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

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 Outline of the Agreement on Agriculture “Three Pillars” Domestic Support AMS reduction Green Box de minimis Market Access Tariffication Tariff reduction Minimum access Special Safeguard Export Subsidies Reduction Prohibition of new subsidies 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 Number of tariff lines Tariffs in per cent Bound at ceiling level Lower applied rates Like Tanzania: Bound 120%

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

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

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

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

12 Market Access: Agriculture Formula:line-by-line increasing cuts Level of ambition, S&D? Exporter – importer Dev’ed – dev’ing Preferences Flexibilities: Exempt some lines, SP & SeP 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) Initial tariffs: Bound rates Result: Meaningful better access? Protect vulnerable farmers Start

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 Agreement on Agriculture Sanitary and Phytosanitary Measures (SPS) Technical Barriers to Trade (TBT) Trade –Related Aspects of Intellectual Property Rights (TRIPs) Marrakesh Decision for LDC and NFIDC

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 standards Regulations must be based on science International standards, guidelines and recommendations shall be used Higher standards are possible Objectives Example

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