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Background Note

April 2002

Thematic File: Post-Doha Agenda
Agriculture Negotiations: Current State and Prospects


Players, Positions and Motivations

How Was the Uruguay Round Deal Implemented? Has It Had an Impact?

Moving on - What Has Changed?

From the 'Built-in Agenda' to the Doha Negotiations

Adding a 'Development Box'

Special and Differential Treatment - a Strengthened Role

'Multifunctionality' - A New Name for an Old Concept

Export Subsidies - A Broader Agenda This Time

Domestic Support - More 'Boxes' or Less

Market Access - Some Technical Issues

Where Does the Process Go Now?

I. Introduction

1. Following the Doha Ministerial Conference, in November 2001, the WTO's agricultural negotiations became an integral part of the Doha Work Programme. The negotiations, aimed at continuing the process of farm trade reform begun in the Uruguay Round, had been launched in early 2000 as part of the 'Built-in Agenda' and had already attracted a broad range of proposals. As in the case of services, the process is already relatively advanced and well understood even if the extent of potential new reform commitments - and the conditions surrounding those commitments - are far from clear. The Doha Work Programme painted in some targets but is relatively vague and, in parts, ambiguous.

II. Players, Positions and Motivations

2. The battle lines for the agricultural negotiations have barely changed from those in place at the end of the Uruguay Round. Further, the essential framework within which new reform commitments will be set looks like being that adopted for the earlier agreement, reached under the GATT.

3. The WTO members calling for the most radical reform are, as before, the highly productive and competitive producers of the Cairns Group. Led by Australia, the now 18-member [Note 1] group has, since its inception in the mid-1980s, sought an end to export subsidies - especially those in the European Communities, regarded as having the most damaging impact on world markets. The group also continues to demand major reductions in market access barriers and a further winding back of trade-distorting domestic supports paid to farmers. The Cairns Group continues to be supported, in large part, by the US. However, the US has several severely protected farm sectors - sugar, honey, peanuts and dairy products, among them - and itself provides extensive financial support to its farm communities.

4. Facing the US and the Cairns Group was, and is, principally the European Union. The target for the reformers is the European Common Agricultural Policy (CAP) - a complex system of support and protection, built up over several decades, which still serves to shield European farmers, and their income, from competition and fluctuations in world market prices. The CAP was subjected to internally agreed reform in the early 1990s, which helped remove one of the major hurdles in drawing the Uruguay Round to a close. Most recently, it has undergone further changes through the Agenda 2000 package agreed by member States in 1999, and still being implemented.

5. However, European farmers are not the only beneficiaries of financial support and protection among industrialised nations. Major targets for reform in the Uruguay Round were Japan and Korea which, in particular, protected their rice producers stringently - to the extent of permitting no imports at all except in time of emergency. They continue to be targets. So too, are Norway and Switzerland that protect and subsidise farmers in remote and mountainous country respectively, where costs are high and competitiveness low. For the most part, taxpayers and consumers in these countries have been prepared to pay a price - sometimes a very heavy price - to ensure farm communities survive. Their governments insisted, during the Uruguay Round, on the recognition by the GATT of 'non-trade concerns' in agriculture, a concept (now also referred to as 'multifunctionality' - see below) that will figure large in the negotiations mandated in the Doha Work Programme.

6. For developing countries, which were not members of the Cairns Group - only three of the group are, in fact, industrialised nations - there were two main concerns during the Uruguay Round, and these remain. The first was the need for flexibility, including the possibility of using direct subsidies and market protection in maintaining and enhancing indigenous agricultural production. The second was a concern that significant reductions in export subsidies, especially in the EC and US, would increase the food bills of the poorer countries that had been recipients of - and had become dependent on - cheap supplies from the heavy subsidisers.

7. Since all these concerns and positions have remained largely unchanged, and are those that underlie the Doha negotiations today, it is likely that a new deal will resemble the previous, at least in its essential structure (see Annex 1 for the Uruguay Round deal).

III. How Was the Uruguay Round Deal Implemented? Has It Had an Impact?

8. A detailed notification and monitoring process was put in place to review implementation issues. In the period leading up to the launch of the Doha negotiations there was much debate about whether the Uruguay Round package had brought significant benefits to the competitive exporters and to other developing countries seeking to enter world markets with farm products. There are several possible responses. An essential point is that the Uruguay Round deal was the start, not the finish, of a reform process. It sought to halt protectionist agricultural policies - which had been steadily worsening through the 1970s and 1980s - and to begin to subject them to substantial disciplines and commitments (since they were covered very ineffectively under the GATT). The intention was to reverse the trend towards ever-higher levels of financial support and high, often opaque, import barriers.

9. Given these objectives it can be argued that the agreement largely worked. There have been problems - like the non-transparent, burdensome and, for some, unfair administration of tariff-rate quotas, for instance. But WTO members have, for the most part, lived up to their commitments made in the three principal areas of reform. Has it really made a difference to world trade in farm products? That is more difficult; the OECD points out, for instance, that the overall levels of financial support in agriculture have not changed much, even if policies have. Very clearly, governments have re-engineered their support policies away from those that are either prohibited or subject to reduction commitments, often towards 'Green Box' policies.

10. Judging by the statements of the Cairns Group, efficient exporters have not benefited as greatly as they had hoped. Some developing countries consider they are unduly constrained in supporting agricultural development. Others have been disappointed that little of substance has resulted from the undertakings on the net-food importers (food aid shipments have been falling in recent years, but so have world prices for many commodities). Some producers have been frustrated by higher safety and testing standards for food products which have blocked access to new markets despite apparent export opportunities.

IV. Moving on - What Has Changed?

11. Apart from experience with the reform commitments, what has changed since the Uruguay Round that will impact on the new negotiations? In the industrialised countries - and, indeed, in some in the developing world - there has been a growing change in sentiment towards farming; less a focus on higher levels of production, more on safety and quality issues, protection of the environment, the challenge of genetically-modified organisms (GMOs), the maintenance of rural communities. In the European Union, which continues to reform the CAP alongside its WTO commitments, there is continual pressure on the budget and concern to adjust policies in the light of impending enlargement to the East. According to the OECD, comparatively high world commodity prices in the early years of the Uruguay Round implementation period (the mid-1990s) allowed more countries to export without subsidies. Some also reformed their policies and continued to avoid export subsidies, on some products at least, even when world prices fell in the late 1990s.

12. Among poorer countries that are not significant exporters already, and especially the least developed, there has been a much more concerted and energetic effort to bring development issues to the fore in the agriculture negotiations. This is interpreted in terms both of securing access to new markets and in maximising the flexibility, through special and differential treatment, to maintain the widest possible range of policy tools with which to build productive domestic farming capacity.

V. From the 'Built-in Agenda' to the Doha Negotiations

13. Article 20 of the Uruguay Round Agreement on Agriculture committed the WTO to negotiations for continuing the process of reform. Before and during the Seattle Ministerial Conference of the WTO, there were major differences over whether Article 20 was a sufficient basis on which to start a new set of negotiations. Many of the agricultural exporters wanted a more detailed mandate with better-defined targets for reform. Despite the failure of the Seattle meeting, negotiations started, as required under Article 20, in early 2000 and have moved already through two phases. The first phase (from early 2000 to March 2001) was largely devoted to the tabling of formal proposals (45 from 126 countries) in each of the areas likely to be covered by a final agreement at the end of the negotiations. The second phase, which ended in February 2002, concentrated on the examination and further elaboration of issues raised by those proposals. During this phase over 100 informal papers were submitted.

14. The same debate, on Article 20, took place prior to the Doha Ministerial Conference. In the event, relatively little was added to the Article 20 mandate in the Ministerial Declaration - but what additions there were were important. The key section of Paragraph 13 reads:

'Building on the work carried out to date and without prejudging the outcome of the negotiations we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiationsÉ.'.

15. The reference to 'phasing out' export subsidies was the first such commitment to be made in a GATT or WTO negotiating mandate. The requirement for concrete measures of special and differential treatment was also much stronger than ever before. The mandate requires 'modalities for further commitments, including provisions for special and differential treatment' to be established no later than 31 March 2003. The word 'modalities' in this context is usually taken to mean, in particular, the target reduction commitments in each of the three pillars. By the time of the 5th Ministerial Conference, due to be held in Mexico in 2003, participants should have tabled comprehensive drafts of the commitments they are prepared to take at the end of the negotiations (January 2005).

VI. Adding a 'Development Box'

16. Prior to the Doha meeting a number of developing countries had pressed for the negotiating mandate to include specific reference to the addition of a 'development box' to the reform framework. Although the declaration omitted specific reference, the 'development box' concept was discussed in detail early in the post-Doha negotiating programme. The proposal was first spelled out formally in a paper in June 2000 by a group of eleven developing countries [Note 2]. The box would allow a range of policy instruments in developing countries aimed at enhancing food production and food security, sustaining rural employment, allowing protection from cheap imports, providing flexibility in domestic support disciplines and stopping the dumping of subsidised imports. It would also allow developing countries to subject only those farm products they choose to disciplines under the WTO Agreement on Agriculture (the so-called 'positive list' approach).

17. When discussed in February 2002, the proposal [Note 3] found support among some developing countries but opposition from others. Cairns Group nations were among those that considered the idea contrary to the objectives of the Doha mandate and likely to damage trade between developing countries rather than improving it. Developed countries - notably the EU, US, Japan, as well as richer Cairns Group members - also opposed, warning against creating two sets of disciplines for developed and developing countries [Note 4]. Nevertheless, extensive discussion during the second phase has demonstrated general recognition of the importance of rural development, and not only in developing economies.

VII. Special and Differential Treatment - a Strengthened Role

18. If it is unclear that a specific 'Development Box' will be adopted, it is undeniable that special and differential treatment (S&D) for developing countries in the agricultural negotiations is a prerequisite for agreement. The Doha Declaration says:

'We agree that special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the Schedules of concessions and commitments and as appropriate in the rules and disciplines to be negotiated, so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development.'

19. How will this undertaking be made concrete? Debate has tended to revolve around differing positions of principle. Are developing countries best served by more solid and far-reaching reform commitments on the part of developed nations? In other words, the more agricultural markets are allowed to operate freely, the less trade will be distorted and the easier it will be for poorer countries to enhance their own indigenous farming and to trade on their own behalf. Should S&D be interpreted in terms of some flexibility in commitments for developing countries, or complete exclusion from many of those commitments? A wide range of proposals has been tabled since 2000 with many of the specific policy proposals for S&D running along the same line as those for a 'Development Box'. In addition, there is pressure for further market-opening initiatives by developed countries to encourage export performance in farm products by developing nations.

20. Apart from the notion of a 'Development Box' and the general pressure for practical recognition of special and differential treatment, the second phase also considered the particular problems of small-island developing states and single-commodity producing countries.

VIII. 'Multifunctionality' - A New Name for an Old Concept

21. However, it is not just developing countries that see themselves as having special concerns with respect to agriculture. Another casualty at Doha was the omission of a reference to 'multifunctionality' in the negotiating mandate: there is simply a confirmation that 'non-trade concerns' (the phrase used in the Uruguay Round) will be taken into account. Whatever the words used, the intention is to signal that agriculture is about more than producing and trading farm products. Japan and Korea have long held the view that their agricultural policies must focus on food security, notably with respect to rice. Countries like Norway and Switzerland insist their agricultural policies must also safeguard the interests of farmers, and their communities and pastures, in remote areas where competitive production is impossible. India has argued that food security must be a priority in poorer countries and must be recognised as such in the commitments they make in the WTO. Mauritius has been a leader among the 'small island developing states' which have stressed their own non-trade concerns centred on the problems of food security. The European Union has also argued that the multifunctional character of its agricultural policies are designed to produce food, feed and fibre but also to preserve the rural environment and landscape and to contribute to the viability of rural areas and balanced territorial development. It has also introduced the issue of animal welfare as a non-trade concern that must be taken into account in the negotiations. In view of the scope of the 'environmental agenda' agreed in Doha, it is clear that the European Union and some others will continue to see a link between the concessions they are prepared to make in agriculture and the results obtained on environmental topics.

22. On the other side of the argument, the US and the Cairns Group in particular, have stressed that the instruments and flexibility necessary to cope with non-trade concerns already exist in the Agreement on Agriculture, including in the 'Green Box' policy list. They insist that open markets and the ability to buy and sell at competitive prices on international markets usually best serve food security. Clearly the exporters' concern is that 'multifunctionality' is, in reality, an attempt by its proponents to dampen the potential for meaningful new commitments on agricultural reform.

23. The wider food security issue has tended to subsume the continued debate on making the Uruguay Round decision on NFIDCs (see Annex) more operational. Pressure to cope with short-term, food shortages through grant-based food aid remains. A number of competitive developing-country agricultural exporters have argued that attempts to enhance domestic production in NFIDCs will be frustrated so long as dumped, subsidised exports are distorting world trade.

IX. Export Subsidies - A Broader Agenda This Time

24. Proposals on export subsidies predictably included calls for their complete elimination (Cairns Group and US) - in the case of Cairns, with a 50 percent 'down payment' at the front end of a 6-year elimination programme. As discussed above, the Doha Declaration envisages a 'phasing out' at some point.

25. Developing countries have pointed to the apparent unfairness of the current agreement in permitting countries which had previously subsidised some of their exports to continue doing so - albeit with reduction commitments - while developing countries have no right to start. India, the ASEAN countries and a number of other developing countries have proposed reversing that situation, eliminating export subsidies for developed nations while allowing developing countries some limited flexibility to employ them.

26. India and others also emphasise that even if export subsidies are disciplined, exports are still being supported by other policies in the industrial countries. With this, the European Communities, Japan, Korea and other more defensive WTO members agree. Indeed, the EU has repeatedly insisted that while it is willing to talk about deeper limits on subsidies, other support policies must also be covered.

27. The US tends to be the main target since it is a major user of two principal support tools: officially guaranteed export credits (on which the OECD has been seeking an agreement for some years, without much success) and food aid. With respect to the latter the most common charge is that the US appears to resort to its food assistance programmes when its domestic prices are low (and stocks high) rather than when world commodity prices are high and the need in poor countries is the greatest. A third object of attention in the context of export supports is the activities of state-trading enterprises - marketing bodies that are most active in countries like Canada, Australia and New Zealand. Another issue is that of export taxes and restrictions that impact on the food security concerns of countries like Japan, Korea and Switzerland. Each of these different measures that serve to support exports, and the potential for disciplining them, have been the subject of extensive examination in the second phase of talks.

X. Domestic Support - More 'Boxes' or Less

28. Most work to date in the field of domestic support has focused on the future of the 'Blue Box' and the 'Green Box' as well as well as the proposed addition of a 'Development Box' (see above). Proposals from the Cairns Group, the US, and a number of developing countries have sought the abolition of the 'Blue Box' altogether. This is opposed by the European Union, which insists the mechanism is necessary for the continuation of its domestic reforms. Apart from the EU and Japan, four European countries are current users of this box (Iceland, Norway, Slovak Republic and Slovenia).

29. As for the 'Green Box', proposals have come from participants that are divided three ways: those which want to reduce the scope of policies covered, in order to avoid abuse, especially where the policies may be trade-distorting; those which consider the current contents of the box are about right; and those that believe further policies should be added to cope with development needs and the 'non-trade' aspects of agriculture.

30. Objectives for further reductions in the 'Amber Box' will be the subject of forthcoming negotiations on 'modalities' (see paragraph 15 above).

XI. Market Access - Some Technical Issues

31. Although the extent of further cuts in agricultural tariffs is a matter for the coming stage of negotiations, several technical issues have occupied the first two phases. As already mentioned, the administration of tariff rate quotas (TRQs) has been a major concern in terms of the implementation of the Uruguay Round commitments. Currently some 38 WTO members have in place a total of almost 1400 TRQs. Various proposals have been made to improve their administration, to subject them to 'auctioning', to expand their sizes or, indeed, to eliminate them completely in favour of low tariffs.

32. A second issue is the future of the special safeguard in agriculture (see Annex). The provision has been used only very sparingly, partly because its conditions are very tightly drawn. Some developing countries have suggested that the safeguard should not be used against them, or that they, not developed countries, should be the only part of the WTO membership to have access to the instrument. These approaches have been opposed, as has a proposal by Japan and Korea, to use the safeguard on seasonal and perishable products.

33. One of the acknowledged problems with the reduction in agricultural tariffs is the consequent erosion of the value of preferences. Some recipients are anxious to hold on to preferences as long as possible while some other WTO members question the benefits of such concessions if they prolong dependence on uncompetitive commodities. This was discussed in the second phase.

34. Canada and the US have proposed sectoral negotiations in agriculture, involving so-called zero-for-zero reduction commitments for particular products. Support has been limited since, for some, the approach would divert attention from overall liberalization efforts.

XII. Where Does the Process Go Now?

35. At the end of March 2002, a programme was agreed to move the process towards the 31 March 2003 deadline for agreement on the 'modalities'. Four major 'special' (negotiating) sessions of the Committee on Agriculture will take place during the remainder of 2002, three on substance (the three pillars) and a follow-up meeting on the three. The sequencing of the negotiations was an issue of controversy, as members sought to stave off to the closing stages the areas where the greatest concessions would be called for: the EU seeking to start with market access and developing countries wishing to tackle export subsidies and domestic support first and leave market access to the third meeting. The compromise was to focus consecutively on export subsidies, competition and restrictions in the first meeting; the second on market access and the third on domestic support. Special and differential treatment and non-trade concerns will be an integral part of each session. The fourth meeting will centre on issues requiring a follow-up. At the end of the year, the Committee Chairperson, will present an 'overview paper', drawing together the ideas discussed.

36. The first quarter of 2003 will be devoted to the negotiating and drafting of the modalities agreement, including the numerical targets to be attached to the three reform pillars. Following agreement on modalities, members will use the targets in tabling their first offers of commitments in agriculture, by the time of the Mexico WTO Ministerial Conference.

37. Will these objectives be met? It is difficult to say. In a sense, the timetable requires agriculture to remain on a fast track compared with almost all other Doha Work Programme dossiers, with the possible exception of services. As the final stages of the 'modalities' process approach it seems likely that the European Union, Japan and others that have favoured a very broad Doha agenda will press for significant movement in at least some of those other dossiers in parallel. That may be premature, especially for some developing countries. On the other side, we can expect the Cairns Group to insist that agriculture remains their priority and that they must see early signs of a serious and worthwhile outcome. Agriculture has always been the most difficult element in trade negotiations; the Doha Agenda is unlikely to be any different.

Annex: The Uruguay Round Deal on Agriculture

Three pillars of reform

1. Agricultural trade reform was implemented, after the Uruguay Round, on the basis of three 'pillars' of reduction commitments: domestic support, export subsidies and market access barriers. These three elements are often seen as linked. After all, if they were not shielded from world market prices through domestic support, goes the theory, farmers would not need protection from imports. At the same time, if domestic support and border protection lead to over-production the resulting surpluses can only be sold on world markets by bridging the gap between domestic prices and world prices - i.e. by using export subsidies.

2. In short, the Uruguay Round agricultural agreement set out commitments as follows:

Market access

● With very few exceptions (principally rice), all border protection was to be in the form of bound tariffs only. That meant translating many quantitative restrictions and other access barriers into equivalent tariff rates ('tariffication') [Note 5] and binding those new rates in WTO schedules.
● Developed and transition economies were required then to reduce the consequent tariffs, and all others in the agricultural sector, by 36% over six years. Developing countries were committed to reduce by 24%. Least-developed countries were not required to make any commitments.
● Since some new tariffs were prohibitively high, 'tariff rate quotas' were required to ensure that 'current access opportunities' for certain products already entering markets on a zero, low-duty or preferential basis could be met. Similarly, where little or no imports had previously taken place, commitments were required to allow expanding 'minimum access opportunities' over the period to end-2000, for developed countries, and end-2004 for developing countries.
● A special temporary safeguards arrangement was established to cope with sudden increases in imports of tariffied products under the new system.

Export subsidies

● A wide range of export subsidies were required to be reduced over the six-year implementation period.
● For developed countries - those principally using such subsidies - budgetary outlays had to fall by 36% and the quantities of products benefiting by 21% of the 1986-90 base period levels.
● For the very few developing countries which subsidised exports of one or more products, the corresponding reduction commitments were 24% and 14%.
● While all other countries were prohibited from using these subsidies, developing nations were left free to resort to subsidies which reduce export marketing costs and those which apply to internal freight and transport charges.

Domestic support

● Domestic support was more complicated. Much of this expenditure was first translated into a standard measure called the Aggregate Measurement of Support (AMS).
● Developed countries agreed to reduce their AMS levels by 20% over six years, from base-period levels fixed in the period 1986-88. All such covered policies are sometimes said to have been in an 'Amber Box' (see below).
● Developing countries were required to reduce by just over 13% over 10 years. However, developing countries were also able to exclude from their AMS calculations: generally available agricultural investment subsidies, input subsidies for low-income or resource-poor producers and subsidies designed to pull farmers away from narcotic crops.
● Least-developed countries were not required to make any reduction commitments.
● Two other major classes of exclusions applied to all WTO members. The 'Green Box' list covers, among other things, agricultural research, income safety-net programmes, natural disaster payments, adjustment assistance (farmer and land retirement programmes for instance) and environmental and regional assistance programmes. The 'Blue Box' was designed largely with the European Communities in mind and exempts from reduction commitments 'direct payments under production-limiting programmes' even though such payments may distort trade.

Net-food importers

● A ministerial decision was taken which set up a programme to cope with the 'possible negative effects' of the reform programme on net-food-importing developing countries (NFIDCs) and least-developed countries. This included attention to the possible adverse effects on the availability of food aid.

'Peace Clause'

● A 'peace clause' was agreed under which, until the end of 2003, certain domestic support and export subsidy measures, conforming to the terms of the agriculture agreement, would be exempt, under specified circumstances, from countervailing duties, dispute settlement complaints and certain other actions. Whether or not the Peace Clause should be rolled forward will be an issue for negotiators in the coming year or so.


Note 1: The Cairns Group consists of: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay. (return to text)

Note 2: Document G/AG/NG/W/13, dated 23 June 2000, presented by Cuba, Dominican Republic, El Salvador, Haiti, Honduras, Kenya, Nicaragua, Pakistan, Sri Lanka, Uganda and Zimbabwe. (return to text)

Note 3: Non-paper by Cuba, Dominican Republic, El Salvador, Honduras, Kenya, Nigeria, Pakistan, Sri Lanka and Zimbabwe (SS(INF)AG/5) submitted to the Informal Special Session meeting on 4-6 February 2002. (return to text)

Note 4: A developed country that did not oppose the Development Box was Switzerland. In a non-paper (585) it explicitly welcomed measures that would enhance domestic production, improve the livelihood of low-income farmers and would take into account non-trade concerns. However, just as was argued by other developed countries, such flexibility should not produce a two-tier system where some countries would be permanently exempted from entering into any kind of commitments under the WTO rules on agriculture. (return to text)

Note 5: Apart from tariffs, a variety of instruments had previously been used to restrain imports, among them quotas, variable import levies, voluntary export restraints and discretionary import licensing. 'Tariffication' required tariff equivalents to be calculated using the difference between internal and external prices. (return to text)


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