Agriculture, Market Access, and Development in the WTO

On Thursday, April 18, 2002, the Carnegie Endowment sponsored a presentation by former Indian trade negotiator Shishir Priyadarshi on the role of agriculture in the new World Trade Organization negotiating round. Mr. Priyadarshi presently works for the South Centre, an intergovernmental organization of developing countries based in Geneva. He is in charge of the Centre’s project to provide technical assistance to developing countries in the World Trade Organization’s ongoing negotiations in agriculture. Prior to his current position, Mr. Priyadarshi worked with the Government of India for nearly twenty years, spending time in the Cabinet Office dealing with issues relating to the WTO and the Agreement on Agriculture on India's domestic agriculture production, and as counselor with the Indian Mission to the WTO in Geneva.

Comments were provided by Bernard Hoekman, research manager for international trade at the World Bank's Development Research Group and research fellow at the Centre for Economic Policy Research.

John Audley, senior associate at the Carnegie Endowment and moderator of the event, gave a brief history of the WTO’s work on agriculture. The Uruguay Round’s Agreement on Agriculture (AoA) included commitments to reduce trade-distorting domestic subsidies and import duties, but with mixed results. Developed countries complain that developing countries have not sufficiently lowered their tariffs, while developing countries retort that wealthier countries have not met their market access commitments. The Doha Ministerial in November 2001 gave negotiators a more precise mandate entering this new round, which is supposed to be finished in 2005 as a single undertaking. Paragraphs 13 and 14 of the ministerial declaration call for comprehensive negotiations on market access, export subsidies and domestic support. These negotiations will be marked by tensions not only between developed and developing countries, but between the United States and Europe over domestic support measures.

Mr. Priyadarshi divided his presentation into five sections. (Click here to view his PowerPoint presentation.) First he discussed the mandate of the negotiations under Article 20 of the Agreement on Agriculture and the Doha declaration. Second, he described the current status of the negotiations. He then explained the similarities and differences among developing countries in their concerns related to the agricultural sector. Next, he described the main issues of interest to developing counties in the negotiations. He concluded with a discussion of what developing countries really want from the round.

Article 20 of the AoA provides the basic framework for agriculture negotiations. It says that negotiations will take account of the experience of implementing the agreement – the basis of current developing-country proposals -- non-trade concerns, and special and differential treatment, which permits carve-outs for developing countries. The mandate from Doha builds on this framework by instructing negotiators to reduce export subsidies and domestic support and to provide meaningful special and differential treatment provisions.

Currently, the negotiations are in their third phase. In the first phase (March 2000 to March 2001), countries submitted very broad proposals. In the second phase (April 2001 to March 2002), negotiators turned the country proposals into technical papers. Developing countries were much more active in those two rounds than they had been in Uruguay Round negotiations, and often collaborated on proposals in large groups. In the third round of negotiations (April 2002 to March 2003), now underway, negotiators hope to formulate and adopt the negotiating modalities.

What these negotiations are evidencing is that developing countries, though cited quite frequently as a bloc, are in fact a very heterogeneous group, particularly on agriculture issues. Among various constituencies, African countries are very concerned about food security; ASEAN countries with special and differential treatment; the Cairns Group with market access; and Caricom with preserving their trade preferences. These differences aside, developing countries also have many properties and objectives in common. Most of their populations are engaged in subsistence agriculture on small family farms marked by low productivity, antiquated methods and poor infrastructure. The farmers are bound by the AoA into dependence on fallible market principles, but they lack any safety nets, with the result being that the number of hungry people in the world has increased over the last three years. To combat these problems, developing countries want to enhance production – not to increase their share of the world market per se, but to increase domestic consumption and alleviate poverty.

To achieve those ends, developing countries in negotiations on market access want deep cuts in tariffs, special and differential treatment provisions, and most critically, a safeguard against import surges that imperil domestic producers. In talks on domestic support, they want to reduce the massive distortions in the playing field created by the AoA. The European Union, for example, can legally support 40 percent of production, but poor countries that had never given support are subject to a de minimis limit of 10 percent; this unevenness is the source of many problems for developing countries, making domestic production difficult even for the purposes of domestic consumption. On non-trade concerns, developing countries are concerned primarily with food security, which can come with the flexibility to protect small farmers.

(Recognizing that eliminating the trade-distorting export subsidies favored in Europe is easier said than done, Mr. Priyadarshi declined to discuss that issue in depth.)

What do developing countries want? Primarily, they want to eliminate trade-distorting support, free and fair market access and the flexibility to support and protect small farmers. They hope to do this through the introduction of a "Development Box" into the agriculture agreement, which would:

• Exempt food security crops from the AoA
• Protect the livelihood of rural population through appropriate tariff bindings
• Protect domestic production systems
• Increase domestic production and productivity, alleviating food security concerns
• Improve market access, especially for exports from low-income farmers
• Increase incomes and reduce poverty
• Address the problems of Net Food-Importing Developing Countries (NFIDCs)

There will be a large gap between what developing countries want from the agriculture negotiations and what they will get, but they are working together better than they ever have before to achieve common goals. The United States has a large role to play and can help by lending its support to "development box" initiatives.

In his comments, Bernard Hoekman agreed that agriculture is a critical issue for developing countries. One of the major problems, he said, is that the prevailing structure of protection is detrimental to developing countries. Tariff peaks are highest in agriculture; in the Quad countries, the ratio of peak to average tariffs is 55:1, compared to 5:1 to 10:1 in developing countries. Strong agricultural interests in the Quad countries, combined with heterogeneity in developing countries, will make a consensus for reform difficult to achieve.

Mr. Hoekman went on to question whether the WTO is the right forum to address many of these issues, particularly as they relate to poverty alleviation. First, there are problems within many developing countries, where government policies often discriminate against farms are the rural poor. Second, a "Development Box" in the AoA would carry the danger of giving legitimacy to European and Japanese calls for multifunctionality. Third, in trying to figure out what kind of rules make the most sense for developing countries, it might be better to work through a more cooperative and less litigious forum than the WTO.

Questions at the discussion touched on a number of subjects, including South-South trade disputes, the relationship between agriculture and anti-dumping/countervailing duty disciplines, the environment, and the capacity of the WTO to handle as wide a variety of negotiation areas as it does.

Summary by Edward Sherwin, junior fellow.