Thanks are due to Jim Greenfield, Panos Konandreas, Alan Matthews and Jamie Morrison for useful comments on a previous draft. One of them remarked interestingly that this paper will take flak because it steps outside the conventional liberalization consensus, but so would many negotiating proposals on special and differential treatment.
Further reduction of the agricultural tariffs bound in the Uruguay Round will be the major focus of negotiations on market access in the ongoing WTO negotiations. Many proposals have been made on the approach to these tariff cuts, which range widely from deep cuts on all products without exception to moderate reductions on average with minimum cuts on all products, as in the Uruguay Round. The negotiations should intensify during the early part of 2003 once draft modalities are tabled towards the end of 2002. The main ideas for these generalized tariff reductions, i.e. without regard to special treatment, may be summarized as follows, although they are not necessarily mutually exclusive:
• the Uruguay Round-type formula to achieve a given average reduction (e.g. 36 percent) with minimum cuts for all commodities (e.g. 15 percent);
• deep cuts overall with minimal tariff dispersion across products, as would result from the use of a harmonization formula;
• harmonizing tariff rates across countries;
• capping all tariffs at some maximum level, separately or in conjunction with the above approach;
• zero-for-zero sectoral liberalization.
Some studies are already available on the resulting new tariff structure following the application of various tariff-cutting formulae (e.g. FAO 2001a, Wainio, Gibson and Whitley 2001). On the whole, these studies show that harmonization formulae, such as the so-called Swiss formula, result in low tariffs and minimal dispersion. The Uruguay Round formula also lowers tariffs on average, depending on what average reduction is aimed at, but could result in many tariff peaks. As this formula will use current bound rates as the starting point, the current imbalances in tariff bindings across countries and commodities will continue, an outcome that has been criticised for various reasons.
Special and differential treatment (SDT) for developing countries will also be an integral part of this process. In the Uruguay Round, SDT took the form of lower reduction rate (e.g. two thirds of the general rate) and a longer implementation period (e.g. ten instead of six years). A similar approach may be taken this time also. While this is likely to be the approach for generalized tariff cuts, several proposals have been made for presumably additional special treatment for a selected list of products that contribute most to food security, livelihoods and agricultural development in developing countries. One specific idea was for developing countries to have the option to set bound tariffs at “appropriate” levels for these selected commodities. This idea is most clearly expressed in the proposals on Food Security and Development Boxes, but is also found in other proposals. None of the proposals, however, is explicit about what level of the bound tariff is “appropriate”.
The purpose of this paper is to illustrate an approach to quantify these “appropriate” levels of tariffs. The next section provides the background, covering a summary of the negotiating proposals on special treatment, justifications made and some issues related to the proposal. Section 3 describes the analytical approach and methodology used to quantify appropriate tariffs, for which fluctuations in world market prices are used as the main basis. Section 4 presents the results and Section 5 concludes.