| Module 7 Special and Differential TreatmentI. Mamaty Commodities and Trade Division |
The objective of this Module is to summarize various SDT provisions in the Agriculture Agreement and other relevant agreements in order to assist developing countries in identifying the SDT provisions that are useful for them and which should be taken into account in the next round of negotiations.
7.1 Introduction
7.2 The SDT provisions in the Uruguay Round and their significance
7.3 Some considerations for the next round of negotiations
Focus is on the value of existing and potential SDT measures
The Uruguay Round Agreement sets as one of the overall goals the integration of developing countries into the global trading system. It recognizes constraints faced by many developing countries in taking full advantage of the emerging trading opportunities due to structural problems, low level of industrialization, limited access to advanced technologies and non-availability of adequate infrastructure. The provision of special and differential treatment (SDT) is a response to this recognition. The SDT is also recognized as an integral part of the Agreement.
Many Agreements, Understandings and Decisions of the Uruguay Round have SDT provisions. Broadly, these are provided for in the following five forms:
For the next round of multilateral trade negotiations, developing countries need to evaluate their experience with the SDT provisions, identifying those that have been found to be useful and those where improvements can be made, at the same time separating others that were not useful or are unlikely to be so.
In this context, this module reviews the following aspects:
Annex 1 summarizes SDT provisions in the AoA, under the five categories listed above. It also includes some important SDTs which are not mentioned in the AoA but were contained in a document called Modalities which provided guidelines to the UR negotiators for preparing specific commitments. Annex 1 has three columns. The first describes the provisions that apply to developing countries. In order to see the difference, the various provisions here should be compared with those for the developed countries (column 3). The least-developed countries have specific provisions (column 2) in addition to provisions for the developing countries at large (column 1) which apply to them as well. In what follows, the SDT provisions are introduced and some comments made on their practical significance.
Value of general commitments depends on follow-up measures
Provisions that recognize special interests generally. Three SDT provisions in the AoA are notable1: i) a general recognition that SDT is an integral part of the agreement; ii) that developed country members will provide greater market access for agricultural products of particular interest to developing countries; and iii) a consideration of the possible negative effects of the implementation of the reform programme, in the form of taking actions as outlined in the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries (the Decision).
The practical significance of these measures can be evaluated as follows. The first of these simply states that SDT is an integral component of the trade negotiations. It has little practical significance for trade on its own - its utility has to be judged on the basis of specific provisions that follow from this. As for the second, its significance depends upon the extent to which the Uruguay Round opened up developed country markets to developing country products. What is known from the Schedules is that tariffs on tropical products were reduced on average by 43 percent, compared with 37 percent for all agricultural products2. Besides tropical products, several other commodities are of export interest to the developing countries, e.g. sugar, fruit and vegetables, rice as well as other cereals, livestock products and so. For these, the reduction rates in several major markets were relatively low. Also, the bound tariffs on these products turned out to be relatively high (see Module II.2 on "Preparing for Negotiating Further Reductions of the Bound Tariffs''). Even in the case of tropical products, the practical significance of the 43 percent reduction may not be that significant as the bulk of imports were already duty free or subject to very low tariffs. As regards the third SDT above, the Decision has some elements of SDT that are considered to be useful for the two groups of countries mentioned there. However, it is being increasingly realized that its trigger mechanism, i.e. when and how to implement, is not as obvious in the practical sense (see Module II.9, "Decision on Measures Concerning The Possible Negative Effects on LDCs and NFIDCs"). Moreover, it is yet to be implemented in the real sense of the term.
The longer implementation period was little used ...
Longer implementation period. The developing countries are given a longer period (10 years, 1995-2004) to implement various reduction provisions, compared to six years for the developed countries. This SDT was potentially of significance as it gives flexibility to phase-in the reduction commitments gradually. However, in practice, this did not prove to be as useful for a majority of the developing countries because of the way they made their commitments. For example, for a majority of them there was very little to reduce over the implementation period (e.g. domestic support levels and export subsidies - see below). This provision was also not relevant for least-developed countries as they were not required to reduce anything.
... while exemptions from reduction obligations have been significant
Lower reduction obligations. The first measure here was the opportunity for developing countries to offer ceiling bindings rather than follow the tariffication approach to eliminating non-tariff barriers. The downside of this approach was the inability to make use of the Special Safeguard Clause for products covered by ceiling bindings. Nevertheless, most developing countries opted for ceiling bindings, and at quite high levels, thus giving them more flexibility to determine future tariff levels following the next round (see Module II.2 - Preparing for negotiating future reductions in the bound tariffs).
SDT measures also took the form of lower reduction rates to be applied to fixed base period values of trade-distorting domestic supports (covered by Total Aggregate Measurement of Support or Total AMS), tariffs and export subsidies - which was two-thirds for the developing countries of the levels required for the developed countries in each of these three areas. No reductions were required for LDCs. The reduction rates are summarized in Table 1. The potential value of this provision is obviously a more gradual phasing-in of reductions. However, as said above, in practice, this provision was not as useful for a majority of the developing countries. Very few of them had positive Total AMS levels that had to be reduced. The same was the case with export subsidies. In the case of tariffs, while all countries had to bind these, a majority of these countries did not have to reduce tariffs as they chose the option of ceiling offers (see below). Thus, although potentially a useful SDT, very few developing countries used the provision. The least-developed countries were not required to reduce anything.
| Reform areas | Developed | Developing | Least-developed |
| Market access | |||
| simple average tariff | 36 | 24 | 0 |
| minimum reduction per tariff line | 15 | 10 | 0 |
| Domestic support | |||
| Total Aggregate Measurement of Support 3 (AMS) | 20 | 13.3 | 0 |
| Export subsidy | |||
| value of expenditure on subsidies | 36 | 24 | 0 |
| quantity of subsidized exports | 21 | 14 | 0 |
On domestic support measures, there are additional SDT provisions besides the lower reduction rate for Total AMS. One is the de minimis threshold, which exempted from inclusion in the AMS calculations those trade-distorting support measures that accounted for 10 percent or less of the total value of production, as against a threshold of 5 percent for developed countries. During 1995 and 1996, some 26 percent of the developing countries mentioned having used this provision in their notifications to the WTO. For a majority of others, however, the provision was not useful because they claimed not to have trade-distorting support measures.
Another SDT for the developing countries is the exemption from reduction commitments of two types of support measures that are sometimes referred to as rural development measures: investment subsidies which are generally available to agriculture and agricultural input subsidies generally available to low-income or resource-poor producers4. These are important exemptions - 70 percent of the developing country notifications to the WTO for 1995 and 1996 show recourse to this provision.
On border protection, the option for the developing countries and LDCs to offer ceiling bindings (where these were not bound previously) was useful and most of these countries used this option rather than apply the tariffication formulae. This was an important concession because they did not have to go through the complicated procedure of computing tariff equivalents. Where they offered relatively high bound rates, these countries also retained an opportunity to review their tariffs more carefully as their level of understanding of the consequences of the tariff bindings increased, which is an advantage as they may have to set new, lower bound rates in the next round. An additional advantage of this option was that minimum import access commitments were not required.
As regards export competition, the main SDT, in addition to lower reduction rates, was the exemption from reductions of subsidies given to marketing and internal transport and freight costs on the export of agricultural products. This provision is valid only during the implementation period. As most developing countries suffer from high costs of marketing and transport, this SDT could prove to be useful. Some 13 percent of export subsidy notifications of these countries mentioned using this provision in 1995 and 1996.
Also on export subsidies, Article 12, Disciplines on Export Prohibitions and Restrictions, exempts developing countries, other than a net-exporter of a specific foodstuff, from provisions contained therein on introducing export prohibitions and restrictions. However, no developing country has notified to the WTO having used this provision.
Fewer notification obligations. In a way, fewer notification obligations (i.e., the number as well as the frequency of notifications) is a form of SDT as the preparation of the notifications involves considerable resources. The difficulty faced here by the developing countries is already reflected in considerable delays in the submission of these notifications to the WTO. Fewer notifications also means that these countries would need to prepare fewer answers to questions raised by trading partners on these notifications.
Technical assistance. While there was no general commitment to providing technical assistance to help with the implementation of the Agricultural Agreement, the Decision on Measures Concerning the Possible Negative Effects on LDCs and NFIDCs provides for access to concessional financing facilities in the event of difficulties arising in financing food imports, commitments on food aid availability, as well as requiring full consideration to be given to requests for technical and financial assistance to improve agricultural productivity and infrastructure in the least-developed countries and net food-importing countries covered by this Decision. The experience to date in implementing the Decision is reviewed in Module II.9.
Other Agreements also contain relevant SDT measures
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). The main SDT provisions here address: a longer time frame for developing countries to implement the provisions related to measures affecting imports (until 2000 for LDCs, and until 1997 for other developing countries if justified based on lack of technical expertise and resources) (Article 14); consideration for developing countries to be given a longer time period to comply with new SPS measures introduced in their export markets where there is scope for their phased introduction; and technical assistance to developing countries to comply with SPS requirements. Of these, the provision of technical and financial assistance has attracted a significant amount of attention, as the developing countries feel that they would need considerable assistance to upgrade their standards. As for other provisions, these are considered to be difficult to translate them into concrete action.
Agreement on Technical Barriers to Trade (TBT). The main SDT provisions are: due recognition of developing country needs; a longer time frame for the implementation of the agreement (Articles 12.4; 12.8); and technical assistance (Articles 10.6; 11; 12.7). These provisions are similar to the above measures in the SPS Agreement. As above, technical and financial assistance holds some promise as it is difficult to translate other provisions into concrete action.
Agreement on Subsidies and Countervailing Measures. Article 13 of the AoA, Due Restraint, provides for certain derogations from the rules of the Agreement on Subsidies and Countervailing Measures for agricultural products, but only for the implementation period of the AoA. Thus, as and when this derogation expires5, agricultural trade would also be subject to these general rules. This agreement has one section (Part IV) devoted to developing countries. As a SDT, some developing countries. As a SDT, some developing countries6 are exempted from restrictions on export subsidies (Article 27 (a)) while others are given an eight-year transition period to phase out their export subsidies (Article 27.3). In general, these SDT provisions allow for a longer time frame and fewer obligations.
Agreement on Safeguards. Unlike with the case of Agreement on Subsidies and Countervailing Measures, Article 13 of AoA does not mention a derogation from the rules of the Agreement on Safeguards - which means that these rules should apply to agricultural products as well7 . The two main SDT provisions in the Safeguards Agreement are that imports originating from developing countries are exempt from safeguard measures under certain conditions8 (Article 9.1) and that these countries could extend the period for the application of safeguard and countervailing measures (Article 9.2).
The "general recognition of interests". These are found almost everywhere in the Uruguay Round Agreements, Decisions and Understandings, at times followed by some concrete, practical measures (e.g. lower reduction obligations) but often none. One question that may be asked at the outset is what is the practical value of these statements? How can these be improved, e.g. with concrete measures that can be implemented and their effectiveness monitored and assessed?
Each country should assess where it stands on each of these options
Monitoring the effectiveness of the SDT provisions. This is related to the above but needs some emphasis. The issue is where the provisions are of a "best endeavour" nature, as many of these are, should their implementation be monitored? The implementation of some of the SDT provisions (e.g. those in the Decision) lies within the competence of organizations and agencies other than WTO, as well as of individual developed countries. If the SDT provisions are to be effective as intended, effective indicators are required to measure progress, not only to review their implementation but also their impact.
Lower "reduction rate" as an SDT. In the Uruguay Round, the reduction rate for the developing countries was two-thirds of the levels required for the developed countries (and none for the LDCs). This provision was not widely used in the Uruguay Round, but could be of value in the next round, e.g. in reducing the currently bound tariff rates. Although a small point, it is not clear why "two-thirds" was chosen for the Uruguay Round - this could not have reflected the gap between the two groups of countries in terms of indicators such as the level of development or per caput income or the global trader status. As this question may come up again in the next round, some analysis could be useful, especially on the criteria that would reflect the relative situation of the developing (and least-developed) countries in world trade and development.
SDT on domestic support measures. The main criterion for reviewing SDT provisions here should be policy "flexibility" for agricultural development, a legitimate food security concern for the developing countries. This requires a review of all WTO-compatible options in the light of a country's own commitments (see Module II.1 for details). Briefly, the Green Box measures are available to all WTO Members - there are just a few SDT which may be scrutinized if Green Box rules are tightened up. The two development measures (investment and input subsidies) are important exemptions for the developing countries. The situation with trade-distorting measures (the AMS) is not as clear. Here, the main points for review are: whether the 10 percent de minimis threshold for them is adequate or not, given the zero AMS commitments of many of them; if not, what higher level would be needed?; Should they also negotiate for "credits" for negative AMS so that the overall limits become less binding?; if this is not feasible, should they consider negotiating for new exemptions, e.g. on food security grounds, which is a valid non-trade concern for the developing countries?
SDT in border protection. It is very probable that the currently bound tariffs will be reduced further through negotiations in the next round. It is also very likely that the developing countries may obtain an SDT, perhaps something similar to the two-third level established in the Uruguay Round. As the current levels of the bound tariffs differ across countries, individual countries need to review their situation (see Module II.2, "Preparing for Negotiating Further Reductions of the Bound Tariffs'') and determine what type of the SDT provision suits them.
SDT for safeguards against import surges or depressed import prices. This is very important for most developing countries as the agricultural sector is generally in a weak position to withstand these shocks, while, at the same time, the sector is critical for the livelihood of the majority of population. Where bound tariffs are not high relative to the fluctuations of world market prices of agricultural commodities, import duties fail to counter such shocks. Such shocks are not uncommon in agriculture - during 1998-99, within a period of five months, the world price of sugar fell from 12 to 8 cents per pound, which would require a tariff of 50 percent to stabilize the domestic price9 if used to the limit i.e. zero at the higher world price and 50 percent at the lower price. Although there are general safeguards accessible to all, notably anti-dumping and countervailing duties, in practical terms it would seem very difficult for a majority of developing countries to resort to these measures as these are very demanding in terms of analytical, institutional and legal resources. For them, a simpler alternative, as a SDT, may be something like the AoA's Special Safeguard Provision (the SSG), which is triggered automatically as imports surge or import prices collapse, beyond some agreed trigger levels. In case it is not feasible to negotiate such a safeguard for all commodities, an alternative could be to limit this to fewer commodities, e.g. those that are most sensitive from a food security point of view.
SDT in access to import markets of the developed countries. The preamble to the AoA has called upon the developed countries to provide greater market access for agricultural products of particular interest to developing countries. This was a recognition of general interest and not a binding measure, and the post-Uruguay Round tariff rates on several of these products are high. It is also technically difficult to consider lower tariffs for the developing countries as it would contradict one of the fundamental principles of the WTO rules, i.e. the MFN rule10 . Some forms of SDT may however be considered. One could take the form of sharp, unilateral tariff reductions by developed countries on agricultural products of export interest for the developing countries. The other could be in the form of some SDT measures that would lead to greater access to the Tariff Rate Quotas, but again these are supposed to be provided on a MFN basis.
SDT in export competition. As most developing countries did not report export subsidies for the base period, the SDT in the form of a lower reduction rate was not widely used. There are, however, three other provisions that deserve a review for the next round. First, the exemption given to subsidies on marketing and transport costs has been used and in general seems promising for many; but the provision is valid only through the implementation period of the Uruguay Round. Second, it may be important to clarify whether they can take recourse to the exemptions on certain forms of export assistance schemes allowed for them under the Subsidies Agreement11 . Third, some net food-importing developing countries may find it useful to review their situation as regards the provision on "Disciplines on Export Prohibitions and Restrictions". The issue is whether this exemption should also apply to countries that are net food-importers on the whole, but significant exporters of one or more basic foodstuffs (e.g. Pakistan with rice; Sudan with sorghum) because of substitution possibilities among different types of food.
SDT for new acceding developing country Members. It should be noted that the negotiating modalities of the Uruguay Round do not apply to newly acceding countries, which must negotiate specific commitments with members, under Article XII of the WTO Agreement. In practice, existing SDTs are not automatically applicable to newly acceding developing countries. For instance, the required rates of reduction and the implementation period may not be the same as for the Uruguay Round Agreements signatories.
Technical and financial assistance provisions. Unlike several other agreements (i.e. SPS and TBT), the AoA does not have specific provisions for technical and financial assistance to developing countries, with one exception of some measures contained in the Decision as mentioned in Section 7.2.1. Recent experience has shown that many developing countries face difficulties in complying with their commitments under the AoA, one notable area being the preparation of notification to the WTO. Some form of a technical assistance provision may be needed in this area.
Finally, the definition of a developing country. This may turn out to be an important issue in the next round as the definition of a developing country for the purpose of the SDT is not clearly defined in the WTO (unlike the case of the LDCs, where the UN definition is widely followed). In the WTO system, the practice has been "self-designation" - i.e., it is up to a country to designate whether it chooses to be classified as a developing country (subject to agreements by other Members). The problem is that this seems to be specific to particular agreements. For example, while "net food-import position" is used as a criterion for the Decision, "global trader status" is used in the Subsidies Agreement for the purpose of SDT. In recent debates in various international fora, some experts have even advocated "food insecurity position" as a criterion for the Agriculture Agreement. A potential problem here is that, as the various Agreements are inter-related, there is a risk that having several criteria may result into conflicting interpretation of these Agreements.
FAO. 1998a. The Implications of the Uruguay Round Agreement on Agriculture for Developing Countries: A Training Manual, by S. Healy, R. Pearce, M. Stockbridge. Training Materials for Agricultural Planning, No. 41. Rome.
FAO. 1998b. Preparing for Multilateral Trade Negotiations on Agriculture Articulation of Issues and Positions, by Ramesh Sharma, Jim Greenfield & Panos Konandreas, ESCP Division.
Low, Patrick. 1997. Safeguards, antidumping, countervailing duties, and observations on administrative and technical barriers to trade. In Implementing the Uruguay Round Agreement in Latin America: The Case of Agriculture. FAO/World Bank Workshop, Santiago, Chile.
WTO. 1999a. Guide to the Uruguay Round Agreements, Kluwer Law International & WTO Secretariat.
WTO. 1999b. Third Progress report on the follow-up to the high-level meeting, Sub-Committee on Least-Developed Countries, 24 February, WT/COMTD/LDC/W/13.
WTO. 1998. Compliance with notification obligations, Committee on Agriculture: 19-20 March, Room document.
WTO. 1997a. Committee on Agriculture: General Council Overview of WTO Activities G/L/211, 24 November, Committee on Agriculture. Geneva.
WTO. 1997b. An Integrated Framework for Trade-Related Technical Assistance, including for Human and Institutional capacity Building, to Support Least-Developed Countries in Their Trade and Trade-Related Activities, Revision, WT/LDC/HL/1/Rev.1, 23 October. Geneva.
WTO. 1996. Technical cooperation handbook on notification requirements, Agreement on agriculture, WT/TC/NOTIF/AG/1, September. Geneva.
WTO. 1995. Notifications requirements and formats, G/AG/2, 30 June. Geneva.
WTO. 1994a. A description of the provisions concerning least-developed countries in the Uruguay Round agreements, legal instruments and ministerial decisions, COM.TD/LLDC/W/54, November. Geneva.
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WTO. 1993. Modalities for the establishment of specific binding commitments under the reform programme, December. Geneva.
| Applicable to developing countries as well as least-developed countries | Additional SDT provisions applicable to least-developed countries only | Applicable to Developed Countries only | |
| 1. Recognition of Interests and Needs | Improve Market access in Developed countries for products of interest to developing countries. (Preamble, para.5; and Modalities for the Establishment of specific Binding Commitments, para.17) | ||
| Recognition of SDT as an integral element of the negotiations (Preamble, Paragraph 6 , Paragraph, 15.1, Modalities for the Establishment of Specific Binding Commitments, para.13) | |||
| 2.Implementation period | Implementation of reduction commitments over a period of up to 10 years (Article 15.2). | No reduction commitments (Article 15.2; Modalities for the Establishment of Specific Binding Commitments Para 16). | Implementation of reduction commitments over a period of up to 6 years. |
| 3. Fewer obligations 3.1 Lower rate of reduction |
Two third of developed countries in market access, domestic support and export subsidy. | No reduction commitment in market access, domestic support and export subsidy. | |
| 3.2. Market Access | No reduction commitment (Article 15.2; Modalities for the Establishment of Specific Binding Commitments Para 16). | ||
| Possibility of setting up ceiling bindings for products subject to unbound ordinary customs duties (Modalities for the Establishment of Specific Binding Commitments, Para. 14). | Tariffication through tariff equivalent only. | ||
| 24% reduction on simple average basis , with a minimum of 10% reduction per tariff line (Article 15.1; Modalities for the Establishment of Specific Binding Commitments, Para. 15). | Same percentages are respectively 36 and 15. | ||
| 3. 3 Domestic Support | No reduction commitment (Article 15.2; Modalities for the Establishment of Specific Binding Commitments Para 16). | ||
| Investment subsidies and agricultural input subsidies to encourage agricultural and rural development are exempted. (most useful) (Article 6.2). | |||
| De minimis of 10% for total AMS (Article 6.4(b); Modalities for the Establishment of Specific Binding Commitments Para. 19). | de minimis of 5% for Total AMS. | ||
| Possible use of subsidized stocks of products for food. security purposes. (Annex 2 para. 3, footnote 5). | |||
| Provision of foodstuffs at subsidized prices to meet food needs of poor population (Annex 2, para. 4, footnotes 5&6) | |||
| 13.3% reduction of total AMS by the year 2004 compared to the base Total AMS of the years 86-88. (Para.15). | Reduction of 20% in developed countries by the year 2000. | ||
| 3.4. Export Subsidy | No reduction commitment (Article 15.2; Modalities for the Establishment of Specific Binding Commitments Para 16) | ||
| No reduction in export subsidies for costs of marketing exports of agricultural products and internal transport and freight charges (Article 9.4; Para20). | Reduction for the same export subsidies categories. | ||
| Use of para.2 of Article XI of GATT 1994 without restriction (Article 12.2). | Restrictions on the use of Article XI of GATT 1994 on export prohibitions or restrictions temporarily. | ||
| 14% reduction of subsidies exports quantities and 24% reduction of the value (Para. 18, Article 9.2(b) (iv)). | Same percentages are respectively 21 and 36 | ||
| 4. Notification obligations | Possibility to postpone the report of tables DS:1 to DS:3.under request (Notification Requirements And Formats (G/AG/2), Current total aggregate measurement of support (p11): paragraph ii). | Possibility to postpone the report of tables DS:1 to DS:3.under request (Notification Requirements And Formats (G/AG/2), Current total aggregate measurement of support (p11): paragraph ii). | Submission of the quoted Tables every year. |
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3 Total AMS = (product-specific AMS exceeding de minimis + non-product specific AMS exceeding de minimis)
4 A third measure in this category is support to producers to encourage diversification from growing illicit narcotic crops.
5 The discussion on Article 13 will take place during the future negotiations process. Its status is not clear in the interim, i.e. during the negotiations (between 2004 and beginning of a new implementation period).
6 As specified in Annex VII of the SCM agreement, it includes LDCs and 20 listed developing countries when their GNP per capita reaches US$1 000 per annum.
8 If (a) those imports' share of the member's total imports of the product concerned does not exceed 3 percent; and (b) total imports from those developing country members having less than a 3 percent individual import share do not account collectively for more than 9 percent of the total imports of that product.
9 Assuming the simple expression, Pd = Pw * (1+t), where Pd and Pw are domestic and world prices and t is the tariff rate. If Pd is to be maintained at 12 cents when Pw is 8 cents, t would have to be 50 percent.
10 The concern here is with the MFN tariffs. There are some preferential access arrangements for developing countries, e.g. the GSP but this is non-contractual.
11 The Subsidies Agreement seems to permit a group of export subsidies that are not explicitly referred to by the AoA, notably various incentive schemes aimed at export-oriented agricultural enterprises. However, the position is not as clear. While Article 8 of the AoA clearly states that subsidies not specified in a country's Schedule are not permitted and its Article 10(1) restricts the use of all forms of subsidies other than those listed in Article 9, it does not say whether everything else is prohibited. On the other hand, various export incentive schemes listed in Annex 1 of the Subsidies Agreement seem to be allowed. Thus, the question is whether it is correct or not in the first place to refer to Subsidies Agreement when it comes to these forms of export assistance to agricultural products that are not explicitly mentioned by the AoA?
