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DOHA Round & Agriculture Riho Kruuv Jennifer King Jennifer Lord Kouraichi Tome Tanevski
History of AG Negotiations • Original GATT • Did not apply to AG trade • Allowed countries to use NTB-s such as import quotas and subsidies • Export subsidies as a main “evil” • Distortion of AG trade as a result • Uruguay Round as a breakpoint • Liberalization commitments implemented over a six year period (10 years for developing countries) starting in 1995. • Least developed countries - no commitments to reduce tariffs or subsidies. • Participants agreed to initiate negotiations for continuing the reform process one year before the end of the implementation period i.e. in 2000 (The negotiations are now underway).
WTO AG Agreement • Objectives: • To reform trade in the AG sector and to make policies more market-oriented. • To improve predictability and security for importing and exporting countries • Specific Targets: • Market access — various trade restrictions confronting imports • Domestic support — subsidies and other programs, including those that raise or guarantee “farmgate” prices and farmers’ incomes • Export subsidies and other methods used to make exports artificially competitive
WTO Compliance Uruguay Round Agreement on Agriculture (URRA) Commitments: Policies that seriously distort trade were differentiated from those with minimal trade effects. The two respective categories were labeled "amber box" and "green box." AMBER Box: trade distorting policies targeted for reductions under the URAA (e.g., price supports, marketing loans, payments based on acreage or # of livestock, input subsidies, etc.) GREEN Box: non-trade distorting policies & acceptable under URA, including taxpayer-funded and non-transfers from consumers for research, extension, pest/disease control, crop insurance, marketing/promotion, natural disaster relief, conservation programs, public stockholding, decoupled income support, income safety nets, etc. BLUE Box: trade distorting policies BUT exempt from reductions under URAA (including direct payments linked to certain production-limiting policies)
Uruguay Round: EU, Japanese, and U.S. Agricultural Domestic Support, 1998 (US Dollars in Billions)
Doha & Agriculture • The Doha Declaration commits WTO members -to negotiate substantial improvements in market access for agricultural products - reduce, with a view to phasing out, all forms of export subsidies - substantially reduce domestic support payments that distort trade. • By the fifth ministerial conference in September 2003, members must submit their tariff schedules detailing the specific concessions they are willing to make by tariff line, based on the modalities they agreed to 6 months earlier in March. Source: www.gao.gov
Tariffs and quotas Domestic support (amber, blue and green boxes) Export subsidies and restrictions State trading Food security Food safety Rural Development Geographical indicators Safeguards Environment Trade preferences Food aid Consumer information and labeling Sectorial initiatives Development box, single commodity producers, small island developing states, special aid and differential treatment Additional issues (food aid, the Green Box, tariff quota expansion) Doha AG Issues
WTO AoA Participants • European Union (15 members) • USA • Japan • Groups of countries: • The Cairns Group (1/3 World AG exports; 18 members: Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay) • “African Group” (41 African countries) • ASEAN (members of WTO) • Caricom (Caribbean Community countries) • Mercosur ( Argentina, Brazil, Paraguay, Uruguay) • “Small Island Developing States” (SIDS; 9 members) • “Developing Country Grouping” • “Non-trade Concerns” • “Transition” (Mostly countries of CEE) • Mixed groups (Common proposals of the countries from various groups)
Developing Countries and the Doha Round • The World Bank classifies 105 current WTO members, or approximately 73 %, as developing countries • Agricultural products are often their primary exports • Suffer from remoteness, vulnerability to natural hazards • Lack of resources and lack of economies of scale
Cairns Group on Export Subsidies and Domestic Support (September 2002) • Developing and least-developed countries should not be compelled to compete with products receiving trade-distorting support which largely originate from developed countries. • Real cuts to distorting support along with improved disciplines on domestic support will be fundamental to agricultural trade liberalization and a successful Doha Round outcome. • Substantial reductions in distorting domestic support will lead to more open and efficient markets to the benefit of all Members, especially developing countries.
EU & WTO • EU has a non-agricultural applied tariff average of 4.1% • EU has an average tariff of 16.1% for agricultural products • Doha Round requires EU to change its policies on textiles and agriculture • Thus far EU has complied on textiles, but has failed to resolve CAP issues • EU is the highest user of ag export subsidies in the world
The Cost of the CAP According to a recent article in the British newspaper The Guardian high tariffs and subsidies extol a huge price for third world agricultural producers. The article says that an average family in the EU pays higher food prices and an extra 16 pounds a week in taxes to support the CAP “The CAP is, however, in a class of its own when it comes to damaging the interests of poor countries, because support is more concentrated on export subsidies which allow European farmers to dump their products on world markets. The EU exports wheat at two-thirds of what it actually costs to produce, its sugar at only 25% of the cost of production. At a time when a fifth of the world's population lives on a dollar a day, the average cow in the EU receives a Dollars 2.20 daily handout from Brussels.”  Elliot, Larry. (2002, October 30). Analysis: An EU cow is given Dollars 2.20 daily - the world's poor live on Dollars 1 a day.The Guardian. Pg. 4.
A Political History of U.S. agriculture The development of farm subsidies • Rooted in 1930s Depression Era; USDA created as part of “New Deal” Introduction of mixed strategy • Price Supports (“loan rates” & “target prices”), • Supply Control (“set-asides” & “conservation reserve”) • Trade Interventions (export subsidies, import quotas) with continual adjustments (new Farm Bill every 5 yrs) • Crop Insurance, Commodities, Farm Loans, Commodity Purchase & Donation • Purposes: Designed to provide emergency aid to maintain safe & affordable food supply & keep prices reasonable & consistent for farmers • Supplied some stability, but created many problems, including: • Market inefficiencies by holding prices artificially low • Worked against small & medium farmers because it tended to discourage diversification & crop rotation • Provided disproportionate benefits to large-scale agriculture • 1970s Commodity boom, falling interest rates → prosperity, spike in land value • 1980s Commodity bust & rising interest rates → farm crisis • 1985 Farm Bill: rebalance instruments to increase exports (less supply control & stockholding, more payments)
A Political History of U.S. agriculture • 1990s Technical change, falling interest rates = prosperity for those using new technologies • 1995 - 1996: Commodity price spike • Federal Agricultural Improvement Act of 1996: designed to eliminate price support fixed payments (“decoupling”) and allow for market dictated prices after its expiration in 2002 • 1997 - 2002: Commodity prices decline • 1998 - 2001: “Emergency” payments • Farm Security & Rural Investment Act of 2002 • $180 billion farm bill signed into law by Pres. Bush on May 13, 2002 • “Countercyclical” payments restored • Directs U.S. agriculture policy for next six years • Included $9.2 billion in new funding for conservation programs
QUESTION: Why is agricultural trade and agricultural policy important for U.S. agriculture? U.S. is world’s leading exporter of grains -- accounts for 30 - 60% of the international market Major Export Crops: corn, barley, oats, wheat, soybean, cotton, rice Domestic Food/Agricultural Sector Accounts for 1/5th of GNP Employs 20% of nation’s workforce Agricultural exports currently provide employment for 765,000 Americans Helps offset the trade deficit U.S. exports increased from $7.3 billion to in 1970 to $53.5 billion in 2001
U.S. Export Policy “American agriculture is currently twice as reliant on international markets as the U.S. economy as a whole, and by the year 2000 it will be 2.5 times as reliant.” – USDA Secretary Dan Glickman (1996) • Aggressive pursuit of agro-export growth since 1970s, when the U.S. experienced its first trade deficit of the century & the international community suffered a widespread food crisis • Food/Agriculture policy targeted at building new market share and promoting U.S. food exports Various Export Promotion Programs and Tools • Commodity Credit Corporation's Facility Guarantee Program • Export Enhancement Program • Emerging Markets Program (authorized by the Food, Agriculture, Conservation, and Trade Act of 1990 • Import licensing • Dairy Export Incentive Program • Canadian Wheat Access Facilitation Program
US Policy Recommendations • US & EU should cooperate at Doha and work together to represent the concerns of developed countries • In accordance with the Doha Mandate export subsidies should be eliminated • The US should keep crop and disaster insurance and gradually reduce price supports and shift funds to R&D for alternate uses of agricultural products like ethanol • Industrial countries should provide greater market access, and reduce their excessive use of domestic supports for agricultural products
Sources • Babkina, A.M. (2000). World Trade Organization: Issues and Bibliography, Huntington, New York: Nova Science Publishers. • Elliot, Larry. (2002, October 30). Analysis: An EU cow is given Dollars 2.20 daily - the world's poor live on Dollars 1 a day. The Guardian. Pg. 4. • EU/WTO: Supachai Urges Progress in Doha Talks. (2002, October 5). European Report. • EU/WTO: Bleak Prospects for Breaking Down Farm Trade Barriers. (2002, November 1). European Report. • General Accounting Office. World Trade Organization: Early Decisions Are Vital to Progress in Ongoing Negotiations.GAO-02-879, September 4, 2002. • Web site of the European Commission, www.europa.eu.int • Web site of the Cairns Group, www.cairnsgroup.org • Web site of WTO, www.wto.org • EU/WTO: Supachai Urges Progress in Doha Talks. (2002, October 5). European Report. • EU/WTO: Bleak Prospects for Breaking Down Farm Trade Barriers. (2002, November 1). European Report. • World Trade Organization. (June 26, 2002). Trade Policy Review European Union Report by the Government. Retrieved from: www.wto.gov on October 27, 2002. • World Trade Organization. (June 26, 2002). Trade Policy Review European Union Report by the Secretariat. Retrieved from: www.wto.gov on October 27, 2002.