FAO GENEVA SYMPOSIUM
on
THE EXPERIENCE WITH IMPLEMENTING THE WTO AGREEMENT ON AGRICULTURE AND SPECIAL AND DIFFERENTIAL TREATMENT TO ENABLE DEVELOPING COUNTRIES TO EFFECTIVELY TAKE ACCOUNT OF THEIR DEVELOPMENT NEEDS, INCLUDING FOOD SECURITY AND RURAL DEVELOPMENT
Geneva, 2 October 2002
Paper No. 4
Measures to enhance agricultural development, trade and food security in
the context of the WTO negotiations
Commodities and Trade Division
Measures to enhance agricultural development, trade and food security in the context of the WTO negotiations
The Doha Ministerial Declaration reaffirms that “special and differential treatment for developing countries shall be an integral part of all elements of the negotiations on agriculture and shall be embodied in the schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development”.
The reduction of distortions in agricultural markets would also contribute to an improved trading environment in which development needs could be better addressed. In particular, levelling the playing field in agriculture, in terms of reducing the disparity between developed and developing countries in the use of support and protection, could enhance the effectiveness of measures to meet developmental needs, including food security and rural development.
Accordingly, this paper considers measures in the two areas, within the context of the negotiations on agriculture, that would enable developing countries to deal effectively with their development needs, including food security and rural development. For an overview of current commitments of WTO members under the WTO Agreement on Agriculture (AoA), see the Annex.
I. SPECIAL AND DIFFERENTIAL TREATMENT (SDT) FOR DEVELOPING COUNTRIES
a) Why SDT in agriculture?
Given the current economic and social conditions of the developing countries, in particular, the structural underdeveloped nature of their economies and agricultural sectors, their high incidence of poverty, the high proportion of their population living with hunger and fear of starvation (chronic food insecurity), their huge rural population whose livelihood derives largely from subsistence farming, special and differential treatment under the rules and disciplines of WTO for agriculture is necessary in order to facilitate their agricultural and rural development and enhance their food security.
Recognising that these structural economic and social conditions vary across countries, different types of SDT measures, tailored to specific circumstances, may be necessary in order to effectively meet the development needs of the developing countries, including food security and rural development. In this respect, four distinct but overlapping categories of country situations can be distinguished based upon economic criteria. The identification of these situations is not to suggest the creation of new groups, but is indicated for analytical purposes to highlight particular needs.
• all developing countries;
• developing countries with a large proportion of low-income or resource-poor farmers for whom agriculture is an important source of livelihoods;
• developing countries with a high dependence on a few (1-3) primary agricultural commodities for export earnings; and
• net food-importing developing countries with limited financial means, and access to financial markets on reasonable terms, for financing food imports.
Countries are likely to find themselves in more than one of the above-mentioned agricultural situations.
An illustration of indicators of agricultural situations that could be utilised to identify appropriate SDT measures is as follows:
Situational category |
Criterion/indicator |
Situation 1 – all developing countries |
- WTO definition of developing countries |
Situation 2 - developing countries with a large proportion of small, low-income or resource-poor farmers |
- A high proportion (e.g. more than 20 percent) of the population economically dependent on agriculture (i.e. total agricultural population as a percentage of the total population), |
- A high proportion (e.g. more than 20 percent) of the population depending on agriculture living on less than $2 a day 1, | |
Situation 3 - developing countries highly dependent on a few primary agricultural commodity exports |
- A high share (e.g. more than 20 percent) of a few (1-3) primary agricultural commodities in total export earnings (i.e. share of the top 1-3 agricultural commodities in total merchandise exports), |
Situation 4 – net food-importing developing countries |
- WTO definition of NFIDCs |
b) SDT measures to support agricultural development and food security in the context of the WTO negotiations
For the four overlapping situations just identified, the following SDT measures could be considered.
Situation 1 - all developing countries
In view of their lower level of overall economic development and standard of living, including the relative underdeveloped nature and structural handicaps of their agricultural sectors, developing countries need a greater degree of policy flexibility under WTO rules and disciplines to pursue development needs, including food security and rural development. Such flexibility in the context of the AoA could be defined as follows:
Domestic support:
• Reduction commitment – maintenance of the Uruguay Round (UR) flexibility (e.g. two thirds of AMS reduction commitment, with exemption for LDCs from reduction commitment);
• Implementation period – maintenance of the UR flexibility of a longer period (e.g. 10 instead of 6 years);
• Maintenance of a higher de minimis exemption for developing countries;
• Maintenance of the exemption from cuts of agricultural investment subsidies generally available, input subsidies for low-income or resource-poor farmers and support to producers to encourage diversification of production from growing illicit narcotic crops;
• Maintenance of all Annex 2 (of the AoA) exemptions of relevance to developing countries;
• Grant to all developing countries acceding to WTO since the start of the negotiations on agriculture (i.e. since March 2000), the flexibility to implement the reduction commitment from their pre-accession support levels, provided that this does not result in levels of support higher than their accession commitments.
Market access:
• Reduction commitment – maintenance of the UR flexibility (e.g. two thirds of tariff reduction commitment, with exemption for LDCs from reduction commitment), and if a formula approach is adopted the coefficient shall be appropriately adjusted;
• Implementation period – maintenance of the UR flexibility of a longer period (e.g. 10 instead of 6 years);
• Grant to all developing countries acceding to WTO since the start of the negotiations on agriculture (i.e. since March 2000), the flexibility to implement the reduction commitment from their pre-accession tariff levels, provided that this does not result in levels of tariffs higher than their accession commitments.
Export competition:
• Reduction commitment – maintenance of the UR flexibility (e.g. two thirds of the export subsidy reduction commitment, with exemption for LDCs from reduction commitment);
• Implementation period – maintaining the UR flexibility of longer time period (e.g. 10 years instead of 6 years);
• Maintenance of the exemption from reduction commitment for developing countries of subsidies to reduce costs of marketing exports as well as for internal transport and freight charges on export shipments;
• Grant to all developing countries acceding to WTO since the start of the negotiations on agriculture (i.e. since March 2000), the flexibility to implement the reduction commitment from their pre-accession export subsidy levels, provided that this does not result in levels of export subsidy higher than their accession commitments.
Situation 2 – countries with a high proportion of small, low-income or resource-poor farmers
Countries with a large proportion of low-income or resource-poor farmers, for whom agriculture is an important source of livelihoods, may need to retain additional policy flexibility in order to provide such vulnerable groups with needed support and protection within the context of programmes to raise their incomes above subsistence levels and to provide them with alternative economic opportunities. For countries in this situation, government support for productivity raising investments and the diversification efforts of such vulnerable groups, as well as actions to protect them against unfair and potentially ruinous import competition are crucial for making progress. Such flexibility could include the following:
Domestic support:
• Reduction commitment – exemption from reduction commitment;
• Higher de minimis allowances than those for developing countries generally, particularly for sensitive products from a livelihood perspective;
• Exemption of government investment subsidies for product diversification, marketing, distribution and processing in agriculture.
Market access:
• Reduction commitment – flexibility to apply no or minimum tariff cuts for sensitive products, irrespective of the agreed tariff cutting formula; in particular, flexibility to apply the reduction on an average rather than a product-specific basis;
• Access to special agricultural safeguards (e.g. SSG) for sensitive products and basic foodstuffs.
Export competition:
• The SDT measures generally available to developing countries.
Situation 3 –commodity dependent developing countries
For developing countries heavily dependent on a few primary agricultural commodities for their export earnings, including those exporting such commodities under eroding trade preferences, additional flexibility would be required to allow them to pursue strategies for the accelerated diversification of their economic and export base which would make it possible for them to take advantage of the new global trading opportunities. Additional flexibility may include the following:
Domestic support:
• Same as for countries in situational category 2.
Market access:
• Same as for countries in situational category 2.
Export competition:
• Exemption from Article 9 of the AoA, except for exports of a product in which a share of 3.25 per cent of world trade has been obtained.
Situation 4 – net-food importing developing countries
Recognizing that LDCs and NFIDCs are likely to experience negative effects in terms of the availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions as a result of the multilateral reform process in agriculture, the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries provides for four response mechanism:
• Food aid;
• Short-term financing of normal levels of commercial imports;
• Favourable terms for agricultural export credits;
• Technical and financial assistance to improve agricultural productivity and infrastructures.
These measures need to be made operationally effective, including acceptance and implementation of the proposal on the establishment a revolving fund.
Exit and performance criteria
There would be a need to establish performance criteria for determining when a provision would no longer apply to a particular country, or when the country would graduate from one situation to another. The indicators above would provide a basis for monitoring a change in the situation of countries. To these might be added performance criteria as, for example, is indicated with respect to export competition for situation 3.
II. REDUCING DISTORTIONS IN WORLD AGRICULTURAL MARKETS
The reduction of distortion in agricultural markets is also important for creating an enabling trading environment that would allow developing countries to meet their development needs under the multilateral trading system. This can be assisted by reducing the existing disparities in the levels of production and trade-distorting support utilized by WTO members. OECD countries spend more than $300 billion annually on trade-distorting support. Substantial cuts in their trade-distorting domestic support, tariffs and export subsidies would go a long way to establish a more level playing field in world agricultural trade. However, the possible negative effects on NFIDCs need to be taking into account by making operationally effective the Marrakesh Decision.
The following are some specific measures to consider in the areas of domestic support, market access and export subsidies.
Domestic support
• Substantial reductions in total AMS;
• Make AMS reduction commitments product-specific;
• Eliminate or reduce de minimis allowances for countries with large AMS levels;
• Agree to strengthen criteria for policies with "minimal effect on production and trade" which qualify for inclusion in the green box;
• Introduction of reduction commitment on blue box payments.
Market access
Tariffs:
• Apply reduction methods that substantially reduce tariff peaks and tariff escalation – with respect to the latter, focus on reducing the tariff spread between specific primary and process product pairs;
• Simplify complex tariffs regimes, including limiting the use of specific tariffs;
TRQs:
• Expand substantially the quota volume of TRQs and substantially reduce or eliminate the in-quota tariff rate;
• Make the administration of TRQs more transparent;
• Add product specificity in minimum access commitments by disaggregating further the TRQs.
Special safeguard (SSG):
• SSG should be revised and be made available on need-based eligibility criteria.
Export competition
• Reduce substantially or eliminate export subsidisation, including export credit with similar effects
ANNEX 2
The reductions in agricultural subsidies and protection agreed in the Uruguay Round
Numerical targets for cutting subsidies and protection:
|
Developed countries |
Developing countries |
Tariffs |
|
|
average cut for all agricultural products |
–36% |
–24% |
minimum cut per product |
–15% |
–10% |
Domestic support |
|
|
cuts in total (“AMS”) support for the sector |
–20% |
–13% |
Exports |
|
|
value of subsidies (outlays) |
–36% |
–24% |
subsidized quantities |
–21% |
–14% |
Notes: Least-developed countries do not have to reduce tariffs or subsidies. The base level for tariff cuts was the bound rate before 1 January 1995; or, for unbound tariffs, the actual rate charged in September 1986 when the Uruguay Round began.
Only the figures for cutting export subsidies appear in the agreement. The other figures were targets used to calculate countries’ legally binding “schedules” of commitments. Each country’s specific commitments vary according to the outcome of negotiations. As a result of those negotiations, several developing countries chose to set fixed bound tariff ceilings that do not decline over the years.
Amber box: who can use it?
30 WTO members have commitments to reduce their trade-distorting domestic supports in the amber box (i.e. to reduce the “total aggregate measurement of support” or AMS). Members without these commitments have to keep within 5% of the value of production (i.e. the “de minimis” level) — 10% in the case of developing countries.
Argentina |
Hungary |
Papua New Guinea |
For more details, see WTO Secretariat background paper “Domestic Support” G/AG/NG/S/1
Who has tariff quotas?
38 WTO members currently have a combined total of 1,379 tariff quotas in their commitments. The numbers in brackets show how many quotas each country has. Of the total, 562 are scheduled to increase over the relevant implementation period, 812 to remain unchanged and 5 to decrease in quantity.
Australia (2) |
Hungary (70) |
Panama (19) |
For more details, see WTO Secretariat background paper “Tariff and other Quotas” G/AG/NG/S/7.
Special safeguards: who has reserved the right?
38 WTO members currently have reserved the right to use a combined total of 6,072 special safeguards on agricultural products. The numbers in brackets show how many products are involved in each case, although the definition of what is a single product varies.
Australia (10) |
Indonesia (13) |
Poland (144) |
For more details, see WTO Secretariat background paper “Special Agricultural Safeguard” G/AG/NG/S/9.
Who can subsidize exports?
25 WTO members can subsidize exports, but only for products on which they have commitments to reduce the subsidies. Those without commitments cannot subsidize agricultural exports at all. Some among the 25 have decided to greatly reduce their subsidies or drop them completely. In brackets are the numbers of products involved for each country.
Australia (5) |
Iceland (2) |
Romania (13) |
The agreement includes certain temporary exemptions for developing countries, allowing them to subsidize marketing, cost reduction and transport (Art 9.4). For more details, see WTO Secretariat background paper “Export subsidies” G/AG/NG/S/5.
1 The proxy that could be used is the World Bank $ 2 a day indicator, which refers to the upper poverty line.
2 Excerpted from WTO, WTO agricultural negotiations: the issues, and where we are now, WTO Website, 8 April 2002.