A number policy developments during the past few years have been designed to provide assistance to farmers and/or to the agricultural sector in general. As such they are not commodity specific policies and, therefore, could not be included in the previous chapters, but are likely to have a significant indirect impact on specific commodities. These policies are normally related to income support and/or disaster relief, changes in input subsidy and credit programmes, and on-going structural reforms. International trade agreements are also likely to be of a general nature and affect several commodities.
The Government of Australia, in its 2000/2001 budget provided about A$ 309 million (US$ 182 million) under the Agriculture-Advancing Australia (AAA) programme, first launched in 1997. This programme is targeted at assisting the rural areas to be more competitive, sustainable and profitable.
In Canada, from 1998 onward, additional, non crop-specific support was provided to farmers who, for reasons beyond their control (including price instability, competition with subsidised production in other countries, and adverse weather conditions) experienced sudden and severe reduction in their farm income. The Government, in November 1999, extended the coverage of its disaster payments by allocating C$179 million (US$ 114 million) to farmers who had negative gross margins in their farm operations over the previous three years (used as base). The new funding was in addition to that allocated under the Agricultural Income Disaster Assistance Programme (AIDA), a two-year national programme open to farmers whose gross margins dropped below 70 percent of the base period. The disaster programme was boosted further by the provision of an additional C$1 billion (US$ 670 million) in January 2000 to assist farmers in managing market and production risks. Furthermore, in July 2000, a 3-year programme on farm income safety nets, valued at C$5.5 billion (US$ 3.7 billion) was finalised, with funding provided on a 60:40 percentage basis between the federal and provincial governments, respectively. The programme is intended to offset income losses because of lower prices and bad weather, and is designed so that its potential trade distortion effects are minimal.
The Government of Poland reduced its budgetary outlay to subsidise lime fertiliser production by one-third to US$19 million in 2000, while the excise and value added taxes for diesel fuel were increased. In the meantime, a new value-added tax (VAT) on agricultural inputs was approved by the Polish Parliament. The VAT of 3 percent will apply to all agricultural producers with annual receipts of 20 000 zloty (US$ 4,255) or more.
The Russia Federation was able to meet its commitments for all farm incentive programmes, although the budgetary outlay for agriculture was reduced by 32 percent in 2000. An amount of 1.05 billion roubles (US$ 36 million) was provided for its machinery leasing fund; 100 million roubles (US$ 3.5 million) for its seed and crop protection fund; 500 million roubles (US$ 18 million) for soft credits to agriculture and 341 million roubles (US$ 12 million) for a seasonal spare parts fund. The Government is planning to write off about 70 billion roubles (US$ 252 million) of farm debt in 2001 and extend for ten years the repayment period for an additional 50 billion roubles (US$ 180 million) of debt owed by producers.
In 2000, the Government of Ukraine allocated about 9 billion hryvnas (US$ 167 million) to support its agricultural sector. Of the allocated amount, about 1.4 billion hryvnas (US$ 26 million) was provided as loans to farmers, of which over one-half that amount was given directly to farmers to make up for losses as a result of drought.
During the period under review, some developed countries intensified the use of emergency and disaster relief programmes. In the United States, in addition to regular programme support under the FAIR Act, supplemental and non-crop-specific assistance was granted to farmers in 1999 and 2000, compatible and complementary to existing safety net programmes. The principle objective of these payments was to compensate farmers for losses incurred due to unfavourable market conditions and/or severe climatic conditions faced in those years.35 In June 2000, a bill was approved in the US Congress to provide emergency assistance to producers following a prolonged period of depressed prices, and to restructure crop insurance programmes. Under this bill, a total amount of US$ 15 billion was allocated, of which about US$ 7 billion was for emergency relief payments and the rest for crop insurance programmes, expected to run for five years.
In 1999, the EC issued new regulations on the operations of environment and rural development schemes, which compelled participating farmers to adhere to "good farming practices." Agri-environmental projects, which, for instance, limit the use of fertilisers or plant protection products, are eligible to a compensatory payment of up to euro 600 (US$ 580) per hectare.
In Bulgaria, in late 2000, the Government proposed that foreign ownership of any proportion of land would be halted for 10 years after the country becomes a full-fledged EC member. Currently, foreign land ownership is permitted (partially) through joint ventures with locally registered companies. In December 2000, the Government of Kyrgystan removed the ban on private ownership of land, which had been in place since 1998. Under this new directive, land owned by the private sector must be used only for agricultural purposes and is limited to a maximum of 50 hectares per person. Under this measure, non-nationals are allowed leasehold for up to 50 years.
In early 2001, the Polish Government announced that it would offer pension payments to farmers of pre-retirement age who give up farming and pass on their holdings to a successor. This new regulation, which is similar to that already in existence in the EC member States, is aimed at attracting the younger members of the population into agriculture. The pension will be paid monthly for five years to ex-farmers between the ages of 60-65 years for men and 55-60 years for women. The amount paid per farmer will be equivalent to 150 percent of the lowest pension paid in the country. However, the Government must fund the pension scheme by itself until it becomes a member of the EC, after which it will be eligible for 75 percent co-financing from the EC budget.
In early 2000, the Government of El Salvador introduced a value-added tax (VAT) on food products. Previously, food producers were taxed at a rate of 13 percent for purchases of inputs but consumers had been exempted from the VAT. This VAT is expected to increase the cost of food to the average Salvadorian household by about US$38 per annum and will augment the Governments' tax receipts by about US$ 30 million annually. In July 2000, the Australian Government introduced a goods and service tax (GST) of 10 percent on the sale price of farm products as well as on sales of farm assets. All farmers with earnings of AU$ 50 000 (US$ 30 000) for a 12 month period were required to register for the GST payment. Grain products exempted from the GST include those in which a farmer has added value to and/or exported by farmers themselves, provided the operation is carried out within two months of issuing an invoice or receiving payments.
The URAA lead many countries to enact new and, in some cases, strengthened existing bilateral and multilateral trading agreements. In addition, countries seeking to join the WTO have been making bilateral agreements with their principal trading partners. Of particular importance is the agreement between China and the United States, signed in November 1999, which established many of the agricultural trade commitments that are expected to be in the final protocol agreement for China's accession to the WTO. Similar agreements were subsequently reached with the EC, Australia and other WTO members, to complete China's accession requirements. Box V-1 summaries the China-US agreement for the commodities covered in this report.
In Eastern and Southern Africa, the 22 nation Common Market for Eastern and Southern Africa (COMESA) finalised modalities for the creation of Africa's largest free trade association. (Box V-2 presents the background and summary of this agreement).
In October 2000, MERCOSUR member States initiated discussions to develop a framework for Chile's entry into the organization. Chile is expected to become a full-fledged member by 2002. This meeting was followed by discussions between members of both MERCOSUR and the Andean Pact group for the creation of a regional free trade area. The deadline for the creation of the free trade agreement was set for January 2002. Representatives of MERCOSUR and the Republic of South Africa initiated discussions for the formation of a free trade area in late 2000. During the discussions, a proposal was tabled by South Africa to broaden the trade area to include the other member States of the Southern African Customs Union (Botswana, Lesotho, Namibia and Swaziland).
Also, as part of a basic agreement on economic integration between El Salvador, Guatemala and Nicaragua, the Government of El Salvador in May 2000 introduced a programme of reforms which involve setting up food import duties of between 15-40 percent, poverty reduction and environmentally friendly programmes.
In late 2000, the EC authorised the allocation of 520 million Euros (US$ 520 million) from its budget for rural development programmes (SAPARD) to the ten Central and East European (CEE) countries.35 In October 2000, the Czech Republic, Slovakia and Hungary signed a pact to further liberalise mutual trade in agricultural products beginning January 2001. Elsewhere, Russia, Belarus, Kazakhstan, Kyrgystan and Tajikistan formally signed a treaty establishing a new "Eurasian Economic Community" based on a previous Customs Union between the countries. The main objective of this agreement is to harmonise their tax, custom laws and administrative structures.
In May 2000, the Russian Federation and the United States signed an agreement whereby Russia would export ammonium nitrate fertilisers to the United States at a minimum price of US$ 85 per tonne. This agreement was aimed at settling a previous anti-dumping dispute in which the United States was imposing an anti-dumping margin in the form of cash deposits from Russian exporters. With this agreement, the US waived the anti-dumping levy and Russia committed itself to export up to 690 000 tonnes of fertiliser in annual instalments between 2000 and 2004. Furthermore, in late 2000, the United States restored its credit guarantee programme to Russia that had been cancelled in 1998. An initial guarantee of US$ 40 million was provided for the purchase of US grains or other farm products.
35 Funds were made available for a variety of purposes but classifying the support provided by recipients and/or specific crops is problematic.
