The Ongoing Negotiations on Agriculture: Some Observations

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The Ongoing Negotiations on Agriculture Some
Observations

• Parthapratim Pal
• TERI

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Difference in Role of Agriculture in Developed
and Developing Countries
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The Objective of AoA

• Given these problems, it was felt before the
  Uruguay Round that there was 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,
  imbalance and instability in world agricultural
  markets.
• Ministerial Declaration launching the Uruguay
  Round.

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With these objectives, the AoA intended to bring
agricultural trade under the disciplines of a
multilateral trading system by

• Reforming trade in agricultural sector.
• Making policies more market-oriented.
• Reducing the distortion present in the
  agricultural trade sector by substantial and
  progressive reductions in agricultural support
  and protection.
• The focus of the Agreement are on three broad
  areas. They are
• Market Access
• Domestic Subsidies
• Export Subsidies

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Experience with UR AoAAgriculture has remained a
distorted sector

• Explicit non-tariff barriers were removed in most
  cases.
• However, tariff remained very high, World average
  agricultural tariff is around 60, while average
  industrial tariff is less than 8.
• Also tariff peaks and tariff escalation is
  widespread in agriculture.
• Increasingly other WTO measures like SPS and
  Anti-dumping are used as protectionist tools by
  many countries.
• Most importantly, there has been no meaningful
  reduction of subsidies
• Price volatility in agriculture has not declined
  for most crops

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Share of Developing Countries in World
Agricultural Exports by Region,
1990-2003(Percentage)
Source WTO Secretariat, TN/AG/S/19
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Movement of Price Indices During the WTO
Implementation Period
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Volatility of International Commodity Prices
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Some Interesting Figures from FAO
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Food Security Map of India
Source (MSRF)
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Special Products

• Special Products (SPs) can be defined as
  agricultural products of particular importance
  to farming communities in developing countries
  for reasons of food security, livelihood security
  and rural development
• SPs will attract lower level of tariff reduction
  commitment than other agricultural products.
• Special Products is a component of WTOs Special
  Differential (SD) provision
• Special Products should not be confused with
  Sensitive Products

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Why do we need Special Products?

• Role of Agriculture in developed and developing
  countries are different
• An open trade regime may threaten food and
  livelihood security because
• Secular decline in commodity prices
• Increased Volatility
• It was realized during the Uruguay Round that
  free trade regime may not contribute to food
  security and self-sufficiency in food is
  important.
• Supply uncertainty,
• Thin market Argument
• Foreign exchange constraint
• Political economy of food dependence

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Special Safeguard Mechanisms

• Special Safeguard Mechanisms or SSMs are a set of
  provisions through which a WTO Member country can
  temporarily impose higher than bound tariff rate
  on the import of a particular product if there is
  a surge of import or a sudden dip in import price
  of that product.
• A similar provision called the Special
  Safeguards (SSG) was available in the Uruguay
  Round AoA but only a handful of WTO Members (39
  out of 149) were given the right to use it.
• The new SSM provisions will be available to all
  developing and least developed country Members of
  WTO.

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Why SSMs?

• To tackle the international price volatility of
  agricultural commodities-surges in imports can
  threaten (otherwise viable) domestic production
  base
• In a tariff only regime, international price
  volatility gets directly transmitted to domestic
  markets
• Agricultural Market Access Negotiations will lead
  to lowering of the tariff overhang (the gap
  between bound and applied tariff rates). No other
  form of safeguards available.

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Some Questions Remain

• Country Eligibility?
• Product Eligibility?
• Linkage with Special Products, Sensitive
  Products?
• Proof of Injury Requirement?
• Should SSM be only Tariff based or can QRs be
  temporarily imposed?
• Possible loopholes and need for additional
  domestic regulations

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SP and SSM Final Thoughts

• Both Special Products (SP) and Special Safeguard
  Mechanism (SSM) are useful defensive mechanisms.
  However, a lot will depend on the details.
• Developing countries must ensure that developed
  countries do not use these concessions to lower
  the level of ambition of agricultural
  negotiations
• It must be kept in mind that these instruments
  cannot be used against imports from Regional
  trading partners.

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Key dates Mentioned in the Doha declaration 

• Formulas and other modalities for countries
  commitments by 31 March 2003
• Countries comprehensive draft commitments by
  5th Ministerial Conference, 10-14 September 2003
  (in Cancún, Mexico)
• Stock taking 5th Ministerial Conference,
  10-14 September 2003 (in Cancún, Mexico)
• Deadline by 1 January 2005, part of single
  undertaking.

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The Actual Progress

• Article 20 Negotiations
• The Doha Development Round
• In Search for the still elusive MODALITIES Text
• Original deadline was 31st March 2003 - Missed
• The Harbinsons Text (March 2003) -Rejected
• The Derbez Text (September 2003) - Rejected
• The July Framework- July 2004 BREAKTHROUGH
• July Approximation (July 2005) - Failure
• Hong Kong December 2005 Limited Progress
• April 2006- New Deadline for Modalities - Missed

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Final Words

• Negotiations on agriculture moving very slowly,
  the HK Ministerial is a Modest Success Small
  Defensive Gains and No Major Losses. But the hard
  bargaining begins now
• Developing Countries must link tariff reduction
  to subsidy reduction
• The G20 Initiative is a Key Movement. It is
  important that they stand together
• Two Key Questions
• Should we be defensive or aggressive?
• Indias negotiating strategy- Running with the
  hare and hunting with the hounds?
• Finally, bigger threat to Indian agriculture
  seems to be coming from Regional trading
  Agreements rather than WTO Agreement on
  Agriculture.