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FAO SYMPOSIUM
ON
AGRICULTURE, TRADE AND FOOD SECURITY:
ISSUES AND OPTIONS IN THE FORTHCOMING WTO NEGOTIATIONS FROM THE PERSPECTIVE OF DEVELOPING COUNTRIES
Geneva, 23-24 September 1999
SESSION II b:
Experience with the implementation of the Uruguay Round Agreement on Agriculture - developing country experiences (based on case studies)
Paper No. 3
Synthesis of country case studies
Commodity Policy and Projections
Service
Commodities and Trade Division
1. This paper presents the main findings of 16 country case studies conducted by FAO to document the experiences of developing countries with the implementation of the Agreement on Agriculture (AoA) and other Uruguay Round (UR) agreements affecting agriculture.1 Summaries of the individual case studies are provided in the Annex to this paper. These summaries cover: i) country commitments and experiences with implementing the main provisions of the AoA; ii) effects of the AoA on trade; and iii) some cross-cutting issues and concerns for the future.
2. Under the AoA, 12 developing countries have reduction commitments on domestic support policies as measured by the Aggregate Measurement of Support (AMS). Among the least-developed countries (LDCs) and net food-importing developing countries (NFIDCs) studied, only Morocco had such commitments.2 Morocco's current AMS outlays were well within the permitted limits, as is the case for all other WTO Members having reduction commitments. The rest, with no AMS commitments, indicated their support measures fell under other categories, notably the Green Box, Special and Differential Treatment (SDT) measures and by default the de minimis exemption.
3. The case studies revealed that none of the countries had to reformulate or re-instrument their domestic policies in order to comply with the general provisions of, or with their specific commitments under, the AoA. This does not imply that the sample countries made no policy adjustments in the post-UR period. For most of them, the reform process under the AoA was a continuation of earlier reforms they had adopted under structural adjustment programmes (SAPs), regional agreements, or unilateral liberalisation programmes. The AoA basically reinforced and consolidated their earlier reforms.3
4. Although only a few of the sample countries explicitly notified support under the SDT category, this provision was considered very useful. Other practical realities have constrained them from fully utilising the provisions, e.g. budgetary limitations and SAP conditionality.
5. None of the case studies reported any difficulty with living with a "tariff only" regime, as required by the AoA, because all the sample countries had gone through a series of trade policy reforms prior to the conclusion of the UR and had eliminated most (see some exceptions below) non-tariff barriers (NTBs).
6. The studies also showed that although bound tariffs were generally high, applied tariffs were mostly much lower. A number of constraints were reported that prevented them from applying the full range of the bound tariffs, where necessary: i) commitments with international financial institutions; ii) fear or risk of ruining trade relations with exporters who provide support through preferential market access, foreign aid and the like; and iii) the political economy necessity of maintaining low product prices, especially for basic foods.
7. Nevertheless, tariffs were a major trade instrument for safeguarding vital domestic sectors. Tariff rates were often varied in response to particular circumstances, such as abrupt changes in domestic supply-demand balances and changes in world market prices, and often at short intervals.4 For example, tariffs were typically reduced during 1995-97 when world market prices were high and were raised as these prices started to decline5. Mostly, tariffs were used for domestic market stabilization and only rarely for protection.
8. There were no experiences reported as regards contingency measures. The simplest of these measures - the Special Safeguard (SSG) provision of the AoA - was not available for most sample countries, with the exception of Botswana and Morocco. None of them had, as at the end of 1998, invoked the instrument.
9. Finally, except for Morocco and Thailand, the other sample countries do not have Tariff Rate Quotas (TRQs), therefore they did not have any experience in implementing this trade policy instrument.
10. On the whole, few studies reported improvements in agricultural exports in the post-UR period - the typical finding was that there was little change in the volume exported or in diversification of products and destinations. This was perhaps to be expected in view of the gradual phasing-in nature of the AoA commitments on market access. Thus, traditional exports of the sample countries continued along the past trends - e.g. cotton and rice from Pakistan; tea, rubber, coconut and spices from Sri Lanka; sugar and bananas from several preferential-receiving countries; and tropical products and agricultural raw materials in general.
11. But many studies considered that prospects were good for non-traditional products, notably fruit and vegetables. In some cases, some positive effects were already evident, e.g. fruit and vegetables exports from Bangladesh; fruit, vegetables and other exotic products from Fiji, Guyana, Pakistan and Jamaica. On all these products, the main concern expressed was with SPS/TBT standards in import markets (see below).
12. There was very little experience with accessing the TRQs opened up in the UR. Traders surveyed as part of the studies often reported lack of information about export opportunities under this market access measure. Confusion was widespread regarding TRQs allocation and administration. Therefore, it was not possible to conclude whether market access for these countries through the TRQs had actually improved or not.
13. Many sample countries had had experiences relating to SPS/TBT measures and there was a clear recognition that these measures were playing an increasingly important role in trade. Among the major problems encountered included lack of mutual recognition of inspections and standards, with several large importing countries often asking for "sameness" in the process rather than "equivalence". As a result, "trade harassment" was considered a common problem. There were also some positive experiences, e.g. in the case of Fiji where acceptance of certain standards and processes by New Zealand led to an immediate growth of exports of several agricultural products. The general observation seemed to be that while adequate rules may exist, what mattered was the "spirit" or "good-will" with which the rules were applied and a determination on both sides to solve specific problems.
14. There were few cases of concrete technical and financial assistance from outside, as promised in the SPS/TBT agreements. Pakistan reported of an assistance offer by Japan to set up a food-processing plant to improve export standards. Fiji also benefited from SPS-related assistance from New Zealand. Most of these experiences related to exports - very little was reported on how these countries were implementing SPS/TBT measures on imports to their own markets, although several noted the need for financial and technical assistance in upgrading their regulatory and inspection systems.
15. Food imports were reported to be rising rapidly in most case studies.6 There was a remarkably similar experience with import surges in particular products in the post-UR period. These were dairy products (mainly imports of milk powder) and meat products (mainly poultry). Some regions, notably the small island states in the Caribbean and the South Pacific, seemed to be facing difficulties coping with import surges of these products, with detrimental effects on the competing domestic sectors.
16. On the whole, a common observation was the asymmetry in the experience between the growth of food imports and the growth of agricultural exports. While trade liberalisation had led to an almost instantaneous surge in food imports, these countries were not able to raise their exports. Significant supply side constraints prevented them from taking advantage of increased global market access.
17. Most countries in the sample, as net food-importers, had a major interest in the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food Importing Developing Countries. Many viewed the Decision as a compensation for other negative effects of the UR and expected to receive concrete benefits from it. There was no reported experience of any of the eligible sample countries receiving any tangible assistance related to the Decision (e.g. changes in food aid volumes, compensatory financing or increased assistance to agricultural development programmes).
18. The period since the conclusion of the UR was too short to assess fully the long-term impact on economies studied. However, several case studies reported experiences with reforms under SAPs, which also pointed in the same direction as the AoA. A common reported concern was with a general trend towards the concentration of farms, in a wide cross section of countries. While this led to increased productivity and competitiveness with positive results, in the virtual absence of social safety-nets, the process also marginalised small producers and added to unemployment and poverty.7
19. Similarly, most studies pointed to continued problems of adjustment on account of weak supply response and related lack of export competitiveness. As an example, the rice and sugar sectors in Senegal were facing difficulties in coping with import competition despite the substantive devaluation in 1994. More often than not, these are the very commodities that are vital for the economy of these countries - in terms of food supply, employment, economic growth and poverty reduction. How to further the process of liberalisation without hurting these sectors appeared to be the main challenge facing these countries.
20. A number of case studies reported that officials from those countries had
participated in seminars, workshops and other training activities organised
by various international agencies and, as a result, the level of awareness of
the UR agreements and their implications was much better now than in 1995. However,
more was required, notably in preparing WTO notifications and related databases,
analyzing consequences on both policies and the real economy, re-instrumentation
of policy measures, upgrading SPS/TBT standards, monitoring of developments
at the WTO and analyzing these, and in trade negotiations. There was a feeling
that institutional mechanisms need to be improved at the international level
for the coordination and delivery of technical assistance.
21 Agriculture generates 30 percent of Gross Domestic Product (GDP) and provides livelihoods for some 60 percent of the 123 million people of Bangladesh.8 Food consumption averages less than 2,100 calories per day,9 and an estimated 30-35 percent of the population are chronically undernourished. Food imports consume 13 percent of total export earnings and imports supply about 4 percent of cereals consumption.
22. Bangladesh implemented wide-ranging economic reforms prior to the UR and by 1994, for most commodities, quantitative import restrictions had been converted to tariffs, export taxes were eliminated and trade was privatised. Tariffs were bound at 200 percent in the UR, but applied rates are well below the bound rate for most commodities. Imports of two agricultural items (eggs and sugar) are banned and/or restricted, and this is the only instance where Bangladesh has faced difficulties in complying with the AoA provisions on market access.
23. Most domestic supports are granted through Green Box measures, and many commodities receive "negative" price support, i.e. they are taxed. Total support to agriculture amounts to less than 3.5 percent of the value of agricultural output. Some export incentive schemes are used, but these measures - except cash compensation and reduced airfare on vegetable exports - were not considered export subsidies in the sense of the AoA.
24 Bangladesh had some negative experiences in the post-UR period, notably on shrimp exports which suffered on SPS/TBT grounds. Positive experiences include the growth of exports of fruit and vegetables. As a Least Developed Country (LDC), Bangladesh is eligible for assistance under Marrakesh Decision and had hopes of assistance, however, this has not materialised. Concerns regarding new issues for agricultural trade include: intellectual property rights, environment and labour issues, food safety and standards, and investment and competition policy. Bangladesh has not received financial and technical support to upgrade its ability to meet SPS/TBT standards for its export products and was looking forward to the implementation of this provision in the next round.
25. Botswana is a Net Food-Importing Developing Country (NFIDC). A land-locked country with a difficult agricultural environment, 45 percent of the population of about 2 million is dependent on agriculture for their livelihood. Food consumption averages less than 2,200 calories per day, and an estimated 30-35 percent of the population are chronically undernourished. Food imports absorb about 9 percent of total foreign exchange earnings and imports provide about 70 percent of total cereals consumption. Beef and related products are Botswana's main agricultural export and provide about 5 percent of total merchandise export earnings.
26. Botswana is a member of the Southern African Development Community (SADC) and the Southern African Customs Union (SACU)10 which provides a framework for the free movement of goods among member states as well as a common external tariff. Botswana's commitments in the area of market access require an average 24 percent cut in tariffs on agricultural products - the SACU common external tariff applies. Quota controls operated by SACU were converted to tariff equivalents and are being reduced. Botswana has claimed the right to use the special safeguard (SSG) provision for 38 percent of its 983 total agricultural tariff lines. Botswana declared a base AMS of zero, and the minimal support currently given to the sector is classified under the Green Box. Similarly, Botswana has no commitments on export subsidies.
27. An assessment of the effects of the UR commitments of Botswana and of Botswana's trading partners is complex. The European Community (EC) is both the main market for Botswana beef (under the Lomé Protocol) and its main competitor in the regional Southern African market, thus changes in either market can affect Botswana's exports. The EC's commitment to reduce tariffs on beef and related products affects the value of Botswana's preferential access to that market. Furthermore, the elimination of quota restrictions on SACU imports opens those markets to competition from outside the region, often coming from subsidised EC exports.
28. Issues relevant to Botswana in the next round include: access to non-traditional export markets in support of its diversification strategy; uncertainty regarding the future of beef exports in regional and EC markets; mechanisms to promote stability in price and supply of food imports given the progressive reduction of import tariffs.
29. Brazil is a large, diversified agricultural exporter and relies on imports for a significant share of its domestic consumption needs. Average food consumption is almost 3,000 calories per day, and less than 10 percent of the population is undernourished. Agriculture generates 14 percent of GDP and 30 percent of merchandise exports, and supports about 18 percent of the 164 million Brazilian people. Food imports absorb about 8 percent of total foreign exchange earnings, and imports supply about 15 percent of domestic cereals requirements.
30. The process of reform began in Brazil the mid-1980s with the liberalisation of trade regime. By the early 1990s, tariffs had been reduced to 14 percent on average and tariff dispersal had been reduced significantly. MERCOSUR narrowed the range even further - MERCOSUR has had a bigger influence on Brazilian agricultural trade policy than WTO. Discussions are going on for the Free Trade Area of the Americas and a FTA with EC.
31. On border protection, Brazil's applied tariffs are much lower than bindings, which themselves are not high. On domestic support, support agencies still exist but are not in use. Brazil does not have export subsidies and export taxes have been eliminated for all commodities except sugar (these are very low).
32. As regards Brazil's access to export markets, poultry has been a success story and potential exists for tropical fruits, pork, soybean and milk. Brazil faces market access problems for dairy and sugar. Brazil's biggest concerns in this area are the use of export subsidies by other large exporters and the possible misuse of SPS standards to block trade unfairly.
33. The Brazilian agricultural sector is undergoing considerable change as a result of the reform process.11 Although Brazil is one of the lowest-cost sugar producers in the world, production levels were excessive due to cross-subsidisation from fuel alcohol. This subsidy is ending and will probably lead to a reduction in sugar area, to be replaced by higher value crops. In the case of dairy, farm size is increasing, herds are being improved, large-scale industrial processing firms are moving in (e.g. Nestle, Parmalat) and traditional cooperatives are failing. In maize and soybeans, farms are being consolidated, and both planted area and productivity are on the rise. By contrast, wheat, rice and cotton sectors are declining - Brazil is now a cotton importer.
34. With this process of transformation, new institutions are needed. One of them is strengthening the capability to enforce anti-dumping measures. Credit institutions are also required - once the system was highly subsidised, but now there is simply no flow of credit for small farmers. There may also be the need for some contract law, as large companies are moving into the sector.
35. Egypt is a large NFIDC. About 39 percent of the population is involved in agriculture, and agriculture provides 16 percent of GDP and 14 percent of merchandise exports. Food imports absorb 19 percent of total foreign exchange earnings. Cereals constitute the main agricultural import, and imports supply about 40 percent of total cereals consumption. Daily food consumption averages more than 3,200 per person and less than 10 percent of the population is considered undernourished.
36. The Egyptian economy was liberalised considerably under Structural Adjustment Programmes (SAPs), beginning several years prior to the UR conclusion, reducing most tariff barriers to trade and eliminating a large part of producer and consumer subsidies. Remaining government assistance to agriculture has been provided mainly through subsidised inputs such as fertilisers, infrastructure, electricity and water, with the latter being provided to farmers almost free of charge. Most of these inputs were considered exempt from reduction commitments, and as a result Egypt has no commitments on AMS. Similarly, Egypt does not have commitments on export subsidies.
37. Tariff bindings for cereals, the main food imports, were generally low, e.g. 5 percent in the case of wheat. In view of this, and given the heavy dependency on world markets for cereals, Egyptian domestic food markets are particularly vulnerable to instabilities in world markets. For some products such as meat, however, tariffs were set at relatively high rates (e.g. 80 percent for poultry meat) and most of them are currently subject to stringent quality control requirements, a process that has been questioned by some WTO trading partners.
38. In general, the effects of the market-oriented policy reforms during the 1990s have been mixed. There was a clear reduction of net farm incomes, especially of the small farmers, as output prices did not rise enough to offset the increased farm input costs, in part due to reduced subsidies. Domestic market-orientation and trade liberalisation had affected cropping patterns. In response to changing profitability, fruit and vegetables are expanding at the cost of cotton, wheat and rice. Although these shifts make economic sense, this is viewed by many in Egypt as a negative outcome of the reform process as cotton and wheat are considered crops of strategic importance.
39. The experience with trade has not been favourable. Imports have risen much faster than exports. Total merchandise imports grew by 50 percent between 1990-92 and 1995-97 and food import bills increased by 37 percent, while total exports rose only 17 percent. It remains to be analysed whether Egypt's relatively low tariff bindings played a role here.
40. On access to import markets, Egypt has frequently voiced its concerns about the application of SPS measures and technical standards by its trading partners, particularly those related to potatoes in the EC markets.
41. Fiji has traditionally relied on preferential market access for most of its agricultural exports under arrangements such as SPARTECA and the Lomé Protocol; however, it recognises that the viability of the agricultural sector over the longer-term requires efficiency gains in order to compete in non-preferential markets. Towards this end, Fiji introduced reform programmes on agriculture in 1989, including the adoption of a tariff-only regime, gradual tariff reduction and transitional support measures to promote the adjustment process. Fiji's commitments under the UR have not presented difficulties in most cases because the previous reforms had already brought the sector largely into conformity with the AoA. Tariffs are bound at 40 percent, but applied rates range from 10 to 35 percent for most commodities. Fiji has yet to introduce national legislation on anti-dumping and intellectual property rights.
42. Food imports have risen less steeply since the deregulation of trade in 1989, evidence of a competitive domestic supply response. Production of several commodities (rice, maize and sorghum) has declined in the face of stronger import competition. The growth of exports, in the aggregate, has not changed since the reform process began, but there is evidence of diversification away from sugar. Success stories for Fiji include impressive increases in exports of taro, ginger, papaw and kava. Production for local consumption is considered sustainable for fresh milk, pigmeat and poultry, but the domestic beef and milk powder industries are threatened by imports.
43. In the area of SPS/TBT, Fiji is relatively free from major pest and diseases and has a well-equipped Quarantine Department with a well-trained staff. Fiji's innovative use of the High Temperature Forced Air (HTFA) treatment that kills fruit fly in certain fruits and vegetables without the use of any chemicals, has been a highly valuable development. In 1996 the New Zealand Quarantine Service formally accepted the importation of papaw treated by this method, with the result that papaw exports to New Zealand rose from 8 tonnes in 1995 to 97 tonnes in 1997. Exports are now limited only by how much Fiji can produce. New Zealand has also recently accepted the same HTFA treatment for both mangoes and eggplant, which has again led to large increases in exports. Acceptance of the HTFA method by other importers has been slow and transhipments of HTFA-treated products through certain ports have been prohibited, constraining Fiji's exports and raising concerns that SPS rules may constitute unfair trade barriers. Fiji has not made use of the WTO dispute settlement procedures in this regard, but may do so in the future.
44. Guyana is a small (population of less than 1 million) agricultural exporter that also imports a significant share of its domestic food requirements. With an average daily food consumption of 2,500 calories per person, about 20-25 percent of the population is considered chronically undernourished. Agriculture generates about 40 percent of total merchandise exports and supports about 20 percent of the population. Guyana spends about 10 percent of its foreign exchange earnings on food imports, and relies on imports for 35 percent of its domestic cereals consumption.
45. Guyana's agricultural and trade policies were liberalised (export restrictions, import bans, quantitative restrictions and import licensing arrangements were eliminated) starting in 1988 and further reforms were undertaken with the implementation of the CARICOM Common External Tariff (CET) in 1993. The CET will range between zero and 20 percent when all countries complete implementation. Several commodities in the agricultural sector are important exceptions, with CET rates of 40 percent plus consumption taxes of 10 to 30 percent.
46. Because Guyana had moved away from guaranteed prices and subsidised inputs, it did not calculate the AMS - the Green Box and de minimis exemptions were considered adequate to cover policy measures. Export taxes are collected for rice and sugar to fund the development of the agricultural sector. The main issue here is to ensure that such measures are consistent with the export subsidy provisions of the AoA. Export subsidies are not used.
47. Guyana receives preferential access to the EC market for rice and sugar under the Lomé Protocol, and to the US market for sugar. Since the UR, Guyana has found that exporting to the EC has become more complicated and the licensing system has reduced market access. Preferential access to the Caribbean market under the CET also favours exports from Guyana. How liberalisation affects these markets is a matter of crucial concern.
48. On SPS, the general feeling among traders in Guyana was that the process is cumbersome and takes too long to rectify past decisions. This has led to Guyana losing markets in the United States but also in other countries that take their lead from the US Animal and Plant Health Inspection Services (APHIS).
49. On trade trends, imports of food and live animals almost doubled between 1994 and 1998. There is the fear that without adequate domestic market protection accompanied by agricultural development programs, many commodities that have historically been produced domestically (e.g. milk, poultry, fruit juice, beans, peas, cabbage and carrot) will be imported and the domestic diet will increasingly shift toward greater dependence on imported food products.
50. India is not a NFIDC but is considered a Low Income Food Deficit Country (LIFDC) by the FAO. Roughly self-sufficient in food, India imports in some years and exports in others. With a population of 966 million, average daily food consumption is less than 2,500 calories per person and about 20 percent of the population is undernourished. Agriculture provides 27 percent of GDP, 17 percent of merchandise exports and occupies 57 percent of the population. Food imports absorb 4 percent of total foreign exchange earnings.
51. India was traditionally a closed agricultural economy with a high degree of self-sufficiency in food commodities. In the UR, India submitted a detailed schedule on domestic support measures and tariffs. On domestic support, the base period product-specific total AMS level was negative and non product-specific was about 6 percent of the value of domestic production. The latter stood at about 7.5 percent in recent years. Thus, the main difficulty India is facing is that the non product-specific AMS is approaching the de minimis limit of 10 percent. Support price schemes are in effect for over 12 commodities, but historically support prices have been below world levels. India occasionally faces the problem of large cereal stocks, which are difficult to export profitably at low world prices. Many State Trading Enterprise (STE) monopolies used to exist, but their monopoly rights were lifted in the late-1980s. Some of the STEs play a vital food security role, in supporting producer prices through procurement and in the distribution of subsidised foodstuffs. India does not have export subsidy commitments.
52. On market access, prior to the UR, India maintained import quotas for thousands of products, justified under balance of payments exceptions. In the UR, India tariffed all agricultural lines, often at very low rates. Without the balance of payments exceptions, India is facing problems for some basic foods, e.g. zero bound rate on rice, maize and skim milk powder. The bound rate is 300 percent for some edible oils but only 45 percent for others; given the high degree of substitution in consumption, the 300 percent binding probably has no significance.
53. There has been virtually no reduction in rural poverty in India during the 1990s despite the fact that both GDP and agricultural GDP grew nearly as fast as in the 1980s. The rural poverty rate was 55 percent in the 1970s, fell to 30-35 percent in the 1980s but is still 30-35 percent in the 1990s. The agricultural sector is diversifying away from grains into higher value goods for local consumption.
54. Jamaica (population 3 million, 22 percent engaged in agriculture) is a small producer and exporter of a limited range of agricultural commodities, mainly sugar and bananas. The agricultural sector contributes 8 percent of GDP and 21 percent of merchandise exports. Jamaica is an NFIDC: food imports absorb 9 percent of total foreign exchange earnings and almost all domestically consumed cereals are imported. Average daily food consumption is about 2,500 calories, and about 20-25 percent of the population is chronically undernourished.
55. Jamaica has not encountered significant problems with respect to the implementation of its AoA commitments, because it had undertaken significant agricultural reforms during the 1980s and 1990s under SAPs and CARICOM. Jamaica had abolished the use of subsidies, reference pricing, and state trading enterprises etc. in the agricultural sector as well as in the general economy. Non-tariff measures were converted to tariff equivalents and tariffs were reduced in line with the CARICOM CET. Under its UR commitments, Jamaica bound all agricultural tariffs at 100 percent, except for a few commodities where bindings are generally higher. Applied tariff rates are generally much lower than bound rates, ranging from 0-40 percent. Jamaica had no commitments on domestic support or export subsidies.
56. The most immediate impact of the WTO on the agricultural sector in Jamaica is likely to be the recent rulings on the EC banana regime. These rulings are significant not only for the country's banana export but for the agricultural export sector as a whole, as they undermine the foundation of non-reciprocal preferential arrangements, which have dominated the greater part of Jamaica's trade policy for many years.
57. Jamaica's agricultural imports have increased significantly since the liberalisation process began. In the next round of negotiations Jamaica will likely stress the need for safeguards that can be readily and effectively applied for a selected number of sensitive agricultural products. Concerning the SPS Agreement, Jamaica wants a firm commitment on the part of developed countries to provide technical and financial assistance in modernising its SPS systems and laws. Finally, Jamaica would like to see the Marrakesh Decision fully implemented.
58. Kenya is an NFIDC with a population of 28 million. Average daily food consumption is less than 2,000 calories and almost half the population considered chronically undernourished. Agriculture supplies 30 percent of GDP and 55 percent of total merchandise exports (tea and coffee comprise 60 percent of agricultural exports), and employs 77 percent of the population. Food imports absorb 17 percent of total foreign exchange earnings and imports supply about 30 percent of domestic cereals consumption.
59. Kenya first implemented reforms of the agricultural sector in 1979-80 but controls were re-established periodically until 1993. At that time, the sector was fully liberalised, with the removal of government controls on food pricing and marketing. Ongoing reforms are aimed at reducing the government's remaining involvement in the marketing of agricultural commodities.
60. Under the UR, Kenya eliminated its remaining bans on food imports and offered a 100 percent ceiling binding for all agricultural products. Domestic support measures are exempt from reduction commitments, and 10 percent of the total value of policies claimed under the Green Box is spent on public stockholding for food security purposes and strategic reserve operations. Kenyan has no commitments on export subsidies.
61. In the short term, Kenya has experienced negative impacts from market liberalisation in the production of cotton. The Kenyan Government recognises that improvements in the efficiency of product markets must be accompanied by efficient seed development and distribution systems which are closely related the SPS, TBT and Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreements.
62. In Morocco, an NFIDC, agriculture accounts for 20 percent of GDP and occupies approximately 40 percent of the total active population and 80 percent of rural workforce. Daily food consumption averages 3,100 calories and about 5-10 percent of the population is undernourished. Since the 1980s the Moroccan government has been pursuing a liberal trade policy in the framework of the SAPs. As a result, adapting to the new AoA rules has not been much of a problem. For example, current AMS levels were only 12 percent of the permitted levels for both 1995 and 1997 and 33 percent for 1996. AMS in Morocco varies considerably from year to year along with changes in cereal production, which is highly dependent on rainfall. The bulk of the support measures in Morocco are included in the Green Box (notably, research, infrastructure, food security stock holding and farmers' training). Morocco also makes use of SDT exemptions on support measures, the outlays of which amounted to 47 percent of total notified support for 1995 and 26 percent for 1996.
63. The tariffication process for products not previously bound resulted in high bound tariffs, and Morocco reserved the right to use SSGs for most of these products. For many other products, however, bound rates are relatively low. The bindings for these products were done at the rates applied then as Morocco had contractual obligation to do so under SAPs. Morocco also established tariff rate quotas for 16 products including cereals, meat, milk, oilseeds and sugar. The quota fill rates for Morocco were reported as 71 percent for 1995 and 89 percent for 1996, relatively high compared with other WTO members.
64. Morocco has no commitments on export subsidies. During 1995 and 1996, Morocco notified the WTO that it provided export subsidies that are exempt from reduction commitment, mostly for export marketing and internal transport activities.
65. As regards experience with market access, Morocco's major agricultural exports are fruit and vegetables primarily to the EC, and their market access is determined through bilateral negotiations under the EC-Mediterranean Agreements.
66. Pakistan supports rapid liberalisation of trade in agriculture, despite its high dependence on food imports which absorb 13 percent of total foreign exchange earnings. Daily food consumption averages 2,500 calories and an estimated 15-20 percent of the population is undernourished. In the UR, Pakistan bound more than 90 percent of its agricultural import tariffs at 100-150 percent. These relatively high bindings were done to safeguard against an anticipated increase in imports following the removal of non-tariff restrictions. Irrespective of the WTO bindings, Pakistan's applied tariffs have been reduced and simplified, the maximum tariff brought down in phases to 65 percent in 1996 and to 35 percent in early 1999. At present applied rates vary between zero and 35 percent.
67. Total base AMS as reported by Pakistan was negative and was expressed in domestic currency terms. In its notifications, however, Pakistan has reported its AMS in US dollars, in order to overcome problems arising from inflation and currency depreciation. A break down of AMS by categories shows that while product-specific support has been regularly negative, non-product specific support is positive and has increased since 1995. The bulk of input subsidies were considered exempt from the reduction commitment and were reported under the SDT category.
68. While Pakistan does not have commitments on export subsidies, it provides a variety of export subsidies which are considered exempt from reduction. Freight subsidies were occasionally provided to the exports of fruit and vegetables, but those have been recently discontinued. There is an export re-finance scheme under which credit is made available at concessional interest rate to exports of high value-added products and some agricultural products like fish and packed rice. Higher and specific credit limits are allowed for cotton and sugar which ultimately enter the export market.
69. The impact of the AoA on market access opportunities in the case of Pakistan is not readily visible, at least for the two major exports of the country: cotton and rice. No trade barrier affected cotton exports. Rice has export potential if import barriers in the developed countries are reduced considerably.
70. Most of the market access difficulties Pakistan is currently facing are in the area of food safety and quality standards. On those grounds, the EC banned imports of fish in July 1998. The United States also tried to ban import of tuna fish but the dispute settlement committee decided the case in favour of Pakistan. Likewise, fruit exports, despite their improved performance post-UR, continue to face SPS difficulties in importing countries. To overcome such problems, national standards for most agricultural products have witnessed some notable improvements. Nonetheless, standards for some of the products remain low compared with international levels, mainly due to the lack of the required technology.
71. By virtue of its high import dependence for essential items like wheat and edible oil, Pakistan is an NFIDC and is eligible to receive financial, technical and food assistance envisaged in the Marrakesh Decision. Despite the significant surge in its wheat imports following the UR, however, Pakistan, like most NFIDCs, has not received assistance under the Decision.
72. Peru is an NFIDC. With an average daily food consumption of 2,300 calories, some 25-30 percent of the population is chronically undernourished. Agriculture generates 7 percent of GDP and 9 percent of merchandise exports, and provides the livelihoods of 32 percent of Peru's 24 million people. Food imports take about 13 percent of total foreign exchange earnings and imports supply 58 percent of domestic cereals consumption. Most agricultural products exported by Peru are traded under preferential agreements.
73. Peru began liberalising its trade policy in 1990, and tariffed its remaining non-tariff barriers in the UR. Applied tariffs are now in the range of 12-20 percent. A system of a variable price bands is applied for a group of 20 "sensitive" products which are affected by fluctuations and distortions of the international prices. Peru considers this system compatible with its obligations in the WTO, because the resulting applied tariffs do not exceed the bound rates. Peru has no commitments on domestic support or export subsidies.
74. For the forthcoming round of Multilateral Trade Negotiations (MTN), Peru would like to continue having at least the current range of flexibility in domestic support measures (e.g. de minimis of 10 percent), which is felt necessary for the development of the agricultural sector.
75. Senegal is an NFIDC. Some 75 percent of the population depends on agriculture for their livelihoods. Daily food consumption averages 2,400 calories and about 25-30 percent of the population is undernourished. Agriculture generates 18 percent of GDP and 10 percent of merchandise exports. Food imports absorb 29 percent of total foreign exchange earnings and 55 percent of cereal consumption (mainly rice) is imported.
76. Senegal began reforming its agricultural sector in the 1980s and eliminated non-tariff barriers, direct subsidies and export taxes prior to UR. During the UR, Senegal bound its tariffs at the level of 30 percent plus additional taxes up to 150 percent. Applied tariffs are generally lower, varying from 27 to 65 including surtax for some sensitive products, thus Senegal should not face problem in meeting its market access commitments in the UR. Senegal has no commitments on domestic support and does not anticipate difficulties in this regard as long as investment and development programmes are permitted. No export subsidy have been notified.
77. Liberalisation measures undertaken since the 1980s and the 50 percent devaluation of the CFA franc in 1994 have not improved the competitive position of the agricultural sector which has been facing difficulties due to import competition (e.g. dairy products, rice, onions and sugar). Many national experts considered that it is essential for Senegal to maintain a minimum protection system (e.g. temporary special safeguards) on sensitive products, particularly in case of greater liberalisation process.
78. In Sri Lanka, also an NFIDC, agriculture contributes some 22 percent of GDP and 21 percent of merchandise exports and supports about 48 percent of the population. Food consumption averages 2,300 calories per day, and an estimated 25-30 percent of the population is undernourished.
79. As part of a series of policy reforms undertaken since the late 1980s, much of the government support to agriculture was removed. For this reason, Sri Lanka did not make any commitments on amber support and export subsidies. As for market access commitments, Sri Lanka bound its tariff levels for agricultural products at a uniform rate of 50 percent; however, the applied rates for most of these products are 35 percent or less.
80. The bulk of Sri Lanka's major agricultural exports are directed to the Middle Eastern countries, most of which are not yet members of the WTO. Therefore changes in export performance of these products cannot be directly attributed to the UR. However, for some other products such as spices, floriculture products, seasonal fresh fruits and vegetables, some marginal increase in exports was observed post-UR, partly related to improved market access under the UR.
81. The high quality standards required for floricultural products by European traders and consumers remain a great challenge for Sri Lanka. On access to TRQs, Sri Lanka's only major allocation (2,553 tons of bananas for the EC at a tariff of 75 US$/ton) was not utilised due to lack of quality produce. Similarly, although Brazil's removal of a safeguard measure on desiccated coconut exports is considered important concession, Sri Lanka has not been able to exploit this opportunity due to lack of produce.
82. The impact of policy reforms, including those under the AoA, was more pronounced on food imports. In general, food imports have witnessed a significant increase since 1996, and this was partly attributed to the tariffication and the relatively low tariff bindings for these products. The surge in imports was also followed by a decline in domestic production in a number of food products, resulting in a clear drop in rural employment. It was reported that roughly 300,000 persons were affected following the recent drop in production of onions and potatoes. The major challenge facing Sri Lanka's agriculture is how to cope with these tariff bindings in future, particularly with the possibility of further reductions. In view of these possible negative impacts, further flexibility in support in the short to medium term is considered necessary to sustain agricultural development and food security.
83. Tanzania is an LDC, daily food consumption averages less than 2 000 calories per person, and an estimated 40-45 percent of the population is undernourished. Agriculture supports 80 percent of the population and contributes 48 percent of the country's GDP and 62 percent of merchandise exports. The sector is dominated by smallholders, 93 percent of whom operate on landholdings of less than 2 hectares. Food crop production dominates the agriculture economy, accounting for 55 percent of agricultural GDP followed by livestock at 30 percent. Food imports absorb 16 percent of total foreign exchange earnings, and imports supply about 30 percent of cereals consumption.
84. Economic liberalisation has been underway since the mid-1980s. This process has sought to encourage private investment in various sectors of the economy, notably those involving exports and the generation of foreign exchange earnings. Tanzania has liberalised the corn market and the government's only remaining role in the market is to purchase corn for the Strategic Grain Reserve (SGR). Tanzania had no reduction commitments in the UR.
85. Agricultural export earnings fell significantly in 1997-98, reflecting the weather-induced decline in the output of export crops and the damage to transport infrastructure that disrupted access to external markets. The external current account deficit increased but was broadly in line with programme projections, as the growth of imports was less than had been projected.
86. Tanzania is a member of both SADC and the Common Market for Eastern and Southern Africa (COMESA), and receives preferential access to the EC market under the Lomé Protocol.
87. Thailand has a natural comparative advantage in agriculture, based on its relatively abundant endowment of land, and is a major exporter of rubber, rice, sugar, cassava and chicken meat. Agriculture generates about 11 percent of GDP and 14 percent of total merchandise exports, and provides livelihoods for about half of Thailand's 60 million people. With an average daily food supply of about 2,400 calories per person, an estimated 25-30 percent of the population is chronically undernourished.
88. The agricultural sector was relatively open prior to the UR, with the exception of border protection and domestic supports for some import-competing crops. Thailand began a broad unilateral liberalisation process in the early 1990s and participated in the UR as a member of the Cairns Group, seeking disciplines on the use of trade-distorting domestic supports and export subsidies in agriculture.
89. Thailand's UR commitments on market access required tariff bindings for all agricultural products as well as tariffication for 22 products previously covered by non-tariff barriers. The over-quota tariffs for these products range from 40 to 200 percent. Imports of some products have exceeded their quotas without being charged the over-quota tariffs, but problems have been noted, including zero or low fill rates for certain products. In some cases, Thailand is a competitive producer and exporter (e.g. rice and sugar) thus imports would not be expected. In other cases, however, the TRQs were assigned to state agencies (e.g. raw silk) or tied to local purchase requirements (e.g. milk), practices which may have discouraged imports. For most agricultural products, however, bound tariffs exceed the applied rates and Thailand has had little difficulty in complying with its UR commitments on market access.
90. On domestic support, Thailand declared a relatively large base-period AMS and claimed SDT measures amounting to 10 percent of total support and Green Box measures, of which environmental programmes constitute the largest element. The base AMS was declared in local currency terms and inflation has increased the current AMS, nevertheless the current AMS has not exceeded 60-80 percent of the permitted levels.
91. Thailand did not declare export subsidies in its Schedule. During recent periods of low world prices, Thai producers of rice, sugar, and cassava have lobbied for export subsidies, which could not be granted because of the WTO commitments.
92. As an exporter of agricultural commodities, Thailand has benefited, directly or indirectly, from the UR market access commitments of other countries including, inter alia, Japan, the Republic of Korea, Indonesia, the Philippines, the EC and Malaysia. Commodities of interest to Thailand for which market access has improved include rice, sugar, chicken meat and cassava. Nevertheless, Thailand's gains under market access would have been greater had the liberalization been deeper, and a number of problem areas remain. For example, the EC cassava quota is not being filled because recent price developments in the EC favour grains. For chicken, access has improved in the EC, but Australia has banned Thai chicken on SPS grounds. Thailand does not receive sugar quotas from the United States or the EC.
93. As for experience with SPS measures, Thai exports were reported to be facing problems in several markets. Typical complaints have charged that Thai agricultural products have high insecticide remnants, insects, and possible diseases, and bacteria. A positive development of this, however, has been that Thai farmers have become much more conscious of these issues and are upgrading production and quality standards.
94. Thailand's comparative advantage in agriculture has been eroding over the past decade or so as labour costs in the sector have risen faster than productivity. The sector is diversifying, with some support from the government, and recent developments show changing cropping patterns in favour of import-competing and non-traded crops. The 20 percent devaluation of the baht in real terms following the Asian crisis, however, has tilted profitability in favour of export crops and farmers are responding to that shift.
1 The case studies, conducted by national experts, covered: Bangladesh, Botswana, Brazil, Egypt, Fiji, Guyana, India, Jamaica, Kenya, Morocco, Pakistan, Peru, Senegal, Sri Lanka, Tanzania, Thailand.
2 The two major agricultural exporters among the case study countries (Brazil and Thailand) also had reduction commitments.
3 FAO monitors cereal policies with a comprehensive global coverage of countries. See FAO's annual publication Cereal Policies Review. Recent rice policies are also documented in FAO Follow-up to the Guidelines for National and International Action on Rice in 1996-99, Commodities and Trade Division, FAO Rome.
4 See Cereal Policies Review, FAO, various issues; and Review of Cereal Price Situation in Selected Developing Countries in 1995-96 and Policy Measures to Offset the Price Rise, ESCP Document No.1, FAO, 1996.
5 Some of the main variants include the following: Peru and some other countries in Latin America operate price band policies for several "sensitive" commodities as a means of stabilization. Morocco also implements a scheme with similar effects for some of its products. Sri Lanka reported that at times it was difficult to provide adequate price stabilization within the limit of its 50-percent bound tariff for some products, and a more automatic scheme like the price band policy was being discussed.
6 This aspect was examined in detail in a 1997 FAO study that reviewed the situation for all LDCs and NFIDCs. It was shown that food import bills of these countries rose sharply during most of the post-UR period for a number of reasons which included the very high food prices in world markets during 1995-97; the sharp fall in food aid shipments; and the virtual absence of export subsidies. For details, see FAO The Food Situation in the Least Developed and Net Food-Importing Developing Countries, 1997, Rome.
7 See Trade and Hunger: How International Trade is Causing Hunger, John Madeley (ed), APRODEV, 1999.
8 Includes farmers, farm workers and their dependants.
9 The amount of food - or dietary energy supply (DES) - needed for the human body to function and maintain a moderate degree of activity ranges between 2 000 and 2 300 calories per caput/day. An average 2 700 calories per caput/day is roughly estimated to be necessary to satisfy the food needs of most people.
10 SACU members are South Africa, Botswana, Lesotho, Swaziland and Namibia. SADC members are Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. For more information on the reform process in Southern Africa, see: FAO (1997) The Uruguay Round and Agriculture in Southern Africa: Implications and policy responses.
11 For more information on the reform process in Brazil and other countries in Latin America, see: FAO (1997) Implementing the Uruguay Round Agreement in Latin America: The Case of Agriculture.