UNCTAD Virtual Institute Study Tour Course on Economics of Commodity Production and Trade Agriculture and the WTO Gene

1. United Nations Conference on Trade and Development UNCTAD Virtual Institute Study Tour Course on Economics of Commodity Production and Trade Agriculture and the WTOGeneva, February 2010 Ralf Peters UNCTAD (secondment) and ILO, Geneva

2. Many factors impact food security • Income level / poverty • Availability of arable land, rainfall • Volume of agricultural production • Structure of agricultural production • Exports of food • Imports of food • ... • Trade agreements and WTO has major impact on food security

3. “Three Pillars” Outline of the Agreement on Agriculture • Export Subsidies • Reduction • Prohibition of new subsidies • Market Access • Tariffication • Tariff reduction • Minimum access • Special Safeguard • Domestic Support • AMS reduction • Green Box • de minimis • Special and Differential (S&D) Treatment for DCs and LDCs • Related Agreements, e.g. Marrakesh Decision • Establishment of a Committee on Agriculture • Continuation of the reform process

4. Achievements of the Uruguay Round A rules-based system that largely reduces arbitrary actions: NTBs tariffied and reduced + minimum access to ensure trade takes place Commitment to reduce some types of distortive domestic support Commitment to reduce export subsidies Recognised need for SDT for dev’g countries (time, size of cuts, special exemptions, trade-related TA, etc.) Also, new disciplines under SPS Agreement, to minimize discriminatory trade effects of SPS

5. Problems created by UR “Legitimatised” remaining distortions:domestic support and export subsidies (uneven playing field) Tariff peaks and tariff escalation Effectively, little additional market access Room for circumventing commitments Less flexibility to design its own agricultural policy Several countries consider agriculture not just another sector of the economy Others wish to see agr fully integrated into the MTS

6. European Union: bound and applied tariff rates Note: New AVEs (Paris), Five products with tariffs above 500% not plotted. Olive oil, refined Sugar, raw Tea

7. Developing countries: bound and applied tariff rates Like Tanzania: Bound 120% Bound at ceiling level Tariffs in per cent Lower applied rates Number of tariff lines

8. Developing countries: bound and applied tariff rates Tariffs in per cent Number of tariff lines

9. Measures for reduction commitments OTDS • Product specific support • Market price support • Payment on output • Input subsidies • Investment subsidies • Non-product specific support Amber Box • Research • Training • Extension • Infrastructure • Pest & disease control • Public stockholding • Domestic food aid • Decoupled income support • Support to structural adjustment • etc. Green Box Amber Box Development Investment subsidies and input subsidies, provided by DC’s to resource-poor low-income farmers • Blue Box • Set aside • Quota De minimis Exempted measures

10. State of Play: Doha Negotiations on Agriculture … have been a difficult & complex process: • Agriculture is a politically sensitive sector in both developed & developing countries. • Countries (developed or developing) have widely divergent views on the extent of agricultural liberalization. • Deadlines to agree on “modalities” were missed. • The Framework Agreement brought the negotiation back on track, but the “modalities” are still left for further negotiations • Few more details have been agreed at Hong Kong Ministerial. • Draft Modalities Text (July 2007, Feb. 2008, Dec. 2008) widely accepted.

11. Alliances and interests Special and differential treatment G-20 G-33 G-10 EU ACP Cuts in domestic support Cairns USA Degree of special and differential treatment “Multi- functionality” Moderate, flexible tariff cuts and flexible domestic support Substantial tariff cuts Level of ambition in market access

12. Market Access: Agriculture Flexibilities: Exempt some lines, SP & SeP Formula: line-by-line increasing cuts Special Products (SP) Products essential to achieve food security, livelihood security and rural development Sensitive Products (SeP): Selected number of tariff lines will receive flexibility in tariff cuts (but access is improved) • Level of ambition, S&D? • Exporter – importer • Dev’ed – dev’ing • Preferences Initial tariffs: Bound rates Result: Meaningful better access? Protect vulnerable farmers Start

13. Related WTO Agreements • All WTO agreements and understandings on trade in goods apply to agriculture (e.g. customs valuation, emergency safeguard measures) • Where there is a conflict: AoA prevails Trade –Related Aspects of Intellectual Property Rights (TRIPs) Agreement on Agriculture Marrakesh Decision for LDC and NFIDC Sanitary and Phytosanitary Measures (SPS) Technical Barriers to Trade (TBT)

14. Agreements on Sanitary and Phytosanitary measures and on Technical Barriers to Trade • Ensure country specific technical regulations, product standards and safe food AND at the same time ensure that strict health and safety regulations are not used as an excuse for protecting domestic producers • In 1997 developed countries imposed restrictions on fish imports from some African countries because they were considered to have inadequate hygiene standardsRegulations must be based on science • International standards, guidelines and recommendations shall be used • Higher standards are possible Objectives Example

15. Marrakesh Decision for least developed and net-food-importing developing countries • Recognised that LDC’s and NFIDC’s may experience negative effects in terms of food availablity from external sources on reasonable terms and conditions during the reform programme • Mechanisms to ensure that UR agreement does not adversly affect availablity of food-aid- Review of food aid level by Committee on Food Aid- Increase proportion of basic foodstuff provided in fully grant form- Technical and financial assistance to improve agricultural productivity and infrastructure • Export credits in favour of LDC’s and NFIDC’s • Short term difficulties: Resources from intern.finan.institutions

16. Export Restrictions are allowed: legal perspective • Article XI of GATT: General Elimination of Quantitative Restrictions shall not extend to • Export prohibitions or restrictions temporarily applied to prevent or relieve shortages of foodstuffs or other essential to the exporting contracting party • Article 12 of AoA: Disciplines on Export Prohibitions and Restrictions • Member instituting restriction shall give due consideration to the effects on importing members • Give notice to the Committee on Agriculture • AoA provision does not apply to dev’g net-importers of that foodstuff

17. Export Restrictions two-edged sword:economic perspective • Understandable Policy … • Reduces domestic prices • Provides relief for domestic consumers if world food prices are high • … can have negative consequences for domestic production … • Lowers incentive for producers to increase production • … and collectively, may worsen the situation globally • World food prices increase if many or big producers restrict their exports

18. Export Restrictions:negotiations • Mixed views • Many countries agree that some disciplines are needed to ensure supplies are available for importing countries. • What would be the level of special and differential treatment for dev’g countries or net-food importers • Current provision is weak • Draft Modalities text (Dec. 2008) • Higher notification and consultation requirements • Time limit: 12 month normally