WTO agreements and developing countries
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This briefing document focuses on the
agricultural issues raised in the lead-up to the Seattle Ministerial Conference.
- An outline of the
WTOs Agriculture Agreement can be found in the section on agriculture in
Understanding the WTO”
(pages 1719 in the printed version, or here on the WTO website).
- Go to Part
2, some agricultural trade statistics
introduction, objective, tariffs/quotas, special
safeguards, domestic support, export
subsidies, developing countries, net
clause, fisheries/forests, Article
20 and beyond
|Numerical targets for cutting
subsidies and protection
reductions in agricultural subsidies and protection agreed in the Uruguay Round
cut, all ag. goods
Least-developed countries do not have to make commitments to reduce tariffs or subsidies.
The base level for tariff cuts was the bound rate before 1 Jan 95; or, for
unbound tariffs, the actual rate charged in Sept 86, when the Uruguay Round began.
figures for cutting export subsidies appear in the agreement. The other figures were
targets used to calculate countries legally binding schedules of
Up to 1995, GATT rules
were largely ineffective in disciplining agricultural trade. In particular, export
subsidies came to dominate many areas of world agricultural trade, while the disciplines
on import restrictions were often flouted. The 19861994 Uruguay Round went a long
way towards changing all that.
The trade is now
firmly within the multilateral trading system. The Agriculture Agreement, together with
individual countries commitments to reduce export subsidies, domestic support and
import barriers on agricultural products make up a comprehensive programme for reforming
The reform programme
struck a balance between agricultural trade liberalization and governments desire to
pursue legitimate agricultural policy goals, including non-trade concerns (see below).
The reform brought all agricultural products (as listed in the agreement) under
multilateral disciplines, including tariff bindings WTO members have
bound themselves to maximum tariffs on nearly all agricultural products, while many
industrial tariffs remain unbound.
WTO members also
agreed (Article 20 of the Agriculture Agreement) to reopen negotiations in
agriculture at the end of this year in order to continue the reform programme.
In the run up to the
Seattle ministerial and the new negotiations, the following issues are among those that
have been raised.
Continuing reductions: the objective back
reductions in tariffs, domestic support and export subsidies can be expected to be the
main focus of 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, mainly developed countries, reject the
idea for a number of reasons (for example, see non-trade concerns and
Market access: tariffs and tariff
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 is
known as tariffication). In some cases, the calculated equivalent tariff was
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
outside 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 and the way they have been administered.
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,
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 enterprise, bilateral agreements, and auctioning. Exporters are sometimes
concerned that their ability to take advantage of tariff quotas can be handicapped because
of the way the quotas are administered.
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, or to sort out what they consider to be restricting and non-transparent
Market access: special agricultural
contingency restrictions on imports taken temporarily to deal with special circumstances
such as a 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 3132). In agriculture, unlike with normal
- 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.
agricultural safeguard can only be used on products that were tariffied, but not on
imports within the tariff quotas, and only if the government reserved the right to do so
in its schedule of commitments on agriculture.
Proposals for the
negotiations 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.
However, the right to use the special agricultural safeguard would lapse if there is no
agreement in the negotiations after Seattle to continue the reform process
initiated in the Uruguay Round.
Domestic support back
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, but there is a blue box for certain types of subsidies, and
exemptions for developing countries (sometimes called an S&D box).
For agriculture, all
subsidies and other 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
In order to qualify
for the green box, a subsidy must not distort trade, or at most cause minimal
distortion. They 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) production. Green box subsidies are
therefore allowed without limits, provided they comply with relevant criteria (for
details, see Article 6 and Annex 2 of the Agriculture Agreement).
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, including some major players advocating general
agricultural trade liberalization, have said that the green box should not be changed
because it is already satisfactory.
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 say they distort trade less than alternative amber
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. Others say it is an
important tool for supporting and reforming agriculture, and for achieving certain non-trade objectives.
|Export subsidies back
countries are proposing the total elimination of export subsidies. Others reject the idea.
In addition, some countries would like to examine the rules to prevent governments getting
around (circumventing) their commitments including the use of state
trading enterprises and subsidized export credits.
Developing countries back
reflect a range of interests in the debate on agriculture, and the distinctions are not
Most members of the
Cairns Group which favours much greater liberalization in agricultural trade
are developing countries. But like most WTO members, the Cairns Group would also like to
see developing countries given special and differential treatment to take
account of their needs.
Some countries say WTO
arrangements should be more flexible so that developing countries can support and protect
their agricultural and rural development and ensure the livelihoods of their large
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.
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.
countries complain that their exports still face high tariffs and other barriers in
developed 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.
WTO statistics show
that developing countries as a whole have seen a significant increase in agricultural
exports. Agricultural trade rose globally by nearly $100bn between 1993 and 1998. Of this,
developing 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 individual developing countries have seen their agricultural trade
balance worsen their imports have risen faster than their exports.
|Who can subsidize exports?
members have export subsidy reduction commitments. Those without commitments cannot
subsidize agricultural exports at all. Some among the 25 have decided to greatly reduce
their subsidies or drop them completely:
Australia, Brazil, Bulgaria,
Canada, Colombia, Cyprus, Czech Rep, EU, Hungary, Iceland, Indonesia, srael, Mexico, New
Zealand, Norway, Panama, Poland, Romania, Slovak Rep, South Africa, Switzerland, Turkey,
US, Uruguay, Venezuela
The agreement includes
temporary exemptions for certain sbusidies for developing countries (Art 9.4)
|The Cairns Group
membership: Australia, Argentina, Brazil, Canada, Chile, Colombia, Fiji, Indonesia,
Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, Uruguay
Decision on net-food importing
developing countries back
A number of developing
countries which 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.
Although 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
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 to least-developed and net-food importing countries to assist in
improving their agricultural productivity and infrastructure.
Non-trade concerns and
agriculture can serve many purposes back
Agreement includes provisions for important non-trade concerns such as food
security, the environment, structural adjustment (which can include rural development) and
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
multifunctionality. The question debated in the WTO is whether
"trade-distorting" subsidies, or subsidies outside 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. Examples include direct
payments to producers, structural adjustment assistance, environmental programmes, and
regional assistance programmes which do not stimulate agricultural production or affect
prices. These countries say the onus is on the proponents of non-trade concerns and
multifunctionality 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. A number of countries have
produced studies to support their arguments, and these studies have also been debated.
developing countries say multifunctionality is a form of special and differential
treatment for rich countries. Several even argue that any economic activity
industry, services and so on is equally multifunctional, 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.
The peace clause back
(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 other provisions. The peace clause is due to expire at the end of
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 under the
Others want it to
lapse as part of their overall objective to see agriculture brought under general WTO
disciplines, although they might be prepared to consider an extension, depending on what
is agreed in other parts of the agriculture negotiation.
Fisheries and forestry back
Agreement does not include fishery and forestry products. Some WTO members would like to
see specific disciplines negotiated for these products and have tabled proposals for
In particular there
are proposals for dealing with fisheries subsidies (both for fishing fleets and for fish
farming) and their impact on fish stocks and the environment. The proposed rules and
disciplines for forestry products would include the promotion of resource conservation and
management, other environmental concerns, and disciplines on market access and export
restrictions on logs.
The proposals would
almost certainly not come under the Agriculture Agreement.
Article 20 and beyond back
Article 20 of the
Agriculture Agreement says WTO members have to negotiate to continue the reform programme
accept that this should result in better market conditions, lower production distorting
subsidies and reductions in export subsidies. However, there is no agreement about the
depth of these reforms (how deep the cuts in subsidies and tariffs should go, and how far
the quotas should be widened) or on how issues like some non-trade concerns should be
negotiations will be difficult but they will also 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. This is particularly the case for many
developing countries whose economies depend on an increasingly diverse range of primary
and processed agricultural products.
|Article 20 of the Agriculture
Continuation of the Reform
Recognizing that the
long-term objective of substantial progressive reductions in support and protection
resulting in fundamental reform is an ongoing process, Members agree that negotiations for
continuing the process will be initiated one year before the end of the implementation
period, taking into account:
(a) the experience to
that date from implementing the reduction commitments;
(b) the effects of the
reduction commitments on world trade in agriculture;
concerns, special and differential treatment to developing-country Members, and the
objective to establish a fair and market-oriented agricultural trading system, and the
other objectives and concerns mentioned in the preamble to this Agreement;
(d) and what further
commitments are necessary to achieve the above mentioned long-term objectives.
to Part 2, some agricultural trade