WTOWTOAGREEMENT AGREEMENT ON ON AGRICULTUREAGRICULTURE

Rajan Sudesh Ratna

ProfessorCentre for WTO StudiesDepartment of CommerceIndian Institute of Foreign Trade

rsratna@nic.in

GATTGATT 1947 - THE ORIGIN1947 - THE ORIGIN Established through negotiation under the UN

Conference on Trade and Employment as the “third” of the Bretton Woods “institutions” for conduct of international relations

General Agreement on Tariffs and Trade, 1947 Entered into force: 1 January 1948 Terminated: 31 December 1995, but

substance lives on as GATT 1994

“Provisional” set of rules, since Havana Charter for the Internnational Trade Organisation never entered into force

“Original” 23 contracting parties, including India, agreed on substantial tariff reductions

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Year Place/ name Subjects covered Countries

1947 Geneva Tariffs 23

1949 Annecy Tariffs 13

1951 Torquay Tariffs 38

1956 Geneva Tariffs 26

1960–1961 Geneva (Dillon Round)

Tariffs 26

1964–1967 Geneva (Kennedy Round)

Tariffs and anti-dumping measures

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1973–1979 Geneva (Tokyo Round)

Tariffs, non-tariff measures, “framework” agreements

102

1986–1994 Geneva (Uruguay Round)

Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc

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The 15 original Uruguay Round subjectsTariffsNon-tariff barriersNatural resource productsTextiles and clothingAgricultureTropical productsGATT articlesTokyo Round codesAnti-dumpingSubsidiesIntellectual propertyInvestment measuresDispute settlementThe GATT systemServices

Sep 86 Punta del Este: launchDec 88 Montreal: ministerial mid-term reviewApr 89 Geneva: mid-term review completedDec 90 Brussels: “closing” ministerial meeting ends in deadlockDec 91 Geneva: first draft of Final Act completedNov 92 Washington: US and EC achieve “Blair House” breakthrough on agricultureJul 93 Tokyo: Quad achieve market access breakthrough at G7 summitDec 93 Geneva: most negotiations end (some market access talks remain)Apr 94 Marrakesh: agreements signedJan 95 Geneva: WTO created, agreements take effect

AGRICULTUREAGRICULTURE

The original GATT did apply to agricultural trade, but it contained loopholes. For example, it allowed countries to use some non-tariff measures such as import quotas, and to subsidize. Agricultural trade became highly distorted, especially with the use of export subsidies which would not normally have been allowed for industrial products. The Uruguay Round produced the first multilateral agreement dedicated to the sector.

The new rules and commitments apply to: market access — various trade restrictions

confronting imports domestic support — subsidies and other

programmes, including those that raise or guarantee farm gate prices and farmers’ incomes

export subsidies and other methods used to make exports artificially competitive.

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Continuation of the Reform Process Recognizing that the long-term objective of

substantial progressive reductions in support and protection resulting in fundamental reform is an ongoing process, Members agree that negotiations for continuing the process will be initiated one year before the end of the implementation period, taking into account:(a)  the experience to that date from implementing the

reduction commitments;(b)  the effects of the reduction commitments on world

trade in agriculture;(c)   non-trade concerns, special and

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

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

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MARKET ACCESS MARKET ACCESS Market access to be governed by a ‘tariffs

only’ regime. Remove non-tariff barriers – through

tariffication process. Reduction in tariffs:

Simple average of 36% over 6 years for developed countries; and

24% over 10 years for developing countries. India’s binding:

100% for primary products 150% for processed products 300% for edible oils Few items have lower bindings (on some 119

tariff lines).

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EXPORT SUBSIDIESEXPORT SUBSIDIES

Subsidies in general are identified by “boxes” which are given the colours of traffic lights: Green – permitted Amber – slow down i.e. to be reduced Red – forbidden or prohibited.

Though GATT developed rules for subsidies on industrial goods, it had failed to bring the discipline to subsidies granted by governments to the agriculture sector.

AoA for the first time brought this discipline. No Red Box in agriculture. Developed countries to reduce in 6 years, the base

period (1986-90) volume of subsidies by 21% and the corresponding budgetary outlays for export subsidies by 36%. For developing countries these are 14% in volume terms and 24% in budgetary outlays over a period of 10 years.

Developing countries allowed to provide certain subsidies like subsidising of export marketing costs, internal and international transport and freight charges etc.

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DOMESTIC SUPPORTDOMESTIC SUPPORT Meant to identify

acceptable measures of support to farmers, and curtailing unacceptable trade distorting support to

farmers. Categories:

Support with no or minimal distortive effect on trade ( Green Box and Blue Box), and

Trade distorting support (Amber Box) – measured in terms of “Total Aggregate Measurement of Support” (AMS): Expressed as a percentage of the total value of agriculture

output and includes both product specific and non-product specific support (calculated by using product – by – product basis by taking the difference between average external reference price for a product and its applied administered price multiplied by the quantity of production. Non-product specific domestic subsidies are further added).

Reduction by 20% in 6 years and 13.33% in 10 years by developed and developing countries respectively, taking 1986-1988 as a base period.

Under the de minimis provision the Amber Box supports upto 10% of the total agricultural produce in developing countries and 5% in developed countries are allowed. AMS within this limit is not subject to any reduction commitment.

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BOXESBOXES

BLUE BOX (para 5 of Article 6 of AoA): Amber box with conditions Any support that would normally be in Amber Box, is

placed in Blue Box if the support also requires farmers to limit production.

No limits prescribed on Blue Box spending.GREEN BOX (Annex 2 of AoA): Subsidies that do not distort trade, or at most cause

minimal distortion. Have to be government funded (not by charging

consumers higher prices) and must not involve price support.

Green Box subsidies are allowed without limits, subject to the conditions prescribed in Annex 2.

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RESULTSRESULTS

Uruguay Round did not bring about trade liberalisation in agriculture to the desired extent.

No significant reduction in domestic support and export subsidies done by developed countries.

Non-tariff barriers were raised with stricter and new SPS and TBT measures.

Anticipated increase in exports of agriculture products from developing countries was not realised.

Market access to efficient producers were denied. Developed countries started shifting their Blue

Box measures to Green Box and also restructured their policies/programmes to comply with their reduction commitments without making any effective reductions.

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13. We recognize the work already undertaken in the negotiations initiated in early 2000 under Article 20 of the Agreement on Agriculture, including the large number of negotiating proposals submitted on behalf of a total of 121 members. We recall the long-term objective referred to in the Agreement to establish a fair and market-oriented trading system through a programme of fundamental reform encompassing strengthened rules and specific commitments on support and protection in order to correct and prevent restrictions and distortions in world agricultural markets. We reconfirm our commitment to this programme. Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We take note of the non-trade concerns reflected in the negotiating proposals submitted by Members and confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture.

14. Modalities for the further commitments, including provisions for special and differential treatment, shall be established no later than 31 March 2003. Participants shall submit their comprehensive draft Schedules based on these modalities no later than the date of the Fifth Session of the Ministerial Conference. The negotiations, including with respect to rules and disciplines and related legal texts, shall be concluded as part and at the date of conclusion of the negotiating agenda as a whole.

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CONTENT OF AGRICULTURE CONTENT OF AGRICULTURE NEGOTIATIONSNEGOTIATIONS

Three basic pillars: market access: substantial reductions export competition: reductions of, with

a view to phasing out, all forms of these (in the 1 August 2004 “framework” members agreed to eliminate export subsidies by a date to be negotiated)

domestic support: substantial reductions for supports that distort trade (in the 1 August 2004 “framework”, developed countries pledged to slash trade-distorting domestic subsidies by 20% from the first day any Doha Agenda agreement is implemented.

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COMPONENTS OF MARKET COMPONENTS OF MARKET ACCESSACCESS

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• Tariff cuts for developed and developing countries

• Sensitive Products

• Tariff capping

• Tariff simplification

• Special Products (SPs)

• Special Safeguard Mechanism (SSM)

DOMESTIC SUPPORT: KEY COMPONENTSDOMESTIC SUPPORT: KEY COMPONENTS

Cuts in Overall Trade-distorting Domestic Support (Amber + de minimis + Blue Box)

Cuts in Aggregate Measure of Support (AMS)

Product-Specific ceilings

Blue Box and associated disciplines

Green Box

Cotton

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EXPORT COMPETITION: KEY COMPONENTSEXPORT COMPETITION: KEY COMPONENTS

Phase out of export subsidies

Food Aid and commercial displacement

State trading enterprises

Export credits and guarantees

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POST DOHAPOST DOHA Fifth Ministerial Conference in Cancún, Mexico, 10–

14 September 2003. The conference ended without consensus.

Ten months later, the deadlock was broken in Geneva when the General Council agreed on the “July package” in the early hours of 1 August 2004, which kicked off negotiations in trade facilitation but not the three other Singapore issues. The delay meant the 1 January 2005 deadline for finishing the talks could not be met.

In the Sixth Ministerial Conference in Hong Kong in December 2005, the Ministers resolved to complete the negotiations in 2006. In pursuance of this objective, they further resolved to establish modalities in agriculture and NAMA no later than 30 April 2006 and to submit comprehensive draft schedules based on these modalities no later than 31 July 2006. In respect of Services, they agreed that Requests may be submitted by 28 February 2006; a second round of Revised Offers by 31July 2006; and Final Draft Schedules by October 31, 2006. The April and July 2006 deadlines were missed because of lack of convergence on the major issues in agriculture and NAMA.

Several mini - Ministerial level meetings were held. Next mini Ministerial is being held on 21st July 2008 in Geneva.

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FURTHER DEVEOPMENTSFURTHER DEVEOPMENTS Agriculture – Chair: Crawford

Falconer, New Zealand NAMA – Chair: Don Stephenson Draft modalities paper issued on 17th

July 2007. Draft blueprints issued – 8th February

2008. Revised – 19th May 2008. Further revised papers – 10th July

2008 ( Still has 15 + 2 square brackets).

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No change from May 2008 proposals.

(1) OTDS: US to cut to between $13-16.4 billion ( size of cut 66-73%) Its present OTDS is below US $10 billion. EU to reduce to €16.5-27.6 billion (size of cut 75-85%). For US $ equal or less than 10 billion, the size of cuts would be 50-60%. Reduction 6 cuts in 5 years for developed countries & developing countries will do 2/3rd of the cuts - 9 cuts in 8 years.

 (2) AMS: EC to cut by 70% to €20.15 billion; US to cut by 60% to $7.6 billion.

(3) Product specific: AMS caps: Base period for all countries except US to be 1995-2000; special dispensation for the US on the base period.

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Proposals on Proposals on domestic supportdomestic support

DOMESTIC SUPPORT PROPOSALSDOMESTIC SUPPORT PROPOSALS

Blue Box - less trade-distorting than Amber Box subsidies

Blue Box cap at 2.5% of value of agricultural production in the base period [1995-2000]

Product –specific support for a crop not to exceed average value of support during 1995-2000

Several concessions for developed countries, both explicit and implicit

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DOMESTIC SUPPORT PROPOSALSDOMESTIC SUPPORT PROPOSALS

Green Box - exempt from reduction commitments

Greater flexibility built in the May text in eligibility conditions (implicitly for developed countries)

Cotton Formula proposed for reduction in AMS for cotton

Rc = Rg + (100 – Rg) * 1003 * Rg

 Rc = Specific reduction applicable to cotton

as a percentageRg = General reduction in AMS as a

percentage 

This shall be applied to the base value of support calculated as the arithmetic average of the amounts notified by Members for cotton in supporting tables DS:4 from 1995 to 2000.

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MARKET ACCESS PROPOSALS MARKET ACCESS PROPOSALS

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Band-wise cuts by Developed Countries

Band (Bound rates in %) Reduction(%)

0-20 50

Greater than 20 ≤ 50 57

Greater than 50≤75 64

75+ [(66) – (73)]

Band-wise cuts by Developing Countries (2/3rds of developed country cuts in each band)

Band (Bound rates in %) Reduction(%)

0-30 33.33

Greater than 30≤80 38

Greater than 80 ≤130 42.66

130+ [(44) – (48.66)]

MARKET ACCESS PROPOSALS MARKET ACCESS PROPOSALS

Minimum average cut for developed countries – 54%.

Maximum overall average cut for the developing countries is 36% .

If the above formula for the developing countries imply an overall cut of more than 36%, flexibility to apply lesser reductions in proportionate manner across the board.

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INDIA’S AGRICULTURAL TARIFF INDIA’S AGRICULTURAL TARIFF PROFILEPROFILEBands as in Draft

Modalities (Bound rates in %)

Number of Tariff Lines

% of total agriculture tariff lines

0-30 26 4

30-80 101 14

80-130 339 47

130+ 249 35

TOTAL 715 100

• Average Bound Tariff = 114%

• Average Applied Tariff = 37%

• 2/3rds band-wise proportionality implies average tariff cuts of 41-44% for India

• However, the 36% cap provides a cushion

SPECIAL PRODUCTS (SPS)SPECIAL PRODUCTS (SPS)

Criteria: Food Security, Livelihood Security and Rural Development needs

Core Elements: Self-designation of “an appropriate number” of SPs on the basis of indicators framed to satisfy one of the 3 criteria

G-33 demanded that the treatment should be more favorable than developing countries. 20% of total agriculture tariff lines must be designated as SPs & 8% must be exempt from tariff cuts.

May 2008 proposal: Maximum of 20% & minimum of 8% as SP; no cuts on 0-40% of total number of SPs; on balance 60% overall cut of 15% with minimum 12% and maximum 20% cuts.

July 2008: Developed countries – [(4) – (6)]% of total agriculture

TLs. Developing countries – 10-18%. Upto 6% of/no lines may

have no cuts. Overall cut , in any case be 10-14%.

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SPECIAL SAFEGUARD MECHANISM (SSM)SPECIAL SAFEGUARD MECHANISM (SSM)

Rationale: Protection against import surges (leading to price dips) for poor and vulnerable farmers of developing countries

July proposals: No a priori product limitations – can be invoked for all

TLs, in principle.

The condition to use on 3-8 products in 12 months time period (specified in May text) - dropped.

two independent triggers for applying SSM: price based and volume based. But no simultaneous application of both. Can’t use if Article XIX of GATT or WTO Safeguard is in place on the same product.

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SSM PROPOSAL CONTD.SSM PROPOSAL CONTD.

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Volume trigger Remedy (Maximum limit of additional duty (Remedy)

110-115 25% of Doha Round Bound or 25% AV whichever is higher

Greater than 115 - 135

40% of Doha Round Bound or 40% AV whichever is higher

Greater than 135 50% of Doha Round Bound or 50% AV whichever is higher

For volume based SSM – rolling average of imports in preceding 3 year period to be taken.

Price Trigger 15% fall in prices (reduced from 30% proposed in May

2008 proposal) below the average of the most preceding 3 year period for which data is available.

Additional duty shall not exceed 85% of the difference between the import price of the shipment concerned and the trigger price.

Following in square brackets:“[For developing country Members other than those referred to in the preceding paragraph, they may apply the maximum remedy provided for above even if this would otherwise entail breach of a pre-Doha bound tariff provided that (a) the maximum increase over the pre-Doha bound tariffs would be no more than 15 ad valorem percentage points or 15 per cent of the current bound tariff, whichever is the higher; (b) the maximum number of products for which this provision would be invoked would be no more than 2-6 in any given period; and (c) this would not be permissible for two consecutive periods. All other provisions would be applicable.] “

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EXPORT COMPETITIONEXPORT COMPETITION

Developed countries to eliminate export subsidies by end 2013.

Subsidies to be halved by end 2010 and remaining commitments eliminated in equal installments by end 2013.

As a flexibility, the developing countries to continue to have right for some export subsidies up to 5 years after the end date for elimination of all subsidies.

Disciplines to Export credits, State Trading etc. prescribed in the proposal ( Annexes – J,K & L to the main document).

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SCENARIOSCENARIO

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Mr. Pascal Lamy, Director General, reported “that the main blockage is on the Agriculture legs [domestic support and market access] of the triangle of issues” that were being sought to be addressed, and that “it remained clear that the gaps remain too wide”.

The main reason of the deadlock is lack of consensus in Agriculture. The most crucial country is USA.

THANK THANK YOUYOU

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