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UNCTAD Virtual Institute Study Tour Course on Economics of Commodity
Production and Trade
Agriculture and the WTO
Geneva, February 2010
United Nations Conference on Trade and DevelopmentUnited Nations Conference on Trade and Development
Ralf Peters
UNCTAD (secondment) and ILO, Geneva
Many factors impact food security
• Income level / poverty
• Availability of arable land, rainfall
• Volume of agricultural production
• Structure of agricultural production
• Exports of food
• Imports of food
• ...
• Trade agreements and WTO has major impact on food security
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Outline of the Agreement on Agriculture
“Three Pillars”
Domestic Support• AMS reduction
• Green Box
• de minimis
Market Access• Tariffication
• Tariff reduction
• Minimum access
• Special Safeguard
Export Subsidies
• Reduction
• Prohibition of new subsidies
• Special and Differential (S&D) Treatment for DCs and LDCs
• Related Agreements, e.g. Marrakesh Decision
• Establishment of a Committee on Agriculture
• Continuation of the reform process
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Achievements of the Uruguay Round
A rules-based system that largely reduces arbitrary actions:
• NTBs tariffied and reduced + minimum access to ensure trade takes place
• Commitment to reduce some types of distortive domestic support
• Commitment to reduce export subsidies• Recognised need for SDT for dev’g countries (time, size of
cuts, special exemptions, trade-related TA, etc.)• Also, new disciplines under SPS Agreement, to minimize
discriminatory trade effects of SPS
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Problems created by UR
• “Legitimatised” remaining distortions:domestic support and export subsidies (uneven playing field)
• Tariff peaks and tariff escalation• Effectively, little additional market access• Room for circumventing commitments• Less flexibility to design its own agricultural policy
• Several countries consider agriculture not just another sector of the economy
• Others wish to see agr fully integrated into the MTS
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European Union: bound and applied tariff rates
Note: New AVEs (Paris), Five products with tariffs above 500% not plotted.
0
50
100
150
200
250
300
350
400
450
1 159 317 475 633 791 949 1107 1265 1423 1581 1739 1897 2055
Olive oil, refinedSugar, raw
Tea
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Developing countries: bound and applied tariff rates
Kenya bound and applied tariffs
0
20
40
60
80
100
120
0 200 400 600 800
bound
applied
Number of tariff lines
Tar
iffs
in p
er c
ent
Bound at ceiling level
Lower applied rates
Like Tanzania:Bound 120%
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Developing countries: bound and applied tariff rates
Number of tariff lines
Tar
iffs
in p
er c
ent
Cote d'Ivoir
0
10
20
30
40
50
60
70
1 38 75 112 149 186 223 260 297 334 371 408 445 482 519 556 593 630 667
bound
applied
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De minimisDe minimis
Blue BoxBlue Box• Set asideSet aside• QuotaQuota
Amber Box
Product specific support• Market price support• Payment on output• Input subsidies• Investment subsidies
Non-product specific support
Exempted measures
Amber BoxAmber Box
Measures for reduction commitments
Development Development Investment subsidies and input subsidies, provided by DC’s to resource-poor
low-income farmers
• Research• Training • Extension• Infrastructure• Pest & disease control• Public stockholding• Domestic food aid • Decoupled income
support• Support to structural
adjustment
etc.
OTDS
Green BoxGreen Box
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State of Play: Doha Negotiations on Agriculture
… have been a difficult & complex process:
Agriculture is a politically sensitive sector in both developed & developing countries.
Countries (developed or developing) have widely divergent views on the extent of agricultural liberalization.
Deadlines to agree on “modalities” were missed.
The Framework Agreement brought the negotiation back on track, but the “modalities” are still left for further negotiations
Few more details have been agreed at Hong Kong Ministerial.
Draft Modalities Text (July 2007, Feb. 2008, Dec. 2008) widely accepted.
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Alliances and interests
EUEUG-10G-10
Level of ambitionin market access
“Multi-functionality”
Cuts in domestic support
CairnsCairns
Deg
ree
of s
pec
ial a
nd
dif
fere
nti
al t
reat
men
t
USAUSA
Special and differential treatment
Substantial tariff cuts
Moderate, flexible tariff cuts and
flexible domestic support
G-20G-20
G-33G-33ACPACP
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Market Access: Agriculture
Formula:Formula:line-by-lineline-by-line
increasing cutsincreasing cuts
•Level of ambition, S&D?•Exporter – importer•Dev’ed – dev’ing•Preferences
Flexibilities:Flexibilities:Exempt some Exempt some lines, SP & SePlines, SP & SeP
Special Products (SP) Products essential to achieve food security, livelihood security and rural development Sensitive Products (SeP):Selected number of tariff lines will receive flexibility in tariff cuts (but access is improved)
Initial tariffs:Initial tariffs:Bound ratesBound rates
Result:Meaningful better access?Protect vulnerable farmersStart
Related WTO Agreements
• All WTO agreements and understandings on trade in goods apply to agriculture (e.g. customs valuation, emergency safeguard measures)
• Where there is a conflict: AoA prevails
Agreement on Agriculture
Sanitary and Phytosanitary Measures (SPS)
Technical Barriers to Trade (TBT)
Trade –Related Aspects of Intellectual Property
Rights (TRIPs)Marrakesh Decision for LDC and NFIDC
Agreements on Sanitary and Phytosanitary measures and on Technical Barriers to Trade
• Ensure country specific technical regulations, product standards and safe food
AND at the same time ensure that strict health and safety regulations are not used as an excuse for protecting domestic producers
• In 1997 developed countries imposed restrictions on fish imports from some African countries because they were considered to have inadequate hygiene standardsRegulations must be based on science
• International standards, guidelines and recommendations shall be used
• Higher standards are possible
Obj
ecti
ves
Exa
mpl
e
Marrakesh Decision for least developed and net-food-importing developing countries
• Recognised that LDC’s and NFIDC’s may experience negative effects in terms of food availablity from external sources on reasonable terms and conditions during the reform programme
• Mechanisms to ensure that UR agreement does not adversly affect availablity of food-aid- Review of food aid level by Committee on Food Aid- Increase proportion of basic foodstuff provided in fully grant
form- Technical and financial assistance to improve agricultural productivity and infrastructure
• Export credits in favour of LDC’s and NFIDC’s• Short term difficulties: Resources from intern.finan.institutions
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Export Restrictions are allowed:
legal perspective• Article XI of GATT: General Elimination of Quantitative Restrictions shall not extend to– Export prohibitions or restrictions temporarily applied to prevent or
relieve shortages of foodstuffs or other essential to the exporting contracting party
• Article 12 of AoA: Disciplines on Export Prohibitions and Restrictions– Member instituting restriction shall give due consideration to the
effects on importing members– Give notice to the Committee on Agriculture– AoA provision does not apply to dev’g net-importers of that
foodstuff
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Export Restrictions two-edged sword:
economic perspective• Understandable Policy …– Reduces domestic prices
– Provides relief for domestic consumers if world food prices are high
• … can have negative consequences for domestic production …– Lowers incentive for producers to increase production
• … and collectively, may worsen the situation globally – World food prices increase if many or big producers restrict
their exports
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Export Restrictions:negotiations
• Mixed views– Many countries agree that some disciplines are needed to
ensure supplies are available for importing countries.
– What would be the level of special and differential treatment for dev’g countries or net-food importers
• Current provision is weak – Draft Modalities text (Dec. 2008)
– Higher notification and consultation requirements
– Time limit: 12 month normally