In fact, the Agreement on Agriculture is an international treaty of the World Trade Organization which was negotiated during the Uruguay Round of the General Agreement on Tariffs and Trade, and entered into force with the establishment of the WTO on January 1, 1995. As mentioned, the Uruguay Round Agreement on Agriculture (AoA) which came into force on 1 July 1995 is to be implemented over a six-year period ending 31 December 2000 and over a ten-year period ending 31 December 2004 for developed and developing countries respectively. The AoA called for the conversion of non-tariff barriers on agricultural products to tariffs as well as their reduction. It also called for cuts to both domestic support subsidies and export subsidies. Developing countries had a more relaxed schedule of reductions, and the Least Developed Countries were exempt from these cuts.
It consideres the interests of developing countries to some extent and provides them with the special and differential treatment. However, world agriculture trade still remains heavily distorted. On the one hand, some rich countries keep on protecting their producers by domestic supports and export subsides. On the other hand, they force developing countries open markets as agriculture trade liberalization. In general it can be said that the AoA is not a really fair agreement to developing countries.
The main aim of the Agriculture Agreement is to reform trade in the agricultural sector and to make policies more market-oriented which would improve predictability and security for importing and exporting countries alike. It was a significant first step towards order, fair competition and a less distorted sector.
In a nutshell, the new rules and commitments apply to:
market access - various trade restrictions confronting imports
domestic support - subsidies and other programmes, including those that raise or guarantee farmgate prices and farmers' incomes
export subsidies- and other methods used to make exports artificially competitive.
All WTO members, except least developed countries (LDCs), were required to make commitments in all these areas in order to liberalise agricultural trade. As can be seen in the box below, developing countries were given a limited element of special and differential treatment (S&DT).
The Uruguay Round agreement included a commitment to continue the reform through new negotiations. These were launched in 2000, as required by the Agriculture Agreement. The agreement does allow governments to support their rural economies, but preferably through policies that cause less distortion to trade. It is also flexible in the way commitments are implemented. Developing countries do not have to reduce subsidies or tariffs to the same extent as developed countries, and they are given more time to complete their obligations. Least-developed countries don't have to do this at all. Special provisions deal with the interests of countries that rely on imports for their food supplies, and the concerns of least-developed economies.
The policy situation for agriculture in developing countries differs greatly from that of developed countries in the sense that people in the developed countries spend approximately 10-15 percent of their incomes on food while in developing countries, people may spend up to 50 percent of their income on food (FAO 2008). Moreover, primary agriculture in developing countries remains labour intensive and finally most developing countries have to cope with a large fraction of their population that can be characterized as the "urban poor"
Three Pillars
The AoA has three central concepts, or "pillars" namely; market access, domestic support, and export subsidies.
Market access (articles 4 and 5 and Annex 5 of AoA)
The first pillar of AoA is market access. The new rule for market access in agricultural products is "tariffs only". Before the Uruguay Round, some agricultural imports were restricted by quotas and other non-tariff measures. These have been replaced by tariffs that provide more-or-less equivalent levels of protection
The most important commitments include the following:
• Developed and developing countries to convert all non-tariff barriers into simple tariffs (a process known as tariffication).
• All tariffs to be bound (i.e. cannot be increased above a certain limit).
• Developed countries to reduce import tariffs by 36% (across the board) over a six year period with a minimum 15% tariff reduction for any one product.
• Developing countries to reduce import tariffs by 24% (across the board) over a ten year period with a minimum 10% tariff reduction for any one product.
Least Developed Countries (LDCs) were exempted from tariff reductions, but either had to convert non-tariff barriers to tariffs-a process called tariffication-or "bind" their tariffs, creating a "ceiling" which could not be increased in future
Table 1 gives an overview on the tariff measures for both developed and developing countries
Table 1
Numerical targets for agriculture The reductions in agricultural subsidies and protection were agreed in the Uruguay Round.
Developed
countries
6 years: 1995-2000
Developing
countries
10 years: 1995-2004
Tariffs
average cut for all agricultural products
-36%
-24%
minimum cut per product
-15%
-10%
Domestic support
total AMS cuts for sector (base period: 1986-88)
-20%
-13%
Exports
value of subsidies
-36%
-24%
subsidized quantities (base period: 1986-90)
-21%
-14%
LDCsdo not have to make commitments to reduce tariffs or subsidies.
Source: http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm
For products whose non-tariff restrictions have been converted to tariffs, governments are allowed to take special emergency actions ("special safeguards") in order to prevent swiftly falling prices or surges in imports from hurting their farmers. But the agreement specifies when and how those emergency actions can be introduced (for example, they cannot be used on imports within a tariff-quota).
Four countries used "special treatment" provisions to restrict imports of particularly sensitive products (mainly rice) during the implementation period (to 2000 for developed countries, to 2004 for developing nations), but subject to strictly defined conditions, including minimum access for overseas suppliers. The four were: Japan, Rep. of Korea, and the Philippines for rice; and Israel for sheepmeat, wholemilk powder and certain cheeses. Japan and Israel have now given up this right, but Rep. of Korea and the Philippines have extended their special treatment for rice. A new member, Chinese Taipei, gave special treatment to rice in its first year of membership, 2002.
Domestic Support( article 6 and Annex 2, 3 and 4 of AoA)
The AoA structures domestic support (subsidies) into three categories or "boxes" namely a
(a)Green Box- measures that are assumed not to have effects on production, such as support for research, marketing assistance
(b) Amber Box- measures that are taken to be trade-distorting and have effect on production, such as input subsidies and price support
(c) Blue Box- measures such as direct payments to farmers to compensate them for programmes to limit their production
The AoA's domestic support system currently allows Europe and the USA to spend $380 billion every year on agricultural subsidies alone. It is often still argued that subsidies are needed to protect small farmers but, according to the World Bank, more than half of EU support goes to 1% of producers while in the US 70% of subsidies go to 10% of producers, mainly agri-businesses.. The effect of these subsidies is to flood global markets with below-cost commodities, depressing prices and undercutting producers in poor countries - a practice known as dumping.
Green Box
The green box is defined in Annex 2 of the Agriculture Agreement. In order to qualify, green box subsidies must not distort trade, or at most cause minimal distortion. They have to be government-funded (not by charging consumers higher prices) and must not involve price support. They tend to be programmes that are not targeted at particular products, and include direct income supports for farmers that are not related to current production levels or prices. They also include environmental protection and regional development programmes. "Green box" subsidies are therefore allowed without limits, provided they comply with certain policy-specific criteria set out.
In the current negotiations, some countries argue that some of the subsidies listed might not meet the criteria of the green box because of the large amounts paid, or because of the nature of these subsidies, the trade distortion they cause might be more than minimal. Among the subsidies under discussion here are: direct payments to producers, including decoupled income support, and government financial support for income insurance and income safety-net programmes, and other paragraphs. Some other countries take the opposite view - that the current criteria are adequate, and might even need to be made more flexible to take better account of non-trade concerns such as environmental protection and animal welfare.
The above shows that developing countries are subjected to the same disciplines to liberalise their agriculture sector as the developed countries, the only concession being slightly lower reduction rates and slightly longer time schedules. The LDCs do not have to reduce their tariffs or subsidies, but they are also committed not to raise them. Thus, developing countries have to abide by a programme of liberalisation.
Amber Box
All domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box, which is defined in Article 6 of the Agriculture Agreement as all domestic supports except those in the blue and green boxes. These include measures to support prices, or subsidies directly related to production quantities.
These supports are subject to limits: "de minimis" minimal supports are allowed (5% of agricultural production for developed countries, 10% for developing countries); the 30 WTO members that had larger subsidies than the de minimis levels at the beginning of the post-Uruguay Round reform period are committed to reduce these subsidies.
The reduction commitments are expressed in terms of a "Total Aggregate Measurement of Support" (Total AMS) which includes all supports for specified products together with supports that are not for specific products, in one single figure. In the current negotiations, various proposals deal with how much further these subsidies should be reduced, and whether limits should be set for specific products rather than continuing with the single overall "aggregate" limits. In the Agriculture Agreement, AMS is defined in Article 1 and Annexes 3 and 4
Blue Box
This is the "amber box with conditions" - conditions designed to reduce distortion. Any support that would normally be in the amber box, is placed in the blue box if the support also requires farmers to limit production (details set out in Paragraph 5 of Article 6 of the Agriculture Agreement).
At present there are no limits on spending on blue box subsidies. In the current negotiations, some countries want to keep the blue box as it is because they see it as a crucial means of moving away from distorting amber box subsidies without causing too much hardship. Others wanted to set limits or reduction commitments, some advocating moving these supports into the amber box.
Export Subsidies (articles 8,9,10 and 11 of AoA)
The Agriculture Agreement prohibits export subsidies on agricultural products unless the subsidies are specified in a member's lists of commitments. Where they are listed, the agreement requires WTO members to cut both the amount of money they spend on export subsidies and the quantities of exports that receive subsidies. Taking averages for 1986-90 as the base level, developed countries agreed to cut the value of export subsidies by 36% over the six years starting in 1995 (24% over 10 years for developing countries). Developed countries also agreed to reduce the quantities of subsidized exports by 21% over the six years (14% over 10 years for developing countries). Least-developed countries do not need to make any cuts.
During the six-year implementation period, developing countries are allowed under certain conditions to use subsidies to reduce the costs of marketing and transporting exports.
Special and differential treatment in AoA for developing countries
The principle of special and differential (S&D) treatment is that international trade rules should be adapted to the particular economic situation of developing countries.
Within the WTO, S&D treatment has taken two main forms:
With respect to market access commitments, S&D treatment has been implemented through non-reciprocal trade preferences designed to provide preferential access for developing country exports to the markets of developed countries.
With respect to trade rules and disciplines, S&D treatment means that developing countries can be exempted from the need to implement multilaterally agreed rules or might be asked to accept less onerous obligations. In the Uruguay Round, S&D treatment also meant offering developing countries longer implementation periods and possibly technical assistance to help them meet multilaterally-agreed commitments.
The Doha Ministerial Declaration reaffirmed that "provisions for special and differential treatment are an integral part of the WTO Agreements" and agreed that "all special and differential treatment provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational." What this will mean in practice will be determined by the decisions reached in a number of negotiating areas.
Tariff reductions. While the intention is that developed countries will be required to make bigger cuts in their tariffs than developing countries (and least developed countries will not be required to make any cuts), the way in which the tiered formula agreed in the July 2004 Framework Agreement is implemented will be very important in establishing the extent of S&D treatment. Important issues here are the number and position of the tariff bands and the size of the reduction coefficients. Both developed and developing countries will be able to designate a certain number of products as sensitive products, with the possibility of implementing lower tariff reductions on these products than the tiered formula would require.
Special products. In addition, developing countries will be able to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment, with their criteria for selection and treatment to be specified in the further negotiations.
Special safeguard mechanism. Producers in developing countries are vulnerable to import surges and imported price volatility, in the absence of alternative risk management and safety net instruments. It is accepted that a special safeguard mechanism will be established for use by WTO developing country members, but key criteria such as the country coverage, product coverage, trigger levels and preconditions, type of remedy and duration remain to be decided.
Domestic subsidy commitments. Developing countries have proposed some broadening of exempt Amber Box policies as well as other rule changes to increase their flexilibility to be able to provide budgetary support to their producers.
In particular, the S&D measures should enable developing countries to prevent cheap subsidised imports from displacing the products and livelihoods of their farmers. Developing countries should be given the right to protect themselves from dumping, cheap imports and import surges. There should also be measures to assist developing countries to realise the goals of food security and rural development.
Special and differential treatment is provided for developing countries in three main ways under the AoA. First, there are lower reduction percentages and longer implementation periods for the main commitments entered into. Second, there is greater flexibility in the use of certain policy instruments such as investment subsidies and export subsidies. Third, special commitments were entered into for net food-importing developing countries and least developed countries, known as the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries. However, while this Decision contained many exhortatory and 'best endeavour' commitments, no real action has followed from it to date.
The main S&D provisions are:
Least developed countries are completely exempted from making commitments to reduce tariffs, domestic support or export subsidies (Article 15.2);
Investment subsidies which are generally available to agriculture in developing country Members and agricultural input subsidies generally available to low-income or resource-poor producers are exempted from the calculation of aggregate measures of support.
The de minimis level of trade-distorting domestic support permitted to developing countries (10 percent) is higher than that permitted to developed countries (5 percent).
Reductions in tariffs, domestic support and export subsidies are lower or spread over a longer period
Government stockholding programmes aimed at enhancing food security, and the operation of which is transparent and in accordance with officially published criteria, are considered to be in conformity with the Agreement
The provision of foodstuffs at subsidized prices, with the objective of meeting the food requirements of the urban and rural poor on a regular basis and at reasonable prices, is also supposed to be in conformity with the Agreement.
An Unequal Agreement
Since it came into force, the AoA has demonstrated several weaknesses.The AoA contains several types of imbalances that are favourable to developed countries and unfavourable to developing countries. These imbalances have been analysed by Das (1998) and in Third World Network (TWN 2001).
The essence of the unfairness is the following: "The WTO Agreement on Agriculture has allowed developed countries to increase their domestic subsidies (instead of reducing them), substantially continue with their export subsidies and provide special protection to their farmers in times of increased imports and diminished domestic prices. The developing countries, on the other hand, cannot use domestic subsidies beyond a de minimis level (except for very limited purposes), export subsidies and the special protection measures for their frmers. In essence, developed countries are allowed to continue with the distortion of agriculture trade to a substantial extent and even to enhance the distortion; whereas developing countries that had not been engaging in such distortion are not allowed the use of subsidies (except in a limited way) and special protection" (TWN 2001).
The main form of unfairness is in the area of domestic support. Developed countries with high levels of domestic subsidies are allowed to continue these up to 80 per cent after the six-year period. In contrast, most developing countries (with a very few exceptions) have had little or no subsidies due to their lack of resources. They are now prohibited from having subsidies beyond the de minimis level (10 per cent of total agriculture value), except in a limited way. In addition, many types of domestic subsidy have been exempted from reduction, most of which are used by the developed countries. While these countries reduced their reducible subsidies to 80 per cent, they at the same time raised the exempted subsidies substantially. The result is that total domestic subsidies in developed countries are now much higher compared to the base level in 1986-88. Thus, in the EEC, the subsidy in the base period 1986-88 was US$83 billion, and it was increased to US$95 billion in 1996. In the United States, the corresponding levels are US$50 billion and US$58 billion. The professed reason for exempting these subsidies in the developed countries from reduction is that they do not distort trade. However, such subsidies clearly enable the farmers to sell their products at lower prices than would have been possible without the subsidy. They are therefore trade-distorting in effect.
The exemption from reduction applicable to developing countries is limited to four items: input subsidy given to poor farmers; land improvement subsidy; diversion of land from production of illicit narcotic crops; and provision of food subsidy to the poor. The scope is very limited and hardly half a dozen of the developing countries use these subsidies (Das 2000, 1998). Furthermore, subsidies exempted from reduction and used mostly by developed countries (Annex 2 subsidies) are immune from counteraction in the WTO; they cannot be subjected to the countervailing-duty process or the normal dispute settlement process. But those exempted from reduction and used by developing countries do not have such immunity.
With regard to export subsidies, the developed countries get to retain 64 per cent of their budget allocations and 79 per cent of their subsidy coverage after six years. The developing countries, on the other hand, had generally not been using export subsidies, except in a very few cases. Those that have not used them are now prohibited from using them, whilst those that have subsidies of little value have also to reduce the level.
Another inequity is in the operation of the "special safeguard" provision. Countries that had been using non-tariff measures or quantitative limits on imports were obliged to remove them and convert them into equivalent tariffs. Countries that undertook such tariffication for a product have been given the benefit of the "special safeguard" provision, which enables them to protect their farmers when imports rise above some specified limits or prices fall below some specified levels. Countries that did not undertake tariffication did not get this special facility. This has been clearly unfair to developing countries, which, with few exceptions, did not have any non-tariff measures and thus did not have to tariffy them. The result is that developed countries, which were engaging in trade-distorting methods, have been allowed to protect their farmers, whereas developing countries, which were not engaging in such practices, cannot provide special protection to their farmers (Das 2000, 1998).
This inequity and imbalance appears aggravated when one considers the limitation to the use of the general safeguard provision (in GATT) in the agriculture sector. One necessary requirement for taking a general safeguard measure is that there be injury (or threat thereof) to domestic production, which will be extremely difficult to demonstrate in this sector because of the large dispersal of farmers across the country.
Apart from these specific problems in the areas of subsidy and protection, there is a basic problem with the agreement. The AoA is based on the assumption that production and trade in this sector should be conducted on a commercial basis. But agriculture in most of the developing countries is not a commercial operation, but instead is carried out largely on small farms and household farms. Most farmers take to agriculture not because it is commercially viable, but because the land has been in possession of the family for generations and there is no other source of livelihood. If such farmers are asked to face international competition, they will almost certainly lose out. This will result in large-scale unemployment and collapse of the rural economy, which is almost entirely based on agriculture in a large number of developing countries (TWN 2001).
In addition, developed countries have failed to reduce their protection and supports. After many years of the implementation of the AoA, two major problems have arisen. Firstly, the developed countries have not met their commitments (at least in spirit). Secondly, the developing countries have encountered serious problems arising either from the first or from their having to meet their own obligations. The first problem is discussed in this section.
The AoA was supposed to discipline the high levels of protection in the developed countries and, by doing so, offer very substantial benefits in terms of market access to many developing countries, as they have a comparative advantage in agricultural products. In reality, however, the developed countries have made little progress in reducing agriculture protection and subsidies.
High tariffs on selected items of potential interest to the South have had to be reduced only slightly.
In the first year of the agreement, there were tariff peaks at very high rates in the United States (e.g., sugar 244 per cent, peanuts 174 per cent); the EEC (beef 213 per cent, wheat 168 per cent); Japan (wheat 353 per cent) and Canada (butter 360 per cent, eggs 236 per cent) (Das 1998: 59). According to the agreement, developed countries needed to reduce their tariffs by only 36 per cent on average to the end of 2000, and thus the rates for some products remain prohibitively high (Das 1998).
Domestic support has increased rather than decreased.
Although the agreement was supposed to result in decreases in domestic support in agriculture, in fact, the overall value of such support has increased. The agreement obliged developed countries to reduce the Aggregate Measurement of Support. However, only some types of subsidies fall under the AMS, and two categories of subsidies are exempted. While developed countries reduced their AMS, they also increased their exempted subsidies significantly, thereby offsetting the AMS reduction and resulting in an increase in total domestic support. According to OECD data, the Producer Subsidy Equivalent (PSE) for all developed countries rose from US$247 billion in the base period to US$274 billion in 1998. (In the EEC it rose from US$99.6 billion to US$129.8 billion, and in the United States from US$41.4 billion to US$46.9 billion.) (Das 2000: 2-3). A more comprehensive coverage of domestic support in agriculture calculated by the OECD is the Total Support Estimate (TSE), which for the 24 OECD countries rose from US$275.6 billion (annual average for base period 1986-88) to US$326 billion in 1999 (OECD 2000).
As explained earlier, what is even more ironic is that most developing countries, by contrast, had previously little or no domestic or export subsidies. They are now barred by the Agriculture Agreement from having them or raising them in future (Das 1998: 62). There is a great imbalance in a situation in which developed countries with very high domestic support are able to maintain a large part of their subsidies (and in fact, due to loopholes in the agreement, to raise their level) while developing countries with low or no subsidies are prohibited from raising their level beyond the de minimis amounts.
Export subsidies are still high.
Regarding export subsidies, the agreement also committed developed countries to reduce the budget outlay by 36 per cent and the total quantity of exports covered by the subsidies by 21 per cent. The base level was the average annual level for 1986-90 and the reduction is to be done over the period 1995-2000. Thus, even in the year 2000 the level of export subsidies is allowed to be as high as 64 per cent of the base level (Das 2000: 3).
The effect of agriculture subsidies in developed countries is that their farm production levels are kept artificially high and their producers dispose of their surplus in other countries, by often dumping on world markets at less than the production cost.
'Dumping' is defined as the sale of products in third markets at less than the cost of production in the exporting country. Dumping from developed countries occurs, in part, because export subsidies bridge the gap between high domestic prices and lower world prices (as in EU sugar and dairy products); and direct payments bridge the gap between higher costs of production and the lower world price (as in EU cereals).
It is generally accepted that currently "practically everything exported from [the USA and EU] involves some level of dumping".In the US, it is calculated that over the past ten years, maize has been sold in third markets at some 5-35% less than its cost of production (COP), cotton 20-55% less than the COP, wheat 20-35%, rice 15-20% and soybeans 8-30%. In the EU, the picture is similar. Recently, wheat was sold at 30-35% less than the COP, sugar 60-75% and skimmed milk powder some 50% below COP. Dumping has three main effects. It depresses world prices, displaces developing country exports in third markets, and undermines domestic production in developing countries as local producers are unable to compete with the cheap imports. Dumping can have a devastating impact on developing country farmers, depriving them of their livelihoods and forcing them to leave their lands. In the process it seriously undermines food sovereignty and food security.
Swaziland produces sugar at less than half the cost of the EU and yet it is unable to compete with EU confectionary imports. These are coming to dominate markets in Swaziland and its neighbours. Sugar production plays an important role in the Swaziland economy. In 1995-6, sugarcane accounted for 53% of agricultural output and 34% of agricultural wage labour, while sugar milling constituted 37% of manufacturing output and 22% of manufacturing wage labour. Swaziland has an annual import quota into the EU of approximately 117,000 tonnes and relatively little EU sugar is exported to Swaziland. However, export subsidies given to EU confectionary manufacturers to encourage global sales have enabled them to undercut prices and reduce the export market for confectionary manufactured in Swaziland. Assouthern African outlets have switched to buying cheaper, dumped EU confectionary, Swaziland's Sugar Daddy factory has gone out of business. Already the dumping of EU sugar products has led to the loss of some 16,000 jobs in the Swazi sugar industry and 20,000 jobs indirectly linked to the industry, such as packaging and transport.
Farmers in developing countries incur losses in three ways namely;
They lose export opportunities and revenues from having their market access blocked in the developed countries using the subsidies;
They lose export opportunities in third countries, because the subsidising country is exporting to these countries at artificially low prices;
They lose their market share in their own domestic market, or even lose their livelihoods, due to the inflow of artificially cheap subsidised imports.
Elimination or reduction of subsidies by developing countries also has had a negative impact. As explained above, developing countries have also been constrained in regard to domestic subsidies for local farmers. The overall amount of the relevant subsidies was recorded for 1995 as a ceiling, and developing countries (except LDCs) are required to reduce this amount by 13.3 per cent over a period of 10 years. There is a small general de minimis exclusion from the subsidy discipline for developing countries of 10 per cent of the value of production (for product-specific subsidies) and 10 per cent of the value of total agricultural production (for non-product-specific subsidies); and also exemptions for limited purposes (such as investment subsidies and input subsidies for poor farmers). These exclusions apart, developing countries are now constrained from increasing the level of domestic support to their farmers and instead have to bring down the level. Developed countries, which in general have offered very high levels of domestic support, have committed themselves to only slightly reducing these. Most developing countries have previously maintained low levels of subsidy and are unable to increase them beyond the exemptions. And even in areas where domestic support is permissible, most developing countries cannot avail themselves of the facility because of the lack of financial resources.
The concessions to developing countries are that the rates of reduction (of tariffs, domestic support and export subsidies) are two-thirds those for the developed countries, and that there is a longer implementation period (10 years compared to six years for developed countries). LDCs are exempt from reductions. These concessions are minor, especially in view of the fact that developed countries are allowed to continue to maintain very high levels of import protection and agricultural subsidies.
Meanwhile, serious problems of implementation have emerged in developing countries. Some countries were asked to reduce or eliminate subsidies, or institutions set up to assist farmers in marketing their products, under the loan conditionalities of the international or regional financial institutions. There is thus an unfair practice of double standards. Whereas the developed countries have maintained or increased their very high domestic support, several developing countries have had their agricultural subsidy system dismantled or their rates reduced.
Subsidies in Southern African countries were reduced or eliminated, and marketing boards closed, under the influence of World Bank loan conditions. A study was done on Malawi, Zambia and Mozambique on the effects. There was a collapse of input and credit supply in some cases, and food reserves were liberalised. In Zambia, maize and fertiliser subsidies were removed. An internal World Bank study in 2000 said: "The removal of subsidies led to stagnation and regression instead of helping Zambia's agriculture sector"
Moreover, import liberalisation through the removal of non tariff barriers has had detrimental effects on developing countries. In fact, under the AoA developing countries (including LDCs) have to remove non-tariff controls on agricultural products and convert these to tariffs. Developing countries are then required to progressively reduce these tariffs, while LDCs are exempt from this requirement. In many developing countries this has threatened the viability of small farms that are unable to compete with cheaper imports. Many millions of small Third World farmers could be affected. The process has also increased fears of greater food insecurity, in that the developing countries will become less self-sufficient in food. For many, food imports may not be an option due to shortage of foreign exchange.
One of the most comprehensive studies of the effects of the WTO Agriculture Agreement was conducted by the Food and Agriculture Organisation (FAO), which surveyed the experience of 14 developing countries in implementing the agreement. The two-volume study (FAO 2001, 2000) made several interesting findings, including the following (FAO 2001: 3-26):
Import liberalisation had a significant effect. The average annual value of food imports in 1995-98 exceeded the 1990-94 level in all 14 countries, ranging from 30 per cent in Senegal to 168 per cent in India. The food import bill more than doubled for two countries (India and Brazil) and increased by 50-100 per cent for another five (Bangladesh, Morocco, Pakistan, Peru and Thailand).
Increases in food imports were generally significantly greater than increases in agricultural exports. In only two countries was export growth higher while in most other countries import growth far outstripped export growth. The study also measured the ratio of food imports to agricultural exports and found the ratio was higher in 1995-98 than in 1990-94 for 11 of the 14 countries. An increase in the ratio indicates a negative experience, as it shows food import bills growing faster than agricultural export earnings. The worst experiences were those of Senegal (86 per cent rise in the ratio), Bangladesh (80 per cent) and India (49 per cent) (ibid.: 22-24). As the FAO's Senior Economist concluded: "A majority of the studies showed that no improvement in agricultural exports had taken place during the reform period…. Food imports were reported to be rising rapidly in most of the countries, and import surges, particularly of skim milk powder and poultry, were common. While trade liberalisation led to an almost immediate surge in food imports, these countries were not able to raise agricultural exports due to weak supply response, market barriers and competition from subsidised exports" (FAO 2000: 30).
Although bound tariffs were generally high, the applied tariffs were on average much lower for the countries surveyed. Most countries had already reformulated their domestic policies under structural adjustment programmes. The simple average of the applied rates for 12 of the 14 countries was 22 per cent whereas the bound rate was 90 per cent. Some countries were obliged to set applied rates well below their WTO bound rates due to loan conditionality. While bound tariffs were high on average, there were several exceptions: Egypt's rates (28 per cent average) were low; India's tariff binding was zero for 11 commodities (including sensitive items like rice and some coarse grains), and all of Sri Lanka's agricultural tariffs were bound at 50 per cent with applied rates capped at 35 per cent for 1999.
Several case studies reported import surges in particular products, notably dairy products (mainly milk powder) and meat. In some regions, especially the Caribbean, import-competing industries faced considerable difficulties. In Guyana, there were import surges for many main foodstuffs that had been produced domestically in the 1980s under a protective regime (FAO 2001).
In Sri Lanka, policy reforms and associated increases in food imports have put pressure on some domestic sectors, affecting rural employment. There is clear evidence of an unfavourable impact of imports on domestic output of vegetables, notably onions and potatoes. The resulting decline in the cultivated area of these crops has affected approximately 300,000 persons involved in their production and marketing. The immediate possibilities for affected farmers to turn to other crops are limited. Consequently, the economic effects of import liberalisation in this sector have been significant (ibid.: 325-26).
There was "a general trend towards the consolidation of farms as competitive pressures began to build up following trade liberalisation" and this has led to "the displacement and marginalisation of farm labourers, creating hardship that involved typically small farmers and food-insecure population groups, and this in a situation where there are few safety nets" (ibid.). The study noted especially the case of Brazil, where consolidation taking place in the dairy, maize and soybean sectors has affected traditional cooperatives and marginalised small farmers.
Some reforms which should be considered
In light of the developing countries' disappointment with the AoA, the WTO membership endorsed the idea of a 'development round' at Doha. It was supposed to give special consideration to the needs and concerns of developing countries. The Doha Declaration stressed that special and differential treatment for developing countries would be integral to the agricultural negotiations. However, the drafts submitted by US, EU and OECD are still disappointing and highly controversial. It was widely seen that the draft did not represent all members' interests fairly, and in particular was inadequate with respect to developing country concerns.
Developing countries in particular are dependent on agriculture as a major source of employment and foreign exchange, and the AoA rules should be changed to allow these countries to nurture their domestic agricultural production and markets. Exemptions from tariff and domestic support reductions should be revised to take into account relative economic dependence and poverty.
Market access.
Developing countries, especially poor members, should be allowed to limit market access, by the application of tariffs, quotas or variable levies, to protect the existence of agricultural systems that they can show provide environmental or other public goods. This would allow poor Members to take action to protect their environments and peasant farmers, when they do not have the fiscal resources to do so. Tariff, special safeguard and tariff quotas are three important aspects of market access which should be considered to amend to meet the needs of developing countries. There are some suggestions about these aspects.
First, in order to keep food security and protect peasant farmers, developing countries should control imports of food directly. At the same time, AoA should allow developing countries to execute quantitative restrictions. When a country takes such measures, it should note the Secretariat of WTO and prepare to negotiate with other countries if they require. The tariff cut commitment of products which related to food security should be abolished. When developing countries found the current tariff of a certain product could not protect peasant farmers, they can negotiate with interest concerned countries and ask for rise limited tariff. In such situation developing countries should not be asked for compensation.
AoA should give a 'top' tariff which could apply to all the products. That means the tariff of any product cannot be higher than the 'top' tariff. As the special and differential treatment, developing countries could have a higher 'top' tariff than developed countries. There should be a certain proportion of the total agriculture tariff cut (such as at least a certain percent) and of every agriculture tariff cut during five years. At the same time, give developing countries lower proportion and longer time.
Second, there should be a provision that developing countries could execute special safeguard measure. Because it is complex to start the measure, the AoA should afford a simple standard of startup for developing countries. One possible way is if the import level exceeds a certain proportion of the average level of last three years, developing countries could execute special safeguard measure. The same way can be used in trigger price: when the price falls to a certain proportion of the average price of last several years, they can use the measure.
Third, except the tariff quotas for some special countries, there should be more tariff quotas that could be executed by all the members with transparence. In particular, tariff quotas should be used by export countries which actually implement non-discrimination policy.
Domestic support.
First, the supports including in blue and green boxes should be restricted and cut as same as those in amber box. There must be a schedule of supports reducing: all the supports must be abolished before a certain time, and the proportion of supports reducing of every year should be set. Further more; domestic support should be restricted by Dispute Settlement Mechanism. Second, in order to protect food security and peasant farmers, developing countries could afford domestic supports to products which for domestic consumption and peasant farmers. Such supports should not be restricted by Dispute Settlement Mechanism. To insure the supported products are only used for domestic consumption, only the non-exported products or the products which in the limitation of lowest export (a certain percent of products) could apply such supports. And the definition of peasant farmer should be determined by idiographic society and economic conditions of developing countries. The de minimis commitment of market access of developing countries should be abolished.
Export subsidies.
First, all kinds of export subsidies, including export credit, export credit guarantee and export insurance, should be cancelled during a certain period or before a certain time. All countries should note WTO Secretariat about their plans and measures of export subsidies cutting so that Secretariat can supervise them effectively. The developing countries should be afforded a longer period. Second, AoA should allow developing countries to execute export subsidies for high-tech agriculture products. There should be a top subsidy likes a certain percent of export price of product.
Conclusion
The 1994 Agreement on Agriculture (AoA) laid the groundwork for agriculture negotiations in the Doha Round. The AoA was one of the major achievements of the Uruguay Round of multilateral trade negotiations: it was the first agreement to impose strict disciplines on agricultural trade. The AoA focuses on four areas of reform: market access, domestic support, export competition, and sanitary/phytosanitary issues. Under the agreement, members commit themselves to reducing import tariffs, export-promoting subsidies, and total aggregate support to agricultural producers. The agreement also takes into account the particular needs and conditions developing countries face and allows them a more gradual course of liberalization. The AoA exempts rural development programs and development-oriented domestic support when calculating total aggregate support, thus allowing countries to maintain certain subsidies and supports during the process of liberalization.
In many poor countries, agriculture not only accounts for a large share of gross domestic product (GDP), but is also the primary source of employment, food and livelihood for the majority of the population. This is in contrast to the situation in the world's two biggest agricultural exporters, the European Union (EU) and the United States (US), where agriculture employs a tiny percentage of the population and makes only a small contribution to the economy. Yet it is the EU and US that give most protection to agriculture, using high tariffs and huge subsidies to shield their producers from competition.
