Status of Agriculture Negotiation in the WTO

1. Status of Agriculture Negotiation inthe WTO

2. WTO Genesis WTO Came into existence on 1-1-1995 with the conclusion of Uruguay Round Multilateral Trade Negotiations at Marrakesh on 15th April 1994, to facilitate: • Transparent, free and rule-based trading system • Provide common institutional framework for conduct of trade relations among members • Facilitate the implementation, administration and operation of Multilateral Trade Agreements • Rules and Procedures Governing Dispute Settlement • Trade Policy Review Mechanism • Concern for LDCs and NFIDCs • Concern on Non-trade issues such as Food Security, environment, health, etc.

3. The General Agreement on Trade and Tariff (GATT) came into existence in 1947 • It sought substantial reduction in tariff and other barriers to trade and to eliminate discriminatory treatment in international commerce. • India, a signatory to GATT 1947 along with twenty two other countries • Eight rounds of negotiations had taken place during five decades of its existence

4. WTO- AoA of 1995 Aims at • Fair and market oriented trading system • Commitments on support and protection reduction • Operationally effective GATT Rules & Disciplines • Commitment to Equitable Trade Reform process • Greater opportunities and Terms of Access to Developing countries • Concern for LDCs and NFIDCs • Concern on Non-trade issues such as Food Security, environment, health, etc.

5. Long-term Objective: To establish a fair and market oriented system by substantial progressive reductions in agricultural support and protection, Commitments on three pillars: Market access, Domestic Support Export Competition.

6. Domestic Support in AoA Green Box - Research, Extension, PDS, Market promotion, Infrastructural services, DecoupledPayments, Public stockholding for food security Blue Box - Production Limiting Subsidies ; Amber Box - AMS-subject to reduction commitments - Product specific (MSP) - Non product specific (input subsidies-fert. Power, irrigation, Art 6(2) benefit for developing countries).

7. Reduction commitments in AoA

8. Mandate for further Reforms ARTICLE 20 OF THE AoA MANDATES FRESH NEGOTIATIONS WHICHSTARTED IN 2000, TAKING INTO ACCOUNT: • THE EXPERIENCE OF THE AoA IMPLEMENTATION • THE EFFECTS ON WORLD TRADE IN AGRICULTURE • NON TRADE CONCERNS • WHAT FUTURE COMMITMENTS ARE NECESSARY TO ACHIEVE THE LONG TERM OBJECTIVES

9. Doha Development Agenda • Doha Round aims for substantial reduction in trade distorting domestic support, phase out of all forms of export subsidies and substantial improvements in market access. • Development concerns, needs and interests of developing and least developed countries placed at heart of DDA, Special & Differential Treatment, (July Framework).

10. Domestic Support: Key components • Cuts in Overall Trade-distorting Domestic Support • Cuts in Aggregate Measure of Support (AMS) • Product-Specific ceilings • Blue Box and associated disciplines • Green Box review, monitoring & surveilance • Cotton

11. Market Access: Key components • Tariff cuts for developed and developing countries as per tiered formula, • Sensitive Products, flexibilities • Tariff capping, tariff simplification etc. • Special Product (SP) and Special Safeguard Mechanism (SSM) for developing countries to address their concerns of food & livelihood security and rural development.

12. Export Competition: Key components • Phase out of export subsidies • Food Aid and commercial displacement • State trading enterprises • Export credits and guarantees

13. THE MULTILATERAL PROCESS IN GENEVA • Draft modalities paper issued on 17 July 2007 • Initial discussions on paper held in Geneva during 23-27 July 2007 • What are the proposals on the table?

14. PROPOSALS Agriculture: Domestic support (1) OTDS: US to cut to between $13-16.4 billion. EU to reduce to €16.5-27.6 billion (2) AMS: EC to cut by 70% to €20.15 billion; US to cut by 60% to $7.6 billion. (3) Product specific: AMS caps: Base period for all countries except US to be 1995-2000; special dispensation for the US on the base period.

15. PROPOSALS Market Access Tariff cuts: (1) Separate tariff bands for developed and developing countries as proposed by G-20. Tariff cuts lower than G-20 proposals, to accommodate EC & G-10. Tariff bands and cuts for developed countries:

16. Tariff bands for developing countries: Tariff cuts to be two-third cuts taken by developed countries in each band. India’s Agricultural tariff profile:- Bound Tariffs Average Bound Tariff = 111% Average Applied Tariff = 37%

17. (2) No overall proportionality for developing countries: two-thirds band proportionality implies average tariff cuts of 41-44% for India compared to 52-57% for EC. • Maximum cut for developing countries proposed in the Draft Modalities at 36-40%; to take care of concerns to some extent. • Greater flexibilities for Small and Vulnerable Economies and other small countries proposed in the Draft Modalities.

18. What is agreed for SP Para 7 0f Hong Kong Ministerial Declaration: (December, 2005) “….Developing country Members will have the flexibility to self-designate an appropriate number oftariff lines as Special Products guided by indicators based on the criteria of food security, livelihood security and rural development.”

19. Indicators for SPs G33, a group of about 46 Developing countries and LDCs proposed about 12 indicators based on the agreed criteria, as required under paragraph 7 of Hong Kong Declaration. These are taken as the basis for negotiation on SP.

20. PROPOSALS SPs Draft modalities text proposes self-designation on the basis of the indicators which are open to verification against international / national data; start work with G-33 indicators. The treatment of SPs (extent of tariff cuts to be taken) still open for negotiations. Special Safeguard Mechanism (SSM) Text honours the mandate; price and volume triggers, proposes that safeguard duties should not cross Uruguay Round bound levels subject to negotiations.

21. Special Product and Special Safeguard Mechanism are defensive instruments available for the Developing Countries to protect the resource poor and vulnerable farmers from the possible adverse effects of ambitious reforms and trade liberalization in agriculture envisaged in the current WTO negotiations and to better manage the reforms for over all development.

22. PROPOSALS Export Competition • Developed countries to eliminate export subsidies by end 2013. • Subsidies to be halved by end 2010 and remaining commitments eliminated in equal instalments by end 2013. • Developing countries to continue to have right for some export subsidies up to 5 years after and date for elimination of all subsidies.

23. Overall Assessment of Draft modalities • A relatively better balanced paper which is generally well received and has formed the basis for present engagement in the WTO. • Negotiations has started in Geneva from first week of September 2007.

24. Policy Implications • Present trend of negotiations point towards aggressive stand being taken by some of the developing countries which want tighter norms for SP and SSM, on the ground that these will adversely affect their export interests. • Higher risk of imports from more efficient producers in developing countries like Thailand, Argentina, Brazil, Vietnam etc. than from developed countries.

25. Enhancing competitiveness of farming is more difficult in view of declining farm income and profitability in relative terms compared to the non-farm income due to lower agriculture growth and proportionately higher percentage of the population depending on agriculture and allied sector. • Emphasis on improving income of the farmers from farm and non-farm activities in addition to improving productivity of different activities in farm sector. • Risk mitigation measures, social security cover.

26. Promoting entrepreneurship, empowerment through better training and extension, quality awareness and farmer friendly research • Improving investments in agriculture sector particularly in rural infrastructure • Market reforms, encouraging linkage with food and agro processing industries • Improving access to credit and other essential inputs required for boosting farm income • Emphasis on sustainable management of resources

27. A major Policy reorientation with strong focus on welfare of farmers, particularly of small & marginal farmers and agricultural labourers and their empowerment in order to improve their efficiency and income is necessary.

28. Some of the initiatives taken by the Govt. of India like the new schemes of Food Security Mission and RKVY can achieve this reorientation. While preparing proposals State/UT Govt. may take this into account.

29. Suggested follow up action • Watch on trade and market scenario and to intimate surges in imports or fall in prices of agricultural products • Intimate if any agricultural produce of the State should be designated as SP with justification and data • Action plan to improve competitiveness, income of farmers and bridge yield gap, decentralized planning • Input subsidy; expenditure on capacity building empowerment and infrastructure

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