COMMITTEE ON COMMODITY PROBLEMS

Sixty-second Session

Rome, 12-15 January 1999

REPORT ON TECHNICAL ASSISTANCE RELATED TO THE URUGUAY ROUND

Table of Contents

I. INTRODUCTION

II. THE OVERALL CONTEXT OF FAO's TRADE-RELATED TECHNICAL ASSISTANCE

III. TECHNICAL ASSISTANCE ON SPS/TBT

IV. TECHNICAL ASSISTANCE RELATED TO AGRICULTURAL AND FOOD POLICY

V. PREPARATIONS FOR FUTURE NEGOTIATIONS ON AGRICULTURE

I. INTRODUCTION

1. The Committee at its last Session urged FAO to continue its programme of work in providing trade-related technical assistance, in particular on policy issues and SPS matters related to the implementation of Uruguay Round (UR) commitments, and to develop a programme of policy assistance with the aim of ensuring that developing countries are well informed and equal partners in the reform process leading to the next round of multilateral trade negotiations. This document provides information on FAO activities in this area and discusses some issues raised in the course of these technical assistance activities.

II. THE OVERALL CONTEXT OF FAO's TRADE-RELATED TECHNICAL ASSISTANCE

2. FAO has a long history of providing its members with trade-related technical assistance, dating back to well before the UR, but subsequently this assistance has intensified. The UR Agreements in which FAO has particular competence1 include:

3. The most frequent problems confronted by developing countries in the above areas include:

4. In order to streamline its trade-related technical assistance activities and provide a framework for addressing countries' requests for such assistance effectively, FAO published in 1997 a brochure on the UR related technical assistance activities of the Organization2. The Brochure discusses the significance of the UR Agreements for agriculture, forestry and fisheries, reviews related technical assistance provided by FAO in the past, and outlines specific areas in which the Organization can use its expertise to continue helping member countries take advantage of current and potential export opportunities and minimize possible negative repercussions.

5. The different technical divisions of the Organization with competence in the various aspects of the UR mentioned above are pursuing technical assistance activities in the context of the overall programme of work described in the Brochure. The whole range of FAO activities in Uruguay Round related activities is now accessible on FAO's Web site http://www.FAO.ORG "Agricultural Trade". The focus of this report will be limited to a brief review of the three specific items mentioned by the Committee at its last Session, i.e. SPS/TBT issues, agricultural and food policy, and technical assistance activities related to future negotiations.

III. TECHNICAL ASSISTANCE ON SPS/TBT

6. The relationship of FAO to the Agreements under the World Trade Organization is highlighted by the critical role played by the Codex Alimentarius Commission (CAC) and the IPPC in the Agreements on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and Technical Barriers to Trade (the TBT Agreement).

7. Both the CAC and the IPPC standards, guidelines and recommendations are identified in the SPS Agreement as benchmarks for harmonization of food quality and safety measures and plant protection standards respectively. Measures based on the international standards, guidelines and recommendations from the designated standard setting organizations are deemed acceptable without further justification. In instances where measures deviate from established standards, or where measures are established in the absence of standards, the SPS Agreement requires justification based on scientific principles and evidence. Risk analysis methods elaborated by Codex and the IPPC provide systematic frameworks for this purpose. Both Codex and the IPPC offer extensive experience and information in this area.

8. The obligations of the SPS and TBT Agreements have resulted in significantly increased requests to FAO for technical advice and assistance. FAO's technical assistance and advice related to the SPS and TBT Agreements is provided in the following areas:

9. FAO continues to be an important source of technical assistance to both developed and developing countries, and it has a strong comparative advantage in the area of food quality and safety; fisheries; forestry; animal and plant production and health; and agriculture in general. A unique strength of FAO technical assistance lies in the Organization's ability to draw upon a wide range of multidisciplinary expertise in addressing any level and complexity of assistance required related to all aspects of the SPS and TBT Agreements.

IV. TECHNICAL ASSISTANCE RELATED TO AGRICULTURAL AND FOOD POLICY

10. FAO's follow-up work and technical assistance in relation to the AoA falls into two main categories: normative, largely done at Headquarters, and operational, largely done at the field.

11. At the normative level, following up on the major study reported to the Committee at its 60th Session, more detailed individual commodity assessments have been undertaken, including assessment of export prospects of fast growing agricultural products, especially in the fruits and vegetable sectors of major import markets, reported to the Committee at its 61st Session. Since then, such individual commodity assessments are continuing and reviewed by the respective commodity IGGs. At present, a major study for the world sugar economy is under preparation to be completed in early 1999.

12. In addition to assessments of individual commodities, the Secretariat examined the implications of the UR on selected issues, including on tariff escalation and possibilities for vertical diversification of agricultural exports, loss of preferences, and in particular on how the ACPs are affected, analysis of factors affecting world price instability and the impact of the world price spike of 1995/96 for selected net food importing developing countries. Work is also under way to assess the extent of world price transmission to domestic markets of developing countries in selected commodities.

13. The Secretariat also monitors on a continuous basis the impact of world price changes on the food import bills of the least-developed and net food-importing developing countries related to the Marrakesh Ministerial Decision and this is reported periodically to the WTO Committee on Agriculture which is responsible for monitoring the implementation of this Decision. At the request of the International Grains Council, FAO provided a paper on issues and proposals to be taken into account in the process of the re-negotiation of the 1990 Food Aid Convention (FAC).

14. Another issue on which the Secretariat has responded to increasing demand from developing countries is on the interpretation of the specific provisions of the AoA and their implications for domestic food and agricultural policy. This is being examined in the form of general studies and in the context of policy assistance to individual countries (see below).

15. At the operational level, FAO's technical assistance in agricultural and food policy is delivered at regional and country levels with the aim of building the capacity of these countries in trade issues. Up to now, the bulk of FAO's technical assistance has been concerned with helping countries understand the implications of the Agreement of Agriculture for national policies. This has been done through workshops, national policy advice missions, publications, and training manuals.

16. As regards regional activities, emphasis was placed initially on increasing awareness and understanding of the meaning of rules and commitments made. This was done largely through workshops, in collaboration with the World Bank, the WTO, IFPRI and other international organizations, regional bodies and donors. In addition to addressing issues of interpretation of the AoA these workshops focused also on selected issues of regional concern.

17. At the country level, FAO assistance in agricultural and food policy included: reviewing current food and agricultural policies of countries members of the WTO and examining their compatibility with those agreed under the Agreement of Agriculture; assisting in the incorporation of trade policy concerns in the formulation of domestic agricultural policy; assistance to non-members of the WTO on accession issues; training farmers' organizations in WTO-related matters; and examining the implications of EU integration.

18. The focus of technical assistance in agricultural and food policy has now shifted to preparing countries for the continuation of the reform process in agriculture under the WTO which is scheduled to start in 1999 (see below on some specific issues which would be central in the preparation of developing countries). In the second half of 1998, four regional meetings were held on "1999" issues. These were: for the Pacific Region in August/September, for the North Africa/Near East region in December, for Sub-Sahara Africa in November; and for Latin America in November. These were organized with a variety of funding sources and with the collaboration of other organizations. Also, at the invitation of the Swiss Agency for International Trade, Information and Co-operation (AITIC), FAO held a training course for the missions of developing countries in Geneva in October 1998.

19. For 1999 FAO is planning to hold, funds permitting, further regional workshops. Subsequently, an expert consultation will be held in Rome with the aim at pulling together the main ideas that emerge from the regional perspectives and fostering alliances between countries that have similar concerns so that they put on the negotiating agenda issues of concern to them.

20. FAO is also associated with the six agency (WTO, UNCTAD, ITC, World Bank, IMF and UNDP) Integrated Framework initiative for providing trade-related technical assistance to the Least Developed countries. Finally, FAO has established good working relationships with a number of NGOs which have capacity in trade-related issues. Such alliances with NGOs are being fostered by consultations and an exchange of studies and information on the impact of the UR agreements as they are being implemented in practice and in soliciting views on emerging issues and problems, based on a broader base of all those concerned in the continuation of the reform process in agriculture, including governments, consumer groups and farmers' organizations in the different regions.

21. FAO also helps developing countries with a broad range of legal issues in agriculture and renewable natural resources management, including in the field of intellectual property rights over plant varieties, and both technical and legal aspects of seed quality control and plant varietal protection. The focus of FAO's work in this regard is to assist national authorities to analyse their needs and identify appropriate policy options; to formulate or revise the relevant national legislation; and to advise on the structure and functions of the institutions involved. FAO is able upon request to advise countries in relation to the fulfilment of their WTO obligations to provide effective plant varietal protection, according to TRIPS, and to assist in the formulation of relevant draft acts and regulations.

V. PREPARATIONS FOR FUTURE NEGOTIATIONS ON AGRICULTURE

22. Article 20 of the AoA points the way to further negotiations on agriculture to be initiated in 1999. The form that these negotiations (i.e. whether it would only cover "mandatory" subjects3 like agriculture, services and parts of intellectual property, or whether it would be extended to other sectors like all goods or new areas like competition policy and environment) is still to be decided.

23. Article 20 recognizes that to reach the long term objective of substantial and progressive reductions on agricultural support and protection there is a need to continue negotiations, taking into account: (a) the experience from implementing the reduction commitments; (b) the effects of the reduction commitments on world trade in agriculture; (c) non-trade concerns, special and differential treatment to developing country Members, and the objective to establish a fair and market-oriented agricultural trading system, and the other objectives and concerns mentioned in the preamble to the Agreement; and (d) what further commitments are necessary to achieve the above mentioned long-term objectives.

24. While the decision on the agenda of future negotiations will have to wait till sometime in 1999, the following issues of concern to developing countries have been raised in the context of FAO's technical assistance work as well as in other fora.

25. Many developing countries have experienced problems in the implementation of their Uruguay Round commitments and in realizing the expected benefits foreseen when the Marrakesh agreements were signed four years ago. Other developing countries, not members of the WTO, have also encountered difficulties in preparing their institutional and policy framework for their entry negotiations. The most common difficulties faced by the developing countries in the implementation of the UR Agreement on Agriculture concern domestic support. Many developing countries notified zero Aggregate Measure of Support (production or trade distorting support) or set commitments in terms of domestic currencies, the value of which has been eroded by inflation. Sometimes the real value of the AMS remains negligible while the monetary value exceeds the de minimis ceiling. Another issue concerns whether certain policies are eligible for inclusion in the Green Box or for exempt development measures (Article 6.2). The latter is particularly important as assistance to "low income or resource poor producers" under this clause is exempt from reduction commitments; yet it is not always clear which farmers qualify. Other problems have arisen in the use or lack of use of external reference prices for the calculation of the level of domestic support. Finally the issue of the appropriate treatment of negative AMS items has also been raised.

26. The special and differential treatment accorded to developing countries under the Uruguay Round agreements is another area of concern to some developing countries. These special provisions were designed to take into account the constraints faced by many developing countries in taking advantage of trading opportunities. Such constraints could be due to structural problems, low level of industrialization, limited access to advanced technologies or non-availability of adequate infrastructure. However, in the view of several developing countries, these provisions have had disappointing results in the process of the implementation of the Uruguay Round agreements. Thus, they emphasize that a high priority should be given to addressing existing imbalances and problems of implementation of the relevant provisions and decisions adopted during the Uruguay Round negotiations, particularly those relating to the needs and interests of developing countries.

27. In the area of market access, while non-tariff barriers have been banned under the AoA, in practice access is still felt to be difficult in many cases and stops developing countries from benefiting fully from potential export opportunities. Growth in agricultural trade has shifted partly to processed/higher quality niche markets which are not so easily penetrable by new exporters, partly due to high costs in complying with the sanitary and phytosanitary standards in these markets. Efforts would need to continue in the harmonization of SPS standards and in providing technical assistance to developing countries to upgrade their capacity in quality control and related infrastructure in order to be able to meet such standards.

28. Of significance for many developing countries in the continuation of the reform process in agriculture is giving adequate consideration to non-trade concerns and especially food security which is explicitly mentioned in the preamble of the AoA. There are three components of food security - adequacy, stability and access. As regards adequacy of food supplies, which for many food deficit developing countries have to come mainly from domestic production, there is one issue that is often raised. This is whether efforts to boost food production and to help sustain the incomes of poor farmers largely dependent on agriculture for a living should be subject to reduction commitments at all.

29. As regards stability, the reduction of publicly held food stocks by major exporting countries has shifted more the burden of cushioning domestic markets (against major fluctuations in world market prices) to the importing countries. While the transmission of moderate world price changes to domestic market is desirable, full transmission of extreme price changes is considered by many developing countries to be undesirable for both consumers and producers. In this context they consider that existing relevant provisions of the AoA which allow a certain degree of flexibility in the application of border and domestic stabilization measures should be further clarified and strengthened. Related to this issue is also the Special Safeguard Clause (SSG) of the AoA which allows for additional tariffs in the case of either low import prices or sharply increased import volumes. However, access to SSG is not universal (neither in terms of products nor countries) with most developing countries not having access to it, as it was linked to the tariffication process. In particular, in the case of basic foodstuffs, many developing countries favour having access to the SSG, given that they find the general GATT safeguards are not easily applicable in practice as they require proof of injury and a costly dispute settlement process.

30. As regards access to food, the issue being raised by several net food importing developing countries relates not so much to domestic poverty alleviation, which continues to be the major impediment to access but whether their overall export earnings are able to keep pace with their food import bills. The question of the implementation of the Marrakesh Decision in favour of the Least Developed Countries (LDCs) and Net Food Importing Developing Countries (NFIDCs) is also a matter of concern to them.

31. Related to the food security concerns of developing countries is the future treatment of state trading enterprises (STEs) by the multilateral system. STEs exist in most countries, both developed and developing, and are particularly prominent in the agricultural sector where their activities in most developing countries are not merely in trading operations. They often play an important role in implementing other policy goals, such as in providing inputs and basic infrastructure to farmers and maintaining prices of basic foodstuffs affordable to poor households. STEs have long been a matter of debate (Article XVII and Understanding on the Interpretation of this Article) and they are presently subject to review by the WTO Working Party on STEs.

32. A final issue that has implications for developing countries is the consequences of further trade liberalization for preferential trade arrangements which benefit some of them. The changes in the global trading environment often have implications for the preference-receiving countries, bringing in new challenges and offering fresh opportunities. These countries have already experienced some erosion in tariff preferences, and are concerned lest further erosion occurs in the future.

33. This paper has been prepared for the information of delegates.

1 FAO is also involved in other Agreements in a more limited way e.g. Agreement on Rules of Origin in the fisheries area.

2 FAO Technical Assistance and The Uruguay Round Agreements, FAO Rome 1998 (Second Edition).

3 Article 20 of the Agreement on Agriculture; Article XIX of the General Agreement on Trade in Services and Article 27.3 of the Agreement on Trade Related Aspects of Intellectual Property Rights.