levels that are currently applied.3
Second, while bound tariffs are high on average, there are several exceptions. For example, those of Egypt (average 28 percent) are generally quite low relative to most developing countries. Morocco's bound rates for 71 percent of all agricultural tariff lines are 34 percent (plus 15 percent Other Duties or Charges). India's tariff binding is zero for 11 commodities, including rice, some coarse grains and skimmed milk powder - all considered "sensitive" from a food security standpoint. All of Sri Lanka's agricultural tariffs are bound at 50 percent (applied rates capped unilaterally at 35 percent for 1999). Low bound tariffs have consequences for, among other things, further reduction commitments in the new round, if fluctuations in world market prices continue to be high and import-competing sectors are weak. In sum, not all developing countries have high bound tariffs on some or all agricultural products - contrary to prevailing views - despite the option they had in the UR to offer ceiling bindings generally.
Third, several case studies showed that some countries had difficulty "living with" the ordinary tariff in its simplest form for a number of products, notably basic food products. Often, tariffs on these products were higher than average and were supplemented by additional measures such as surcharges and variants of price band policies. Examples include Peru's price band policy (sobre-tasa), Morocco's threshold-price-based formula for determining import tariffs, Kenya's suspended duties (surcharges), Jamaica's additional stamp duties and India's quantitative restrictions on balance of payments grounds. These were not pointless measures and were implemented to good effect. In Peru's case, the 30 percent bound tariff (for most agricultural products) would not have been adequate to stabilize the domestic markets for sugar, wheat and dairy products where applied tariffs reached as high as 46-54 percent (but still within the bound rate of 68 percent for these products). In sum, the case studies show that several countries face particular difficulties in living with simple, ordinary tariffs alone, especially on sensitive food products, and that these difficulties cannot be simply ignored.
Fourth, the case studies showed that tariffs were often the primary, if not the only, trade instrument open to these countries for stabilizing domestic markets and safeguarding farmers' interests in the face of sharp swings in world prices or a surge of imports. With virtually no safety-net measures, no access to the much simpler Special Safeguard (SSG) provision of the AoA and practical difficulties in resorting to the general WTO safeguards, tariffs were frequently varied to cope with sharp swings in world market prices and, in some cases, changes in exchange rates.4 By contrast, many high-income countries do have the option to use additional, non-tariff instruments to cope with price or other risks, e.g. relief payments, subsidized emergency loans and risk management instruments.5 One lesson is that tariffs play a much broader and important role in developing countries for lack of other trade instruments and alternative safety-net measures - hence the importance of the bound rates.
Fifth, on safeguard and trade remedy measures, only three of the 14 countries (Botswana, Morocco and Thailand) had access to the agricultural SSG, for a limited range of products. None of them had recourse to the safeguard during 1995-99 and so had no experience to report. However, several case studies commented on the SSGs, stressing the "unfairness" of a global trading system that gives some members access to them but not others. Some of the studies added that this was doubly unfair because the countries concerned had indeed "tariffied" their NTBs, but on a unilateral basis prior to the UR, for which no credit was given. It was also emphasized in many of the studies that the general WTO safeguards were of no practical value because the Government lacked the institutional capability to apply them. The Jamaican case study in particular put stress on having an effective trade remedy measure based on experiences with several episodes of import surges that undermined domestic sectors (notably poultry, beef, dairy products and rice). Some attempts were made to initiate anti-dumping measures but were dropped for lack of legislation and institutional capability. In sum, one important conclusion is that there is need for an appropriate safeguard mechanism, which also seems essential for furthering the process of trade liberalization without incurring high social costs.
Sixth, and finally, only three countries (Brazil, Morocco and Thailand) had opened tariff rate quotas (TRQs), and they had little experience to report. In Brazil, the MFN tariff itself was below the in-quota rate, while Thailand had been asked some questions at the CoA on low "fill-rates" and quota administration methods in some cases.6 One of the objectives of the case studies was to document experience with accessing TRQs opened by others, notably the developed countries. However, that did not prove possible, since in the short time available the national consultants were unable to interview traders, who would have had the relevant information. Since TRQs are important for accessing markets for many products that otherwise face prohibitive above-quota tariffs, the sixth conclusion would be that it is essential to record and analyze this experience - especially to determine who (which country) was able to access how much of the TRQs and what factors were responsible.
2.2 Domestic Support Measures
The implementation experience with respect to commitments on domestic support measures was reviewed for each country on the basis of the following check-list of points:
It should be recalled that the focus of this analysis is on the extent to which the AoA provisions and country commitments on domestic support policies have required them to make policy changes or adjustments, and not on questions such as whether these supports and subsidies are high or low in an absolute sense, or desirable or not for the economy. The information on support measures for the 14 countries is summarized in Table 3, and together with additional information in the individual case studies, leads to the following main findings:
First, only five of the 14 countries submitted detailed information on support measures, i.e. green box (GB) outlays, product-specific (PS) and non-product-specific (NPS) AMS levels, and developmental or Special and Differential Treatment (SDT) outlays. Three of the remaining nine had no information at all (Bangladesh, Guyana and Sri Lanka), other than reporting that all of their support measures conformed to the "exempted" categories (GB, SDT and AMS within the de minimis levels). Three others reported only GB outlays, while two others also informed on SDT outlays. Peru provided information on GB and NPS AMS.
Second, the AMS levels for current years have been well below the committed or permitted levels, with the "utilization ratios" on the higher side only for Thailand.7 The Brazilian study in particular shows marked declines in AMS levels due to fundamental changes in agricultural policies by 1995 compared with the AoA base period of 1986-88. Of the four countries without AMS reduction Table 3: Summary of information on domestic support measures
Country |
Information available |
Comments 1 |
Bangladesh2 |
None |
PS AMS negative; NPS AMS about 1% of VoP |
Botswana |
GB only |
GB level about 3% of VoP |
Brazil |
Detailed |
PS AMS in 1995 and 1996 respectively 27% and 23% of permitted levels; NPS AMS de minimis |
Egypt |
GB and SDT only |
- |
Guyana |
None |
- |
India |
Detailed |
PS AMS negative; NPS AMS about 7.5% of VoP; SDT not used but the right to use reserved |
Jamaica |
GB only |
GB outlay about 2% of VoP |
Kenya |
GB only |
- |
Morocco |
Detailed |
AMS in current years 12-33% of permitted levels |
Pakistan |
Detailed |
PS AMS negative; NPS AMS about 3% of VoP; PS AMS calculated for one crop in 1997/98 and 11 in 1986-88. |
Peru |
GB and NPS AMS |
NP AMS 5.0-6.2% of VoP; GB 5% of VoP |
Senegal |
GB and SDT only |
85% of GB/SDT on water development |
Sri Lanka |
None |
- |
Thailand |
Detailed |
Current AMS 60-80% of permitted levels. |
|
1 Abbreviations: PS = product-specific, NPS = non-product-specific, VoP = value of production (agriculture). 2 The AMS estimates are unofficial ones of a national research institution. Source: Country case studies. | ||
commitments8 (Bangladesh9, India, Pakistan and Peru), the PS AMS was negative for the first three countries (no information is available for Peru), while the NPS AMS was positive in all four cases. The NPS AMS was fairly high (relative to the permitted 10 percent of value of production) only for India (up to 7.5 percent) and Peru (5 to 6 percent). This combination of negative PS AMS and positive NPS AMS seems to be a general feature in many developing countries.10 This experience has prompted proposals in both WTO and elsewhere for combining the two AMS levels before imposing reduction disciplines so that the AoA rules address the aggregate of both forms of distortion.
Third, although there were no cases of countries breaching the AoA rules and commitments, the studies identified several issues of significance for the future. Many of these were also raised by WTO Members during the process of verification at the CoA. The studies on India and Pakistan in particular provide more details. Briefly, these issues relate to: taking into account inflation and currency depreciation in calculating current AMS; the definition of "eligible" production and of "low-income" and "resource-poor" farmers; treatment of negative AMS; confusion over the logic of using fixed, historical external reference prices for computing current AMS levels; how to treat the reference prices if a country changes its trade status during the implementation period (e.g. from a net importer to a net exporter); and how to treat properly the recovery of investment and operating costs (e.g. on irrigation). Some of these issues reflect ambiguities in the terminology and definitions used in the AoA while others reflect particular difficulties facing a low-income agricultural economy. For the developing countries as a whole, and for that matter for all WTO Members, it is important to resolve these ambiguities, definitional problems and practical difficulties.
Fourth, while there has been no problem of compliance with AoA provisions and commitments for current years, many case studies expressed fears for the future on a number of scores. Several countries do not know their position exactly and their policies have not been rigorously examined in the CoA (e.g. to determine whether a particular measure belongs to the GB or AMS category), most probably reflecting lack of information in notifications. This lack of scrutiny cannot be assumed to continue indefinitely. Furthermore, it is not clear what will happen in the future, when current rules, definitions and exemptions may change and/or national development priorities and policy options change.
Egypt provides an example of this last point. It was indicated in the case study that failure so far in the national debate to address squarely the desirable level of self-reliance in wheat was perhaps due to the large food aid shipments in wheat received and to export subsidies which masked the potentially much higher food import bill. In such a situation, the low level of support to wheat made good economic sense, but no longer has any validity. The debate on this subject is likely to start now not only because of the high import bill but also because of the great importance of wheat for food security. It has been estimated that raising Egypt's self-sufficiency ratio for wheat from the 1994/95 level of 48 percent to 60 percent would involve a product-specific AMS in excess of the de minimis level, thus breaching current commitments. Many other countries could find themselves in a similar situation. The question asked in several case studies is how to prepare for negotiations without the benefit of an analysis of prospective needs for agricultural support when world commodity markets and relative prices are considered to have changed in a fundamental way. Very few countries seemed to have an answer to this question.
Traditionally, most of the 14 countries studied had a record of regulating exports through quantitative limits and taxes. But by the time the UR Agreement was signed, export regimes had already been substantially liberalized. Export subsidization was generally not an issue - only one of the 14 countries (Brazil) has the right to subsidize agricultural exports, but has not so far exercised this option. Rather, most countries felt strongly that the practice should be banned altogether, though in some studies this was not explicitly stated.
What came up repeatedly in most studies was that the governments occasionally implemented export incentive programmes, such as tax breaks, currency retention schemes and duty drawbacks. These schemes are not specifically referred to in the AoA but are addressed in the Agreement on Subsidies and Countervailing Measures (Annex 1: Illustrative list of export subsidies). It is not entirely clear whether it is legitimate to grant such subsidies on agricultural products (by referring to the Subsidies Agreement) when all forms of agricultural subsidization are prohibited by the AoA for those countries with zero export subsidy commitments. This is an issue that requires clarification.
Marrakesh Decision - Most of the 14 countries studied, as net food-importers, had considerable interest in the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries. Many held the view that the Decision was part of an overall contract (the Uruguay Round Agreements) that recognized that some countries could suffer during the reform process, for which assistance provisions had been made. With very little progress in implementing the Decision, obviously none of the countries has been able to report any "positive" experience with it. The experience with food aid shipments, one of the assistance mechanisms, was mentioned in many studies as an example of the ineffectiveness of the Decision. In particular, it was stressed that food aid shipments fell to record low levels during a period when there was a hike in food prices (in 1995 and 1996) and food import bills rose sharply.
SPS/TBT Agreements - Reviewing the experience with these Agreements was originally within the scope of the case studies. The review was to have been done on the basis of interviews with traders, but that did not always prove possible. The picture that emerges, although partial, may be summarized as follows. First, the SPS/TBT Agreements were considered as positive developments for safeguarding the interests of small trading countries without much retaliatory clout. Second, the key problem was the wide gap in the ability to meet international standards between the developing and developed countries, which cannot be narrowed in the short run, not least because it requires much investment. This state of affairs will continue to limit their export trade. Third, for obvious reasons, traditional agricultural exporters gave much more prominence to these Agreements (Brazil and Thailand among the 14). Fourth, several instances of both favourable and unfavourable experiences were reported in the case studies, in particular those of Brazil, Egypt, Jamaica, Pakistan and Thailand. Fifth, some of the problems encountered by these countries were lack of mutual recognition of inspections and standards (with several large importing countries often asking for "sameness" in the process rather than "equivalence") and "trade harassment", where the Agreements did not provide clear guidelines. Finally, all studies were critical of the fact that the promised technical and financial assistance had so far not been forthcoming.
There is a considerable interest in information on the impact of the UR in general, and the AoA in particular, on food and agricultural trade. This analysis would obviously have to be part of any assessment of experiences with the implementation of the AoA and the effects of the reform programme on world trade in agriculture. Yet, it was obvious from the outset that it would be very difficult to relate particular trade flows to the implementation of the Agreements, i.e. to isolate the effects of the UR from many other developments taking place simultaneously. It is, therefore, important to bear in mind this caveat in reviewing the results reported here.
Given the complexities involved in explaining trade flows, a simple approach was adopted for the review - comparing the average value of food and agricultural trade during 1995-98 with that during 1990-94, simply to see whether trade has grown or not.11 All the case studies reviewed the experience at a more disaggregated level, focusing separately on five or six major export and import products, and further identifying the source of the change in terms of volume and price effects. Some case studies tried to relate the observed change in the trade flows to particular factors, e.g. access to preferential markets, tariff changes, SPS/TBT measures and domestic productivity growth.
What follows summarizes the main findings on the basis of three indicators: total agricultural exports; total food imports; and the ratio of food imports to agricultural exports. Individual case studies provide more details.
3.1 Agricultural Exports12
Table 4 shows that the value of agricultural exports in 1995-98 was higher than in 1990-94 for 12 of the 14 countries, the increase ranging from 14 percent to 99 percent. For five of them (Peru, India, Sri Lanka, Brazil and Guyana), exports rose by 50 percent or more. Of the two countries where there was no increase, exports remained flat for Bangladesh, while Senegal was unique in experiencing a fall in exports (by 32 percent).
The last column of Table 4 shows changes in agricultural trade flows in volume terms, measured as export values at fixed, base period (1989-91) prices. They indicate five of the 14 countries (Botswana, Kenya, Senegal, Sri Lanka and Thailand) experienced negative trade growth in volume terms, while four of these had positive growth in value terms (Senegal being the only country in the sample with negative growth in both volume and value terms). The world market prices of many agricultural commodities were higher in 1995-98 than in 1990-94.13 As a result, trade expansion was on the whole lower in volume terms than in value terms - this was the case with 10 of the 14 countries covered in the table. The four cases where the opposite was the case were Bangladesh, Egypt, Guyana and Pakistan. More detailed accounts of these changes are presented in the individual case studies.
Table 4: Total agricultural exports in 1990-94 and 1995-98
All agricultural products | |||||||
Average annual value (in current prices) |
Change between periods |
Change in values (in constant prices) 2 | |||||
10-year trend (1985-94) 1 |
1990-94 |
1995-98 | |||||
Country |
million US$ |
million US$ |
% |
||||
Bangladesh |
- |
134 |
134 |
0 |
-0.1 |
27.5 | |
Botswana |
+ |
91 |
120 |
29 |
32.0 |
-7.9 | |
Brazil |
+ |
9 614 |
14 720 |
5 105 |
53.1 |
42.6 | |
Egypt |
- |
426 |
519 |
92 |
21.6 |
33.7 | |
Guyana |
+ |
152 |
230 |
78 |
51.4 |
62.8 | |
India |
+ |
3 083 |
5 635 |
2 552 |
82.8 |
75.6 | |
Jamaica |
+ |
242 |
299 |
57 |
23.6 |
11.7 | |
Kenya |
+ |
832 |
1 215 |
383 |
46.0 |
-11.3 | |
Morocco |
+ |
601 |
826 |
225 |
37.5 |
7.1 | |
Pakistan |
- |
962 |
1 101 |
139 |
14.4 |
46.5 | |
Peru |
+ |
332 |
663 |
330 |
99.3 |
44.5 | |
Senegal |
+ |
140 |
95 |
-45 |
-32.2 |
-45.2 | |
Sri Lanka |
- |
572 |
926 |
355 |
62.0 |
-6.8 | |
Thailand |
+ |
6 210 |
8 411 |
2 200 |
35.4 |
-5.4 | |
1 The plus and minus signs indicate the slope of a linear trend fitted for 1985-94. 2 Export values for current years at fixed, base period (1989-91) prices. FAOSTAT reports these statistics under its trade index number domain. Source: Computed from FAOSTAT data. | |||||||
Several case studies sought to explain the change in the trade flow at the level of individual commodities. For example, the rapid growth in Brazil's agricultural exports in recent years (e.g. soy bean and soy bean products, sugar and poultry) was attributed to a large extent to the remarkable and consistent rise in crop yields, i.e. to a competitive advantage led by productivity growth. The export performance for poultry was particularly impressive (a 26 percent increase in volume) despite the fact that market access terms in all major markets did not change much in the UR. By contrast, it remains to be explained why, among the three soy bean products, the export performance of soy oil was more impressive than that of soy bean and soy meal, even though oils face higher tariffs in all major markets. An analysis of exports by destination should provide further insights: e.g. did exports increase to those markets where access terms improved as a result of the AoA? In Brazil's case, trade should also have expanded strongly within MERCOSUR, something unrelated to the changes in market access terms due to the AoA. A thorough analysis of the impact of the AoA on trade flows is indeed much more complex than is usually assumed.
In the Sri Lankan study, it was argued that much of the export growth in 1995-98 could not be attributed to the AoA for two reasons. First, most of it involved traditional products (e.g. tea, coconut and rubber), which faced few market access problems even before the UR. Second, the destination for many other products with higher export growth was the Persian Gulf region, where there are few WTO Members. Nevertheless, part of the export growth could have been due to changes in market access terms related to the AoA, as in the case of sesame oil, exports of which to Japan rose following the reduction of the import tariff. Some positive experience was also noted in the case of floriculture products and seasonal and fresh fruit and vegetables.
Many case studies identified fruit and vegetables as the principal non-traditional products with good export prospects. In some cases, there were reports of already positive, though minor, effects, e.g. Bangladesh, Guyana, Pakistan and Jamaica. The Egyptian and Moroccan case studies in particular analyse access terms for fruit and vegetables in the EU market and review alternative negotiating options in some detail.
Information on exports subject to TRQs would have provided a more direct link between observed trade flows and the AoA. Unfortunately, information is not readily available on which countries were able to access the quotas during 1995-98. There were also reports of widespread confusion among traders on the allocation, access and administration methods of the TRQs.
3.2 Food Imports14
Table 5 shows that the value of food imports in 1995-98 exceeded the 1990-94 level in all 14 countries, ranging from a low of 30 percent more in Senegal to as much as 168 percent in India. The increases were greater than for agricultural exports. The food import bill more than doubled for two countries (India and Brazil) and increased by 50-100 percent for another five (Bangladesh, Morocco, Pakistan, Peru and Thailand). Several case studies disaggregated the sources of the higher food import bill by commodity, distinguishing volume and price changes.
Table 5: Value of food imports in 1990-94 and 1995-98
Average annual value |
||||||
10-year trend |
1990-94 |
1995-98 |
Change between periods | |||
Country |
(1985-94) 1 |
million US$ |
million US$ |
% | ||
Bangladesh |
- |
549 |
977 |
427 |
77.8 | |
Botswana |
+ |
211 |
290 |
79 |
37.4 | |
Brazil |
+ |
2 304 |
4 761 |
2 457 |
106.7 | |
Egypt |
- |
2 086 |
2 954 |
868 |
41.6 | |
Guyana |
+ |
36 |
50 |
15 |
40.9 | |
India |
- |
883 |
2 371 |
1 487 |
168.4 | |
Jamaica |
+ |
222 |
320 |
98 |
44.4 | |
Kenya |
+ |
250 |
373 |
123 |
49.3 | |
Morocco |
+ |
699 |
1 174 |
475 |
68.0 | |
Pakistan |
+ |
999 |
1 527 |
527 |
52.8 | |
Peru |
+ |
737 |
1 159 |
422 |
57.3 | |
Senegal |
+ |
322 |
419 |
97 |
30.1 | |
Sri Lanka |
+ |
429 |
609 |
181 |
42.1 | |
Thailand |
+ |
639 |
1 093 |
454 |
71.1 | |
|
1 The plus and minus signs indicate the slope of a linear trend fitted for 1985-94. Source: Computed from FAOSTAT data. | ||||||
In the ten years up to 1994, the trend in the value of food imports was downward for only three of the 14 countries (Bangladesh, Egypt and India). Measured against these declining trends, their 1995-98 food import bills were between 56 and 216 percent higher, obviously a negative experience. Of the other 11, the 1995-98 import bill exceeded the trend by small amounts (less than 10 percent) in four cases (Botswana, Guyana, Kenya and Senegal); in the remainder there was a marked increase relative to what could be expected if the 10-year trend (already positive) had continued up to 1998.
As with export earnings, several case studies provide some explanation for the increase in food import bills in 1995-98. For example, Botswana's 53 percent rise in cereal imports was due more to price than to quantity, while the 35 percent increase for dairy products was due to both quantity and price. Similarly, almost all of the 37 percent rise in Jamaica's cereal import bill was due to prices, while the 37 percent increase in the value of meat import was mainly due to quantity.
Several case studies reported import surges in particular products, notably dairy products (mainly powder milk) and meat (mainly low quality beef and poultry parts). In some regions, in particular the Caribbean, there were also reports of import-competing industries facing consequential difficulties. In Guyana, for example, there were import surges in recent years for several of the main foodstuffs that were produced domestically in the 1980s under a protective import regime. In several instances the surge in imports has undermined domestic production. For example, fruit juices imported from as far as France and Thailand have now displaced much of domestic production. Producers and traders of beans indicated that increasing imports have led to a decline in the production of the minca peas, developed and spread throughout Guyana in the 1980s. The same applied to local cabbage and carrot. The fear was expressed that without adequate market protection, accompanied by development programmes, many more domestic products would be displaced, or undermined sharply, leading to a transformation of domestic diets and to increased dependence on imported foods.
Some useful insights are available from an earlier study on factors that contributed to the rise in cereal import bills since 1994 for LDCs and NFIDCs taken as an aggregate.15 That study showed that the increase in the total cereal import bill for those countries was due partly to volume (a rise of roughly 23 percent) and partly to the rise in nominal world prices (roughly 18 percent), while a further almost 60 percent was due to a change in the financial terms of imports, which reflects the effects of a drastic cut in food aid and the disappearance of subsidized sales. Thus, the study found that the cereal import bills of these countries were now on a much higher plateau than prior to 1995.
3.3 Food Imports Relative to Agricultural Exports
What can be said of the agricultural trade experience on balance for each of the countries studied? To answer this question, it is useful to review the trend in the ratio of total food imports to total agricultural exports because there was an increase over the period in both trade flows for most countries. An increase in the ratio would indicate a negative experience (food import bills growing faster than agricultural export earnings).16 Table 6 shows that the ratio was higher in 1995-98 than in 1990-94 for 11 of the 14 countries.17 The worst experiences were those of Senegal (the ratio rose by 86 percent), Bangladesh (80 percent) and India (49 percent). Even major agricultural exporters like Thailand and Brazil saw the ratio worsen. The three countries for which the ratio fell were Guyana (by 9 percent), Sri Lanka (13 percent) and Peru (22 percent). Peru, nevertheless, had the fifth largest ratio among the 14 countries for 1995-98.
Table 6: Ratio of the total value of food imports to the total value of agricultural exports
10-year trend |
Average ratio |
Change between periods | |||
Country |
(1985-94) 1 |
1990-94 |
1995-98 |
Absolute |
Percent |
Bangladesh |
+ |
4.12 |
7.42 |
3.30 |
80.2 |
Botswana |
+ |
2.32 |
2.43 |
0.11 |
4.5 |
Brazil |
+ |
0.24 |
0.32 |
0.09 |
36.2 |
Egypt |
+ |
4.94 |
5.73 |
0.79 |
16.0 |
Guyana |
+ |
0.24 |
0.22 |
-0.02 |
-8.9 |
India |
- |
0.28 |
0.42 |
0.14 |
48.9 |
Jamaica |
- |
0.92 |
1.07 |
0.15 |
16.8 |
Kenya |
+ |
0.30 |
0.30 |
0.01 |
3.2 |
Morocco |
+ |
1.20 |
1.42 |
0.23 |
19.0 |
Pakistan |
+ |
1.08 |
1.42 |
0.34 |
31.4 |
Peru |
+ |
2.26 |
1.78 |
-0.49 |
-21.5 |
Senegal |
+ |
2.46 |
4.58 |
2.12 |
86.2 |
Sri Lanka |
+ |
0.78 |
0.68 |
-0.10 |
-13.3 |
Thailand |
+ |
0.10 |
0.13 |
0.03 |
27.9 |
|
1 The plus and minus signs indicate the slope of a linear trend fitted for 1985-94. The positive sign indicates that food imports grew faster than agricultural exports. Source: Computed from FAOSTAT data. | |||||
The ratio was on a rising trend during the 10-year period 1985-94, indicating that food imports were outpacing agricultural exports in 12 of the 14 countries (the exceptions being India and Jamaica). Two types of experience could be noted from the standpoint of the past trend. First, both India and Jamaica witnessed a change of direction of the ratio after 1994 - from a negative value to a sharply positive one, obviously a negative outcome. Second, Bangladesh and Senegal, with the sharpest increases relative to 1990-94, saw their situation worsen significantly also relative to the trend.
Although the effects of the SPS/TBT Agreements on trade were not analyzed in these studies, one of the features considered was the asymmetry in trade between high-income and low-income countries on account of the wide gap in standards. While trade liberalization by the latter could lead to an almost instantaneous surge in imports of agricultural (mainly food) products, since it is hardly likely that a product from a high-income country would be rejected in a low-income country on grounds of technical standards, the opposite is not generally the case. This is an interesting feature worth examining more closely.
To conclude, whereas the case studies provided information on trends in agricultural exports and food import bills, identifying some explanatory factors, they were not able to link rigorously the observed changes to UR-related factors because of analytical difficulties mentioned earlier and the lack of survey information from traders. Obviously, more detailed analysis along these lines would be essential for a better understanding of the impact of the AoA on agricultural trade.
In addition, whereas the link between improved market access conditions and export growth is relatively clear, the link between the reform programme and increased food import bills is less so. Changes in the value of food imports result by definition from changes in quantities imported and/or import unit values (prices), and both types of changes have to be taken into account in explaining the behaviour of import values. The AoA-related policy changes, in particular reduction commitments on export subsidies and domestic support, are likely to raise world market prices and/or import unit values for particular countries. In addition, the trade liberalization commitments of a food-importing country can also be expected to affect the volume of its food imports. Thus, it is essential to study both types of linkages, i.e. the effects through world markets and the effects of domestic trade liberalization, in order to better understand the impact of the reform programme of the AoA on the food security of the developing countries.
Although insufficient time has elapsed since the conclusion of the UR to assess the longer-term impact of the Agreements on agriculture and food security, several of the case studies addressed these broader concerns, largely drawing upon experience relating to the on-going process of trade liberalization (e.g. under structural adjustment programmes). The effects of the reform process under the AoA point in the same direction as these earlier reforms and the experience acquired so far provides a useful basis for responding to emerging challenges.
One observation common to several of the case studies was that there was a general trend towards the consolidation of farms as competitive pressures began to build up following trade liberalization. While this has generally contributed to increased productivity and competitiveness, it led to the displacement and marginalization of farm labourers, creating hardship that involved typically small farmers and food-insecure population groups, and this in a situation where there are few safety nets. In Brazil, for example, the agricultural sector has been considerably transformed as a result of the reform process. In the dairy sector, farm size has been increasing, herds have been improved, large-scale industrial processing firms have been moving in and traditional cooperatives failing. Also, in the maize and soybeans sub-sectors, farms have been consolidated, and while both cultivated area and productivity have been increasing, many small farmers have been marginalized. Some sub-sectors have been shrinking due to competitive pressures, e.g. wheat, rice and cotton. The solution was said not to be a retreat from this process of transformation but the creation of new institutions. For example, the strengthening of the capability to enforce anti-dumping measures could alleviate some of the difficulties. Similarly, new credit institutions are required, especially for providing credits to small farmers. The study also pointed to the need for a contract law that safeguarded the interests of small farmers, as large companies moved into agriculture.
In Sri Lanka, policy reforms and the associated increase in food imports have put pressure on some domestic sectors, affecting rural employment. The study cited one instance where roughly 300 000 persons involved in the production and marketing of onions and potatoes were adversely affected when tariff reductions resulted in a surge of imports of these products. The possibility of diversification away from these crops is limited.
The Indian case study noted the conundrum that the incidence of poverty has failed to decline, despite faster economic growth since 1991, when a substantial liberalization programme was initiated, whereas there had been a reduction in poverty in the 1980s. A possible explanation put forward was that food prices rose faster than other consumer prices after 1991 and price stability was consequently considered essential for protecting the welfare of the poor during the transition. In this context, the study came to the conclusion that both trade and stockholding policies are essential components of an effective food security policy and reviewed some possible problems arising from stockholding policies within the current AoA rules.
The 14 country case studies, as well as studies made elsewhere,18 basically point to the need for a cautious approach to trade liberalization if social costs are to be minimized. Where the costs involve a large segment of the population, as in many low-income agrarian economies, the text-book solution of redistributing the gains between winners and losers at the national level becomes impracticable. As a result, policy makers in developing countries, most of whom are convinced of the need for market orientation and trade liberalization, face a dilemma in deciding the appropriate pace of trade liberalization. The solution is not simple because the major problem faced is inadequate competitiveness, in both domestic and export markets. Competitiveness cannot be enhanced overnight and requires increased investment in technology and infrastructure. Therefore, in the final analysis, the pace of trade liberalization has to bear some relationship to the ability of economic agents in agriculture to adapt to the new conditions and be more competitive.
1 The case studies were conducted by national experts and covered: Bangladesh, Botswana, Brazil, Egypt, Guyana, India, Jamaica, Kenya, Morocco, Pakistan, Peru, Senegal, Sri Lanka and Thailand.
2 These are only approximations, providing a rough order of magnitude of the true values. For Guyana and Jamaica, the average applied tariff was assumed to be 40 percent, which is that of the CARICOM Common External Tariff. The actual average is probably much lower.
3 Some developing countries are known to have taken such a stance in the UR on account of loan conditionality, thus locking themselves into a disadvantageous position.
4 See, for example, Review of Cereal Price Situation in Selected Developing Countries in 1995-96 and Policy Measures to Offset the Price Rise (ESCP Document No.1, FAO, 1996), which documents trade policy responses during 1995 and 1996, when world market prices of basic foods rose sharply. Similar information is available in the FAO annual publication, Cereal Policies Review.
5 The point made in the previous paragraph, i.e. that there were some additional measures taken by several of the countries studied, does not contradict this finding because those measures were still based on tariffs.
6 Although TRQs did not feature prominently in the case studies, as most countries had none, this was one of the topics that attracted considerable attention in the CoA during the early years (i.e. 1995 and 1996), as well as in the process of Analysis and Information Exchange.
7 The Moroccan study presents an interesting case of sharp annual fluctuations in AMS levels as a result of fluctuations in production due to weather. That has not so far created a problem because the level of flexibility is high, but it could do so where the AMS on average is close to the permitted maximum. How to address fluctuations in production from the standpoint of compliance with AMS could be an issue to consider.
8 There were no reduction commitments because the AMS was within the de minimis limit.
9 The AMS data reported for Bangladesh are unofficial and are contained in a study prepared by a national research institution as part of a FAO-sponsored project.
10 It was found, for example, in Sudan, Syria and Yemen (all non-Members of WTO) in studies prepared under FAO technical assistance programme during 1995 and 1996.
11 The actual average value of trade in 1995-98 was also compared with the average extrapolated value for the same period derived from a linear trend fitted to the data for the 10 years 1985-94. Assuming that the extrapolated values for 1995-98 indicate the level of trade that would have prevailed had the 10-year trend continued beyond 1994, this comparison would show departures from the past. The main problem with this approach, however, lies in accepting these extrapolated values as the appropriate counterfactual scenario.
12 All the trade data used are from FAOSTAT and hence exclude fishery and forestry products.
13 FAO's composite world price index for major primary commodities (1990=100) was 97 for 1990-94 and 112 for 1995-98. The sub-index for major tropical agricultural products (e.g. beverages, raw materials, bananas) was 100 in 1990-94 and 131 in 1995-98. Insofar as the structure of commodity trade of a particular country reflects that of the FAO index, its trade growth in volume terms would be smaller by the extent of the rise in the price index.
14 All the trade data used are from FAOSTAT. Food excludes fishery products.
15 P. Konandreas and R. Sharma, "The Net Food-Importing Developing Countries: Role and Perspectives", Chapter 16 in S. Bilal and P. Pezaros (eds.), Agricultural Trade and the "Millennium" WTO Round, European Institute of Public Administration and Kluwer Law International, London (forthcoming).
16 This ratio is used to summarize the relationship between the two variables most commonly discussed in the context of the AoA. It is not intended to indicate a country's food import capacity, which is often described in terms of the ratio of food imports to total exports, including services.
17 For example, the ratio of 4.12 for Bangladesh indicates that the food import bill was over four times as high as agricultural export earnings; the ratio of 0.24 for Brazil indicates that food imports were 76 percent smaller than agricultural export earnings.
18 See, for example, John Madeley (ed.), Trade and Hunger: How International Trade is Causing Hunger, Association of World Council of Churches Related Development Organisations in Europe (APRODEV), Brussels, 1999. This publication is based on the review of 36 case studies prepared by a large number of civil society organizations in Africa, Asia and Latin America. It basically concludes that structural adjustment programmes, including trade liberalization, have worsened the food security of the rural poor in developing countries.
