WTO negotiations: agriculture and developing countries

Statement by Mike Moore Director-General of the World Trade Organization

Agriculture plays a fundamentally important role in the economic growth and development prospects of the vast majority of developing countries. The situation in the industrialised countries utterly pales by comparison (see figures in the Annex).

Over the decades this situation has been reflected in persistent demands by developing countries for substantial improvements in access to world markets for their agricultural exports, for more equitable conditions of competition, particularly as regards export subsidies, as well as demands for special and differential treatment in one form or another.

As is evident from the negotiating proposals already submitted in Geneva, there is no doubt that developing countries will use the WTO agricultural negotiations now underway to achieve more substantial liberalisation than ultimately proved to be possible in the Uruguay Round.

There are, of course, developing countries whose positions are more defensive and more oriented towards maintenance of the status quo for certain products for which they enjoy a relatively privileged position in this or that market. I shall return to such concerns in a moment.

Also, there are limits to how far agriculture is negotiable on its own, without the risk being run of blockage to the everyday operation of the WTO system, or to the other mandated negotiations on services. Farmers in developing countries as well as the broader interests of the world economy at large will undoubtedly be better served by negotiations of a broader scope than those currently mandated.

This includes creditor countries and the international financial system which clearly have a substantive interest in the economic and financial viability of developing countries and thus in a broadly positive eventual outcome in areas, including agriculture, which will bolster the trade and economic performance of developing countries.

The agricultural trade performance of developing countries has been evolving, and so too have their interests in the current negotiations. International trade in agriculture is increasingly a trade in processed and other higher value products.

Concessions on agricultural raw materials and other bulk commodities, which many industrialised countries have to import anyway (as inputs to their own more innovative but protected processing industries), and on so-called tropical products now only cover part of the spectrum of developing countries' export interests. My impression is that many exporting developing countries will not accept to be fobbed off, as they were to a certain extent in the Uruguay Round, with concessions on such traditional, low-growth products.

In other words concessions on temperate products efficiently produced by developing countries and, more generally, on processed agricultural products will figure prominently in the negotiating process when it starts to get into specifics.

Import markets in industrialised countries will, of course, not be the only ones in the firing line. Here again the interests of developing countries have been evolving.

Developing country markets, and also the markets of transition economies, have and will continue to become increasingly important outlets for developing countries. Over the past decade, the share of developing country agricultural exports going to these markets has grown to reach around 40 per cent. These markets have thus become almost as important as the markets of the industrialised countries.

Developing countries are of course concerned about the impact of predatory and subsidised imports in their own markets. This is reflected in various of the proposals for special and differential treatment in terms of counter measures permitted under the WTO system. But the answer is emphatically not a wholesale extension to developing countries generally of the Special agricultural safeguard mechanism (devised as part of the UR tariffication package and up to now infrequently utilised). To do so would immeasurably prejudice the actual and potential export interests of developing countries in each other markets. In my view, the answer must be to correct the distortions at their root source

A major issue for developing countries but also for the multilateral system itself is special and differential treatment in the form of extended preferential tariff treatment for agricultural products originating in developing countries.

Are the interests of developing country exporters as a whole better served through an extension of Gatt bound and protected, non-discriminatory, unconditional, MFN access concessions?

Or are the interests of developing countries and of the trading system better served by an extension of preferential market access arrangements which lack most of the eminent qualities just enumerated?

I believe that this issue, which is by no means new, is important and merits the fullest reflection by all of us gathered here today and elsewhere. Discrimination, including discrimination among developing countries, is hardly the way to strengthen the hand of the weaker players in the system.

That being said, the WTO, like the old GATT, is also a pragmatic institution. Negotiations may have to find creative solutions in addressing some long-standing, unique access arrangements on a basis which is fair and reasonable to all concerned.

Further reductions, if not eventual elimination, of “export subsidies” and more effective disciplines on other forms of export subsidisation are both areas where developing countries have major interests.

Agricultural exporting countries, both developing and developed, will be immeasurably better off when export prices are determined by fairer conditions of market competition, rather than indirectly by bureaucrats calculating and handing out export subsidies, or through the manipulation of other governmental export promotion programmes.

Here the road ahead will no doubt be both long and steep. As anyone who rides a bicycle knows, the wider the road the more negotiable it becomes. Hence, once again, the importance of a broader WTO Round so far as the agriculture negotiations are concerned.

Net food-importing countries are another group having interests in what may emerge in the area of export competition and these will need to be addressed as appropriate. In any event, as the proposals tabled by a number of them suggest, these countries have increasingly come to realize that some possible short-term benefits aside, export subsidies of their trading partners are impeding the development of their own agricultural sectors.

Let me now turn to the debate on non-trade concerns.

A key point, stressed on all sides of this debate in Geneva, is that, to one degree or another, all countries have legitimate non-trade concerns in agriculture. Another important consideration is that such concerns should be addressed so far as possible in ways that are not at the cost of trading partners.

It is worth recalling that the Uruguay Round results have gone quite some way to enable countries through domestic support measures to accommodate non-trade concerns, such as food security, regional assistance and environmental concerns, in ways that are minimally trade distorting. However, these UR domestic support arrangements are perceived, in appearance if not in fact, as taking more account of specific concerns of industrialised countries.

The adequacy of these WTO domestic support arrangements from the point of view of developing countries will therefore be an important focus of the agricultural negotiations. Key non-trade concerns of developing countries, such as poverty alleviation, rural development and food security, are qualitatively quite different from those asserted by some highly industrialised countries. And there are many developing countries who consider that any amalgam between the two is not propitious.

More generally, my feeling is that from the system point of view, the various non-trade concerns which are being asserted should be addressed primarily within the domestic support context, under conditions ensuring minimal trade distortion. No doubt, in many instances measures outside the trade and agriculture sphere proper will have to play an even more important role in appropriately dealing with such concerns (e.g., education, infrastructure, social and structural adjustment policies).

Some other ways could also help dealing with non-trade concerns, as was the case in the Uruguay Round agricultural negotiations. I would remind you that the tariff reduction formula in that Round allowed for “minimum cuts” significantly below the required average reductions for both developed and developing country participants.

Approached in such a pragmatic but principled way, I believe most non-trade concerns should be able to be addressed in effective and constructive but minimally trade distorting ways. If so, then there is a way forward, particularly in case of a broader process of negotiations where there is greater scope for eventual trade-offs for everyone.

But in saying this I nevertheless think that non-trade concerns should not be confused with special and differential treatment. The latter is after all the preserve of the developing countries.

Nor in either case should we lose sight of the very important practical principle, enunciated by Ministers in the Mid-Term review of the Uruguay Round, that in realising the long-term objective of the agricultural reform process, the strengthened and more operationally effective rules and disciplines would be equally applicable to all Members.

I would like to conclude, Mr Chairman, by underlining that the WTO Secretariat will continue to provide full and practical assistance to developing countries, so as to enable them to fully participate in the negotiations.

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Annex

Agriculture involves more than half of the labour force in many developing countries, versus relatively small and declining shares in OECD countries (Table 1).

Africa derives about 15 per cent of its export income from agricultural products, Latin America about 20 per cent — a much higher dependence than in the case of developed countries (Table 2).

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Table 1 — Share of agriculture in the labour force of selected OECD countries (per cent)

1 . Base period of the Uruguay Round. back to the table.

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Table 2 — Share of export income derived from agriculture in selected OECD countries (per cent)

Source for Tables 1 and 2: OECD “Evaluation and Monitoring Report” for 2000.