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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