Report - Eat This Fresh Ideas on the WTO AoA - Eat This Fresh Ideas on the … · wpo\np\aoa\5059 . Eat this: fresh ideas for the WTO Agreement on Agriculture 1 Contents Summary 3

$Page 1: Report - Eat This Fresh Ideas on the WTO AoA - Eat This Fresh Ideas on the … · wpo\np\aoa\5059 . Eat this: fresh ideas for the WTO Agreement on Agriculture 1 Contents Summary 3$
Eat this: fresh ideas on the WTO Agreement on Agriculture

Tom Crompton and Pete Hardstaff

Acknowledgements The authors are grateful for insightful comments from Jonathon Burney (English Nature), Mark Crawford (The RSPB), Penny Fowler (Oxfam), Laura Kelly (Action Aid), Sophia Murphy (IATP), Mireille Perrin (WWF International), Jules Pretty (University of Essex, UK) Matt Rayment (The RSPB) and Alan Swinbank (University of Reading, UK). Responsibility for the content of this report lies with the authors. This report should be cited as: Crompton, T and Hardstaff, P (2001) Eat this: fresh ideas on the WTO Agreement on Agriculture. The RSPB, Sandy, UK. For further information on this report, please contact Tom Crompton or Pete Hardstaff at: The RSPB, UK Headquarters, The Lodge, Sandy, Bedfordshire SG19 2DL Tel: +44 1767 680551 Fax: +44 1767 692356 e-mail: [email protected] [email protected]

wpo\np\aoa\5059


Eat this: fresh ideas for the WTO Agreement on Agriculture

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Contents

S u m m a r y 3 A c r o n y m s 5 1 I n t r o d u c t i o n 7 1.1 The RSPB and the Agreement on Agriculture 7 1.2 The re-negotiation of the Agreement on Agriculture 8 1.3 A way forward 9 2 D e f i n i n g t h e c h a l l e n g e s 11 2.1 Introduction 11 2.2 The environmental and biodiversity challenge 11 2.3 The food security challenge 16 2.4 The rural livelihood challenge 19 2.5 Making the links: the environment, food security and rural development connection 20 2.6 The ‘efficiency’ challenge 22 2.7 Conclusions 26 3 T r a d e p o l i c y a n d a g r i c u l t u r e 28 3.1 Introduction 28 3.2 Agricultural trade policy and high external input agriculture (HEIA) 28 3.3 Agricultural trade policy and the environment 31 3.4 Agricultural trade policy and food security 33 3.5 Agricultural trade policy and rural livelihoods 41 3.6 Conclusions 44 4 W h o w a n t s w h a t – d i s e n t a n g l i n g t h e p o s i t i o n s 45 4.1 Introduction 45 4.2 The Cairns Group 46

4.2.1 Introduction 46 4.2.2 Export competition 47 4.2.3 Domestic support 48 4.2.4 Market access 50 4.2.5 Non-trade concerns 52

4.3 The United States 52 4.3.1 Introduction 52 4.3.2 Export competition 53 4.3.3 Domestic support 53 4.3.4 Market access 54 4.3.5 Non-trade concerns 55

4.4 Net food-importing developing countries (NFIDCs), least developed countries (LDCs), small island states (SISs) and other developing countries (India, for example) 56

4.4.1 Introduction 56 4.4.2 Export competition 57 4.4.3 Domestic support 57 4.4.4 Market access 59 4.4.5 Non-trade concerns 60

4.5 ASEAN countries 61 4.5.1 Introduction 61 4.5.2 Export competition 61 4.5.3 Domestic support 61 4.5.4 Market access 62 4.5.5 Non-trade concerns 62

4.6 Friends of Multifunctionality – Introduction 63

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4.7 The European Union 64 4.7.1 Introduction 64 4.7.2 Export competition 65 4.7.3 Domestic support 66 4.7.4 Market access 67 4.7.5 Non-trade concerns 67

4.8 Other ‘Friends of Multifunctionality’ 68 4.8.1 Introduction 68 4.8.2 Export competition 69 4.8.3 Domestic support 69 4.8.4 Market access 69 4.8.5 Non-trade concerns 70

4.9 Economies in transition 71 4.9.1 Introduction 71 4.9.2 Export competition 71 4.9.3 Domestic support 71 4.9.4 Market access 72 4.9.5 Non-trade concerns 72

5 A r e f o r m e d A o A 75 5.1 Introduction 75 5.2 Export competition 78 5.3 Domestic support 83 5.4 Market access 85 5.5 It’s not just trade – the need for complementary policies 98 6 References 104 WTO working documents on the agriculture negotiations 112 A p p e n d i x : a n a n a t o m y o f t h e A o A 118 A.1 Export competition 118 A.2 Domestic support 119 A.3 Market access 120 A.4 Special safeguard provisions 122 A.5 Due restraint 122 A.6 Special and differential treatment 123


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Summary The first decade of the 21st century is a critical time in the development of agriculture across the world. Key international decisions will be made that will determine how we feed ourselves and what impact this will have on the natural environment. Analysis of the problems facing agriculture, how trade policy interacts with them, and the positions governments are taking at the World Trade Organisation (WTO), reveals immense disparities between the architecture of current trade regimes and the need to develop alternative policies to deliver secure supplies of food through sustainable agriculture. National agriculture policies sit within, and will continue to evolve under, the Agreement on Agriculture (AoA) – the global framework for agricultural trade relations. This international instrument, which is overseen by the WTO, promotes the liberalisation of agricultural markets between its members. The AoA is now up for re-negotiation, and the outcome will determine the extent to which agricultural trade policy contributes to more environmentally sound agriculture, secure and equitable supplies of food, and the survival of viable rural communities. The Royal Society for the Protection of Birds (RSPB) is well placed to engage in debate on the reform of the AoA, and its environmental and social impacts across a broad spectrum of national contexts. The Society is the largest member of BirdLife International, a global network of conservation organisations working in over 100 countries. Many of these organisations are acutely aware of the environmental importance of national agriculture policies, and the way in which these impact on the welfare of rural communities. In the course of voicing its concerns about the way in which the AoA is reshaped, the RSPB draws upon and extends its long-standing work on the European Common Agricultural Policy (CAP). The Society has advocated reform of the CAP for many years, arguing that this should promote more sustainable agriculture – not just in Europe, but throughout the world. In an analysis of the current problems facing agriculture, this report highlights the failure of agricultural systems which are based upon high levels of external input. Loss of wildlife, soil degradation and pollution are all symptomatic of such failure, with a knock-on effect that yield increases obtained under high external input agriculture (HEIA) are falling, or yields themselves are plateauing throughout the world. Evidence that long-term food security cannot be premised upon the techniques of HEIA can therefore no longer be ignored. The report goes on to make the links between the problems facing agriculture – environmental degradation, food insecurity and rural decline – and trade policy. Proponents of complete market deregulation argue that greater production efficiency will ensue from dismantling all trade distortive practices. However, this argument is premised upon a narrow view of efficiency. The report points to the external costs arising


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from market failures associated with HEIA systems (for example, emissions from international food transport, contamination of drinking water, loss of biodiversity, soil erosion, pesticide poisoning, urbanisation and displacement of rural communities). These are inefficiencies which will not be averted through a blind push towards an unfettered market. That said, the current range of trade policy interventions in the agricultural sector – such as many production-related subsidies and export subsidies – frequently exacerbate rather than correct these market failures. Neither the ‘free market’ approach nor a defence of the status quo can help deliver more sustainable agriculture. Clearly, new thinking on agricultural trade policy must be developed. However, a breakdown of negotiating proposals submitted to the WTO suggests that national positions are pervaded by an abject failure to take proper account of the implications of such externalities. While there are aspects of a number of negotiating positions that are complementary to food security and more sustainable agriculture, no one position addresses these concerns satisfactorily. In an attempt to bypass debates concerning so-called ‘free trade’ and so-called ‘protectionism’ and to focus attention on designing policy to address the problems faced by agriculture, the RSPB proposes an alternative blueprint for AoA reform. This blueprint is based on the following key principles: • Flexibility

National flexibility in the course of pursuing food security, rural livelihood and environmental goals.

• Real efficiency

Internalising the external costs of agriculture, fostering a move towards more local food production.

• Non-infringement

Trade policies should be construed such that they do not infringe upon the rights of countries to privilege sustainable local production for domestic food security over and above production of commodities for world markets.

• Sustainability

Only by addressing issues of sustainability can the joint needs of food security, environmental protection and rural livelihoods be accommodated.

• Transparency and predictability

It is important that both domestic and overseas producers can access details on government agriculture policies and be aware of how, and under what circumstances, these may change. Measures taken by governments should thus be clear, well defined, accessible and predictable.

• Accessibility

Effective agricultural trade policies should be accessible for use by


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the poorest countries, which should also receive support in building the technical and institutional capacity for implementation.

The RSPB proposes a number of detailed alternative ways in which the AoA could be reformed to promote these principles. For example, suggestions are made for measures to permit the protection of domestic production, where this is pursued solely to address genuine food security concerns. Proposals are also made for ways in which domestic support strategies in developed countries might be rendered less production-distorting and more clearly focused on addressing genuine environmental and social concerns. Some of these proposals are consistent with measures specified in various country negotiating positions. However, the scale and breadth of the problems also requires some ‘new’ thinking on trade and agriculture policy. The report also briefly touches on a range of complementary policies (eg debt relief, aid for sustainable agriculture, domestic regulation and taxes, consumer labelling, biosafety etc) that are required to promote sustainable agriculture. While it has to be recognised that trade policy is only one aspect of agricultural policy and that there is no ‘one right way’ to structure the AoA, it is critical that negotiations, starting in earnest in March 2001, are focused on encouraging the production and equitable distribution of safe, healthy food in a sustainable way. This report is intended as a contribution towards this ongoing debate.

Acronyms AMS Aggregate measurement of support ASEAN Association of South-east Asian Nations AoA Agreement on Agriculture of the Uruguay Round CAP The European Union’s Common Agricultural Policy CEEC Central and Eastern European Country CBD Convention on Biodiversity CGIAR Consultative Group on International Agricultural Research CGPRT Centre for Research and Development of Coarse Grains,

Pulses, Roots and Tuber Crops EBA Everything but Arms EC European Commission EU European Union FAO Food and Agriculture Organisation FCCC United Nations Framework Convention on Climate Change GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GFAR Global Forum on Agricultural Research GM(O) Genetically Modified (Organism) GNP Gross National Product GP Agreement on Government Procurement GSP Generalised System of Preferences HDI HEIA

Human Development Index High external input agriculture

IATP Institute for Agriculture and Trade Policy


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ICREA International Commodity-Related Environment Agreements IFOAM International Federation of Organic Agricultural Movements ILEIA Centre for Research and Information on Low-External Input

and Sustainable Agriculture IMF International Monetary Fund IPR Intellectual Property Rights IRRI International Rice Research Institute, Los Banos, Philippines IUCN The World Conservation Union LDC Least developed country LEISA Low external input sustainable agriculture MFN Most favoured nation NFIDC Net food-importing developing country NTC Non-trade concern OECD Organisation for Economic Co-operation and Development PPM Non-product related process and production method RSPB The Royal Society for the Protection of Birds SAP Structural Adjustment Programme SARD Sustainable Agriculture and Rural Development S&D Special and differential SIS Small island state SPEC Species of European conservation concern SSG Special Safeguard STE State trading enterprise TBT Agreement on Technical Barriers to Trade TRIPS Agreement on Trade Related Aspects of Intellectual Property

Rights TRQ Tariff rate quota UNCSD United Nations Commission on Sustainable Development UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural

Organisation UR Uruguay Round WTO World Trade Organisation WWF World Wide Fund for Nature


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1 Introduction 1 . 1 T h e R S P B a n d t h e A g r e e m e n t o n A g r i c u l t u r e The RSPB is a UK charity with over one million members and is part of the BirdLife International Partnership, a global alliance of independent national conservation organisations working in more than 100 countries worldwide. The BirdLife International Partnership strives to conserve birds, their habitats and global biodiversity, working with people towards sustainable use of natural resources. The RSPB, through its work on the Common Agricultural Policy (CAP), has contributed significantly to an understanding of the direct impacts of agricultural trade policy upon farmland biodiversity. For example, the CAP has an important bearing on agricultural intensity in Europe and recently published work has found that population declines and range contractions of farmland birds have been significantly greater in countries with higher indices of agricultural intensity (particularly milk and cereal yield)1. Other work has highlighted the adverse impact of the CAP on farming and rural communities both in Europe and further afield. The RSPB advocates the development of more sustainable agriculture which will provide food that is produced within ecological limits and sustains rural communities. This concept of sustainable agriculture encompasses the three ‘pillars’ of sustainability – environmental, social and economic. Care should be taken in the use of nomenclature here; in this document, low external input and sustainable agriculture (LEISA) is presented as an alternative to high external input agriculture (HEIA). This follows the usage of the Centre for Research and Information on Low External Input and Sustainable Agriculture (ILEIA) which defines the term more precisely (see Box 1). The RSPB – along with other BirdLife International partner organisations – has for many years advocated a range of CAP reforms. These have been proposed with the aim of promoting more sustainable agriculture, while reducing the impact of the CAP on countries outside the EU. Clearly, as it stands, the CAP fails to internalise adequately the social and environmental impact of agriculture or to address the international impacts of high levels of EU domestic support and export subsidy. But the RSPB also recognises the adverse effects of unbridled liberalisation of the agriculture sector. Drawing upon, and extending, its criticism of the CAP, the RSPB is seeking to help direct reform at an international level in ways that will contribute to more sustainable agriculture, secure and equitable supplies of food, and more vibrant rural communities the world over.

1 Donald et al (in press).


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Box 1 Nomenclature

Low external input and sustainable agriculture attempts to optimise the efficient and complementary use of locally affordable internal and external resources. This entails building upon a combination of farmers’ knowledge, sound ecological agricultural practices and scientific insights into agroecology. LEISA involves technologies such as soil and water conservation, integrated plant nutrient systems, agroforestry, integrated pest management, intercropping, crop-livestock integration, and microclimate management. The approach aims to secure sustainable increases in agricultural production, while enhancing biodiversity and ensuring the sustainable use of natural resources2. It is misleading to refer to HEIA as ‘modern agriculture’, implying that LEISA is in some way old-fashioned; many LEISA techniques reflect developments at the cutting edge of our understanding of agroecology. Although rather inelegant, it would be more accurate to refer to HEIA as ‘old modernist agriculture’3. ‘Industrial agriculture’ is also avoided here, because much high-input agriculture may nonetheless be on a very small (non-industrial) scale. Similarly, ‘intensive agriculture’ is avoided; organic agriculture, for example, may be highly ‘intensive’. (Note however that the concept of HEIA has also been criticised, on the basis that external inputs of knowledge are of central importance to sustainable regimes.) There is a large and growing body of literature on LEISA, which has been viewed as peripheral to mainstream agricultural research for too long4. Organic agriculture can be viewed as a specific subset of low-external input agriculture, and is sometimes used exclusively to refer to agriculture which is legally defined and certified as organic, usually according to International Federation of Organic Agricultural Movements (IFOAM) criteria. While its adoption in developed countries, where consumer premiums are paid, may present one means of effecting a transition to LEISA, consumer premiums are not prerequisite in order for alternative agricultural systems to be commercially viable. Such premiums are not usually paid in developing countries, and most certified organic produce in these countries is exported. While this does little to contribute directly to domestic food security in developing countries, or to address the environmental impacts of long distance food transportation, organic production can provide a source of high-value export crops which need not entail the degradation of agricultural land in the course of their cultivation.

1 . 2 The re -n e g o t i a t i o n o f t h e A g r e e m e n t o n A g r i c u l t u r e The parameters for agricultural trade negotiations were established at the beginning of the Uruguay Round (UR) in the Punta del Este Declaration of 1986. Contracting parties agreed ‘that there is an urgent need to bring more discipline and predictability to world agricultural trade by correcting and preventing restrictions and distortions including those related to structural surpluses so as to reduce the uncertainty, imbalances and instability in world agricultural markets’5. According to Article 20 of the AoA, agreed at the end of the UR, WTO members are obliged to continue the reform process, beginning one year before the end of the implementation period. Governments agreed to submit initial negotiating proposals by the end of 2000, prior to a meeting in March 2001 to decide on the scope and the format of, and possibly a deadline for, further negotiations. This process

2 See: <www.oneworld.org/ileia>. 3 Jules Pretty, pers comm. 4 See, for example, Altieri and von der Weid (2000). 5 GATT (1986).


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is to continue irrespective of what happens concerning attempts to launch wider WTO negotiations. While the primary aim of the AoA is to reduce support and protection, the Agreement also requires broader issues to be addressed in the reform process. Thus Article 20 states that continued reform will take account of: a the experience to date from implementing the reduction commitments b the effects of the reduction commitments on world trade in agriculture c non-trade concerns, special and differential treatment to developing

country Members, and the objective to establish a fair and market-orientated agricultural trading system, and the other objectives and concerns mentioned in the preamble to this Agreement; and

d what further commitments are necessary to achieve the above mentioned long-term objectives.

[emphasis added] The preamble to the Agreement, alluded to in Article 20 (above), recalls the aim of establishing ‘a fair and market orientated agricultural trading system’. However, ‘market orientation’ need not entail the development of a free market without regulations. Indeed, the preamble goes on to note that the reform programme should proceed while ’having regard to non-trade concerns, including food security and the need to protect the environment; having regard to the agreement that special and differential treatment for developing countries is an integral element of the negotiations, and taking into account the possible negative effects of the implementation of the reform programme on least-developed and net food-importing developing countries’. It is also important to recognise that the public good nature of some non-trade concerns, legitimised in the preamble, implies the need for intervention. That said, such issues raise deep suspicions among many WTO members and the debate in the Agriculture Committee of the WTO is often characterised by those purporting to support ‘free trade’ attacking such concerns as ‘protectionism’. While these suspicions are not without foundation, the danger with such a debate is that positions will become increasingly politicised and entrenched, while ignoring the real problems facing agriculture.

1 . 3 A w a y f o r w a r d Re-negotiation of the AoA clearly cannot take place without a broader consideration of the impacts of agricultural trade policy on people and the environment. Indeed, this report argues that agricultural trade policy cannot be seen in abstract economic terms if it is to help promote more sustainable agriculture. Key to a more thoughtful approach to reforming the AoA is an understanding of the diversity of problems facing agriculture and how these interact with trade policy. Section 2 therefore reviews the current evidence from around the world and draws some broad conclusions about the range of challenges we face in terms of environmental protection, productivity, food security and rural community viability. Critically, the report draws attention to the failure of high external input

Re-negotiation of the AoA clearly cannot take place without a broader consideration of the impacts of agricultural trade policy on people and the environment. Indeed, this report argues that agricultural trade policy cannot be seen in abstract economic terms if it is to help promote more sustainable agriculture.


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agricultural systems, and suggests that long-term food security concerns and environmental protection can only be addressed through a recognition of the need for more sustainable agricultural practices. Section 3 then goes on to analyse the links between these issues and trade policy. The question is, will such considerations play a central role in negotiations or will they be sidelined? Section 4 analyses the negotiating positions of the different countries and groupings of countries submitted to the WTO by December 2000. It is well recognised that reform of trade policy alone cannot provide solutions to these problems – a range of other policy measures are required to achieve sustainability and food security. Nevertheless, this report contends that trade policy does influence both the emergence and perpetuation of these problems, and the scope for addressing them. The AoA has to be reformed to reflect this reality, and Section 5 offers an ‘alternative vision’ for such reform and provides policy suggestions on how it might be achieved.


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2 Defining the chal lenges 2 . 1 I n t r o d u c t i o n Despite the diversity of agricultural practices throughout the world, it is possible to identify several key challenges that are common to all contexts. These might be summarised as: achieving sustainable increases in productivity, while staying within ecological limits (ie conserving natural resources); ensuring secure and stable supplies of food; maintaining or developing viable rural communities; and making agriculture economically efficient. This section presents the current evidence that these challenges are not being met in the context of HEIA, the dominant model for agricultural production in much of the world and the pattern promoted by many of those concerned with the development of the agriculture sector in developing countries. Section 2.2 below discusses the environmental effects of HEIA, and the way these impact upon biodiversity. Section 2.3 focuses on the implications of these environmental impacts for sustainable food production and thus food security. Section 2.4 focuses on the impacts of the failures of intensive agriculture on the livelihoods of rural communities. Although treated separately, the substance of Sections 2.2, 2.3 and 2.4 is intimately connected. This is important, and is discussed more fully in Section 2.5. Finally, Section 2.6 discusses HEIA in the context of economic efficiency.

2 . 2 T h e e n v i r o n m e n t a l a n d b i o d i v e r s i t y c h a l l e n g e

G r e e n h o u s e g a s e m i s s i o n s Agricultural systems can be major sources of greenhouse gas – as methane (from livestock and paddies) and carbon dioxide. Although global methane emissions are far lower than carbon dioxide emissions, the climate altering effects of methane are proportionately greater than those of carbon dioxide. Methane emissions derive in large part from enteric fermentation in domestic animals, particularly cattle. But over a quarter of global methane emissions are attributable to world soils and terrestrial ecosystems, of which anaerobic decomposition of organic matter in flooded paddies is the most important factor6. Gaseous nitrogen emissions also fuel ozone depletion and global warming, with nitrous oxide accounting for an estimated 6% of the enhanced greenhouse effect7. The burning of rice straw is a particularly significant source of nitrous oxide8, which is also generated through the use of chemical fertilisers.

6 Lal (2000a). 7 UNEP (1999) and references therein. 8 When rice straw is removed from land, 66 kg N/ha, 6 kg P/ha and 160 kg K/ha are lost, increasing incidences of micronutrient deficiency (Kabir 1999). These are trends that can be reversed; when some farmers belonging to the farmers’ federation KAIKASAN in the Philippines had been using chicken manure for five years, they achieved yields comparable to those achieved using inorganic fertiliser; use of farmyard manure (FYM) has comparable effects when applied at a rate of 3.1 t/ha.


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W a t e r p o l l u t i o n In addition to atmospheric discharges, nitrogen is being released into terrestrial and aquatic ecosystems, with colossal ramifications for aquatic environments and human health. Some 60% of this nitrogen is attributable to inorganic fertiliser use. In the US and Canada, pesticide and fertiliser run-off into water courses remains a major source of water pollution, with the Organisation for Economic Co-operation and Development (OECD) listing nitrate pollution among the most acute of water pollution problems. Run-off of fertiliser-contaminated water leads to eutrophication of aquatic environments and presents risks of methemoglobinemia (arising from damage to red blood cells) to those who drink the water9. In some US rivers, nitrogen levels rose by an order of magnitude over the course of the last century, entailing expensive purification systems (the issue of such external costs is returned to in Section 2.6 below)10. Apart from the human health implications, algal growth in water-courses accounts for half the impared lake area in the US (well over half in the case of rivers). An oxygen-depleted ‘dead zone’ on the US Gulf Coast approximately the size of El Salvador, appears each year at the time of maximum fertiliser run-off11.

S o i l p o l l u t i o n a n d d e g r a d a t i o n Meanwhile, elevated levels of nitrogen in soil leads to the competitive replacement of diverse plant communities by a restricted range of species better adapted to high nitrogen deposition12. High levels of nitrogen also promote leaching of minerals, which stabilise soil pH. As acidity increases, soluble aluminium ion concentrations become sufficient to kill fish. Nutrient-depleted land cannot support the vegetation necessary to prevent wind or water erosion. Water erosion alone is estimated to lead to the loss of 75 billion tonnes of soil each year13. Soil dispersion leads to ‘crusting’, which in turn increases water run-off, perpetuating this vicious cycle through exacerbation of erosion and the further loss of soil organic carbon 14. The amount of land affected globally by soil degradation amounts to an area the size of North America (see Table 1).

T a b l e 1 L a n d a r e a s a f f e c t e d b y s o i l d e g r a d a t i o n 15 Region Land area affected by degradation

(million hectares) Latin America 300 Africa 500 Europe 167 North America 95 Asia and Pacific 550 Other 288 Worldwide 1,900

9 Matson et al (1997). 10 UNEP (1999). 11 UNEP (1999) and references therein. 12 UNEP (1999). 13 Craswell (2000). 14 Lal (2000b). 15 From UNEP (1999) p37.

Nutrient-depleted land cannot support the vegetation necessary to prevent wind or water erosion. Water erosion alone is estimated to lead to the loss of 75 billion tonnes of soil each year.


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L o s s o f a g r o b i o d i v e r s i t y High external-input agriculture is leading to widespread losses of agrobiodiversity. Loss of farmland biodiversity is of particular importance to the RSPB, and is discussed more fully below. However, also of concern is the loss of agrobiodiversity which has ensued from changes in agricultural practice, with an increasing reliance upon a highly restricted genetic base of staple crops threatening food security16. It has been estimated that just three crops (rice, wheat and maize) account for 60% of the calories and 56% of the protein derived from plants globally17. And yet a dramatic contraction in the genetic diversity of these crops leads to vulnerability to pest and disease outbreaks, entailing need for use of greater volumes of pesticide. The interdependence of agrodiversity and rural livelihood was tragically illustrated by the suicides of debt-ridden cotton farmers in southern India in 1998 (this is discussed further in Section 2.4).

L o s s o f o t h e r b i o d i v e r s i t y Commensurate with reductions in crop biodiversity, diversity of other organisms also decreases, with loss of beneficial soil organisms and invertebrates entailing the need for yet greater use of pesticides, further impacting on their populations. This vicious circularity (the ‘pesticide treadmill’) fuels the severity of pest outbreaks. As might be anticipated from the above, there is a close inter-relationship between on-farm biodiversity and the creation of well-adjusted low-input farming. Spatial diversity of agricultural environments, and diversity of cropping patterns fosters overall farm biodiversity. A joint IFOAM, IUCN, WWF meeting18 explored the linkages between farming practice and biodiversity conservation. Observing that surveys repeatedly identify agricultural practice to be the single greatest threat to biodiversity in many ecosystems19, the editors of the proceedings of the Vignola meeting noted that, hitherto, attempts to address the effects of agricultural intensification on biodiversity have focused on reducing land under agriculture, while intensifying production on this remaining area. Only now is it being recognised that this does not present a sustainable appoach to conservation, with the importance of maintaining biodiversity within areas under production gaining increasing acceptance. A higher faunal diversity and abundance, and a more even species distribution of the most important taxa is recorded on organic as opposed to conventional farming systems. In arable crops, many arthropods play an important role in the regulation of pests; organic farming results in a lower density of aphids, for example. Others (particularly carabids) serve as sensitive indicators of environmental 16 Shiva and Crompton (1998). 17 Thrupp (2000). 18 IFOAM is the International Federation of Organic Agricultural Movements, the IUCN is The World Conservation Union, and WWF is the World Wide Fund for Nature. The meeting, which was held in 1999, grew from a motion made to the IUCN World Conservation Congress by IFOAM in October, 1996. See Stolton et al (2000). 19 Stolton et al (2000), p7 write; ‘analysis of key biodiversity areas, such as the IUCN Centres of Plant Diversity, BirdLife International’s Endemic Bird Areas and WWF’s Global 200 Ecoregions, for example, all show agricultural intensification to be the top threat listed by experts in the areas involved .’


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quality. Endangered (Red List) carabid species diversity and absolute numbers are also found to be higher in organically farmed habitats20. In addition to the nature of specific cultivated areas, spatial variation in habitat type is also found to be important; field margins (hedges, for example) play a critical role in the successful over-wintering of beneficial arthropods. Soils on organically managed farms also exhibit a marked increase in abundance and species diversity of earthworms. The beneficial effects of earthworms for soil structure (aeration, porosity and drainage), nutrient recycling and availability, and control of pests and diseases are extensively documented. Earthworm abundance and species diversity is found to be significantly lower in more high-input agricultural systems (ie their populations decrease with increased use of mineral fertilisers, pesticides, and with the simplification of crop rotation). In some studies, twice as many earthworms were found on organically cultivated fields 21. Agricultural intensification affects nearly half the declining bird species of European conservation concern (SPECs). A high proportion of these are threatened by the conversion of dry grasslands to fast growing, input intensive crops22 (see Box 2 for an example). Elsewhere, the lowering of water-tables on wet grasslands, followed by re-seeding, fertiliser applications and high stocking levels, has prompted the decline of wading birds23. The replacement of hay meadows with silage crops has also had significant adverse impacts on some bird species24. But the most pervasive change has been the intensification of arable land through high inorganic fertiliser inputs, crop specialisation and increased field size. High pesticide use often follows such changes, which result in monocultures of tall, dense crops with reduced numbers of invertebrates and wild plants, and fewer adjoining hedgerows, trees and ditches. As a consequence, bird nesting opportunities, food resources and overall habitat diversity have all decreased. Pesticide use alone affects 24% of declining SPECs through the indirect effects on food supplies, while direct toxic effects threaten 7%25. Some of the impacts of agricultural intensification on bird populations are listed in Box 3.

20 For a review of studies on the effect of organic farming on species diversity and abundance of arthropods and earthworms in arable land, see Pfiffer et al (2000). 21 See Pfiffer (2000) and references therein. The effects of pesticides on earthworms seem to be species specific; it seems likely that species which inhabit upper soil layers, or which emerge onto the soil surface for feeding or mating, will be more vulnerable to pesticide populations. Fumigant nematicides (methylbromide, for example) are particularly toxic. 22 In Europe, this affects birds such as the little bustard, great bustard, black-bellied sandgrouse and stone curlew (see BirdLife 1997). 23 In north-west Europe, this affects the black-tailed godwit, redshank and white stork (ibid). 24 In Europe, this has affected the quail, corncrake and barn owl (ibid). 25 ibid.


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Box 2 The little bustard as an emblem of the biodiversity of cultivated land in France26

The little bustard is dependent upon mixed farming systems, which are also important for arable plants such as poppies and cornflowers. During the last 30 years, agricultural intensification has damaged habitats in the French cultivated plains. New crops such as maize and sunflowers have replaced meadows and pastures. Fields have been amalgamated and increased in size, resulting in reductions in field margins. Irrigation of cereals and maize has been encouraged. Changes to the open plains inhabited by little bustards have reduced their habitat value and biodiversity. There have also been changes to the structure of rural communities, with fewer farmers managing larger areas of land, and a decline in the farm labour force. Intensification of the French plains has been encouraged by the CAP, which has promoted food production while taking little account of the environmental and social consequences. The 1992 CAP reforms brought further changes and reinforced many of the threats caused by the CAP. For example, legume fields were ploughed up because they were ineligible for Arable Area Payments. Meadows and pastures, which are the favoured habitat of little bustards, have also declined in France since 1992. France has implemented agri-environment measures which should provide important benefits to little bustards and to wider biodiversity, as well as protecting water quality. Furthermore, they provide payment to farmers and benefit the economy of these rural areas. Because cultivation is often difficult in these areas, farmers welcome the choice provided by agri-environment measures. In many areas, farming for the environment is the more economically viable option. Agri-environment schemes can therefore help to maintain farming in marginal areas, encourage young farmers to remain in these areas and prevent depopulation. Further CAP reform, increasing the prominence of agri-environment measures in the CAP, would increase these benefits. The Agenda 2000 CAP reform would have provided an opportunity for strengthening support for agri-environment measures, while reducing production-linked payments. However, the reform did not decouple compensation arable area payments from production. It has been widely criticised by many of the EU’s trading partners, and will be challenged during the AoA renegotiation, with particular pressure for the EU to reduce area payments.

Greater species diversity and abundance of birds is also found on organically farmed land. For example, organic farming patterns benefit the ground-nesting skylark, which is restricted to agricultural fields27. A long-running (thirty-year) study by The Game Conservancy Trust in England has linked declining populations of Lepidoptera and sawfly larvae under high-input agricultural regimes to a fall in the populations of grey partridge. One farm in the study area is still being managed under a traditional ley system; this is the sole farm where the density of insect larvae has remained unchanged, and coincides with the only area of the study site where the population of grey partridges has remained stable. Similar results have also been obtained for densities of corn-buntings28. Table 2 summarises recent research on the impact of HEIA on farmland bird populations.

26 Taken from BirdLife (1997). 27 See Hansen et al (1999) and references therein. 28 Potts et al (undated).


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Box 3 Factors reflecting agricultural activity which have been implicated in farmland bird decline in

Europe29 • Increased use of pesticides and possible associated loss of food supply. • Increase in high-input cereal farming at the expense of lower-input arable/grass systems. • Decline in habitat diversity and increased field size as a consequence of increased mechanisation. • Loss of hedgerows and other non-productive land. • Changes to sowing and harvesting schedules. • Greater intensity of grassland management through increased stocking, field drainage, re-seeding and

fertiliser applications. • Replacement of hay with silage crops. • Abandonment of low-intensity land with high biodiversity.

T a b l e 2 S u m m a r y o f s o m e r e c e n t r e s e a r c h o n t h e i m p a c t o f h i g h - i n p u t a g r i c u l t u r e o n f a r m l a n d b i r d s 30

Study

Conclusion

Pesticide use on cereals and the survival of grey partridge chicks

Reduced survival rates of the grey partridge correlates with pesticide application

Changes in corn bunting distribution on the South Downs in relation to agricultural land use and cereal invertebrates

Demonstrated impacts of high-input agriculture on corn buntings

The effect of organic farming regimes in breeding and winter bird populations, British Trust for Ornithology, 1995

Skylark densities and breeding success are lower under conventional farming regimes

Indirect effects of Pesticides on Birds, Joint Nature Conservation Committee, 1997

Highlights 19 species of farmland birds where populations were affected by pesticides

Review of the Comparative Effects of Organic Farming on Biodiversity

Organic systems promote biodiversity as compared to other systems

Pesticide Use, Avian Food Resources and Bird Densities, Game Conservancy Trust and English Nature, 1999

Intensification of farming methods has led to a decline in populations of the grey partridge and corn bunting.

2 . 3 T h e f o o d s e c u r i t y c h a l l e n g e It has been estimated that globally some 800 million people are threatened by food insecurity31. Although the sustainable production of food is critical in addressing such insecurity, there are also critical problems of access to food. At the World Food Summit in 1996, the assembled Heads of State and their representatives reaffirmed ‘the right of everyone to have access to safe and nutritious food, consistent with the right to adequate food and the fundamental right of everyone to be

29 See Donald et al (unpublished), and references therein. 30 After Soil Association (1998), and references therein. 31 FAO (1996).


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free from hunger’. As others have since elaborated, there are several dimensions to the right of access to food (see Box 4).

Box 4 Food security as a fundamental human right32 Food security is about far more than the immediate availability of sufficient foodstuffs. Such security is contingent upon: • An ecological dimension – without sustainable use of natural resources, there can be no long-term

reliability of production, or thus food security. • A livelihood dimension – without the protection of the livelihoods of rural communities, especially in

developing countries, there can be no food security. Such communities are producers of the food upon which others depend. They are also consumers who are dependent upon their means of production in order to avail themselves of food in the marketplace.

• A cultural dimension – without availability of culturally appropriate food, there can be no food security. The connection between biological diversity and cultural diversity is crucial, although it is not explored further in this report.

• A health and nutrition dimension – without availability of safe and nutritious food free of health hazards there can be no food security. Again, although important and linked with economic, cultural and ecological issues, food safety and nutrition are not explored in detail in this report.

Food security is a human rights issue on each of these grounds; it must be predicated on the right to resources, the right to work, the right to cultural diversity, the right to health, and the right to information.

Although international trade in agricultural produce is essential where domestic food supply is threatened by harvest failure, or where the agricultural resources for food self-sufficiency are inadequate, the primary means of achieving domestic food security is through sustainable domestic production of safe, nutritious and culturally appropriate foodstuffs. However, there is incontrovertible evidence that, in the long-term, domestic production cannot be sustained through the techniques of HEIA. Such evidence is presented below. Moreover, the techniques of HEIA cannot best safeguard the livelihoods of rural communities. This is discussed further in Section 2.4. The maintenance of soil and hydrological systems is key to agricultural productivity – and thus food security. Yet agricultural intensification can lead to soil salinisation and depletion of ground water reserves through poor management of irrigation systems or loss of soil fertility. Soil degradation, through salinization, compaction, erosion, pollution or nutrient depletion is estimated to affect 65% of global agricultural land33. Twenty-four per cent of agricultural land is considered to be degraded to the extent that agricultural production is greatly reduced. Losses attributable to soil degradation alone have been estimated as up to 9% of agricultural gross domestic product (GDP) in some African countries, and 7% of the total agricultural GDP in south and south-east Asia34. Furthermore, nutrient balances are negative for most crops and cropping systems. In areas that have been studied (Latin America and sub-Saharan Africa), soil fertility is found to be declining. Such impacts

32 After Shiva (1996). 33 World Resources Institute (2000). 34 World Resources Institute (2000), p64.


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are leading to a slowing in the growth of cereal crop yields, and a decline in productivity on an estimated 16% of agricultural land35. As a recent World Resources Institute publication comments, ‘. . .the declining rate of yield growth is worrisome in a world where the growth in food demand is not expected to slow’36. Evidence of the failure of current agricultural practice is compelling. In India, yields of the intensive wheat-rice cropping systems of the Punjab, the ‘bread-basket’ of the country, are declining37. The wheat-rice cropping system emerged during the Green Revolution as the predominant pattern in the Indo-Gangetic Plains. However, their adoption has led to receding water-tables in Punjab and Haryana, and, elsewhere, waterlogging and salinisation38. Throughout Asia, the growth in yields from high-input rice cultivation are also being called into question39. Long-term experimental station trials conducted in the Philippines and India show downward trends in yields. For example, at the International Rice Research Institute (IRRI) in a continuous cropping experiment in which three crops were grown each year over the period 1968–1990, yields of the dry season crop dropped from eight tonnes per hectare to six40. In Carchi, a northern region in Ecuador, yields of potatoes, initially boosted by use of chemical fertilisers, are now diminishing. Today average yields are just over 20 tonnes per hectare, as compared to yields of up to 60 tonnes per hectare when chemical fertilisers were first used. Soil in the valley floor, once highly fertile, is now used only as pasture. Lower valley slopes, on which chemical fertilisers have been used for the last quarter of a century, require ever longer fallow periods between plantings of potato. Nonetheless, yields still decline. Highest yields are found in newly cleared fields far above the valley floor, where farmers continue to deforest land for better potato production. In an attempt to address the problem of declining yields, Ecuadorian national agricultural services have introduced a series of improved potato varieties, which now account for over 90% of production. However, according to one author, while these led to brief increases in yield and improved pest resistance, such benefits proved to be short-lived41. The economic and social impacts of productivity loss due to soil degradation are significantly greater in developing countries than industrialised countries: ‘In industrialised countries, soil quality plays a relatively less important role in overall agricultural productivity because of the high level of fertilizer and other inputs used. Furthermore, the most important grain-producing areas in industrialized countries typically have deep, geologically ‘new’ soils that can withstand considerable degradation

35 World Resources Institute (2000), p64. 36 World Resources Institute (2000), p62. 37 Matson et al (1997). 38 Gupta and Abrol (1998). 39 See Matson et al (1997) and references therein. For Asia as a whole, increases in yield fell from 2.86% per year over the period 1973–1983, to 1.32% per year over the period 1985–1993. See Greenland (1997), Chapter 8. 40 Greenland (1997). 41 Frolich et al (1999).

Evidence of the failure of current agricultural practice is compelling. In India, yields of the intensive wheat-rice cropping systems of the Punjab, the ‘bread-basket’ of the country, are declining.


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without having yields affected ’42. Nonetheless, salinisation of soils is a particular problem in the United States (US), where use of irrigation systems is particularly prevalent, and dryland salinisation is a problem in Australia where conversion of native bush to agriculture has caused groundwater levels to rise, leading to salinisation of soil. At present 10% of the landscape is affected, though this is projected to increase to 40% over the next 50 years43. Although falling yields have prompted farmers to intensify fertiliser application, yield increases continue to decline, while the environmental impacts intensify. Whereas in developed countries, the effects of unsustainable agricultural practice can be offset to some extent by increasing inputs of (for example) fertiliser, in developing countries the relative economic cost is greater. Such economic considerations, coupled with the fact that some tropical ecosystems may be more vulnerable to poor management practices, underline, from a food security perspective, the importance of finding alternatives to HEIA, especially in developing countries.

2 . 4 T h e r u r a l l i v e l i h o o d c h a l l e n g e The maintenance of viable rural communities is crucial for the development of sustainable agricultural systems. Yet, all over the world, rural communities are facing hardship and decline. The reasons are manifold – including decreasing commodity prices, the increased efficiency of capital in relation to labour and inappropriate government intervention – but the common result is the increasing marginalisation of small-scale farming. The agricultural crisis has huge social repercussions for rural communities in both developed and developing countries. In England, farm incomes fell by 72% over the period 1995–200044, and 23,800 farmers left the industry between June 1999 and June 200045. Suicides among farmers and farm managers in 1999 were the highest in a decade46. In the US, farmers testifying before a Senate Democratic Policy Committee Hearing spoke first hand of the social implications of the crisis in American agriculture. One spoke of the impact on other members of farming families: ‘On my stretch of road, nine out of ten spouses work off the farm in order supplement [sic] income and obtain health insurance coverage. Six years ago only one spouse was working off the farm . . .I have friends that do not have the option of obtaining health insurance coverage through their spouse. They face health insurance premiums averaging $6,000 a year. Some of these friends have put their entire operation on the line by not carrying life insurance, so that they may put the additional money into their operation and try to hold on for one more year’47. In India, several hundred peasants (the exact number is unknown) in Andhra Pradesh, faced with uncontrollable pest outbreaks and insurmountable debts, have resorted to suicide. Bank notices, posted on

42 World Resources Institute (2000) p64. 43 Environment News Network (1999). 44 National Farmers Union Press Release, 30.11.2000. 45 National Farmers Union Press Release, 18.12.2000. 46 National Farmers Union Press Release, 10.11.2000. 47 Barth (1999).


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the doors of debt-ridden farmers who cannot read them, drive some to despair. In the summer of 2000, many farmers, and others belonging to farmers’ families in the Anantapur region, committed suicide by drinking the pesticide intended for their fields. The suicides began with cotton farmers, but have since spread to those growing groundnut. Cotton is not traditionally a major crop in the affected regions, but the promise of high financial returns achieved on larger holdings have encouraged small farmers to begin planting large areas of the crop. Much of this land has been planted with a single cotton hybrid, exacerbating the problems of susceptibility to pest outbreaks when these occur48.

2 . 5 M a k i n g t h e l i n k s : t h e e n v i r o n m e n t , f o o d s e c u r i t y a n d r u r a l d e v e l o p m e n t c o n n e c t i o n Discrete treatment of the environmental, food security and rural development challenges as outlined above should not obscure their interdependence. It is clear that the environmental impacts of HEIA undermine sustainable production, in turn impacting upon rural livelihoods. The former Deputy Director General of Research at the IRRI writes: ‘[T]here is no doubt about the current slowing down of the momentum in production, not only of rice but of other food crops... There has been concern not only about yield levels and production potential, but also about environmental problems and the sustainability of the methods used to attain the current yields... There must also be concern about the economic aspects of sustainability, particularly declining factor productivity. As yields increase, the response obtained per unit of input tends to decrease’49. Mainstream agricultural researchers are now coming to realise that intensive monoculture itself is undermining food security. As some CGIAR scientists comment: ‘Emerging farm-level evidence from the rice bowls of Asia indicates that intensive rice monoculture systems lead, over the long term, to declining productivities of inputs. Over time, farmers have been found to use increasing amounts of inputs to sustain the yield gains made during the Green Revolution years. Ironically, the very policies that encouraged increased food supply through intensive monoculture systems also contributed to the declining sustainability of these systems’50. Intensive rice cultivation leads to over-use of paddies, increased reliance upon inorganic fertilisers, asymmetry of planting periods, and reduced crop diversity. These trends lead in turn to a build-up of salinity and water-logging, declines in soil nutrient levels, increased incidences of soil toxicity, pest build-up, and reduced resilience of the ecosystem to pest attacks. Increased reliance upon monoculture heightens vulnerability to pests and diseases51, while dependence upon ammonium or urea-based nitrogen fertilisers also intensifies soil acidity. This leads to a loss of soil biodiversity, restricting plant root development and enhancing the mobility of heavy metals, polluting both surface and ground water. Many soils in Africa no longer support the high yields recorded when chemical fertilisers were first used52.

48 Menon (2000). 49 Greenland (1997), chapter 1. 50 Pingali et al (1997), p6. 51 Crompton and Wakeford (1998). 52 Karbo et al (1999); Atengdem and Dery (1999).

Mainstream agricultural researchers are now coming to realise that intensive monoculture itself is undermining food security.


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It is not only advocates of ecological farming practice who draw attention to the problems of yield loss. The extent of nutrient depletion throughout Africa is also documented in a paper produced by the Fertilizer Development Center. The authors note that: ‘The... depletion of nutrients from soils has caused crop production to stagnate or decline in many African countries. In some cases, notably in the east African highlands, the rate of depletion is so high that even drastic measures, such as doubling the application of fertilizer or manure or halving erosion losses, would not be enough to offset nutrient deficit... All African countries, except Mauritius, Reunion and Libya, show negative nutrient balances every year. In the semi-arid, arid, and Sudano-Sahelian areas that are more densely populated, soils lose 60–100 kilograms of nitrogen, phosphorus, and potassium per hectare per year’ 53. Nutrient depeletion in the US is fuelled by the financial hardships facing American farmers. One testifier to the Senate Democratic Policy Committee Hearing on the Crisis in Agriculture explains: ‘When prices are low, we are unable to build a reserve to carry us through bad years. Low prices mean that every phase of farming gets cut. We are not always able to do things as we know we should – the right way. For example, this year I made a conscious decision to mine our soil and not apply any mixed fertilizer. I only used nitrogen to get by this year. When talking to our local fertilizer dealer, I learned that I was not the only farmer doing this. His business is down. He has also received a fax explaining how the whole fertilizer industry is hurting ’54. Disruption to the salt balance of soil is particularly prevalent in irrigated or puddled land and is seen as an important contributing factor in the decline of yields in the rice-wheat system of the Indo-Gangetic plains55. Puddling of rice fields places high demands on water supplies, leading to depletion of ground water reserves. This technique also degrades soil structure, diminishing yields of following crops, and fuelling soil degradation. Degradation of farmed land is a particularly acute problem, and it has been estimated this could lead to a halving of crop yields in Africa within 40 years56. As the CGIAR scientists note: ‘Upland degradation also imposes a negative externality on the lowlands through increased sediment buildup in irrigation infrastructures. Environmental externalities generated within a watershed transcend various sectors of economic activity; for example, pesticide run-off from rice paddies affects fish production in lowland lakes. Similarly, indiscriminate pesticide use can affect drinking-water supplies and human health’57. The problems associated with a phalanx of crop pathogens are exacerbated by high applications of nitrogen fertiliser. Populations of

53 Henao and Baanante (1999). The authors conclude that to maintain current average levels of crop production without depleting soil nutrients Africa will require three times more fertiliser each year than it currently uses. Note that only nitrogen, phosphorus and potassium are mentioned, although these are just three of the 45 minerals needed for plant growth (Primavesi 1999). 54 Brackman (1999). 55 Gupta and Abrol (1998). 56 UNEP (1999) p36. 57 Pingali et al (1997), p6–7.


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sap-feeding insects tend to increase sharply in response to nitrogen fertilisation. Intensive fertilisation of high-yielding varieties of rice throughout south-east Asia, for example, has led to large-scale outbreaks of the brown plant-hopper Nilaparvata lugens. Such pest problems are further aggravated by use of monoculture. Reduced crop biodiversity favours the emergence of a more restricted spectrum of pests which may nonetheless prove to be far more abundant. This doesn’t apply only to insect pests; most viruses which are transmitted by insects are found at higher levels in monocultures as a result of the effects of reduced plant diversity on their insect vectors58. Increased prevalence of pests leads to high demand for pesticides and an acceleration of pest resistance to these. In the Peruvian Andes, for example, farmers are increasingly encountering problems of such resistance. In response, and though they can ill-afford it, they are applying larger amounts of more dangerous organophosphate and carbamate compounds59. Following the suicides of groundnut farmers in Andhra Pradesh, as a result of indebtedness following pest outbreaks, the state government despatched over 600 tonnes of monocrotophos pesticide to the affected region. Monocrotophos, also used as a bird poison, is banned in many countries60.

2 . 6 T h e ‘ e f f i c i e n c y ’ c h a l l e n g e In a recent speech, the Director General of the WTO, Mike Moore, commented: ‘Maximising efficiency means... enabling people to fulfil their potential and helping countries to make the most of their resources and conserve their environment. Efficiency is just another word for conservation’61. Production based upon the unsustainable use of natural resources, or production which fails to optimise human resource use, is inefficient. But regretably, many current patterns of production fall short on both counts. Such production is best characterised by HEIA, which is premised upon the utilisation and depletion of resources which cannot be easily renewed: soil, soil nutrients, water, minerals and genetic resources. As the preceding sections have clearly shown, HEIA is unsustainable and is thus inherently inefficient. Despite this, HEIA is seen by many as being intrinsically more efficient than systems which rely less upon external inputs – the reason being that, in economic terms, HEIA systems are based on externalising environmental and social costs. In other words, the costs of the many social and environmental impacts of HEIA (eg biodiversity loss, soil erosion, desertification, nutrient depletion, rural community decline and contraction of the genetic base of staple crops) are borne by wider society rather than by farmers, agri-businesses or consumers. This produces an extremely distorted picture of the economic ‘efficiency’ of HEIA.

58 Matson et al (1997). 59 Osorio and Travaglini (1999). 60 Use of monocrotophos on a single 60 hectare farm in Argentina killed over 62,000 birds following planting of pesticide-treated seeds. American Bird Conservancy (1997). 61 Moore (2000).

Production based upon the unsustainable use of natural resources, or production which fails to optimise human resource use, is inefficient. But regretably, many current patterns of production fall short on both counts.


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Attempts have been made to quantify some of these external costs. For the UK alone they have been estimated as £2.3 billion, or nearly 90% of total net farm income in 1996 (see Table 3). (Note that the problems associated with attributing financial cost to non-market impacts means that the estimates presented here are likely to be conservative.) Thus, for example, the external costs of decontaminating drinking water adulterated with pesticide residues runs to around a quarter of the value of the total pesticide market in the UK.


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T a b l e 3 E s t i m a t e s o f s o m e e x t e r n a l c o s t s o f U K a g r i c u l t u r e ( 1 9 9 6 ) 62

Externality Estimated annual cost (pounds sterling)

Contamination of drinking water: pesticide 120,000,000 nitrate 16,000,000 Cryptosporidium 23,000,000 phosphate and soil 55,000,000 Eutrophication and pollution incidents 6,000,000 Damage to wildlife, habitats, hedgerows and walls 125,000,000 Emissions of methane, ammonia, nitrous oxide and

carbon dioxide 1,113,000,000

Soil erosion and organic carbon loss 106,000,000 Food poisoning 169,000,000 Bovine spongiform encephalopathy (BSE) 607,000,000 Total 2,340,000,000

Current concepts of ‘efficiency’ are clearly in need of revision. Henceforth, we use ‘real efficiency’ to denote efficiency which takes proper account of the need to conserve resources for sustainable production, and to optimise human resource potential. Real efficiency addresses not just immediate, but also external costs. Truly efficient agricultural production should not entail the depletion of natural resources or degradation of land; policies should take proper account of the social ramifications of farm amalgamation, the displacement of rural communities, and the social and economic costs of urbanisation; they should work with, rather than counter to, the biodiversity that provides genetic resources for future breeding programmes; they should factor in the costs associated with deforestation, biodiversity decline and emissions from the production of fertilisers. Such accounting should also reflect the transport costs associated with trans-national shipment of food and inputs. This will entail a probable shift in current emphasis, towards increased domestic or regional consumption for many products63. In their negotiating proposals, several developing countries, lead by Cuba (see Section 4.4), outline the greater efficiency of domestic production: ‘From the point-of-view of some, encouraging developing countries to increase domestic food production may not seem to be market efficient. However, if all the benefits are taken into account – agriculture as the sole source of employment for the majority of developing countries; domestic production especially of key staple products as the most accessible source of food for the majority – then clearly, these benefits outweigh the supposed ‘economic costs’. This type of flexibility, however, must be differentiated from exporting developed countries’ provisions of supports in order to gain markets abroad’ [emphasis added]64. 62 Taken from Pretty et al (2000). 63 Consider, at a national level, ‘Food from Britain’, which as SERA (The UK Labour Environment Campaign) has suggested, should be re-launched as ‘Food for Britain’. 64 G/AG/NG/W/13.


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Concern about the long-term social and environmental impact of high input agriculture is often construed as an indulgence of the well-fed65. However, as has been discussed above, the recent performance of HEIA (manifest globally as plateauing or even diminishing yields) points towards the need to adopt alternative, more sustainable, techniques. Contrary to some of the hyperbole surrounding the food productivity debate, yields from sustainable agricultural systems need not necessarily be lower. In one extensive study, which does nothing to duck the immense problems of sustainably feeding a world population of over eight billion in 50 years time, yields on farms in Africa were found to increase by 50–100% in 95% of holdings adopting sustainable agricultural practices, where such yield increases were the aim66. Similar results have been achieved in Asia67. But crucially, these yield increases were not contingent upon the acquisition of new technologies, from which the poor might be excluded access. They were achieved solely through the more efficient use of available resources. Nonetheless, these latter results underscore the fact that LEISA, is not a reversion to some form of traditional or low-technology agriculture. Rather, it draws extensively on a contemporary and sophisticated biological understanding of agricultural ecosystems. In essence, LEISA, or resource-conserving agriculture, emphasises the integration of agricultural production through a diversity of pest, nutrient, soil and water management technologies, at the level of the farm68. By-products or wastes from one component become inputs to another, maximising real efficiency. LEISA is associated with increases in yields in subsistance agriculture, maintenance of yields by comparison to Green Revolution systems, and maintenance of profitability (coupled with a possible, transitory, fall in productivity) in industrialised agriculture69. Case studies in the US reveal that in most instances, yields from LEISA holdings are higher than local county averages, while inputs are substantially lower (or eliminated completely from some farms). Where evidence of the effects of a transition to LEISA on Green Revolution lands exists, this suggests that input use can be cut dramatically, while yields can be maintained or improved. This, of course, is also in the context of the reversal of the environmental and human health impacts associated with current Green Revolution practices. In those vast agricultural areas where external input use is currently minimal, yield increases of two-or-three fold from adoption of LEISA techniques are not uncommon, and here transition to sustainable approaches need not entail transitionary yield losses70. Clearly, where natural, human and social resources have been depleted as a result of pursuit of HEIA techniques, such resources must accumulate once more before yields obtained from systems based on these can be optimised.

65 Crompton (1998). 66 Pretty (1999). 67 Pretty and Hine (2000). 68 Pretty (1995), p10. 69 ibid, p204. 70 ibid, p206–213.


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Box 5 Benefits of sustainable agriculture – to farmers, ecosystems and the public71

• Reduced soil erosion. • Reduced cost of external inputs. • Lower greenhouse gas emissions. • Maintenance of knowledge and skills in the farming community. • Better quality of products, such as better tasting meats and fruits. • The amenity value associated with more diverse and wildlife-rich landscapes. • The maintenance of environmental quality, such as uncontaminated aquifers and surface water. • The sustaining of resources for future generations. • Increased wild bird populations and numbers of territories. • Increased numbers of beneficial insects. • Improvements in animal welfare through cutting of routine use of unnecessary drugs (eg antibiotics to

promote growth) and lower livestock densities.

These findings are all the more remarkable when it is considered that LEISA and organic farming have developed largely outside the mainstream research system, and are inherently less interesting to the private sector simply because reliance upon external inputs is minimal. This, in conjunction with the fact that such agriculture produces more positively valued public goods as well as benefits to farmers (see Box 5), makes a strong case for increased public spending on research focused on the needs of the LEISA sector72. In addition, of course, such yields would be more sustainable.

2 . 7 C o n c l u s i o n s This section analysed the current challenges facing agriculture. The evidence shows that current agricultural systems – which can be characterised as HEIA – are causing environmental degradation, are threatening food security and are contributing to rural community decline. A key conclusion from the above analysis is that the interdependence of environmental, food security and rural development problems cannot be ignored. It is also clear that HEIA is inherently inefficient. There is a pressing need to move towards a concept of real efficiency which takes account of sustainability concerns. This will entail a shift towards LEISA techniques, such as organic agriculture, which would be recognised as more efficient than HEIA were external costs to be properly ‘internalised’.

71 Adapted from ibid, p211. 72 Dabbert (1999).

A key conclusion from the above analysis is that the interdependence of environmental, food security and rural development problems cannot be ignored.


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3 Trade policy and agriculture 3 . 1 I n t r o d u c t i o n In Section 2, the various challenges facing global agriculture were briefly outlined and the conclusion was reached that current HEIA systems are unsustainable on grounds of environmental, food security, and rural development concerns. In short, the real efficiency of such systems is low. This report is concerned with such inefficiency, insofar as it might be ameliorated through changes in trade policy – although it should be recognised that trade policy reform is just one part of pursuing more sustainable agriculture. There are two aspects to addressing such inefficiencies in relation to the WTO. The first is to consider ways in which the policies agreed in the WTO are actively perpetuating these inefficiencies. The second is to examine those inefficiencies in the agriculture sector which have arisen despite, rather than because of, the WTO Agreements, but which might nonetheless be addressed through careful refinement and judicious application of trade policies. Such refinement should be premised upon an appreciation of the fact that production systems which fail to conserve the resources upon which they depend are patently inefficient. This section assesses the current evidence concerning the potential and actual impacts of agricultural trade policies on the environment (Section 3.3), food security (Section 3.4) and rural development (Section 3.5). But first, it is important to establish the general links between trade policy and HEIA.

3 . 2 A g r i c u l t u r a l t r a d e p o l i c y a n d h i g h e x t e r n a l i n p u t a g r i c u l t u r e ( H E I A ) The imposition of an increasingly restricted number of agricultural models upon a diversity of landscapes has led to widespread losses of biodiversity and the displacement of rural populations73. However, the interplay between agricultural trade policy and the social and environmental impacts of agriculture is complex.

T h e l i b e r a l i s a t i o n a g e n d a Liberalisation of the agriculture sector under the AoA was expected by some to decrease production, increase prices, and make farming more profitable. In the event, the small profit margins to which most farmers are working have increased pressure for maximising production with a corresponding tendency to further depress prices74. Simultaneously, agricultural systems have become more commercialised with economic growth, urbanisation, and the withdrawal of labour from the agriculture sector. This is true both for staple food crops, as well as high-value export crops, and has led, according to some CGIAR commentators, to a greater market orientation of farm production; progressive substitution of non-traded inputs in favour of purchased

73 Stolton et al (2000). 74 Murphy (1999). This may be counterintuitive in the light of a rational response to diminished profit margins. However, the ‘perverse supply response’ is well documented. See, for example, Potter et al (1999).


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inputs; the gradual decline of integrated farming systems and their replacement by specialised enterprises for crop, livestock, poultry and aquaculture products. This is partly because of product-specific demands on the expertise of the farmer, and investment, and its effect has been to disrupt the integrated systems of enterprises within a single farm under which the by-products from one component become inputs to another. The substitution of non-traded for traded inputs means that power, soil fertility maintenance, animal fodder and household nutrition have become increasingly sourced as external inputs75. Overall the agriculture sector may diversify. However, at the level of the farm, mixed farming systems are replaced with specialised market-orientated production units76. Take the example of rice: ‘Increased commercialisation shifts farm households away from traditional self-sufficiency goals and towards profit and income-orientated decision making; farm output is accordingly more responsive to market needs. The returns to intensive subsistence production systems that require high levels of family labour generally decline relative to production for the market with predominant use of hired labour. The proportion of farm income in total household income declines as family members find more lucrative non-agricultural employment opportunities. At the same time, the share of agriculture in farm household income declines’77. The impacts of liberalisation on the European agriculture sector may be similar: The EC suggests: ‘Pressures on farming, derived mainly from technological developments and liberalisation of markets, causes farmers to modify their farm practices to maintain and advance their businesses. Common trends include intensification, specialisation and concentration in profitable areas and marginalisation and even abandonment in difficult areas. These trends are likely to lead to a reduction in the provision of environmental and cultural public goods’78. That liberalisation of agricultural trade will lead to the restructuring and intensification of the agriculture sector seems clear. Summaries of recommendations given in 10 country reports from selected Asian countries which are undergoing structural adjustment to the agriculture sector stress the need for increased farm productivity and efficiency. For example, recommendations as to how the Malaysian agriculture sector must respond to an increased exposure to world markets, include79: • the restructuring of production to allow farm consolidation and

operation of better economies of scale (The impacts of the

75 Pingali et al (1997), p160 76 ibid 77 ibid, p161 78 EC (2000a) or G/AG/NG/W/36 Rev1. ‘Concentration’ refers to the congregation of farmers producing the same crops in the same vicinity; ‘Specialisation’ refers to the replacement of mixed farming by monoculture; ‘Intensification’ refers to increased use of inputs, higher operating costs, and higher yields to cover these costs; ‘Marginalisation’ refers to the underuse or abandonment of structurally disadvantaged farmland. 79 Kanai and Titapiwatanakun (2000).

That liberalisation of agricultural trade will lead to the restructuring and intensification of the agriculture sector seems clear.


30

amalgamation of small farms upon rural livelihoods are discussed further below; see Section 3.5.)

• the reduction of labour requirements in the palm oil production process

• the provision of an environment conducive to private sector investment in food production on a large-scale commercial basis

• the promotion of programmes targeted at increased participation by larger operators able to exploit economies of scale.

Similarly, an academic from the National Centre for Agricultural Economics and Policy Research in New Delhi, in reviewing the ongoing liberalisation of the agriculture sector in India, has concluded: ‘The best strategy to face the challenge of import liberalisation and to take advantage of export potential would be to ensure... continuous improvement in efficiency of production to keep the cost of production low. These would require [an] increase in the use of modern inputs like fertilisers and plant protection technologies,... promotion of improved seeds, improvement in production technologies, full exploitation and efficient use of irrigation resources,... agricultural diversification at the macro level; by promoting specific specialization at the micro level’80. The summary report of this same study lists such recommendations to address the effects of agricultural liberalisation, collated from national reports from 10 countries. Of these 115 recommendations, only two make perfunctory reference to environmental concerns81. None allude to concerns regarding the sustainability of intensified food production.

T h e i n t e r v e n t i o n i s t a g e n d a The foregoing critique of the impacts of liberalisation is not intended to deflect attention from the manifest failures of some forms of intervention, most notably embodied in the EU’s CAP. For example, high prices in the EU, maintained under the CAP, have contributed to the intensification of agriculture with some of the environmental impacts outlined above (Section 2.2). However, it is far from clear that a simple reversal of these policies (liberalisation) will lead to a corresponding amelioration of the environmental impacts and a move towards LEISA. This concern arises for several reasons82: • The perverse supply response – farmers may intensify production

following a cut in support. • Reduced conservation investment may ensue from diminished

resources available for countryside management. • With increased competition, there is possible pressure on regulators

to keep standards low. • Possibility of farm abandonment, which could adversely affect

habitats dependent on the maintenance of farming systems.

80 Chand (2000). 81 Both these recommendations are found in the paper from Thailand: ‘...introduce new technological initiatives that are appropriate to different producing areas while conserving environments’, and ‘. . . establish linkage among development, trade and environment policies’. Kanai and Titapiwatanakun (2000). 82 Potter et al (1999).


31

• Removal of support will leave farmers vulnerable to world market forces, probably driving a restructuring process that will lead to an amalgamation of farms.

It is this last concern which is perhaps the most compelling, and which has as deep implications for the restructuring of agriculture sectors in developing countries as it does for reform of interventionist policies in the industrialised world. Such restructing is likely to have environmental impacts, particularly where diversification of agricultural production at a national level, and greater specialisation at the local level, could result in a reduction in on-farm biodiversity.

3 . 3 A g r i c u l t u r a l t r a d e p o l i c y a n d t h e e n v i r o n m e n t Section 3.2 reviewed the probable effects of continued liberalisation, as anticipated by economists in India and Malaysia and CGIAR scientists. These, it was projected, would entail the ‘progressive substitution ... of non-traded inputs in favour of purchased inputs’83, an ‘increase in the use of modern inputs like fertilisers and plant protection technologies’84, ‘promotion of improved seeds’85, and ‘specialisation at the macro level’86. Such effects will exacerbate the environmental impacts outlined in Section 2.2. And yet the environmental impacts of many intervention policies need be no less destructive. Domestic support provisions which encourage intensification and overproduction, particularly where these favour larger farmers, generate comparable impacts. That said, there is even anecdotal evidence to suggest that, at least in the EU, economies of scale free larger farmers to pursue agri-environment schemes for which smaller farmers may not have the time or resources to apply87. Recent work by the RSPB has drawn attention to the correlation between intensity of agricultural practice (as measured by a series of several broad indices) and mean farmland bird population declines, for both EU countries, and Central and Eastern European Countries (CEECs). Agricultural intensity was generally found to be higher in EU states than in CEECs. Results also indicate that bird population declines between 1970 and 1990 were significantly greater in the EU, suggesting that the impacts of agricultural policy on biodiversity are detectable at a continental level, making them comparable in scale to deforestation and global climate change as major threats to biodiversity88. The amalgamation of farms, driven by such economies of scale, will lead to a diminished variety of cropping patterns per unit area, and possible increases in field size with attendant loss of field margins and hedgerows. Specialisation at the level of the farm will decrease use of integrated farming pratices and increase use of monoculture. The corresponding loss of crop diversity leads to decreases in farmland

83 Pingali et al (1997). 84 Chand (2000). 85 Chand (2000). 86 Chand (2000). 87 Comment made by Marie Skinner at the RSPB conference Farming – Fit for the Future? 23 November, 2000, Royal Society of Arts, London. 88 Donald et al (in press).

Increases in the use of pesticides, whether as a result of the subsidisation of these, or in response to the pressures of liberalisation, entails a loss of vertebrate, insect and plant diversity, including that of agricultural benefit, and pollution of water courses.


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biodiversity, both as a direct effect of a restriction of available foodstuffs and habitat diversity, and less directly through increased use of external inputs necessary under monoculture. Increases in the use of pesticides, whether as a result of the subsidisation of these, or in response to the pressures of liberalisation, entails a loss of vertebrate, insect and plant diversity, including that of agricultural benefit, and pollution of water courses. Increased use of inorganic fertiliser exacerbates problems of eutrophication of aquatic environments, and increases methane emissions. In 1995, agriculture accounted for nearly half of the aggregate nitrous oxide emissions, with fertiliser use listed as the largest source in the majority of audits. Finally, increased trans-national shipment of produce (either reflecting export of excess produce generated under inefficient intervention policies, or as a result of increased international trade under liberalisation) generates greater greenhouse gas emissions. For many countries, more than 95% of total carbon dioxide emissions arise from fuel combustion, with many countries recording emissions from transport as the largest source.89 The evidence suggests that dramatic per capita reductions in emissions can be achieved with increased consumption of locally grown produce.90 Box 6 presents some examples of the environmental impacts of food transportation. Continued liberalisation of agricultural trade and the perpetuation of poorly targetted intervention policies will also exacerbate the displacement of rural communities, and the erosion of domestic food security. Both these factors are considered in their own right below. However, they also have environmental impacts in themselves: • It is anticipated that urban populations will double over the course

of the next 30 years, to 5.1 billion. The displacement of rural communities fuels urbanisation, and generates attendant environmental and health problems. To take just two, consider air and water pollution in cities. Air pollution levels in many megacities exceed WHO health standards several fold91. Problems of waste disposal also lead to poor quality of surface water in urban areas. Both have immense implications for public health, with corresponding financial costs.

• With the erosion of domestic food security, dependence upon

importation of foodstuffs from elsewhere increases. This entails dependence upon international transport of basic commodities, with implications for greenhouse gas emissions as mentioned above.

Box 6 Examples of greenhouse gas emissions attributable to international movement of agricultural

produce92

• The importation of Californian asparagus to Europe requires four litres of fuel per kilogram.

89 FCCC (1998). 90 Carlsson-Kanyama (1996). 91 World Resources Institute (2000) p142. 92 New Economics Foundation (2000).


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Box 6 Examples of greenhouse gas emissions attributable to international movement of agricultural produce92

• New Zealand kiwi fruits are transported to Europe by air freight, with the production of 5 kg of carbon

dioxide per kilogram of fruit. • British consumption of South African apples, rather than production of this fruit locally, entails the

generation of 600 times more nitrogen oxide.

The perceived imperative to be ‘internationally competitive’ can impact on the development of environmental regulations. In the UK, for example, farmers’ organisations opposed a suggested tax on pesticides because, they argued, importers would not be subject to such costs and would undercut UK producers. This anti-tax stance was supported by the pesticides industry which recently announced a £6 million budget to be spent on opposing the proposed measure93. In general terms, a global market is intended to favour the most competitive producers. Evidently, international competitiveness might be compromised by government regulations, which increase production costs. The international market could therefore act as a deterrent to the development of such regulations. In the course of formulating trade policy, it is therefore important to clarify a legitimate basis for competition, and to establish the scope afforded governments to address the adverse impacts of increased competition.

3 . 4 A g r i c u l t u r a l t r a d e p o l i c y a n d f o o d s e c u r i t y

F o o d s e c u r i t y a n d i n t e r n a t i o n a l t r a d e The AoA is premised on the assumption that domestic food security is best achieved through promoting liberalised trade, although food imports are contingent upon both foreign currency reserves, and the reliability of transportation networks. Such an approach is outlined by the US Government which states that: ‘The United States believes, in addition to the non-trade distorting domestic support measures countries take to enhance their food security, further liberalization of trade in agricultural products and promoting legitimate assistance programs are important elements in strengthening food security... In addition to specific disciplines which expand sources of supply and encourage efficiencies in agricultural production, trade reform will result in economic growth and spur innovation, expanding global food security. It is important that liberalization alone will not address food security needs in all developed and least developed countries. As a consequence, the negotiations need to take into account the continuing role of international food aid and credit programmes in providing for food import needs’94. There are problems inherent to such an approach to food security. As a Communication from India prior to the 1999 Ministerial Conference of the WTO suggests: ‘In [countries with a large agrarian peasantry], a purely market-oriented approach may not be appropriate’95. Where there are

93 FWi (2000). 94 G/AG/NG/W/15. 95 WT/GC/W/342.


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unpredictable fluctuations in international prices, or where foreign currency reserves cannot be relied upon in the event of famine, domestic food security is best achieved through local means of production, rather than exposing small, resource-poor farmers to the vagaries of international commodity markets. Indeed, international commodity markets are such that there are inherent reasons why developing countries are likely to become net food importers under liberalised trade regimes. By and large, developing countries import food products with relatively high income elasticities in their markets, while exports to the saturated markets of developed countries generally create relatively little income and show low price elasticities. That is, competition between developing countries for export to the inelastic markets of the developed world leads to price decline, rather than increases in volumes exported96. As a result, the overall balance of trade may well favour developed countries. The importance of domestic food security runs beyond even the basic humanitarian goal of removing the supply of staple foodstuffs from the vagaries of international markets and foreign currency reserves. As one informal Indian submission claims, ‘agricultural self-reliance forms a vital underpinning for the growth of the GDP of agrarian developing economies since good agricultural production provides purchasing power to a large majority of the population, which in turn spurts industrial growth. Self-sufficiency in food production has therefore a specific developmental perspective as opposed to a purely commercial perspective’97. All too often, hunger arises not from problems with domestic production or the availability of imports, but because the poor cannot afford to buy food on the domestic market. In countries where the majority of the poor live in rural areas, measures which improve the remuneration received by the agrarian peasantry will directly improve their food security. The impacts of trade policy upon rural livelihoods are considered further below (Section 3.5).

T h e p r o b l e m o f d u m p i n g Problems arising from premising food security upon international markets are compounded by the interventionist policies of developed countries which continue to support exports (either directly though export support, or indirectly through highly production distorting domestic support measures). Such export support policies are expensive to pursue, and can only therefore be adopted by a limited number of countries. Furthermore, countries that were not already using export subsidies were forbidden to introduce them under the AoA, while those that were using them have made only modest cuts. Only 25 of the current 137 members of the WTO have export subsidy entitlements in their Schedules98. Direct subsidies are still employed extensively by the EU, for example. With the disciplining of import tariffs under the AoA, developing countries are now vulnerable to the sale of goods on world markets at less than cost of production (ie through the use of production-related subsidies that do not internalise costs). Such subsidies increase

96 FAO (1995). 97 India (1998). 98 G/AG/NG/W/11.

Problems arising from premising food security upon international markets are compounded by the interventionist policies of developed countries which continue to support exports (either directly though export support, or indirectly through highly production distorting domestic support measures).


35

production for sale on world markets, increasing global supply and thus depressing the world price. This, so-called dumping can thus depress domestic food prices, undermining the welfare of agrarian communities. It may also be the case that concentration in world agricultural trade has allowed some large companies that control significant proportions of particular commodity markets (and are thus effectively ‘price makers’) to ‘dump’ products strategically on countries at less than costs of production, in order to undercut competition and create markets99. Under the current anti-dumping laws, the onus is upon the importing country to demonstrate that dumping has occurred if they are to impose countervailing measures (see Section 3.4). Developing countries may have neither the national legislation, nor the financial resources, to take disputes to the WTO. In practice, it is difficult for developing countries to demonstrate that dumping has occurred, and to date most anti-dumping measures have been taken by developed countries. The importance of domestic support payments in exacerbating problems of dumping is less transparent, yet of more general impact. The extent to which Blue and Green Box domestic support payments are trade distorting is highly controversial. However, it is inevitable that some such payments lead to some production distortion and thus could affect world market prices. Clearly, for the importing country, the effects on world prices of increased production for export facilitated by production distorting domestic support subsidies are indistinguishable from those of price support and export subsidies100. The effect of the current approach is to deny policy flexibility and to give undue weight to the rights of agricultural exporters. As one author summarises: ‘It is clear that the AoA primarily has favoured agricultural exporters. The agreement in effect codifies a ‘right to export’ through the rules about minimum market access, the practical consequence of which is that a country no longer has the right to opt for full self-sufficiency as a strategy in any category of agricultural products. No matter what the reasons might be, as long as there is an exporter anywhere willing to sell at a lower price, the AoA is on the side of that exporter... remarkably, regardless of whether the lower price is made possible through export subsidies’101.

C o u n t r i e s w h i c h a r e i n h e r e n t l y f o o d i n s e c u r e Some countries face a serious food-import burden, as a result of economic problems (eg a rapid rise in urban food demand which exceeds production growth); the heavy dependence of agricultural production on weather conditions; or agricultural policies that place greater emphasis on the production of exportable goods than on the production of basic foodstuffs. It was predicted that the AoA would lead to an increase in world market prices of basic foodstuffs (particularly those attracting production and export supports). While this may have been to the benefit of domestic producers in many

99 Note: although an extremely important issue in world agricultural trade, regulation of trans-national corporations and anti-competitive practices are not dealt with in detail in this report. 100 Einarsson (2000). 101 Einarsson (2000).


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developing countries, it would have generated increased financial burdens for countries relying upon food imports. Some such countries, the net food-importing developing countries (NFIDCs), were supposed to receive assistance under the Marrakesh Agreement to help avert the impacts of projected increases in world commodity prices under the AoA. In fact, the Marrakesh Decision has been poorly implemented (see Box 9 p77). In addition to NFIDCs, many least developed countries (LDCs) will experience fluctuations of global food prices particularly acutely. Both NFIDCs and LDCs are reliant upon high levels of imports, and have low foreign currency reserves. Thus over the period 1995/6–1996/7 expenditure on cereal imports by LDCs and NFIDCs increased 49% by comparison to the previous period. Ninety-six per cent of this increase was as a result of increased prices of cereals, rather than increased imports102. Table 4 shows the main exports of a selection of LDCs, where this is agricultural. Clearly many are highly dependent upon single crops for the majority of their export earnings. Burundi is dependent upon coffee for 77.8% of its total exports, Guinea Bissau on cashew nuts for 87.5%.

102 ibid.


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T a b l e 4 M a i n e x p o r t s o f s o m e L D C s , w h e r e t h i s i s a g r i c u l t u r a l 103 Country Export crop (as

percentage of total exports)

Main markets

Afghanistan Dried fruit and nuts (51.3%)

Developing countries in Asia

Benin Cotton yarn (38.5%) Developing countries in Asia Burkina Faso Raw cotton (33.5%) Developing countries in Africa Burundi Coffee (77.8%) Developed market economy countries, esp EU Chad Cotton lint (50.6%) Developed market economy countries, esp EU Ethiopia Coffee (40.5%) Developed market economy countries, esp EU Guinea Bissau Cashew nuts (87.5%) Developed market economy countries, esp EU Malawi Tobacco (59.5%) Developed market economy countries, esp EU Mali Cotton products (50.0%) Developing countries in Asia Rwanda Coffee (51.1%) Developed market economy countries, esp EU Sao Tome and Principe Cocoa (96.4%) Developed market economy countries, esp EU Sudan Cotton (17.8%) Developing countries Togo Cotton (25.2%) Developing countries in Asia Tuvalu Copra (21.5%) Eastern Europe Uganda Coffee (53.6%) Developed market economy countries, esp EU

Some of those countries listed in Table 4 are also small island states (SISs). These also tend to rely upon a limited range of export products. Sao Tome, for example, relies upon cocoa for almost its entire export earnings. This usually reflects specific climatic or other conditions which permit a small country to excel in growing a limited range of crops for export. Besides such commodities, levels of self-sufficiency in other crops is negligible104. These countries therefore require other resources in order to import staple foodstuffs. Food security is further threatened by climatic extremes105. This is a pattern which is likely to be exacerbated by climate change and rising sea-levels, themselves fuelled by HEIA. Indeed, agriculture is seen as being a key area in which reduction in use of fossil fuels should be achieved (see Section 2.2). Elsewhere, this report advocates an increased emphasis on premising food security upon domestic production (see Proposals 7 and 8 in Section 5.4). Clearly, in some cases this is not realistic. Thus proposals are also made to address the food supply concerns of developing countries which are dependent upon cheap imports (see Proposal 3, Section 5.2).

T h e i m p a c t o f t h e A o A o n f o o d s e c u r i t y i n d e v e l o p i n g c o u n t r i e s A Food and Agriculture Organisation (FAO) study on the impacts of the implementation of the AoA on 14 developing countries found that the value of food imports in the period 1995–8 exceeded those over the

103 Taken from UNCTAD (1999) . 104 G/AG/NG/W/36/Rev1 Attachment 5: Developing countries and non-trade concerns (prepared by Mauritius). 105 The US Disaster Relief Organization Review, 1990 (cited in Mauritius, 2000) concluded that 13 of the 25 most disaster-prone countries were small island developing states.

An FAO study on the impacts of the implementation of the AoA on 14 developing countries found that the value of food imports in the period 1995–8 exceeded those over the period 1990–94 in all 14 countries.


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period 1990–94 in all 14 countries (by as much as 168% in the case of India, where the trend in the value of food imports had been downward over the 10 years preceeding 1994). Over this period, food import bills increased relative to agricultural export earnings in 11 of these 14 countries106. In the case of India and Jamaica, this represented a reversal of the trend over the preceeding 10 years, in the case of Bangladesh and Senegal, significant worsening of these existing trends. ‘In Guyana, for example, there were import surges in recent years for several of the main foodstuffs that were produced domestically in the 1980s under a protective import regime. In several instances, the surge of imports has undermined domestic production... The fear was expressed that without adequate market protection, accompanied by development programmes, many more domestic products would be displaced, or undermined sharply, leading to a transformation of domestic diets and to increased dependence on imported foods’107. Similarly, a joint study by Vredeseilanden-Coopibo-Uganda, SNV-Uganda and Oxfam-Uganda, presents ‘evidence that the emphasis on exports, both traditional and non-traditional cash crops, has simultaneously meant a decline in the production of foodstuffs consumed locally, both in amounts and in variety’108. In the Philippines, domestic production of the staple foodstuffs rice and corn fell by 24% and 20% respectively, over the period 1993–1998. Whereas in 1994 the country imported no rice, in 1998 it imported over two million tonnes, or 20% of its annual consumption109. This is despite the Philippines applying Special Safeguard (SSG)110 provisions on rice, with an out-quota tariff rate of 100%. Yet since 1997, rice imports were well above the minimum access quota. Similarly, importation of corn increased annually from 643,000 tonnes in 1994 to 1.67 million tonnes in 1998. Table 5 shows the balance in trade in agriculture in the Philippines over the period 1990–1998. Meanwhile, dietary preferences have changed, and Filipinos are eating more wheat, which is imported predominantly from the US. Initially this was distributed free as food aid. Subsequently it has supplied fast food chains operating in the Philippines, including American multinationals like McDonalds111.

106 FAO(2000). In Senegal the ratio of food import bills to agricultural export earnings increased 86%, in Bangladesh by 80%, and in India by 49%. 107 FAO (2000). 108 Effects of agricultural price and market liberalisation and other factors on food security in selected districts of Uganda. Vredeseilanden-Coopibo-Uganda, SNV-Uganda and Oxfam-Uganda, December, 1998. Reviewed in Madeley (2000). 109 Domestic production in 1998 was abnormally low. However, the Philippines imported 862,000 and 722,000 tonnes of rice in 1996 and 1997, respectively. 110 See Appendix. 111 See Yabut-Bernardino (2000) for further analysis.


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T a b l e 5 B a l a n c e o f t r a d e i n a g r i c u l t u r e i n t h e P h i l i p p i n e s o v e r t h e p e r i o d 1 9 9 0 – 1998 ( f ree-o n -b o a r d v a l u e i n m i l l i o n U S d o l l a r s ) Year Exports Imports Balance 1990 1,701 1,555 146 1991 1,845 1,260 585 1992 1,866 1,560 307 1993 1,918 1,626 292 1994 2,072 2,114 -42 1995 2,499 2,649 -150 1996 2,307 3,096 -789 1997 2,338 3,102 -764 Realising that it is better, where possible, to premise domestic food security upon domestic production, many developed countries, and some Asian countries, successfully achieved a higher rate of agricultural production than population growth, through raising their food self-sufficiency ratio112. Such self-sufficiency can be eroded by the liberalisation of trade in agriculture. As has been noted by one government economist in India: ‘There are signals that the agricultural sector has started responding to economic reforms initiated in the country. The crop pattern is getting diversified with a shift away from foodgrain crops towards high value, in some cases export orientated crops. This has implications for food security in the country. The growth rate in foodgrain output during the 1990s has declined to around 2%, which is the lowest ever realised in the post Independence period. This development is depressing when viewed in the light of existing nutritional intake and future demand for foodgrains’113. These predictions are echoed by economists at the National Agricultural Research Centre in Pakistan: ‘Due to lower (or negative) net returns from planting food grains, including wheat, the cropping pattern is getting diversified with a shifting away from food grains towards high value crops or export-orientated crops. This is a very serious issue, since with the existing population growth of around 3%, demand for food commodities is increasing at a faster rate’114. It has been predicted that implementation of the UR in China, which, at the time of writing, is in negotiations to become a member of the WTO, would also have negative impacts on domestic food security, particularly in grains. The Chinese Government has set a target of 95% grain self-sufficiency, and yet under free trade scenarios, domestic grain production is predicted to fall far behind consumption115. Exports of staple foodstuffs comprise the surplus to domestic requirements. Generally, this is quite small as a proportion of total production (eg just 4.5% of the world’s rice is traded). Consequently, fluctuations in supply can have disproportionate impacts on world

112 Ohga (2000). 113 Chand (2000). 114 Akhtar (2000). 115 Huang and Chen (2000).


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prices116. This problem is compounded by the relatively limited number of countries which contribute to international markets (60% of the international market for wheat, and 90% of that for soybeans, are supplied by the three largest exporting countries)117. But increased reliance upon growing crops for export markets can also have more immediate implications for the food security of small-scale producers. Increased use of monoculture, arising from orientation towards income-orientated production, leads to abandonment of traditional self-sufficiency goals, tends to reduce on-farm diversity, and leads to increased vulnerability to the economic impacts of crop failure. It also diminishes production of staple foodstuffs for local consumption118. Failure to utilise and maintain local landraces leads to the erosion of plant genetic resources for use in future breeding programmes for pest and disease resistance. Export-orientated farming also tends to favour larger producers over smaller farmers who cannot produce volumes demanded by exporting companies, or who are trying to cultivate crops with which they are unfamiliar. There is thus increased use of plantation farming or contract growing to supply export markets, and corresponding displacement of small farmers. The social implications of this are discussed below (Section 3.5). However, food security is affected as the one-time rural producers migrate to swell the ranks of the urban poor. Finally, production of export crops may be inherently less sustainable than production of staple food stuffs. Use of pesticides and fertilisers may increase, undermining long-term productivity in ways that have already been discussed. Where food procurement is increasingly premised upon the long-term sustainability of export earnings, environmental degradation will have important implications for food security.

M a i n t a i n i n g a b a l a n c e While domestic production provides some insurance against food shortages, supply reliant entirely upon domestic production is vulnerable to harvest failures. In practice, the optimal level of dependence upon food imports will be country specific. A proposal by Japan and The Republic of Korea, recently suggested: ‘The optimum solution for each country varies according to its specific situation and cannot be found by relying only on market mechanism [sic]. In order to find this optimum solution, external effects and public goods aspects of food security as well as the element of risk (uncertainty in supply) must be fully taken into account’. They continue, ‘[e]ach country has a right to pursue the optimum combination of domestic production, importation and public stockholding to ensure its food security. A desirable international framework should allow countries to pursue their respective goals based upon their specific situations .. . ’119. While such a position is likely to come under attack during the AoA negotiations, it is worth noting that, at the Commission for Sustainable Development in 2000, governments nevertheless agreed ‘to reaffirm their

116 Japan and Republic of Korea (2000) or G/AG/NG/W/36 Rev1. 117 Japan and Republic of Korea (2000) or G/AG/NG/W/36 Rev1. 118 Shiva and Crompton (1998). 119 Japan and Republic of Korea (2000) or G/AG/NG/W/36 Rev1.


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individual and collective commitments to achieving food security, particularly through development of domestic food production, combined with the importation, where appropriate, and storage of food . . .’120. Some developing countries have also supported a similar line. In the course of preparing for further reform of the agriculture sector, one developing country has pointed out: ‘non-trade concerns such as maintenance of the livelihood of the agrarian peasantry and the production of sufficient food to meet domestic needs [should] be taken into consideration ... Countries which argue for and support rapid liberalisation of the agriculture sector, contend that global food sufficiency would in a way ensure food security since countries could then produce what they are most competent and efficient in while importing the rest of their food requirements. Such an argument presupposes that all countries would at all times have sufficient foreign exchange to procure their food requirements internationally’121.

3 . 5 A g r i c u l t u r a l t r a d e p o l i c y a n d r u r a l l i v e l i h o o d s

I n c r e a s e d v u l n e r a b i l i t y o f s m a l l f a r m e r s Small family-run farms tend to produce more equitable economic opportunities for those who live in rural areas, in both developed and developing countries. However, as the size of the manufacturing and service sectors increase, the opportunity cost of using family labour on agricultural holdings also increases, and the profitability of family-run farms tends to diminish. While farmers who are cultivating large areas plant less labour-intensive monocultures, small farms (particularly in developing countries) are more likely to plant a high diversity of crops, rotate crops and livestock, and rely more upon waste products produced on the farm for the replenishment of soil fertility. Such reliance alleviates the environmental impacts of heavy use of agricultural inputs (fertilisers or pesticides), and maximises the overall profitability and real efficiency of the business. Rather than generating seasonal work for hired workers, small farms tend to rely upon family labour. Reversing the trend for the aggregation of farms into large agricultural production units is important in addressing the problems associated with the loss of rural livelihoods, and mass rural–urban migration122. Small farmers can also come under pressure from processors and retailers. Increasingly, firms sourcing produce for processing and export are turning away from the use of spot markets, and towards a reliance upon plantations or contract growers. Neither plantations nor contract growing need be beneficial for small farmers. In the case of the plantations, hired labour is used to cultivate the land, and little secure employment need be provided for those living among the rural communities from which this labour is drawn. In the case of contract farming, firms are able to exercise control over production, without engaging in farm ownership. It has been suggested that such contract growing may provide a means for the integration of small-scale farmers into the modern agricultural sector. But there are problems here, too,

120 UNCSD (2000a). 121 India (1998). 122 Rosset (1999).

Reversing the trend for the aggregation of farms into large agricultural production units is important in addressing the problems associated with the loss of rural livelihoods, and mass rural–urban migration.


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and many small-holders have fallen foul of contract farming. Creeping dependency upon an agro-industrial firm through investment in fixed resources or changes in cropping patterns can be exploited by such firms, leaving farmers vulnerable to extortionate contracts. Moreover, increased reliance upon cash crops can make families more exposed to food scarcity and price fluctuations. Other firms exclude small-holders as contractors; a policy which in the context of liberalised land markets can again lead to increasing farm size and marginalisation of the rural poor who may then be hired as seasonal labourers on large contract farms123. One study on frozen vegetable production in Mexico shows that, by-and-large, firms prefer to contract with large growers – maximising production per grower and minimising fixed costs (in particular the costs of screening new growers and enforcing the contracts, the expense of visits by extension agents, and costs of monitoring for pesticide violations). Where small-holders are excluded from contracting, contract farming may serve to exacerbate income and asset inequalities124. In addition to reliance upon a restricted market for their produce, small-scale farmers who shift towards producing export-orientated crops are also beholden to a diminished number of suppliers. One extensive study in India found that small domestic seed companies struggle to compete with large foreign companies that sell a restricted variety of hybrids. Rather than saving seed to replant the following year, farmers who plant hybrids must return to their supplier to re-purchase seed each season. As local landraces are lost and small seed companies flounder, crop genetic diversity diminishes, heightening vulnerability to disease, exacerbating risks of crop failure and increasing dependence upon external inputs125.

U n e m p l o y m e n t It seems that both liberalisation of the agriculture sector, and the perpetuation of a number of intervention policies, are tending to exacerbate pressures for the amalgamation of farms and displacement of small family farmers. Several case studies reviewed in an FAO report on the impacts of the implementation of the AoA found ‘a growing trend towards the consolidation of farms as competitive pressure began to build up following trade liberalisation. While this has generally contributed to increased productivity and competitiveness, it led to the displacement and marginalisation of farm labourers, creating hardship that involved typically small farmers and food-insecure population groups, and this is in a situation where there are few safety nets’126. Although subsistence farmers may be highly efficient at producing food for their own consumption, or for local markets, many experience difficulty competing internationally for sales of a restricted range of commodity crops. And yet many such farmers are compelled to turn to the production of crops for export, as domestic markets are opened to imports of staple foodstuffs – in many instances from developed countries where production and exports have been stimulated through the use of subsidies, tax breaks or other competition measures (see Section 3.4).

123 Key and Runsten (1999). 124 ibid. 125 Shiva and Crompton (1998). 126 FAO (2000).


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These FAO findings are corroborated by the predictions of economists in several Asian countries (see Section 3.2). In Malaysia, economists at the Economic and Technology Management Research Centre, Kuala Lumpur suggest that continued liberalisation will only generate major gains in the palm oil and wood product sectors. Other producers will be severely affected, particularly rice farmers. Concerns that this will lead to competitive disadvantage at a national level have prompted recommendations for ‘altering the structure of production to allow farm consolidation and operation of better economy of scale [sic]’, and reduced employment in the palm oil sector127. Academics from the Center for Chinese Agricultural Policy at the Chinese Academy of Agricultural Sciences, predict that trade liberalisation will reduce domestic production of grains and lead to unemployment for an estimated three-and-a-half millon farmers. Projected expansion of the rice and livestock sectors under liberalisation would not offset this, with net reduction in employment estimated at two-and-a-half million in the period 2000–2005128. Other estimates put this far higher. An International South Group Network study contrasts Philippine Government predictions of the benefits of implementation of the WTO with the impacts as experienced in 1998. Rather than the 20% increase in agricultural export earnings that was forecast, these fell by 12% over the period 1995 to 1998 (see Table 5). An additional 500,000 jobs had been forecast in the agriculture sector. In fact, between 1996 and 1998, 710,000 jobs were lost in the agriculture sector129. As outlined above and in Section 3.4, intervention in production in developed countries has important implications for producers of staple food stuffs in developing countries. But interventionist policies, where these are poorly targeted, may have comparable impacts on small-scale producers in developed countries. Production-linked subsidies under the European CAP, for example, have provided incentives for intensification analogous to those that are generated by liberalisation, benefitting those who produce most. With the top 17% of producers receiving 50% of CAP funds, subsidies have failed to reduce the economic vulnerability of the majority of farmers130, while at the same time driving intensification.

I m p a c t s o n w o m e n Studies on the impacts of trade liberalisation in Kenya, Ghana, Uganda, Zimbabwe, Mexico, Jamaica and the Philippines examine the impacts of trade liberalisation on women, and report the accentuation of gender inequalities131. In most African countries, women produce 60–75% of the food. In Uganda, for example, the closure of local government depots which previously bought produce, mainly from women, now entails dependence upon accepting lower prices from private traders. In

127 Ahmad and Tawang (2000). 128 Huang and Chen (2000). 129 Yabut-Bernardino (2000). 130 ABARE (2000). 131 Reviewed in Madeley (2000).

Academics from the Center for Chinese Agricultural Policy at the Chinese Academy of Agricultural Sciences, predict that trade liberalisation will reduce domestic production of grains and lead to unemployment for an estimated three-and-a-half millon farmers.


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Mexico, male labour migration has increased the workload on the majority of women, who remain at home.

3 . 6 C o n c l u s i o n s It is clear that trade policy has a range of impacts on sustainable agriculture. From the impact of export subsidies on small farmers in some developing world countries and the impact of perverse production subsidies on European wildlife to the impacts of radical liberalisation on rural communities and the environment through the encouragement of HEIA. The key conclusion to be drawn from this is that both agricultural protection and agricultural liberalisation can have adverse impacts. Neither is appropriate in all situations. This highlights the need firstly, for sustainability impact assessments of policies in order to inform policymakers and, secondly, the need for flexibility at the national level in order to pursue policies that are appropriate to national and local circumstances.


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4 Who wants what – disentangling the posit ions 4 . 1 I n t r o d u c t i o n Under Article 20 of the Agreement on Agriculture, member states of the WTO are committed to resuming the reform process one year before the end of the implementation period. This process started in Spring 2000 with governments agreeing to submit initial negotiating proposals by the end of December 2000 (note that a negotiating proposal is to be treated as distinct from a negotiating offer). This was with a view to deciding, at their meeting in March 2001, the scope and format for further negotiations, and possibly a deadline for their conclusion. This section looks at the positions that have been taken by governments in the run up to the meeting in March 2001. This is based on formal submissions to the Agriculture Council of the WTO, although other official statements have been drawn upon. References refer to negotiating proposals, which are listed at the end of the references section of this report, and which are retrievable from the WTO website. In general terms, two broad approaches to the negotiations can be identified132: the ‘market only’ approach is adopted by those countries that do not differentiate between agriculture and other sectors in the course of developing trade policy. Countries that view agriculture like any other industry tend to be the major agricultural exporting nations, which have favourable climatic conditions, and relatively low population densities – entailing high levels of both production, and food surpluses after domestic needs have been met133. The position taken by such countries might be juxtaposed with the ‘Article 20’ approach. Article 20 of the AoA requires that negotiations for continuing the reform process should take into account, inter alia, ‘other objectives and concerns mentioned in the preamble to this agreement’. These in turn include ‘non-trade concerns, including food security and the need to protect the environment; having regard to the agreement that special and differential treatment for developing countries is an integral element of the negotiations, and taking into account the possible negative effects of the implementation of the reform programme on least developed and net food-importing developing countries’. Because, hitherto, environmental protection and food security have been seen as distinct, or even conflicting aims, negotiating positions within the ‘Article 20’ approach differ widely. They might be subdivided according to whether domestic support payments or market access measures are emphasised as a means to address non-trade concerns (NTCs). They also differ according to which specific NTCs are stressed – the EU, for example, places particular emphasis upon environmental protection and the

132 Switzerland (2000) or G/AG/NG/W/36 Rev1. 133 The USA, Canada, Argentina, Uruguay, Brazil, Australia and New Zealand. Brazil, Uruguay and Argentina are distinct among developing countries, in their competitiveness with developed countries in the markets for wheat, feedstuffs and animal products (see Einarsson, 2000). The exception from this grouping is the EU, which is a major exporter but does not advocate a ‘market only’ approach.


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rural economy, while the approach taken by developing countries stresses food security and economic development concerns. What follows is an attempt to group countries broadly by their negotiating stance, based upon negotiating proposals they have submitted. However, it should be noted that these groupings are to some extent fluid, and as such obscure some differences in position between countries. They should, therefore, be treated with some caution.

4 . 2 T h e C a i r n s G r o u p Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, Uruguay.

4 . 2 . 1 I n t r o d u c t i o n The Cairns Group has attracted the membership of most large commodity exporters – the US and the EU being the notable exceptions. Argentina is the world’s third largest exporter of soybean and maize, the fifth largest of wheat; Brazil is the largest exporter of sugar, and second largest of soybean; Thailand is the largest exporter of rice and cassava, fourth largest of sugar134. The group has also been joined by Fiji (this reflects the trading relationship Fiji has with Australia and New Zealand). The Cairns Group is committed to establishing ‘a fair and market orientated agricultural trading system, by correcting and then preventing restrictions and distortions in agricultural markets’135. It notes that ‘[d]istorted world markets for agricultural products penalise countries which have liberalised and discourage countries from implementing further liberalisation’136. Members of the group draw attention to OECD statistics which demonstrate that support for farmers, at over $360 billion in 1999, is as high as it was prior to negotiation of the UR137. However, in line with its high level of membership drawn from developing countries, the group ‘is convinced that better market access conditions in a world free of trade-distorting subsidies is essential for the development of developing countries’138. The group maintains that ‘S&D is integral to the reform process’, and ‘attaches deep importance to this dimension’139. Australia, in introducing the Cairns Group proposal on domestic support, has commented: ‘The Cairns Group recognises that developing countries…have particular concerns including rural development, poverty alleviation and food security concerns. The Cairns Group is committed to ensuring that S&D provisions enable developing countries to address their legitimate and varied needs, including agricultural and rural development, food security, and subsistence and small scale farming for the development of

134 Mauritius (2000) or G/AG/NG/W/36 Rev1. 135 G/AG/NG/W/21. 136 G/AG/NG/W/54. 137 G/AG/NG/W/35. 138 G/AG/NG/W/54. 139 G/AG/NG/W/21. See the Appendix for an explanation of special and differential treatment (S&D).


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domestic food production…S&D outcomes must ensure that developing countries have adequate flexibility to pursue their development needs’140.

4 . 2 . 2 E x p o r t c o m p e t i t i o n The Cairns Group position on export subsidies is clear. Their negotiating proposal on export competition comments: ‘Price and quality are the only fair means of export competition and it is unfair to support exports through subsidised prices or subsidised terms of payment’141. In commenting on the Cairns Group proposals on export competition, Australia notes that the impact of export subsidies ‘weakens long-term food security and development…[and]…force less sustainable production methods as others scramble to compete, thus damaging the environment’142. The Group therefore ‘…seeks the complete elimination of all forms of agricultural export subsidies’143. It was proposed that a date for the elimination of remaining export subsidies should be agreed in the negotiations, beginning with bound export subsidy ceilings at the end of 2000 for developed countries144, and the end of 2004 for developing countries. Recognising the importance of other forms of export support, the Cairns Group also proposes ‘[a]dditional or strengthened rules and disciplines… to prevent the circumvention of the elimination and prohibition of all forms of export subsidies’. These would include ‘eliminating any subsidy elements of other forms of unfair export competition measures including, but not limited to, export credits, export credit guarantees or insurance programs and non-commercial transactions’145. However, the Cairns Group dissents from the EU position that consideration of any export competition measures should be contingent upon review of rules governing all such measures. The group has responded to this EC proposal by acknowledging the need to address other forms of export competition beside export subsidies, but asserting that ‘subsidies are the most trade-distorting form of support…and as such should be eliminated’146. Argentina has elaborated on this position: It is ...[a] source of concern to us that this positive statement of willingness to pursue the reform process [the EU proposals on export competition] is conditional upon the solution of other problems which, in the EU’s view, are equally or even more harmful than export subsidies’. Similarly, on the US proposals, Argentina comments: ‘We all know that the United States has shown little interest in embarking upon these negotiations [on disciplines on export credits and export credit insurance] and seeks to justify this attitude by the continued and intensified use of export subsidies by the EU’147. Elsewhere Argentina has suggested that ‘if we are unable to adopt disciplines on export credits, export guarantees and insurance programmes by the end of this year [2000], these practices should be deemed equivalent to other forms of

140 G/AG/NG/W/40. 141 G/AG/NG/W/11. 142 G/AG/NG/W/21. 143 G/AG/NG/W/11. 144 Note: the end of 2000 deadline has passed so this probably now translates into ‘as soon as possible’. 145 G/AG/NG/W/11. 146 G/AG/NG/W/43. 147 G/AG/NG/W/39.

The Cairns Group position on export subsidies is clear. Their negotiating proposal on export competition comments: ‘Price and quality are the only fair means of export competition and it is unfair to support exports through subsidised prices or subsidised terms of payment’.


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export subsidies, in other words, subsidies that have a direct impact on the price of exported products’148. In addressing the argument that NFIDCs benefit from export subsidies through access to cheaper imports, some developing country members of the Cairns Group (Argentina, Bolivia, Brazil, Chile, Costa Rica, Paraguay and Uruguay) note that: ‘…the option for imported “cheap” food curbs the development of a domestic industry in poor countries and contributes not to food security, but to perpetuate “food dependency” and the external vulnerability of developing countries. Additionally, when local production is forced to compete, in domestic and international markets, with artificially depressed prices of imported goods, domestic farmers’ income declines substantially’149. These developing country members of the Cairns Group allude to Paragraph 3 (iii) of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries (see Box 9 p75). This requires members to provide technical and financial assistance to LDCs and NFIDCs in order to ‘improve their agricultural productivity and infrastructure’, and to provide an increasing proportion of basic foodstuffs ‘in fully grant form’150. Food security concerns should be addressed through the ‘transposition of these political commitments into concrete measures’ and the concurrent ‘elimination of distortive practices which impede the participation of developing countries in the international agriculture trade’151.

4 . 2 . 3 D o m e s t i c s u p p o r t On domestic support, the Cairns Group is similarly unequivocal, seeking ‘major reductions in domestic support leading to the elimination of all forms of trade and production-distorting support. Only non-distorting forms of support should be permitted within the context of declining levels of support’152. In particular, the Cairns Group members note that ’ ... high levels of trade-distorting support are used only by a small group of rich countries’ and that ‘[s]uch support encourages inefficient production which competes unfairly with producers in other countries’153. Blue Box support, as used by the EU, comes under particular attack: ‘The EU alone is providing more than ECU 20 billion in blue box payments: these payments are highly trade- and production-distorting and yet subject to little, or no, discipline’154. Noting that, with the expiry of the peace clause, member countries will be able to take action against domestic support under the 1994 General Agreement on Tariffs and Trade (GATT) and the Agreement on Subsidies and Countervailing Measures, the Cairns Group proposes155: 148 G/AG/NG/W/20. 149 G/AG/NG/W/38. 150 G/AG/NG/W/38. 151 G/AG/NG/W/38. 152 G/AG/NG/W/35. 153 G/AG/NG/W/40. 154 G/AG/NG/W/40. 155 G/AG/NG/W/35. Perhaps anticipating the possibility of the extension of the peace clause, Canada, in its statement on domestic support calls for, inter alia, ‘the elimination of those elements of the peace clause that restrict Canada’s rights to pursue dispute settlement in cases where trade-distorting domestic support and export subsidies


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• ‘…[M]ajor reductions in trade and production distorting domestic support, including AMS and blue box, leading to the elimination of such support…’. The Blue Box attracts particular criticism, with the Philippines156, Colombia157, and Argentina158 rejecting suggestions that Blue Box payments do not interfere with the market, and underlining the need for its reduction.

• Such reductions should be initiated through ‘a substantial

downpayment during the first year of the implementation period’ of not less than 50% reduction in trade and production-distorting domestic support. These reduction commitments should be made on a ‘disaggregated basis’ (ensuring reductions across the board for all agricultural products).

• A review of the Green Box, ensuring that ‘all such domestic support

meets the fundamental requirements of no, or at most minimal, trade-distorting effects or effects on production’ . Thus, for example, ‘Canada considers it an important achievement that the Uruguay Round began identifying the difference between support policies that have distorting impacts and those with no, or at most minimal, impacts on production or trade’, and would not want to lose this distinction. Hence, ‘Canada will pursue a clear understanding on the non-countervailability of green programmes’159.

These reforms should be subject to Special and Differential (S&D) provisions enabling ‘developing countries to address their legitimate and varied needs, including agricultural and rural development, food security, and subsistence and small scale farming for the development of domestic food production.’ Such provisions ‘should build on the existing WTO provisions and include: • enhanced Green Box provisions for developing countries which would

address their specific concerns regarding food security, rural development and poverty eradication

• differentiated AMS formula [sic] and commitments for developing

countries, including preserving de minimis provisions and exceptions for investment and input subsidies…

• enhanced technical assistance…’160. Canada has developed the Cairns proposal on domestic support, suggesting an overall limit on the amount of domestic support of all types, and a review of the Green Box to ensure that such payments

cause nullification and impairment of access or disrupt sales in third country or import markets’ (G/AG/NG/W/42). 156 G/AG/NG/W/48. 157 G/AG/NG/W/43. 158 G/AG/NG/W/39. 159 G/AG/NG/W/42. 160 G/AG/NG/W/35.

The Cairns Group calls for ‘vastly improved market access opportunities for all agricultural and agrifood products’, within ‘an agreed timeframe’.


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genuinely do not distort production or trade. Following such review, Annex 2 criteria ‘should be permanently recognised as not countervailable’161.

4 . 2 . 4 M a r k e t a c c e s s The Cairns Group calls for ‘vastly improved market access opportunities for all agricultural and agrifood products’, within ‘an agreed timeframe’162. It proposes, inter alia, ‘deep cuts to all tariffs using a formula approach which delivers greater reductions on higher level tariffs, including tariff peaks, and eliminates tariff escalation, and establishes maximum levels for all tariffs…’163. The Group notes that some developing countries have adopted export restrictions or taxes in response to tariff escalation in export markets. They therefore suggest that improved disciplines on export restrictions and taxes should be linked to the elimination of tariff escalation164. Canada has been more specific, suggesting that ‘if the formula would not result in real access, as an option, a tariff above a specified level should be accompanied by a specified quantity of duty free in-quota access’165. The Cairns Group Proposal calls for ‘substantial increases in all tariff quota volumes’166. Canada has also developed this suggestion, calling for ‘tariff quota volumes to provide duty free access equal to at least a common minimum percentage of current consumption on a product basis’167. As in its treatment of export competition measures and domestic support, the Cairns Group proposal stresses the need for ‘special and differential treatment provisions for developing countries, …and a greater improvement of opportunities and terms for access for agricultural and agrifood goods produced in, and exported from, developing countries…’168. However, this identified need for S&D provisions extends only to market access for goods produced in developing countries. It does not propose the retention of market access restrictions by developing countries in order to protect domestic production. The need for such measures, at least during transition to a trading regime under which domestic support and export subsidies in developed countries are drastically reduced, has been hinted at by several developing country members of the Cairns Group. Thus Indonesia, Malaysia, the Philippines and Thailand, in commenting on the Cairns Group proposal on market access, note: ‘A levelling of the playing field suggests that developing countries’ commitment to market access can only be directly proportional to developed countries’ commitments in export subsidies and domestic support. Developing countries cannot liberalise for so long as these

161 G/AG/NG/W/92. 162 G/AG/NG/W/54. Neither Canada nor Fiji signed this proposal, prompting the EC to comment ‘…it is clear that a decision not to sign this paper is not incompatible with continued membership of the Cairns Group ’ (G/AG/NG/W/66). 163 G/AG/NG/W/54. 164 G/AG/NG/W/93. 165 G/AG/NG/W/63. 166 G/AG/NG/W/54. 167 G/AG/NG/W/12, G/AG/NG/W/23, and G/AG/NG/W/63. 168 G/AG/NG/W/54.


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trade-distorting measures persist in the agricultural regimes of developed countries’169. Indonesia goes further, asserting that ‘developing countries will need flexibility to ensure that their small farmers can continue to make a livelihood out of agriculture while adjusting to trade liberalisation’ . Indonesia suggests lower levels of reduction commitments for developing countries, the preservation of the SSG mechanism for developing countries (irrespective of whether these have undergone ‘tariffication’), and that ‘measures for the protection of small and subsistence farmers as well as for the achievement of food security should be excluded from the discipline on market access…’170. Similarly, Colombia ‘supports the continued use of variable tariffs as an element of special and differential treatment for all of the developing countries, since this scheme has enabled such countries to respond promptly to excessive fluctuations in international prices of agricultural products without creating distortions on the domestic market’171. It seems that there may be differences in the position taken by different Cairns Group members here. South Africa acknowledges ‘that tariffs are the primary effective policy instrument used by developing countries who have liberalised and often have neither the institutional capacity nor the financial resources to support their agriculture’. However, this has important implications for other developing countries: ‘Where this protection is...used to protect against export and other subsidies and what governments may regard as unfair competition, it raises barriers also against those with comparative advantages…[W]e don’t only have an interest in fair access to developed markets – a large part of our export market is in developing countries. On average we face tariffs in developing countries that are four times that of developed countries’172. Canada acknowledges that ‘ for food importing countries, increased market access means an increased reliance on world markets to meet food security needs’173. It asserts that ‘an open and well-functioning world market can make an important contribution to food security’. In order to ensure the reliable supply of food stuffs on such a market, Canada proposes that ‘improved disciplines on quantitative export restrictions and export taxes on agricultural products be an integral part of a substantial market access result’174. However, Indonesia notes: ‘Some members may argue that there is no need for a country to make an effort to produce its own food needs if it is cheaper just to import. They believe that food security could be achieved through trade liberalisation by merely opening the market for imports. Although this theory may be applicable to other countries, it is simply not applicable to the condition and situation in my country [Indonesia]’. It goes on to voice concern that food security premised upon imports is vulnerable to availability of

169 G/AG/NG/W/80. 170 G/AG/NG/W/71. 171 G/AG/NG/W/43. 172 G/AG/NG/W/82. 173 G/AG/NG/W/23. 174 G/AG/NG/W/23. This is a concern that is echoed by New Zealand (G/AG/NG/W/29).


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requisite quantities on the international market, adequate foreign exchange reserves, and political crises which may interrupt imports175.

4 . 2 . 5 Non-t r a d e c o n c e r n s In addressing the issue of NTCs mentioned in Article 20 of the AoA, several Cairns Group members, acknowledging that countries have specific and legitimate NTCs, assert that these can and should be addressed through instruments that do not distort trade or production. The Cairns Group criticises the Friends of Multifunctionality – strong advocates of NTCs – for failing to give a clear outline of the instruments they envisage as a means to address NTCs176. Cairns Group countries reject the distinction made between the ‘Article 20’ approach and the ‘market only’ approach. Rather, they suggest, there is no reason why a liberalised agricultural environment shouldn’t take full account of non-trade concerns177. Thus Brazil claims to have addressed its NTCs through S&D measures, or through the Green Box178. Furthermore, it is suggested that ‘[t]o promote the non-trade concerns of one member through trade-distorting measures is to ensure that other members are denied the opportunity to promote their non-trade and trade concerns’179. Argentina identifies three main non-trade concerns (rural poverty, unemployment and environmental protection), which ‘are all intrinsically related to current trade-distortive policies implemented by some of our richest trading partners’, as a result of the dumping of exports from developed countries, and market access restrictions for exports from developing countries 180. However, as discussed above (Section 4.2.4), some Cairns Group members (notably Indonesia) stress the importance of food security as a non-trade concern, and express the view that policies may be needed to guarantee adequate domestic production. Thus one contribution from Indonesia states: ‘…my delegation is of the position that policies adopted for legitimate food security purposes should not be restricted by the WTO rules’181. Clearly, if such policies are to support the continued domestic production of staple foodstuffs which might otherwise be more cheaply imported from elsewhere, these will entail a degree of trade distortion. Indonesia also echoes these concerns in addressing the problems of rural development, stressing that it is important ‘to adopt policies aimed at preserving the viability of rural employment and development in order to protect the livelihood of more than 125 million farmers and their families from adverse affects [sic] of trade liberalisation in agriculture’182.

4 . 3 The Un i ted Sta tes

4 . 3 . 1 I n t r o d u c t i o n Although a major exporter, the US is not a member of the Cairns Group, and provides considerable domestic support under the Green Box as 175 G/AG/NG/W/71. 176 G/AG/NG/W/59, G/AG/NG/W/62. 177 G/AG/NG/W/62. 178 G/AG/NG/W/62. 179 G/AG/NG/W/59. 180 G/AG/NG/W/88. 181 G/AG/NG/W/71. 182 G/AG/NG/W/71.

It is also notable that the US seeks to include ‘focused disciplines covering trade in products of new technologies’, and a focus on ‘unjustified restrictions’ on such products. This is a reference to, inter alia, negotiating rules on market


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well as export credits. Broadly, it advocates a reduction in levels of protection and trade-distorting support, which are seen to disadvantage competitive farmers and distort international markets183. Thus, ‘[T]he major challenge facing members in this negotiation is to build upon [the foundation provided by the AoA] by accelerating the process of reducing trade distortions while preserving the appropriate role for governments to address agricultural concerns in a non-trade-distorting fashion’184. It is also notable that the US seeks to include ‘focused disciplines covering trade in products of new technologies’, and a focus on ‘unjustified restrictions’ on such products. This is a reference to, inter alia, negotiating rules on market access for products of genetically modified organisms (GMOs)185. Such rules – which would likely involve strictures on regulatory processes, risk assessment, conformity with international standards etc – would be a new departure for the AoA. The US also proposes that support for such technologies should be included as an exempt measure under the US proposal to categorise domestic support measures as ‘exempt’ and ‘non-exempt’ (see below). Exactly what kind of measures the US envisages using to support GM technology is unclear at this point. Identifying the urgency of the reform process, the US proposes that members should reach an overall agreement by the end of 2002.

4 . 3 . 2 E x p o r t c o m p e t i t i o n The US proposes the ‘elimination of export subsidies’, ‘disciplines on the use of export restrictions on agricultural products to enhance the stability and predictability of world food markets’ and ‘disciplines on single-desk state trading enterprises, import and export’186. Export subsidies should be reduced to zero ‘through progressive implementation of annual reduction commitments over a fixed period’187. There should be an end to ‘exclusive export [and import] rights to ensure private sector competition in markets controlled by single-desk importers’, and elimination of ‘the use of government funds or guarantees to support or ensure the financial viability of single-desk exporters’188. Finally, the US argues that export credit programmes should be disciplined in accordance with negotiations conducted by the OECD, rather than the WTO (see Box 8 p74). The US sees no reason to create new disciplines on food aid, asserting that those contained in Article 10.4 of the AoA have proven adequate189.

4 . 3 . 3 D o m e s t i c s u p p o r t The US proposes a ‘simplification of rules applying to domestic support, and establishment of a ceiling on trade-distorting support that applies proportionately to all countries’190. The right of countries to provide

183 G/AG/NG/W/32. 184 G/AG/NG/W/15. 185 Federal News Service (1999). 186 G/AG/NG/W/32. 187 G/AG/NG/W/15. 188 G/AG/NG/W/15. 189 G/AG/NG/W/15. 190 G/AG/NG/W/32.


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support for domestic farmers is recognised, but this should be ‘delivered in the least trade-distorting manner possible’191. A category of such ‘exempt support’ could be retained for ‘income safety-net and risk management tools, domestic food aid, environmental and natural resource protection, rural development, new technologies, and structural adjustment which promote [sic] economically sustainable agricultural and rural communities’192. ‘In all cases, exempt measures must be targeted, transparent, and designed to minimise impacts on other WTO members, particularly developing countries’193. Indeed, special consideration would be given to exempt support measures addressing the needs of such countries194. While criteria contained in Annex 2 to the AoA provide a basis for this exempt category, these ‘were developed more than seven years ago, and may not fully reflect new directions in agricultural policy or the challenges facing developing countries and members with economies in transition’195. Additional criteria should therefore be created for ‘support measures deemed essential to the development and food security objectives of developing countries’196. Non-exempt support would be subject to a reduction commitment. Thus, ‘the Aggregate Measurement of Support is to be reduced to a final bound level equal to a fixed percentage of the members’ value of total agricultural production in a fixed base period’. This ‘…fixed percentage will be the same for all members, and reductions would be implemented through progressive annual reduction commitments over a fixed period’197. There is clearly scope for different interpretation of acceptable forms of domestic support. Thus while the Cairns Group and the US concur on the need for such support to be non-trade-distorting, Thailand suggests that the US does not go far enough in limiting the forms this could take, suggesting that ‘…the ambitious [US] proposal on market access on the one hand and the less ambitious proposal on domestic support on the other hand will not be able to address the issue at hand, but rather increase the disparity among the three pillars that already prevails’198.

4 . 3 . 4 M a r k e t a c c e s s The US seeks ‘to reduce substantially or eliminate disparities in tariff levels among countries, to reduce substantially or eliminate tariff escalation, and ensure effective market access opportunities for all products in all markets’199. Tariffs should be reduced substantially, or eliminated, ‘through progressive implementation of annual reduction commitments over a fixed period of time’200. This should be concurrent with ‘substantial increases in all tariff-rate quotas’201. 191 G/AG/NG/W/32. 192 G/AG/NG/W/15. 193 G/AG/NG/W/16. 194 G/AG/NG/W/15. 195 G/AG/NG/W/49. 196 G/AG/NG/W/15. 197 G/AG/NG/W/15. 198 G/AG/NG/W/31. 199 G/AG/NG/W/15. 200 G/AG/NG/W/15. 201 G/AG/NG/W/32.


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In addition to reforming the disciplines governing the administration of tariff rate quotas (TRQs), the phasing out of transitional TRQs should proceed through the establishment of ‘in-quota duties based on historical quota fill, so that the lower the historical TRQ fill, the greater the reduction in the in-quota duty’. That is, if a member’s TRQ does not achieve a fixed percentage fill rate after a specified period of time, that member would lower the in-quota rate to provide improved access. TRQ quantities should be increased substantially, and out- quota duties decreased simultaneously.202 The US approach to tariff reductions has been queried by the Philippines, which does ‘not find adequate logic or justice in the call for tariff reductions from applied rates while at the same time proposing reductions in domestic support based on bound levels’203. The EC has criticised the proposal on the grounds that it ‘tries to place the main burden of adjustment on those with higher tariffs than the US’204.

4 . 3 . 5 Non-t r a d e c o n c e r n s Non-trade concerns are addressed through the US proposal for criteria-based support measures that should be exempt from reduction commitments. ‘Environmental protection has already been identified as a non-trade concern that members want to be able to address through the reform process. Using targeted policies, members should be able to help farmers and ranchers adopt environmentally-sound production practices that conserve and protect natural resources, which will benefit producers and consumers alike and is crucial to agricultural sustainability and food security’205. Rural development programmes are similarly included: ‘Programs that invest in rural infrastructures, promote economic development, and provide technical assistance and information to empower local communities can be highly beneficial in enhancing rural development’206. The US position on food security is that it will be best secured by countries purchasing food on the international market (see Section 3.4). This entails the need for further liberalisation of agricultural trade and the provision of food aid for any countries that struggle to meet domestic food requirements. As part of this strategy, the US would like to place greater restrictions on the ability of countries to regulate or curtail their own exports. Specifically, it proposes ‘to strengthen substantially WTO disciplines on export restrictions to increase the reliability of global food supply’207.

202 G/AG/NG/W/58. 203 G/AG/NG/W/48. 204 G/AG/NG/W/24. 205 G/AG/NG/W/16. 206 G/AG/NG/W/16. 207 G/AG/NG/W/15.


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4 . 4 Net food- i m p o r t i n g d e v e l o p i n g c o u n t r i e s ( N F I D C s ) , l e a s t d e v e l o p e d c o u n t r i e s ( L D C s ) , s m a l l i s l a n d s t a t e s ( S I S s ) a n d o t h e r d e v e l o p i n g c o u n t r i e s ( I n d i a , f o r e x a m p l e ) NFIDCs208: Barbados•, Botswana, Cote d’Ivoire, Cuba, Dominican Republic•, Egypt, Honduras, Jamaica•, Kenya, Mauritius, Morocco, Pakistan, Peru, Saint Lucia•, Senegal, Sri Lanka, Trinidad and Tobago•, Tunisia and Venezuela. LDCs: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia*, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of Congo (formerly Zaire), Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea Bissau, Haiti, Kiribati, Lao People's Democratic Republic*, Lesotho, Liberia, Madagascar, Malawi, Maldives, Mali, Mauritania, Mozambique, Myanmar*, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe, Sierra Leone, Solomon Islands, Somalia, Sudan, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen and Zambia (48 LDCs, as listed by UNESCO). SISs: Antigua and Barbuda•, American Samoa, Barbados•, Belize•, Cape Verde, Comoros, Cook Islands, Cuba, Cyprus, Dominica, Federated States of Micronesia, Fiji, Grenada•, Guam, Guinea Bissau, Guyana•, Jamaica•, Kiribati, Maldives, Malta, Marshall Islands, Mauritius, Mauru, Netherlands Antilles, Niue, Palau, Papua New Guinea, Samoa, Sao Tome, Seychelles, Singapore, Soloman Islands, St. Kitts and Nevis•, St Lucia•, St Vincent and the Grenadines•, Suriname•, The Bahamas•, Tonga, Trinidad•, Tuvalu, US Virgin, Vanuatu. •Members of the Caribbean Community and Common Market (CARICOM). *Members of the Association of South-east Asian Nations (ASEAN)

4 . 4 . 1 I n t r o d u c t i o n Neither NFIDCs, LDCs nor SISs have submitted joint proposals. There are many overlapping groupings of developing countries, delineated either by common trading interests (CARICOM or ASEAN, for example), common geographical constraints (SISs) or common development status (LDCs). Where some of these groupings have contributed proposals to the AoA negotiation process, corresponding positions are outlined below. However, although there are a great many common concerns among developing countries, they are by no means a homogenous group. What follows should therefore be treated with some caution.

N F I D C s NFIDCs are listed by the WTO for the purposes of the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries (see Box 9)209. Mauritius (an NFIDC and SIS, which has also contributed to a meeting on non-trade concerns organised by the ‘Friends of Multifunctionality’ – see below) identifies the main concerns of NFIDCs as that ‘they maintain and strengthen their 208 As of March, 2000, 19 countries had notified themselves as NFIDCs (defined as developing countries which were net importers of basic foodstuffs in any three of the most recent five years). (See Raghavan 2000). 209 G/AG/5.

The US position on food security is that it will be best achieved by countries purchasing food on the international market (see Section 3.4). This entails the need for further liberalisation of agricultural trade and the provision of food aid for any countries that struggle to meet domestic food requirements.


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market access, mainly in respect of cash crops, and have the means to procure staple food. It does not appear that they want to produce staples to compete on the world market.’ It continues: ‘The food security issue requires a global and comprehensive approach and not one that just refers solely to trade liberalisation and elimination of export subsidies, which are in fact the primary concerns of multi-commodity exporters and not those of NFIDCs’210. Although not exclusively NFIDCs, proposals made by a number of developing countries on S&D treatment, the Green Box and market access reflect the needs of developing countries which struggle to achieve domestic food security, and are discussed here. In what follows, these proposals are attributed to Cuba et al211.

L D C s Many LDCs are also NFIDCs, and jointly, these two classes of country comprised a total population of almost a billion in 1997212. Most also have agricultural sectors dominated by subsistence farming, a significant debt burden, and problems with loss of rural workforces and urbanisation. Many LDCs depend upon a restricted number of crops as the main source of export revenue (see Section 3.4).

S I S s Most SISs benefit from preferential trade agreements with developed countries (for example, under the Lome Convention). Several such states are also in the NFIDC or LDC categories. SISs also tend to rely on a very limited range of exports; sugar or bananas, for example (see Section 3.4).

4 . 4 . 2 Expor t c o m p e t i t i o n Cuba et al have not made detailed proposals on export competition, beyond calling for the prohibition of dumping, and the elimination of all forms of export subsidies by developed countries213. Mauritius points out that ‘[r]eform to export subsidies and export credits should take into account the importance they have for food procurement capabilities of LDCs and NFIDCs which have, on account of inherent constraints, to rely on food imports’214. It is particularly concerned to stress the need for measures in favour of NFIDCs, to ameliorate the negative impacts of reform on food security in these countries215. It also notes that ‘STEs are important for Small Island Developing States, in particular those acting as single desk sellers of commodities’, and calls for ‘a cautious and pragmatic approach ’ to introducing disciplines on their operation216.

4 . 4 . 3 D o m e s t i c s u p p o r t Mauritius, while acknowledging that the majority of developing countries are ‘either constrained by limited budgetary resources or are undergoing structural adjustments’, and cannot therefore fully utilise 210 G/AG/NG/W/75. 211 Proposals by Cuba*, Dominican Republic*, El Salvador, Honduras*, Kenya*, Haiti+♦, India♦, Nicaragua♦, Nigeria♦, Pakistan*, Sri Lanka*, Uganda+, and Zimbabwe. (*NFIDCs, +LDCs, ♦have not endorsed all papers). 212 FAO (1999). 213 G/AG/NG/W/37. 214 G/AG/NG/W/75. 215 G/AG/NG/W/28/Add1. 216 G/AG/NG/W/75.


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permissible domestic support measures, notes that these will nonetheless continue to be of importance to developing countries. It suggests that ‘the scope of the green box should be widened to take on board a series of new concerns, for instance, development needs and protection and preservation of the environment’217. Mauritius draws attention to the fact that Green Box provisions are inadequate or unaffordable by most developing countries218. It observes that ‘the straight-jacket recommendation that only non-trade-distortive measures can be taken would be detrimental to low potential countries and in particular to Small Island Developing States’219. The contribution of Mauritius to the Ullensvang meeting on non-trade concerns has been supported by the CARICOM countries (listed above)220, on behalf of which Grenada has commented that ‘CARICOM countries are drawn to the concept of flexibility, beyond the measures contained in the ‘green box’, particularly for developing and least-developed countries as a means of addressing their particular and very genuine NTCs in agriculture’221. Cuba et al point out that the AMS, which is subject to a 24% reduction in developed countries, can at present be deflected into Green Box support with impunity. The proposal challenges the assumption that Annex 2 payments have minimal impacts on production levels, claiming that such large decoupled payments will inevitably increase farm input use and facilitate access to new technologies, increasing production. ‘The problem is that Green Box criteria have not been vigorously defined. What is considered “no or at most minimal, trade-distorting effects” remains a value judgement on the part of the government providing the subsidy.’ But while on the one hand Annex 2 provisions are claimed to be open to flagrant abuse, on the other they are ‘too narrow for the purposes of protecting developing countries’ non-trade concerns such as the protection of small farmers’ livelihoods, and food security’222. Cuba et al therefore propose that current domestic support categories are replaced with a single ‘General Subsidies Box’. This would permit support up to 10% of production for all countries, with additional subsidies (up to 15%) being actionable for developed countries. Subsidies above this level would be prohibited. Developing countries, however, would be allowed greater flexibility to address rural employment and food security concerns, with an increase in their de minimis support level to 20%223. Furthermore, the due restraint clause should not be extended beyond 2003, but should become a S & D treatment provision to protect developing countries in their efforts to increase food security, ensure rural employment and to increase domestic production capacity224. In commenting on Cairns Group proposals which presuppose that the peace clause will not be renewed,

217 G/AG/NG/W/75. 218 G/AG/NG/W/36/Rev1. 219 G/AG/NG/W/75. 220 G/AG/NG/W/67. 221 G/AG/NG/W/67. 222 G/AG/NG/W/14. 223 G/AG/NG/W/13. 224 G/AG/NG/W/14.

Cuba et al therefore propose that current domestic support categories are replaced with a single ‘General Subsidies Box’. This would permit support up to 10% of production for all countries, with additional subsidies (up to 15%) being actionable for developed countries. Subsidies above this level would be prohibited.


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Mauritius comments that it ‘would not be able to make further commitments if there is no due restraint clause’225. India has suggested that ‘developing countries need to be allowed to provide domestic support in the agriculture sector to meet the challenges of food security and to be able to preserve the viability of rural employment, as different from the trade-distortive support and subsidies presently permitted by the Agreement...Support for maintaining enhancing [sic] domestic production for domestic consumption in food insecure countries should be entirely exempted from the provisions of the Agreemen.’226. India also expresses concern that any additional flexibility afforded developing countries under domestic support provisions ‘should not lead to an intrusive approach by the WTO in the domestic development policy of a member’227.

4 . 4 . 4 M a r k e t a c c e s s On market access, Cuba et al call for the reduction or elimination of tariff peaks and escalation in developed countries. Variable tariffs would only be permitted for developing countries, under the S&D provisions (cf proposals outlined in Section 5.4), under the provisions of a ‘Development Box’ (see Box 7 p57). They also point out that there is little evidence of an increase in the share of world agricultural exports benefiting developing countries. They call for the elimination of tariff peaks and escalation in developed countries, and the weighting of tariff reductions228. Variable tariffs should be accessible only to developing countries, under S & D treatment229. The proposals made by Cuba et al also provide detailed recommendations on the reform of TRQs. In particular, they draw attention to frequent instances of quota underfill. In some of these cases, imports were nonetheless taxed at above-quota tariff rates. It is proposed that there should be a mandatory filling of quotas before imports take place at the above-quota level. Measures should also be taken to ensure that new suppliers from developing countries have equal access to allocations under TRQs230. Finally, Cuba et al propose that developed countries should be prohibited from using the SSG provisions (see Appendix). Rather, these should be opened to all developing countries231. Elsewhere, they propose that developing countries can use tariff barriers to protect domestic production ‘until such time as they are exporters of these

225 G/AG/NG/W/52. 226 WT/GC/W/342. 227 G/AG/NG/W/33. 228 Aggregation of tariff reductions allows countries to make high percentage cuts in already low tariffs, and low percentage cuts in high tariffs (usually levied on domestically produced crops) . The overall effect is toproduce an ‘average’ percentage cut that results in little improvement in market access. 229 G/AG/NG/W/37. 230 G/AG/NG/W/37. 231 G/AG/NG/W/13.


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products’232. They do not elaborate on how such provisions would operate, and how these would interact with SSG provisions (cf section 5.4). India concurs that ‘a certain degree of protection in terms of moderately high tariff levels and Special Safeguard clause [sic] are a must for sustainable agricultural development in developing countries’233.

4 . 4 . 5 Non-t r a d e c o n c e r n s Cuba et al stress the importance of reforming the AoA to protect better and enhance domestic food production in developing countries, and sustain existing employment for the rural poor. They suggest a ‘positive list approach to declare which agricultural products or sectors [developing countries] would like disciplined under AoA provisions’. Furthermore, ‘[w]here it has been established that cheap imports are destroying or threatening domestic producers, developing countries should be allowed to raise their tariff bindings on key products to protect food security’234 (see Box 7). In an earlier informal paper, India draws attention to the recognition the AoA makes of NTCs, including food security and environmental protection. The balance between trade concerns and NTCs ‘does not appear to have been fully reflected in the provisions of the Agreement and consequently in its implementation’235. Elsewhere, a paper supported by India stresses that the benefits of encouraging domestic food production to promote food security outweigh the ‘supposed economic costs’ of such production being less ‘market efficient’. The paper goes on to say that flexible measures to support domestic food security must be differentiated from measures to increase production for export (see Section 2.6)236

232 G/AG/NG/W/14. 233 G/AG/NG/W/33. 234 G/AG/NG/W/13. 235 India (1998). 236 G/AG/NG/W/13.


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Box 7 Proposed Development Box237

Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka

and El Salvador have proposed the formation of a ‘development box’. This would: • permit nomination of products upon which developing countries would like disciplines under AoA

provisions (a ‘positive list approach’) • permit developing countries to raise their tariff bindings on key products, to protect food security, where

it has been established that cheap imports are destroying or threatening domestic producers • require reductions in tariffs in developed countries, particularly on products of importance to developing

countries • permit increases in de minimis levels of domestic support for developing countries, from 10% to 20%. These measures would be accompanied by the elimination of all forms of export subsidy by developed countries. Other forms of support would be simplified, and incorporated in a single ‘General Subsidies Box’238.

4 . 5 A S E A N c o u n t r i e s Brunei Darussalam, Cambodia*, Indonesia•, Laos*, Malaysia•, Myanmar*, Philippines•, Singapore, Thailand•, and Vietnam (•Cairns Group country; * LDC)

4 . 5 . 1 I n t r o d u c t i o n The ASEAN proposal stresses the importance of S & D treatment for developing countries, noting that ‘[t]he sheer underdevelopment of agriculture in developing countries limits their ability to implement reforms at the same level and pace as that which developed countries are able to undertake’. S & D treatment must therefore extend beyond concessions on the time-frame for introduction of reforms. Rather, the ‘nature, depth and substance of commitments must also be different’239.

4 . 5 . 2 E x p o r t c o m p e t i t i o n The ASEAN proposal demands immediate cessation of the use of export subsidies by developed countries, though permitting developing countries to ‘continue using existing flexibility with respect to export subsidies’. Disciplines in export credits, export credit guarantee or insurance programmes should be concluded before the end of the implementation period, and should provide ‘adequate flexibility for developing countries’240.

4 . 5 . 3 D o m e s t i c s u p p o r t Disparities between domestic support reduction commitments for developed and developing countries must be redressed. In particular, ‘developed countries must commit to a substantial downpayment of aggregate and specific support from a determined base period, in absolute terms’. Remaining AMS should be eliminated incrementally, as should Blue Box support. It is anticipated that such reductions in domestic support would lead to large cuts in surpluses in developed countries, reducing 237 G/AG/NG/W/13. 238 G/AG/NG/W/14. 239 G/AG/NG/W/55. 240 G/AG/NG/W/55.


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the usefulness of export subsidies. The criteria for Green Box measures should be reviewed, to ensure that these have at least minimal or no trade-distorting effects or effects on production. Furthermore, ‘there should be an overall cap on the budget of developed countries allocated for green box measures’241. Low levels of reduction commitments for developing countries alone will not be sufficient; these are not measures that have been used extensively by developing countries, and budgetary constraints are likely to preclude any extensive use in future. The ASEAN countries propose that certain measures (investment and input subsidies which are considered an integral part of development programmes, and support for agricultural diversification) should remain exempt from reduction commitments. The Agreement ‘must be able to make an appropriate differentiation between domestic measures which result in overproduction and the ability to carve out a niche in the international market, and those measures designed to face the challenges of food security of developing countries’. Furthermore, the existing de minimis concept should be retained only for developing countries242. In commenting on the US proposals on domestic support, the Philippines (a member of both the Cairns Group and ASEAN) notes that ‘even seemingly harmless domestic support measures will have distortive effects on agricultural trade’, and that ‘[t]heoretically, and upon deeper reflection, no specific agriculture policy is fully decoupled from production and therefore without consequences to trade’243. It calls for a review of the criteria for the Green Box ‘to ensure that they meet the fundamental requirement that they have at least minimal or no trade distorting effects or effects on production’, and goes on to suggest that there ‘should be an overall cap on the budget of developed countries allocated for Green Box measures’244.

4 . 5 . 4 M a r k e t a c c e s s Tariffs should be reduced, and tariff peaks and escalation eliminated, for imports of tropical agricultural products from developing countries to developed countries. Tariff quotas, if permitted under a revised Agreement, must be allocated without discrimination. Furthermore, ‘developing countries must be allowed the flexibility to continue the application of special safeguards’245.

4 . 5 . 5 Non-t r a d e c o n c e r n s The ASEAN proposal stresses the need for S & D treatment for developing countries. ASEAN believes that ‘developing countries [only] have much to gain from a fair and market-orientated trading system...if agricultural trade liberalisation is pursued to the extent that it serves development objectives’246.

241 G/AG/NG/W/55. 242 G/AG/NG/W/55. 243 G/AG/NG/W/48. 244 G/AG/NG/W/55. 245 G/AG/NG/W/55. 246 G/AG/NG/W/79.

Negotiating as a group will prove far from easy, as most participants freely admit. They [the Friends of Multifunctionality] are a disparate collection. At the core are the countries that, during the Uruguay Round, developed the notion of “non-trade concern” as a means of avoiding commitments that would undermine non-economic farming – namely, Switzerland, Norway, Korea and Japan.


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4 . 6 F r i e n d s o f M u l t i f u n c t i o n a l i t y – I n t r o d u c t i o n European Union, Japan, (Mauritius), Norway, South Korea, and Switzerland The Friends of Multifunctionality is a loosely associated group that stresses the importance of NTCs, and the need to maintain a flexible approach to implementing these in both developing and developed countries. However, as one commentator has observed: ‘Negotiating as a group will prove far from easy, as most participants freely admit. They [the Friends of Multifunctionality] are a disparate collection. At the core are the countries that, during the Uruguay Round, developed the notion of “non-trade concern” as a means of avoiding commitments that would undermine non-economic farming – namely, Switzerland, Norway, Korea and Japan’247. The EU has also joined the alliance, and a significant number of developing countries are showing interest in NTCs – including Mauritius (see Section 4.4), and other developing countries anxious to premise their food security upon domestic production (India, for example)248. The term ‘multifunctionality’ has generated much suspicion among many WTO members, particularly Cairns Group countries, and there now seems a reluctance among some ‘Friends’ to persist in using it. Japan however experiences no such reticence, and defines the word as ‘a concept which explains that agriculture is an economic activity that not only produces food and fiber but also creates both tangible and intangible values, which are embodied in various ways in each country’249. Other countries have come to prefer to allude to these concerns as ‘non-trade concerns’given that this term is already recognised in the AoA. The importance attached to specific NTCs varies between countries. Those with large agrarian populations stress the importance of agriculture in the rural economy; food security is of particular concern to countries which predominantly import foodstuffs. Thus Japan and South Korea, for example, stress domestic agriculture’s contribution to domestic food security; while the EC emphasises environmental protection, cultural heritage and the rural economy. In particular, the EC identifies the following categories of functionality (these are taken from EC contributions to an International Conference on Non-Trade Concerns in Agriculture250. As such, they were later submitted as a negotiating proposal introduced by a note which was co-sponsored by a total of 27 countries, counting the EC as one251): • employment – in developed countries, growing consumer demand

for labour-intensive production techniques (such as organic farming)

• related economic significance (ancillary and service industries) • maintenance of a viable population in structurally disadvantaged or

remote areas

247 World Trade Agenda (2000). 248 World Trade Agenda (2000). 249 G/AG/NG/W/91. 250 ‘Agriculture’s contribution to rural development’ and ‘Agriculture’s contribution to environmentally and culturally related non-trade concerns’. EC (2000a) and EC (2000b) or G/AG/NG/W/36/Rev1. 251 G/AG/NG/W/36/Rev1.


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• environmental and cultural services, including conservation of biological diversity, maintenance of farmed landscapes (eg rice terraces, mixed farms) including cultivated and seminatural habitats, preservation of landuses of cultural significance

• protection against natural and induced/exacerbated natural disasters (flooding, fire, avalanche and severe wind or water erosion).

4 . 7 T h e E u r o p e a n U n i o n

4 . 7 . 1 I n t r o d u c t i o n Up until 20 or 30 years ago the EU was a net food importer252, and its present status as the second largest exporter of agricultural and food products is in part a result of the high levels of external inputs, use of which is made possible by extensive domestic support measures. These measures are defended on the grounds that the importance of agriculture extends far beyond industrial food production and procurement. Rather, the ‘multifunctional’ aspects of agriculture are stressed; rural employment and environmental services in particular. Thus an EU Council of Ministers’ communique in November 1997 observed: ‘European agriculture has its own specific nature and characteristics related to its territorial coverage and the existence of different regions which may have, inter alia, particular specific characteristics, such as less-favoured mountainous and remote regions, arid and semi-arid regions, urban or high population density regions, to the rural population and the large number of family farms, to the diversity of its products and differences in its yields and to the multiple roles increasingly taken on by it’253. According to the European advocacy of the multifunctional viewpoint, agricultural intervention in the landscape is an essential component in the formation of a unique ecosystem because a high proportion of European plant and animal species are adapted to the farmland environment. Drawing attention to the dependency of the majority of vascular plant (and therefore invertebrate and bird) species upon farmed landscapes, the European Commission (EC)254 comments: ‘...[T]he farming systems upon which plant diversity depends are typified by low-input, low-output management of livestock, grazed on pasture for part of the year and fed on relatively inefficient fodder crops in the winter months. Clearly, a high-input, high-output intensive system of production, which requires high levels of nutrient use would not conserve the biological diversity of the grazed lands associated with the former system. It should be noted that in terms of economic efficiency, a low-input, low-output system is not intrinsically less efficient than an intensive system, as efficiency depends on cost and profit variables, especially the levels of debt and capitalisation of the farm’255. The EC goes on to note that reduced intensity of input use will be accompanied by diminished outputs of food and fibre. Thus, although the conservation activity would be linked to productivity, output is at a lower level than under the farming practices which would otherwise take place. It is argued that provision of support for such

252 Einarsson (2000). 253 Cited in: Consumers in Europe Group (2000), p29. 254 The European Commission (EC) negotiates on behalf of the European Union (EU). 255 G/AG/NG/W/36/Rev1.


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agricultural practice should therefore be made possible, and that policies for the compensation of farmers for additional costs incurred in the course of addressing non-trade concerns should be implementable. Outlines of the proposals made by the EC are summarised below for each of the three pillars of the AoA, and for NTCs. In addition, the EC identifies the need ‘for the continuation of a peace clause’, as ‘the logical corollary of the specific nature of the Agreement on Agriculture.’ The peace clause also ‘defines the conditions under which specific support measures may be granted, and therefore contributes to the enforcement of the reduction commitments…’256.

4 . 7 . 2 E x p o r t c o m p e t i t i o n

E x p o r t s u b s i d i e s The EC maintains that ‘disciplines and rules should be developed to deal with all instruments affecting export competition on an equitable basis.’ It is wrong, therefore to single out export subsidies for particular attention, where EC use of such subsidies ‘is transparent, fully notified to the WTO and in compliance with its WTO obligations’257. The EC suggests that as their system of export subsidies ‘is the only one which is disciplined and on which there are clear, transparent and well known statistics, some members appear to believe that all the problems of the world market are due to our [EC] policies’258. Other countries have welcomed the EC proposal that negotiations should treat the issue of export competition in a comprehensive manner259. The EC is ‘willing to continue to negotiate further reduction in export subsidies provided that all forms of support to exports of agricultural and food products are treated on a common footing. Disciplining only this one form of export measure is discriminatory and gives the misleading impression that export subsidies are inherently more trade-distorting than other measures affecting exports’260. The EC has criticised US proposals on export competition on the grounds that while the US advocates the elimination of export subsidies, ‘nothing, or less drastic action, should be taken on export assistance given through mechanisms which the US does use, in particular export credit and loan deficiency payments’261.

E x p o r t c r e d i t s Following the failure of the OECD to develop disciplines for export credits (see Box 8 p74), these are still ungoverned and there are no transparency requirements. And yet, ‘officially supported export credits may have a similar effect as aggressively used export subsidies’, while ‘justifying the use of export credits as a tool to decrease the food bill of developing countries is called into question by the very low share of export credits granted to Net-Food-Importing Developing Countries (NFIDC) and Least Developed Countries’262. The EC calls for ‘further analysis of the extent

256 EC (2000c). 257 G/AG/NG/W/34. 258 G/AG/NG/W/45. 259 See G/AG/NG/W/48 and G/AG/NG/W/43. 260 G/AG/NG/W/34. 261 G/AG/NG/W/24. 262 G/AG/NG/W/34.


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to which different forms of export credits are used and their impact on trade in order to develop rules and disciplines in the WTO’263.

F o o d a i d With regard to food aid, abuse of which ‘is comparable to an export subsidy of 100% of the price of the product’, the EC believe that this ‘should be given in fully grant form and that it should not be used as a market promotion tool to displace normal commercial transactions and local production’. ‘[T]he EC are of the view that it is high time that the conditions and forms of food aid transactions were discussed in the WTO with a view to developing rules and disciplines to improve the effectiveness and impact of food aid and enhance food security in developing countries’264. Specifically, the EC proposes the revision and strengthening of the rules governing food aid in Article 10 of the AoA265.

S t a t e t r a d i n g e n t e r p r i s e s ( S T E s ) State trading enterprises can ‘distort trade in several ways and, as a result, they can circumvent the export subsidy disciplines and commitments’ of the AoA. Following further analysis of the impacts of STEs, the EC believes ‘that WTO rules and regulations applying to STEs should be strengthened… In particular, it is necessary to stop circumvention of WTO export subsidy disciplines and commitments’266.

4 . 7 . 3 D o m e s t i c s u p p o r t The EC asserts that the impact of Blue Box payments has been ‘less trade-distorting than market price support, payments based on output or on variable input use’. The EC claims that their ‘papers make clear, on the basis of objective studies by the OECD, that transferring from trade distorting amber box measures to blue box measures based on fixed payments makes a valuable contribution to reform’267. This OECD study found that ‘there were substantially less spillover effects from area payments than from any other form of support studied’268. They continue: ‘This objective analysis stands in contrast to the position of those who want to abolish the blue box simply because they do not use it’269. It proposes that the concept of the Blue and Green Boxes be retained, along with the disciplines applying to these. Reform should continue with reduction in current total AMS, in part through a reduction in the de minimis clause for developed countries. The EC further proposes that Annex 2 provisions be ‘revisited to ensure minimal trade distortion whilst at the same time ensuring appropriate coverage of measures which meet important societal goals such as the protection of the environment, rural development and poverty alleviation, animal welfare, and food security for developing countries’270. 263 G/AG/NG/W/34. 264 G/AG/NG/W/34. 265 EC (2000c). 266 G/AG/NG/W/34. 267 EC (2000c). 268 G/AG/NG/W/17. 269 EC (2000c). 270 EC (2000c).


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The EC has objected to the US proposal to set levels of support according to levels of production, claiming that ‘…this method is obviously designed to favour countries in which large farmers produce large quantities and to attack countries whose support is designed to look after the interests of large rural populations of smaller farmers’271. They continue to note that ‘although the [US] proposal suggests that the green box should be revisited, it attacks the blue box, even though fixed per hectare payments granted under the provisions of the Blue Box are, according to the OECD study, no more distortive than fixed per hectare payments made under the green box’272. EC assertions that Blue Box payments are minimally distorting have drawn criticism. Colombia, for example, refers to these as ‘vague arguments [drawn] from a report with restricted circulation’273. Argentina ‘does not think it can be stated that the Blue Box payments do not interfere with market indications’274.

4 . 7 . 4 M a r k e t a c c e s s As one of the largest exporters in the world, the EC identifies the need for increased market access for all WTO members as being of particular concern275. The EC proposes a continuation of the mechanism for tariff reductions employed under the UR (that is, an overall average reduction accompanied by a minimum reduction for any one tariff line). Rules and disciplines governing TRQS should be defined to increase the transparency of the management of TRQs. The EC also proposes the perpetuation of the SSG provisions. The EC proposes that, in order to improve market access for products originating in developing countries, ‘developed countries and the wealthiest of the developing countries provide significant trade preferences to developing countries (and in particular the least developed)’276. The EC expresses concerns that a ‘…general reduction in tariffs will only favour the most competitive and limit the scope for special and differential treatment’. They ask: ‘How would…deep cuts fit in with…measures to help developing countries and in particular the least developed countries to integrate themselves into the world market?’277

4 . 7 . 5 Non-t rade c o n c e r n s The EC urges the recognition of the ‘multifunctional’ role of agriculture, including ‘its contribution to sustainable development, the protection of the environment, rural development and poverty alleviation’. Specifically, the EC proposes ‘that measures that aim at protecting the environment, some with worldwide acceptance, some linked to particular cultural values, should be accommodated in a new agreement’. [M]easures that aim at promoting rural development and poverty alleviation should also be provided for in a new agreement, and should be exempted from reduction commitments

271 G/AG/NG/W/24. 272 G/AG/NG/W/24. 273 G/AG/NG/W/43. 274 G/AG/NG/W/39. 275 EC (2000c). 276 EC(2000c). 277 G/AG/NG/W/66.


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(particularly in view of the importance of such measures in addressing food security concerns)278. The EC alludes to the need to review the use of the precautionary principle, such that this can be used to guarantee the safety of imported food without arousing fears of its abuse for protectionist reasons. It is also suggested, inter alia, that compensation for costs incurred in meeting animal welfare standards should be exempt from reduction commitments279.

4 . 8 O t h e r ‘ F r i e n d s o f M u l t i f u n c t i o n a l i t y ’ Japan, Norway, South Korea, and Switzerland.

4 . 8 . 1 I n t r o d u c t i o n Japan is the largest net importer of agricultural products, importing more than a 10th of total world agricultural exports280. As such, Japan is anxious to stress food security concerns, seeing these as of importance to both developed and developing countries: ‘food security... is a problem for every country, whether it be present or potential’281. Both Japan and South Korea maintain that there is no single common prescription that can guarantee the food security of all WTO member countries. Such security is unlikely, they argue, to arise from a reliance upon market mechanisms, and must be addressed on a country-specific basis. Countries should therefore be able to exercise freedom to adopt policies which they consider in their own best interests. They suggest that the sustainable utilisation of domestic agricultural resources in each country plays an important role in assuring food security, insuring against import interruptions or crop failures in exporting countries. Their position is thus comparable to that of the EU. However, Japan and South Korea place more emphasis on the need for countries to be able to pursue their own food policy, incorporating domestic production capacities, rather than remaining beholden to a restricted number of exporting countries or private companies. They point out that it is undesirable that a limited number of exporting countries should dominate international markets, and that major agricultural commodities should be controlled by a small number of multinational ‘grain majors’. It is also iniquitous, they suggest, that importing countries should be obliged, under the WTO, to provide access opportunities, while exporting countries should be permitted to export or withhold products (by raising export tariffs, for example) depending upon domestic markets. Norway points out that the AoA, particularly Article 20, provides for a ‘balanced negotiation mandate that takes into account the interests of all members’. Again, it stresses the importance of maintaining national flexibility, although recognising that there should be limits to such flexibility (curtailing the freedom to implement export competition measures, for example).

278 EC(2000c). 279 EC(2000c). 280 G/AG/NG/W/46. 281 G/AG/NG/W/73.

The EC urges the recognition of the ‘multifunctional’ role of agriculture, including ‘its contribution to sustainable development, the protection of the environment, rural development and poverty alleviation’.

Norway is also concerned to maintain levels of domestic support, stressing rural livelihood issues: ‘in remote regions of many developed countries... agriculture is a cornerstone whose contribution to rural employment and economic and social viability is fundamental’.


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4 . 8 . 2 E x p o r t c o m p e t i t i o n Norway reiterates the EC position on export competition282. Japan’s position is also consistent with that of the EC, alluding to the need for ‘a comprehensive examination…to strengthen the rules and disciplines on export measures, including export prohibitions/restrictions, export tax and export subsidies’283. Japan calls for improved transparency and predictability of state trading284. However, Mauritius, in commenting on the US proposals on export competition, points out ‘the usefulness for certain NFIDCs [of which Mauritius is one] of export subsidies and export credit programmes [in providing for food import needs]’285. Japan agrees that ‘[w]hen strengthening the rules and disciplines on exports and state trading, measures to exempt or ease obligations should be taken so as not to cause an excessive burden on developing countries’286. Japan disagrees that food aid should be made available only in grant form, suggesting that this may hinder the adequate flow of aid287.

4 . 8 . 3 D o m e s t i c s u p p o r t Japan supports the maintenance of the Green, Blue and Amber Boxes. In particular, ‘the “blue” policy should be positively evaluated as the intermediate stage for shifting from “amber” to “green”’288. Norway is also concerned to maintain levels of domestic support, stressing rural livelihood issues: ‘in remote regions of many developed countries... agriculture is a cornerstone whose contribution to rural employment and economic and social viability is fundamental’289. Norway also supports the views of the EC on the Blue Box, and suggests that: ‘Blue Box direct payments linked to factors of production have, in the past decade, constituted an important element when reducing support linked to prices and output. For instance, the area payment which contains environmental and cultural landscape requirements has made it possible to maintain marginal agricultural areas in a country where only three per cent of the area is cultivated land. Completely decoupled measures would not have made this possible, and this illustrates that Green Box measures only cannot safeguard all NTCs in our case. We strongly believe that retaining the Blue Box measures will facilitate the future reform process’290.

4 . 8 . 4 M a r k e t a c c e s s On market access, Japan stresses the need for case-by-case examination, both on national and product-specific bases. ‘The current tariff levels have been decided based on domestic geographical and natural conditions, as well as on the situation of the respective products…It is therefore not appropriate to

282 G/AG/NG/W/50. 283 G/AG/NG/W/27. 284 G/AG/NG/W/91. 285 G/AG/NG/W/28. 286 G/AG/NG/W/91. 287 G/AG/NG/W/73. 288 G/AG/NG/W/27. 289 G/AG/NG/W/36 Rev1. 290 G/AG/NG/W/50.


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make a simple comparison of the tariff levels among members…’291, and ‘[w]e need some specific and detailed consideration on each product’292. Switzerland voices concern about the implications of market access reform for domestic production, noting that ‘[t]he obligation to drastically and quickly increase market access for basic food commodities, can result in reducing the incentive for local production, especially in countries and regions where producers are less competitive due to specific circumstances or in countries and regions with fragile production structures or low incomes combined with low purchasing power’293. Like the EC, Norway has ‘serious difficulties with some of these ideas [of the Cairns Group on market access]’. The proposal ‘fails to recognise that agricultural production conditions are varying considerably among WTO members’294.

4 . 8 . 5 Non-t r a d e c o n c e r n s Following a Conference on Non-Trade Concerns in Agriculture, organised by the EC, Japan, Mauritius, Norway, the Republic of Korea and Switzerland, six papers were submitted to the WTO negotiations. These were submitted to the WTO and introduced by a note co-sponsored by 27 countries in total295. The papers recognise that ‘every country has a right, in accordance with mutually agreed rules, to address non-trade concerns, such as strengthening the socio-economic viability and development of rural areas, food security and environmental protection, and promoting the co-existence of various types of agriculture’296. This led Switzerland to assert that the ‘[s]pecific characteristics of agriculture and policy objectives in relation to NTCs call for separate treatment of agriculture within the WTO’297. Norway, in discussing its contribution on flexibility in national policy design, addresses the issue of the extent to which policies implemented to address domestic non-trade concerns can be legitimately allowed to affect the trading interests of other countries. In some ‘low-potential countries with disadvantaged and unfavourable production conditions’, ‘domestic agricultural production necessary to address NTCs such as for instance food security and rural development, are unlikely to

291 G/AG/NG/W/27. 292 G/AG/NG/W/46. Japan claims that ‘both single tariffs and tariff rate quotas are equally legitimate border measures under the WTO agreements. [W]e do not see the reason why a tariff quota should be considered an interim or transitional measure toward establishing a single tariff’ (G/AG/NG/W/73) (cf the US proposals on TRQs). 293 G/AG/NG/W/36/Rev1. 294 G/AG/NG/W/77. 295 In addition to the six organising countries, this includes Barbados, Burundi, Cyprus, Czech Republic, Estonia, Fiji, Iceland, Israel, Latvia, Liechtenstein, Malta, Mauritius, Mongolia, Poland, Romania, St Lucia, Slovak Republic, Slovenia, Switzerland, Trinidad and Tobago. The inclusion of Fiji here, given its membership of the Cairns Group is of particular interest. The Czech Republic has observed that: ‘although the positions… contained in [these] papers may differ, countries co-sponsoring the Note are unanimous in recognising that every country has the right… to address non-trade concerns such as those listed therein.’ (G/AG/NG/W/65). The CARICOM countries have also supported the proposals, ensuing from this meeting, singling out the contribution from Mauritius for particular mention (G/AG/NG/W/67). 296 G/AG/NG/W/77. 297 G/AG/NG/W/36/Rev1.


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be sustained by applying green box measures only, without having any impact on trade’298. Consequently, ‘…we have to realise that international spillover effects go in both directions. In order to maximize welfare both NTCs and trade concerns should be adequately addressed. I think we have to be honest and acknowledge that there may in certain cases be a conflict between NTCs and TCs…[T]hese negotiations will only succeed if we find a balance between the various conflicting interests…’299.

4 . 9 E c o n o m i e s i n t r a n s i t i o n Central and Eastern European countries (CEECs), the New Independent States of the Former Soviet Union, Mongolia and Vietnam.

4 . 9 . 1 I n t r o d u c t i o n In a joint proposal, several transition economies outline the impact of political and economic change on agriculture in formerly centrally-planned economies. ‘Agricultural land has been privatised and/or restituted to former owners. Agricultural production has shifted from large-scale farming to medium- or small-size family businesses. The changes in ownership and production structure have been accompanied by a dramatic decline in agricultural production’300. They continue: ‘The recovery of the agricultural sector is an absolute political and economic priority for these countries… [I]t is evident that for a transitional period governments in transition economies [will] have to play a crucial role in assisting farmers in their efforts to re-establish the viability of agricultural production. Leaving farmers fully exposed to… market forces… would destroy the agriculture sector. A key question here is whether the multilateral disciplines as they currently stand would offer adequate flexibility for agricultural policy-making, especially if we take into account the prospect of further significant reductions in support as a result of the ongoing negotiations’301.

4 . 9 . 2 E x p o r t c o m p e t i t i o n The Czech Republic and Hungary both endorse the position taken by the EC, without reservation302, with Hungary placing particular emphasis on the need to strengthen disciplines applying to STEs.

4 . 9 . 3 D o m e s t i c s u p p o r t The introduction of production limiting programmes under the Blue Box would further exacerbate the production problems transition economies face. ‘The only provision in the present agreement which…partially [accommodates] concerns related to transition is [the Green Box provision for] structural adjustment assistance through investment aids.’ Several transition economies therefore suggest specific provisions for

298 G/AG/NG/W/77. 299 G/AG/NG/W/77. 300 G/AG/NG/W/56. Contributed by Albania, Bulgaria, Croatia, the Czech Republic, Georgia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Mongolia, the Slovak Republic and Slovenia. 301 G/AG/NG/W/56. 302 G/AG/NG/W/44 and G/AG/NG/W/51, respectively.


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members in the process of transition to a market system. Such a provision would exempt from reduction commitments ‘investment subsidies and input sudsidies, …interest subsidies…[and] grants to cover debt repayment…It would also increase the de minimis threshold applicable to the transition economies’303. Hungary concludes that ‘disciplines in the area of domestic support, if left as they now stand, are likely to prevent transition economies from successfully continuing the transformation process in agriculture’304. Thus it welcomes the ‘readiness of the US to review the criteria for exempt support measures … as well as establish additional criteria-based categories to be exempted from reduction’305. Several transition economies, including Hungary, have also expressed concern that Cairns Group proposals, particularly on criteria for the exemption of support measures from reduction commitments, failed to take account of the needs of countries in the process of transition to a market economy306.

4 . 9 . 4 M a r k e t a c c e s s Several transition economies propose a ‘specific flexibility provision…[which] would, inter alia, exempt low tariffs from further reduction commitments for these countries…[and] selective reduction commitments’307. Hungary responds positively to Canada’s suggestions for ‘improving market access…[such] that the major disparities in terms of access between members can be reduced significantly’308. However, the Hungarian response to the US proposal to link reductions in in-quota duties to TRQ fill is less enthusiastic, as ‘this suggestion presupposes a direct link between the level of in-quota duties and the quota fill’. In fact, ‘in most cases quota fill levels are determined by a variety of other factors…[and] reduction of in-quota duties would not result in the expected increase of quota fill rates’309.

4 . 9 . 5 Non-t r a d e c o n c e r n s Several transition economies endorsed the note on non-trade concerns outlined above (see Section 4.8.5)310. Poland311 and the Czech Republic have also underscored their commitment to NTCs in separate papers. The Czech Republic attaches particular importance to environmental concerns, suggesting that ‘unified co-operatives’ under the previous centrally-planned economy generated ‘an inappropriately high proportion of arable land and intensive large-scale farming…entailing…excessive use of industrial fertilisers and pesticides’312.

303 G/AG/NG/W/56. 304 G/AG/NG/W/85. 305 G/AG/NG/W/26. 306 G/AG/NG/W/53. 307 G/AG/NG/W/57 Countries as for W/56, but omitting Albania and Mongolia, and including Estonia. 308 G/AG/NG/W/26. 309 G/AG/NG/W/69. 310 Proposal G/AG/NG/W/36/Rev.1 was signed by 27 countries, including the Czech Republic, Estonia, Latvia, Mongolia, Poland, Romania, the Slovak Republic and Slovenia. 311 G/AG/NG/W/81. 312 G/AG/NG/W/65.


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Hungary emphasises the importance of rural development, considering it essential that the agricultural reform process should ‘not prevent members from pursuing policies aimed at restoring the viability of rural areas which due to the unique challenges of economic transition is a particularly high… priority’313.

313 G/AG/NG/W/69.


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5 A reformed AoA 5 . 1 I n t r o d u c t i o n Some elements of the tabled negotiating positions outlined above would undoubtedly foster the development of an Agreement which better focused on the problems of optimising real efficiency and achieving sustainable agriculture. However, none of these proposals takes proper account of the full range of problems outlined in Section 2, or the linkages between these problems and trade policy, as outlined in Section 3. The analysis presented in this report provides a compelling case for applying an understanding of the interactions between agricultural trade policy and sustainable agriculture to the reform of the AoA. Given the complexity of these interactions it seems that a combination of both liberalisation policies and market intervention are required in order to address current market failures. However, it is likely that the coming negotiations will see a political tug-of-war between radical liberalisation and a maintenance of the status quo, rather than a consideration of how to use trade policy to achieve more sustainable and equitable outcomes. Firstly, therefore, the RSPB advocates further assessment of the impacts of agricultural trade liberalisation on agriculture, human development and the environment. Although this is crucial if the negotiations are to proceed on a sound footing, and despite previous commitments (eg at the United Nations) to assess the impacts of the Uruguay Round on Agriculture, much remains to be done. Secondly, if negotiations are to be focused properly, the main objective of the AoA should be changed. Rather than pursuing ‘substantial progressive reductions in support and protection’, the focus of the agreement should be shifted towards using the trading system to address sustainable agriculture, encompassing sustainable food production and food security, the maintenance of rural livelihoods, and environmental protection. Although commitments under the programme stipulated by the Agreement were to have ‘regard to non-trade concerns, including food security and the need to protect the environment’314, the focus of the Agreement is still in need of refinement if inefficiencies in the agriculture sector are to be addressed effectively. The ultimate aim of trade policy is to address so-called ‘non-trade concerns’ in their broadest sense (ie improvements to our quality of life). Such concerns should therefore be central, rather than peripheral, to trade policy development. Thirdly, the principles that should underpin reform proposals must be defined. The RSPB suggests the following: • flexibility • real efficiency • non-infringement

314 Uruguay Round: Agreement on Agriculture. Preamble.

It is likely that the coming negotiations will see a political tug-of-war between radical liberalisation and a maintenance of the status quo, rather than a consideration of how to use trade policy to achieve more sustainable and equitable outcomes.


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• sustainability • transparency and predictability • accessibility. Each of these principles is outlined further below. Finally, the RSPB suggests that reform proposals should be made, based on the analysis, objectives and principles outlined above. Although the RSPB recognises that this is a complex and evolving debate and that there are no ‘answers’, various more detailed policy suggestions are made (in Sections 5.2–5.4) on ways in which the AoA could be reformed.

F l e x i b i l i t y The range and severity of the challenges described in Section 2 differ greatly both between countries and within countries. Such a diversity of problems requires a diversity of solutions because ‘one size’ clearly cannot ‘fit all’ in this context. This means that a key principle in agricultural trade policy should be ‘flexibility’. Countries should therefore be afforded a degree of national flexibility in the course of pursuing food security goals, in safeguarding the livelihoods of their rural communities, in preserving food and agricultural traditions and in protecting the domestic environment. No single strategy for intervention on behalf of developing countries on economic grounds can be recommended. This is clear from the range of negotiating positions maintained by developing countries at the WTO – from membership of the Cairns Group, through to the positions of the NFIDCs. Factoring in environmental considerations further complicates things; in the short-term, policy changes advocated on the grounds of food production may be contradictory to those promoted for environmental reasons. Rather, ‘[c]ountries such as India need a certain degree of autonomy and flexibility in determining their domestic agricultural policies’ [emphasis added]315. As argued by Norway, ‘the flexibility in national policy design and long-term room for manoeuvre for developing countries and economies in transition should not be reduced unduly even though many countries may not, for different reasons, be able to take advantage of this flexibility at present’316. Such flexibility is particularly important in the agriculture sector: NTCs are often specific to agriculture. Many of the concerns which can be addressed through specific agricultural policies cannot be confronted through policies developed in other sectors. (An example would be the concern for the conservation of farmland habitat317.)

R e a l e f f i c i e n c y The analysis in Sections 2 and 3 showed that many current agricultural systems are highly inefficient, whether this be a result of minimal

315 WT/GC/W/342. 316 Norway (2000) or G/AG/NG/W/36 Rev1. 317 Emissions of greenhouse gases provide a countervailing example of a NTC which must also be addressed in other sectors, although agricultural policy has an important impact on climate change.


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government intervention or inappropriate government intervention. Agricultural trade policy should therefore promote a move towards real efficiency, internalising the external costs of agriculture outlined in Section 2.6. This is likely to entail a strengthening of local food production.

N o n - i n f r i n g e m e n t Domestic food security and sustainable production are indissociable, and can be threatened by the drive for competitive production and the failure to internalise external costs. Trade policies should be construed such that they do not infringe upon the rights of countries which opt to privilege sustainable local production for domestic food security over and above production of commodities for world markets. This is referred to as the principle of non-infringement. Rather than premising the AoA upon a ‘right to export’, irrespective of how such export may undermine domestic production in importing countries, the Agreement should be premised in the first instance upon a right to address domestic food security and environmental concerns.

S u s t a i n a b i l i t y In the long-term, agricultural trade policy must recognise the sustainability imperative. Only by addressing issues of sustainability can the joint needs of food security, environmental protection and rural livelihoods be accommodated. The importance of sustainable approaches to agriculture are also becoming apparent to large agricultural producers in developed countries, some of which now fear the economic consequences of unsustainable production. A key principle of trade policy therefore has to be sustainability.

T r a n s p a r e n c y a n d p r e d i c t a b i l i t y Trade policy will not be effective if it is either negotiated or implemented in any kind of secrecy or is subject to arbitrary changes. Transparency in negotiations is crucial so that those affected can understand and engage in the policy process. Transparency and predictability in implementation is crucial for a well functioning market. It is important that both domestic and overseas producers can access details on government agricultural policies and be aware of how, and under what circumstances, these may change. Measures taken by governments should thus be clear, well defined, accessible and predictable.

A c c e s s i b i l i t y Effective agricultural trade policy measures need to be accessible for use by the poorest countries. This points to a need both for an adequate range of policy mechanisms being available, and for capacity building to facilitate the implementation of the agreement by developing countries. Support – both financial, and in terms of outside expertise – should be made available to developing countries and should be obligatory under a reformed agreement. The concrete suggestions for reform of the AoA which follow are elaborated under the ‘three pillars’ of the AoA; export support, domestic support and market access. Although these policy areas are treated separately, the linkages between them are recognised and the proposals are intended to be complementary.

Trade policies should be construed such that they do not infringe upon the rights of countries which opt to privilege sustainable local production for domestic food security over and above production of commodities for world markets.


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5 . 2 E x p o r t c o m p e t i t i o n Under the AoA, export subsidies are prohibited other than where these are specified in a country’s commitments. They are currently used almost exclusively by developed countries – particularly the EU. Other export competition measures (such as export credits) are not restricted by the Agreement.

P r o p o s a l 1 : P r o h i b i t e x p o r t s u b s i d i e s u n d e r t h e A o A . Export subsidies have three important implications: • elevated levels of production in the exporting country • displacement of production in, and exports from, rival exporting

countries • undermining of domestic production in importing countries

(principally, developing countries). Elevated levels of production in the exporting country generate environmental impacts. It has also been argued that where export subsidies in the EU displace production from rival exporters, this too has an indirect environmental effect. Where producers (principally in North America or Australasia) which compete with the EU for export markets are disadvantaged by EU export subsidies, removal of these would generate some environmental dividend. This is suggested on the grounds that production in these rival exporting countries tends to be more extensive than in the EU318. That said, there are also instances where production (in some livestock sectors, for example) is more intensive in non-EU countries and, it is argued, export subsidies keep ‘more environmentally sound’ EU producers in business. However, the use of export subsidies does not present an effective and sustainable way to maintain less-intensive farming systems. The most compelling arguments for the prohibition of export subsidies arise from their impact upon domestic production in developing countries, where they depress or eliminate production, leading to import dependency and diminished food security. Such impacts are felt most immediately by more marginal farmers319. Again, displaced production in developing countries may have been more extensive, with lower environmental impacts, than production in the EU. Few developing countries are eligible to use export subsidies. In an FAO study of 14 developing countries, only one (Brazil) retained this right under the AoA. It is not exercised. The FAO study did reveal, however, that developing countries frequently employ occasional incentives for export (such as tax breaks, for example). In promoting production for export markets, such incentivisation may serve to undermine production of foodstuffs for domestic consumption. It is also unclear whether such measures are legitimate under the Agreement on Subsidies and Countervailing Measures320. Where production for domestic markets is not viable as a result of competition from imported foodstuffs, production for export markets will clearly be of central concern, and the provision of such incentives

318 Baldock et al (2000). 319 Baldock et al (2000). 320 FAO (2000).

Prohibiting export subsidies should be a primary concern, on the grounds of food security, the preservation of rural livelihoods, and environmental protection (including minimisation of the external costs of international transport of produce).


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may encourage the development of export markets. However, banning the use of export subsidies in developed countries is likely to make food production for domestic markets in developing countries more viable, diminishing the importance of export incentives in developing countries, and obviating the need for incentives which are of dubious legitimacy. Prohibiting export subsidies should be a primary concern, on the grounds of food security, the preservation of rural livelihoods, and environmental protection (including minimisation of the external costs of international transport of produce) (see Section 3). Export subsidies can have severely detrimental effects upon domestic markets in importing countries, and (in line with AoA intent) their abolition should be sought. Given the current extent of export subsidy use in the EU, and thus the need to restructure agricultural policy, there may need to be a phase-in period and timetable for the elimination of export support.

Proposal 1 is consistent with the positions of the Cairns Group, the US and several developing countries (see Sections 4.2.2, 4.3.2 and 4.4.2). Potential conflicts exist with the EU, which calls for reduction of export subsidies, contingent upon common treatment of all forms of export support. ASEAN calls for retention of export subsidies for developing countries (see Sections 4.7.2 and 4.5.2).

P r o p o s a l 2 : R e s t r i c t o t h e r f o r m s o f e x p o r t s u p p o r t m e a s u r e s , a s w e l l a s e x p o r t s u b s i d i e s . Although trade distorting, a number of export support instruments besides export subsidies are not restricted under the current AoA. In particular, these include subsidised export credits, irresponsible uses of food aid, state-trading enterprises and some market support systems321. These should be examined on a case-specific basis, and their impacts (on sustainability and domestic production in developing countries) should be assessed. • Long running efforts to develop restrictions on export credits

(Article 9), for example, have hitherto proven unsuccessful. Claims that such credits contribute to food supply in food insecure countries are undermined by OECD work which demonstrates that LDCs and NFIDCs are granted a very low share of export credits322. Clearly, there are better ways to address the needs of such countries (see Proposal 3, below). Negotiations for an Understanding on export credits at the OECD failed at the end of 2000 (see Box 8).

• Abuses to food aid continue, with the exploitation of food aid

provisions as a means of disposing of price-depressing surpluses in donor countries and as a means of market development rather than a means to address short-term food insecurity. Correspondingly, food aid is found to increase when prices are low, and decrease when needed most (at times of higher prices)323. Although free food

321 G/AG/NG/W/34. 322 G/AG/NG/W/34. 323 Konandreas (2000).


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may be important in addressing severe short-term food shortages, sourcing food aid locally is often a more efficient and appropriate response than shipping this from the US or the EU. Food aid should be provided on the basis of an objective assessment of need, and without increasing the debt burden of recipient countries324. In many cases, it may be more appropriate to provide this as grant aid.

• STE may control a large proportion of the exports of certain

agricultural products, effectively circumventing export subsidy disciplines and commitments. However, in some instances, government marketing boards provide price stability across geographical regions, or throughout the growing season. This effectively means that remote or small farmers are subsidised by those with access to transport infrastructure, or capacity to store produce. In developing countries, privatisation of such markets has generated additional hardship for small farmers. If the operations of STEs are to be reformed, this should permit the persistence of those aspects of government marketing boards which address the needs of remote and small farmers in developing countries325.

Proposal 2 is broadly consistent with the positions of the Cairns Group and the EC (Sections 4.2.2 and 4.7.2). Potential conflicts exist with ASEAN which, although wanting all forms of export support disciplined, wants such support (eg export credits) to be available for developing countries (Section 4.5.2); and, most notably, with the US which wants current food aid provisions to remain and for its use of export credit programmes to be disciplined through the OECD rather the WTO (Section 4.3.2). (Note OECD negotiations on export credits collapsed in November 2000 – see Box 8.)

Box 8 Export credit negotiations at the OECD

The ‘development of internationally agreed disciplines to govern the provision of export credits, export credit guarantees or insurance programmes’ in trade of agricultural goods was foreseen by Article 10.2 of the AoA. Negotiations for an understanding on export credits were conducted at the OECD, and were scheduled for completion by the end of 2000. The US took the position that this non-binding Understanding would fulfill WTO commitments. However, the EU saw this as laying the foundation for the subsequent integration of disciplines on export credits into the renegotiated AoA326. Use of the OECD as the negotiating forum generated disquiet among some non-OECD countries. The Philippines has pointed out that while OECD countries may be the chief providers of officially supported export credits, the impact of disciplining these would extend to other exporting countries. Other countries should therefore be involved in the negotiations for a protocol on export credits327. Brazil, Trinidad and Tobago, Mauritius, Colombia and India have also queried the development of disciplines on export credits outside the WTO328. Negotiations for an Understanding on export credits failed in November 2000, with US industry lobbyists arguing that the draft text would render US government export credit programmes uncompetitive, that

324 G/AG/NG/W/34. 325 G/AG/NG/W/34. 326 IATP (2000a). 327 G/AG/NG/W/48. 328 See G/AG/NG/W/28, G/AG/NG/W/43, G/AG/NG/W/52 and G/AG/NG/W/33. 329 IATP (2000b).


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Box 8 Export credit negotiations at the OECD

agreement of an Understanding at this time would be to relinquish a valuable bargaining chip in the AoA negotiations, and that, besides, export credit programmes are legal under the terms of the AoA. Others countered that US pressures for reform of EU export subsidies would ring hollow in the absence of reform of the export credit system329.

Proposal 3: Accompany prohibition of export subsidies with measures to address food supply concerns in developing countries which are dependent upon cheap imports. With the abolition of export subsidies, the concerns of countries which do not have the resources to address food requirements through domestic production, or which have come to depend upon cheap food shipments for their domestic food security should be addressed (see Section 3.4). Removal of export subsidies should therefore be accompanied by other measures to safeguard the food supply to these LDCs. In particular, unconditional direct financial aid should replace food aid330. Such assistance should be provided without exacerbating the indebtedness of recipient countries, and should increase with world prices. Where such aid is required, this should be accompanied by technical assistance to promote, where appropriate, domestic production of staple foodstuffs employing sustainable techniques. The potential difficulties that the AoA may have generated for developing countries were to have been addressed through the Marrakesh Decision. As yet, this has not been properly implemented (see Box 9).

Proposal 3 is broadly consistent with the positions of the Cairns Group, Mauritius and Japan (see Sections 4.2.2, 4.4.2, and 4.8.2). However, no country or grouping has suggested the provision of direct financial aid linked to technical assistance to promote more sustainable domestic agriculture.

Box 9 The Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform

Programme on Least Developed and Net Food-importing Developing Countries In response to concerns that implementation of the AoA could generate difficulties for some developing countries, the Marrakesh Decision was intended to commit members to provide assistance for NFIDCs, LDCs and some non-WTO members. In particular, NFIDCs and LDCs were concerned about the transitional costs of adjusting to the reduction of export subsidies by the US and EU. Paragraph 2 of The Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries reads: Ministers recognise that during the reform programme leading to greater liberalisation of trade in agriculture least-developed and net food-importing developing countries may experience negative effects in terms of the availability of

330 The EC has proposed that ‘food aid should be given in fully grant form; that a code of conduct covering food aid operations be established; that the type of operations to be considered as food aid be clearly defined; that a [prior] mandatory notification mechanism be established; that a list of recipients be drawn up and that particular provisions for emergency situations be agreed.’ Elsewhere in the same document, the EC expresses its belief that ‘providing food aid under credit terms increases the debt burden of these countries and is therefore detrimental to their long-term interests.’ (EC 2000c).


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Box 9 The Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-importing Developing Countries

adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions, including short-term difficulties in financing normal levels of commercial imports of basic foodstuffs331. In recognition of this, ministers agreed to: • review levels of food aid, and ‘initiate negotiations... to establish a level of food aid commitments sufficient to

meet the legitimate needs of developing countries during the reform programme.’ • ‘adopt guidelines to ensure that an increasing proportion of basic foodstuffs is provided to least-developed and net

food-importing developing countries in fully grant form and/or on appropriate concessional terms.’ (cont’d)

(cont’d) • ‘give full consideration in the context of their aid programmes to requests for the provision of technical and

financial assistance to least developed and net food-importing developing countries to improve their agricultural productivity and infrastructure.’

• ‘ensure that any agreement relating to agricultural export credits makes appropriate provision for differential

treatment in favour of least developed and net food-importing developing countries.’ The Decision itself is not part of the AoA text, though Article 16 requires Members to take action as provided for by the Decision. In fact, it has been concluded that the Decision, while legally binding, is not enforceable332. Countries are left to negotiate policies for the implementation of the Marrakesh Decision on a bilateral basis, while the International Monetary Fund (IMF) and the World Bank will provide support within existing frameworks. The World Bank commented, given ‘the small price impacts expected to arise as a consequence of the UR, and the difficulty involved in distinguishing the UR impact from other shocks, it did not seem appropriate to establish a special UR adjustment facility’333. It has yet to be established what exactly constitutes a sufficient level of food aid, and the WTO has not conducted assessments on the impact of the implementation of the AoA on food security in developing countries. An FAO study found that ‘[t]he experience with food aid shipments, one of the assistance mechanisms, was mentioned in many studies as an example of the ineffectiveness of the Decision. In particular, it was stressed that food aid shipments fell to record low levels during a period when there was a hike in food prices (in 1995 and 1996) and food import bills rose sharply’334. The Marrakesh Decision is a compensatory mechanism long overdue to NFIDCs. However, as this stands, its implementation presents considerable difficulty and it is of little use to those countries it is intended to benefit. One suggestion for its revision is that a fund should be maintained by subscription from: (1) developed countries which have made extensive use of export subsidies; (2) developed countries which have hitherto exercised highly protectionist agriculture policies, but which are now (in the course of implementing the AoA) opening their markets; and (3) developed countries which export large volumes of agricultural produce and which benefit from increased market access and reduced competition from subsidised products. This fund would finance programmes to improve domestic production, and provide food aid in

335 331 Uruguay Round: Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries. 332 Action Aid (2000). 333 Cited in: Raghavan (2000). 334 FAO (2000). 335 Action Aid (2000).


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Box 9 The Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-importing Developing Countries

grant form at times of extreme shortage335.

5 . 3 D o m e s t i c s u p p o r t

P r o p o s a l 4 : R e d u c e a n d e v e n t u a l l y e l i m i n a t e ‘ A m b e r B o x ’ s u b s i d i e s . Reform of Amber Box payments, which includes price support, is vital. Price support involves government intervention buying in the agricultural sector in order to raise internal prices. This requires less tax revenue than direct payments to maintain an equivalent level of farm support. However: • Price support is far too general to either promote more sustainable

farming or specifically support those farmers or areas where need is greatest.

• It is more transparent to provide agricultural support through direct government expenditure than through price support. (Direct expenditure may also place more severe constraints on the amount of support given, depending on the taxpayers’ ‘willingness to pay’.)

• Payments specifically related to production or input linked subsidies (also in the Amber Box) encourage over production and intensification.

Price support often requires the use of quotas to limit increased production encouraged by higher prices. It also requires export subsidies in order to refund the difference between higher domestic prices and world prices. It is important to bear in mind, therefore, that the intimate linkage between price support and export subsidies means that the abolition of one requires the abolition of both. Production quotas may also become less of a necessity if these production-related instruments are eradicated.

Proposal 4 is consistent with Cairns Group and ASEAN calls for reduction and then elimination of Amber Box support (see Sections 4.2.3 and 4.5.3). The US and EC only go so far as to propose reductions in Amber Box support (see sections 4.3.3 and 4.7.3).

P r o p o s a l 5 : R e p l a c e B l u e a n d G r e e n B o x e s w i t h a s i n g l e G e n e r a l S u b s i d i e s B o x , i n c o r p o r a t i n g m e a s u r e s w h i c h a d d r e s s g e n u i n e f o o d s e c u r i t y o r e n v i r o n m e n t a l c o n c e r n s . O t h e r m e a s u r e s s h o u l d b e e x c l u d e d . P a y m e n t s u n d e r t h e G e n e r a l S u b s i d i e s B o x s h o u l d b e e x e m p t f r o m c h a l l e n g e , a n d n o t b e s u b j e c t t o c e i l i n g s . P r o v i s i o n s s h o u l d e n s u r e a d e q u a t e f l e x i b i l i t y t o a d d r e s s e f f e c t i v e l y m a r k e t f a i l u r e s . The Blue Box covers a range of payments made under so-called ‘production limiting programmes’. These are payments made on the basis of fixed areas, fixed yields or fixed numbers of livestock. Like Amber Box subsidies, these payments are rarely useful in correcting market failures and encouraging more sustainable agriculture. The Blue Box should therefore be reduced and then abolished, although some


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blue box style payments may still be of use and should be incorporated within a single General Subsidies Box. Hence, there should be explicit recognition that ‘production limiting payments’ (eg headage based payments) that are made as part of an environmental or rural development programme (in other words with environmental or rural development conditions attached) are legitimate measures. For example, some habitats are dependent upon the maintenance of particular grazing regimes, the continuation of which may be best secured through headage payments with environmental conditions. Evidently, inclusion of any such mechanisms in the General Subsidies’ Box would require careful and clear definition. Current Green Box measures should also be reviewed, and those measures defined as legitimate shifted to the General Subsidies’ Box. Flexibility should be incorporated to address effectively failures of the market. However, bearing in mind concerns regarding the link between subsidies and increased production, such flexibility should be subject to transparent assessments of environmental and food security needs, and the efficacy of direct payments made to address these needs. Also, under the General Subsidies’ Box, flexibility could be provided for developing countries to use temporary production-linked support payments where these are required to address food security concerns. More specifically, provisions should be made to ensure that farmers are rewarded for the public goods provided by farming. Under the current AoA, ‘[t]he amount of payment [under environmental programmes] shall be limited to the extra costs or loss of income involved in complying with the government programme.’ (AoA, Annex 2, para 12). This restriction leads to a failure to correlate the rewards received for pursuing agri-environmental schemes with either their efficacy as environmental measures, or with perception of their public value. Clearly, assigning monetary value to specific habitats (for example) is fraught with difficulty. Nonetheless, the AoA should enshrine greater flexibility to match payments under agri-environment schemes to their social and environmental benefits. Provisions under the General Subsidies’ Box would be exempt from challenge. The ongoing flexibility to address market failures through domestic support payments should be a central tenet of a reformed AoA rather than being contingent on the periodic extension of concessions under Article 13 (due restraint, or the peace clause). There should be no constraint on levels of spending under the General Subsidies’ Box. Agricultural support should be about correcting market failures in the most effective way. Arbitrary restrictions on domestic support spending would undermine the flexibility of countries to improve real efficiency. The level of domestic support available will to some extent reflect the willingness of taxpayers to address current market failures. Such measures should therefore be complemented with effective regulation of domestic agriculture (see Section 5.5), and provisions for preferential import of products which have been produced more sustainably (see Section 5.4).

Provisions should be made to ensure that farmers are rewarded for the public goods provided by farming.


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Proposal 5 is consistent with the proposal of Cuba et al to replace current domestic support categories with a General Subsidies Box (see Section 4.4.4). That said, Cuba et al diverge from Proposal 5 in suggesting ceilings on spending within this box. India and Indonesia propose that domestic support for domestic consumption should not be subject to discipline (Section 4.4.4). The US envisages a review of domestic support measures, with imposition of a ceiling on trade-distorting support that applies proportionately to all countries (see Section 4.3.3). The Cairns Group proposes enhanced Green Box provisions for developing countries (see Section 4.2.3). The EC, Norway, Japan and transition economies all allude to the value of some uses of the blue box, particularly in protecting rural livelihoods and the environment. The transition economies also list several categories of domestic support that should be exempt from reduction for members in the process of transition (see Sections 4.7.3, 4.8.3, and 4.9.3).

5 . 4 M a r k e t a c c e s s As discussed above, different countries have very different social, economic and environmental conditions. A key principle in the pursuit of food security and more sustainable agriculture is therefore policy flexibility. As discussed elsewhere, the latitude for developing countries to address legitimate food security concerns through domestic production should be enshrined in the AoA. Arbitrary minimum market access requirements place an unreasonable constraint on a country’s freedom to pursue food security through developing domestic production. Rather, such market access requirements should be implemented only after national food security concerns have been adequately addressed. More generally, developed countries or trading blocs such as the US or the EU are able to maintain high levels of domestic support, while many developing countries (either as a result of exchange rate overvaluation, budgetary constraints, or commitments under structural adjustment programmes) are not. Provisions for permitting market access controls to be exercised by developing countries would therefore help to restore some degree of parity to the international trade arena.

P r o p o s a l 6 : D e v e l o p i n g c o u n t r i e s s h o u l d n o t b e r e q u i r e d t o b i n d t a r i f f r a t e s a t c u r r e n t l e v e l s o f a p p l i c a t i o n . M o r e o v e r , m e a s u r e s s h o u l d b e n e g o t i a t e d t o p e r m i t d e v e l o p i n g c o u n t r i e s t o p r o t e c t d o m e s t i c m a r k e t s t h r o u g h m a r k e t a c c e s s r e s t r i c t i o n s , w h e r e s u c h p r o t e c t i o n i s d e e m e d n e c e s s a r y t o m a i n t a i n o r i n c r e a s e p r o d u c t i o n c a p a c i t y o f f o o d s c o n s u m e d d o m e s t i c a l l y ( t o a d d r e s s f o o d s e c u r i t y c o n c e r n s ) , o r t o p r o t e c t t h e l i v e l i h o o d o f s m a l l -s c a l e f a r m e r s . T h e s e s h o u l d r e p l a c e t h e c u r r e n t S S G p r o v i s i o n s , w h i c h f e w d e v e l o p i n g c o u n t r i e s c a n e x p l o i t . Tariffs are the main instrument available to developing countries to protect domestic production where world prices are volatile. SSG provisions purport to address this issue. However, agricultural products for which non-tariff barriers have not been ‘tariffied’ (or, iniquitously, products for which barriers were tariffied unilaterally prior to the UR)336 are not covered by these provisions (see Appendix). Nonetheless, tariffs have to be used judiciously, and many developing countries have left large disparities (referred to as ‘water’) between

336 FAO (2000).


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bound tariff levels and applied levels.337 (Whether to avoid the political implications of maintaining high food prices through tariffs, or in the hope of soliciting market access concessions from other trading partners.) The decision to maintain such ‘water’ will represent a trade off between the political implications of increasing tariffs (and therefore food prices), and the impact of lower prices upon rural people. As lower prices may tend to lead to farm amalgamation and urbanisation (see Section 3.5), the political costs of further undermining the economic returns from food production for domestic markets are likely to be ameliorated as more of the population moves from being food producers to being food consumers. The sensitivity of this compromise, between on the one hand providing cheap foodstuffs, and on the other, addressing food security and rural livelihood concerns through protection of domestic production, is particularly acute with respect to staple foodstuffs. India’s bound tariffs are zero for several such products, including rice, coarse grains and skimmed milk powder338. Other countries have found the need to exercise higher tariffs on basic food stuffs to protect domestic markets. Thus in Peru, for example, tariffs on sugar, wheat and dairy products reached 46–54%, as against the average bound tariff of 30% 339. This suggests that a trade policy should permit flexibility for developing countries to adopt market access restrictions to stabilise domestic markets, while exercising caution where these impact on the price of staple foodstuffs. A prerequisite for such flexibility is that developing countries should resist agreeing to bind tariff rates at current levels of application. Moreover, it is clear that the SSG fails to provide an effective means for developing countries to protect domestic production and food security through market access restrictions. Provisions are envisaged which would afford developing countries the freedom to introduce measures which extend beyond ‘ordinary tariffs’ (variable levies on staple foodstuffs, for example) in order to protect domestic production. Such measures would replace the SSGs under Article 5 of the AoA, and would bear superficial similarity to these. However, they would differ in several important ways: • There would be no constraints on the extent of these levies, subject to

some trigger. (For example, no increase in net agricultural exports, or no export of specific foodstuffs, or some function of these two.) Linking levies to export bans ensures transparency; levies can only be implemented to protect production for domestic consumption and not production for export. Such provisions would be available on a nominated crop basis, such that only production of staple foodstuffs

337 A recent survey of tariff rates across a spectrum of developing countries revealed a low level of applied rates relative to bound rates. Bound rates in Kenya, Pakistan and India, for example, averaged 100%, 101% and 116% respectively. However, applied rates were an average of 17% in Kenya, a maximum of 35% in Pakistan, and an average of 26% (with 83% of tariff lines at least 50% lower than bound rates) in India. Overall, the average of bound rates in the 12 countries studied was 90%. The average of applied rates was 22%. See FAO (2000). 338 FAO (2000). 339 FAO (2000).

Provisions are envisaged which would afford developing countries the freedom to introduce measures which extend beyond ‘ordinary tariffs’ (variable levies on staple foodstuffs, for example) in order to protect domestic production.


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could be protected. Export restrictions are already possible under GATT (see Box 12 p92).

• They would be implementable on products even for which market access measures had not been converted into an ordinary customs duty. Indeed, under these provisions, variable import levies could be applied.

• Their implementation should be concurrent with capacity building in both technical expertise to make use of such measures, and in sustainable production of foodstuffs for domestic consumption.

The extent of these measures and the circumstances for their use would need to be defined clearly. Such restrictions could be: • extended to a subset of developing countries, under S&D treatment

or alternatively, they could be self-targetting (linked to export bans, for example)

• based on a country’s overall food security profile, or they might be specific to staple foodstuffs. There need be no such support for commodity crops grown for export. Border controls might therefore be applicable only to crops which genuinely contribute to domestic food security, or imported crops that may otherwise substitute for domestically produced staple food stuffs

• based upon an assessment of the ratio of food security concerns of the importing and exporting countries (in other words, where a country imposes market access restrictions to protect domestic producers of staple food stuffs, it is required to accept imports from other food-insecure countries or LDCs, before opening its markets to imports from elsewhere). Alternatively, market access restrictions might simply reflect the food security of the importing country.

Where countries chose to adopt such policies, these could reduce reliance upon imports of staple foodstuffs, dependency upon foreign currency reserves, and alleviate the environmental costs associated with food transport. Were such measures to be implementable on nominated crops only, lists of such crops would be country-specific, reflecting current levels of domestic production and consumption. One problem with permitting market access restrictions on a staple foodstuff up until that point at which surplus of this crop is exported, is that countries eligible to impose access restrictions might be found to protect production in certain specific staple foodstuffs, while benefiting from significant exports in other commodities. This could be addressed through a requirement that net agricultural exports do not increase following the implementation of such measures. Alone, market access restrictions will reduce imports and hence increase the total balance of trade. Where countries are addressing food security concerns through increased domestic production of staple foodstuffs, this effect may be offset in part by the diversion of some domestic production from export crops to staple foodstuffs for domestic consumption. Diverting production in this way would serve to off-set the effect of import restrictions on the overall balance of trade in agricultural produce, and lead to a reduction in export earnings. This might be considered a prerequisite in order for countries to avail themselves of the market access provisions. Note that where protection of domestic production


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led to cultivation of staple foodstuffs on marginal land which was otherwise uncultivated, net exports may increase. It may be deemed necessary to further qualify the linkage to market access restrictions to a limit on agricultural export growth. The value of imports of all food items to LDCs increased by almost 50% between the early 1980s and 1997; by 40% for NFIDCs. This is set against a background of extremely high ratios of total food imports to total merchandise exports; for LDCs, this is 0.27; for NFIDCs, 0.17340. Some limit might be set for such ratios (0.10, for example), for developing countries, above which increases in net agricultural exports under the scheme outlined above do not attract restrictions in market access controls. As domestic production of staple food stuff increases, and reliance upon imported food, relative to total exports decreases, and this ratio falls below 0.10, restrictions would be placed on the extent to which market access measures could be applied.

Proposal 6 is consistent with the negotiating proposals of most developing countries, comprising the majority of the WTO’s membership. It is also consistent with the proposals of a number of developed countries. The EC, for example, sounds a note of caution over the possible impacts of tariff reductions on developing countries: ‘How’, ‘would…deep cuts fit in with…measures to help developing countries and in particular the least developed countries to integrate themselves into the world market?’341 The notable exceptions are developed country members of the Cairns Group and the US. The Cairns Group proposals, while accepting the need for preferential access for products produced in developing countries to markets in developed countries, do not include market access restrictions to protect developing country producers. This is clearly a point of difference among members of the Cairns Group (see Section 4.2.4). Cuba et al propose variable tariffs, available to developing countries under S & D treatment. They also propose that SSG provisions should not be accessible to developed countries, while being opened to all developing countries. They suggest that developing countries can use tariff barriers ‘until such time as they are exporters of these products’.

P r o p o s a l 7 : N e g o t i a t e m e a s u r e s t o p e r m i t c o u n t r i e s t o p u r s u e s u s t a i n a b l e a g r i c u l t u r e p o l i c i e s , w i t h o u t i n f r i n g e m e n t b y l e s s s u s t a i n a b l e p r o d u c t i o n s y s t e m s e l s e w h e r e . As highlighted by this report, there is a fundamental contradiction in prioritising food security over sustainability. It is clear that our prosperity must be based upon sustainable production. However, mechanisms to correct market failures and encourage more sustainable production must also be fair and take into account the development dimension. Additional tariffs could be used to protect domestic production where this is undermined by competition from foodstuffs produced through agricultural practice which has low real efficiency, and which is on the market at a price that fails to reflect its true cost of production. Clearly, such additional tariffs should not threaten the livelihood of farmers in developing countries who do not yet have the resources and capacity to adopt more sustainable forms of agriculture. (Proposals relating to access for produce grown in developing countries to markets in developed countries are discussed further below.) However, criteria for sustainable production should include a consideration of rural 340 FAO (1999). 341 G/AG/NG/W/66.


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livelihood issues, such that preferential market access of this produce will specifically benefit small-scale farmers and production in countries where agriculture remains labour intensive. There are several possible approaches to discriminating between produce or exporters, based on sustainability criteria: • Through market access restrictions implementable by the producing

country, in order to ameliorate the effects of competition from imported produce grown less sustainably.

This measure could specifically be for developing countries. Alternatively, it could be used by developing countries and developed countries which use minimal domestic support, or which are taking steps towards reducing domestic support. Thus member states might be permitted to implement market access restrictions on imports of any produce, where this importing state satisfies certain sustainability criteria, at a national level (see Box 11 p89) and makes domestic support payments below a certain proportion of production (say 25%, for example). • Through calculation of tariffs on a bilateral basis, reflecting the ratio of

sustainability indexes (see Box 11 p89) between importing and exporting countries.

The tariff levels which could be legitimately maintained to protect domestic production from imported foodstuffs would be calculated as a function of the ratio of sustainability indexes in the importing and exporting countries. The greater the sustainability index of the importing country, relative to that of the exporting country, the greater the level of protection of domestic markets which could be legitimately levied. There are several considerations here: • This approach would not contravene the WTO’s possible

restrictions on the use of non-product related process and production methods (PPMs), although it would run counter to most favoured nation (MFN) provisions (see Box 10 p87).

• The most fundamental problem with this suggestion is the formulation of a sustainability index which is both fair and applicable across a range of national contexts. Sustainability indexes are discussed further in Box 11 (p89).

• Evidently, it is important that such a measure should not discriminate against developing countries which lack the resources and capacity to shift to more sustainable agricultural patterns. The needs of such countries could be addressed by other provisions, discussed elsewhere in this report. (These might include provisions for market access restrictions to address food security concerns.) An alternative is that, in the course of calculating legitimate tariff levels, the ratio of a development index (for example the UNDP’s Human


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Development Index – HDI342) should also used. Accordingly, the weighting given to the ratio of the importing and exporting countries’ HDI would be inversely related to the HDI of the exporting country. Thus countries which are themselves either adopting sustainable means of production, or which are developing, would be able to opt for higher tariffs, while a prosperous country which relied heavily upon HEIA for domestic production would be severely restricted in levying tariffs on imports. In other words, the protection possible for a country’s domestic agriculture sector would be contingent upon its level of development, with consideration of the degree to which it had implemented sustainable agricultural practices becoming progressively more important for more developed countries.

• A scheme of this type may disadvantage localised sustainable production in countries which had a low aggregate sustainability rating, and would depend upon incentivisation for sustainable agriculture to be provided by national governments.

• Such a scheme would also be open to abuse by farmers employing intensive unsustainable production techniques in countries which otherwise had a high sustainability rating. Such farmers would benefit from such a rating in marketing their produce elsewhere. Again, national legislation and monitoring would be required to preclude such exploitation.

• There will be instances where HDI alone is not sufficiently discriminatory. Where developing countries are constrained to produce a limited range of commodities (see Section 3.4), a case can be made for providing preferential market access for these, on the grounds that production cannot easily be diverted to generate other commodities for export.

342 HDI is calculated as the simple average of three indexes; life expectancy (at birth) index; educational attainment index (calculated from adult literacy and combined gross primary, secondary and tertiary enrolment ratio); adjusted real GDP (PPP$) index (as measured by GDP per capita). The value of the HDI ranges from 0 to 1, with Canada assigned the highest value (0.932), Sierra Leone the lowest (0.254). There are costs associated with the transition to more sustainable agricultural practice. These are in part financial, and in part reflect increased need for extension support and education programmes for farmers. Capacity to meet such costs might therefore be better judged by reference to the HDI, than GDP per capita. Clearly, such costs will be borne more easily by developed countries. See UNDP (1999).


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Box 10 Is it possible to develop market access rules based on differentiation between methods of production,

or countries? This report suggests that there are potential benefits from discriminating in favour of agricultural products that are produced more sustainably. However, as well as the technical problems concerning how to implement such measures fairly, any attempt to discriminate between products based on their methods of production conflicts with WTO rules concerning PPMs. Some uncertainty exists concerning whether or not WTO member governments can freely implement trade policies that distinguish between products on the basis of non-product-related methods of production343 (eg sustainably harvested timber versus unsustainably harvested timber). The conventional interpretation holds that making PPM distinctions is not compatible with WTO rules. For example, Article I of GATT (MFN treatment) states that products from one country are entitled to benefit from the most favourable treatment given to any like product from another country. This means that, ‘In deciding whether products are similar, only those differences which can be discovered by examining the goods themselves are regarded as relevant’344. However, some confusion has been created by the WTO Appellate Body’s ruling in the ‘shrimp-turtle’ case which seemingly opened the door to PPM-based discrimination. It should also be noted that countries are allowed to discriminate against products produced using prison labour (Article XX) although this is specifically an ‘exception’ to the rule. There also seem to be derogations from this rule in the ‘annexed agreements’. For example, the Agreement on Technical Barriers to Trade (TBT) states that technical regulations apply to ‘...product characteristics or their related process or production methods’ which, it has been argued, means that the TBT does allow PPM-based discrimination345. The plurilateral Agreement on Government Procurement (GP) also seems to allow distinctions to be made on the basis of PPMs. Article VI of the GP states that technical product specifications laying down, inter alia, ‘processes and methods of their production’ shall not create ‘unnecessary obstacles to international trade’. According to a UK Government report ‘This suggests that PPM criteria are allowed [in the GP] but need to be applied in a nondiscriminatory manner’346. These ‘exceptions’ within the ‘annexed agreements’ to the GATT 1994 suggest that there is no reason why specific rules on PPM-based discrimination cannot be drawn up within the AoA, which is also an annexed agreement. This report also looks at possible ways of distinguishing between products based on country of origin (the level of positive/negative discrimination being based on indices of human development and/or environmental sustainability). However, such measures infringe one of the central tenets of WTO rules, namely the principle of MFN status. Put simply, MFN means that a country must provide the same treatment to all its trading partners. For example, if it improves market access for one trading partner, it must extend the same concessions to all others. Again, there are derogations from this rule, most notably under the Generalised System of Preferences (GSP) scheme. Under the GSP, a number of industrialised countries have introduced tariff preferences for products

343 ie methods of production that have no bearing on the final physical characteristics of the product. 344 McGovern (1996). 345 Cook et al 1997. 346 Cabinet Office (2000).


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Box 10 Is it possible to develop market access rules based on differentiation between methods of production, or countries?

from developing countries with the range of beneficiary countries and products varying between different industrialised country GSP schemes. This is a clear departure from MFN and is specifically sanctioned in the so-called ‘enabling clause’ agreed between WTO members. (cont’d) (cont’d) Regional trade agreements, sanctioned under Article XXIV of the GATT, also represent derogations from MFN. Under regional trade agreements, countries can be extended preferential trading treatment. Regional trade agreements are discussed further in Section 5.5. Although not comprising derogations from MFN, there are numerous instances where developing countries are afforded special or differential treatment under international trade agreements. Most obviously, the AoA itself enshrines such differential treatment in Article 15. GATT rules provide other examples: Under Article XVIII of GATT 1994, developing countries are afforded special rights concerning balance of payments measures347 and SSG measures348. The principle of differential treatment for developing countries is also enshrined under Part IV (‘Trade and Development’) of GATT 1994. There would seem, therefore, to be good grounds on which to develop a scheme that differentiates between countries on the basis of human development indices and, it could be argued, sustainability indices (particularly given that these are interlinked with human development). Again this could be facilitated by the fact that the AoA is an annexed agreement to the GATT 1994 and thus stands slightly apart from it. There is no reason why, in theory, governments could not agree specific derogations from the MFN principle within the operation of the AoA. Finally, and perhaps obviously, it should also be remembered that, if it can be agreed between members, there is no reason why our governments cannot change the letter, interpretation or application of any of the above-mentioned trade law.

• Through preferential market access for sustainably produced crops. This would entail discrimination of produce on the basis of PPMs (see Box 10). Thus, for example, Italy has suggested that tariff-free access might be afforded to organic produce from developing countries349. More generally, market access restrictions might be implemented on all foodstuffs not produced according to specific sustainability criteria. We are aware however of the difficulties of delineating ‘developing countries’ under this proposal, and of problems concerning some organic production methods, which need not address rural livelihood concerns. There are also practical problems associated with certification schemes, although for organic produce these are in many instances already in place. Were more general ‘sustainability’ criteria to be used, this would require the formulation of a sustainability index which was both fair and applicable across a range of national contexts. Sustainability indexes are discussed further in Box 11.

347 ie restriction of imports to address a balance of payments problem. 348 ie restriction of imports to achieve specific developmental goals. 349 Comment made by Alfonso Pecoraro Scanio, Minister of Agriculture and Forestry, Italy at the conference Farming – Fit for the Future? 23 November, 2000.


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Proposal 7, although clearly promoting improved food security and sustainable production – the avowed concerns of many countries – it is not addressed in any negotiating position currently submitted to the WTO.


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Box 11 Indexes for sustainable agriculture

The use of indicators As noted in a contribution to a recent OECD workshop, Environmental Indicators in Agriculture: ‘If indicators develop in particular ways, they may force decision-makers to address questions they prefer not to address, for example, the real, underlying causes of environmental degradation rather than the cosmetic causes which can be addressed and for which, perhaps with adequate ‘spin-doctoring’, good publicity can be obtained’350. The difficulty of developing bases of comparison for sustainable agricultural production are considerable. Two approaches are discussed here. • National indexes: the less tractable problems relate to approaches to developing a means for comparison of

entire agricultural sectors between countries. Development of agri-environmental indicators is still in its infancy. Nevertheless, the OECD has begun to address the problems of international comparison.

• Product-specific standards: here there is a temptation to use well-established organic standards. However,

these need not address concerns about loss of rural livelihoods, nor the problems associated with use of plantation farming, or contract growing to supply export markets.

National indexes The OECD, among other organisations, is developing indicators for sustainable agriculture, with a view to using such indicators as a basis for, inter alia, national comparisons between member states. In order that such indicators might in future be used as a means for providing preferential trading terms, means must be found for establishing their transferrability across widely differing agri-environmental contexts. The OECD work on agri-environmental indicators refers to this as the ‘level of aggregation’. National level indicators that take into account spatial diversity are being developed by the OECD, to facilitate international comparisons. Given the difficulties of comparing agri-environmental information across environmental and climatic conditions, one suggestion is that trends or changes might be compared over time351. Another approach which could potentially be extended to permit international comparisons to be drawn might be based on point-scoring. A proposed Dutch scheme is based on an accounting system whereby farmers receive points for implementing green services or investments. These can be exchanged for tax relief or green credits. Scope exists for the development of the system such that farmers might be rewarded through discretionary allocation of subsidies or investment support, or quota imposition. The point-based system allows the on-going fine tuning of the criteria by which points are awarded, and rewards farmers incrementally, rather than completely precluding those who fail to reach some arbitrary threshold352. Production methods Organic production Although there are clearly problems with premising such a scheme on organic standards, these would at least have the advantage of being clearly defined, and there are precedents for the certification of organic produce in exporting countries, prior to its acceptance for the European market. However, organic production need not alleviate social problems generated by large-scale plantation farming or contract growing. Discriminating produce or production patterns on the grounds of organic cultivation would therefore be inadequate in the course of addressing a number of concerns. Alternative indicators Alternative sustainable agriculture indexes are being developed. One approach is through the production of

350 Pearce (1999). 351 OECD (1999) p18. 352 Scheme developed by Arie van den Brand <[email protected]>.


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Box 11 Indexes for sustainable agriculture

‘web diagrams’, which provide a means of visualising performance according to a series of (cont’d) (cont’d) sustainability criteria. As employed by Unilever in the course of its Sustainable Agriculture Initiative, `these criteria include ‘social capital’ (an assessment of the contribution to local social networks), and ‘local economy’ (scored according to the geographical proximity of sources of agricultural inputs)353. Clearly these are moves in the right direction, although vertically integrated multinational food companies should also address problems arising from the long distance transport of both agricultural produce and processed foodstuffs. Sustainability indexes should be designed to reflect an assessment of social, gender, and livelihood concerns, in addition to agricultural production factors. Unfortunately, such concerns are all too often omitted from organic production criteria.

P r o p o s a l 8 : L i n k t a r i f f - f r e e a c c e s s f o r e x p o r t f r o m L D C s t o m a r k e t s i n d e v e l o p e d c o u n t r i e s t o s u p p o r t f o r i m p a c t a s s e s s m e n t a n d d i r e c t f i n a n c i a l a i d t o p r o m o t e s u s t a i n a b l e p r o d u c t i o n o f e x p o r t c r o p s . U l t i m a t e l y h o w e v e r , b o t h f o o d s e c u r i t y a n d e n v i r o n m e n t a l c o n c e r n s a r e g e n e r a l l y b e s t a d d r e s s e d t h r o u g h p r o d u c t i o n f o r d o m e s t i c m a r k e t s . T h i s c o u l d e n t a i l r e s t r i c t i o n o f a c c e s s t o m a r k e t s b o t h i n d e v e l o p e d a n d d e v e l o p i n g c o u n t r i e s a n d n a t i o n a l m e a s u r e s t o p r o m o t e m o r e s u s t a i n a b l e a g r i c u l t u r e . Developed countries and trading blocs, particularly Canada, the EU, Japan and the US, have implemented very high tariffs in the course of tariffication (the transposition of non-tariff barriers to tariff barriers). Tariffs are typically higher in temperate-zone products, to protect domestic production. However, many developing countries rely heavily upon export of temperate-zone products (sugar, tobacco, cotton, fruits and vegetables). Tariffs on these products frequently exceed 100% in developed countries354. Access to markets in developed countries is a complex issue. In the long-term, environmental, rural livelihood, and food security concerns are usually best addressed through food production for the domestic market. In the short-term, failure to internalise the costs of international transport of agricultural produce, export support measures implemented by developed countries, and market access provisions under the Agreement, make domestic production policies difficult to maintain. Greater market access opportunities for developing countries should therefore be provided under the current trading regime, while the effects of trade-distorting support measures which do not transparently address environmental issues are reduced (as discussed in Section 5.3). The case for this is particularly compelling with respect to LDCs. The EC and New Zealand have made the case for unconditional market access for LDCs. Under the ‘Everything but Arms’ (EBA) initiative, the EC has proposed to the European Council that LDCs should be extended duty free access on all goods except arms, although it is likely that, under pressure from some producers, the EC will have to modify its proposal. According to the Commission, the EC was the major destination for LDC exports in 1998 (56% of the total).

353 Unilever (undated). 354 G/AG/NG/W/37.


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It was proposed that this should take effect immediately, following Council agreement, with the exception of bananas, sugar and rice, for which duty and quota free access would be introduced incrementally over three years355. While this is to be welcomed, it should be proposed that financial support for the responsible and sustainable development of export markets is provided simultaneously. There are legitimate concerns about the impact of the EBA proposal on poverty eradication and the environment in LDCs and on rural communities and the environment in Europe. Although dramatic short-term increases in production for export would be unlikely, even following the lifting of import tariffs in developed countries, there are nonetheless concerns that increased market access will promote the cultivation of cash crops for export, to the detriment of domestic food production and the environment. The exporting sector in developing countries may be divorced from, or even in open competition with, domestic food production356. Where cultivation of crops for export tends to be conducted on plantations owned by large companies, or through contract growing, the beneficial social and economic impact of this proposal on rural livelihoods is also far from clear (see Section 3.5). Free market access should therefore be seen as a contingency measure and should be subject to on-going review. In this instance, the EU has a responsibility to provide support for impact assessments, with a view to providing direct financial aid to help address such impacts and facilitate transfer of appropriate technologies. Support should be provided for the development of production methods which are both sustainable (requiring minimum use of external inputs) and which address the needs of small-scale farmers. This is consistent with previous EU positions given that the interests of small-scale farmers employing more sustainable means of production were championed by the EU in the course of the recent dispute over banana imports from the Caribbean under Lomé trade preferences. Following the internalisation of international transport costs (through taxation) and the strengthening of domestic production of staple foodstuffs in developing countries (through reform of export supports in developed countries and the transparent application of market access restrictions in developing countries), multilaterally agreed conditions could be placed upon such access. These could be used as a means of promoting more sustainable agricultural practice. Proposals for such market access provisions were outlined above. Self-targeting measures are probably preferable to S&D provisions. The current criteria for assigning countries status as NFIDCs or LDCs should ensure that all countries with genuine food availability concerns are eligible to benefit from corresponding provisions.

355 See <http://europa.eu.int/comm/trade/2000_round/seadfmaldc.htm>. 356 Einarsson (2000). Einarsson suggests that export crops are frequently grown under contract, or on plantations owned by foreign companies. Increased production for export could actually intensify competition between this sector and producers of staple foodstuffs; competition, that is, for land, labour or water.

Support should be provided for the development of production methods which are both sustainable (requiring minimum use of external inputs) and which address the needs of small-scale farmers.


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Proposal 8 – although many negotiating proposals identify the need to improve access for produce from developing countries to markets in developed countries, none identify the concurrent need for capacity building to help developing countries assess and avert the potential rural livelihood, food security and environmental implications of increased production of export crops.

Box 12 Export and import restrictions currently permissible under the AoA and the GATT

Export prohibitions Restrictions on export for reasons of domestic food security are already permitted under the GATT. Paragraph 1 of Article XI of the GATT states: ‘No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party’. However, these provisions shall not extend to ‘export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party’ (XI.2.(a)). This would seem to provide considerable scope for implementing temporary export bans on staple foodstuffs where protection of domestic production was needed to guarantee food security. This scope is preserved under Article 12 of the AoA, which requires a member which ‘institutes any new export prohibition or restriction on foodstuffs in accordance with paragraph 2(a) of Article XI of GATT 1994’ to consider the impacts on importing countries, and provide advance notice in writing. Developing countries (other than those which are net food-exporters of the specific foodstuff concerned) are exempt from Article 12. Import restrictions With regard to the implementation of variable import levies, the provisions of XI.1 do not extend to import restrictions on any agricultural or fisheries product, necessary for the enforcement of governmental measures which operate ‘to restrict the quantities of the like domestic product permitted to be marketed or produced, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted’ (XI.2.(c).(i)). However, the GATT continues to state that: ‘Any contracting party applying restrictions on the importation of any product pursuant to sub-paragraph (c) of this paragraph shall give public notice of the total quantity or value of the product permitted to be imported during a specified future period, and of any change in such quantity or value. Moreover, any restrictions applied under (i) above shall not be so much as will reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions.’ Clearly, prohibition of restrictions at a level which would ‘reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions’ precludes the use of import restrictions to address long-term food security concerns. Qualification of this clause through the reformed AoA could have important implications for the freedom of LDCs and NFIDCs to implement import restrictions to address issues of food security. Ironically, the US proposes, in the interests of food security, ‘to strengthen substantially WTO disciplines on export restrictions to increase the reliability of global food supply’ (see Section 4.3.2). It is our view that such disciplines may well be inimical to food security, and that export restrictions should be implementable where it is demonstrated transparently that such measures are introduced to address domestic food security concerns.


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P r o p o s a l 9 : T a r i f f e s c a l a t i o n s h o u l d b e d i s c o n t i n u e d . While value addition through processing of crops represents one approach that developing countries might adopt in boosting export earnings, the use of tariff escalation regimes (ie increasing tariffs according to the level of processing) has blocked market access for processed products. Such tariffs are particularly prevalent in developed countries, stifling both diversification and greater export revenue generation in developing countries. The RSPB believes there is no reasonable justification for the maintenance of tariff escalation on products from developing countries.

Proposal 9 – the Cairns Group proposes elimination of tariff escalation (see Section 4.2.4). The US and Cuba et al propose elimination or substantial reduction (see Sections 4.3.4 and 4.4.4.). ASEAN proposes elimination of tariff peaks for imports of tropical agricultural products from developing countries to developed countries (see Secton 4.5.4). The EC does not make any proposal specifically addressing tariff escalation.

5 . 5 I t ’ s n o t j u s t t r a d e – the need fo r c o m p l e m e n t a r y p o l i c i e s As has already been mentioned, reforming trade policy is just one aspect of moving towards sustainable agriculture, and governments also need to develop other, complementary, policy measures. This section outlines a range of areas where policy action is required.

A i d Aid has the potential to play an important part in the development of sustainable agriculture. Industrialised countries should meet the United Nations (UN) Official Development Assistance target (0.7% of GNP) as soon as possible and, in the agriculture sector, place an emphasis on using aid to promote LEISA (whether through research, technological development, extension services, marketing, or infrastructural measures).

B i o s a f e t y The introduction and use of genetically modified organisms (GMOs) could have profound effects on the environment, rural livelihoods and food security. Governments therefore need to be able to effectively regulate the development, trade and use of GMOs. As a minimum, and as a matter of urgency, all countries should sign, ratify and implement the Cartagena Protocol on Biosafety. Parties to the Protocol should also, as soon as possible, develop those areas of the agreement left outstanding (including a legal liability regime, dispute settlement, and detailed documentation/labelling requirements for commodities).

C o m m o d i t y a g r e e m e n t s The creation of a more stable economic environment for commodity production is of critical importance to farmers in the developing world. As the eighth Session of the Commission for Sustainable Development concluded, ‘[c]ommodity exports, particularly primary commodity exports, are the mainstay of the economies of many developing countries in terms of their export earnings, the livelihoods of their people and the dependence of


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general economic vitality on these exports. Commodity earnings instability continues to be problematic’357. Such instability can have adverse impacts both on earnings and on the environment. For example, collapsing prices in such commodities as oil palm have squeezed the income of poor farmers increasing pressure on them to clear yet more land and produce more commodities. The result has been forest clearance – which can put species under threat and can also destabilise soil and water systems. Low and/or unstable prices also make it extremely difficult for farmers to plan future production and make production methods more sustainable. Governments have already made some commitment to addressing this issue. The UN CSD 8 decision on trade, states that, ‘Governments and international organisations should endeavour to improve the functioning of commodity markets with the aim of achieving greater transparency, stability and predictability, particularly with regard to commodity export earnings’358. Governments must now turn this into policy action by working at the national and international levels to create greater stability in commodity markets. This could, for example, take the form of commodity agreements between producer and consumer countries aimed at increasing producer revenues and making commodity production more sustainable. Potentially useful in this regard is the concept of International Commodity-Related Environment Agreements (ICREAs) which can involve the use of the tariff system or labelling to create revenues that are then specifically targeted at helping improve the sustainability of commodity production359.

D e b t Addressing a massive external debt burden is still a major factor for many developing countries in determining economic policy. Export oriented agriculture – often resulting from the need to generate foreign exchange to pay off debts – can have negative environmental and food security impacts. It is therefore important to ensure that this is a policy choice rather than a policy necessity. Thus, further efforts to reduce and eliminate external debt burdens are required.

E n v i r o n m e n t a l , w e l f a r e a n d f o o d s a f e t y s t a n d a r d s Governments should implement regulations and market mechanisms that ensure food production is achieved to the environmental, animal welfare and food safety standards that are deemed acceptable by their populace. One such environmental mechanism is a tax on pesticides. For example, in the UK, the RSPB advocates using a well targeted and carefully designed pesticides tax – accompanied with other policy measures such as advice, regulation and research – to reduce the use of pesticides in farming.

I n t e l l e c t u a l p r o p e r t y r i g h t s The interaction between intellectual property rights (IPRs), the WTO’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and agriculture is complex. However, in light of the UN 357 UNCSD (2000b). 358 UNCSD (2000b). 359 Kox (1998).


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Development Programme (UNDP) conclusion that, ‘[i]ntellectual property rights under the TRIPs Agreement need comprehensive review to redress their perverse effects undermining food security, indigenous knowledge, biosafety and access to health care’360, the RSPB believes governments should: • undertake research into the impacts of the TRIPs regime on

development and the environment • support a thorough review and reform of the TRIPs Agreement,

including permitting the exemption of all life forms from patenting • support the extension of implementation periods to accommodate

both this review and reform process and the difficulty developing countries have experienced with establishing IPR regimes

• commit to amending the TRIPs Agreement to ensure coherence with the Convention on Biodiversity (CBD) provisions relating to recognition of traditional knowledge and benefit sharing and/or commit to ensuring that the CBD provisions can be fully implemented without being undermined by the enforcement of the TRIPs Agreement.

I n t e r n a t i o n a l t r a n s p o r t t a x Emissions from cross-border transport (air, sea, rail and road) are probably the primary (and some argue the only) direct impact of trade on the environment. Such emissions are of growing importance in terms of their contribution to climate change but are not included in the greenhouse gas emissions reduction targets that governments signed up to in the Kyoto Protocol. OECD figures predict a 70% increase (over 1992 levels) in the transport of internationally traded goods by 2004361. According to the New Economics Foundation, if this increase were to materialise, ‘the resulting increase in emissions would make a mockery of both the reduction targets set for industrialised countries, and the current exclusion of international freight from Kyoto controls’362. Climate change is clearly a ‘negative externality’ exacerbated by the transport-related emissions of internationally traded products. Other freight transport-related externalities include noise pollution, air pollution, oil spills, accidents and social and environmental impacts resulting from the infrastructure required to move products long distances (eg road, rail, airport and port developments). Few if any of these costs to society are included in the price of international transport. This has the effect of distorting the ‘efficiency’ of long distance transport such that it is as cost effective to produce and transport apples from South Africa to Europe as it is to produce locally, yet it can result in 600 times more nitrogen oxide pollution363. This amounts to a compelling case for some kind of intervention in the market to reduce such distortions and ‘internalise the externalities’. The first best solution is most likely to involve some kind of internationally agreed tax on the fuels used in international transport coupled with the eradication of perverse subsidies for more environmentally damaging forms of transport and the incorporation of international transport into

360 UNDP (1999). 361 OECD (1997). 362 New Economics Foundation (2000). 363 New Economics Foundation (2000).

Climate change is clearly a ‘negative externality’ exacerbated by the transport-related emissions of internationally traded products.


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the emissions reduction targets of the Kyoto Protocol. However, there are also a range of other policy options – including trade policy options – to encourage local production and consumption. These may be particularly relevant in the absence of international policy measures.

P r o d u c t l a b e l l i n g Consumers need to be able to make informed choices about the food they are eating both in terms of food quality/food safety and in terms of choosing products that are produced in ways that are more beneficial to people and the environment. The market can and does deliver such labelling in some circumstances but there are also cases where some form of regulation or incentive is required to deliver effective public information. Governments should, where necessary, develop labelling schemes that facilitate consumer choice concerning products and the way that they are produced.

R e g i o n a l t r a d e a g r e e m e n t s Regional trade agreements could play a useful role in developing trade relations – and trade preferences – with neighbouring countries. This could help foster trade between more equal partners and help encourage inter-regional trade in preference to global trade – reducing long distance transport and its related impacts. Such agreements are sanctioned under Article XXIV of the GATT, which allows countries to provide trade preferences under regional trade agreements that derogate from the MFN principle (providing they meet certain conditions). The ‘enabling clause’ concerning differential treatment for developing countries, also allows for developing country trade agreements that provide members with favourable treatment. However, regional trade agreements can have far-reaching social and environmental impacts, particularly where these are made between countries of sharply differing economic standing.

R e g u l a t i n g t r a n s n a t i o n a l c o r p o r a t i o n s Clearly, in a world agricultural market dominated by a few major corporations, corporate responsibility and the international regulation of anti-competitive practices, mergers and acquisitions are extremely important. International rules on these issues would therefore complement the development of more sustainable agriculture and a more sustainable trading regime.

R e s e a r c h Government support for agricultural research can be vital, especially in circumstances where the market undervalues the further development of particular systems or types of agriculture. Much research is focused on conventional agricultural practices, to the detriment of research on LEISA systems364. Investment in participatory research on LEISA systems is therefore essential. This is something that has been recognised in many international agreements/fora (eg Agenda 21 and the Rome Declaration of World Food Security). Most recently, however, the eighth Session of the Commission on Sustainable Development repeatedly recognised the importance of capacity building in 364 Pretty (1995), chapter 8. Pretty comments: ‘In India, there are overwhelming biases towards modern agriculture in postgraduate research. Researchers seeking a position in a university or government research establishment must select topics to investigate that reflect existing interests and expertise. ’ This viewpoint is based on Gupta et al (1989), cited in Pretty (1995) p250.


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sustainable agriculture and rural development (SARD). In particular, it calls for ‘[r]elevant international, regional and national bodies and the private sector...to support developing countries in their efforts to increase research and to achieve national integrated natural resource management, appropriate technology and sustainable agricultural methods to achieve the objectives of food security and SARD, including participatory approaches, and to disseminate information on the results of their research and its applicability ’365. Elsewhere, it continues: ‘Governments and relevant international organizations are urged to disseminate widely, and to promote the access to farmers and those engaged in agriculture, of information on relevant sustainable agricultural practices, technologies and markets, inter alia, through capacity building programmes...’ Sources of financial aid for research and capacity building in sustainable agriculture, following participatory approaches, should be strengthened through the Global Forum on Agricultural Research (GFAR).

365 CSD (2000) 2(d)22.


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W T O w o r k i n g d o c u m e n t s o n t h e a g r i c u l t u r e n e g o t i a t i o n s These documents can be retrieved from the WTO internet site. G/AG/5 – List of Net Food-Importing Developing Countries for the purposes of the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries. 3 April, 1996. G/AG/NG/W/11 – Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay. Export Competition. 16 June 2000. G/AG/NG/W/12 – Canada. Market Access. 19 June 2000. G/AG/NG/W/13 – Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka And El Salvador. Special And Differential Treatment And A Development Box. 23 June 2000. G/AG/NG/W/14 – Cuba, Dominican Republic, Honduras, Pakistan, Haiti, Nicaragua, Kenya, Uganda, Zimbabwe, Sri Lanka And El Salvador. Green Box / Annex 2 Subsidies. 23 June 2000. G/AG/NG/W/15 – United States. Proposal for Comprehensive Long-Term Agricultural Trade Reform. 23 June 2000.


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G/AG/NG/W/16 – United States. Note on Domestic Support Reform. 23 June 2000. G/AG/NG/W/17 – European Communities. The blue box and other support measures to agriculture. 28 June 2000. G/AG/NG/W/18 – European Communities. Food Quality – Improvement of Market Access Opportunities. 28 June 2000. G/AG/NG/W/20 – Argentina. Presentation of a proposal on ‘Export Subsidies’. 14 July 2000. G/AG/NG/W/21 – Australia. Introduction of Cairns Group Negotiating Proposal on Export Competition. 11 July 2000. G/AG/NG/W/22 – Statement by Brazil. Second Special Session of the Committee on Agriculture, 29–30 June 2000. 11 July 2000. G/AG/NG/W/23 – Canada. Special Session of the Committee on Agriculture29–30 June 2000. 11 July 2000. G/AG/NG/W/24 – European Community. Agriculture 28–29 September 2000. 16 October 2000. G/AG/NG/W25 – Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/25 – Grenada. Second Special Session of the Committee on Agriculture 29–30 June 2000. 21 July 2000. G/AG/NG/W/26 – Hungary. Second Special Session of the Committee on Agriculture 29–30 June 2000. 13 July 2000. G/AG/NG/W/27 – Japan. Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/28 – Mauritius. Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/29 – New Zealand. Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/30 – Norway. Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/31 – Thailand. Second Special Session of the Committee on Agriculture 29–30 June 2000. 11 July 2000. G/AG/NG/W/32 – United States. Second Special Session of the Committee on Agriculture 29–30 June 2000. 12 July 2000.


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G/AG/NG/W/33 – India. Second Special Session of the Committee on Agriculture29–30 June 2000. 13 July 2000. G/AG/NG/W/34 – European Communities. Export Competition. 18 September 2000. G/AG/NG/W/35 – Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand, And Uruguay. Cairns Group Negotiating Proposal Domestic Support. 22 September 2000. G/AG/NG/W/36/Rev.1 – Barbados, Burundi, Cyprus, Czech Republic, Dominica, Estonia, the European Communities, Fiji, Iceland, Israel, Japan, Korea, Latvia, Liechtenstein, Madagascar, Malta, Mauritania, Mauritius, Mongolia, Norway, Poland, Romania, Saint Lucia, Slovak Republic, Slovenia, Switzerland, And Trinidad And Tobago. Note on Non-Trade Concerns. 9 November 2000. G/AG/NG/W/37 – Cuba, Dominican Republic, El Salvador, Honduras, Kenya, India, Nigeria, Pakistan, Sri Lanka, Uganda, Zimbabwe. Market Access. 28 September 2000. G/AG/NG/W/38 – Argentina, Brazil, Paraguay And Uruguay (Mercosur), Chile, Bolivia And Costa Rica. Export Subsidies – Food Security or Food Dependency? 27 September 2000. G/AG/NG/W/39 – Argentina. Third Special Session of the Committee on Agriculture. 28–29 September 2000. 25 October 2000. G/AG/NG/W/40 – Australia Introducing the Cairns Group Proposal on Domestic Support. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/41 – Australia. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/42 – Canada. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/43 – Colombia. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/44 – The Czech Republic. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/45 – European Communities. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/46 – Japan. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/47 – Paraguay. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000.


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G/AG/NG/W/48 – Philippines. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/49 – United States. Third Special Session of the Committee on Agriculture 28–29 September 2000. 5 October 2000. G/AG/NG/W/50 – Norway. Third Special Session of the Committee on Agriculture 28–29 September 2000. 6 October 2000. G/AG/NG/W/51 – Hungary. Third Special Session of the Committee on Agriculture 28–29 September 2000. 16 October 2000. G/AG/NG/W/52 – Mauritius. Third Special Session of the Committee on Agriculture 28–29 September 2000. 10 October 2000. G/AG/NG/W/53 – Bulgaria, the Czech Republic, Estonia, Latvia, Hungary, the Slovak Republic and Slovenia. Third Special Session of the Committee on Agriculture 28–29 September 2000. 16 October 2000. AG/NG/W/54 – Argentina, Australia, Bolivia, Brazil, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay. Cairns Group* Negotiating Proposal. Market Access. 10 November 2000. G/AG/NG/W/55 – ASEAN. Special and differential treatment for developing countries. 10 November 2000. G/AG/NG/W/56 – Albania, Bulgaria, Croatia, the Czech Republic, Georgia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Mongolia, Slovak Republic and Slovenia. Domestic Support – Additional Flexibility For Transition Economies. 14 November 2000. G/AG/NG/W/57 – Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Kyrgyz Republic, Latvia, Slovak Republic, Slovenia, Croatia and Lithuania. Market Access. 14 November 2000. G/AG/NG/W/58 – United States. Proposal For Tarif F Rate Quota Reform. 14 November 2000. G/AG/NG/W/59 – Australia. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/60 – Australia. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/62 – Brazil. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/63 – Canada. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000.

*Canada’s proposal to improve market access for all agricultural and food products is set out in G/AG/NG/W/12 of 19 June 2000.


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G/AG/NG/W/65 – The Czech Republic. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/66 – European Communities. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/67 – Grenada. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/69 – Hungary. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/72 – Jamaica. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/71 – Indonesia. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/73 – Japan. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/74 – Republic Of Korea. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/75 – Mauritius. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/77 – Norway. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/79 – Asean. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/80 – Indonesia, Malaysia, The Philippines And Thailand. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/81 – Poland. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 30 November 2000. G/AG/NG/W/82 – South Africa. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/84 – Swaziland. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 28 November 2000. G/AG/NG/W/85 – Hungary. Fourth Special Session of the Committee on Agriculture 15–17 November 2000. 29 November 2000. G/AG/NG/W/88 – Argentina. Legitimate Non-Trade Concerns. 30 November 2000.


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G/AG/NG/W/88 – Argentina. Legitimate Non-Trade Concerns. 30 November 2000. G/AG/NG/W/91 – Japan. Negotiating Proposal by Japan on WTO Agricultural Negotiations. 21 December 2000. G/AG/NG/W/92 – Canada. Domestic Support. 21 December 2000. G/AG/NG/W/93 – Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay. Export Restrictions and Taxes. 21 December 2000. G/L/125 – Report by the Committee on Agriculture on the Marrakesh Ministerial Decision on Measures Concerning the Possible Negative Effects of the Refom Programme on Least-Developed and Net Food-Importing Developing Countries: Report for the Singapore Ministerial Conference adopted by the Committee on Agriculture. 24 October, 1996. WT/GC/W/342 – India. Preparations for the 1999 Ministerial Conference: Proposals regarding food security in the context of paragraph 9(a)(ii) of the Geneva Ministerial Declaration. 28 September 1999.


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Appendix: an anatomy of the AoA The Agreement on Agriculture is based on the three so-called ‘pillars’ of export competition, domestic support and market access. (Note: this formulation has been criticised by developing countries, on the grounds that it obscures the impacts of domestic support upon export competition.)

A . 1 E x p o r t c o m p e t i t i o n

E x p o r t s u b s i d i e s Export subsidies are financial incentives for production for export. Many developing countries had dismantled export subsidy regimes under structural adjustment programmes, and cannot now reintroduce these. However, during the base years for reduction calculation (1986–1990), export subsidies in the EU were at their peak. Export competition rules govern the extent to which exports can be subsidised; determined both in terms of value of exports, and quantities. Export subsidies must be reduced by 36% over the period 1995–2000 (see Table A1). This is a simple average reduction, and the minimum reduction for any one commodity is 15%; this offers considerable freedom to countries to decide which subsidies to reduce. Reductions in export subsidies have increased cereal prices on the world market, and have led to a reduction in the proportion of cereal imports constituting food aid. This points to a continued need for special measures for LDCs and NFIDCs.

T a b l e A 1 S u m m a r y o f e x p o r t s u b s i d y c o m m i t m e n t s u n d e r t h e A o A 366 Developed Countries

Developing countries LDCs

Export subsidies to be reduced to a level 36% below the base period (1986–1990), over the six year implementation period

Export subsidies to be reduced to a level 24% below the base period (1986–1990), over the 10 year implementation period

No reductions required

Quantity of subsidised exports to be reduced by 21% over the six year implementation period

Quantity of subsidised exports to be reduced by 14% over the 10 year implementation period

No reductions required

The AoA does not currently cover a range of other export-related government policies, such as export credits, food aid donations employed as a commercial and production-related (rather than development) mechanism, and state trading enterprises.

366 AoA, Articles 9 and 10, and ‘A Summary of the Final Act of the Uruguay Round’ <http://www.wto.org/english/docs_e/legal_e/ursum_e.htm>.


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A . 2 D o m e s t i c s u p p o r t Domestic support refers to non-border measures which nonetheless influence the price at which domestic suppliers compete with imports, and which provide indirect support on exports.

T h e A m b e r B o x Amber Box support includes price support, payments specifically related to production, and input subsidies. This support is expressed as total aggregate measurement of support (total AMS), and has the most significant impact on trade. Reductions are detailed in Table A2 below. Blue Box payments (under production-limiting schemes) were included in the calculation of the AMS, although they do not entail reduction commitments. This boosted the value of domestic support in the base period used to calculate reduction commitments, even though Blue Box payments are exempt from such reductions367. Price support involves government intervention buying in the agricultural sector in order to raise internal prices. This requires less tax revenue than direct payments to maintain an equivalent level of farm support. Further reductions and elimination of price support will mostly affect the EU because price support still figures importantly in the EU’s CAP. Article 6 of the AoA stipulates a de minimis percentage, exempting from reduction any product-specific support ‘where such support does not exceed 5% of that member’s total value of production of a basic agricultural product during the relevant year’ and ‘non-product-specific domestic support where such support does not exceed 5% of the value of that member’s total agricultural production.’ For developing countries, this de minimis percentage is 10%. Most developing countries either use levels of AMS (aggregate measure of support, under the Amber Box) well below their permited de minimis limit (10% of the value of production), or provide some domestic support under the Green Box. Of the countries surveyed by an FAO study, only Thailand estimated its AMS at 60–80% of permitted levels; other countries estimated this as being far lower368. Some domestic support measures are exempt from these reductions. Such measures are set out in both Article 6 and Annex 2 of the Agreement. Under Article 6, developing countries need not include investment subsidies available to agriculture, or agricultural input subsidies generally available to low-income or resource-poor producers in calculating current total AMS.

T h e B l u e B o x Article 6 also stipulates exemptions for direct payments under production-limiting programmes, the so-called Blue Box. This was introduced in the final stages of the negotiation of the AoA, following the Blair House agreement. Although linked to factors of production, these payments are not directly linked to price or volume of output.

367 G/AG/NG/W/39. 368 FAO (2000).


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Direct payments under production-limiting programmes are not subject to the commitment to reduce domestic support where these ‘are based on fixed areas and yields, or such payments are made on 85% or less of the base level of production, or livestock payments are made on a fixed number of head.’ Such payments may be excluded from calculation of a member’s current total AMS369. EU direct payments to the arable and livestock sectors fall into this category.

T h e G r e e n B o x Further exemptions from reduction commitments are listed in Annex 2 of the AoA, comprising the so-called Green Box. These exemptions, which are deemed to have ‘no, or at most minimal, trade-distorting effects or effects on production’ can be increased without limitation under the AoA. Such payments include inter alia, support for public stockholding for food security purposes, domestic food aid, direct payments to producers where this is provided as decoupled income support, contributions to income insurance schemes, natural disaster relief, payments made under environmental programmes and retirement of producers or ‘resource retirement’ (removal of land from production).

T a b l e A 2 S u m m a r y o f d o m e s t i c s u p p o r t c o m m i t m e n t s u n d e r t h e A o A 370 Developed Countries


20% reduction in Total AMS over the implementation period (six years, commencing 1995), and relative to the base period 1986–88

13.3% reduction in Total AMS over the implementation period (under Article 15, this is 10 years for developing countries, commencing 1995)

No obligatory reduction, under Special and Differential Treatment (Article 15)

de minimis levels of support can be maintained, up to 5% of the value of production of individual products or, in the case of non-product-specific support, the value of total agricultural production.

de minimis levels of support can be maintained, up to 10% of the value of production of individual products or, in the case of non-product-specific support, the value of total agricultural production.

Excluded from commitments, under Article 15

A . 3 M a r k e t a c c e s s Member countries have a ‘schedule’ of tariff concessions, specifying the maximum tariff that can be applied on imports (see Table A3). Under the market access provisions of the AoA; ‘members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties, except as provided for in Article 5 and Annex 5.’ Such prohibited measures include, among others, quantitative import restrictions, variable import levies, and minimum import prices.

369 The AMS is the ‘annual level of support, expressed in monetary terms, provided for an agricultural product in favour of the producers of the basic agricultural product or non-product-specific support provided in favour of agricultural producers in general, other than support provided under programmes that qulaify as exempt from reduction...’ (AoA, Article 1). 370 AoA, Article 6, ‘Domestic Support Commitments’, and ‘A Summary of the Final Act of the Uruguay Round’ See <http://www.wto.org/english/docs_e/legal_e/ursum_e.htm>.


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Under ‘Special Treatment’, Japan, Korea, the Philippines and Israel were permitted to maintain non-tariff border measures on certain products (rice in the case of the former three) during the period of tariff reductions.


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T a b l e A 3 S u m m a r y o f m a r k e t a c c e s s r e s t r i c t i o n s u n d e r t h e A o A 371 Developed Countries


Conversion of all non-tariff barriers into simple tariffs (tariffication)

Conversion of all non-tariff barriers into simple tariffs (tariffication)

All tariffs bound (no increases)

All tariffs bound (no increases) All tariffs bound, but no requirements for tariff reductions

36% reduction in import tariffs (across board) over a six year period

24% reduction in import tariffs (across board) over a 10 year period

Minimum 15% tariff reduction for any product

Minimum 10% tariff reduction for any product

Tariff quota commitments stipulate minimum access opportunities at 3% of base-period consumption, increasing to 5% over 6 years

Tariff quota commitments stipulate minimum access opportunities at 3% of base-period consumption, increasing to 5% over 10 years

A . 4 S p e c i a l s a f e g u a r d p r o v i s i o n s Under the SSG provisions, any member may levy additional duty on the import of an agricultural product, if ‘the volume of imports of that product entering the customs territory of the member granting the concession during any year exceeds a trigger level’, ‘or, but not concurrently, the price at which imports of that product may enter the customs territory of the member... falls below a trigger price equal to the average 1986–1988 reference price for the product concerned’ [emphasis added]. Such additional duties can only be levied on an agricultural product ‘in respect of which measures referred to in Paragraph 2 of Article 4 of this Agreement have been converted into an ordinary customs duty...’372. In fact, the right to make use of the SSG provisions, which protects domestic markets from sudden increases in import volumes, or a drop in world price, has been reserved by just 38 countries.

A . 5 D u e r e s t r a i n t Under Article 13 of the AoA, during the implementation period, ‘domestic support measures that conform fully to the provisions of Annex 2...[the Green Box] shall be non-actionable subsidies for purposes of countervailing duties...’ or other subsidy action. Furthermore, ‘domestic support measures that conform fully to the provisions of Article 6...including direct payments that conform to the requirements of Paragraph 5 [blue box]

371 Derived from WTO explanation of market access <www.wto.org>. 372 Paragraph 2 of Article 4 prohibits the maintainence or reversion to measures which have been required to be converted into ordinary customs duties. Such ordinary customs duties include ‘quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through state-traded enterprises, voluntary export constraints, and similar border measures other than ordinary customs duties...’


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thereof ...shall be exempt from the imposition of countervailing duties...’. This so-called peace clause remains in effect for a period of nine years; that is, until the end of 2003. If the peace clause was removed, or expired, members would be able to adopt countervailing measures under the 1994 GATT and the Agreement on Subsidies and Countervailing Measures.

A . 6 S p e c i a l a n d d i f f e r e n t i a l t r e a t m e n t Under Article 15 of the AoA, developing countries ‘shall have the flexibility to implement reduction commitments over a period of up to 10 years. LDC members shall not be required to undertake reduction commitments’. These concessions are outlined under each of the above sections. They have been criticised for being indiscriminate (failing to differentiate between the differing needs of many developing countries), arbitrary, and insufficient to provide developing countries the latitude to guarantee food security373. Obligations have also been placed upon developed countries, in recognition of the fact that the AoA may lead to higher food import prices for some LDC and NFIDC trading partners. These were agreed under the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food-Importing Developing Countries (see Box 9 p75). This agreement has been criticised for being ‘vague on timing, criteria and mechanisms’, making legal enforcement difficult374.

373 Phillips (2000). 374 Action Aid (2000).

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