NERC/02/5

Twenty-Sixth FAO Regional Conference for the Near East

Table of Contents

Executive Summary

I. Introduction

II. Sustainable Agricultural Development and Inter-related Environmental and Trade Issues

III. Experience with Implementing WTO Agreement on Agriculture 

IV. Opportunities and Challenges for Sustainable Development in the Context of the New Negotiations on Agriculture

V. Recommended Actions

Annex I:  Membership of Near East

Annex II: Agricultural Trade in the Region

Executive Summary

1. Many of the Near East (NE) countries are currently opening their agricultural markets at three distinct but interacting levels: unilateral liberalization, regional integration schemes and multilateral trade liberalization. Unilaterally, they have liberalized their agriculture sectors by eliminating or reducing input subsidies, removing or reducing guaranteed producer prices, and liberalizing exchange rates and trade regime. At the regional/sub-regional level, they have established several regional trading Agreements (RTAs) with objectives to liberalise regional trade including that in agriculture. Most important among these RTAs are the Arab Free Trade Area (AFTA), the Gulf Co-operation Council (GCC), the Arab Maghreb Union (AMU) and the EU-Mediterranean Agreements. At the multilateral level, many NE countries have acceded to the WTO and made commitments to liberalise their agriculture under its various Agreements, particularly the Agreement on Agriculture (AoA). These developments hold important implications for intra- and extra-regional trade, use of agricultural resources and sustainability of agricultural development in the NE countries.

2. Agricultural trade in the NE is characterized by high commodity concentration: high dependence on food imports and dominance of fruit and vegetables in agricultural exports. In view of the scarcity of water resources in the region, high dependence on food imports is likely to remain a formidable challenge for countries of the region.

3. Despite the several schemes of regional integration in the NE, intra-regional agricultural trade performs poorly and the potential for regional trade remains untapped. Total intra-regional agricultural exports for the Near East barely reaches 10 percent of total agricultural exports. The pattern of intra-regional agricultural trade is centered on few items like live animals and fish, and trade is concentrated among few partners. Major constraints and challenges facing intra-regional trade are: lack of diversity in agricultural products, non-tariff barriers, choice of integration approach, lack of trading support services and divergent political and economic interests.

4. Of the 29 countries of the NE Region, 16 are members and 7 are observers of WTO. The accession to WTO is gaining ground and most of the remaining countries are seriously considering applying for membership. In general, NE countries have not been faced with undue difficulties in meeting their AoA commitments during the period 1995-2000. Information on Sanitary and Phytosanitary Measures (SPS) in NE countries is scanty and often not available. Most of the NE countries have yet to develop or enact laws on property rights in line with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The institutional support to address WTO issues is generally weak and in some cases even non-existent.

5. Major issues arising from the implementation of the UR agreements, as well as those emerging from the new negotiations on agriculture, include the need to gain more flexibility in designing domestic agricultural policies; ability of the NE countries to join WTO on more favourable terms; enhancing sustainable use of water resources in the Region; improving access to foreign markets; and enhancing domestic food security.

6. Despite improvements in recent years, the participation of many of the NE countries in the process of multilateral trade negotiations remains weak and their capacity to implement the various agreements and to take advantage of trade opportunities is rather limited. In order to be able to take advantage of and defend their rights, as well as meet their obligations under the WTO, these countries must develop their capacity to participate effectively in the WTO system. The NE countries should develop their agricultural strategies based on comparative advantage and improved resource use efficiency especially irrigation water. They should develop TRIPS and SPS rules and regulations to address WTO issues.

7. There is also a need that NE countries co-ordinate positions in the whole range of trade negotiations. Efforts to define common regional positions would likely carry more weight in the negotiations. In this respect, existing regional and sub-regional groupings may have a role to play in formulating common agenda and strategy in the multilateral arena. FAO could continue to provide technical support for developing sustainable agricultural development strategies with environmental and trade orientation, support enhancement of analytical capacity of the member countries in trade-related policy areas, support the development of food control and safety, and support in developing regional food security programmes.

I. Introduction

1. Many of the Near East (NE) countries are currently opening their agricultural markets at three distinct but interacting levels: unilateral liberalization, regional integration schemes and multilateral trade liberalization. These changes hold important implications for intra- and extra-regional trade, use of agricultural resources and sustainability of agricultural development in the NE countries.

2. Unilaterally, and since the late 1980s, most countries of the region have liberalized their agriculture sectors by eliminating or reducing input subsidies, removing or reducing guaranteed producer prices, reducing the number of subsidized commodities and liberalizing exchange rates and the trade regime. Most of the implicit and explicit subsidies for agricultural inputs and outputs were withdrawn. However, some of the NE countries were able to continue supporting agriculture mainly for food security reasons. Experiences showed that domestic reform is a necessary but not sufficient condition for economic growth.

3. Agricultural trade liberalization is also taking place in the context of several regional trading Agreements (RTAs) most important among which are the Arab Free Trade Area (AFTA), the Gulf Co-operation Council (GCC), the Arab Maghreb Union (AMU) and the EU-Mediterranean Agreements. Despite lack of clear and significant success, regional integration continues to be an issue of great concern in the Near East and promotion of intra-regional agricultural trade remains key objective in all RTAs in the region. The current developments in the international economic environment including the new rules of international trading system set by the Uruguay Round Agreement (UR), and the proliferation of regionalism world-wide bring regional co-operation in the NE again to the forefront.

4. The most remarkable development in the agricultural trade liberalization process is the accession of many NE countries to the WTO and the commitments they made under its various agreements, particularly the Agreement on Agriculture (AoA) and the Agreement on the Application of Sanitary and Phyto-sanitary Measures (SPS).

5. The UR was a turning point in the evolution of agricultural policy. For the first time, a large majority of countries agreed a set of principles and disciplines to reduce the trade distortions caused by agricultural policies. Several WTO Agreements are directly related to the agricultural sector. Despite progress achieved in the implementation of these agreements, the international trading system remains unbalanced. Moreover, the complexity of import regimes and of accessing tariff rate quotas as well as the costs of complying with SPS and TBT agreements continue to create obstacles to market expansion which may be insurmountable especially for small economies.

6. The WTO negotiations for continuing the reform process in agriculture were launched in February 2000 and are now well advanced. The vast majority of developing countries entered the UR with under-developed agricultural sectors and insufficient resources to raise productivity and output in line with their food needs and production potential.

7. There is growing concern that liberalization of agricultural trade will have a wide ranging impact on the environment. Trade liberalization will affect production and consumption patterns and consequently will influence environmental conditions. Liberalized agricultural trade and the corresponding new rules will increase volume of international trade and create a paradigm shift in regional production patterns. This will in turn affect the environmental quality with attendant impacts on NE countries which are already confronting environmental issues. The interrelationship and interdependence of trade liberalization and environment is a widely debated issue in the NE countries.

8. This document intends to discuss the trade liberalization policies and their implications for intra-regional trade and sustainable agricultural development in NE countries and to recommend practical actions for the Governments and FAO.

II. Sustainable Agricultural Development and Interrelated Environmental and Trade Issues

9. The World, including the NE Region, is witnessing climatic changes. The last 150 years were characterized by the improvements of modern irrigation. This seems to be winding down. The cultural, economic and political forces that shaped this era are being realigned. On the economic front, irrigation expansion in many areas has reached the point of diminishing returns. The NE countries are no exceptions and are more vulnerable to such global climatic and trade changes because of their ecology and narrow resource base. There is a long list of issues confronting the NE agrarian and production base. The most striking challenges are water scarcity, environmental degradation, production instability and food insecurity, and trade related issues.

Environmental Degradation and Water Scarcity

10. Water scarcity for irrigation is becoming a factor in sustainable production for many of the important food-producing NE countries. In many NE countries farmers are pumping ground water faster than nature is replenishing it, causing a steady drop in water table. Global warming may further exacerbate the issue of water insecurity in NE countries. The pace of dam building is slowing down because of the resource constraints, environmental concerns and regional conflicts. Water productivity, getting more crops per drop, seems to be the agricultural frontier for NE countries in the 21^st century. The options for improving irrigation water productivity involve technical, managerial, institutional, and agronomic aspects.

11. Of all the environmental degradation, the most threatening is the scourge of salt, where Southern Iraq is a clear example. The share of salt-affected area in the total irrigated area is 26 percent, 30 percent, and 33 percent in Pakistan, Iran and Egypt respectively. The problem is also noticed in the Gulf countries. Pakistan and the Aral Sea basin countries have two of the world's most intractable salt problems. This, twined with water logging, is threatening the very natural resource base of many NE countries. The situation is further aggravated with the often excessive use of fertilizer and pesticide use as result of crop intensification. The use of fertilizer and pesticide has recently declined, however. Yet these is need to encourage more use of bio-fertilizers and bio-pesticides in order to limit environmental damage.

12. Production instability and food security are inter-related. Most of the rain-fed agriculture is experiencing erratic cereal production. The production instability index (coefficient of variation) is 29 percent for all NE countries. The highest variation is in UAE (85 percent) and Morocco is 55 percent. Most variation is attributed to yields of crops. By and large, all NE countries are food deficit and fulfill their food requirements from imports. The UR AoA has some provisions for special and differential treatment for developing countries, i.e. based on income levels. However, these provisions are not considered to be effective to address the major food and agricultural problems facing these countries, e.g. food security and underemployment. To tackle these problems, a wide range of measures are needed as outlined in the World Food Summit Plan of Action. At present most of the Near East Countries, having per capita water availability below 1700 M³, are net food importers. Irrigation water has to play a key role in meeting this challenge in all NE countries.

High Commodity Concentration of Agricultural Trade

13. Agricultural trade in the Near East is characterized by high commodity concentration: high dependence on food imports and dominance of fruit and vegetables in the regions agricultural exports. Both characteristics have direct bearing for the use of the limited agricultural resources in the Region.

14. High dependency on food imports. For the region as a whole, imports of cereals, as a proportion of the total annual consumption, expanded from 15 percent in 1970-75 to 33 percent in 1980-85 and slowed only slightly to 30 percent in 1990-96 and again slightly increased to 33 percent in 1997-99. The import dependence varies considerably between countries. In 1997-99, for instance, Egypt, Algeria, Yemen and the Gulf states imported over 50 percent of their requirements of wheat and wheat flour, the staple food in these countries. High dependence on food imports means that countries are exposed to some risks. The LIFDCs in the region in particular are facing difficulties in developing adequate foreign exchange earnings to finance food imports.

15. Multilateral reforms are also expected to impact negatively on food aid and subsidized food exports to the region. By virtue of the high import dependence, access to concessional food imports is extremely important for many NE countries to supplement their domestic supplies. In the past, countries in the region benefited from low world prices and the subsidized exports associated with the export subsidy and credit programmes of the EU and the US. During the early 1990s, a large part of US wheat exports to the Middle East and North Africa countries was covered under the Export Enhancement Programme (EEP). Since 1995, however, the volume of subsidized exports declined sharply.

16. The liberalization of agriculture therefore carries the risk of increasing food import bills, but for several reasons, the feared changes in international food prices as a result of the UR have not really materialized so far. The sharp increases in cereal prices during 1995/96, were largely caused by underlying market factors rather than policy reforms under the AoA. Some countries managed to cope with the increase while others were forced to cut down their import volumes and this demonstrates the risks of imports dependence.

17. Dominance of fruit and vegetables in the regions agricultural exports. Live animals, cotton lint, pulses and cereals are principal agricultural exports for a few countries in the NE, while exports of fruits and vegetables are important for almost all the countries in the region. On average, exports of fruits and vegetables constituted about 40 percent of the region's total value of agricultural exports during 1992-96. This share exceeded 50 percent in Algeria, Lebanon, Morocco, and Islamic Republic of Iran.

18. The main external market for fruit and vegetables is the EU. Tariffs on fruit and vegetables in the EU vary by product, season and country of origin, with higher tariffs being imposed during the periods when imports compete with domestic production. Many countries from the region have indicated that the implementation of the Uruguay Round did not result in tangible improvements in market access for their fruit and vegetables. Most of the fruit and vegetables imported into the EU must observe the `entry price' system to avoid disruption of domestic markets. Most of the Near East's exports of fruit and vegetables to the EU are also subjected to seasonal tariff quotas, which are duty free.

19. Fruit and vegetables exports, however, should benefit from the implementation of the SPS Agreement, since these have been subjected to the greatest uncertainty in the past in terms of phytosanitary standards. While reducing elements of arbitrary regulations, the implementation of SPS standards can involve higher compliance costs.

Intra-regional Trade

20. Several arguments have been advanced in support of promoting regional co-operation in agriculture in the Near East. First, given their small economic size - all countries in the Near East together account for less than 4 percent of world agricultural trade. There are a number of other cogent factors that would augur well for greater co-operation among Near East countries in agricultural trade matters. These include: a) the ongoing unilateral policy reforms in the region will provide a new impetus to trade, production and investment in line with the comparative advantage of individual countries thereby promoting efficient division of labour and other resources both at the regional and international levels; b) regional co-operation is seen as an appropriate instrument for bargaining more effectively within the World Trade Organisation (WTO) and in bilateral negotiations with larger and more developed countries; and c) with the accession of 16 countries from the region to the WTO all existing RTAs not concurring with the WTO rules would need to be adjusted, which, in almost all the cases, necessitates further liberalisation of regional markets.

21. The major RTAs in the Near East include the Greater Arab Free Trade Area, the Agreement for Facilitation and Promotion of Intra-Arab Trade, the Council for Arab Economic Unity (CAEU), the Economic Co-operation Organization (ECO) the Gulf Co-operation Council (GCC) and the Arab Maghreb Union (AMU). As regards EU agreements with some countries of the Region, there are two types. First, interim agreements leading to the formation of customs unions and at a final stage to full accession into the EU. Countries having such agreements are Cyprus, Malta and Turkey. Second, limited free trade area agreements (Euro-Mediterranean Free Trade Area) based on non-reciprocity, which also include some elements of preferential treatment particularly in agricultural products. Agreements under the Euro-Mediterranean Free Trade Area have been concluded with Egypt, Jordan, Morocco and Tunisia and are currently being negotiated with Algeria, Lebanon and Syria.

22. Intra-regional trade including agricultural trade, has generally remained low and stagnant. Live animals, meat, fish and fish products are predominantly directed to regional markets, while vegetables, fruits and agricultural raw materials such as cotton reveal a clear extra-regional orientation. Pakistan and Turkey supply not less than 50 percent of the intra-regional exports of cereals. Somalia and Sudan are the major suppliers of live animals, while meat is supplied mostly by Turkey and Syria.

23. The share of the Middle Eastern countries (9-10 percent) is among the lowest of intra-regional trade in total trade. The present regional economic co-operation mechanisms might be necessary but not sufficient devices for the expansion of intra-regional trade. It is important to investigate whether or not limited intra-regional agricultural trade is an inevitable consequence of the prevailing economic characteristics of countries in the region and whether greater gains can be reaped from other forms of integration based on more conducive economic policies and enabling trade environments.

24. Historically, agricultural export flows from the Near East consisted primarily of vegetables, fruits, rice, live animals and meat products and cotton. For wheat, vegetable oils and sugar, however, the region remains dependent on the outside world, and chances for intra-regional trade in these commodities are very limited. The products with greater scope for intra-regional trade are meat, vegetables, fruit, pulses and to some extent rice. The potential trade in cereals, however, is rather limited.

25. The major constraints and challenges facing intra-regional agricultural trade in the Near East may be summarized as follows: a) little diversity in agricultural products; b) the choice of integration approach; c) non-tariff barriers; d) insufficient trade supporting services; and e) divergent political and economic interests¹.

26. It seems imperative for the NE countries to develop positions in wide range of agricultural trade issues concerning their negotiations with the rest of the world. The common regional stand will carry a weight in global trade negotiations. The existing regional and sub-regional groupings can play a vital role for developing a common agenda and strategy in the international trade milieu. The promotion of intra regional trade will also serve as a vehicle for furthering food security objectives in the NE countries.

III. Experience with Implementing WTO Agreement on Agriculture

27. All countries in the Near East region, being members of the WTO or not, are concerned about the multilateral negotiations on agriculture. However, the agricultural and economic systems of the Near East countries vary widely, so that their interest and concerns about the multilateral negotiations on agriculture are hardly similar. Some are exporters of temperate products, some export tropical products while others have virtually no agricultural exports.

28. Of the 29 NE countries 16 are members of the WTO and 7 are observers (Table 1). In general, NE countries have not been faced with undue difficulties in meeting their AoA commitments during the period 1995-2000. On domestic support, the overwhelming majority of these countries have reported zero or less than de minimis total base AMS levels. Most of these countries have no reduction commitments on domestic support but neither do they have WTO "rights" to use "amber box" support in excess of the de minimis level in the future. On market access, most of the NE countries secured high tariff bindings for most of their agricultural products, though some of them bound at low levels.

IV. Opportunities and Challenges for Sustainable Development in the Context of the New Negotiations on Agriculture

29. Opportunities and challenges facing agriculture in the NE in the context of the WTO negotiations on agriculture have been expressed variously in several proposals submitted to the new negotiations on agriculture. Egypt, Jordan, Morocco and Turkey have submitted comprehensive proposals covering many aspects of the AoA, while some others (besides Egypt and Morocco, also Djibouti, Mauritania, Pakistan and Tunisia) have done so through WTO country groups. These proposals have articulated clearly the issues and concerns facing them and contain specific proposals for negotiations. Issues arising from the implementation of the UR agreements, as well as those emerging from the new negotiations on agriculture, are outlined below from the perspective of the ability of the NE countries to join WTO in more favourable terms, enhancing sustainable use of water resources in the Region, developing domestic capacities in agriculture, improving access to foreign markets and enhancing domestic food security.

Accession to the WTO

30. The overwhelming concern for the non-WTO members has been the terms of accession to the WTO. Five Near East countries (Algeria, Kazakhstan, Lebanon, Saudi Arabia, Sudan, Tajikistan and Yemen) have applied to join the WTO, and are facing some institutional challenges in their accession process. Governments from the region recommended that the accession process be expedited. Non-WTO member countries of the region are also concerned about the setting of the terms of accession post-UR. Treating countries on the basis of the most recent three years for which data were available and hard negotiations on the tariff ceiling bindings were seen as being tighter conditions than previous negotiations. For instance, Saudi Arabia has faced the possibility of not being treated as a developing country.

Sustainable use of water resources

31. Water use issues increasingly require integration into analysis of agriculture and trade. This is particularly true in the Near East countries, where agricultural production rests on a relatively scarce water resources. The water issue relates to the multilateral trade reforms in three important aspects. First, scarcity of water means increasing dependence on the international market for supply of basic food and other agricultural commodities. Therefore, increases in world market prices for agriculture products, as a result of multilateral trade liberalization or otherwise, may imply increased drain on water resources. This could occur if increases in prices were passed down to producers and if, as a result, the relative prices of agricultural products rise vis-à-vis other sectors and finally if government subsidies to water use were not reduced to sufficiently offset the increase in prices. Trade liberalization in the context of the WTO, therefore, needs to be taken in tandem with a reform of water and other environmental resource prices. Second, most countries in the region provide heavy subsidies, both operational and investment, to irrigation water. Under the existing AoA requirements, almost all subsidies to capital investment in irrigation could be exempted from the reduction commitment under Article 6.2 of the UR AoA. Third, given the high dependency on rainfed agriculture with high variability in rainfall, countries of the Near East experience heavy fluctuations in food production. Cereal production, in particular, remains highly variable in the region. In Sudan, Morocco and Syria, for example, food production falls below the annual average by more than 30 percent every three to four years as a result of weather variations. Given its direct implications for food aid, the implementation of the AoA and the Marrakech Decision on LDCs and NFIDCs is of great relevance to these countries.

Developing domestic capacities in agriculture

32. Enhancing the domestic capacities of the sector is crucial for the socio-economic development of the NE countries. While the AoA acknowledges the need for special and differential treatment (SDT) for developing countries and has a number of provisions on the subject, these provisions have been seen by many developing countries as falling short of what is necessary and as failing to provide the requisite policy flexibility. This section addresses some of the issues at stake regarding domestic policy flexibility to develop the agricultural potential of NE countries.

33. Border protection. It is sometimes necessary to maintain a degree of border protection in order to implement a domestic support policy. In general, the bound tariffs in most of the NE countries are sufficiently high to allow for a considerable degree of protection at the border. However, there are issues in this area that need to be noted.

34. First, most NE countries chose to offer a uniform, single rate of binding for all agricultural products. With the tariffs now bound and facing further reductions in the new round of negotiations on agriculture, some of these countries might need to approach tariff reductions carefully. Second, some countries have bound their tariffs at very low levels and consequently now have little room for manoeuvre in the use of the tariff as a contingency measure against price fluctuations on world markets.

35. Domestic support. Although many of these countries are not currently constrained by the domestic support provisions of the AoA, they may find their policy options limited in the future. As mentioned earlier, most of the countries in the region have claimed zero Base Total AMS . This may limit options for these countries to use direct price support measures in the future. Besides, all countries have submitted their AMS in domestic currency terms. The major problem of this relates to inflation and depreciation of domestic currency that would tend to inflate Current AMS relative to AMS commitment levels. Some of the NE countries have been faced with difficulties in their domestic support submissions to the WTO due to inflation and currency depreciation.

36. NE countries claim that in order for them to develop fully their agricultural potential, the main requirement would be a reform of policies in developed countries that distort world agricultural markets as there is a substantial imbalance in the levels of domestic support and export subsidies allowed to developed countries, on the one hand, and to developing countries, on the other, under the AoA. the agricultural markets of the developed countries

37. For several reasons, the implementation of the AoA commitments in the developed countries does not seem to have created greater access opportunities for agricultural exports from the NE. The choice of the base year 1986-88, a period of particularly low world price levels, has locked-in a high tariff rates period. In addition, under the simple average formula adopted in the Uruguay Round, countries could make smaller cuts for commodities that were most directly in competition with their own domestic production. Among these commodities are fruit and vegetables, olive oil and pulses, which are also major exports of the NE region. In addition, the Special Safeguards (SSG) for products of fruit and vegetables, both a price-triggered and a quantity-triggered versions, have been used.

38. The minimum and current access commitments made by the developed countries also do not favour major export crops of the region. For example, the EU, the biggest market for the NE, sets minimum and current access commitments for cuts of `high quality' beef, pig meat, poultry meat, eggs, butter, specified cheeses and `quality' wheat, products which are generally not exported by countries of the region. In its minimum access commitments the EU has aggregated all vegetables into one category and all fruit into another. As a result of this aggregation, the quantities of imports of the EU from each of the two categories during 1986-88 was more than 5 percent of its base year internal consumption and as such the minimum access commitment was not applicable. The situation could have been different if a product by product approach had been followed.

39. Erosion of the value of trade preferences constitutes another problem for the region. To the extent that tariff reduction in the developed countries are effective they will erode the countries' margins of preference and cause their competitive position to deteriorate vis-à-vis other suppliers. Some of the LDCs in the region (Djibouti, Mauritania, Somalia, Sudan and Yemen) may benefit from the new EU initiative of "Everything but Arms" (EBA) which grants exports from LDCs, free access to the EU markets. Tariff escalation also remained a barrier to the processed food exports of the region. Many countries such as Cyprus, Turkey, Lebanon, Egypt and the Maghreb countries have good export potential for processed food products, but they are still constrained by high trade barriers in many OECD countries. Although tariff escalation in the fruit and vegetables sector is reduced in the EU post-UR, there may still be opportunities for further expansion of market access. In addition, difficulties and high costs in complying with SPS standards in the region's main markets remain a barrier to exports from the NE. The above mentioned problem areas are of particular concern to the NE countries, for they directly affect the translation of the AoA commitments into real trading opportunities, and most of them have already been tabled for negotiations in the new negotiations on agriculture.

Securing adequate supplies and stable prices for food products

40. Access to the special agricultural safeguards (SSGs). World agricultural market instability remains a major problem for NE countries because of their high dependence on imports and the weakness of their agricultural sectors. Thus, access of these countries to WTO-compatible safeguard measures remains an issue of great concern to them. However, none of the countries of the region, apart from Morocco and Tunisia, have access to SSGs. Several NE countries have clearly indicated in their proposal for the new negotiations on agriculture the importance of allowing them to use SSGs in order for them to safeguard their domestic food producers and consumers.

41. Operationalising the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries. Of the current WTO Members from the region, two (Djibouti and Mauritania) are among LDCs while four others (Egypt, Morocco, Pakistan and Tunisia) are NFIDCs, and therefore, they are eligible to receive such financial, technical and food assistance as envisaged in the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on LDCs and NFIDCs. This Decision has yet to be implemented. Despite the sharp increase in cereal prices in 1995-96, it had been difficult to make use of this Decision because there was no agreement that the rise was related to the Uruguay Round. At the same time, LDCs and NFIDCs of the region did not seem to have benefited from the IMF Contingency and Compensatory Financing Facility (CFF) during 1995-96. Some countries expressed concerns about the conditionalities attached to the CFF. Egypt and Morocco expressed their views, within the WTO Committee on Agriculture, that access to IMF facilities should not be conditional on balance of payments related criteria but rather on whether or not countries concerned were experiencing difficulties in financing normal levels of commercial imports. Likewise, food aid to the region declined sharply during 1995-96.

Promotion of intra-regional agricultural trade

42. Changes in the policy environment in the region following the UR AoA are expected to have pronounced effects on both the magnitude and direction of intra-regional trade. First, the main effect on intra-regional trade will emanate from the tariffication process, as non-tariff protection in most of the countries in the region discriminates against agricultural products that could be competitively supplied from other countries within the region. Hence, tariffication on a MFN basis ensures positive effects on intra-regional trade. Benefits of tariffication will go beyond improvement in the magnitude of intra-trade as it may serve to improve its stability as well. Second, reduction in import tariffs should generally encourage a region-wide exchange of products on an MFN basis, though it may have a negative impact on the exchange within the existing economic groupings in the region (e.g. GCC, ECO and AMU) due to the erosion of the margins of preferences within these groupings. This current large gap between bound and applied tariffs in many NE countries could be exploited by RTAs in the region.

43. Other WTO agreements such as the SPS, TBT, and TRIPS offer great opportunity for the NE countries to harmonise their standards and regulations, which would provide an environment conducive to the promotion of intra-regional trade. Indeed the most significant effect of the UR would emerge from its rules of conduct and the general improvement in policy discipline.

44. The broad scene seems to suggest that the WTO agreements, on balance, would create limited but positive improvement in intra-regional agricultural trade. The magnitude of the increased benefits depends a great deal on the way each country implement its UR commitments and on the level of co-ordination within and between existing sub-regional groupings.

Institutional setup to address trade and environment related issues

45. Legal and institutional capacities for planning and implementing environmental and trade policies in the countries of the region are generally weak. Despite improvements in recent years, the participation of many of the NE countries in the process of multilateral trade negotiations remains weak and their capacity to implement the various agreements and to take advantage of trade opportunities is limited. A major challenge faced by these countries is raising the SPS/TBT standards of their exports to at least internationally recognised levels. Because of their poor capacities in scientific research, testing, conformity and equivalence, they face difficulties in meeting international safety and quality standards. Another challenge is the requirement of the TRIPs Agreement for countries to provide for the protection of plant and animal varieties, either by patents or by effective sui generis measures, presents a number of challenges for NE countries. The lack of plant variety protection and of sufficient capacity to provide rapidly such protection in most of these countries may hamper their ability to comply with this requirement.

46. In order to be able to take advantage of and defend their rights, as well as meet their obligations under the WTO, these countries must develop their capacity to participate effectively in the WTO system. There is also a need that NE countries co-ordinate positions in the whole range of trade negotiations. Efforts to define common regional positions would likely carry more weight in the negotiations. In this respect, existing regional and sub-regional groupings may have a role to play in formulating common agenda and strategy in the multilateral arena.

V Recommended Actions:

Recommended Actions for Governments

47. Based on the above, it is suggested that the countries of the Region should:

• Build their national and regional capacities in trade policy, especially in the following areas:

• Developing and strengthening institutional capacity to meet international standards, e.g. in food safety and quality;
• Strengthening the capacity in multilateral negotiations, in particular to meet WTO commitments, including follow-up of decisions in their favour, and to take advantage of trading opportunities; and
• Strengthening their capacity to analyse trade issues in the context of the continuation of the reform process.
  
  

• Promote sub-regional and regional cooperation, including for export promotion, and improving transport infrastructure to reduce costs and increase trade flows.
  
  
• Remove procedural and institutional bottlenecks to regional trade in food and agriculture, including through efforts to improve efficiency, efficacy and transparency by the implementation of trade facilitation measures and improving standards and quality control.
  
  
• Strengthen their information exchange capacity and their access to relevant information and studies by joining networks, commissioning their own studies, understanding the positions of the major actors in world markets, bringing in non-governmental experts and generally in raising awareness of multilateral trade negotiations process.
  
  
• Encourage diversification of exports into newer and where possible higher-value products.
  
  
• Promote competitiveness of exports in order to facilitate the integration of domestic enterprises into the international economy.
  
  
• Assess support to agriculture in order to ensure sufficient flexibility in designing sustainable and effective domestic agricultural and food policies in the context of the WTO agreements.
  
  
• Improve the efficiency of resource use, especially irrigation water.
  
  
• Develop SPS, TBT and TRIPS rules and regulation in order to address WTO requirements based on scientific information in order to improve the security of trade and to increase effective participation in international standard-setting organizations such as Codex Alimentarius, IPPC and OIE.
  
  
• Establish and support public information/education centers for extension in promoting food practices that augment the present food safety and control measures and environmental concerns in public image.
  
  

• Strengthen laboratory facilities for food safety to meet emerging threats of hazards and contamination of chemical, microbial or of physical origin.

• Ensure that food, agricultural trade, and overall trade policies are conducive to fostering food security for all through fair and market oriented agricultural trading system.
  
  

• Take advantage of technical assistance provided by international organizations, such as World Bank, WTO, UNCTAD, FAO, etc.

Recommended Actions for FAO

48. Within the available financial and human resources, the FAO is called upon to:

• Continue providing technical support to establishing the Near East and North Africa Regional Network for Agricultural Policies (NENARNAP) and to strengthening national capacities in the area of agricultural policy analysis related to international trade and WTO requirements.
  
  

• Strengthening of national capacities to meet Codex requirements and WTO's Agreements on the SPS and TRIPS including food quality and safety.
  
  

• Continue providing assistance in developing agricultural sector strategies based on comparative advantage and efficient resource allocation taking into consideration environmental and gender aspects in order to reap the benefits of trade liberalization and to cope up negative impact of trade liberalization.
  
  

• Continue assisting countries in preparing for multilateral trade negotiations in agriculture, fisheries and forestry inter alia through studies, analysis and training.

Annex I

Table 1: Membership Status of NE Countries in WTO

Source: WTO, Website

Annex II

Table 2. Agricultural Trade in the Near East Region: Major Exporters and Importers 1994-98