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5 Negotiating proposals and their impact on agricultural trade and food security

Peru welcomes the initiative on a new round of multilateral trade negotiations provided that a consensus is reached on a broad and balanced agenda, which reflects the interests of all WTO Members, and that transparent working methods are adopted so as to guarantee equitable participation by all Members. For Peru, it is particularly important to strengthen a stable, transparent and predictable trade environment that allows greater access to international markets for Peru’s exports. Peru intends to maintain its commitment to a free trade regime, the free movement of capital and a floating exchange rate, and to further reforms in foreign trade and the customs regime.

Peru’s trade policy of openness and liberalization seeks to integrate Peru into the global economy so that it can take advantage of specialization in international markets. Peru therefore pays particular attention to strengthening a predictable international trade system based on fair competition, the development of comparative advantages and less protectionism (WTO, 2000b).

The trade policy goal of the Peruvian Government is to double the value of exports in the period 2001-2006 (Perú Posible, 2001). For Peru, the new negotiations have a paramount importance for modernizing the Peruvian economy and for achieving a greater participation in global trade flows.

Given the above policy goal, the issues with higher priority are the deepening of negotiations to achieve complete market access for Peruvian products to the developed markets of the United States, EU and Japan.

A second issue refers to the need to achieve fair competition and less protectionism in world agricultural markets. This requires the final dismantling of domestic support measures and export subsidies in the developed economies (WTO, 2000b).

However, there is a general agreement that developing countries, such as Peru, would continue to require special and differential treatment. Many domestic producers in Peru would need help and time to adjust before they could take advantage of new trading opportunities (WTO, 2000b).

It was also argued above that small producers are often the losers in the globalization trend and in the liberalization of trade. Since any threat to the livelihood of small farmers increases the risk of domestic food insecurity, there is a need to establish some kind of targeted support mechanism to increase smallfarm productivity and competitiveness and stimulate rural economic diversification (FAO, 2000a).

One policy option, suggested at various levels, is the creation of a “Development Box” similar to the Green Box (this issue has not been explicitly raised by the Peruvian authorities). The Development Box would identify support measures which developing countries would be allowed to continue to use in order to meet domestic goals related to a broad range of issues, including increased food production, reducing rural/urban income disparities, rural development, the environment and food security.

From this perspective, Peru and the Andean Group countries should be in a position to negotiate a further reduction of tariffs by all parties. The counterpart should be to offer a lower bound tariff. The offer of a new general bound tariff could be at a level near the maximum CET to be applied in 2004.

The new bound tariff for sensitive items will depend on the advances in removing domestic support and export subsidies in the developed economies. One possible proposal is that the bound tariff on sensitive products might be reduced by half the proportion of the cutback in domestic support/export subsidies in the United States/EU/Japan.

No trade negotiation will do much to enhance production without parallel domestic reform. Trade negotiations are necessary but not sufficient. Some active policies are needed to fill the gaps that the market does not: investment, credit and services. There is an acute problem of finance, especially in countries such as Peru where drastic financial reform was introduced and development banks were eliminated; there is simply no credit for the agricultural sector and no money to engage in agricultural production. Also, the market is not delivering all the services connected to agricultural production (FAO, 2000a) quickly enough. The financial restrictions in the agricultural sector are of special importance to Peru (Perú Posible, 2001).

A structural asymmetry is developing at present because the types of policy instruments that are legitimate require a high level of institutional capacity, which is basically lacking in Peru and most developing countries, while the policy instruments that can be used without major institutional difficulties are being eliminated by the multilateral negotiations. One major goal of Peru and developing countries during the next round is to safeguard their freedom to implement some basic policies in support of the agricultural sector.

Another issue of importance is the relation between agriculture and other areas of negotiation. Developments in the TRIPS Agreement have important impacts on the agricultural sector of Peru and other developing countries in two areas: the extension of the range of patents of plant varieties and animals and the control of technology and parallel imports. These patents may have a strong impact on the cost of basic agricultural inputs: there is worry that increases in input prices may put them beyond the reach of small farmers.

Also, there is the issue of competition. Although a country may negotiate a right to export food products to another, business licences may prevent the supplying of those products from one market to another. This raises the whole issue of market distribution relating to licence holders of patents and franchises that really hampers domestic production and exports. This is an issue that has affected Peruvian companies in the near past, as stated above when referring to the “Pisco” dispute with Chile.

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