The%20Uruguay%20Round%20Agreement%20on%20Agriculture

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The Uruguay Round Agreement on Agriculture

• Lecture 24
• Economics of Food Markets
• Alan Matthews

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Lecture objectives

• to understand the reasons for the disarray in
  agricultural trade prior to the Uruguay Round
  agreement
• to know the outcome of the UR Agreement on
  Agriculture and to be able to critically evaluate
  its impact
• to understand the implications for the EUs
  Common Agricultural Policy of the Uruguay Round
  Agreement

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Reading

• Short extract from WTO Trading into the Future
• OConnor legal analysis
• Various books and papers in the supplementary
  reading list

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From GATT to WTO

• Bretton Woods institutions intended to be
  complemented by International Trade Organisation
  stillborn in 1946
• GATT came into being as an interim arrangement
  1947
• Successive rounds of GATT negotiations to reduce
  tariffs
• culminating in the Uruguay Round which
  established the World Trade Organisation 1994

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GATT principles

• non-discrimination - countries cannot apply
  different trade barriers to different countries.
  Expressed in the principle of most favoured
  nation (MFN) treatment - the most favourable
  market access offered to any one country must be
  offered to all others (an important exception is
  free trade areas and customs unions) (Article I).
  
• national treatment - an imported product, once it
  has entered the country of import, should be
  treated as a national product (Article III)
• protection by tariffs - protection is not
  outlawed but should be provided solely by means
  of tariffs
• tariff reduction - over time attempts should be
  made to reduce tariffs through reciprocal
  concessions
• tariff bindings - any reductions would be bound
  in GATT and could only be raised against payment
  of compensation to affected parties, in order to
  promote security of trade

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Structure of the WTO Agreements

• General Agreement on Tariffs and Trade (GATT
  1994)
• Multilateral Trade Agreements, including
• Agreement on Technical Barriers to Trade
• Agreement on Agriculture
• Agreement on Sanitary and Phytosanitary Standards
• Agreement on Textiles and Clothing
• Agreements on Subsidies and Anti-Dumping
  (measures against unfair trade)
• Plurilateral Trade Agreements
• General Agreement on Trade and Services (GATS)
• Trade-Related Aspects of Intellectual Property
  Rights

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Exclusion of agriculture from the GATT

• Few agricultural tariffs bound, and agriculture
  remained outside the tariff-cutting GATT
  negotiations
• Quantitative import restrictions, banned for all
  other commodities, could be used for agricultural
  commodities, provided that domestic production of
  the commodity was subject to certain restrictions
  (Article XI on import quotas)
• 1955 US waiver
• Use of agricultural export subsidies was
  explicitly permitted, conditional on observance
  of equitable market shares, but impossible to
  define (Article XVI on export subsidies)
• Grey area measures proliferated, i.e. mechanisms
  such as variable import quotas, voluntary export
  restraints and domestic subsidies not explicitly
  covered by GATT
• No disciplines on non-tariff barriers such as
  import controls for food safety and animal and
  plant health reasons

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Background to the Uruguay Round

• World agriculture in disarray - growing US-EU
  tension on farm subsidies
• The growing costs of agricultural protectionism
• Launch of Uruguay Round 1986
• "to achieve greater liberalisation of trade in
  agriculture and bring all measures affecting
  import access and export competition under
  strengthened and more operationally effective
  GATT rules and disciplines"
• Significance of the Uruguay Round
• the most comprehensive coverage of all
  negotiating rounds to date
• included the participation of more than 100
  countries

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Players in the Uruguay Round

• The US moving away from dependent agriculture
  paradigm to a competitive agriculture paradigm,
  and see access to export markets as the
  underpinning for this
• The EU anxious to avoid escalating budget cost
  of farm support and wanting a deal as compatible
  with the CAP as possible
• Cairns Group consisting of 14 agricultural
  exporters from both the developed and developing
  world keen on liberalisation
• Other developing countries concerned about the
  cost of food imports
• Other high-income countries anxious to avoid
  liberalisation

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Tariff rate quotas

• Countries are required to maintain current levels
  of access, for each individual product, where the
  current level is based upon the volume of imports
  during the base period (1986-88).
• For commodities subject to tariffication, a
  minimum access should be established at not less
  than 3 percent of domestic consumption during the
  base period. This minimum level is to rise to 5
  percent by the year 2000 in the case of developed
  countries, and by 2004 in the case of developing
  countries.

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Other aspects of the URAA

• sanitary and phytosanitary provisions addressed
  in the SPS Agreement
• peace clause
• special and differential treatment for developing
  countries
• among developing countries, concerns that net
  food-importing countries would lose out because
  of terms of trade effects. Decision on Measures
  Concerning the Possible Negative Effects of the
  Reform Programme on Least Developed and Net Food
  Importing Developing Countries included to meet
  their concerns.
• agreement to reopen negotiations in 2000

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Achievements of the URAA

• Effectiveness of the agriculture agreement in
  cutting protection was less impressive than the
  nominal cuts suggest, because
• tariff cuts took place from base levels that were
  frequently inflated through the choice of base
  year,
• through the methods used to measure protection
  existing prior to the round (dirty
  tariffication),
• Through use of unweighted average of 36
• through the use of ceiling bindings in
  developing countries
• Uneven tariff reduction many sensitive products
  still protected by high tariffs
• Minimum access commitments counted imports under
  existing special arrangements, despite MFN
  requirement

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Achievements of the URAA

• Export subsidy commitments binding despite
  complaints of front-loading
• Domestic support disciplines limited because of
  agreement on Blue Box
• AMS discipline was established at an aggregate
  level, not on a commodity by commodity basis
• But despite the criticisms, the URAA established
  a framework for further disciplines
• The dispute settlement mechanism has been
  surprisingly effective in allowing countries to
  challenge policies of other countries

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Adjusting CAP to the URAA

• What changes were necessary to the CAP
  mechanisms?
• the implementation of tariffication
• other market access provisions
• no real effect of AMS provision
• more active management of export refund system to
  stay within subsidised export targets
• WTO disciplines were consistent with the
  MacSharry 1992 reforms

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Some specifics of CAP adaptation to WTO
disciplines

• Examples of how tariff for wheat was set
• Variable levy system retained for cereals and
  fruits and vegetables
• (Ab)use of special safeguard provision
• Removal of domestic support to Blue Box
• But export subsidy restrictions have had some
  effect