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Reports on Meetings
1. The continuation of the process of reform, as specified in Article 20 of the Agreement on Agriculture (AoA), is to be initiated one year before the end of the implementation period, i.e. beginning of the year 2000. In view of this, and to assist the representatives of the less-advantaged countries (LACs) in the preparation of the forthcoming negotiations on agriculture, AITIC and FAO jointly organised a workshop on the subject. It was attended by representatives of countries which had not been able to follow the original negotiations closely, were unfamiliar with the implications of the AoA, or wanted to have a fuller grasp of the AoA and related issues. Among these, the Codex Alimentarius, the International Plant Protection Convention (IPPC) and their relation to the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS); trade concerns related to the global fish and livestock markets in relation to the WTO agreements; sustainable forest management and international trade; and, finally bio-diversity and trade-related intellectual property rights.
2. Apart from providing basic information about these subjects, the workshop aimed at responding to specific queries from delegates regarding what is at stake in the forthcoming negotiations? This question's point of departure centres on the problem areas encountered so far regarding the implementation of the AoA. Based on the past five-year experience, what are the particular concerns of less-advantaged countries and which are the areas where they should focus on during the negotiations for the continuation of the reform process? What are their limitations, how to reduce their present disadvantaged position, and how to strengthen their capacities for more active (and effective) participation in the forthcoming negotiations.
3. Clearly, the concerns and problems regarding agriculture were focused from different national perspectives, as the interests of less-advantaged countries can vary considerably. Representatives of net food importing countries and least-developed countries (LDCs) are concerned about the impact of the implementation of the AoA on food prices and levels of food aid, which are at present at historically low levels. Exporters of agricultural products were preoccupied with the uneven playing field in international agricultural trade, as the heavy subsidisers were making it difficult for developing countries--which did not have the financial resources to resort to subsidies--to compete in international agricultural markets. In their view, the implementation of the AoA had diverged considerably from the liberalising aims of its drafters by such artifices as the roll-over of unused export subsidies, lack of transparency in the administration of tariff-rate quotas, and other deviations from the spirit of the AoA.
4. However, despite different national interests depending on the specific problems and conditions, it emerged from the discussions that most LACs nevertheless share a series of common problems and concerns, among others:
5. The workshop benefited from FAO's particular expertise not only on agriculture, but also on forestry, fisheries and livestock, as well as on environmental matters, and bio-diversity and its relation to trade-related intellectual property rights (TRIPS). On all of these the FAO has unique data bases, wide scientific experience and constantly interacts with related inter-governmental organisations. And, very importantly in the context of the AoA and WTO matters, FAO provides the secretariats for the Codex Alimentarius and the International Plant Protection Convention (IPPC), required to collaborate with the SPS and Technical Barriers to Trade Agreements (TBT). Furthermore, according to Article 10.4.b of the AoA, international food aid transactions are to be carried out in accordance with the FAO's "Principles of Surplus Disposal and Consultative Obligations" and the FAO administers the subcommittee on surplus disposal to prevent the circumvention of export subsidy commitments.
6. On agriculture as such, FAO has a vast experience in assisting developing countries and its main concern is agricultural development conducive to food security and improved conditions in rural areas. Related to this objective, it provides global supply and demand assessments, information and early warning system regarding demand for agricultural goods at global, regional and national levels; it identifies specific country difficulties and problems to meet adequate food needs. More directly in relation with the WTO, the FAO provides assessments of the impact of the Uruguay Round agreements on agricultural commodity markets and the agricultural sector overall; how trade, production, and consumption have been affected, as well as analysis on selective issues: tariff escalation and possibilities for product diversification, transmission of world prices to domestic markets, loss of preferences particularly for ACP countries; price stability in commodity markets, etc.
7. The first two sessions set the institutional framework by focussing on the mandates and activities of FAO and WTO. With respect to the latter, the process of trade liberalisation through different rounds of multilateral trade negotiations was explained, first within the GATT and, since 1995, in the WTO. Each Round's achievements and their contribution to the trade liberalisation process were emphasised. Of particular relevance for developing country interests were the accomplishments under the Kennedy and Tokyo Rounds. Similarly, a major success of the Uruguay Round was the integration of agriculture into the framework of multilateral trade disciplines.
8. The main features of the AoA were reviewed, including the three main areas: market access, domestic support and export subsidies. On market access it was remarked that, although countries had agreed to bind all their tariffs, to reduce then gradually, and to provide minimum market access opportunities, problems still remained in these and other areas. One of them was that the process by which countries agreed to convert their non-tariff measures NTMs (quantitative import restrictions, voluntary export restraints (VERs), variable import levies, minimum import prices, NTMs maintained through state-trading enterprises) into their tariff equivalent -the tariffication process- had resulted in wider tariff dispersion and excessively high tariffs, which in effect limit market access. Another difficulty encountered so far in the AoA related to tariff-rate quotas, where a lack of specific disciplines in their administration has hindered better market access opportunities. Difficulties encountered in this area include allocation of TRQs to preferential suppliers, to state-trading enteprises or to producer organisations; the auctioning of TRQs; making imports under TRQs conditional on absorption of domestic production of the product concerned. The result had been low fill rates of TRQs and difficulties in monitoring compliance. Moreover, still on the issue of market access, participants expressed particular concern on high tariffs and tariff escalation and their difficulties in penetrating markets, not the least by their failure to meet the standards required.
9. On domestic support, reduction of the Aggregate Measurement of Support (AMS) (annual level of support in monetary terms provided for an agricultural product) was agreed. This was a means to increase market access by replacing the protection achieved via internal support mechanisms by less trade- and production-distorting ones. In this regard, questions touched on what were the implications of the subsidies that are exempt from reduction disciplines because they are not considered trade- or production-distorting and are contained in the so-called "green box" (note 1) and "blue box" (note 2). Finally, there is a de minimis provision applicable when support is less than 5 per cent of the value of a specific product or of the total value of the agricultural production, when it is not product-specific. On the issue of domestic support, some participants were concerned that reduction of export subsidies could undermine the situation of net food importing countries, as well as countries with serious food security concerns. In this regard, it was mentioned that negotiations on a new Food Aid Convention, which is due to expire in 1999, were currently under way.
10. The commitments on export subsidies may be considered those with a more visible immediate effect on agricultural trade. The agreement prohibits the use of export subsidies on products not specifically listed in the country's schedules and for those products on which export subsidies are paid. The reduction commitments were a reduction of budgetary expenditure of 36 per cent (and 24 per cent for developing countries). It was remarked that only 25 of the 132 WTO members have the right to subsidise their exports. On specific products this is even more remarkable: 93 per cent of subsidised exports of wheat by three countries; 80 per cent of beef by two; and 94 per cent of butter by two. And so far, these commitments have been circumvented by cross subsidisation and by carrying forward ("rolling over") unused export subsidies from one year to the next.
11. During the general discussion, participants were particularly interested in finding out more about technical assistance, the provisions relative to special and differential treatment in the contexts of market access, food security, domestic support, export subsidies, and notification requirements.
12. It was remarked that the implications of Article 20, on the continuation of the reform process are dependent on the interpretation of certain specific issues such as: the experience to date in the implementation of the reduction commitments; the effects of these on world trade in agriculture; non-trade concerns (which would include food security and environmental issues); special and differential treatment to developing countries; establishing a "fair and market oriented agricultural trading system"; and "other objectives and concerns" stated in the preamble of the AoA.
13. It is no surprise that the areas where the new phase of negotiations is to focus will include those where the process of reform has already started, namely market access, domestic support and export subsidies. However, particular attention is now directed towards other important issues for developing countries and economies in transition such as state trading enterprises, sanitary and phytosanitary disciplines and the environment. On market access attention will focus on the reduction tariffs which are out of line with the levels of "normal" tariffs as a result of the tariffication process, as well as on liberalising tariff-rate quotas.
14. Reduction of tariffs opens the question of how to go about it and by how much, if they are to be further reduced? Should the Uruguay Round formula be adopted, by which ordinary customs duties, including those resulting from tariffication, would be reduced, over the six-year period commencing in the year 1995, on a simple average basis by 36 per cent with a minimum rate of reduction of 15 per cent for each tariff line? Another option would be an average tariff cut overboard without differentiation. Still another alternative would be to establish a ceiling rate; or the Swiss formula, with stiffer reductions for high rates to eliminate tariff dispersion, and reduce tariffs more on processed than on primary products? Through an in-depth analysis of their tariff structure as well as their export/import interests, less-advantaged countries should be able to weigh the implications of each of these proposals and support the one that would be more advantageous to their national interests.
15. On domestic support, as in the case of tariffs, reduction commitments may be expected, with questions remaining on whether there would be a move to eliminate the "blue box", given that some modifications have taken place to move them away from specific programmes towards the more generally accepted "green box". Moreover, it could also be expected that future negotiations would focus on a revision of the latter's contents.
16. In view of the number and complexity of important items that would come under negotiation, the need for strengthened administrative arrangements was stressed: in the past many countries' agricultural ministry had been left out of the negotiations and agricultural concerns had not been adequately addressed. Similarly, since the implementation of the AoA, the preparation of different countries for the negotiating process has not been even. Some countries have engaged in serious analysis of issues of concern and brought them up in informal discussion, particularly in the analysis and information exchange that has taken place in the WTO's Committee on Agriculture. Other countries have not yet started preparing for future negotiations. To achieve a more active and effective participation in the forthcoming negotiations, it is important that countries prepare adequately by:
IV. SPS, the Codex Alimentarius and the International Plant Protection Convention
17. Special attention was devoted to the Agreement on Sanitary and Phytosanitary Measures (SPS), in response to the basic question of why is there an SPS Agreement at all? For good reasons: although separate from the AoA, the SPS agreement is closely linked to the AoA, as the latter's disciplines to reduce trade barriers could encourage Members to find other ways not to respect their reduction commitments, for example through the use of technical standards as another means of protection. The SPS objective is to ensure that these measures are not used as barriers to trade.
18. The first part of the presentation focused on providing a general understanding of the SPS. This Agreement's objective is to give each Member the opportunity to protect:
19. If a measure falls within the definition of an SPS it is by exclusion out of the TBT Agreement. What is the difference? An SPS measure is based on health concerns and has to be based on science, while under the TBT Agreement even if the protection of human health or safety, animal or plant life or health or the environment are included, there are other legitimate objectives that a Member may pursue which do not necessarily have to be based on science. Thus the TBT includes other objectives such as national security requirements; the prevention of deceptive practices, etc.
20. What does "based on science" mean? There is no clear definition, however, the SPS relies heavily on three international standards-setting organisations, the so-called three sisters: the Codex Alimentarius Commission, the International Plant Protection Convention (IPPC) and the Office international d'epizooties (OIE), the latter's area being animal health. If a country is going to implement a measure based on standards set by any of these three organisations, it is on safe ground, a fact which confers quite an importance to these international standard-setting organisations. Although each Member of the WTO has the right to protect itself and impose restrictions, the Member must be in a position to prove its case as, if a measure is not already included within the international standards, the measure is likely to be challenged.
21. The SPS Agreement includes a provision on "equivalence" i.e. even if countries have different ways of establishing measures of protection (one of them, for example, is through the hazard analysis and critical control points (HACCP) principle) if the end-product is safe, it should be so recognised by other countries. Thus, countries enter into consultations to achieve bilateral or multilateral agreements on recognition of the equivalence of specified SPS measures. Another principle is the recognition of pest- or disease-free areas and areas of low pest or disease prevalence within the boundaries of a country, by provision of the necessary evidence. Similarly, the principle of transparency should prevail by notifying other WTO Members every time a country adopts a new SPS measure. It is also recognised in this agreement that developing countries in need of technical assistance should be assisted by the WTO secretariat, by other Members, or by the international standard-setting organisations.
22. The Codex Alimentarius system has a vital importance in consumer protection and the food trade business. It is the body whose standards apply to international trade and meeting these standard is presumptive of establishing a compliance with the SPS Agreement requirements. At present the Codex Alimentarius Commission has 163 Members, its membership being larger than that of the WTO and other UN bodies. Codex recommendations for other aspects of food quality are used for establishing national guidelines and regulations, principally under the provisions of the TBT Agreement.
23. All of the standards promulgated by the Codex system (as well as its texts and guidelines issued to Member nations) can be considered as complying with SPS provisions (quality systems, sampling of food products, inspection activities). The World Health Organization (WHO) is also an active participant in the Codex process. The Codex system is composed of seventeen committees. All of the standards adopted by the Codex Commission are adopted by consensus. Each standard for safety must undergo a risk assessment process, done by scientific committees (e.g. the Joint Expert Committee on Food Additives). A risk assessment is defined as a negative impact on the health and safety of humans, animals, plants (or the environment). A safety margin is built into the codex standards, the acceptable level of risk being near zero (there being no such thing as a "zero risk"). If country were to require a higher level of protection than the Codex system provides, it is at liberty to establish the necessary measure. However, the measure must be subject to the other disciplines of the agreement, that is, it must go through a risk assessment process, it must be scientifically justified, should not be discriminatory, nor a barrier to trade. Countries are free to establish their own risk assessments, but this is a costly, complex scientific process.
24. If a country accepts or meets the Codex standards it is likely to have strong case in any dispute. A Codex standard becomes a benchmark and allows for countries to have free access to markets (at least in terms of the acceptability of their products). In that context meeting the standards is an area that developing countries must give importance not to have their products rejected in the international markets. Joint FAO activities with the WTO include seminars and workshops to inform Member countries about these questions and create a better understanding of how to deal with these issues.
25. The international protection of plant life and health by control of pests of plants and plant products and prevention of their international spread is the objective of the IPPC. Although IPPC existed as an international agreement administered through the FAO since 1951, it was in 1992 that the FAO established an IPPC secretariat, recognising the position IPPC was to have as the international forum for standard-setting and harmonisation of phytosanitary measures affecting trade in the SPS agreement of the WTO. Both Agreements are distinct in their scope, purpose and membership, but they are complementary in the areas of overlap: the SPS agreement makes provision for plant protection in a trade Agreement and the IPPC makes provision for trade in a plant protection agreement.
26. Although the traditional role of the Animal Production and Health Division of the FAO (AGA) had been assistance to governments to strengthen public services for increasing productivity and ensuring human health, its activities had not been directly linked to international trade. In view of the SPS Agreement, the AGA is finding the need to refocus its activities on three main areas: (a) to relate specifically to livestock-trading issues and the WTO's SPS Agreement; (b) to redefine cooperative agreements with the OIE with an additional focus on trade issues; and (c) to focus more on livestock trade-related with ministries of trade and producer groups in Member countries.
27. Animal health requirements and decision-making on imports of livestock must stand on scientifically based risk assessments, as recognised by the SPS Agreement. On livestock, the level of risk varies according to factors which includes animal disease status in the country, zone or region of origin. The OIE plays an essential role in communicating to all its Members, to FAO and the WHO all occurrences of animal diseases which are officially reported by the Veterinary Services of the affected country.
28. The importance and potential role of developing countries in the global fish market became evident from the presentation devoted to this issue. An illustration of this is that, in 1996, 37 per cent of world fish production was exported. This is in sharp contrast with other commodities, such as primary forest products, where only 6-8 per cent is internationally traded. Moreover, the fish sector is an important revenue earner for developing countries: about half of world exports of fishery products originate in developing countries and greatly contribute to their foreign exchange earnings.
29. Trade rules applying to fish and fish products are not part of the AoA and there is not a single agreement applicable to fish trade. However, several other Uruguay Round agreements and rules apply to different aspects related to this trade, among others: the overall tariff reductions agreed to in the Uruguay Round, SPS, TBT, antidumping, import licensing, subsidies and countervailing measures, safeguards, etc. Although the Uruguay Round tariff cuts were also applicable to the fish sector, it can be noted that fish and fish products are still subject to high tariffs, and tariff escalation is particularly visible in this sector.
30. The new disciplines under the SPS Agreement greatly influenced the fish processing industry. These are based on the HACCP (hazard analysis critical control point) principle, and all exported fish products have to come from plants with a HACCP plan. However, the investments needed to bring a fish processing plant up to the HACCP standards are so substantial that many developing countries would consider this a de facto NTM. Trade restrictions largely outside the boundaries of existing international agreements as presently defined, exist and seem to be on the increase. Of late, environmental reasons have been advanced for restricting fish imports, which are in effect counteracting some of the benefits achieved under the Uruguay Round liberalisation process. Well-known examples are the tuna/dolphin and the shrimp/turtle cases.
31. The presentation on sustainable forest management and trade started by highlighting several characteristics of the forestry sector: although the traditionally brisk expansion of wood consumption is likely to continue in years to come it will do so at a slower pace than had been anticipated; exports of less-advantaged countries, particularly tropical forest products, represent only a small share of total world exports; both imports and exports of wood products are dominated by a few developed countries (US, Canada, Germany, Sweden, UK, Finland); developing countries only account for 15 per cent of forest product exports, and 75 per cent of these exports are by Indonesia, Malaysia and China; although exports of higher value products have been on the increase, developing country exports are still dominated by logs or sawnwood.
32. Forest products are not covered by the AoA, as they are considered for trading purposes as industrial products. However, the SPS and TBT agreements do apply to wood products. Market access on wood and wood products varies on the specific product and markets. However, in general, tariffs in this sector were already relatively low prior to the Uruguay Round, so tariff cuts were not very relevant for forest products.
33. However, the trade gains from Uruguay Round include improvements in reducing NTMs, particularly through the SPS and TBT Agreements which are likely to limit the use of technical obstacles other than legitimate health, safety, product quality and environmental protection. Other agreements which will benefit forestry trade are the tighter disciplines of the agreements on subsidies and countervailing duties, antidumping, customs valuation and import licensing. On the other hand, recent trends limiting trade in forest products made from wood coming from sustainably-managed forests (through eco-labelling and certification) may increase trade restrictions and counteract the benefits resulting from the Uruguay Round trade liberalisation.
34. The closing presentation focused on genetic resources and their importance for the development and sustainability of agriculture. The "globalisation" process is particularly visible with regards to genetic material. Indeed, a close global interdependence on plant genetic resources (PGRs) is evident from recent studies which estimate that any region in the world is dependent on genetic material originating in other regions for at least 50 per cent of basic food production and in some cases 100 per cent. Thus, conservation, access and use of plant genetic resources, essential for agricultural development and food security, are the cornerstone of the international agreements relative to plant genetic resources (the International Undertaking on Plan Genetic Resources and the Convention on Biological Diversity). There is no incompatibility between these objectives and those of investment promotion in plant development through the protection of intellectual property, provided access to genetic material as found in nature is not blocked.
35. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) establishes standards of protection as well as the procedures and remedies in national legislation to ensure that owners of intellectual property can enforce their rights. The TRIPS agreement provides that new inventions should be patentable in any field of technology without discrimination, subject to certain exceptions. One such exception is that countries are free to exclude essentially biological processes as well as plants and animals, other than micro-organisms (and micro-biological processes), with the following proviso: "Members shall provide for the protection of plan varieties either by patents or by an effective sui generis system or a combination thereof" (Article 27.3.b). It is also stipulated that this provision will be reviewed in four years after the entry into force of the agreement, i.e. 1999.
36. Questions of access to plant genetic resources and related technologies for food and agriculture, the sharing of the benefit arising from their use, and the protection of innovations in this area are being the subject of current negotiations for the revision of the International Undertaking on Plant Genetic Resources (note 3). These negotiations seek to harmonise the International Undertaking with the Convention on Biological Diversity and to consider the issue of access on mutually agreed terms to plant genetic resources, including ex situ collections (not addressed by the Convention) and the realisation of Farmers' Rights. It is likely that the revision of the International Undertaking may be legally binding.
37. The role of small farmers, particularly in continuing to maintain, develop and make available a wide range of genetic variability, is a key focus in the current negotiations, and is the basis for Farmers Rights. In this context, many countries have wished to protect the "farmers privilege", or right to replant seed harvested from proprietary varieties. This right has been progressively restricted under the UPOV's sui generis plant varietal protection system, through the successive conventions of 1961, 1978 and 1991, but even under the latter, governments may make provisions for, and define the farmers privilege. It is clear that patent protection of plant varieties would severely curtail the farmers privilege.
38. In the area of intellectual property rights the countries negotiating the revision of the International Undertaking are discussing the implications of intellectual property over these resources and products derived from them, including patents and sui generis plant varietal protection. The application of patents to living matter is rather recent and many issues remain unclear, including the admissibility of claims of wide coverage (such as "species-wide" patents), the extent to which a holder of a patent on an isolated gene may impede its use in breeding activities of the naturally occurring gene, and in the case of plant varieties, the extent to which they may encourage or discourage further research and breeding. But it is clear that patents restrict access to plant genetic resources in a way that and sui generis plant varietal protection does not.
39. LACs need to consider, in particular, the state of development of their agricultural economies, and the likely effects that the introduction of sui generis plant varietal protection is likely to have. Most LACs are unlikely to have agricultural research and development structures that would be best able to take advantage of patents. Sui generis systems allow for more flexibility, can be more easily tailored to local needs, ensure freedom of access to the plant genetic resources that varieties contain.
40. The Union for the Protection of New Varieties of Plants (UPOV), with a membership composed largely of developed countries, and the more economically advanced developing countries provides an example of a sui generis plant varietal protection. Other sui generis systems could also be developed to fit the needs of countries with different degrees of development. The TRIPS Agreement does not actually refer to UPOV, nor does it require a country to be a Member of UPOV, or to have legislation identical to, or consistent with, the UPOV Conventions. Various studies have been undertaken regarding the provisions that a country would require to meet the TRIPS criteria of "an effective sui generis system", including by the International Plant Genetic Resources Institute (IPGRI) (note 4), which LACs may wish to consult.
41. LACs should also bear in mind that, although the TRIPS Agreement provides for a transition period of five years for developing countries, and eleven years for the least developed countries, Article 27.3b is due to be reviewed in 1999, and decisions taken on that occasion will condition their future actions. They therefore need urgently to develop their policy positions, particularly in order to prevent the elimination of possibilities that may be important to them.
Note 1 : Enumerated in Annex 2 of the AoA and which include, among others, general services -research and training, pest and disease control, marketing and promotion services, etc.;public stockholding for food security purposes- including domestic food aid; direct payments to producers, decoupled income support, structural adjustment assistance through producer retirement programmes or through investment aids; environmental and regional assistance programmes. (return to text)
Note 2 : Created to cover EU and US payments under production limiting programmes. (return to text)
Note 3 : This Undertaking was adopted by the FAO Conference in 1983 and was the first international instrument governing the conservation and sustainable utilisation of agricultural biodiversity. To monitor the implementation of the International Undertaking, the FAO's intergovernmental Commission on Plant Genetic Resources was established in 1985, which ten years later, became the Commission on Genetic Resources for Food and Agriculture (CGRFA), with a mandate expanded to cover all components of genetic diversity. (return to text)
Note 4 : Dan Leskien and Michael Flitner, "Intellectual Property Rights and Plant Genetic Resources: Options for a Sui Generis System", IPGRI, Issues in Genetic Resources No. 6, June 1997. "Recent policy trends and developments related to the conservation, use and development of genetic resources", Bragdon, Susan H. and David R. Downes. 1998, IPGRI, Issues in Genetic Resources No. 7, June 1998. (return to text)