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WTO Agriculture - The issues, and where we are now

The issues, and where we are now

As a word document...
http://www.wto.org/english/tratop_e/agric_e/agnegs_bkgrnd_e.doc

UPDATED 2 OCTOBER 2001

This briefing document explains current agricultural issues raised before and in the current negotiations. It has been prepared by the Information and Media Relations Division of the WTO Secretariat to help public understanding about the agriculture negotiations. It is not an official record of the negotiations.

Countries, alliances and proposals

Members that submitted proposals and technical papers in Phase 1, with an indication of groupings and alignments based on joint-authorship

Details at: http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm

1. Albania (transition: domestic support)

2. Angola (African Group)

3. Antigua and Barbuda (Caricom)

4. Argentina (Cairns Group + Mercosur)

5. Australia (Cairns Group)

6. Barbados (Caricom + small island developing states + non-trade concerns)

7. Belize (Caricom)

8. Benin (African Group)

9. Bolivia (Cairns Group + “Mercosur+” 1, 2)

10. Botswana (African Group)

11. Brazil (Cairns Group + Mercosur)

12. Brunei (ASEAN)

13. Bulgaria (transition: domestic support, market access)

14. Burkina Faso (own proposal + African Group)

15. Burundi (own proposal + African Group + non-trade concerns)

16. Cameroon (African Group)

17. Canada (Cairns Group + own proposal on market access, supplementary proposal on domestic support)

18. Central African Republic (African Group)

19. Chad (African Group)

20. Chile (Cairns Group + “Mercosur+” 1, 2)

21. Colombia (Cairns Group + “Mercosur+” 2)

22. Congo (African Group)

23. Congo, Democratic Rep (own proposal + African Group)

24. Costa Rica (Cairns Group + “Mercosur+” 1)

25. Côte d’Ivoire (African Group)

26. Croatia (transition: domestic support, market access)

27. Cuba (developing country grouping 1, 2, 3 + small island developing states)

28. Cyprus (non-trade concerns)

29. Czech Republic (transition: domestic support, market access + non-trade concerns)

30. Djibouti (African Group)

31. Dominica (small island developing states + Caricom)

32. Dominican Republic (developing country grouping 1, 2, 3)

33. Egypt (own proposal + African Group)

34. El Salvador (developing country grouping 1, 2, 3)

35. Estonia (transition: market access + non-trade concerns)

36–51: EU (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK) (own proposals + non-trade concerns)

52. Fiji (non-trade concerns)

53. Gabon (African Group)

54. The Gambia (African Group)

55. Georgia (transition: domestic support, market access)

56. Ghana (African Group)

57. Grenada (Caricom)

58. Guatemala (Cairns Group)

59. Guinea (African Group)

60. Guinea Bissau (African Group)

61. Guyana (Caricom)

62. Haiti (developing country grouping 1, 2, 3)

63. Honduras (developing country grouping 1, 2, 3)

64. Hungary (transition: domestic support, market access)

65. Iceland (non-trade concerns)

66. India (own proposal + developing country grouping 3)

67. Indonesia (Cairns Group + ASEAN)

68. Israel (non-trade concerns)

69. Jamaica (small island developing states + Caricom)

70. Japan (own proposal + non-trade concerns)

71. Jordan

72. Kenya (own proposal + developing country grouping 1, 2, 3 + African Group)

73. Korea, Republic (own proposal + non-trade concerns)

74. Kyrgyz Republic (transition: domestic support, market access)

75. Latvia (transition: domestic support, market access + non-trade concerns)

76. Lesotho (African Group)

77. Liechtenstein (non-trade concerns)

78. Lithuania (transition: domestic support, market access) (Joined WTO on 31 May 2001)

79. Madagascar (African Group)

80. Malawi (African Group)

81. Malaysia (Cairns Group + ASEAN)

82. Mali (own proposal + African Group)

83. Malta (non-trade concerns)

84. Mauritania (African Group)

85. Mauritius (own proposal + small island developing states + non-trade concerns + African Group)

86. Mexico

87. Mongolia (transition: domestic support + non-trade concerns)

88. Morocco (own proposal + African Group)

89. Mozambique (African Group)

90. Myanmar (ASEAN)

91. Namibia (own proposal + African Group)

92. New Zealand (Cairns Group)

93. Nicaragua (developing country grouping 1, 2)

94. Niger (African Group)

95. Nigeria (own proposal + developing country grouping 3 + African Group)

96. Norway (own proposal + non-trade concerns)

97. Pakistan (developing country grouping 1, 2, 3)

98. Paraguay (Cairns Group + Mercosur)

99. Philippines (Cairns Group + ASEAN)

100. Poland (own proposal + non-trade concerns)

101. Romania (non-trade concerns)

102. Rwanda (African Group)

103. Saint Kitts and Saint Nevis (small island developing states + Caricom)

104. Saint Lucia (Caricom + non-trade concerns)

105. Saint Vincent and the Grenadines (small island developing states + Caricom)

106. Sénégal (own proposal + African Group)

107. Sierra Leone (African Group)

108. Singapore (ASEAN)

109. Slovak Republic (transition: domestic support, market access + non-trade concerns)

110. Slovenia (transition: domestic support, market access + non-trade concerns)

111. South Africa (Cairns Group + African Group)

112. Sri Lanka (developing country grouping 1, 2, 3)

113. Suriname (Caricom)

114. Swaziland (own proposal + African Group)

115. Switzerland (own proposal + non-trade concerns)

116. Tanzania (African Group)

117. Thailand (Cairns Group + ASEAN)

118. Trinidad and Tobago (small island developing states + non-trade concerns)

119. Togo (African Group)

120. Tunisia (African Group)

121. Turkey

122. Uganda (developing country grouping 1, 2, 3 + African Group)

123. United States

124. Uruguay (Cairns Group + Mercosur)

125. Zambia (African Group)

126. Zimbabwe (developing country grouping 1, 2, 3 + African Group)

Key to the groups

African Group (41 countries):

Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Congo (Democratic Republic), Côte d'Ivoire, Djibouti, Egypt, Gabon, The Gambia, Ghana, Guinea, Guinea Bissau, Kenya, Lesotho, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, South Africa, , Swaziland, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe

ASEAN (members of WTO):

Brunei, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand

Cairns Group (G/AG/NG/W/11, 35, 54, 93):

Argentina, Australia, Bolivia, Brazil, Canada (G/AG/NG/W/11, 35, 93), Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, Uruguay

Caricom:

Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Trinidad and Tobago, Suriname

“Developing country grouping” = joint sponsors of:

(1) G/AG/NG/W/13 (S&D and development box): Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka, El Salvador

(2) G/AG/NG/W/14 (green box): Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka, El Salvador

(3) G/AG/NG/W/37 + Corr.1 (market access): Cuba, Dominican Republic, El Salvador, Haiti, Honduras, Kenya, India, Nigeria, Pakistan, Sri Lanka, Uganda, Zimbabwe

Mercosur:

Argentina, Brazil, Paraguay, Uruguay

“Mercosur+” = joint sponsors of:

(1) G/AG/NG/W/38: Mercosur + Bolivia, Chile, Costa Rica

(2) G/AG/NG/W/104: Mercosur + Bolivia, Chile, Colombia

Mercosur, Bolivia, Chile, Costa Rica, Guatemala, India and Malaysia sponsored proposal G/AG/NG/W/139 on export credits

“Non-trade concerns” = 38 countries that sponsored note G/AG/NG/W/36/Rev.1 (conference papers on non-trade concerns):

Barbados, Burundi, Cyprus, Czech Republic, Estonia, EU, Fiji, Iceland, Israel, Japan, Korea, Latvia, Liechtenstein, Malta, Mauritius, Mongolia, Norway, Poland, Romania, Saint Lucia, Slovak Republic, Slovenia, Switzerland, Trinidad and Tobago

“Small island developing states” (SIDS):

Barbados, Cuba, Dominica, Jamaica, Mauritius, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Trinidad and Tobago

“Transition” = joint sponsors of:

(1) G/AG/NG/W/56 (domestic support): Albania, Bulgaria, Croatia, the Czech Republic, Georgia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Mongolia, Slovak Republic, Slovenia

(2) G/AG/NG/W/57 (market access): Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Kyrgyz Republic, Latvia, Slovak Republic, Slovenia, Croatia, Lithuania

WTO AGRICULTURE NEGOTIATIONS

The issues, and where we are now

TEXT UPDATED 2 OCTOBER 2001

Introduction: the present reform programme

Up to 1995, GATT rules were largely ineffective in disciplining key aspects of agricultural trade. In particular, export and domestic subsidies came to dominate many areas of world agricultural trade, while the stricter disciplines on import restrictions were often flouted. The 1986–1994 Uruguay Round negotiations went a long way towards changing all that.

Agriculture trade is now firmly within the multilateral trading system. The WTO Agriculture Agreement, together with individual countries’ commitments to reduce export subsidies, domestic support and import duties on agricultural products were a significant first step towards reforming agricultural trade.

The reform strikes a balance between agricultural trade liberalization and governments’ desire to pur-sue legitimate agricultural policy goals, including non-trade concerns (see below, on page 19).

It has brought all agricultural products (as listed in the agreement) under more effective multilateral rules and commitments, including “tariff bindings” — WTO members have bound themselves to maximum tariffs on nearly all agricultural products, while many industrial tariffs remain unbound.

For the first time, member governments are committed to reducing agricultural export subsidies and trade-distorting domestic support. They have agreed to prohibit subsidies that exceed negotiated limits for specific products. And the commitments to reduce domestic support are a major innovation and are unique to the agricultural sector.

The Uruguay Round agreement set up a framework of rules and started reductions in protection and trade-distorting support. But this was only the first phase of the reform. Article 20 of the Agriculture Agreement (see below, on page 10) committed members to start negotiations on continuing the reform at the end of 1999 (or beginning of 2000). Those negotiations are now well underway, using Arti-cle 20 as their basis.

Negotiations: second phase began in March 2002

The negotiations are now in their second phase. The first phase began in early 2000 and ended with a stock-taking meeting on 26–27 March 2001. Altogether, 126 member governments (89% of the 142 members) submitted 45 proposals and three technical documents. Six negotiating meetings (officially called “Special Sessions” of the Agriculture Committee) were held: in March, June, September and November 2000, and February and March 2001.

In the second phase, the meetings are largely “informal”, with a record of proceedings taking the form of a summary report by the chairperson to formal meetings (i.e formal “Special Sessions”). The work programme decided at the March 2001 stock-taking meeting set a timetable of six informal meetings in May, July, September and December 2001, and February and March 2002. The September and De-cember 2001 and March 2002 sessions are also followed by formal meetings. The first phase con-sisted of countries submitting proposals containing their starting positions for the negotiations. The meetings discussed each of these proposal in turn. In the second phase, the discussions are by topic, and include more technical details, which is needed in order to find a way to allow members to de-velop specific proposals and ultimately reach a consensus agreement on changes to rules and com-mitments in agriculture.

The first three informal meetings of Phase 2 (in May, June and September 2001) covered: tariff quota administration; tariffs; “amber”, “green” and “blue box” domestic supports; export subsidies; export credits; state trading enterprises and single-desk traders; export taxes and restrictions; food security; food safety; rural development; geographical indications; and the special agricultural safeguard. Among the topics to be discussed in future meetings are: environment; trade preferences; food aid; consumer information and labelling; and sectoral initiatives. These are explained below.

The proposals received in the first phase covered all major areas of the agriculture negotiations and a few new ones. Many proposals (e.g. from the US, EU, Japan, Switzerland, Mauritius, etc) were “com-prehensive”, i.e. they covered a full range of subjects for negotiation. Some other proposals dealt with specific subjects (e.g. each Cairns Group proposal dealt with a different area).

Although the views expressed in the papers and during the Phase 1 meetings were very wide, this was not surprising at that early stage. The second phase is more complicated. Members are now discussing specific issues in greater depth. Subsequent phases will also be more difficult because narrowing the gaps between positions and reaching a final agreement will also require tough political compromises.

To assist the negotiations, the Secretariat has so far produced 22 background papers at the request of members. Most of these can be found in the G/AG/NG/S series of official documents (see http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm)

The mandate: Article 20

The negotiations are being conducted under Article 20 of the Agriculture Agreement (see box above). This says WTO members have to negotiate to continue the reform of agricultural trade.

The direction of the reform is clearly set out in the article — “substantial progressive reductions in support and protection resulting in fundamental reform”.

The negotiations are difficult because of the wide range of views and interests among member gov-ernments. They aim to contribute to further liberalization of agricultural trade. This will benefit those countries which can compete on quality and price rather than on the size of their subsidies. That is particularly the case for many developing countries whose economies depend on an increasingly di-verse range of primary and processed agricultural products, exported to an increasing variety of mar-kets, including to other developing countries.

The following issues are among those that have been raised in the negotiations.

The objective: continuing reductions and other issues

Further substantial reductions in tariffs, domestic support and export subsidies are prominent issues in the negotiations. In addition, some countries say an important objective of the new negotiations should be to bring agricultural trade under the same rules and disciplines as trade in other goods. Some others, reject the idea for a number of reasons (for example, see “non-trade concerns and mul-tifunctionality”, below on page 19).

This is sometimes translated into conceptual differences, reflecting the importance that members at-tach to the major issues in the negotiations. Some countries have described the mandate given by Article 20 as a “tripod” whose three legs are export subsidies, domestic support, and market access. Non-trade concerns and special and differential treatment for developing countries would be taken into account as appropriate. Others say it is a “pentangle” whose five sides also include non-trade concerns and special and differential treatment for developing countries as separate issues in their own right. So far, these differences of approach have not delayed the discussions.

PHASE 1

See also Phase 2 update on page 22

Export subsidies and competition

Some countries are proposing the total elimination of all forms of export subsidies, in some cases with a deep reductions right at the start of the next period as a “downpayment”. Others are prepared to negotiate further progressive reductions without going so far as the subsidies’ complete elimination, and without any “downpayment”.

Many (but not all) developing countries argue that their domestic producers are handicapped if they have to face imports whose prices are depressed because of export subsidies, or if they face greater competition in their export markets for the same reason. This group includes countries that are net food importers and also want help to adjust if world prices rise as a result of the negotiations.

In addition, many countries would like to extend and improve the rules for preventing governments getting around (“circumventing”) their commitments on export subsidies — including the use of state trading enterprises, food aid and subsidized export credits.

Some countries, such as India, propose additional flexibility for developing countries to allow subsi-dies on some products to increase when subsidies on other products are reduced.

Several developing countries complain that the rules are unequal. They object in particular to the fact that developed countries are allowed to continue to spend large amounts on export subsidies while developing countries cannot because they lack the funds, and because only those countries that origi-nally subsidized exports were allowed to continue subsidizing — albeit at reduced levels. One group of developing countries compares the effect of various types of export subsidies with “dumping” that harms their farmers. As a result of all of these concerns, some proposals envisage sharply different terms for developing countries. ASEAN and India, for example, propose scrapping all developed countries’ export subsidies while allowing developing countries to subsidize for specific purposes such a marketing. Some developing countries say they should be allowed to retain high tariff barriers or to adjust their current tariff limits, in order to protect their farmers — unless export subsidies in rich countries are substantially reduced. Some other developing countries counter that the barriers would also hurt developing countries that want to export to fellow-developing countries.

Proposals containing positions on export subsides and competition submitted in Phase 1

(see also proposals on developing countries and on non-trade concerns)

- Cairns Group: export competition G/AG/NG/W/11

- 11 developing countries: special and differential treatment and a development box G/AG/NG/W/13

- US: a comprehensive proposal G/AG/NG/W/15

- EU: export competition (focusing on credit, food aid, and state trading enterprises) G/AG/NG/W/34

- ASEAN: special and differential treatment for developing countries in world agricultural trade G/AG/NG/W/55

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Japan: proposal G/AG/NG/W/91

- Switzerland: proposal G/AG/NG/W/94

- Mauritius: proposal G/AG/NG/W96

- Rep of Korea: proposal G/AG/NG/W/98

- Mali: proposal G/AG/NG/W/99

- Norway: proposal G/AG/NG/W/101

- India: proposal G/AG/NG/W/102

- Poland: proposal G/AG/NG/W/103

- “Mercosur+”: state trading enterprises G/AG/NG/W/104

- Morocco: proposal G/AG/NG/W/105

- Turkey: proposal G/AG/NG/W/106

- Egypt: proposal G/AG/NG/W/107

- Nigeria: proposal G/AG/NG/W/130

- Congo, Dem Rep: proposal G/AG/NG/W/135

- Kenya: proposal G/AG/NG/W/136

- Senegal: preliminary positions G/AG/NG/W/137

- Mexico: proposal G/AG/NG/W/138

- Mercosur, Bolivia, Chile, Costa Rica, Guatemala, India, Malaysia: export credits G/AG/NG/W/139

- Jordan: proposal G/AG/NG/W/140

- African Group: joint proposal G/AG/NG/W/142

- Namibia: proposal G/AG/NG/W/143

- A group of Latin American countries in Mercosur and the Cairns Group

also submitted a discussion paper on export subsidies: G/AG/NG/W/38.

- Croatia included export subsidies in its discussion paper G/AG/NG/W/141

Export restrictions and taxes

A number of importing countries, for example Japan, say their food supplies could be disrupted if ex-porting countries restrict or tax exports. They propose disciplines on export restrictions, for example converting them to taxes that would then be reduced (similar to “tariffication” of import restrictions). Switzerland proposes eliminating these completely, but with some flexibility for developing countries.

The Cairns Group of net exporters has submitted a similar proposal, but linked it to reductions in “tariff escalation” — i.e. higher duties on processed products, which hamper the development of processing industries in countries that produce raw materials. The group also proposes flexibility for developing countries.

Proposals that mention export restrictions submitted in Phase 1

- US: comprehensive proposal G/AG/NG/W/15

- Japan: proposal G/AG/NG/W/91

- Cairns Group: export restrictions and taxes G/AG/NG/W/93

- Switzerland: proposal G/AG/NG/W/94

- Rep of Korea: proposal G/AG/NG/W/98

- Congo, Dem Rep: proposal G/AG/NG/W/135

- Jordan: proposal G/AG/NG/W/140

Market access: tariffs and tariff quotas

Nowadays, among WTO members, agricultural products are protected only by tariffs. All non-tariff barriers had to be eliminated or converted to tariffs as a result of the Uruguay Round (the conversion was known as “tariffication”). In some cases, the calculated equivalent tariffs — like the original measures that were tariffied — were too high to allow any real opportunity for imports. So a system of tariff-rate quotas was created to maintain existing import access levels, and to provide minimum access opportunities. This means lower tariffs within the quotas, and higher rates for quantities out-side the quotas.

The discussion since the Uruguay Round has focused broadly on two issues: the high levels of tariffs outside the quotas (with some countries pressing for larger cuts on the higher tariffs), and the quotas themselves — their size, the way they have been administered, and the tariffs charged on imports within the quotas.

The tariffs: The discussion of tariffs covers both tariffs on quantities within quotas and those outside. Traditionally, the tariff reductions that resulted from trade negotiations came from bilateral product-by-product bargaining, or they were based on formulas that applied over a broad range of products, or combinations of the two. How the reductions will be handled in the present negotiations is still unde-cided. Some countries — such as Canada and the US — are advocating that in addition, “sectoral lib-eralization” should be negotiated. In some sectors, in past negotiations these have sometimes meant “zero-for-zero” deals. It would include negotiating the complete elimination of tariffs (and possibly other measures such as export subsidies or subsidized export credits) by at least the key WTO mem-bers in specific sectors such as oilseeds, and barley and malt. Some countries — for example Japan — have said they do not support this.

One country, the US, has gone so far as to argue that because so many agricultural tariffs are high, the negotiations to reduce tariffs should start with “applied rates” (the tariffs governments actually charge on agricultural imports) and not the generally higher “bound rates” (the legally binding ceilings com-mitted in the WTO as a result of previous negotiations). This has proved quite controversial because it would break a tradition of basing negotiations on bound rates. A number of countries have also coun-tered that they should be given credit for unilaterally applying tariffs that are more liberal than the negotiated bound rates, instead of being forced to make even deeper cuts than countries that kept to their higher bound rates. Some countries that recently joined the WTO also feel that they accepted low tariffs in order to become members and therefore should not have to reduce them much further.

A number of developing countries also complain that they face difficulty if they try to increase their incomes by processing the agricultural raw materials that they produce. This is because the countries they see as potential export markets impose higher duties on processed imports than on the raw mate-rials — known as tariff escalation — in order to protect their own processing industries.

Some countries see tariffs and other import barriers as necessary in order to protect domestic production and maintain food security. For this reason, some countries are linking lower import barriers with disciplines on other countries’ export restraints and export taxes — if producing countries do not restrict their exports, then importing countries can feel more secure about being able to obtaining food from them. Some developing countries say they need flexibility in deciding the level of import duties they charge to protect their farmers against competition from imports whose prices are low because of export subsidies.

The tariff quotas: Quota administration is a technical subject, but it has a real impact on trade — on whether a product exported from one country can gain access to the market of another country at the lower, within-quota tariff.

Methods used for giving exporters access to quotas include first-come, first-served allocations, import licensing according to historical shares and other criteria, administering through state trading enter-prise, bilateral agreements, and auctioning. The terms can also specify time periods for using the quotas, for example periods of time for applying for licences, or for delivering the products to the im-porting countries. Exporters are sometimes concerned that their ability to take advantage of tariff quotas can be handicapped because of the way the quotas are administered. Sometimes they also complain that the licensing timetables put them at a disadvantage when production is seasonal and the products have to be transported over long distances.

Each method has advantages and disadvantages, and many WTO members acknowledge that it can be difficult to say conclusively whether one method is better than another. Several countries want the negotiations to deal with tariff quotas: to replace them with low tariffs, to increase their size, to sort out what they consider to be restricting and non-transparent allocation methods, or to clarify which methods are legal or illegal under WTO rules in order to provide legal certainty.

Proposals containing positions on market access submitted in Phase 1

(see also proposals on developing countries and on non-trade concerns)

- Canada: market access G/AG/NG/W/12

- 11 developing countries: special and differential treatment and a development box G/AG/NG/W/13

- US: a comprehensive proposal G/AG/NG/W/15

- EU: Food quality: improvement of market access opportunities G/AG/NG/W/18

- 12 developing countries: market access G/AG/NG/W/37 + Corr.1

- Cairns Group: market access G/AG/NG/W/54

- ASEAN: special and differential treatment for developing countries in world agricultural trade G/AG/NG/W/55

- 11 transition economies: market access G/AG/NG/W/57

- US: tariff rate quota reform G/AG/NG/W/58

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Japan: proposal G/AG/NG/W/91

- Switzerland: proposal G/AG/NG/W/94

- Swaziland: market access under special and differential treatment for small developing countries G/AG/NG/W/95

- Mauritius: proposal G/AG/NG/W96

- Small island developing states: (part of) proposal G/AG/NG/W/97

- Rep of Korea: proposal G/AG/NG/W/98

- Mali: proposal G/AG/NG/W/99

- Caricom: proposal G/AG/NG/W/100

- Norway: proposal G/AG/NG/W/101

- India: proposal G/AG/NG/W/102

- Poland: proposal G/AG/NG/W/103

- “Mercosur+”: state trading enterprises G/AG/NG/W/104

- Morocco: proposal G/AG/NG/W/105

- Turkey: proposal G/AG/NG/W/106

- Egypt: proposal G/AG/NG/W/107

- Nigeria: proposal G/AG/NG/W/130

- Congo, Dem Rep: proposal G/NG/W/135

- Kenya: proposal G/AG/NG/W/136

- Senegal: preliminary positions G/AG/NG/W/137

- Mexico: proposal G/AG/NG/W/138

- Jordan: proposal G/AG/NG/W/140

- African Group: joint proposal G/AG/NG/W/142

- Namibia: proposal G/AG/NG/W/143

- Croatia included market access in its discussion paper G/AG/NG/W/141

Market access: special agricultural safeguards

Safeguards are contingency restrictions on imports taken temporarily to deal with special cir-cumstances such as a sudden surge in imports. They normally come under the Safeguards Agreement, but the Agriculture Agreement has special provisions (Article 5) on safeguards.

The special safeguards provisions for agriculture differ from normal safeguards (see details in “Trading into the Future”, pages 31–32). In agriculture, unlike with normal safeguards:

- higher safeguards duties can be triggered automatically when import volumes rise above a certain level, or if prices fall below a certain level; and

- it is not necessary to demonstrate that serious injury is being caused to the domestic industry.

The special agricultural safeguard can only be used on products that were tariffied — which amount to less than 20% of all agricultural products (as defined by “tariff lines”). But they cannot be used on imports within the tariff quotas, and they can only be used if the government reserved the right to do so in its schedule of commitments on agriculture. In practice, the special agricultural safeguard has been used in relatively few cases.

Proposals range from continuing with the provision in its current form, to its abolition, or its revision to prevent its use on products from developing countries. Some developing countries have proposed that only they would be allowed to use special safeguards — developed countries would not be al-lowed to do so.

Japan and Rep of Korea propose a new form of special safeguard that would apply to perishable and seasonal products. A number of countries have objected to this.

The right to use the special agricultural safeguard would lapse if there is no agreement in the negotia-tions to continue the “reform process” initiated in the Uruguay Round (see Articles 5.9 and 20 of the Agriculture Agreement).

Proposals containing positions on special safeguards submitted in Phase 1

(see also proposals on developing countries and on non-trade concerns)

- 11 developing countries: special and differential treatment and a development box G/AG/NG/W/13

- US: a comprehensive proposal G/AG/NG/W/15

- Cairns Group: market access G/AG/NG/W/54

- ASEAN: special and differential treatment for developing countries in world agricultural trade G/AG/NG/W/55

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Japan: proposal G/AG/NG/W/91

- Swaziland: market access under special and differential treatment for small developing countries G/AG/NG/W/95

- Mauritius: proposal G/AG/NG/W96

- Rep of Korea: proposal G/AG/NG/W/98

- Norway: proposal G/AG/NG/W/101

- India: proposal G/AG/NG/W/102

- Poland: proposal G/AG/NG/W/103

- Morocco: proposal G/AG/NG/W/105

- Turkey: proposal G/AG/NG/W/106

- Egypt: proposal G/AG/NG/W/107

- Congo, Dem Rep: proposal G/NG/W/135

- Senegal: preliminary positions G/AG/NG/W/137

- Jordan: proposal G/AG/NG/W/140

- African Group: joint proposal G/AG/NG/W/142

- Croatia included special safeguards in its discussion paper G/AG/NG/W/141

Domestic support: amber, blue and green boxes

In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down — i.e. be reduced), red (forbidden). In agriculture, things are, as usual, more complicated. The Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production. There are also exemptions for de-veloping countries (sometimes called an “S&D box”).

The ‘amber box’

For agriculture, all domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box. The total value of these measures must be reduced. Various pro-posals deal with how much further these subsidies should be reduced, and whether limits should be set for specific products rather than having overall “aggregate” limits.

The ‘green box’

In order to qualify for the “green box”, a subsidy must not distort trade, or at most cause minimal distortion. These subsidies have to be government-funded (not by charging consumers higher prices) and must not involve price support. They tend to be programmes that are not directed at particular products, and include direct income supports for farmers that are not related to (are “decoupled” from) current production levels or prices. “Green box” subsidies are therefore allowed without limits, provided they comply with relevant criteria. They also include environmental protection and regional development programmes (for details, see Article 6 and Annex 2 of the Agriculture Agreement). Canada has proposed setting limits on all “boxes” combined, which would mean limits on green box subsidies as well.

Some countries say they would like to review the domestic subsidies listed in the green box because they believe that some of these, in certain circumstances, could have an influence on production or prices. Some others have said that the green box should not be changed because it is already satisfac-tory. Some say the green box should be expanded to cover additional types of subsidies.

The ‘blue box’

The blue box is an exemption from the general rule that all subsidies linked to production must be reduced or kept within defined minimal (“de minimis”) levels. It covers payments directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land. Countries using these subsidies — and there are only a handful — say they distort trade less than alternative amber box subsidies. Currently, the only members notifying the WTO that they are using or have used the blue box are: the EU, Iceland, Norway, Japan, the Slovak Republic, Slovenia, and the US (now no longer using the box).

At the moment, the blue box is a permanent provision of the agreement. Some countries want it scrapped because the payments are only partly decoupled from production, or they are proposing commitments to reduce the use of these subsidies. Others say the blue box is an important tool for supporting and reforming agriculture, and for achieving certain “non-trade” objectives, and argue that it should not be restricted as it distorts trade less than other types of support (see below on page 19). The EU says it is ready to negotiate additional reductions in amber box support so long as the con-cepts of the blue and green boxes are maintained.

Proposals containing positions on domestic support submitted in Phase 1

(see also proposals on developing countries and on non-trade concerns)

- 11 developing countries: Green Box/Annex 2 subsidies G/AG/NG/W/14

- US: a comprehensive proposal G/AG/NG/W/15

- US: discussion note on domestic support reform G/AG/NG/W/16

- EU: the blue box and other support measures to agriculture G/AG/NG/W/17

- Cairns Group: domestic support G/AG/NG/W/35

- ASEAN: special and differential treatment for developing countries in world agricultural trade G/AG/NG/W/55

- 12 transition economies: domestic support — additional flexibility for transition economies G/AG/NG/W/56

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Japan: proposal G/AG/NG/W/91

- Canada: domestic support G/AG/NG/W/92

- Switzerland: proposal G/AG/NG/W/94

- Swaziland: market access under special and differential treatment for small developing countries G/AG/NG/W/95

- Mauritius: proposal G/AG/NG/W96

- Rep of Korea: proposal G/AG/NG/W/98

- Mali: proposal G/AG/NG/W/99

- Norway: proposal G/AG/NG/W/101

- India: proposal G/AG/NG/W/102

- Poland: proposal G/AG/NG/W/103

- Morocco: proposal G/AG/NG/W/105

- Turkey: proposal G/AG/NG/W/106

- Egypt: proposal G/AG/NG/W/107

- Nigeria: proposal G/AG/NG/W/130

- Congo, Dem Rep: proposal G/NG/W/135

- Kenya: proposal G/AG/NG/W/136

- Senegal: preliminary positions G/AG/NG/W/137

- Mexico: proposal G/AG/NG/W/138

- Jordan: proposal G/AG/NG/W/140

- African Group: joint proposal G/AG/NG/W/142

- Namibia: proposal G/AG/NG/W/143

- Croatia included domestic support in its discussion paper G/AG/NG/W/141

Developing countries

Developing countries are active in agriculture negotiations and several groups have put their names to negotiating proposals. In general, they reflect a diverse range of interests in the debate, and the distinctions are not always clear.

For example, the Cairns Group — which favours much greater liberalization in agricultural trade — is an alliance that cuts across the developed-developing country boundaries. Fifteen of its 17 members are developing countries. Like most WTO members, the Cairns Group would also like to see developing countries given some kind of “special and differential” treatment to take account of their needs.

Several developing countries have submitted proposals that would lead to clearly separate rules for developed and developing countries. Some proposals are jointly sponsored, the one with the most sponsors coming from the African Group. Three proposals come from a group of 11 or 12 developing countries. Another is from WTO members from the Association of Southeast Asian Nations (ASEAN), four of whom are also in the Cairns Group. There are also proposals from small island de-veloping states, Caricom, and individual member governments such as Swaziland, Mali, India, Mo-rocco, Turkey, Egypt and Namibia.

Some countries say WTO arrangements should be more flexible so that developing countries can sup-port and protect their agricultural and rural development and ensure the livelihoods of their large agrarian populations whose farming is quite different from the scale and methods in developing countries.

They argue, for example, that subsidies and protection are needed to ensure food security, to support small scale farming, to make up for a lack of capital, or to prevent the rural poor from migrating into already over-congested cities. India’s and Nigeria’s proposals are among those that emphasize food security issues for developing countries.

At the same time, some developing countries make a clear distinction between their needs and what they consider to be the desire of much richer countries to spend large amounts subsidizing agriculture at the expense of poorer countries.

Many developing countries complain that their exports still face high tariffs and other barriers in de-veloped countries’ markets and that their attempts to develop processing industries are hampered by tariff escalation (higher import duties on processed products compared to raw materials). They want to see substantial cuts in these barriers.

On the other hand, some smaller developing countries have expressed concerns about import barriers in developed countries falling too fast. They say they depend on a few basic commodities that cur-rently need preferential treatment (such as duty-free trade) in order to preserve the value of their ac-cess to richer countries’ markets. If normal tariffs fall too fast, their preferential treatment is eroded, they say. Some developing countries see this situation as almost permanent. Others, such as Caricom, view it as a transition, and are calling for binding commitments on technical and financial assistance to help them adjust, including the creation of a technical assistance fund for the purpose.

Some developed and developing countries have argued that all developing countries should partici-pate in liberalization and integration into world markets, even if the terms are more relaxed. (In the 1986–94 Uruguay Round negotiations, participants agreed that the rules and disciplines to be negoti-ated would be equally applied to all member governments.)

WTO statistics show that developing countries as a whole have seen a significant increase in agricul-tural exports. Agricultural trade rose globally by nearly $100bn between 1993 and 1998. Of this, de-veloping countries’ exports rose by around $47bn — from $120bn to $167bn in the period. Their share of world agricultural exports increased from 40.1% to 42.4%. But within the group, some indi-vidual developing countries have seen their agricultural trade balance deteriorate — their imports have risen faster than their exports. (For more details, see WTO Secretariat background paper “Agri-cultural Trade Performance by Developing Countries, 1990–98” G/AG/NG/S/6 downloadable from http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm#secretariat)

Proposals or proposals with significant sections specifically on developing countries submitted in Phase 1

(several other proposals also contain items on developing countries)

- 11 developing countries: special and differential treatment and a development box G/AG/NG/W/13

- ASEAN: special and differential treatment for developing countries in world agricultural trade G/AG/NG/W/55

- Swaziland: market access under special and differential treatment for small developing countries G/AG/NG/W/95

- Mauritius: proposal G/AG/NG/W96

- Small island developing states: proposal G/AG/NG/W/97

- Mali: proposal G/AG/NG/W/99

- Caricom: proposal G/AG/NG/W/100

- India: proposal G/AG/NG/W/102

- Morocco: proposal G/AG/NG/W/105

- Turkey: proposal G/AG/NG/W/106

- Egypt: proposal G/AG/NG/W/107

- Nigeria: proposal G/AG/NG/W/130

- Congo, Dem Rep: proposal G/NG/W/135

- Kenya: proposal G/AG/NG/W/136

- Senegal: preliminary positions G/AG/NG/W/137

- Mexico: proposal G/AG/NG/W/138

- Jordan: proposal G/AG/NG/W/140

- African Group: joint proposal G/AG/NG/W/142

- Namibia: proposal G/AG/NG/W/143

Decision on net food-importing developing countries

A number of developing countries that depend on imports for their food supply are also concerned about possible rises in world food prices as a result of reductions in richer countries’ subsidies. Al-though they accepted that higher prices can benefit farmers and increase domestic production, they feel that their concerns about food imports need to be addressed more effectively.

The WTO agreements include a Decision on the Possible Negative Effects of the Reform Programme on Least-Developed and Net-Food Importing Developing Countries. As a result of this decision the Food Aid Convention was recently renegotiated and concluded in July 1999 in the International Grains Council. The WTO Committee on Agriculture also regularly reviews actions within the framework of the decision, in such areas as technical and financial assistance provided by industrial-ized countries to least-developed and net-food importing countries to assist in improving their agri-cultural productivity and infrastructure.

Proposals emphasizing positions on this submitted in Phase 1

- Small island developing states: proposal G/AG/NG/W/97

- Egypt: proposal G/AG/NG/W/107

- Nigeria: proposal G/AG/NG/W/130

- Kenya: proposal G/AG/NG/W/136

- Senegal: preliminary positions G/AG/NG/W/137

- Mercosur, Bolivia, Chile, Costa Rica, Guatemala, India, Malaysia: export credits G/AG/NG/W/139

- African Group: joint proposal G/AG/NG/W/142

Transition economies

So far, two proposals deal specifically with concerns of countries in transition from central planning to market economies. They deal with domestic support and market access. These countries say that shortage of capital, lack of a well-functioning credit system, government budget constraints and other problems they are experiencing in the transition mean that exposing agriculture to market forces would disrupt the sector.

For domestic support, these countries are calling for extra flexibility in providing certain subsidies (for example for debt and interest payments) and in general allow them higher ceilings on amounts of support that are considered small enough (“de minimis”) not to be counted in reduction commitments. Under market access they want to continue protecting some of their own products with existing tariff levels — without having to reduce them further — including those that already have low tariffs. They also want to negotiate the removal of non-tariff barriers in their export markets.

These countries stress that the flexibility would be temporary — so long as the problems of transition persist — and would not lead to additional distortions in agricultural trade.

Proposals on transition economies submitted in Phase 1

- 12 transition economies: domestic support — additional flexibility for transition economies G/AG/NG/W/56

- 11 transition economies: market access G/AG/NG/W/57

‘Non-trade’ concerns and ‘multifunctionality’:

agriculture can serve many purposes

The Agriculture Agreement provides significant scope for governments to pursue important “non-trade” concerns such as food security, the environment, structural adjustment, rural development, poverty alleviation, and so on. Article 20 says the negotiations have to take non-trade concerns into account.

A number of countries have produced studies to support their arguments, and these studies have also been debated — in particular, 38 countries submitted a note for the September 2000 meeting that in-cludes their papers for a conference on non-trade concerns. Some other countries responded by agreeing that everyone has non-trade concerns and by calling for proposals for specific measures to be tabled so that the negotiations can move on to whether trade-distorting measures are really justified.

Most countries accept that agriculture is not only about producing food and fibre but also has other functions, including these non-trade objectives — although some dislike the buzzword “multifunc-tionality”. The question debated in the WTO is whether “trade-distorting” subsidies, or subsidies out-side the “green box”, are needed in order to help agriculture perform its many roles.

Some countries say all the objectives can and should be achieved more effectively through “green box” subsidies which are targeted directly at these objectives and by definition do not distort trade. Examples include food security stocks, direct payments to producers, structural adjustment assistance, safety-net programmes, environmental programmes, and regional assistance programmes which do not stimulate agricultural production or affect prices. These countries say the onus is on the propo-nents of non-trade concerns to show that the existing provisions, which were the subject of lengthy negotiations in the Uruguay Round, are inadequate for dealing with these concerns in targeted, non-trade distorting ways.

Other countries say the non-trade concerns are closely linked to production. They believe subsidies based on or related to production are needed for these purposes. For example, rice fields have to be promoted in order to prevent soil erosion, they say.

Countries such as Japan, Rep of Korea and Norway place a lot of emphasis on the need to tackle agri-culture’s diversity as part of these non-trade concerns. The EU’s proposal says non-trade concerns should be targeted (e.g. environmental protection should be handled through environmental protection programmes), transparent and cause minimal trade distortion.

Many exporting developing countries say proposals to deal with non-trade concerns outside the “green box” of non-distorting domestic supports amount to a form of special and differential treat-ment for rich countries. Several even argue that any economic activity — industry, services and so on — have equal non-trade concerns, and therefore if the WTO is to address this issue, it has to do so in all areas of the negotiations, not only agriculture. Some others say agriculture is special.

Proposals that include positions emphasizing non-trade concerns or multifunctionality submitted in Phase 1:

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Japan: proposal G/AG/NG/W/91

- Switzerland: proposal G/AG/NG/W/94

- Mauritius: proposal G/AG/NG/W96

- Rep of Korea: proposal G/AG/NG/W/98

- Norway: proposal G/AG/NG/W/101

- Poland: proposal G/AG/NG/W/103

- Congo, Dem Rep: proposal G/NG/W/135

- Jordan: proposal G/AG/NG/W/140

Submissions for discussion on non-trade concerns tabled in Phase 1

- 38 countries: non-trade concerns (conference papers) G/AG/NG/W/36/Rev.1

- Argentina: technical submission on non-trade concerns G/AG/NG/W/88

- Croatia: submission G/AG/NG/W/141

Animal welfare and food quality

Two new issues which have not specifically been written into the Agriculture Agreement have been the subject of proposals submitted in 2000. One deals with animal welfare, and includes the idea of compensating farmers for the extra costs they bear when they are required to meet higher standards of animal welfare. Under the proposal, these payments would be in the green box of permitted domestic support. The debate has partly been about whether this would be at the expense of human welfare, particularly in poorer countries.

A separate proposal on food quality deals with reserving the right to produce food of specific charac-teristics associated with specific localities. The debate is linked to the discussion in the TRIPS (intel-lectual property) Council on geographical indications. Countries opposing the discussion argue that it should be handled in other WTO committees such as the TRIPS Council and the Technical Barriers to Trade Committee.

Proposals on animal welfare and food quality submitted in Phase 1

- EU: food quality: improvement of market access opportunities G/AG/NG/W/18

- EU: animal welfare and trade in agriculture G/AG/NG/W/19

- EU: comprehensive negotiating proposal G/AG/NG/W/90

The peace clause

Article 13 (“due restraint”) of the Agriculture Agreement protects countries using subsidies which comply with the agreement from being challenged under other WTO agreements. Without this “peace clause”, countries would have greater freedom to take action against each others’ subsidies, under the Subsidies and Countervailing Measures Agreement and related provisions. The peace clause is due to expire at the end of 2003.

Some countries want it extended so that they can enjoy some degree of “legal security”, ensuring that they will not be challenged so long as they comply with their commitments on export subsidies and domestic support under the Agriculture Agreement.

Some others want it to lapse as part of their overall objective to see agriculture brought under general WTO disciplines that deal with governments’ ability to take action against subsidies.

Some countries have proposed variants. Canada would like to see “green box” domestic supports freed from the possibility of countervailing action under the Subsidies Agreement. India proposes something like the peace clause should be retained but only for developing countries, so that some subsidies are free from the possibility of countervailing duty.

Proposals referring to the peace clause submitted in Phase 1

- EU: comprehensive negotiating proposal G/AG/NG/W/90

- Canada: domestic support G/AG/NG/W/92

- Mauritius: proposal G/AG/NG/W96

- India: proposal G/AG/NG/W/102

- Turkey: proposal G/AG/NG/W/106

- Nigeria: proposal G/AG/NG/W/130

- Kenya: proposal G/AG/NG/W/136

- Mexico: proposal G/AG/NG/W/138

- African Group: joint proposal G/AG/NG/W/142

- Namibia: proposal G/AG/NG/W/143

UPDATE: PHASE 2

The second phase consists of detailed discussions on the many issues raised in the first phase, organ-ized topic by topic. The meetings are largely “informal”, meaning that there is no official record ex-cept for chairperson’s summaries presented at the formal meetings. Papers presented so far have not been official WTO documents. They are usually off-the-record “non-papers”. Despite the increased complexity, developing countries continue to participate actively.

Tariff quota administration

See also page 13. Participants in the negotiations generally accept that there is no single “best” method of administering quotas. Some want the negotiations to sort out which allocation methods should be allowed and which should not. Others are looking for broad principles such as transparency and access for all-comers (at least for part of the quota allocation).

Some countries say that if part of a quota is unused (“underfill”), this is often a problem caused by the administration method. They propose various solutions to reduce underfill, including carrying unused portions over to subsequent periods, preventing imports at out-of-quota tariff rates until the quotas are filled, and closer monitoring. Others say underfill is often caused by supply and demand conditions, and should not be considered a problem.

Auctioning quotas is one method that has aroused a lot of discussion. One view is that the money governments raise from auctioning is equivalent to an additional tax and could violate tariff commit-ments (“bindings”). Another is that auctioning simply makes the additional value created by a quota (“quota rent”) more transparent, and shifts it to the government instead of to private companies. Sup-porters add that it meets the objectives of transparency and simplicity, while giving all importing companies the chance to participate.

A number of other methods were also examined and their pros and cons debated. These included first-come-first-served, historical allocation, etc.

Papers or off-the-record “non-papers” from: The EU, Australia, Switzerland and Japan.

Tariffs

See also page 12. Two proposals have emerged for tariff reductions in general. One would copy the formula of the 1986–94 Uruguay Round negotiations which used an average reduction over all prod-ucts, allowing some variation for individual products provided a minimum reduction was met. This would be “simpler” to implement, advocates said. Another, known as a “cocktail” approach envisages a flat rate percentage reduction for all products (the percentage so far unspecified), with additional “non-linear” reductions on higher tariffs, expanding quotas, and special treatment for developing countries. Advocates have described this as “fairer”. Other methods were also discussed, but these two were the most popular.

Part of the discussion has focused on special treatment for developing countries, countries that re-cently joined the WTO, and countries in transition to market economies. Some developing countries say their tariff cuts would have to depend on developed countries reducing trade-distorting domestic supports and export subsidies. Smaller island or land-locked countries depending on few export com-modities are calling for their trade preferences in developed countries to be preserved, and given greater legal certainty. But other countries say that certain preference schemes cause discrimination against other developing countries. Participants generally recognize, however, that preferences cannot be eroded or removed suddenly, and that transition periods might be needed.

Other points discussed include: whether or not to balance disciplines on import tariffs and restraints with export taxes and restraint; whether or not to give special treatment for specially sensitive prod-ucts; and how to take account of agriculture’s multifunctionality (see page 19).

Papers or “non-papers” from: Australia, Mercosur (plus Chile and Bolivia), and Japan.

Amber box domestic supports

See also page 15. Some countries have proposed steeper cuts on higher levels of support, with some disaggregation according to products (current amber box reductions are aggregates over all products). Some countries want amber box subsidies to eventually be eliminated completely.

Some of the discussion was linked to the two other categories of domestic supports, the “blue” (page 16) and “green” (page 16) boxes: whether the concepts should be retained, whether the blue box should be restricted or eliminated, whether some green box subsidies should be moved into the amber box because they distort trade. Some spoke of overall caps covering subsidies in all categories.

Amber box details. There has been some discussion of the idea (not accepted by everyone) that some domestic supports have the same effect as export subsidies because the supports vary according to market prices (rising when prices fall, and vice versa), and large proportions of production are ex-ported. Opinions also differed on whether commitments to reduce amber box subsidies should be dis-aggregated according to product, or stay at total AMS (aggregate measurement of support).

“De minimis” levels (subsidies that fall within small limits). There is a general willingness to look at de minimis levels for developing countries and possibly transition economies (most of these countries are bound by de minimis levels rather than AMS reduction commitments). Proposals include: no change; higher levels for developing countries and/or transition economies; lower levels or abolition for developed countries, etc.

Inflation. Some countries say their AMS commitments have been eroded by inflation. They propose that that inflation should be built into the commitments. Others disagree.

Papers or “non-papers” from: The EU, Australia, and Japan.

Export subsidies

See also page 10. One proposal involves a 50% reduction in export subsidies as an immediate down-payment, followed by eliminating subsidies completely in three years (for developed countries) or six years (for developing countries)

Another proposal is similar but with more emphasis on flexibilities for developing countries. It in-cludes expanding the types of export subsidies that developing countries are currently allowed under Article 9.4 of the Agriculture Agreement. This group’s proposed formula would continue reductions at the same pace as under the present agreement while negotiations continue, followed by complete elimination within three years of the negotiations’ end or 2006, whichever is earlier — with a longer deadline for developing countries.

These proposals received some support, and some opposition, particularly over the complete elimina-tion of export subsidies.

An alternative proposal includes “rebalancing” — more moderate reductions on some products in re-turn for steeper reductions on other products, with the possibility of raised ceilings — without elimi-nating export subsidies. Again, this idea has received both support and opposition, some countries predicting that with rebalancing the products they most need to export will face competition from the highest subsidies.

Some countries emphasize matching measures on imports with those on exports. Subsidy reductions would be gradual and not lead to elimination. To match the concept of bound tariffs, export subsidies would be bound per unit (e.g. per ton).

Many countries say other forms of export subsidies (such as food aid, subsidized export credit — see below — and insurance, trading by state enterprises) should be disciplined, and say they will elaborate on this later. Even among the countries that agree on the need to tackle these, there is a difference of opinion as to whether these other forms are a serious as direct export subsidies.

Some smaller developing countries argue that export subsidies should be eliminated but over a longer period of time to help them adjust to higher food import bills. They are calling for stronger measures to help net food-importing developing countries and least developed countries adjust.

Papers or “non-papers” from: The Cairns Group, five developing countries (Nicaragua, Panama, Peru, Venezuela and Zimbabwe), Switzerland, Japan.

Export credits

See also page 10. Most delegations who spoke in the negotiations say subsidized export credit (along with export guarantees and insurance, various forms of food aid, activities of state trading enterprises) could be used to circumvent export subsidy commitments. They called for disciplines on the subsidy portion of theses measures.

Some say that export subsidy reductions should be negotiated as part of a package that also includes disciplines and reductions in subsidized credit. Others argue that export subsidies are far more serious.

Countries taking a more cautious view of this say they are in favour of disciplines along the lines of those being developed in the OECD, but also argue that export credits do not contain large amounts of subsidies and are useful for food security in importing countries suffering from financial crises or food supply problems.

Papers or “non-papers” from: The EU, US, and Australia.

State trading enterprises/single-desk traders

See also pages 11 (export subsidies) and 13 (tariff quotas). Ideas discussed:

Symmetry: is the present agreement biased because it has tougher disciplines on importing enter-prises than on exporting ones? Some countries say “yes” because exporting state enterprises supply world markets and could distort world trade more. Some exporting countries with state trading enter-prises say “no” because importing enterprises have a serious impact on market access through tariff quota administration, etc, with knock-on effects on world markets.

Tackle the enterprises or specific measures? Behind this debate is the question of whether state enterprises are fundamentally different from private companies.

Some countries see little difference. They say their state companies operate on a commercial basis. They add that private companies can also enjoy monopoly power, use differential pricing, and can be bailed out with subsidies when they are in trouble. These countries therefore argue that the disciplines should not apply to state enterprises in general, but to specific measures. Some are calling for specific disciplines on multinational corporations.

Some developing countries say they need state enterprises to fill in where the private sector is too weak to trade or to compete with large foreign traders, or to serve government objectives such as food security.

The other side of the debate is the view that there really is a fundamental difference, because state enterprises or marketing boards have a monopoly when buying commodities for export, and they also enjoy government guarantees, and do not work with commercial objectives.

Papers or “non-papers” from: Japan, and the US.

Export taxes and restrictions

See also page 12. Most participants agree that some disciplines are needed to ensure supplies are available for importing countries. Among the issues that have been raised:

Symmetry between imports and exports: Some countries argue that the disciplines in this subject should be seen as part of balancing measures on the imports with those on exports. Others disagree.

Supporting domestic processing: Several developing countries say taxes or restrictions on raw mate-rials exports are sometimes needed in order to promote domestic processing industries, particularly when importing developed countries charge higher tariffs on processed products than on raw materials (“tariff escalation”). Some countries argue that getting rid of tariff escalation is a better solution.

Prohibited products and national security: Some countries say some restrictions are needed to pre-vent exports of hazardous and other prohibited products, and for national security reasons. Others dis-agree.

Papers or “non-papers” from: Japan, and the US.

Food security

See also page 19 (non-trade concerns), page 17 (developing countries), and page 19 (net-food im-porters). The length of the debate reflects the fact that all countries consider food security to be im-portant, especially for developing countries. Opinions differ on how to deal with this. Among the ideas discussed:

Is it necessary to protect domestic production in order to ensure food security? Most countries say this is best handled through a combination of means, but they vary a lot in the emphasis they give to various methods. These include: trade (importing, together with exporting to finance imports); stockholding; and domestic production (which can require some support and protection in developing countries).

They differ on whether liberalization and market orientation should be the main route because distor-tions jeopardize food security (countries advocating substantial liberalization take this view); whether market failings and particular circumstances such as an adverse climate require more emphasis on intervention (importing developing countries, some developed countries favouring continued protec-tion and support); or whether a gradual approach towards liberalization is best (some European coun-tries).

Some developing countries argue that they need to intervene in agricultural trade because they see little prospect of developed countries ceasing to distort markets with subsidies and protection, because at times they lack foreign exchange, and because they need to support small scale subsistence farm-ing.

Some countries distinguish between short term and long term measures and between different prob-lems. One view is that developing countries’ short term problems in obtaining food are best served with well-targeted food aid. In the long term, the solution is raising incomes, which means liberaliza-tion is part of the long-term best solution. However, complete reliance on market forces could lead to specialization in different regions, increasing the risk of acute shortages when weather and other con-ditions are unfavourable in those regions, and therefore, the best approach is gradual, monitoring the impacts, according to this view.

Some other countries agree that raising incomes is the long term solution to food security. But for the short term, the Marrakesh Ministerial Decision on Net Food-Importing Developing Countries and Least Developed Countries, combined with food aid and other emergency measures apply, they say.

International stockholding and a revolving fund: Some countries propose creating an international stockpile. A number of developing countries have proposed a safety-net revolving fund to allow net food-importing developing countries and least developed countries to borrow in order to buy food in times of shortage. Developing countries concerned about food security support the stockpile proposal. Some countries question whether there should be a new fund, preferring existing World Bank and IMF programmes.

Papers or “non-papers” from: Japan, the US, and 12 developing countries (Cuba, Dominican Republic, El Salvador, Honduras, Kenya, Nicaragua, Nigeria, Pakistan, Peru, Sri Lanka, Venezuela, and Zimbabwe).

Food safety (see also SPS materials)

One proposal: this needs to be tackled as part of liberalization talks in order to avoid critics who ac-cuse the WTO of requiring governments to force their consumers to accept unsafe food. The proposal is for a written “Understanding” agreed among WTO members. It would do no more than endorse dispute panel and Appellate Body interpretations of sanitary and phytosanitary (SPS) provisions on precaution. (Some other members question whether this is appropriate as part of the agriculture nego-tiations rather than under SPS).

Another proposal: Developments in food safety issues since the end of the Uruguay Round negotia-tions mean the current talks need to deal with food safety. Examples include: new consumer concerns about genetically modified organisms; recent disease outbreaks such as BSE; and toxic substances such as dioxin. These are being examined in other organizations such as the OECD and Codex, and the WTO should coordinate with these other efforts, according to this view.

The discussion: This was the first time this topic has been discussed in the negotiations. All agree that consumers must be protected. All also agree on the need to avoid protectionism in disguise. The discussion is about whether the SPS Agreement (specially Article 5.7) is clear enough to maintain that balance appropriately. Some countries support clarifying it through an understanding that would also send the right signals to consumers. Others say this should be discussed in the SPS and Technical Bar-riers to Trade committees, and not in the agriculture negotiations.

Papers or “non-papers” from: Japan, and the EU.

Rural development

See also page 17 (developing countries) and page 19 (non-trade concerns). Discussion on this topic has been one of the lengthiest in Phase 2. All papers and comments say this is important, particularly in developing countries. But is it also important for developed countries? Broadly, participants have one of three answers: yes, even if details are different; yes, specially for transition economies; no, or yes but there is a significant difference.

Several developing countries advocate various special provisions for dealing with their problems of food security, rural poverty, etc. These include additional transition periods, and a “development box” of measures that would be added to the green box. One proposal is for the development box to incor-porate a “positive list” approach, i.e. each member would list the agricultural products it is ready to discipline under the Agriculture Agreement.

Several developed and developing countries emphasize the need for market orientation and the re-moval of distortions, even if flexibility is allowed to deal with rural poverty. Some warn that each country’s measures should not hurt others — they should be targeted, decoupled and transparent, and should move away from border and production measures.

Others argue that some price/production intervention is necessary to deal with rural development problems even in developed countries.

Papers or “non-papers” from: Cyprus, nine developing countries (Cuba, Dominican Republic, El Salvador, Honduras, Kenya, Nicaragua, Pakistan, Sri Lanka, Zimbabwe), Norway, and Japan.

Geographical indications (see also TRIPS material)

See also page 20 (food quality). This deals with extending the level of protection currently given to wines and spirits to other products.

One view is that this is a question of market access for agricultural products, which justifies its inclu-sion in the negotiations. This is because product differentiation is an important feature of competition. It benefits consumers because they are offered more choice with more information about product quality. It also benefits producers, who are able to develop quality products and are free from unfair or misleading competition in markets that import their products, according to this argument.

An alternative view shares the argument, but says this should be negotiated in the WTO’s intellectual property (TRIPS) council. The point is raised in the agriculture negotiations to stress the link: prog-ress in the agriculture negotiations requires progress on this subject in the TRIPS Council, a number of countries say. Some point out that the agriculture negotiations focus on food products, whereas proposed negotiations under TRIPS would cover all products including handicrafts, etc.

Another group of countries opposes discussing the issue in the Agriculture Committee outright. They say it should only be handled in the TRIPS Council.

Papers or “non-papers” from: The EU, and Switzerland.

Green box domestic supports

See also page 16.- One proposal would maintain the green box as a set of measures that do not distort trade or are minimally distorting. Among the additions would be programmes that reimburse addi-tional costs arising from the protection of animal welfare, and special flexibility for developing coun-tries tackling food security and poverty alleviation.

Another proposal envisages retaining the green box but updating the base periods for “decoupled” income supports, changing threshold levels for income insurance and safety net programmes, and similar adjustments on relief from natural disasters.

Several developing countries propose additional flexibility for their needs, including a “development box” added to the green box.

Some countries are more critical of the green box as it stands, arguing that despite its objectives it does distort trade by encouraging more production and lowering world prices. One country proposes: a quantitative means of measuring whether a policy is “non-distorting”; removing direct payments, decoupled income support, and subsidized income insurance and safety nets; revising criteria for structural adjustment programmes that include factor “retirement”; notification and evaluation criteria for disaster relief, investment aids, environmental programmes, and regional assistance; transparency for food security measures and food aid; and limits on green box spending.

A number critics of the green box say this proposal is interesting, but would like to examine it further. A number of other members object to capping the green box, arguing that green box measures meet the fundamental criteria of non or minimal distortion.

One of themes taken up, particularly by developing countries, is the view that while individual green box programmes may appear to be non-distorting, the cumulative effect of the large amounts spent does distort for a number of reasons.

Papers or “non-papers” from: Argentina, Cyprus, nine developing countries (Cuba, Dominican Rep, Honduras, Nicaragua, El Salvador, Kenya, Pakistan, Sri Lanka, Zimbabwe), the EU, Japan, and Namibia.

Blue box domestic supports

See also page 16. A number of developed and developing countries favour of getting rid of the blue box (moving it into the amber box). They propose additional disciplines while it is being phased out. These countries see the blue box as an interim or transitional measure to help subsidizing countries move away from amber box subsidies. The counter argument is that the blue box should be preserved — although some members are prepared to discuss modifications — arguing that it distorts less than the amber box and helps make reforms easier to undertake.

Papers or “non-papers” from: The Cairns Group.

Special agricultural safeguards

See also page 14. Among the proposed ideas are:

- Retaining the present special safeguard and adding a new safeguard to deal with seasonal and perishable products. The proposal includes ideas for formulas. Critics say this would increase protectionism

- A countervailing mechanism for developing countries to use on subsidized imports from devel-oped countries. The right would be automatic without any need to prove any damage. Some crit-ics say this would undermine countries’ legitimate right to subsidize exports, including within the minimal (“de minimis” ceilings), and that it could obstruct trade. They prefer reducing large sub-sidies.

- Preserving the special safeguard. Some countries taking this view are also willing to extend the right to use the safeguards to countries that did not “tariffy” or previously reserve the right.

- Allowing developing countries to use special safeguards for all products. A number of developing countries who take this view also advocate scrapping the special safeguard in developed coun-tries.

Within these views are different shades of opinion. Some countries see the safeguards as permanently necessary measures. Others describe them as a confidence-building means of encouraging countries to lower tariffs.

Papers or “non-papers” from: Eight developing countries (Cuba, Dominican Rep, Honduras, Kenya, Nicaragua, Pakistan, Sri Lanka, Zimbabwe), five developing countries (Argentina, Bolivia, Paraguay, Philippines and Thailand), Japan, Namibia, Norway, and Switzerland.

Next topics

Environment, trade preferences, food aid, consumer information and labelling, sectoral initiatives

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DATA

World trade in agricultural products, 2000

Value $bn 558

Annual change %

1980–85 –2

1985–90 9

1990–00 3

1997 –1

1998 –5

1999 –3

2000 2

Share in world merchandise trade % 9.0

Share in world exports of primary products % 40.7

Source: WTO International Trade Statistics 2001, table IV.3, includes intra-EU trade

Top 15 agricultural exporters and importers, 2000

Value

$bn Share in world

% Value

$bn Share in world

%

Exporters Importers

United States 70.87 12.7 United States 66.69 11.0

France 36.52 6.5 Japan 62.19 10.3

Canada 34.79 6.2 Germany 41.54 6.9

Netherlands 34.14 6.1 United Kingdom 32.49 5.4

Germany 27.76 5.0 France 30.39 5.0

Belgium 19.86 3.6 Italy 29.39 4.9

Spain 16.88 3.0 Netherlands 20.90 3.5

United Kingdom 16.67 3.0 China 19.54 3.2

China 16.38 2.9 Belgium 18.52 3.1

Australia 16.37 2.9 Spain 16.98 2.8

Italy 16.09 2.9 Canada b 15.27 2.5

Brazil 15.47 2.8 Korea, Rep. of 12.99 2.1

Thailand 13.28 2.4 Hong Kong, China 11.73 -

Argentina a 11.97 2.2 retained imports 6.52 1.1

Denmark 10.94 2.0 Mexico b 11.06 1.8

Russian Fed. c 9.87 1.6

Above 15 357.98 64.2 Above 15 394.32 65.2

Source: WTO International Trade Statistics 2001, table IV.7, includes intra-EU trade

a 1999 instead of 2000 b Imports are valued f.o.b. c Includes WTO Secretariat estimates.

Agricultural products’ share in trade, by region, 2000

Exports Imports Exports Imports

Share in total

merchandise trade, % Share in

primary products trade, %

World 9.0 9.0 World 40.7 40.7

North America 10.0 5.9 North America 58.2 33.8

Latin America 18.4 9.0 Latin America 47.3 44.1

Western Europe 9.4 10.0 Western Europe 57.2 47.3

C./E. Europe/Baltic States/CIS 8.9 10.7 C./E. Europe/Baltic States/CIS 20.7 41.8

Africa 12.9 15.1 Africa 17.7 51.9

Middle East 2.4 13.1 Middle East 3.2 59.9

Asia 6.5 9.4 Asia 48.0 34.7

Source: WTO International Trade Statistics 2001, table IV.5, includes intra-EU trade


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