CL 123/2

Council

Table of Contents

I. INTRODUCTION

II. CURRENT FOOD SECURITY SITUATION

A. TRENDS IN UNDERNOURISHMENT
B. FOOD SHORTAGES AND EMERGENCIES

III. CURRENT AGRICULTURAL SITUATION

A. CROP AND LIVESTOCK PRODUCTION
B. COMMODITY PRICES AND MARKET TRENDS
C. FISHERIES PRODUCTION AND TRADE
D. PRODUCTION AND TRADE OF FOREST PRODUCTS

IV. EXTERNAL ASSISTANCE TO AGRICULTURE

V. THE IMPLICATIONS OF THE FOURTH WTO MINISTERIAL CONFERENCE FOR AGRICULTURE, FISHERIES AND FORESTRY

I. INTRODUCTION

1. This document highlights recent major trends in global food security, agricultural production and markets, development assistance to agriculture, and policy developments of relevance to international commodity trade, based on information available as of August 2002. Delegates are also invited to refer to various recent FAO documents and web pages for more current information: the latest versions of “Food Outlook”, and “Food Crops and Shortages” offer updated commodity production and market information; more comprehensive information and analysis on world food and agriculture is available in “The State of Food and Agriculture 2002”; and, more comprehensive information on food insecurity is available in “The State of Food Insecurity in the World 2002”.

II. CURRENT FOOD SECURITY SITUATION

A. TRENDS IN UNDERNOURISHMENT

2. According to FAO’s latest estimates, there were 840 million undernourished people in the world in 1998-2000: 799 million in developing countries, 30 million in countries in transition and 11 million in developed market economies. More than half of the undernourished (508 million people; 60 percent of the total) live in Asia and the Pacific, while Sub-Saharan Africa accounts for almost a quarter (196 million people; 23 percent of the total).

3. The number of undernourished people in the developing countries has fallen by 19 million since 1990-92 (from 818 million). This is far slower than the rate of reduction that is needed to meet the World Food Summit goal of halving the number of undernourished by 2015 (from the 1990-92 base). Furthermore, the global reduction masks wide variations in regional and national performance. Rapid progress in a few countries obscures a stagnant or deteriorating situation in many more countries.

4. Sub-Saharan Africa has the highest prevalence of undernourishment, at 33 percent of the population. The second highest prevalence is found in Asia and the Pacific where 16 percent of the population is undernourished. This regional aggregate disguises important sub-regional differences; in South Asia, 24 percent of the population is undernourished, while for East and Southeast Asia, this proportion is 10 and 12 percent respectively. For the Near East and North Africa, the prevalence of undernourishment is 10 percent, and for Latin America and the Caribbean it is 11 percent.

5. The prevalence of undernourishment in developing countries has fallen from 28 percent of the total population in 1979-81 to 17 percent in 1998-2000. This is significant progress; however, it has been very uneven and has slowed in recent years. In Asia and the Pacific, the prevalence has been halved since 1979-81, with the most rapid progress occurring in East Asia. In Sub-Saharan Africa the incidence of undernourishment has fallen slightly since 1979-81, although with population growth the absolute number of undernourished has continued to rise. In Latin America and the Caribbean the incidence of undernourishment has fallen marginally in the 1990s, from a low base. In the Near East and North Africa, marginal progress in the 1980s was offset by a slight deterioration during the 1990s, so both the prevalence and the absolute number of undernourished have increased, also from a low base.

B. FOOD SHORTAGES AND EMERGENCIES¹

6. Following two successive years of poor harvests in most countries of southern Africa, a food crisis has emerged in the subregion. Globally, 31 countries are experiencing severe food shortages and require international food assistance.

7. In southern Africa, nearly 13 million people need emergency food aid following two consecutive poor cereal harvests. Large areas were devastated by a prolonged drought during the 2001/02 growing season, while others were affected by excessive rain. Government and farmers’ maize stocks were depleted and imports were late and insufficient, resulting in severe food shortages and unprecedented price increases. In Zimbabwe, reduced plantings in the large-scale commercial sector due to land reform activities compounded the problem. A regional emergency operation valued at US$507.3 million was jointly approved by FAO and WFP in late June to provide food assistance to about 10.3 million people, 80 percent of the affected population, until the next main harvest from April 2003. However, by early August, only 25 percent of this amount had been pledged.

8. In eastern Africa, the food outlook is bleak in several countries due to poor seasonal rains. In Eritrea, the short rains from March to May failed totally and the drought continued into the important planting months of June and July, raising serious concerns over the country’s prospective food security. Over one million people are currently in need of assistance. Similarly in Ethiopia, severe drought has caused the death of large numbers of livestock, mainly in the eastern and north-eastern pastoral areas. More than 8 million people are in need of assistance. In Kenya, poor rains have reversed earlier optimistic crop prospects and raised serious concerns over the food supply outlook. Nearly 1.3 million people are estimated to be dependent on food assistance. In Somalia, despite a favourable forecast for the main season crops, serious malnutrition rates are reported, reflecting successive droughts and long-term insecurity. The recent escalation of conflict has displaced a large number of people and disrupted delivery of food assistance. In Tanzania and Uganda, the overall food supply situation is satisfactory, although the escalation of conflict in northern Uganda has displaced large numbers of people, adding to the more than 1.5 million internally displaced persons, refugees and other vulnerable people that already depend on food assistance.

9. In western Africa, dry weather has seriously affected crops, particularly in The Gambia, Guinea-Bissau, Mauritania and Senegal. In Cape Verde, prospects for the maize crop, normally planted from July, are unfavourable due to delayed onset of rains. By contrast, crop growing conditions have improved in central and eastern parts of the Sahel with increased and better distributed rainfall in most agricultural regions of Burkina Faso, Chad, Mali and Niger. Agricultural activities in Liberia have been disrupted by renewed civil strife, pointing to reduced rice production this year. Sierra Leone and Guinea remain heavily dependent on international food assistance due to large numbers of internally displaced persons and refugees.

10. In central Africa, the food supply situation has improved in Rwanda and Burundi following good harvests of the 2002 second season crops. By contrast, the food and nutritional situation in the Democratic Republic of Congo gives cause for serious concern. Persistent civil strife continues to cause massive population displacements, with the number of internally displaced persons currently estimated at 2 million. Their food situation is extremely serious, as distribution of relief assistance is hampered by insecurity. The food supply situation in Kinshasa is also serious, as food availability falls far short of needs.

11. In Asia, following recent donations to the Democratic Peoples Republic of Korea, food assistance has been resumed. However, additional cereal pledges are needed to ensure continued food supplies to needy groups. In Mongolia, another harsh winter and severe spring storms further eroded the food security of nomadic herders. Extreme floods have caused loss of life and damage to infrastructures and crops in western and central China, northeastern India and Bangladesh. In Iran, a violent earthquake struck northwestern areas in late June. The food supply situation in some Asian countries of the Commonwealth of Independent States is tight due to adverse weather and emergency food assistance is required in Tajikistan, Uzbekistan and Georgia, the worst affected countries. Tajikistan, in addition, has recently experienced a locust infestation, torrential rains and floods, which have destroyed large areas of crops.

12. In the Near East, the food situation in Afghanistan remains grave, notwithstanding the relative calm and improved delivery of food assistance. The worst locust plague in 30 years and floods in parts have affected crop prospects. Funding shortfalls for humanitarian agencies are cause for serious concern. The food situation in the West Bank and Gaza Strip continues to be serious.

13. In Central America and the Caribbean, the tight food supply situation in parts of El Salvador and Guatemala has been aggravated by the dramatic fall in international coffee prices.

14. In Europe, targeted food assistance continues to be necessary for refugees, the internally displaced and vulnerable populations in the Federal Republic of Yugoslavia and in Chechnya in the Russian Federation.

III. CURRENT AGRICULTURAL SITUATION

A. CROP AND LIVESTOCK PRODUCTION

15. World agricultural (crop and livestock) production over the past two years increased at rates below the average of the preceding decades. Total world agricultural output growth in 2000 is estimated at only 1.3 percent. The estimates for 2001 suggest even lower output growth, of 0.5 percent, the lowest rate since 1993. With population growth, this implies a decline in global per caput production in both 2000 and 2001.

16. The recent slowdown in output growth is primarily the result of depressed commodity prices (see price section) that have reduced farmers’ incentives to expand production. Slowing population growth rates and weak per caput income growth in some of the poorest countries have dampened longer-term demand growth that might otherwise boost price incentives and stimulate more rapid output growth. Policy changes in some countries may also have contributed to the slowdown by reducing incentives for over-production. In the shorter term, as noted above, localised weather disturbances in some regions have also disrupted production.

17. Declines in the rate of output growth in both developing and developed market economies more than offset the strong recovery in output growth in the countries in transition. For the countries in transition, 2001 constitutes the first year of significant output growth after a decade of mostly contracting production.

18. Much of the declining trend in agricultural output growth in Asia is attributable to China, where the very high rates of growth recorded since the beginning of the economic reform process in the late 1970s have been tapering off in recent years. A similar pattern of lower growth in the last five years relative to the preceding five-year period and the 1980s is also discernable, although less pronounced, for the rest of Asia as a whole.

19. Sub-Saharan Africa is the only developing country region where agricultural output has been trailing population growth for most of the last three decades. Following strong performance in the early 1990s – which led to sustained gains in per caput terms for the first time since the 1960s – agricultural output has reverted to a pattern of declining per caput output in the most recent years.

20. The Latin America and Caribbean region has experienced somewhat higher average growth in agricultural output over the last five-year period compared with the early 1990s. This represents a return to the output growth rates recorded in the 1960s and 1970s.

21. In the Near East and North Africa, agricultural performance has normally been characterized by more pronounced fluctuations than in most of the other regions due to the climatic conditions of large parts of the region. Over the past few years, production has been particularly affected by successive droughts in many countries, resulting in a marginal decline in production over the period.

Changes in agricultural production (crop and livestock)

(Production indices at costant prices)

1) World and economic groupings:

2) Developing countries by regions:

Source:FAO

B. COMMODITY PRICES AND MARKET TRENDS

22. As noted above, most agricultural commodity prices remained depressed in 2001 and are likely to remain low through the rest of 2002, although some show signs of recent firming. Prices of most major agricultural commodities remain well below their peak levels of a few years ago. The low price situation suggests that output growth – despite slowing in 2000 and 2001 – has outpaced demand growth at the global level.

23. Between May 1996 and January 2000 the FAO international price index for total foodstuffs declined by some 38 percent, to a record low point for the decade. The index stabilized in 2000 and has remained at depressed levels. Among the major food stuffs the decline in prices has been most pronounced for cereals, for which prices peaked in May 1996. By 1999 the average cereals price index had fallen more than 40 percent below the 1996 average, and has remained relatively flat over the last three years.

24. After a slight recovery in 2001, world cereal production ² is expected to decline in 2002. With opening stocks lower than in the previous season and production falling, the new 2002/03 marketing season could mark the beginning of a tighter supply/demand situation than experienced in recent years.

25. With the overall total cereal utilization exceeding world production for the third year in a row, world cereal stocks by the end of the crop seasons in 2003 are forecast to fall almost 9 percent from their already reduced opening level. However, large supplies in a number of non-traditional exporting countries could, to some extent, mitigate the impact of this expected sharp decline in global stocks on world markets. The anticipated decline in wheat inventories could prove most significant but reductions in coarse grains and rice stocks are also expected to be substantial. The primary factor behind the global stocks depletion in recent years continues to be the development in China where, following a period of large stocks, the Government is seeking to reduce its national inventories. 9
 

Source: FAO

26. World cereal trade in 2002/03 is forecast at 235 million tonnes, down slightly from the previous season, mostly due to smaller expected wheat and rice imports. While imports by the developed countries are forecast to fall sharply, an almost equally large increase is anticipated for the developing countries as a group, whose imports could rise to a record 178 million tonnes.

27. Reflecting the generally tighter prospects, international cereal prices started to gain ground since April 2002. As of July 2002, wheat prices rose considerably in response to poorer crop prospects in a number of major exporting countries. Maize prices also strengthened despite large supplies of feed wheat in international markets, which weakened demand for maize in some markets. Rice prices also started to rise, reflecting tighter supplies in some exporting countries and policy measures in others.

28. The average price index for oils/fats rose sharply during the mid-1990s and peaked in 1998 on the basis of strong demand growth. The price index soon came under intense downward pressure due to a strong recovery in global oilseed production and a slow-down in consumption growth, and by 2000 had fallen more than 45 percent from the peak. The price index for oil/fats strengthened marginally over the course of 2001 and in the early months of 2002, but remains well below the peak.

29. Meat prices declined 12 percent between 1997 and 1998, as the US beef cycle bottomed and increasing supplies put downward pressure on the market. Prices have remained relatively flat since then, reflecting weak economic growth in some of the major import markets and continuing animal disease and food safety concerns that have dampened demand growth.The index of dairy prices resumed a downward trend in mid-2001 following a brief rally in 2000. By mid-2002 dairy prices were almost 35 percent below the peak level of 1995 and near the depressed levels of the early 1990s. International dairy markets are very thinly traded (trade is a small percentage of global output) so small shifts in import demand can produce large price changes. Declining import demand for milk powder is the main reason for the recent decline in global dairy prices.

30. The index of dairy prices resumed a downward trend in mid-2001 following a brief rally in 2000. By mid-2002 dairy prices were almost 35 percent below the peak level of 1995 and near the depressed levels of the early 1990s. International dairy markets are very thinly traded (trade is a small percentage of global output) so small shifts in import demand can produce large price changes. Declining import demand for milk powder is the main reason for the recent decline in global dairy prices.

31. Coffee prices continued declining through 2001 and remain severely depressed. Prices in 2001 fell to their lowest level since 1973 in nominal terms and to a record low in real terms. Coffee prices largely reflect a substantial increase in global production (green coffee production was almost 25 percent higher 2000-01 than during the first five years of the 1990s) and continued large stocks.

32. Cocoa prices experienced a sharp drop in 1999 and 2000 when exports expanded by almost 25 percent over the levels of the early 1990s. In 2000 the ICCO daily price averaged US$ 888 per tonne, the lowest since 1973 in nominal terms. Prices firmed in 2001, increasing 16 percent on average for the year, and continued to rise in the first half of 2002, to levels near the 1998 peak. The recovery in prices is largely attributed to a tightening of supplies due to disease problems in some major producing regions and to speculative buying that is not expected to be sustained beyond the end of 2002.

33. Tea prices had remained relatively firm in recent years, but weakened substantially in 2001 and the first half of 2002. Rising production in 2000 and 2001 coupled with weak demand in some major markets have put downward pressure on prices. Efforts on the part of exporters to improve quality are expected to strengthen demand and halt the slide in prices.

34. Cotton prices have suffered a pronounced decline, with average prices in 2001 down by 50 percent from their level 1995. After reaching a trough in December 1999 cotton prices recovered somewhat in the course of 2000, but resumed their downward trend in 2001. Prices have been on a long-term declining trend due to excess production and increasing competition from synthetic fibres.

35. Sugar prices rose in late 2000 and early 2001 but have since returned almost to the level of the 1999 trough, at which time they had fallen to less than half their 1995 level. Lower production and exports in 2000/01 were responsible for the price rally, but higher output in 2001/02 has renewed the downward pressure on prices.

Export prices of selected commodities:

* Average of first four months

¹ COTLOOK, index 'A' 1-3 / 32, Friday
² RSS1, spot London, Wednesday

C. FISHERIES PRODUCTION AND TRADE

36. Total world fishery production - the total of marine and inland aquaculture and capture production - reached a new high of 130.4 million tonnes in 2000, an increase of 12 percent since 1995, reflecting enormous gains in aquaculture production in China. Total production for the rest of the world, however, has increased only marginally. In the light of its dominant share of the world capture and aquaculture production, the figures of both, including and excluding China, are presented below, following past practice.

37. Total world capture production, 94.8 million tonnes in 2000, was only 3 percent higher than the 1995 level and, excluding China, production decreased by 2.1 percent.

Table 1. Fish production

Source: FAO

38. Total world aquaculture production increased by 45.8 percent since 1995, reaching 35.6 million tonnes in 2000, the largest share of the growth accounted for by China. Excluding Chinese production, world aquaculture production increased by 29.4 percent between 1995 and 2000 to 11 million tonnes.

39. The production gains for aquaculture have occurred in both inland and marine environments. Total world inland aquaculture production reached 21.4 million tonnes in 2000, an increase of 53.6 percent over the 1995 level of 14 million tonnes. World marine aquaculture production has expanded, increasing by 35.5 percent since 1995 from 10.4 to 14.2 million tonnes in 2000.

40. In 2000 China alone accounted for 69 percent of total aquaculture production (70.8 percent of inland production and 66.5 percent of marine production).

41. Total per caput supply of fish for food increased 7.3 percent since 1995 from 14.9 kg to 16 kg in 2000, but outside of China it remained practically unchanged from 13.3 kg in 1995 to 13.1 kg in 2000. In 2000, 96.7 million tonnes of fish were used for human consumption, of which 34 million tonnes were in China.

42. International trade in fish products has again increased to a new record of US$55.2 billion in 2000, which continues the underlying 4 percent annual growth in fisheries trade in the last decade. The increase was largely due to a rise in the volume traded, while prices of major food products decreased marginally compared to 1998 and those of fish-based feeds declined sharply.

43. Despite a slump in the late 1990s, exports of fish and fishery products from developing countries have increased 83 percent since 1990 to US $28.1 billion in 2000. Imports of fish and fishery products in developing countries experienced a similar increase of 94.2 percent in the same time period to US $10.1 billion.

44. In 2000, developed countries accounted for more than 80 percent of the value of total fishery product imports, which reached US $49.9 billion, as compared to exports of US $27.1 billion.

45. Major issues of international trade in fishery products during recent years include: the change in quality control measures in the main importing countries towards preventive HACCP-based strategies; the increasing application of the concept of risk assessment for fishery products; the concern of the general public regarding overexploitation of fishery resources; environmental concerns with regard to aquaculture; and new requirements regarding traceability and labelling.

D. PRODUCTION AND TRADE OF FOREST PRODUCTS

46. Global markets for forest products continued to recover in 2000, due to growth in the global economy. Overall, global roundwood production increased by 1.9 percent to 3.4 million m³. In the developing countries, which account for about 60 percent of total roundwood production, production increased by only 0.3 percent, but production in the developed countries increased by 4.3 percent.

47. Industrial roundwood production (which excludes the production of wood used for fuel) accounted for about 47 percent of total roundwood production in 2000 and increased by 3.2 percent to 1.6 million m³. In the developed countries, which account for the largest share of industrial roundwood production (about 73 percent), production rose by 4.5 percent to 1.2 million m³. Developing country production remained unchanged.

48. Global production of solid wood products (which includes sawnwood and wood based panels) also increased during 2000 by 1.7 percent to a level of 610 million m³ with an increase of 2.6 percent in the developed countries and a decline of 1.4 percent in the developing countries.

49. Overall, global output of pulp and paper products continued to show strong growth, with an increase of 3.2 percent to 494 million MT. As in the previous year, developing countries led the recovery with an increase in production of 5.7 percent in 2000 to just over 100 million MT. Developed country production increased by 2.6 percent to 393 million MT.

50. Global trade in forest products also continued to grow in 2000. Overall exports of forest products increased by around 6 percent to US $140 billion, 83 percent of which is accounted for by the developed countries.

Table 2. World Output of Main Forest Products

Table 3. Total export values of main forest products

Source: FAO

IV. EXTERNAL ASSISTANCE TO AGRICULTURE³

51. According to provisional data, the major bilateral and multilateral donors committed US$ 10 700 million to external assistance (concessional and non-concessional) for agricultural development in 1999, broadly defined⁴, as compared to US$12 605 million in 1998. When converted into constant 1995 prices, this corresponds to a decline of 17 percent, after increases of 4.6 and 14.5 percent in 1998 and 1997 respectively. Partial data available for the year 2000 suggest that the level of external assistance to agriculture would decline further.

52. Both bilateral and multilateral commitments declined in real terms in 1999, bilateral commitments by 12 percent and multilateral by 20 percent. Most of the decline in multilateral commitments was due to significantly lower lending by the World Bank and the International Bank for Reconstruction and Development (IBRD), while International Development Association (IDA) lending remained unchanged in real terms.

53. The fall in commitments in 1999 affected both developing countries and countries in transition, the sharpest drop (-39 percent in constant prices) being in Latin America and the Caribbean, followed by the transition countries (-32 percent) and developing Asia (-13 percent). Assistance to Africa dropped marginally (-2 percent) in constant prices and has remained relatively stable over the last four years. The largest portion of assistance (46 percent in 1999) is absorbed by Asia, followed by Africa (25 percent) and Latin America (16 percent). The share going to the transition countries has declined from close to 7 percent in 1996 to less than 4 percent in 1999.

54. At the sub-sectoral level, agriculture narrowly defined absorbs 57 percent of total external assistance to agriculture (of which 2 percent is accounted for by the fisheries and 2 percent by the forestry sector). Among the other areas included in the broader definition of agriculture, rural development and infrastructure receives the largest share of total assistance, and this category has seen its share increase from 13 percent in 1996 to 24 percent in 1999.

55. In spite of a continuing decline in its assistance to agriculture over the past few years, among the bilateral donors Japan remains by far the largest contributor to the sector with contributions of US $1 644 and 1 265 million respectively in 1999 and 2000. After an interval of some years, the USA re-emerged as the second largest donor (US $519 million) in 2000 followed by UK (US $511 million) and Germany (US $379 million). In particular the UK has increased its assistance to the sector sharply over the last few years from a level of only US $102 million in 1996.
 

Source: FAO

Source: FAO.

V. THE IMPLICATIONS OF THE FOURTH WTO MINISTERIAL CONFERENCE FOR AGRICULTURE, FISHERIES AND FORESTRY

56. New multilateral trade negotiations were launched at the Fourth World Trade Organization (WTO) Ministerial Conference held in Doha, Qatar from 9-14 November 2001. The negotiations, which are scheduled to conclude by 1 January 2005, will have important implications for agriculture, fisheries and forestry. In addition to the talks on agriculture and services that have been underway for more than two years,⁵ the new negotiations will cover a much broader agenda. The Doha Ministerial Declaration focussed considerable attention on the need to ensure that the development and food security needs of its most vulnerable members are not compromised in the drive towards a fair and market-oriented international trading system.

57. Elements of the negotiations that are particularly relevant to agriculture, fisheries and forestry are summarised in the following.

• For agricultural trade, in the Doha Ministerial Declaration the WTO Members agreed to undertake “comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view of phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.” They committed to providing special and differential treatment for developing countries to enable them to take account effectively of their development needs. Non-trade concerns such as food security and the need to protect the environment are to be taken into account. The Doha Declaration recognized the progress already achieved in the agriculture negotiations that began in March 2000 under Article 20 of the Agreement on Agriculture.
• In the first phase of these negotiations, discussed in depth in SOFA 2001, some 44 negotiating proposals were tabled, sponsored by a total of 125 WTO Members. A major positive development in the first phase was the broad participation of developing countries in the process. The second phase of the negotiations, which ran from March 2001 to March 2002, focussed on more in-depth work on all issues and options for policy reform as set out in Members' proposals during the first phase, with further elaboration as appropriate.
• The third phase of the negotiations, which will last until 31 March 2003, will involve reaching agreement on the “modalities” for further reforms which will spell out the specific procedures countries must follow in reforming their agricultural trade policies, for example, the formula and timing for tariff reduction. The WTO Members will then have until the date of the Fifth WTO Ministerial Conference (which must be held before the end of 2003) to prepare their draft “Schedules of Commitments”. The final phase of the negotiations will entail debate, verification and acceptance of the final commitments. The negotiations on agriculture will be concluded as part of the broader negotiations, currently scheduled to be finalised by 1 January 2005.

58. The discussions on market access have dealt primarily with tariff reductions and the administration of tariff-rate quotas (TRQs). On tariff cutting, two basic approaches have received the most attention thus far. The first would repeat the Uruguay Round formula, whereby a minimum cut per tariff line is required along with an overall average cut for all tariffs. In the Uruguay Round, the minimum cut was 15 percent (10 percent for developing countries) and the average cut was 36 percent (24 percent). No cuts were required of least developed countries.

59. The second approach, would combine a flat rate percentage cut for all tariffs with additional cuts on higher tariffs and would also include expanding tariff-quotas and providing special treatment for developing countries. This approach could be effective in reducing tariff-dispersion both between countries and between product categories, including a reduction in tariff escalation.

60. On the administration of TRQs, no consensus appears to be imminent. The basic concern is that the method by which a TRQ is allocated may act more as a barrier than an opportunity for market access. The challenge is how to ensure fair market access for all WTO members while protecting the interests of traditional suppliers.

61. Measures for special and differential treatment in the area of market access, are being considered for developing countries, new WTO Members and economies in transition. Some developing countries consider that their tariff commitments should be conditional on developed countries reducing trade-distorting domestic supports and export subsidies. Some small “single-commodity” exporters are calling for their trade preferences in developed country markets to be preserved and strengthened, while some countries find that certain preference schemes unfairly discriminate against other developing countries. Members generally agree that the erosion of preferences is a problem and that appropriate transition measures may be needed.

62. A wide range of topics have been debated in the area of domestic support to agriculture with little consensus emerging so far. Some countries have argued that high levels of domestic support – including measures currently exempt from disciplines – are trade-distorting and should be disciplined. Others argue that current exemptions should be continued and broadened to include measures related to a variety of “non-trade concerns” such as animal welfare or the viability of rural areas.

63. There appears to be some willingness to reconsider the perceived imbalance between developed and developing countries regarding their commitments on domestic support.⁶ Recent discussions have revolved around the possible need for a “Development Box” that would provide significant flexibility for developing countries to support their domestic production, particularly of staple food commodities.

64. Some countries are proposing the total elimination of export subsidies with an immediate 50 percent cut. Others are prepared to negotiate further progressive reductions but only if all forms of export subsidies are covered. Net food importing developing countries fear higher food prices if subsidies are eliminated abruptly. Others argue that their domestic producers are put at a disadvantage by competition with subsidised products in their home and export markets. Many countries would like to extend and improve the rules for preventing “circumvention” of commitments on export subsidies through the use or misuse of state trading enterprises, food aid and subsidised export credits.

65. The agriculture negotiations are addressing a number of other issues, including inter alia state trading, food security, food safety, rural development, geographical denominations, safeguards, environment, trade preferences and food aid. The special concerns of various groups of countries have also been identified. These groups include small islands, land-locked countries, countries in transition to market economies, new WTO Members, net-food importers, and least developed countries. Considerable debate revolves around the need to create special rules and exemptions for vulnerable groups of countries versus the need for a coherent set of international trading rules applying to all countries.

_______________________________

¹ This report is based on information available as of August 2002. Up-to-date information can be found in FAO’s Foodcrops and shortages, issued every two months.

² This report is based on information available as of July 2002. Up-to-date information on the cereal market can be found in FAO’s Food Outlook, issued every two months.

³ Based on FAO’s databank on commitments made by bilateral and multilateral donors, in current prices. The analysis is based on data obtained from the OECD, the Annual Report of the World Bank and data received from other organizations and regional development banks. The data excludes some donors and regional banks for which data is not available. It does not include food aid and technical cooperation provided in kind.

⁴ The narrow definition of agriculture includes: agriculture (crops and livestock), agricultural services and input provision, fisheries, forestry and development of land and water resources. The broader definition also includes (in declining order of importance): rural development and infrastructure; environmental protection; research, training and extension; regional and river development; and others such as agro-industries and manufacturing of agricultural inputs and machinery.

⁵ See Sofa 2001 for overview.

⁶ In the Agreement on Agriculture, countries agreed to cap and reduce production- and trade-distorting supports under the Aggregate Measurement of Support (AMS, also known as the Amber Box) and to cap distorting supports provided under production-limiting programes (Blue Box). Supports defined as non-trade distorting (Green Box) were not subject to limits. Certain supports provided by developing countries were also exempt from reduction commitments under special and differential treatment (SDT). Supports provided below the de minimis thresh-hold (5 percent of the value of production for developed countries; 10 percent for developing countries) were also exempt from reduction commitments. Since most developing countries provided far less than the de minimis level of support during the 1986-88 base period, this level constitutes their commitment under the Agreement and effectively caps their future ability to provide non-exempt domestic supports. Most developed countries, on the other hand, are bound by their AMS and Blue Box commitments which typically are far higher than the de minimis limits. In other words, the Uruguay Round “legalised” the developed countries’ high levels of distorting domestic supports while constraining developing countries to the much lower de minimis levels. While developing countries are free to provide supports under the exempt Green Box and SDT categories, few of them have the financial means to so.