1 Issues related to the Accession to the WTO Agriculture Syria, 26. – 28. November 2008 United Nations Conference on Trade and Development Ralf Peters UNCTAD, Geneva

2 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

3 1. Accession Negotiations

4 ISSUES FOR AGRICULTURAL NEGOTIATIONS Market access Tariffs Bind & evtl. reduce Non-tariff barriers Eliminate Tariff rate quotas ? Safeguard ? Agri policies Farm subsidies (Amber) Bind & Reduce (Blue) ? (Green) Provide information Export subsidies Bind & eliminate or reduce Other trade policies State trading enterprises Article XVII of the GATT Taxation regime Article III of the GATT Product quality standard Agreements on SPS, TBT Accession negotiations

5 Multilateral Track Working Party (WP) meetings (negotiations on rules) 1.Memorandum of Trade Regime 2.Questions & replies 3.Working Party Report Negotiating Process Accession negotiations

6 Tariff Schedule Saudi Arabia

7 Market Access: Current Tariffs Source: UNCTAD TRAINS and UNCTAD calculations based on WTO CTS Specific Problems: Tariff escalation Tariff peaks

8 MARKET ACCESS COMMITMENTS Agriculture Accession negotiations

9 Accession negotiations

10 CHINACHINESE TAIPEISaudi Arabia Entry date Dec 2001Jan 2002Dec 2005 Tariffs Average 16 %13 %12 % Max 65 % (cereal)500 % (deer velvet) 340 % (chicken offal) 200 % (tobacco) Specific tariffs Mostly in 0 – 25 % % TRQs Wheat, corn, rice, soybean oil, palm oil, rapeseed oil, sugar, wool, cotton Pork, chicken, milk, peanuts, red bean, garlic, sugar, fresh fruits, sugar, dried mashroom None e.g Rice In-quota:1 % MFN: 65 % Quantity:9,636,000 mt Staging:4 years Sugar In-quota:12.5 % MFN: 143 % Quantity:205,000 mt Staging:4 years Accession negotiations

11 CHINACHINESE TAIPEISaudi Arabia SSG None77 tariff linesNone Pork, poultry, milk, garlic, red beans, fresh fruits (pears, persimmons), peanuts, sugar Special treatment None Rice: import prohibition Quantity:205,000 mt Some alcohol, pork: import prohibited Accession negotiations

12 SUPPORT TO PRODUCERS % of the total farm receipt Source: OCDE, Politiques agricoles des pays de l’OCDE, 2001

13 Support to Producers: WTO definition Notified Domestic Support in 1995 and 2000 US$ mill. Amber box (AMS) de minimis (AMBER)Blue box Green boxTotal '5704'01935'907129'011290' '7279'31321'979102'466201'486 Source: UNCTAD calculation based on ERS / USDA calculation from WTO notifications

14 * Number of included countries changes Source: USDA from WTO notifications

15 Domestic Support COMMITMENTS Accession negotiations

16 2. Doha Round Negotiations

17 Doha: Negotiating Mandate Single undertaking –Impl. Issues and SDT review –Agriculture –Services Market access (reduction of trade barriers) –NAMA –Rules (AD, SCM & RTAs) –TRIPS –Trade and Environment Singapore issues –Trade Facilitation (part of single undertaking) Non single undertaking –DSU Review AD = Anti Dumping SCM = Subsidies Countervailing Measures RTA = Regional Trade agreements TRIPS = Trade Related Interlectual Property DSU = Dispute Settlement Understanding

18 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 (2004) 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 (2005) èDraft Modalities Texts (July 2007 – July 2008) widely accepted èAgreements on many issues in July 2008; Outstanding: SSM, cotton

19 The state of play Triangle is a square EU/G10 agricultural tariffs US domestic supportDeveloping countries’ industrial tariffs Also agricultural tariffs especially flexibilities ?

20 Outline of the Negotiations on Agriculture “Three Pillars” Domestic Support Total and AMS reduction de minimis Blue box criteria Green Box Market Access Formula defensive interests offensive interests Preferences SP and SSM Export Subsidies Elimination NFIDC Food aid Special and Differential Treatment for DCs and LDCs Flexibilities for recently acceded countries Cotton initiative

21 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

22 Market Access Agriculture: Formula Tiered Formula –Linear cuts in 4 bands –Higher tariffs reduced by a higher percentage Order of magnitude proposed –Developed countries: 50 % – 70 % (min avg. 54) –Developing countries: 33 % - 47 % (max avg. 36) –SVEs: 23 % - 37 % (max avg. 24) 2/3 principle

23 Market Access Agriculture: Exceptions Sensitive products –4 per cent of tariff lines; DCs: 5.3 per cent (+1/3) –1/3 to 2/3 deviation from cuts; TRQ expansion Special Products –12 per cent of tariff lines sheltered from formula –Average cut of 11 % –“Super-specials”: 5 per cent (within the 12)

24 Draft modalities text July 2008 SSM proposal: Volume Trigger 1 st step: Import surge 2 nd step: Cross check: absolute level of imports negligible relativ to production and consumption 3 rd step: how high is the import surge ( %, %, above 135%); determines additional duty: Para 124 4th step: beyond the UR bound rate? If yes, limits: Para 133 to 136

25 SSM for import surge 115 – 135 % 57+40=97

26 SSM for import surge 115 – 135 % 10+40=50

27 Controversial: Special Agricultural Safeguard United States: Going beyond pre-Doha bound rate only if import surge above 140 per cent India, China: Going beyond pre-Doha bound rate already if import surge above 115 per cent

28 Draft July 2008: Recently acceded members additional flexibility or exempt Market Access Moderate cuts under the tiered formula by 8 ad valorem percentage points in each band Exempt their final bound tariffs at or below 10 per cent VRAMS and SLI_RAM_EIT completely exempted from cuts Overlapping commitments? Start of implementation for such tariff lines one year after the end of implementation of accession commitment Implementation period for RAMs prolonged by up to two years after the end of the developing countries’ implementation period VRAMs: Very recently acceded members (Saudi Arabia, Macedonia, Vietnam, Tonga, Ukraine); SLI_RAM_EIT: Small low income RAMs with economies in transition

29 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 Domestic Support

30 Domestic Support: Total Trade Distorting Support Three tiers: percentage cuts Applied levels affected? e.g. US new commitment US$ 14.5 bill. Applied: US$ 8 – 19 bill. EU 80 US, Japan 70 Others Developed 50 – 60 Developing* * No reduction commitment if no AMS

31 Draft July 2008: Recently acceded members additional flexibility or exempt Domestic Support OTDS and AMS cuts: VRAMs and SLI_RAM_EIT exempted; other RAMs 2/3 of cuts De minimis: VRAMS and SLI_RAM_EIT exempted; other RAMs with 5% de minimis 1/3 of cuts + five years longer implementation period For RAMs, the maximum permitted value of support shall be 5 per cent of the average total value of agricultural production in the period VRAMs: Very recently acceded members (Saudi Arabia, Macedonia, Vietnam, Tonga, Ukraine); SLI_RAM_EIT: Small low income RAMs with economies in transition

32 Cotton Four West and Central African countries put forward the cotton initiative Sub-committee on cotton –Few results Hong Kong Declaration –Progress on Export Subsidies: Elimination in 2006 –Less progress on Domestic Support: more ambitious reductions than on other products

33 Change of Cotton World Price after eliminating all distorting support Source: FAO policy brief No.1

34 3. Analysis

35 Questions Will we gain or lose from further WTO liberalisation? Export enhancement? Or flooded with imports? Tax revenues?

36 ATPSM Agricultural Trade Policy Simulation Model Static, deterministic, no stocks Tariff rate quotas, quota rents 35 commodities 160 countries plus EU25 plus RoW.

37 ATPSM Commodity Aggregation (1) Livestock Bovine meat Sheepmeat Pigmeat Poultry Milk, fresh Milk, conc. Butter Cheese Hides and skins Wheat Maize Sorghum Barley Rice Sugar raw Sugar refined Oilseeds, temperate Oilseeds, tropical Vegetable oils

38 ATPSM Commodity Aggregation (2) Pulses Roots, tubers Tomatoes Non-tropical fruits Citrus fruits Bananas Other tropical fruits Coffee green Coffee processed Cocoa beans Cocoa processed Tea Tobacco leaves Tobacco processed Rubber Cotton linters

39 Base Syrian trade Maize Sugar

40 Change in world prices

41 Doha Round: Change in welfare Syria (no policy changes in Syria)

42 Implications After WTO Doha Round conclusion: –World prices increase –Exports increase –Imports + or - –Welfare losses or gains

43 Implications (2) Countries lose because –Export subsidy removal→ ↑P –Domestic support has limited trade effects –No change in own tariffs, no allocative efficiency gains

44 Accession: Change in welfare maximum tariff 12 %

45 Limitations Have ignored sensitive/special products Tariff cuts at at HS4, not HS10 Ignore dynamic, GE effects Poor quality data, particularly for LDCs