Inter-American Development Bank
Integration and Regional Programs Department
Research Department
MARKET ACCESS IN THE AMERICAS:
AN UNFINISHED AGENDA
Background document prepared by the
Integration, Trade and Hemispheric Issues Division∗
for the seminar
“Looking Beyond Our Borders:
Opportunities and Challenges of the New Regionalism”
Annual Meetings of the Board of Governors, Inter-American Development Bank
And Inter-American Investment Corporation
Fortaleza, Brazil
March 11, 2002
∗
This background document is based on several ongoing studies from the Integration, Trade and Hemispheric Issues
Division of the Integration and Regional Programs Department of the IDB on market access issues. In particular,
Chapter II is based on Estevadeordal, A. and M. Shearer (2002) “Trade Policy and Regional Integration in the
Americas: A Quantitative Assessment”; Chapter III is based on Jank, M. and R. Finch (2002) “Perspectives for
Agriculture in Multilateral and Regional Negotiations” and Chapter IV is based on Granados, J. (2002) “ The FTAA
Agenda for Market Access Negotiations”. The views expressed in this document are the author’s and do not necessarily
reflect those of the Inter-American Development Bank.
Index
CHAPTER I - INTRODUCTION
1
CHAPTER II - THE COMPLEX WEB OF MARKET ACCESS LIBERALIZATION IN THE 1990s
2
II.1. Unilateral, Multilateral and Preferential Liberalization
2
II.2. Instruments for Market Access Liberalization
6
CHAPTER III. AN UNFINISHED LIBERALIZATION IN THE AGRIBUSINESS SECTOR?
20
III. 1. The Political Economy of Agricultural Protection
20
III.2. Agricultural Market Access and Subsidies in the Western Hemisphere
25
III.3. Conclusion: Perspectives for agricultural liberalization in the Western Hemisphere
38
CHAPTER IV. MARKET ACCESS IN THE FTAA
39
IV.1. Development of the FTAA process: 1995-2002
39
IV.2. The agenda for negotiating market access for goods
40
IV.3. The Challenges Ahead
41
IV.4. Balancing inter-group concessions
47
IV.5. What interactions are there with the WTO?
48
IV.6. The road ahead
49
REFERENCES
52
CHAPTER I - INTRODUCTION
Trade Liberalization occupies a prominent chapter in any economic history account of Latin
America in the XX century, a century where external events have played a key role in determining
the development path for most countries in the region. Some decades from now, when future
economic historians look back at the turning point of this century they will have to pay special
attention, once again, to the role played by the external trade policies undertaken by most
countries in the region (and their most important partners) during the 1990s. Among all structural
reforms implemented in recent times, trade liberalization in general, and market access
liberalization in particular, stands out as the most consistent policy advocated by countries
throughout the period. Although the extent of liberalization has varied from country to country and
from sector to sector, economic historians will look back at this period as the most open in the
region since the period before the Great Depression of the 1930s. However, the agenda on market
access in the hemisphere is far from being finished.
This document presents a detailed account on how much market access liberalization has been
achieved in the hemisphere in recent times, and what is left to be completed evaluating a decade
characterized by a complex web of simultaneous unilateral, multilateral and preferential (bilateral or
regional) liberalization efforts in the region. These simultaneous policy efforts have defined a new
paradigm in the region in the way trade policy has been designed and implemented. This new
paradigm was first named by ECLAC as “Open Regionalism” and most recently, in similar but more
theoretical fashion, analyzed by Ethier (1998) and Devlin and Estevadeordal (2001) under the
name of “New Regionalism”. According to Either’s analysis, first, most countries (particularly the
smaller ones) have made important unilateral reforms and liberalized trade on a multilateral basis
before (or simultaneously) to the negotiation of new preferential trade agreements. Second, when
the preferential relation involved countries of different relative sizes, the burden of liberalization has
been often on the small country. Third, the trade policy reforms have involved usually deep
objectives, which go beyond traditional market access opening. Finally, there has been a dominant
regional bias, in a geographical sense, in most preferential trade agreements.
The goal of this paper is to provide an in depth analysis of the different pieces of this complex
mosaic on market access negotiations and market access liberalization during the 1990s and the
prospects for further enhancement. Chapter II provides an overview of the trade policy paradigm in
Latin America in recent years quantifying the importance and the degree of liberalization achieved
on several fronts and with respect to various measures affecting trade, mostly tariffs and non-tariff
measures. Chapter III analyzes agriculture, which is probably the most problematic sector in global
market access. Finally, Chapter IV evaluates the status quo and challenges of the ongoing market
access negotiations under the most ambitious trade negotiation ever in the hemisphere, the Free
Trade Area of the Americas (FTAA).
CHAPTER II - THE COMPLEX WEB OF MARKET ACCESS LIBERALIZATION IN THE 1990s
II.1. Unilateral, Multilateral and Preferential Liberalization
Starting in the mid to late 1980s, most of the developing world was moving toward substantial
market-oriented economic reforms, which included, almost without exception, unilateral trade
liberalization policies. In addition, all of this was happening in the context of multilateral efforts in
Geneva to liberalize trade in goods and services around the world, which culminated in the
Uruguay Round Agreements of 1994 and the creation of the World Trade Organization in 1995.
Moreover, a growing interest in regionalism was taking hold around the word, especially in Latin
America, in the context of old regional initiatives or as newly crafted preferential trade agreements.
The mid-1990s marked the tenth anniversary of the beginning of the wave of substantive unilateral
trade reforms undertaken by most countries in the region. The depth of these reforms is self
evident when looking at the average regional tariff rates that went from 40 percent in the mid1980s to 11 percent in mid-1990s. For most countries those tariff cuts were in the order of 50
percent and they were implemented over relatively short periods of time (two to three years).
Average maximum tariffs in the region fell from more than 80 to 40 percent with only very few
countries currently applying maximum tariffs of up to 100 percent on a small number of products.
Tariff dispersion, on average, has declined from 30 percent in the mid-1980s to an average of 9
percent today. Both the highest average rate and the highest dispersion rate, as measured by the
standard deviation, are currently under 18 percent. There are still, however, some important tariff
peaks. On average, approximately 20 percent of tariff lines are subject to rates above 20 percent.
(Table 1).
Also, in the mid-1990s, the Final Act of the Uruguay Round was signed at Marrakech (April 1994),
ending almost a decade of multilateral trade negotiations. The agreements, which made up the
final package entered into force on January 1995, including the agreement establishing the World
Trade Organization, which is responsible for administering the most sophisticated, and
comprehensive world trade agreement ever signed. The Uruguay Round negotiations (1986-1994)
were primarily concerned with two basic issues on market access. First, ensuring greater access to
markets by reducing or eliminating obstacles to trade in goods and services. Second, making the
new levels of market access legally binding under more stringent WTO regulations and
procedures. In the area of tariff liberalization, this latest round of GATT negotiations achieved an
average tariff reduction of 38 percent in industrialized countries and, from the standpoint of the
Latin American and the Caribbean countries, implied substantial commitments to dismantle import
barriers. The central obligation with respect to tariffs requires countries to limit their levels to a
specified maximum or so-called GATT tariff commitment or “ binding”. The latest round resulted in
a significant increase in the number of bound tariff lines. In the case of developed countries, the
increase went from 22 to 72 percent; and in the case of countries in transition, it went from 78 to 98
percent. Latin America as a whole agreed to bind practically all tariff lines. This is especially
significant when compared to the existing levels of tariff bindings before the Uruguay Round
began. In Latin America as a whole, only 38 percent of tariff lines for industrial products were
bound, equivalent to 57 percent of imports. For agricultural products, the percentages were 36 and
74 percent, respectively.
2
Table 1. Tariff Structure in Latin America 1985 - 1999
Average Tariff Rates
((Unweighted Averages)
Tariff Dispersion
(Standard Deviation)
Tariff Peaks
(Average tariff rates top 1
Percent products with
Highest tariffs)
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Paraguay
Peru
Uruguay
Venezuela
1985
39.3
22.7
55.1
20.2
46.5
58.7
33.6
18.7
64.4
35.9
31.6
1988
30.8
16.6
41.5
15.1
46.3
44.5
10.2
18.6
70.5
26.9
42.2
1991
14.2
9.2
20.4
10.8
16.4
16.6
12.6
13.6
16.2
21.3
15.1
1994
15.4
9.7
9.7
10.9
11.3
11.0
12.4
7.3
15.6
13.6
11.3
1997
14.1
9.6
14.9
10.8
11.4
9.9
13.7
10.0
13.1
10.1
11.5
1999
15.5
9.7
15.8
10.0
12.2
14.3
17.9
13.2
13.6
13.8
12.8
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Paraguay
Peru
Uruguay
Venezuela
9.4
4.6
28.0
1.6
16.9
56.0
20.3
13.8
24.6
14.9
25.2
10.3
1.3
19.5
.9
17.4
35.0
6.6
13.7
24.4
11.3
36.3
6.0
2.5
16.8
1.5
8.0
10.4
5.2
11.8
5.8
6.5
11.0
8.8
1.1
6.9
.9
5.8
6.0
5.5
6.8
3.8
5.9
6.1
6.4
1.4
7.1
1.2
5.8
8.3
14.2
6.3
3.6
6.4
5.8
6.2
1.2
6.2
0.5
6.2
6.6
14.8
6.6
3.6
6.7
6.5
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Mexico
Paraguay
Peru
Uruguay
Venezuela
51.5
32.3
108.0
27.4
85.0
245.0
105.5
50.0
104.0
60.0
100.0
57.6
17.0
85.0
20.0
88.0
125.0
20.0
50.0
109.0
45.0
139.9
25.0
10.0
70.0
11.0
51.4
37.0
20.0
52.0
25.0
30.0
40.0
30.0
10.0
20.0
11.0
20.0
20.0
20.0
32.0
25.0
20.0
20.0
27.2
10.0
35.0
11.0
20.0
24.5
56.2
23.7
25.0
22.0
20.0
31.3
10.0
34.0
10.0
22.7
25.7
113.5
24.5
25.0
23.0
25.0
Source: Estevadeordal and Shearer (2002)
These unilateral and multilateral reforms have been accompanied in Latin America and the
Caribbean by an active agenda of Free Trade Agreements (FTAs).1 FTAs have a long history in
the region. In the 1950s there was much discussion of a Latin American Common Market.
Following a decade of negotiations the Latin American Free Trade Association (LAFTA),
comprising the South American countries and Mexico was launched in 1960. The same year the
Central American Common Market (CACM) was also officially launched. Also, the Andean Group
(AG) was founded in 1969. While the agreements experienced some success (especially the
CACM), it was short lived. By the second half of the seventies all of them were in great difficulty
and most of them fell into open crisis in the 1980s. These old Post-War regional initiatives can be
characterized by the following stylized facts. First, the central objective of the agreements was to
support the prevailing state-led import substitution industrialization (ISI) model of development. The
model was expressive of export pessimism, skepticism regarding private markets, and great
1
. A detailed comparative analysis between the “Old” and “New” Regionalism can be found in Devlin and
Estevadeordal (2001) and an application in the case of Mercosur in Estevadeordal, Goto and Saez (2001).
3
concern about the presence and dependence on foreign firms. The goal was to industrialize by
substituting imports behind high levels of national protection (effective protection reached levels of
150-200 percent), state planning and direct public sector intervention in markets. Second, regional
integration was seen as an instrument to overcome the limitations of the ISI model through the
creation of a regional market. The approach was to eliminate internal barriers to trade while
maintaining high levels of external protection and expanding industrial planning to the regional
level. Third, the liberalization mechanisms were mostly based on multiple positive lists coupled with
by complex arrangements for special and differential treatment for the less developed members.
Fourth, the creation of a costly bureaucratic architecture inspired by the European model in most of
the agreements cum sectoral industrial programming, eroded credibility with the private sector.
Fifth, in terms of liberalization and trade, the old schemes generally did not succeed in meeting
their most basic objectives. Negotiations and liberalization schedules bogged down quickly. Hence,
effective liberalization was limited and growth of intra-regional trade modest (Central America was
probably the only important exception). Other disciplines often did not go beyond paper accords.
The debt crisis of the early 1980s and consequent balance of payments problems induced a deep
recession in Latin America and with that, a severe contraction of intra-regional trade. However, to
the surprise of many observers, new regional initiatives began to appear in the second half of the
1980s and a true resurgence materialized in the decade of the 1990s. The initial preferential
arrangements were the so-called Economic Complementary Agreements (Acuerdos de
Complementación Económica or ACE in Spanish) under the framework of the Latin American
Integration Association (LAIA, or ALADI, Asociación Latinoamericana de Integración in Spanish),
that was created in 1980 as the successor to LAFTA. ALADI eschewed the objectives of the 1960s
in favor of limited agreements confined to market access via the exchange of partial or full
preferences on specific products. However, by the time the multilateral talks ended in 1994, a new
generation of regional preferential agreements had already spread throughout much of Latin
America. Months before the signature of the Final Act of the Uruguay Round, the North American
Free Trade Agreement (NAFTA) was implemented. In addition, important advances were made in
the Southern Cone in preparation for the launching of MERCOSUR in January 1995, a customs
union project among Argentina, Brazil, Paraguay and Uruguay building upon some previously
signed bilateral ACE agreements. Later in the year, in December 1994, the most ambitious
initiative for economic integration was launched during the Miami Summit under the acronym of
FTAA (Free Trade Area of the Americas). Moreover, during the same time period two countries in
the hemisphere were in the process of consolidating their positions as strategic trade hubs in the
region for the time to come. Mexico was able to secure in 1994 three important agreements--which
were based on the NAFTA model-- with Costa Rica in April, with Colombia and Venezuela (known
as the G-3 Agreement) in June and with Bolivia in September. All three agreements were
implemented at the beginning of 1995. Mexico then built on this momentum by concluding
agreements with Nicaragua in 1997 and the Northern Triangle in 2000 and successfully broadened
and deepened its agreement with Chile in 1998. The Americas’ other trade hub, Chile, acquired its
status by building in a gradual and consistent fashion. It signed its first and most basic agreements,
in terms of scope and nature of coverage, with Mexico in 1991, Venezuela in 1992, Colombia in
1993 and Ecuador in 1994. The level of scope and sophistication then somewhat expanded in
Chile’s 1996 agreement with MERCOSUR and 1998 agreement with Peru. Nevertheless, the
broadest expansion yet in the nature of Chilean agreements came in 1996 with the signing a free
trade agreement with Canada, which almost completely mimicked the NAFTA. Subsequently,
Chile’s 1998 upgraded agreement with Mexico was based on the NAFTA model as was its 1999
accords with the countries of the Central American Common Market. Most recently, Chile has been
negotiating a free trade agreement with the United States based on the NAFTA model. When
concluded, it will add to the ever-growing list of North-South Agreements in the Hemisphere of this
type. In addition, around the same time, important institutional and policy reforms were carried out
4
in existing agreements such as the Andean Pact (renamed Andean Community in 1997),
CARICOM and the Central American Common Market.
Figure 1. Trade Agreements Signed and Under Negotiation in the Americas
“First Generation” Agreement
Agreement Under Negotiation
“Second Generation” Agreement
Reciprocal Agreement:CU-Country
Customs Union (CU)
Non-Reciprocal Agreement:CU-Country
FTAA
ALADI
Bahamas
Haiti
USA
Canada-CA-4
USA-CACM
Canada
USA-Chile
Mercosur
Nicaragua
Uruguay
CACM
Costa Rica
Brazil
Argentina
Chile
El Salvador
Guatemala
Honduras
Dominican
Republic
Paraguay
Mexico
Panama
CARICOM Trinidad &
Dominica
Suriname Tobago
Jamaica St. Lucia Belize
St. Kitts & Nevis Grenada Barbados
Guyana St. Vincent & Grenadines
Antigua & Barbuda
Colombia
Peru Ecuador
Venezuela
Bolivia
Andean
Community
ALADI
This dynamism has also been present at the extra regional level, in particular, in the context of the
APEC initiative. Mexico joined APEC as a full member in November 1993, Chile entered one year
later and Peru in 1998. Moreover, during the II Presidential Meeting of APEC in November 1994 in
Indonesia (the same year of the launching of the FTAA), the leaders agreed to achieve the goal of
free trade and investment in the region by no later than 2010 for the industrialized economies and
2020 for developing countries. This brief review of the integration efforts in the mid-1990s would be
incomplete without reference to the European Union involvement with Latin America. In December
1995 a trade and economic cooperation agreement with MERCOSUR was signed. A Framework
Cooperation Agreement with Chile followed this in June 1996. However, the most far-reaching
process to date has been the Economic Partnership, Political Coordination and Cooperation
Agreement between Mexico and the European Union. The broad framework agreement was
signed in 1997 and led to the signing of a comprehensive free trade agreement between the two
parties in 1999. Formal launching of negotiations of Association Agreements by the EU with
MERCOSUR and Chile were agreed on April 2000.
5
This historical overview provides some insights on how the new regionalism in Latin America and
the Caribbean has interacted (and will interact in the future) with other approaches to trade
liberalization. Some of the commitments undertaken by the Latin American and Caribbean
countries during the Uruguay Round negotiations can be explained by successful unilateral trade
liberalization reforms carried out at the national level. In turn, those same commitments at the
multilateral level acted as lock-in mechanism for the domestic reforms. At the same time, the
Uruguay Round agreements set the stage for the pursuit of regional agreements under a common
umbrella of global trade rules and a clearer set of disciplines under which preferential agreements
can be negotiated. Moreover, while the reciprocal nature of the multilateral round provides a
national political underpinning to further liberalization, and the economic advantages of free trade
achieved at the multilateral level are well understood, it is sometimes difficult to evaluate net gains
in a negotiating forum of more than one hundred countries with very different strategic interests
acting as a constraint to new commitments. Regional and bilateral agreements offer certain
advantages in this respect. These agreements are based on reciprocity principles involving a
smaller group of countries. This can provide a better environment to reach consensus on the
complex range of issues in modern trade agendas, to better evaluate the potential gains from this
bargaining exercise and to gain private sector understanding and support for the liberalization
process. Ethier (1998) has also pointed out that the incentives for exploiting the advantages of
regional negotiations are greater the more successful are the multilateral rounds. In sum, this wave
of new regionalism in the Americas including the deepening of agreements already in existence
and the hemispheric wide FTAA negotiations should be seen as complementary forces to the
unilateral reforms and multilateral efforts. Also, and most importantly, they are key laboratories for
the development and the learning-by-doing of new paradigms in the design and implementation of
trade policy around the world.2
II.2. Instruments for Market Access Liberalization
a) Tariffs
Market access in traditional preferential agreements, in particular the Latin American ACE
agreements, used to be negotiated by means of a fixed preferential tariff below the MFN rates and,
in many cases, only for a selected group of products or sectors. Unilateral and multilateral tariff
reductions had the effect of progressively eroding the margins of preference initially agreed upon.
To maintain constant those margins over time countries had to renegotiate the agreements on a
continuous basis. Later on, preferential agreements were based on constant relative margin of
preference by means of negotiating a preferential tariff reduction as a percentage of the current
MFN applied rates. Nowadays, most of the “new” FTAs have followed the NAFTA model in many
respects, moving towards tariff phase-out programs that are relatively quick, automatic, and nearly
universal. The tariff elimination process follows pre-specified timetables ranging from immediate
elimination up to generally a 10-year period phase-out, with special phase-out periods for those
products regarded as “sensitive”. The negotiations usually start with an agreement on a base rate
or base level from which phase out schedules will be applied. Those base rates usually coincide
with the MFN applied rates to third parties at the time of negotiations. This was the case, for
instance, in NAFTA after initial proposals to use GATT bound rates were rejected. In other cases, it
has been necessary to take into account previous preferences negotiated under other agreements
in order to establish the initial base rate. These rates can also be subject to negotiations with the
aim of beginning the phase-out schedules from lower rates. In a second stage, parties must agree
on specific tariff elimination programs or phase-out schedules to bring the initial base rates to zero
in a defined time period.
2
. See Devlin and Ffrench-Davis (1999) and Devlin and Estevadeordal (2001).
6
Figure 2. MFN & Preferential Tariff Liberalization
Latin America 1985-1997
Average tariff rates
50
40
30
MFN Tariffs
20
10
Preferential Tariffs
0
85
86
87
88
89
90
91
92
93
94
95
Source: Estevadeordal and Shearer (2002)
Figure 3a. Trade Liberalization by 2005
% of Items Free by 2005 under current agreements
(Estimates)
100%
80%
60%
40%
20%
0%
Each bar represents a preferential bilateral relation (country-pair) under current agreements
Source: Estevadeordal, Harris and Shearer (2002)
7
96
97
Figure 3b. Trade Liberalization by 2005
% Imports from Latin America under current agreements
(Estimates)
100%
80%
60%
40%
20%
Fully Liberalized by 2005
PER
MEX
CRI
VEN
EC U
GT M
C OL
H ND
BR A
SL V
NIC
BOL
U RY
AR G
C HL
PR Y
0%
Under Agreement but not Fully Free
Source: Estevadeordal, Harris and Shearer (2002)
Figure 3c. Trade Liberalization by 2005
% Imports from the Western Hemisphere under current agreements
(Estimates)
100%
80%
60%
40%
20%
Fully Liberalized by 2005
Under Agreement but not Fully Free
Source: Estevadeordal, Harris and Shearer (2002)
8
CRI
VEN
PER
COL
HND
GTM
ECU
BRA
SLV
NIC
ARG
BOL
CHL
URY
PRY
USA
CAN
MEX
0%
Figure 2 displays the evolution of MFN tariffs compared to the average preferential tariffs in several
countries from mid-1980s to 1997 showing the simultaneous lowering of external and internal
barriers, as one of the key stylized facts highlighted by Ethier (1998) in his analysis of the new
regionalism. Figure 3 presents several estimates of degree of liberalization by 2005 as a result of
implementing existing liberalization programs of current agreements. Although most programs will
eliminate internal tariffs for almost all products by 2005 (the average percentage of exceptions is
around five percent, which contrasts favorably with most of the old agreements), the internal
dynamics of the phase-out programs varies widely across agreements. Figure 4 normalizes the
liberalization phase-out paths of several agreements as if all of them had started on the same date.
It then presents the percentage of items and bilateral trade that will be subject to zero tariffs over a
ten-year time period, the usual GATT consistent framework for creation of a free trade area.3 The
figure shows the different built-in speeds of each agreement. For some agreements, more than fifty
percent of the products become free of tariffs during the first year of implementation of the
agreement. For others, those percentages will not be reached until the 5th year or later. Four
patterns are observed. First, a high percentage of trade was liberalized in the first year of the US
and Canadian NAFTA liberalization schedules vis-à-vis Mexico, the Mexico-Costa Rica FTA and
the Mexican liberalization to Bolivia. In the case of the Chilean bilateral agreements and the
liberalization of Bolivia to Mexico a high level of liberalization occurred by year five. A third pattern
is the Mexican side of NAFTA, which undertakes the bulk of its opening between years 5 and 10.
Finally, the G-3 did not undertake much liberalization at all until after year five. The figure also
displays a relatively high degree of nominal reciprocity in liberalization schedules with the notable
exception of NAFTA and the Mexico-Bolivia FTA.
Figure 4. New Regionalism: Speed of Intraregional Tariff Liberalization
Percentage of items under Full Liberalization
(6)CHILE-ME,-(7)CO,-(8)VE
100
(1)NAFTA (US-ME)
80
(3)CR-ME
60
(9)NAFTA (ME-US)
(2)ME-CR
(4)NAFTA (CA-ME)
%
(10)NAFTA (ME-CA)
40
(11)BOL-ME
(5)ME-BOL
20
(12)GROUP OF 3
0
Before PTA
1st Year
5th Year
10th Year
Period of Liberalization
3
. In reality, of course, the phase-out programs are discrete in time rather than continuous. However, for visual purposes
the figures smooth out the discrete phases with a continuous fitting line.
9
Percentage of Trade under Full Liberalization
(6)
100
80
60
%
(8)
(11)
(2)
(4)
(3)
(12)
40
(9)
(1)
20
(7)
(5)
(10)
0
Before PTA
1st Year
5th Year
10th Year
Period of Liberalization
Source: Devlin and Estevadeordal (2001)
The picture tells a different story when considering the amount of bilateral trade affected by the
different tariff elimination programs. It is important to note the caveat that the projections are based
on the import structure of the initial period and therefore assumes an unrealistic null elasticity of
imports to the elimination of import tariffs. The data in the bottom half of Figure 3 shows a much
higher degree of variance and no discernable pattern regarding the speed of the programs and the
levels of reciprocity. When the examination it is done by sectors (not shown), the intra-sector
dispersion among the agreements is quite marked and, in particular, the agricultural products
generally have the most gradual liberalization schedules. Finally, with few exceptions, most of the
bilateral trade in the agreements analyzed becomes fully liberalized within a ten-year period.
Figures 5 and 6 present the current average levels and distribution of the bilateral preferential rates
among Latin American countries (1999-2000 data) vis-à-vis the multilateral tariff rates. A complete
analysis requires looking at relative margins of preference, that is, the levels of tariff preferences
relative to MFN rates. Examining first the MFN tariff profiles in Figure 5, the 11 countries fall into
three rough groups. The first is characterized not only by higher MFN tariffs, but a wider
distribution of tariffs as well. Argentina, Brazil, and Mexico fall into this category, the three of them
having the three highest tariff medians as well as the three highest extreme values. A second
group has smaller overall dispersion and lower tariffs compared to the first group. Interestingly,
however, the inter-quartile regions for these countries tend to be larger than those of the first
group. This grouping consists of Colombia, Ecuador, Paraguay, Uruguay, and Venezuela. A final
group of countries, consisting of Bolivia, Chile, and Peru, has for the most part uniform tariff
structures. Furthermore, these countries tend to have lower median tariffs than those in the other
two categories, and Bolivia and Chile have the two lowest medians of all.
These differences among categories become even more important when we take into account the
preferential tariff structures. In fact, the median preferential tariffs for the Argentina-Brazil-Mexico
10
group fall significantly; although not below those of the countries in the second grouping and the
inter-quartile ranges of the preferential distribution are completely below the MFN structures of
each respective country. In a sense, the “most protectionist” group is at the same time the one
offering the highest margins of preference to the rest. The second group does give notable
preferences to their regional trading partners, but apparently not to the same extent. Finally, the
preferential tariff structure of the Bolivia-Chile-Peru group preserves the uniformity principle in
terms of lower dispersion with significant margins of preference as well.
Figure 5. MFN and Preferential Tariff Structure in Latin America 1999-2000
40
30
20
10
Product Category Outliers
* Product Category Extreme Values
0
MFN
-10
Avg. Preferential
N
VE
Y
R
U
Y
PR
R
PE
EX
M
U
EC
L
O
C
L
H
C
A
BR
L
BO
G
AR
Source: Estevadeordal and Shearer (2002)
Figure 6. MFN and Preferential Tariff Structure in Latin America 1999-2000 by Country
Argentina
Brazil
40
40
30
30
20
20
10
10
0
0
-10
-10
MFN
BOL
BRA
CHL
COL
ECU
MEX
PER
PRY
URY
VEN
MFN
11
ARG
BOL
CHL
COL
ECU
MEX
PER
PRY
URY
VEN
Uruguay
Paraguay
40
40
30
30
20
20
10
10
0
0
-10
MFN
ARG
BOL
BRA
CHL
COL
ECU
MEX
PER
URY
VEN
-10
MFN
ARG
BOL
BRA
CHL
COL
ECU
MEX
PER
PRY
VEN
Colombia
Bolivia
40
40
30
30
20
20
10
10
0
0
-10
-10
MFN
MFN
ARG
BRA
CHL
COL
ECU
MEX
PER
PRY
URY
ARG
BOL
BRA
CHL
ECU
MEX
PER
PRY
URY
VEN
ECU
MEX
PRY
URY
VEN
VEN
Ecuador
Peru
40
40
30
30
20
20
10
10
0
0
-10
-10
MFN
ARG
BOL
BRA
CHL
COL
MEX
PER
PRY
URY
VEN
MFN
12
ARG
BOL
BRA
CHL
COL
Chile
Venezuela
40
40
30
30
20
20
10
10
0
0
-10
-10
MFN
ARG
BOL
BRA
CHL
COL
ECU
MEX
PER
PRY
URY
MFN
ARG
BOL
BRA
COL
ECU
MEX
PER
PRY
URY
VEN
Mexico
40
30
20
10
0
-10
MFN
ARG
BOL
BRA
CHL
COL
ECU
PER
PRY
URY
VEN
Source: Estevadeordal and Shearer (2002)
b) Rules of Origin
Because of its discriminatory nature, a preferential agreement must distinguish “non-member
originating” from “member originating” products in order for a product to be granted preferential
access. The growth of international trade in goods that are not manufactured in a single country
has made the issue of the rules for determining the “origin” (RoO) of goods traded into one of the
most important and complex areas of preferential market access negotiations. Although this has
been an area well known to trade lawyers and customs specialists (Vermulst et alt. (1994)) it has
just recently caught the attention of economists. The economic analysis of RoO has been relatively
limited, both in terms of formal modeling as well as empirical testing. It has been argued, from an
analytical point of view, that the way in which RoO are defined and applied within modern
preferential agreements plays an important role in determining the degree of protection they confer
and the level of trade distortion effects which they produce.4
One of the most convincing treatments of the potential “hidden” protectionism of RoO has been
elaborated by Krishna and Krueger (1995) who argued that RoO can induce a switch in the
sourcing of low cost non-regional to high-cost regional inputs in order for producers to take
4
. See Hoekman (1993) for a conceptual discussion and Estevadeordal (2000) for an econometric application in the case
of NAFTA.
13
advantage of the preferential rates. Since the tariff applies to the transaction value of final goods
whenever preferences are deep and RoO are restrictive there is an incentive for regional
producers to buy intermediate goods from regional sources. So, by displacing low-cost
intermediate goods from the rest of the world, restrictive rules of origin provide additional protection
to regional producers of intermediate goods to the apparent detriment of downstream or final
goods producers. This apparent conflict could be explained because of the specific production
relations that exist between component producers and users.
If the linkages between the different parts of the production chain are very tight, it may be difficult
for a foreign final good producer to locate components within the region and remain competitive,
that is, RoO “export protection” both for the intermediate and final goods producers. Moreover,
outside producers of intermediate goods hurt by restrictive RoO may have an incentive to move
production facilities into the lower-cost country within the region, even though it is not the lowest
cost producer worldwide. This situation could potentially distort efficient investment decisions and
hinder the liberalizing effects of a FTA.
Conceptually, there are two basic criteria to determine origin. The criterion of “wholly obtained or
produced”, where only one country enters into consideration in attributing origin, and the criterion
of “substantial transformation”, where two or more countries have taken part in the production
process. The first criteria applies mainly to commodities and related products which have been
entirely grown, extracted from the soil or harvested within the country, or manufactured there from
any of these products. Such products acquire origin by virtue of the total absence of the use of any
second country components or materials. Even a minimal content of imported components will
imply losing its qualification of “wholly produced”. Most countries have adopted the precise
definition contained in the Kyoto convention (Annex D.2) for this criterion.
The “substantial transformation” criterion is the second concept recognized by the Kyoto
Convention as a basis on which origin of goods may be determined. The Kyoto Convention does
not offer a single approach for defining substantial transformation. One of the goals underlying the
NAFTA negotiations on RoO was to develop specific criteria to give more precision to this concept.
There are at least three methods in the NAFTA agreement:
•
•
•
A change in tariff classification, requiring the product to change its tariff heading, chapter
under the Harmonized Commodity Description System (Harmonized System) in the
originating country.
A domestic content rule or regional value content, RVC, requiring a minimum percentage of
local value added in the originating country (or setting the maximum percentage of value
originating in non-member countries).
A technical requirement, TECH, prescribing that the product must undergo specific
manufacturing processing operations in the originating country.
These methods have been used with different degrees of precision under different FTAs. In the
case of agreements negotiated in the Americas, we find at one extreme of this “continuum”
traditional agreements where a general rule is being used across the board for all tariff items (e.g.,
under the traditional LAIA agreements the general RoO that applies across-the-board is based on
a Change in Tariff Classification at the heading level or, alternatively, a regional value added of at
least 50 percent of the FOB export value). At the other extreme we encounter the type of RoO
negotiated under NAFTA that incorporates a general rule plus additional specific rules negotiated
at the product level (6 digit HS), combining in many different ways the three methods described
above. An immediate precedent with a lower degree of specificity can be found in the FTA
agreement between the United States and Canada. RoO negotiated under the G-3 agreement, the
Mexican bilateral with Costa Rica and Bolivia and the recent Chilean bilateral with Mexico and
14
Canada are also close to the NAFTA model. Meanwhile, rules introduced under the MERCOSUR
and MERCOSUR bilateral with Chile and Bolivia, as well as the Central America Common Market,
can be considered intermediate models between the two extreme cases.
The structure of RoO in a selected number of Latin American FTAs is presented in Table 2. The
table illustrates the degree of specificity used in the making of the RoO in these modern
agreements (see also Cornejo and Garay (1999, 2001)
Table 2. New Regionalism: Structure of Rules of Origin in Selected Agreements
FTA
US-CA
cc
16,7
CC/E
CC/OR
27,0
5,8
8,4
CC/E/OR
RULES OF
ORIGIN
BASED ON
CHANGE OF
CHAPTER
NAFTA
20,0
27,8
6,0
5,8
5,7
6,7
5,8
2,7
CanadaChile
20,9
26,5
6,7
5,3
MERCOSUR-
Chile
Bolivia
6,2
7,9
1,2
1,3
2,0
1,1
1,0
12,8
CC or CS/E/RC
16,2
2,5
CC/E or CS/E/RC
11,2
SUBTOTAL
56,6
52,1
40,9
40,4
41,3
42,7
ch
21,1
7,9
14,8
14,9
15,2
8,9
CH/E
6,3
14,2
13,2
16,3
13,9
14,6
CH/RC
5,8
3,1
2,0
2,6
2,2
3,4
CH/OR
CH/E/OR
MERCOSUR-
1,0
CC or CH/E/RC
CC or CS/RC
MexicoBolivia
6,3
CC or CH/RC
CC/E or CH/RC
ORIGIN
BASED ON
CHANGE OF
HEADING
MexicoCosta Rica
5,5
CC/RC/OR
CC/E or CH/E
RULES OF
G-3
1,0
5,8
0,0
0,0
10,0
11,9
20,0
21,2
24,0
22,3
46,0
44,6
100,0
100,0
1,7
CH/RC/OR
8,1
CH/E/RC/OR
4,9
CH or RC
10,0
1,0
CH or CH/RC
CH or CS/RC
6,9
1,0
CH or CS/E/RC
1,1
7,4
7,5
CH/E or CS/E/RC
1,1
CH/E or CH/RC
CH/E or CH/E/RC
SUBTOTAL
cs
1,9
2,6
34,0
45,0
45,9
43,0
38,0
1,1
1,3
1,0
1,6
1,7
11,0
1,3
1,3
1,6
4,2
4,2
1,3
1,3
CS/E
RULES OF
ORIGIN
BASED ON
CHANGE OF
SUBHEADING
2,5
39,0
CS/RC
4,6
CS/E/OR
CS or RC
CS or CS/RC
CS/E or CS/RC
subtotal
1,1
1,3
5,6
8,4
8,5
12,6
0,0
0,0
TOTAL
96,7
87,4
91,5
94,7
92,8
93,3
100,0
100,0
Notes: Only percentages above 1% of the total are reported. The following abreviations are used (see text): CC - Change of Chapter; CH
- Change of Heading; CS - Change of Subheading; CI - Change of Item; E - Change of Tariff Classification including Exceptions; OR Other Technical Requirements; RC - Regional Value Content Criteria.
Source: Devlin and Estevadeordal (2002)
15
c) Non-Tariff Measures
As countries succeed in eliminating tariffs, both explicit and subtler new ways to protect domestic
industry from external competition have been developed. A major accomplishment of several
rounds of multilateral trade negotiations in the context of the GATT agreement has been the steady
reduction of tariffs across sectors and countries. Tariff reductions negotiated during the Kennedy
Round (1967) and the Tokyo Round (1979) were followed by an increased use of non-tariff barriers
in the form of quantitative restrictions. The Uruguay Round made important progress in reducing
those types of trade barriers. However, countries are progressively relying in more subtle forms of
protection such as antidumping investigations or the use of technical standards. The level of
protection provided by such barriers is far more difficult to quantify than for tariffs or other
quantitative restrictions, making negotiations for their removal difficult. Due to their potentially
restrictive intent, there has been considerable progress made towards the harmonization across
countries. Determining the tariff equivalent of a quantitative restrictions are difficult, but determining
the costs to an importer of the paperwork for a health permit, a change in packaging requirements,
or inconsistent enforcement of customs standards often proves practically impossible. The benefits
of traditional trade liberalization could be greatly reduced if countries merely compensate by
imposing hidden protective technical measures.
Although most regional agreements contain provisions on the application of non-tariff measures to
control imports among partners, in most cases those are applied on a MFN basis. In this section
we provide an analysis of those measures, among other, minimum price setting, automatic license
arrangements, non-automatic licenses, tariff rate-quotas, import prohibitions, monopolistic
measures in the administration of imports, and other technical measures. During the period
previous to the trade liberalization reforms most countries required import licenses in order to
assure that imports did not surpass pre-set quotas. These levels could be modified by authorities in
response to foreign exchange crises, becoming in practice an instrument to deal with balance of
payment problems. The countries of the region gradually eliminated quantitative limits on imports
both unilaterally and within the framework of multilateral commitments assumed during the
Uruguay Round. The gradual elimination of quota systems on imports and their tariffication, prior
to the tariff reduction per se, had the initial effect of raising revenues from custom duties and
therefore limiting opposition to tariff reform. When both quotas and tariffs reduced simultaneously,
however, fiscal problems arose, even though these reforms were more credible. Taking a regional
average for those countries where data is available, non-tariff measures affected 33.8 percent of
imports in the pre-reform period, and declined to 11.4 percent. The number of tariff lines affected
by these measures fell from 29.6 to 1.6 percent. There remains, however, trade regulation that
could potentially restrict trade, such as government purchasing arrangements, inappropriate use of
anti-dumping measures, and the increasing use of certain competition policies and technical
measures with protective purposes.
In this paper we use two measures based on data compiled by the United Nations Conference on
Trade and Development (UNCTAD) and the Inter-American Development Bank (TRAINS for the
Americas). Alternative definitions of NTMs have been used in the empirical literature. UNCTAD
uses an overall non-tariff incidence measure (NTM), and a core NTM incidence measure (core).
Deardorff and Stern have proposed an alternative treatment of non-tariff measures, which
disaggregates NTMs into several. In this study we have accommodated Deardorff and Stern’s
classification to the UNCTAD coding system and methodology in order to work with five additional
16
NTM groups: quantitative, charges, government participation in trade, customs, and technical
barriers to trade.5 A summary on how the measures have been constructed appears in Annex 1.
As with our tariff analysis, Figure 7 displays the distribution of two aggregate measures: overall
NTMs and the core measure, as well as the five disaggregated measures used by Deardorff and
Stern for several countries. The box plots are constructed based on SITC 1-digit sections (instead
of the 3-digit headers used in the tariff box plots), due to the tendency of the measures to be either
zero or 100 at the more disaggregated product level. Charges, government, and customs tend to
be zero or close to zero for most countries. Therefore, much of the action for overall NTMs is due
to the presence of quantitative and technical measures. Core NTMs are generally quite low overall,
albeit non-zero in terms of their box plots. The behavior of the quantitative measure variable varies
significantly between countries and even within integration groups. Argentina, Brazil, Paraguay, as
well as Colombia, Ecuador, and Venezuela tend to have a higher quantitative incidence, while
Uruguay, Bolivia, and Peru have a lower incidence. Mexico and Chile have remarkably similar
quantitative behavior. Although the profile of the technical measure differs between countries, the
figure displays clearly the growing importance of those measures, in particular in light of its
potential use as protectionist measures.
Figure 7. NTM Incidence in Latin America 1999-2000 by Country
Argentina
Brazil
120
120
100
100
80
80
60
60
40
40
3
3
7
20
20
1
3
0
4
-
-20
N=
1
5
0
-20
11
NTM
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
N=
11
NTM
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
Paraguay
Uruguay
120
120
100
100
80
80
60
60
0
40
40
3
20
20
1
1
0
-20
N=
9
0
0
-20
11
NTM
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
N=
11
NTM
5
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
. It should be noted here that although the categories are mutually exclusive, they together do not make up all of the
measures that embodied in the NTM variable, although they cover most of them. Nor should these statistics be added
17
Colombia
Bolivia
120
120
100
100
80
80
60
60
40
40
4
4
9
9
9
20
20
0
0
5
9
0
0
-20
-20
N=
11
11
11
11
11
11
11
NTM
CORE
QUANT
CHRGS
GOVT
CSTMS
TECH
N=
11
11
NTM
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
Peru
Ecuador
120
120
100
100
80
80
60
60
40
40
4
4
20
20
6
8
0
8
0
0
0
0
8
-20
-20
N=
N=
11
11
NTM
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
Venezuela
120
100
80
60
40
4
4
20
4
3
0
0
-20
N=
11
NTM
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
11
NTM
together, since more than one class of measures could cover a tariff line.
18
11
CORE
11
11
11
11
11
QUANT
CHRGS
GOVT
CSTMS
TECH
Chile
Mexico
120
120
100
100
80
80
60
60
9
4
40
4
9
40
5
20
8
6
20
0
0
1
0
-20
N=
11
11
11
11
11
11
11
NTM
CORE
QUANT
CHRGS
GOVT
CSTMS
TECH
-20
N=
11
11
11
11
11
11
11
NTM
CORE
QUANT
CHRGS
GOVT
CSTMS
TECH
Source: Estevadeordal and Shearer (2002)
This overview analysis of the structure of protection sets the stage for a more in depth analysis of
two key issues on market access negotiations: the case of the agricultural sector and the prospects
under FTAA negotiations. We turn to those two issues in the next two sections.
19
CHAPTER III. AN UNFINISHED LIBERALIZATION IN THE AGRIBUSINESS SECTOR?
III. 1. The Political Economy of Agricultural Protection
Within international trade, agribusiness is the sector in which market globalization and regional
integration have been mediocre and full of obstacles. Despite efforts to implement the first
multilateral agreement in this area -- the Uruguay Round Agreement on Agriculture (URAA) -- and
the signing of several preferential trade agreements benefiting mainly smaller and poorer
countries, developed countries continue to display important tariff and non-tariff barriers in
agricultural trade. They also offer heavy subsidies that often distort internal production and export
patterns.
However, it is interesting to note that the resistance to opening agricultural markets has not
blocked an impressive increase in foreign direct investments and mergers and acquisitions in
agribusiness worldwide. Ironically, while American, European and Japanese farmers attempt to
maintain subsidies, the largest agribusiness corporations from these same countries rapidly
expand their operations abroad in the regions most affected by protectionism.
Such a dichotomy presents the need to treat the issue of agricultural protectionism in a realistic
and pragmatic way. The objective of the following section (III.1.1) is to identify the economic, social
and political forces that are attempting to maintain the status quo in protectionism from those
attempting to change the current conditions both within their countries and abroad. Section III.2.
compares current protectionist levels and subsidies in agriculture for selected countries of the
Western Hemisphere (Canada, United States, Mexico, Brazil, Chile, Peru, Dominican Republic and
Costa Rica). The data compare the tariff structures of selected countries (number of tariff lines,
basic statistics, presence of tariff rate quotas and the profile of protection for 43 groups of sensitive
products) and the levels of domestic support and export subsidies notified to the WTO.
III.1.1. Pressures in Favor and Against Agricultural Trade Liberalization
III.1.1.1. Protectionist Pressures
The following factors lead to the growth (or at least the continuance) of agricultural protectionism in
the developed world:
a) Intense Lobbying by Agriculture Interest Groups
This is the main factor explaining the persistence of high levels of agricultural protection in the
world. Farmers and some agricultural related sectors (the machinery and agriculture equipment
industry, the agricultural supplies industry, the transportation industry, the warehousing industry
and the supporting banks) form powerful political lobbies in Europe, the US and Japan. Because
this lobbying is concentrated and focused, the pressure exerted by this small group of beneficiaries
is politically more efficient than the less focused and disperse actions of the main losers, namely
the consumers and the taxpayers.
b) The Argument for Food Security
War, hunger and xenophobia are the main reasons explaining the historical treatment of agriculture
as an "exception" in multilateral liberalization. These were the reasons that Europe and Japan
20
developed policies to “protect” their consumers from uncertainties of international market
disruptions. Most of these arguments lost their importance after a long period of peace, and
technological and logistical improvements that have spread agricultural surpluses worldwide.
Although these arguments have lost strength in the developed world, the main arguments for food
security may remain powerful in highly populated countries like India, China and Russia.
c) Quality Standards and Food Safety
At the end of the 1990's, Europe faced successive crises related to sanitary measures and quality
standards of food. The most important of these were the dioxin contamination in Belgium, the
successive epidemics of "mad cow " and “foot and mouth” diseases, and the growing consumer
aversion to genetically modified foods. Food safety is growing in importance in all developed
countries. The issue of food safety and quality is occupying an increased space in the developed
countries' agricultural budgets and there are risks that aspects of the initiatives could substitute
traditional tariff-based protectionism.
d) Intrinsic Characteristics of Agriculture in Developed Countries
The aging of the rural population in developed countries, its low opportunity cost and high cost of
professional relocation are some of the factors explaining the resistance by producers and
policymakers to reduce agricultural subsidies in wealthy countries. The main argument (although
not proven) is that subsidies are cheaper than the social cost of agriculture unemployment.
e) Agricultural Non-Trade Concerns (NTC)
In recent years, some countries have tried to promote a “fourth pillar” in the international
agricultural negotiations, adding to the three traditional ones – market access, export subsidies and
domestic support. The most popular expression of the NTC’s is the evolving concept of
“multifunctionality” of agriculture. This concept would justify the concession of new subsidies to
farmers because they perform roles that extrapolate commercial production of foods and fibers. In
this point of view, farmers, as opposed to other economic agents, perform roles that produce
positive externalities to society. Among them are the occupation and management of national
territory, the survival of small towns, the preservation of the rural landscape and eco-tourism, the
maintenance of peasants’ culture and way of life, and, more importantly, the preservation of the
environment. Of these roles -- and many of them are difficult to define and measure -environmental preservation is the central element of this new concept of “rurality”. Trade and
environment enjoyed much attention in the WTO Development Agenda in Doha and, more
recently, in the discussions of the upcoming round of reform of the Common Agricultural Policy.
These are five primary factors that explain the continuance of agricultural protectionism in the
developed world. Now, if agricultural protectionism were to be justified and implemented only by
the industrialized countries, developing countries might have mobilized more leverage to address
these five factors. However, the great majority of the developing world supports the continuity of
agricultural protectionism because of one or more of the following three reasons:
•
Intrinsic Characteristics of Agriculture in Developing Countries
Agriculture is an important component of the GDP, employment and export agenda of the majority
of the developing world. Most of these countries concentrate their most competitive agricultural
production in a very small group of commodities, usually of tropical origin, and which face very little
if any protection in the developed world. The majority of these countries view protectionism with a
certain sympathy for the following reasons: food security (as already mentioned), maintenance of
21
subsistence agriculture, government support for exports, the fostering of rural development and
land reform programs, and, most of all, due to a strong concentration of voters in the rural area.
Many poor countries tend to offer subsidies and protectionism to the agriculture sector, in general
with very little success. They are, however, always appealing to the idea of “special and differential
treatment” in the multilateral trading system.
•
Food Dependence
Developed countries have the practice of setting prices above the supply and demand equilibrium,
which, by definition, generates over-production. Such over-production is released in the world
markets through direct incentives to exports (eg, E.U. export refunds), government credits (eg,
GSM 102 and 103 programs in the US) and food aid programs. This process allows the possibility
of acquiring cheap foods in the world market, and in turn creates a strong dependency from the socalled Net Food Importers.
•
Trade Preferences
Preferential Trade Agreements are probably the most important factor explaining the international
alliances among wealthy and poor countries in support of the agricultural “waiver” to free trade.
The great majority of developing countries depend directly on preferential access of the few
commodities that are the bulk of their export schedule. Coffee, cocoa, sugar and bananas are good
examples of products for which a completely free market could sweep away a large part of the
developing world’s market share. Agreements like the GSP, ACP, AGOA, CBERA, ATPA6 and
others are fundamental to the survival of many exports from the poorest countries of the world.
These are the eight factors, with emphasis on the first in the case of the wealthier countries and
the last in the case of the poorer countries, which explain the continuance of agricultural
protectionism in the world.
III.1.1.2. Pressures against Protection
Six main factors help to explain the pressures on public policy leading to a reduction of agricultural
protection. A review of each follows.
a) The Uruguay Round Agreement on Agriculture and the Cairns Group
The GATT Uruguay Round (1986-1994) brought the first multilateral agreement for agricultural
trade, with rules and regulations in three basic areas: market access, domestic support and
exports subsidies. There was also an agreement for a 9-year Peace Clause7. In addition, in 1986 a
group of 15 countries exporters of commodities met in the Australian city of Cairns, forming a solid
free-trade alliance which acted as a third force in the negotiations. Under Australia’s leadership,
the Cairns Group remains active today, with 18 members. The 4th Ministerial Meeting of the WTO
in Doha finally firmed up the track of agriculture negotiations, which should be concluded by
January of 2005.
6
. Generalized System of Preferences (GSP), Africa Growth and Opportunity Act (AGOA), Andean Trade Preference
Act (ATPA), Caribbean Basin Economic Recovery Act (CBERA) and the Lome and Cotonou Agreements between the
European Union and its former colonies from Africa, the Caribbean and Pacific (ACP).
7
. Article 13 (“due restraint”) of the Agriculture Agreement protects countries using subsidies that comply with the
agreement from being challenged under other WTO agreements. Without this “peace clause”, countries would have
greater freedom to take action against each others’ subsidies, under the Subsidies and Countervailing Measures
Agreement and related provisions. The peace clause is due to expire at the end of 2003. (WTO, 2002).
22
b) Agricultural Policy Inconsistencies in the Developed World
In wealthy countries, the group of farmers which truly benefit from subsidies and protection is
continuously getting smaller while at the same time representing a larger portion of assets,
including land and the value of production. The economic literature points to the fact that the
current models of the US and European Union agricultural policies - which have persisted since the
1930’s and 1950’s, respectively - do not make economic sense. Currently, only one-third of
American farmers receives payments from the government, which in 2000 reached the equivalent
of 50% of the agricultural net farm income. The bulk of subsidies essentially benefit the top 7% of
producers, who are responsible for almost 70% of the value of the production and receive
approximately half of the government payments (an average of US$ 61,000 per farmer in 1999).
Roughly three-quarters of US farmers are systematically losing money from agriculture and survive
only from non-agriculture income (retirement, urban jobs, hobby farms, etc.). In much the same
way, the Common Agricultural Policy (CAP) consumes one-half of the budget of the European
Union, and the high prices to support the CAP mainly benefit the largest farmers. It is enough to
say that less than 20% of European farmers benefit from the incentives to export, which Europe
has been slow to phase out.
Besides the problem of subsidies being concentrated in the hands of a small group of
beneficiaries, other indicators display inconsistencies of the agricultural policies in the developed
countries, such as: (a) in all those countries, agriculture has been losing relative importance as a
percentage of GDP and employment, which means that its capacity of political attraction will be
reduced overtime; (b) despite increasing incentives, two thirds of European and American farmers
abandoned agricultural activities since the end of the World War II, and the exodus is still
advancing; (c) there is increased aging of the rural population, since the descendents of small
farmers do not want to continue in agriculture; and (d) there is a transfer of subsidies via market
support prices to the land price in Europe and US. Recent studies in the US show that 37% of the
benefits of the commodities programs (market support prices and other payments per ton or
hectare) go to the landlords. In other words, the policy ends up stimulating an undesirable rentseeking behavior in the agricultural sector.
c) New Domestic Pressures
The inconsistencies mentioned above have moved important sectors to favor a broader reform in
trade and agricultural policies. On the one hand, organizations of industrial and end consumers
and an important part of the American and European media are showing stronger support for
agricultural policy reforms. On the other hand, in some countries there is increased pressure for a
more “extensive” agricultural policy model, with less use of modern inputs (by stimulating organic
production, for instance) and more respect for environmental preservation8. In reality, there is a
conflict of interest between political and budgetary forces. Politically, the preservation of interests
of environmentalists (represented mainly by non-governmental organizations) tend to be in conflict
with the farmers’ trade interests, mainly through a strong opposition to the traditional support
systems of agriculture. Consequently, there is a growing competition between the allocation of
resources for traditional policies of price support and for conservation policies. This conflict has
already emerged with some strength in the 2002 Farm Bill debates of the US Congress.
8
. This new orientation, already discussed, is reflected very clearly in the recent position paper of the German Ministry
of Consumer Protection, Food and Agriculture, “EU Agricultural Policy for the Future”.
23
d) Growing International Pressures
Along with the pressures that resulted from the new WTO multilateral trade round, where it seems
that countries from the Cairns Group and others will have a stronger voice, the agricultural debate
also tends to play a central role for many countries in regional forums as well. Such is the case of
the FTAA, where Mercosur countries will certainly be demanding a balanced agreement that will
have more effects on agricultural liberalization than was found in NAFTA. At the same time, 10
countries from Eastern Europe will pressure the European Union to expand their agricultural policy,
which will entail a significant change to the current model. Similarly, the European Union tends to
face a new assemblage of forces with the United Kingdom and Germany now pushing for a
broader CAP reform. Internationally, several presidents of multilateral organizations, leaders of
large private corporations and non-governmental organizations have increased pressure for
change. The recent communiqué by the World Economic Forum shows an increased discontent
with agricultural protection. It was signed by representatives of WTO, OECD, World Bank and
FAO, and by non-governmental organizations such as Consumers International and Catholic
Agency for Overseas Development as well as by presidents of corporations like Cargill, Unilever,
Coca-Cola, General Mills, Kraft, Nestlé, Royal Ahold, A.T. Kearney and Sara Lee.
e) Internationalization of Large Agribusiness Corporations
There are strong movements towards the internationalization of agribusiness firms. Behind
traditional commodities like soybean and chicken there are about half-dozen global players acting
at the same time in the main producing regions of the world. In general, transnational corporations
try to take advantage of cost gaps, tariffs and national incentives. Most of the time, these
enterprises attempt to maintain their “market reserves” in their headquarter countries, leaving the
production and exploration of new markets abroad. Such firms understand cost differences and
competitiveness and know that they can operate in a much more efficient way with production and
export bases abroad, to supply the local and third markets. While this internationalization grows in
investment terms and mergers and acquisitions, the interests of these firms converge more and
more with the interests of countries interested in elimination of protections, especially because the
long-term value of the assets of these enterprises abroad is at stake.
f) International Migration of Farmers
In a very preliminary way, a growing movement of commercial farmers can be noticed worldwide,
pushed by one or more of the following factors: (a) large differences in land prices and labor costs
between countries with similar production conditions; (b) strong differences in the rigor of
environmental laws, which makes the cost of production much higher in some regions
(Netherlands and Denmark are good examples); and (c) difficulty in expanding agriculture
horizontally by exploring economies of scale, due to supply-control mechanisms (quotas, set-aside,
etc.)
As the current model of agriculture policy of the US and Europe is maintained, these differences
become stronger. Therefore, Dutch farmers migrate to Eastern Europe, to the U.S. mid-west and to
Australia. American farmers buy cheap land in the Brazilian Mid-west region. It is quite possible
that the “farmers’ globalization” will evolve at a much faster process than the “agricultural
globalization”.
The following table summarizes the main pressures in favor and against agricultural protectionist
policies and subsidies in the modern world.
24
Table 3. Pressures in Favor and Against Agricultural Protectionism
•
•
•
•
•
•
•
In Favor
Intense Lobbying by Agriculture Interest
Groups
The Argument for Food Security
Quality Standards and Food Safety
Intrinsic Characteristics of Agriculture
Agricultural Non-Trade Concerns (NTC)
Food Dependence (Net Food Importers)
Preferential Trade Agreements (PTAs)
•
•
•
•
•
•
Against
The Uruguay Round Agreement on Agriculture
and the Cairns Group
Agricultural Policy Inconsistencies in the
Developed World
New Domestic Pressures.
Growing International Pressures.
Internationalization of Agribusiness Corporations
International Migration of Farmers.
III.2. Agricultural Market Access and Subsidies in the Western Hemisphere 9
III.2.1. Tariff Structure and Trade Profile in the Western Hemisphere
Despite the achievements of the Uruguay Round Agreement on Agriculture (URAA), the
agricultural sector continues to be the most protected sector in the world economy. While
protection through tariffs remains the main form of trade protection, agricultural products are
unique in that they are also protected through specific and compound tariffs, tariff rate quotas,
sanitary restrictions and many different types of non-tariff barriers (licensing, standards, voluntary
export restrictions, prohibitions, state trading, etc.).
As a result of the “tariffication” effort of the URAA, many products that used to be protected with
import quotas are now protected through Tariff Rate Quotas (TRQs). In this case, lower “within
access commitment” rates are set for specified quantities, and higher “over access commitment”
rates are set for quantities that exceed the quota. The in-quota tariff would be the tariff rate up to
the quota limit, and the over-quota tariff is the higher duty rate.
The first step in developing tariff profiles is to convert specific and mixed tariffs10 into ad valorem
equivalents (AVE). According to the WTO, ad valorem equivalents are usually calculated “either by
comparing collected custom revenues to the value of imports or by comparing unit values of traded
products with the applied non-ad valorem tariff”. The methodology followed in this study to obtain
ad valorem equivalents was to divide the product’s specific rate by its import price. In this case the
price was calculated by dividing the value of imports by the quantity of imports. Where no trade
data was available, the price of the closest related product was used. The data used came from
the 2001 Hemispheric Database of the Americas (HDA) and the Agricultural Market Access
Database (AMAD).11
9
. See Jank & Finch (2002) and Gibson, Wainio, Whitley & Bohman (2001) for a detailed analysis and methodological
issues regarding the measurement of protection in agriculture.
10
. Specific tariffs are tariffs that are set as a monetary amount per unit of import, i.e. a product can have a specific tariff,
which charges $1.50 per kilogram. Countries may also combine ad valorem and specific tariffs so that a product’s tariff
may be the sum of the ad valorem tariff plus the specific tariff, called mixed or compound tariffs.
11
. To analyze and compare the level of protection several country databases where created for specific countries with
year 2000 data. The objective was to compile in one database all trade-related data available for agricultural products by
country. The databases include data in 8-digit (or more) Harmonized System Code and include product descriptions,
MFN ad valorem tariffs, MFN specific and mixed tariffs, preferential rates, and ad valorem equivalents for such tariffs,
imports value, quantity, imports price, exports value, export volume, indication of whether the tariff is a Tariff Rate
Quota, and tariff peaks. In addition, the data was also analyzed in an aggregate basis by being grouped in 43 “sensitive”
groups of products based on the International Bilateral Agricultural Trade (IBAT) Database.11 Once all tariffs were
expressed in terms of ad valorem equivalents, we were able to calculate the number of tariff lines and TRQs, mean,
25
In order to analyze agricultural trade protection in the Western Hemisphere, a selection of key
players was made, and it includes at least one member per trade agreement. The countries being
analyzed are United States, Canada, Mexico, Brazil, Chile, Peru, Costa Rica and the Dominican
Republic.
As can be seen in Figure 8, the European Union has the highest proportion of specific tariffs at
39%, closely followed by the US at 37% and Canada with 19% and Mexico with 1%. Brazil, Chile,
Peru, the Dominican Republic and Costa Rica only use ad valorem tariffs.
Figure 8. Comparative Tariff Structure (2000): Percentage of Ad Valorem,
Specific and Mixed Tariffs
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
EU
CR
PERU
DR
CHILE
BRAZIL
MEXICO
CANADA
USA
Ad Valorem
Specific Rates
Mixed
Note: DR (Dominican Republic) and CR (Costa Rica)
Source: 2001 Hemispheric Database of the Americas.
Figure 9 shows that Mexico has the highest mean tariff at 23.3%, followed by the Dominican
Republic with 21.2% and Canada with 20.1%. The US has the second lowest average tariff at
11.4%, after Chile. In the case of Chile, even though their ad valorem tariffs appear to be the
lowest, set at 9% for all products, agricultural imports are subject to price bands and other
restrictions that significantly protect against imports.
median, tariff dispersion, maximum and minimum tariffs, and frequency distributions. J.C. Bureau from INRA-France
provided data for the European Union.
26
Figure 9. Comparative Tariff Structure (2000): Means and Medians
3.0
5
9.0
3.7
9.0
11.4
13.0
12.6
14.0
12.0
13.8
8.7
11.0
15
10
Median
17.1
18.0
20
Mean
20.1
21.2
23.3
%
25
25.0
30
-
CHILE
USA
BRAZIL
CR
PERU
EU
CANADA
DR
MEXICO
Note: DR (Dominican Republic) and CR (Costa Rica)
Source: 2001 Hemispheric Database of the Americas.
In those countries where the median is far greater than the mean, such as the Dominican Republic,
it indicates that very low tariffs for some products result in a low mean, although most tariffs are
high. The opposite is true for countries like the US, Canada, the E.U. and Mexico, where the
highest tariffs are concentrated in few products, but most tariffs are very low. In other words, these
four countries are applying a small number of very high tariffs, commonly known as tariff peaks or
megatariffs, while keeping the rest of their tariffs at low levels. In the case of Costa Rica and Brazil,
since the mean and median are almost identical, it indicates that the most frequent tariffs are very
close to the mean tariff.
Figure 10 shows the frequency distribution of the countries’ tariff structure. The countries’ tariff
lines were classified in five different tariff ranges to evaluate the percentage of lines with rates
ranging from 0%, 0% to 15%, 15% to 30% and above 50%. This analysis provided very interesting
results. While the US has the lowest average tariff (11.4%), four percent of its tariff lines (sixty-one
lines) have rates above 50% and in some cases up to 350% (as is the case of some tobacco
lines). Nevertheless, the US’s high proportion of low rates (83% of its tariff lines have rates below
15%) offset the impact of its megatariffs and ultimately result in a low overall average. In the case
of Canada its high overall average (20.8%) comes from the levels of high tariffs (7% of its tariffs, or
98 tariff lines, are above 50% rates) with some products from the milling industry reaching rates of
up to 530%. The same is true for Mexico whose 5% of tariff lines (54 lines) are above 50% and
86% are between 0% and 30% resulting in a high overall average of 23%.
27
Figure 10. Comparative Tariff Structure (2000): Frequency Distribution
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
EU
15% - 30%
CR
0% - 15%
PERU
DR
CHILE
BRAZIL
MEXICO
CANADA
USA
0%
30% - 50%
>50%
Note: DR (Dominican Republic) and CR (Costa Rica)
Source: 2001 Hemispheric Database of the Americas.
Figure 11 shows the value of agricultural imports. The EU has the highest value of imports, and is
ranked number one in world imports, followed by the US
Figure 11. Value of Agricultural Imports (US$ Million, 2000)
70
65.8
60
50
41.9
40
30
20
11.7
9.8
1.3
0.7
0.9
0.5
DR
PERU
CR
4.0
CHILE
10
0
EU
BRAZIL
MEXICO
CANADA
USA
Note: DR (Dominican Republic) and CR (Costa Rica)
Source: 2001 Hemispheric Database of the Americas.
Figures 12 through 19 show the average tariff rates and imports by the main “sensitive” groups of
agricultural products in the FTAA region. The US’ most protected groups are tobacco, dairy,
peanuts, orange juice and sugar. Although one would expect that imports for such products would
be low due to high tariff rates, the presence of TRQs (low in-quota rates) and/or preferential rates
from the US’s trade agreements allow for imports of those products. Thirteen products groups have
28
an average tariff higher than the US’ mean of 11.4%, most of them very “sensitive” for other Latin
American countries.
For the US the five most protected tariff lines are: over-quota tobacco lines with rates of 350%;
several dairy products being infant formula and milk & cream the most protected with rates of
253% and 236% respectively; chocolates and other products using dairy and sugar; peanuts and
peanut preparations with rates of 163% and 131%; and fructose syrup and cane and beet sugar
with 159% and 109%.
In the case of Canada, twelve product groups have average rates above its mean of 20.8%. The
most protected sectors are beverages, cocoa processed products, coffee (because of high
protection of processed coffees), cheeses, and many other dairy products, eggs and feed
products. For the groups with average rates above the mean, imports appear to be very low.
Canada has the highest tariffs of all 8 countries. The most protected products by far fall under the
category of dairy products and dairy preparations with cream (442%); milk (417%); butter (325%)
and ice cream (291%) being amongst the most protected. In addition, some tariff lines in meat
products and preparations are also highly protected, especially fowl livers (520%), poultry
preparations (331%) and several fowl cuts (271%).
Mexico has ten product groups with average rates above the mean. Among the most protected
groups are swine meat, cheese, milk powder, tobacco and cocoa products. Imports for the groups
above the mean are low, except for processed vegetable imports that mainly come from the US
due to NAFTA preferences.
Brazil has low rates overall with the lowest total mean after the US. As mentioned earlier, Brazil’s
median is so close to the mean that most tariff lines are very close to the mean tariff of 12.5%.
Nevertheless, protection can be seen in product groups such as dairy powder, ethanol, beverages,
cheeses and food preparations, the maximum Brazilian tariff being 27%.
In Chile’s case, as mentioned earlier, the across the board rate of 9% can be misleading. Although
Chile appears to have very low tariff protection, the reality is that the agriculture sector is highly
protected through non-tariff barriers such as price bands. The level of protection has translated into
low levels of agricultural imports, mostly in grains, bovine meat, and fats and oils.
Peru has relatively low tariff rates with a mean of 17% and a median of 12%. The maximum tariff is
30% and is applied to poultry meat. The other most protected sectors are pork meat, cheese, milk
powder, tropical fruits, and juices.
Costa Rica has a low mean of 13.8% and median of 14%. Nevertheless, eight product groups have
average rates well above the mean with a maximum rate of 162%. The most protected sectors are
dairy powder, poultry and pork meat, other dairy, sugars and cheese.
The Dominican Republic has an average tariff of 21% and a median of 25%. Most of its product
groups (30) have average rates above the mean. Interestingly, cheese, juice, orange juice,
processed fruits, poultry meat and nuts have the same average rate of 35%.
29
Coffee
Dairy (other)
30
Hides & Skins
Oilseeds
Live Animals
Meat: Pork
NES
Essential oils
Meat (other)
Live Plants
Grains
Wheat & Malt
Fibers
Starches
T a riff L in e s
1736
% A d V a lo re m
57
% S p e c ific
37
% M ix e d
7
M ean
1 1 .4 %
M e d ia n
3 .7 %
S t. D e v
3 2 .0 %
M ax
3 5 0 .0 %
No. TRQs
376
A g . Im p .('0 0 0 ) $ 4 1 ,9 4 6
60
50
40
10
NES
Nuts
Oilseeds (proc)
7 ,8 0 0
Veg (proc)
Veg (F&D)
Tobacco
Tea & Spices
Sugars
70
Starches
80
Sweeteners
90
PTO
18 5 1 1 2 1 0 2
Soybeans
Peanuts
Oilseeds (proc)
Oilseeds
Nuts
70
Flowers
80
Meat (other)
Temperate Fruits
Tea & Spices
Beverages
Fats & Oils
Veg (F&D)
Veg (proc)
Coffee
Fruits (proc)
Meat: Bovine
PTO
Feed
Tropical Fruits
Juice
Meat: Poultry
Soybeans
Grains (proc)
Eggs
Alcohol
Sweeteners
Cocoa
Food prep.
Dairy (cheese)
Sugars
Orange Juice
90
Meat: Poultry
Meat: Pork
Meat: Bovine
Peanuts
Dairy (other)
2 ,5 0 0 2 ,7 0 0
Live Plants
Live Animals
Hides & Skins
Wheat & Malt
Grains (proc)
Grains
Fruits (proc)
Orange Juice
Juice
Tropical Fruits
Temperate Fruits
Food prep.
Flowers
Fibers
Feed
Fats & Oils
Alcohol
Essential oils
Eggs
Dairy (Powder)
Tobacco
Dairy (Powder)
2 ,0 0 0
1250
1000
750
T a riff L in es
13 41
% A d V alo rem
73
% S p ec ific
19
% M ixe d
10 2
M e an
2 0.1 %
M e d ian
3.0 %
S t. D e v
6 1.7%
M ax
5 30 .0 %
No. TRQ s
87
A g . Im p .('00 0)
$ 11 ,6 62
60
1250
50
1000
40
10
Imports (US$ Millions)
0
Dairy (cheese)
100
Cocoa
0
Beverages
Average Ad Valorem Equivalent (%)
100
Imports (US$ Millions)
Average Ad Valorem Equivalent (%)
Figures 12-19
Tariff and Trade Import Profiles for 43 “Sensitive” Groups of Products (2000)
Figure 12. United States
2000
1750
1500
30
20
500
250
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
Figure 13. Canada
2000
1750
1500
750
30
20
500
250
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
31
NES
40
10
Live Plants
50
Live Animals
Peanuts
Essential oils
Tropical Fruits
Food prep.
Soybean
Feed
PTO
Sugars
Meat: Bovine
Sweeteners
Flowers & Foilage
Dairy (other)
Grains
NES
Alcohol
Veg (F&D)
Fibers
Live Animals
Meat (other)
Wheat & Malt
Orange Juice
Coffee
Oilseeds (proc)
Oilseeds
Live Plants
Starches
Fats & Oils
Tea & Spices
Temperate Fruits
Nuts
Eggs
Fruits (proc)
Juice
Meat: Poultry
Grains (proc)
Veg (proc)
Beverages
Hides & Skins
Cocoa
Tobacco
Dairy (Powder)
60
Oilseeds
Hides & Skins
80
Fibers
90
Grains
100
Peanuts
Feed
Veg (F&D)
Flowers
Meat: Pork
Dairy (cheese)
Average Ad Valorem Equivalent (%)
70
Eggs
Fats & Oils
Wheat & Malt
Oilseeds (proc)
Meat (other)
Soybeans
Nuts
Meat: Bovine
Temperate Fruits
Tropical Fruits
Essential oils
Tea & Spices
Meat: Pork
PTO
Meat: Poultry
Veg (proc)
Starches
Coffee
Grains (proc)
Orange Juice
Juice
Fruits (proc)
Dairy (other)
Tobacco
Cocoa
Sugars
Food prep.
0
Sweeteners
Dairy (cheese)
Beverages
Alcohol
80
1069
95
1
4
2 3 .3 %
8 .7 %
3 7 .8 %
2 6 0 .0 %
48
$ 9 ,7 9 0
1250
1000
750
T a riff L in e s
940
% A d V a lo re m
0
% S p e c ific
0
% M ix e d
0
M ean
1 2 .6 %
M e d ia n
1 3 .0 %
S t. D e v
5 .8 %
M ax
2 7 .0 %
N o. TR Q s
1
A g . Im p . ('0 0 0 ) $ 3 ,9 6 8
60
1250
50
1000
40
750
30
20
500
10
250
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
0
Imports (US$ Millions)
0
Dairy (Powder)
90
T a riff L in e s
% Ad V al
% S p e c ific
% M ix e d
M ean
M e d ia n
S t. D e v
M ax
No. TRQs
A g . Im p .('0 0 0 )
Imports (US$ Millions)
Average Ad Valorem Equivalent %
100
173
Figure 14. Mexico
2000
1750
1500
30
20
500
250
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
Figure 15. Brazil
2000
1750
70
1500
Meat: Pork
32
Tobacco
NES
Veg (proc)
Veg (F&D)
Tobacco
Tea & Spices
Sugars
Sweeteners
Starches
T a riff L in e s
% A d V a lo re m
% S p e c ific
% M ix e d
M ean
M e d ia n
S t.D e v .
N o. T RQ s
A g . Im p .('0 0 0 )
Soybeans
T a riff L in e s
% A d V a lo re m
% S p e c ific
% M ix e d
M ean
M e d ia n
S t.D e v
M ax
No. TRQs
A g . Im p .('0 0 0 )
Oilseeds (proc)
Oilseeds
Live Plants
80
Live Animals
90
PTO
Soybeans
Peanuts
Oilseeds (proc)
Oilseeds
Nuts
Meat (other)
Meat: Poultry
Meat: Pork
Meat: Bovine
Live Plants
Live Animals
Hides & Skins
Wheat & Malt
Grains (proc)
Grains
Fruits (proc)
Orange Juice
Juice
Tropical Fruits
Temperate Fruits
Food prep.
Flowers
Fibers
Feed
Fats & Oils
Alcohol
Essential oils
Eggs
Dairy (Powder)
Dairy (other)
Dairy (cheese)
80
Hides & Skins
Cocoa
Coffee
90
Flowers
100
Fibers
Feed
Alcohol
Essential oils
Eggs
NES
Starches
Fats & Oils
Food prep.
Tea & Spices
Sugars
Sweeteners
Peanuts
Beverages
Grains
Cocoa
Wheat & Malt
Coffee
Veg (F&D)
Grains (proc)
PTO
Veg (proc)
Dairy (other)
Meat: Bovine
Meat (other)
Temperate Fruits
Nuts
Fruits (proc)
Orange Juice
Juice
Tropical Fruits
Dairy (Powder)
Dairy (cheese)
100
647
100
0
0
9 .0 %
9 .0 %
0 .0 %
0
$ 1 ,2 8 6
50
40
10
900
100
0
0
1 7 .1 %
1 2 .0 %
6 .5 %
3 0 .0 %
0
$ 9 0 5 .6
60
1250
50
1000
40
750
30
20
500
10
250
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
0
Imports (US$ Millions)
0
Beverages
0
Meat: Poultry
Average Ad Valorem Equivalent (%)
60
Imports (US$ Millions)
Average Ad Valorem Equivalent (%)
Figure 16. Chile
2000
1750
70
1500
1250
1000
750
30
20
500
250
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
Figure 17. Peru
2000
1750
70
1500
33
Fibers
Essential oils
Live Plants
NES
Oilseeds
Wheat & Malt
Starches
Hides & Skins
113 8
100
0
0
1 3.8%
14.0%
2 0.0%
1 62 .0 %
67
$4 55.8 6
60
50
40
10
Live Plants
Fibers
T ariff L ines
% Ad Valo rem
% Sp ecific
% M ixed
M ean
M ed ian
S t.D ev
M ax
No. TRQs
Ag . Im p . ('000)
Oilseeds
Live Animals
NES
70
Feed
80
Wheat & Malt
90
Grains
100
Peanuts
Soybeans
70
Live Animals
Peanuts
Soybeans
Eggs
Fats & Oils
Feed
Oilseeds (proc)
Nuts
Orange Juice
Food prep.
Tea & Spices
Cocoa
Juice
Meat: Bovine
Sweeteners
Tobacco
Grains
Grains (proc)
Veg (F&D)
Veg (proc)
Alcohol
Temperate Fruits
Flowers
Fruits (proc)
Beverages
Coffee
Tropical Fruits
PTO
Meat (other)
Meat: Pork
Dairy (cheese)
Sugars
Dairy (other)
80
Hides & Skins
Oilseeds (proc)
Starches
Sweeteners
Sugars
Essential oils
Fats & Oils
Eggs
Dairy (Powder)
Grains (proc)
Veg (F&D)
Meat: Bovine
Tropical Fruits
Coffee
Flowers
Tobacco
Dairy (other)
Tea & Spices
Cocoa
Meat (other)
PTO
Meat: Pork
Food prep.
Veg (proc)
Alcohol
Beverages
Temperate Fruits
Nuts
Meat: Poultry
Fruits (proc)
Orange Juice
Meat: Poultry
Dairy (Powder)
90
T ariff L in es
% A d V alo re m
% S p ec ific
% M ix ed
M ea n
M ed ian
S t.D ev
M ax
N o. TRQ s
A g . Im p .('00 0)
12 5 0
10 0 0
778
100
0
0
21.2%
25.0%
10.6%
35.0%
0
$659.2
60
1 250
50
1 000
40
7 50
30
20
5 00
10
2 50
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
Imports (US$ Millions)
0
Juice
0
Dairy (cheese)
Average Ad Valorem Equivalent (%)
100
Imports (US$ Millions)
Average Ad Valorem Equivalent (%)
Figure 18. Cost Rica
20 0 0
17 5 0
15 0 0
75 0
30
20
50 0
25 0
0
PTO: Potatoes, Tomatoes and Onions. NES: Others. Source: 2001 Hemispheric Database of the Americas and AMAD. Author’s calculations.
Figure 19. Dominican Republic
2 000
1 750
1 500
III.2.2. Domestic and Export Agricultural Subsidies
One of the major breakthroughs of the URAA was the recognition of the direct link between
domestic agricultural policies and international trade. A distinction was established between
domestic policies that: i) do not or minimally distort trade (“green box”); and ii) those that distort
trade (“amber box” and “blue box”).
a) Domestic Support Notifications
The Agreement on Agriculture sets out a number of general and measure-specific criteria which,
when met, allow subsidies to be placed in the green box. These measures are exempt from
reduction commitments and can even be increased without any financial limitation under the WTO.
The general criteria are that the measures must have no, or at most minimal, trade distorting
effects or effects on price support or production. In addition to measures covered by the green box,
two other categories of domestic support measures are exempt from reduction commitments under
the URAA: certain developmental policies in developing countries (S&D box) and the government
payments under production-limiting programs (blue box). All domestic support measures
considered distorting production and trade fell into the amber box, and had reduction commitments
under the Agreement. Amber box subsidies are measured through an indicator named Total
Aggregate Measurement of Support (AMS).
Tables 4 and 5 show, respectively, the notifications on green and blue box (both categories exempt
from reduction commitments) for all FTAA countries, compared to the major world “players” in
subsidies. Table 6 shows the evolution on amber box notifications, through the AMS indicator.
As can be seen, the FTAA has the highest proportion of green box commitments at 46.6% of which
87.5% are US commitments and the E.U. has a low 19% green box commitments. On the other
hand, the E.U. has the highest percentage of blue and amber box commitments at 88.8% and
58.1% respectively, while the FTAA has 6.7% and 9% respectively. The US amber box
commitments have experienced a growth trend since 1995 while E.U. commitments have
experienced a downward trend.
34
Table 4. FTAA Members’ and WTO Notifications on Green Box
(US$ Millions)
1995
United States
Brazil
Mexico
Canada
Venezuela
Colombia
Argentina
Chile
Peru
Trinidad & Tobago
Costa Rica
Uruguay
Paraguay
Dominican Rep.
Jamaica
FTAA TOTAL
European Union
"Like-Minded"
Others
WORLD TOTAL
1996
1997
1998
Average
46,041
4,883
1,625
1,534
539
318
137
176
80
61
67
18
23
7
55,509
51,825
2,600
1,443
1,452
618
578
237
169
109
98
30
33
9
10
7
59,218
51,252
3,458
1,460
859
613
350
49,824
2,420
1,448
201
223
58
40
37
22
9
8
58,590
95
24,189
41,681
8,812
130,191
26,598
35,301
7,524
128,641
20,475
31,406
6,465
116,936
% FTAA
% World
22
39
19
15
8
54,041
49,736
3,340
1,494
1,282
590
349
187
160
137
72
40
32
18
10
6
56,840
87.5%
5.9%
2.6%
2.3%
1.0%
0.6%
0.3%
0.3%
0.2%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
100.0%
40.8%
2.7%
1.2%
1.1%
0.5%
0.3%
0.2%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
46.6%
21,537
31,062
5,650
112,290
23,200
34,863
7,113
122,014
-----
19.0%
28.6%
5.8%
100.0%
151
Note: “Like-Minded” countries are the Czech Republic, Hungary, Iceland, Norway, Poland, Switzerland,
Liechtenstein, Japan and Korea.
Source: WTO
Table 5. FTAA Members’ Notifications on Blue Box
(US$ Millions)
United States (FTAA)
European Union
"Like-Minded"
Others
WORLD TOTAL
1995
7,030
26,850
1,147
35,028
1996
25,848
1,124
26,973
1997
23,040
1,043
24,084
1998
17,762
1,436
19,198
Average % FTAA % World
1,758
100%
6.7%
23,375
-88.8%
1,188
-4.5%
-0.0%
26,321
-100%
Note: “Like-Minded” countries are the Czech Republic, Hungary, Iceland, Norway, Poland, Switzerland,
Liechtenstein, Japan and Korea.
Source: WTO
35
Table 6. FTAA Members’ Notifications on Amber Box (AMS)
US$ Million
United States
Mexico
Canada
Venezuela
Argentina
Colombia
Brazil
FTAA TOTAL
European Union
"Like-Minded"
Others
WORLD TOTAL
1995
1996
6,214
5,898
452
303
568
450
542
331
123
84
58
4
7,957
7,070
64,436
61,264
44,716
37,049
2,427
2,396
119,536
107,779
1997
6,238
1,058
364
457
14
8,131
56,571
32,221
2,228
99,151
1998
10,400
1,258
Average % FTAA % World
7,188
82.4%
7.1%
768
8.8%
0.8%
461
5.3%
0.5%
443
5.1%
0.4%
69
0.8%
0.1%
10
22
0.2%
0.0%
83
21
0.2%
0.0%
11,751
8,727
100.0%
8.6%
52,453
58,681
-58.1%
11,479
31,366
-31.1%
1,750
2,200
-2.2%
77,433
100,975
-- 100.0%
Note: (1) Amber Box includes subsidies addressed in the Total Aggregate Measurement of
Support (AMS) reduction commitments, deemed to have the most distorting effects on trade.
(2) “Like-Minded” countries are the Czech Republic, Hungary, Iceland, Norway, Poland, Switzerland,
Liechtenstein, Japan and Korea.
Source: WTO.
When comparing official subsidy notifications using Total AMS data to the subsidies measured
annually by the Organization for Economic Cooperation and Development (OECD), the results are
very contradictory. OECD data shows that total support levels to agriculture in its members’
countries remains high, at around $330 billion per year as measured by the Total Support Estimate
(TSE). According to the last OECD report,12 despite some shift away from market price support and
output payments, these methods continue to be the dominant forms of support (around 70 percent
of the total) in most OECD countries, insulating producers from world market signals and distorting
global production and trade.
Figure 20 compares amber box commitments (AMS) with the Producer Support Estimate (PSE)
indicator of OECD. Despite the fact that the Total AMS methodology is based on the OECD
methodology (PSE), AMS indicators represent less than one-half of the PSE indicators. Data
shows that while AMS presents a decrease of trade-distorting subsidies at the end of the 90’s, the
PSE indicates an increase in subsidies.13
12
. According to the OECD (2001) report, the prices received by farmers in member countries of the OECD in 19982000 were almost 50% higher than those on the world market were. The producer support estimate per farmer was
$25,190 in Japan, $21,785 in Korea, $ 20,803 in the US and $16,028 in the E.U.
13
. Despite the reduction in the current total AMS, the level of agricultural support as measured by the PSE remains
quite high and the gap between the PSE and AMS is increasing over time. There are several reasons explaining why the
AMS is a poor indicator of production and trade distortions, among them the following: a) Total AMS production
commitments are sector-wide, not product-specific (as is the PSE). This gives countries the opportunity to reduce
support on some products leaving other products’ support unchanged or even higher. Countries’ notifications show that
some of them have increased support to certain specific products. b) The market price support component of the AMS is
based on the domestic administered support price and a fixed base-period world reference price. The domestic
administered support price may be a poor proxy for the domestic market price, while the fixed external reference price
of support does not represent the actual border price, which brings into question the measure of price support as defined
by the URAA (the PSE uses current international reference prices). c) The exclusion of price support in cases where no
administered price exists provides wide flexibility to governments in choosing policy instruments. d) The AMS only
includes support provided through domestic measures and it does not capture distortions arising from trade measures
36
Figure 20. Global Subsidies Comparison: Evolution of WTO-AMS and OECD-PSE
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
Others
United States
Japan+Korea
European Union
86-88
1995
1996
1997
280
260
240
220
200
180
160
140
120
100
80
60
40
20
-
1998
86-88
1995
1996
1997
1998
1999
Note: PSE: “Producer Support Estimate” from OECD; AMS: “Aggregate Measurement of Support” of WTO.
Source: OECD-PSE Database and WTO Members’ Notifications.
b) Export Subsidies Notifications
The proliferation of export subsidies in the years leading to the Uruguay Round was one of the key
issues that were addressed in the agricultural negotiations. While under GATT export subsidies for
industrial products have been prohibited along the multilateral rounds, in the case of agriculture
such subsidies were only subject to limited disciplines that moreover did not prove to be
operational. Table 7 shows the evolution of export subsidies notifications in FTAA area, compared
to other major world players in this area.
The European Union alone represents 88 percent of the value of export subsidies notified to the
WTO. The E.U. has had, or has come very close to having, problems in meeting its export subsidy
commitments under the Uruguay Round Agreement on Agriculture in several key commodity
areas: dairy products (notably cheese), rice, wine, beef, olive oil, poultry, and fresh fruit and
vegetables.14
Table 7. Notifications on Export Subsidies
(US$ Millions)
United States
Costa Rica
Colombia
Canada
Mexico
Venezuela
FTAA TOTAL
European Union
"Like-Minded"
Others
WORLD TOTAL
1995
26
18
38
3
85
6,292
619
116
7,112
1996
122
22
4
20
168
6,684
527
93
7,472
1997
112
105
25
36
2
280
4,915
459
91
5,745
1998
147
123
23
4
297
5,843
440
62
6,642
Average
102
57
22
14
10
8
208
5,934
511
91
6,743
%FTAA
49.0%
27.5%
10.6%
6.7%
4.8%
4.0%
100.0%
-----
% World
1.5%
0.8%
0.3%
0.2%
0.1%
0.1%
3.1%
88.0%
7.6%
1.3%
100.0%
Source: WTO
that are excluded from the AMS provisions (e.g. tariffs and export subsidies). For more details, see Diakosavvas (2001)
and Blandford (2001).
14
. According to Blandford (2001), “in terms of the future, it seems clear that further reductions in the allowable
volumes and values of subsidized exports would likely force adjustment in domestic price support programs in the
E.U.”.
37
As can be seen in Table 7, FTAA countries traditionally have had low levels of export subsidies
since other measures with similar effects have been implemented. These measures include
officially supported export credits on agriculture, international food aid programs, and state trading
enterprises (STE), export restrictions (taxes, for example), and revenue pooling arrangements.
These programs have similar effects on exports as export subsidies but are not being regulated
under WTO. Therefore, it would be easy for the region to reduce or eliminate export subsidies in
future negotiations. In the case of the European Union it might prove to be a more sensitive issue.
III.3. Conclusion: Perspectives for agricultural liberalization in the Western Hemisphere
Agriculture is a very sensitive sector for most Western Hemispheric countries and a very complex
and heterogeneous sector in the Americas that will be a strategic issue in the negotiations of the
FTAA. It has a different importance and meaning in every country. Overall, it represents a high
percentage of the economically active population, GDP and exports.
For small economies, such as most of the Caribbean countries, it means a strong dependence on
preferential or duty-free access agreements. Agricultural liberalization and the elimination of
subsidies is a very sensitive issue for the so-called “net food importer” countries15, as they show
strong dependence on low-cost food imports, and consequently some resistance to eliminate the
export incentives in the developed world, like agricultural export subsidies and credits, food aid
mechanisms, etc.
In countries such as Brazil and Argentina, agribusiness is a very competitive sector with strong
potential for generating trade balance surpluses after the recent problems of current account
deficits. These countries can be expected to demand further liberalization.
For the US and Canada, agriculture is a politically sensitive sector where lobbies in the Congress
wield broad bargaining power capabilities.
In addition to the interests that drive each country, the FTAA negotiations on agriculture have a
strong relationship to multilateral negotiations (WTO Development Agenda), other regional
agreements (such as NAFTA and EU-Mercosul) and bilateral arrangements (US-Chile, for
instance).
If Western Hemispheric countries continue to invest political and human capital in the FTAA
process, the launch of the WTO’s new “Development Agenda” will be beneficial for hemispheric
agricultural integration. The new round will allow for the separation of the two most sensitive issues
- market access and subsidies - with market access being primarily discussed at a regional level
and subsidies at the multilateral level.
15
. In July 1999, the “net food importing developing countries” in the Western Hemisphere were Barbados, Cuba,
Dominican Republic, Honduras, Jamaica, Peru, Saint Lucia, Trinidad and Tobago, and Venezuela.
38
CHAPTER IV. MARKET ACCESS IN THE FTAA
IV.1. Development of the FTAA process: 1995-2002
In December 1994, the Presidents and Heads of State of the 34 democratic nations of the Western
Hemisphere decided to begin preparatory work for the construction of a Free Trade Area of the
Americas (FTAA). They agreed that this should be established by the year 2005. To accomplish
this an Action Plan was established, setting the basic goals and an institutional framework to
launch the initiative.16
The framework for preparatory work included the creation of a number of technical working groups,
supervised periodically by the Meeting of Ministers for Trade of the Hemisphere. From 1995 to
1998, twelve Working Groups were established and began work. Their most important task was to
prepare for negotiations for a free trade area.17 Their work consisted essentially of a preliminary
exchange of perspectives on the matters to be negotiated later, while also gathering information
and setting up databases that would be useful for the negotiations.18
Having completed this pre-negotiation stage, the Ministers decided in 1998 to launch the
negotiation stage itself. An agreement was reached on the goals and objectives of the
negotiations, the Working Groups were restructured in order to turn them into nine Negotiating
Groups with specific mandates;19 the Trade Negotiations Committee was established at the viceministerial level as the executive body of the process; the FTAA Administrative Secretariat was
formed to provide logistical support for the process; and technical support was requested of the
Tripartite Committee composed of the Inter-American Development Bank, the United Nations
Economic Commission for Latin America and the Caribbean and the Organization of American
States. A number of consultative groups and technical committees were also set up to support
specific aspects of FTAA discussions.20
Achieving a free trade area that includes 34 diverse countries has been a complex and ambitious
undertaking. The FTAA discussions have advanced without interruption since 1994 and
considerable progress has been made to date. It could be argued that the FTAA process is now
half complete: solid bases for negotiating methods and procedures have been established, as well
as for the infrastructure/logistic and technical support needed to sustain negotiations until the final
goal is reached in 2005.
16
. See Summit of the Americas, December 1994, Miami, Action Plan, Section II, Promoting Prosperity through
Economic Integration and Free Trade.
17
. The twelve working groups were set up to cover these areas: 1) Tariffs and Non-tariff Measures; 2) Customs
Procedures and Rules of Origin; 3) Standards and Technical Barriers to Trade; 4) Services; 5) Investments; 6)
Intellectual Property Rights; 7) Government Procurement; 8) Sanitary and Phytosanitary Measures; 9) Subsidies,
Antidumping and Countervailing Duties; 10) Smaller Economies; 11) Dispute Settlement; and 12) Competition Policy.
18
. The results of much of this work are available at the FTAA official website: www.ftaa-alca.org
19
. The nine Negotiating Groups are: 1) Market Access; 2) Agriculture; 3) Services; 4) Investments; 5) Government
Procurement; 6) Intellectual Property Rights; 7) Competition Policy; 8) Subsidies, Antidumping and Countervailing
Duties; and 9) Dispute Settlement.
20
. Specifically on the topics of Smaller Economies, Electronic Commerce, Participation of Civil Society, Business
Facilitation and, recently, Institutional Issues.
39
IV.2. The agenda for negotiating market access for goods
As part of the agreed restructuring prior to launching negotiations in 1998, the Ministers
established the Negotiating Group on Market Access covering issues dealt with in three of the
working groups, while adding new areas of negotiation. The main issues involve tariffs and nontariff measures, safeguard measures, rules of origin and related procedures, customs procedures
and standards and technical barriers to trade.21 We review each of these areas in turn.
a) Tariffs and non-tariff measures
Tariff and non-tariff measures are usually the starting point for any trade agreement and this is also
the case of the FTAA. The basic mandate is to establish a free trade area compatible with the
basic principles of the WTO, in particular Article XXIV of the GATT of 1994 agreement. As a result,
the 34 countries must negotiate a program to eliminate tariff barriers to substantially all trade in
goods within 10 years. This could include different schedules or “baskets” for phasing out tariff
barriers. The ministers have agreed that there will be no prior exclusions of goods or economic
sectors. As part of the same issue, the group has instructions to deal also with special regimes,
that is, customs-related schemes or others that grant special tariffs and/or tax treatment to the
importation or exportation of goods (duty-free zones, maquilas, inward processing, transit, etc.).
Recently, the ministers instructed the group to prepare recommendations on the methods and
modalities of tariff negotiations. This work is essential to the structural design of the free trade
area. It is hoped that once these methods and modalities have been approved, product-by-product
negotiations will be launched as early as May 15, 2002.
b) Safeguard measures
In order to provide transitory palliative measures to a massive importation of goods that may cause
injury to domestic industry, the group will have to design a regime of safeguard measures suitable
for the FTAA. At their recent meeting in Buenos Aires in April 2001, the ministers instructed the
group to step up its negotiations in this area. This highlights the importance they attribute to this
issue.
c) Rules and procedures of origin
The group must design an origin regime with procedures that guarantee that only products
originating in countries of the hemisphere will benefit from preferential tariff treatment derived from
the FTAA.
d) Customs-related procedures
In order to facilitate trade, customs procedures must be simplified. Particular emphasis has been
placed on facilitating the exchange of customs information, detecting and combating customsrelated infractions, and promoting mechanisms to guarantee that operations can be carried out in a
transparent and efficient manner.
e) Standards and technical barriers to trade
The basic objective here is to identify, eliminate and prevent unnecessary technical barriers to
trade. The group’s agenda is stated in relatively clear terms. However, the issues negotiated are
not always self-contained units. The group faces a number of challenges in its negotiations, since
21
. See specific mandates in the San José Declaration, Annexes I and II.
40
many of the issues have implications for other FTAA negotiating groups or for other international
trade negotiations. The countries will have to coordinate these interactions carefully. For example,
the group has close connections with the Negotiating Group on Agriculture and, to a lesser extent,
with the Subsidies, Dumping and Countervailing Duties and the Dispute Settlement Group. Beyond
the scope of the FTAA, it will be important to carefully monitor the advances made in multilateral
negotiations, especially those launched last November at the Doha Round.22 Many of these issues
will be negotiated in both fora.
IV.3. The Challenges Ahead
The formal agenda of the Negotiating Group on Access to Markets hides behind it an enormous
number of technical, political and economic challenges. The negotiators face a set of issues that
are politically very sensitive and technically very complex. The challenges facing this stage of
negotiations can be grouped broadly in three categories: (a) unraveling the “spaghetti bowl”23; (b)
architectural issues and (c) others. Following is a very brief explanation of some of the main
systemic challenges facing the negotiations on market access in the FTAA. The challenges
urveyed here are only the tip of the iceberg.
IV.3.1. Unraveling the “spaghetti bowl”
The FTAA faces a difficult job in defining the terms of the FTAA’s coexistence with other trade
agreements in the hemisphere. The ministers have coined a language24 that does not necessarily
contribute to solving the technical problems involved. For practical purposes, more than 40 trade
agreements now coexist in the hemisphere, in addition to other agreements that are now being
negotiated or that will be negotiated before 2005. This implies the challenge of having to decide
whether (or how) to deal with current and potential access conditions for the goods that will benefit
from this complex set of trade agreements.25 As we have seen in the first part of this paper, each
agreement has its own tariff reduction scheme, its own rules of origin, and its own technical,
procedural and even documental systems.26
a) Multiplicity of phase-out schedules
Many of these agreements have led, or are leading, to different complex programs to phase out
trade barriers. The pace and speed of each depends on the results of negotiations among member
states. Some of these also exclude certain goods or give special treatment to specific sectors.
Consideration clearly must be given to what kind of treatment the FTAA can give these goods or
sectors; or, if the treatment given under other agreements differs from that negotiated in the FTAA
framework, it is worth considering whether both agreements can coexist. The “rules of origin” factor
further complicates the problem, as we will see next.
22
. See Ministerial Declaration of the Fourth Ministerial Conference of the WTO, Doha, November 14, 2001.
. The “spaghetti bowl” concept has been used in the specialized literature to denote the maze of trade agreements that
have been adopted in recent years. See, for example Bhagwati and Panagariya (1996, page 3).
24
. The Ministerial Declarations made at the San José and Buenos Aires conferences establish literally that “The FTAA
can co-exist with bilateral and subregional agreements, in so far as the rights and obligations under such agreements are
not covered by or do not exceed the rights and obligations of the FTAA.”
25
. Despite these observations, it is important to remember that the agreements in force are the building blocks of FTAA
construction. In many countries in the hemisphere, these agreements have helped build political consensus in favor of
freer trade and the FTAA.
26
. A single source with a series of more detailed analysis of the main agreements and the market access issue is:
Estevadeordal and Robert (2001).
23
41
b) Multiplicity of Rules of Origin Regimes
In addition to the multitude of programs for phasing out trade barriers in the hemisphere, each
agreement also has its own rules of origin regime.27 Rules of origin in themselves can add
considerable complexity, both to negotiations and to their execution and verification. Likewise, the
criteria for determining origin, the precise content of the “accumulation” clauses, and the specific
rules for goods can vary greatly from agreement to agreement. This leaves us with the same
question as before: How can different rules of origin schemes coexist, if only during the FTAA
transition period? If a businessperson wants to export and has an FTAA rule of origin and another
different rule for the same product under a bilateral agreement, how can his or her decision be
facilitated? In fact, one of the basic aims of the FTAA is precisely this - to simplify trade in the
hemisphere. At the technical and political levels, however, the question of coexistence is complex
and will require a great deal of analysis.
c) Multiplicity of technical and procedural requirements
The agreements currently in force in the hemisphere often contain disciplines relating to exporting
and importing procedures, document and labeling requirements, technical regulations and
standards, and requirements for verification and certification.28 Once again, it will be up to the
negotiators to define the best way of simplifying these requirements – something not always easy.
The panorama is indeed complex for national negotiators and the options are not entirely clear.
However, three possible scenarios for a solution are most likely: 1) the FTAA negotiates its own
tariff elimination program, its own set of rules of origin and its own requirements, while exporters
decide on a case-by-case basis whether to opt for FTAA treatment or for treatment in accordance
with another agreement, depending on what best suits their interests; 2) the FTAA invalidates preexisting agreements on tariffs, origin and technical and procedural requirements, making FTAA
criteria the only valid ones; 3) the FTAA does not step in to regulate tariffs, origin or procedural
requirements among countries which already have a trade agreement in force.
Each of these options has its advantages and disadvantages, some greater than others. It is clear
that FTAA market access negotiations will be very complex, but the problem is broader. In fact, the
spaghetti bowl problem is common throughout the FTAA, with identical dilemmas in the areas of
investment and services. Many of these problems will likely be solved as the process advances
and as the need for solutions becomes more intense. It is not clear which of these issues will be
referred to specifically and expressly in the FTAA. What is very clear, however, is that the
“spaghetti bowl” is one of the most significant matters that FTAA negotiators will have to take into
account when designing the basic structure of the market access agreements.
It is worth noting that if the FTAA manages to rationalize the spaghetti bowl, it will have achieved
significant positive externality. It is still early to predict to what degree the FTAA will be able to do
this, but there is no reason to be too pessimistic. Perhaps the most important point here is that the
FTAA could facilitate convergence toward multilateralism and that, as a result, the FTAA could
become a regional agreement that will contribute to the construction of a vigorous multilateral
arrangement.
27
. For an in depth analysis of the different regimes, see Cornejo and Garay (1999, 2001).
. For an idea of the vast number of agreements in this area, see the FTAA paper, Provisions on Standards and
Conformity Assessment in Trade and Integration Agreements of the Western Hemisphere at the FTAA official website:
<www.ftaa-alca.org>.
28
42
IV.3.2. Architectural Issues
There are three key elements in the design of the FTAA market access program: the design of the
transition programs, the origin regime and accumulation, and safeguard measures. The goal is to
define the exact conditions under which goods can enter internal markets, both in terms of tariffs
and origin requirements.
a) The design of transitional programs
As was mentioned above, negotiators will have to establish a free trade area in which substantially
all trade will be liberalized within 10 years. They have many options as they begin to study the
possibilities of a program to phase out tariffs in the hemisphere. The essential elements of tariff
negotiations of this kind involve the base tariff; the number of “baskets” to be liberalized under the
same schedule; the time frame and pace for reaching a zero percent tariff for each basket; the
methods for allocating products to each basket; the possibility of excluding products from the
liberalization program; the procedures for later negotiations to reach a balanced set of concessions
among the 34 countries; the tariff nomenclature to be used in negotiations; the type of basic
statistical information required; the methods for registering concessions; the possibility that a given
country may have different concession schemes applicable to different countries or groups of
countries (or on the contrary, whether there will be a concession scheme for each country
applicable to the other 33 countries); the possibility of granting some kind of special treatment to
certain countries with small economies; and so on. Each of these points is a major challenge and
there may be significant differences of opinion regarding each of them. Before launching
negotiations, the countries must define all these details so that negotiations are streamlined and
balanced and do not suffer from a lack of clear methodology for tariff negotiations.
In order to demonstrate the different points of view that could exist in each of the issues mentioned
above, the base tariff serves as a good example. The definition of the base tariff corresponds to
the definition of the tariff level for each type of merchandise that will be used as the starting point
for phasing out tariffs when the FTAA comes into force after 2005. One option could be that the
base be the most favored nation tariff effectively applied at the start of negotiations in May 2002.
Another could be that the base tariff be the lowest most favored nation tariff applied between this
date and the coming into effect of the Agreement. Still, another option is that the base tariff be the
lowest tariff applicable in May 2002, including any preferential, unilateral or bilateral tariff or any
other tariff of any other kind enjoyed by a country in any other country in the FTAA. Finally, there
could be no base tariff role; in other words, countries could define the final goal (that is, when
goods must reach a 0% tariff) without necessarily predetermining the route to that goal.
Defining the “baskets” containing the products subject to tariff phase-out is also complex. Hiding
behind this issue is the question of the “phase-out timetables” as well as a whole set of key factors
in the tariff phase-out process. Some countries could want a minimum number of baskets to be
phased out more or less immediately, or else over the medium or long term. Others could prefer to
have more baskets, presumably for longer periods. Defining the number of baskets and their time
frames clearly involves complex issues of political economy. The more baskets there are, the more
complex it becomes to administer the tariff phase-out program. The existence of baskets also
means it is necessary to take into account other tariff policy issues. Negotiators would have to
keep in mind the placement of each specific finished product in terms of its components because
specific baskets imply different levels of effective protection during the transition period.
The time frame for reaching a 0% tariff level also has its implications. In principle, a linear phaseout brings certain order and measure to the phase-out process. However, various other phase-out
options have also been used traditionally, for example, including grace periods for linear or
43
immediate elimination; constantly accelerating phase-out periods, etc. Each approach has
advantages and disadvantages. The alternative approaches may alleviate certain political
pressures but involve higher administrative costs. Grace periods, supposedly granted to facilitate
the adjustments made by companies, have sometimes proven not be effective because
companies, in fact, do not begin making adjustments until they actually begin to feel competitive
pressure. As we have seen, there are many very complex issues to be dealt with when defining the
number, time frame and speed of baskets or schedules for tariff phase-out.
b) Rules of origin and accumulation
After several years of applying different origin regimes at the bilateral or subregional levels,
countries have developed their own ways of thinking about the question of determining origin for
preferential purposes. The complications inherent to negotiations among 34 countries with such
different production systems, many of them connected by other integration schemes, also present
hurdles to negotiations of this kind. On an optimistic note, the hemisphere has ready access to raw
materials and semi-processed and processed goods. This makes it easier to handle the typically
“defensive” tone of negotiations on origin, especially if an accumulation clause is accepted (that is,
the opportunity for a producer in one country to import its raw materials or components from other
FTAA countries, and to export its product to any third country within the FTAA, benefiting from
preferential tariff treatment). However, a simple accumulation clause faces a dilemma when there
are different phase out scheduling because they could lead to triangular arrangements. On the
other hand, a single program for each country, could undermine the possibility of differential tariff
treatment aimed at recognizing certain sensitivities.
The issue of origin also presents significant problems of substance and also of procedure. We will
attempt give some examples of both. In terms of the substance of rules of origin, the main problem
may be how to define the criteria for determining the origin of goods, especially when it is known
that certain inputs may come from countries that are not part of the agreement. As mentioned
earlier, origin regimes are traditionally based on one, two or three of the following criteria: 1)
change in tariff classification; 2) use of regional content requirements or value-content tests; and 3)
specific transformation requirements.
Each approach has its advantages and disadvantages, both in negotiations and in its application,
administration and verification. Without going deeply into details,29 we can affirm that there is a
relative consensus that the first approach is the best (and the WTO recognizes this in the Annex to
the Agreement on Rules of Origin), since it basically involves classifying inputs vis-à-vis the
finished goods using the nomenclature of the Harmonized System. The value approach requires
accounting work for each kind of good (often quite complex in the case of manufactured goods) to
determine the percentage of value produced in the free trade area. This method has proven so
difficult to administer and to verify that companies often prefer not to take advantage of preferential
tariffs in order not to go through the complicated accounting required. Finally, the specific
transformation approach can be useful for classifying very specific goods; however, it has the
disadvantage that as production technologies change, the rules of origin become obsolete. It must
be noted that some rules of origin in certain agreements use two or even three approaches
alternatively or simultaneously. In any case, regardless of the approach used, negotiations on rules
of origin are usually complex, slow and very detailed. Advances made in these negotiations often
depend on the advances made in tariff negotiations and vice-versa. This tends to explain why both
negotiations are carried out within the framework of the FTAA Market Access Group.
29
For a more detailed study, see Cornejo and Garay (2001).
44
There are also a considerable number of problems to be solved regarding origin procedures.
Among these, is the question of whether the origin must be certified by authorities specifically
empowered to that effect or whether producers or exporters can follow self-certification procedures.
Generally, it is also necessary to determine procedures for verifying the origin of goods, the regime
of responsibilities, the consequences of not facilitating verification procedures, the ability of the
authorities to issue advance rulings in order to state in advance whether or not specific goods or
prototypes meet the rules of origin, etc.
Once again, in order to illustrate the trade offs faced in these negotiations, we can consider the
issue of certifying origin. Both in NAFTA and in countries that have signed NAFTA-type
agreements, a self-certification philosophy prevails. A certain amount of trust is put in the ability of
the producer or exporter to certify the information on the origin of their goods. The aim is to simplify
the certification process and the associated costs, while complementing this with a strict regime of
responsibilities. Meanwhile, in the ALADI tradition followed in almost all South American countries,
certification is issued by specific government bodies, or else non-governmental bodies authorized
to that effect. The idea here is that an impartial and objective third party must intervene in the study
and certification of origin, normally charging a fee for issuing a certificate.
c) A suitable safeguards mechanism
Another major problem in negotiations on market access is the design of a safeguard measures
mechanism. This is an important issue since on one hand the aim is to integrate the hemisphere
commercially, while on the other hand it is desirable to accomplish this without causing major
destabilization that would bring about serious political problems. More desirable still would be to
facilitate the adjustment of the productive sectors that will eventually be affected by free trade.
Achieving these goals in a balanced way is difficult, especially given the great number of
asymmetries in the FTAA. The main issues involved in the structure of the safeguard measures
have to do with the nature of the measures, their period of application, investigation procedures,
the essential criteria for implementing measures, the relationship of these measures to multilateral
safeguard measures (including the terms for applying multilateral measures to other FTAA
countries), and the possibility of emergency measures for specific sectors.
Again, in order to illustrate the scope of the difficulties involved in the FTAA negotiations, the
period of validity of safeguard measures will serve as an example. Examining the public bracketed
text of the FTAA negotiating it is clear that there are various views on this issue. There are those
positions which favor applying safeguard measures only during the transition period (that is, from
the time the tariff on a specific product begins to be phased out until the moment this tariff reaches
0%), without the possibility of safeguard measures being applied once the tariff reaches 0%.
Others position state that this period should be extended a few years more, while still others would
like it to continue for the entire life of the FTAA. These are not small differences.
IV.3.3. Other Structural Challenges
There is another set of systemic issues, which will require considerable negotiation on the part of
the countries involved if an agreement is to be reached. Some of these issues are of a technical
nature; others have more economic or political overtones.
a) Tariff Nomenclature
An immediate technical problem this year (2002) is tariff nomenclature. In principle, access to
FTAA markets will be negotiated by ministerial mandate, using the nomenclature of the
45
Harmonized Commodity Description and Coding System, or Harmonized System (HS), which is
common to all the countries up to the 6-digit level. However, a number of tariff subheadings of the
HS were legally modified to reflect advances in trade, basically relating to greater environment
protection and other considerations.30 These amendments became legally binding on January 1,
2002 for countries that signed the HS Convention. To date, few countries have implemented them
effectively. In the past, when there have been changes in nomenclature of this kind, it took some
countries several months or even years to make the necessary changes. For this reason, the
launch of product-by-product negotiations after May 2002 will likely require countries to accelerate
the adoption of the HS amendments. However, there are a number of institutional and internal
technical challenges involving changes to hundreds of national tariff openings with more than six
digits,31 changes in customs documents, public and private sector training, changes to all
schedules associated with trade agreements that will be affected by the amendments (tariff
elimination programs of other trade agreements, WTO bound tariff schedules, etc.). Also, if the
FTAA databases on trade and tariffs use a specific nomenclature, (HS, 1996 version), their
effective value as an essential negotiating tool will depend to a great extent on the availability of
computerized conversion instruments or some kind of “correlation” tables linking the new
nomenclature to the old one. Advances in tariff negotiations will depend on how some of these
technical issues would be solved in a satisfactory way.
b) Customs procedures
The flow of goods will undoubtedly slow unless simple, transparent and efficient procedures are
developed. The customs issue is quite complex in Latin America. Many customs systems in the
region have been undergoing modernization programs for several years, though the results have
often not been as positive as was originally hoped. There are many identifiable internal political
and institutional difficulties associated with well-entrenched lobby groups, questionable standards
of conduct in some countries, lack of the political leadership necessary to carry out reforms,
insufficient coordination between trade and customs authorities, and so on. These may be some of
the reasons why customs procedures are given only cursory treatment in the free trade
agreements in force in the Americas - even second generation agreements. The existing
agreements in the hemisphere have most commonly taken a modest “trade facilitation” approach
when dealing with customs-related issues. It remains to be seen whether the FTAA will be able to
act as a potent catalyst for customs reform in the region, or if on the contrary, this will continue at
the rhythm dictated by the internal dynamics of each country. The FTAA may or may not be so
ambitious as to bring about profound national customs reforms. It should, however, promote
important changes.
c) Special Regimes
Another topic that will receive a great deal of attention is the treatment given to special regimes in
the FTAA. Under this heading particular attention will likely be given to issues relating to some of
the instruments used in the past to try to overcome the anti-export bias existing in Latin America
and the Caribbean (although they were used in Canada and the United States as well). These
include: inward processing mechanisms or maquilas, free trade zones, and tax and tariff
exemptions that benefit certain imports, trans-border regimes, customs warehousing and others.
These regimes are relevant because some of their components may distort or constitute loopholes
30
. See document Amending the Harmonized System, World Customs Organization, www.wcoomd.org, November
2001.
31
. The HS has slightly over 6000 six-digit products. However, countries generally open their classification at eight or
even 10 digits, in which case a schedule would have more than 10,000 products. The 2002 version of the HS modifies
about 400 subheadings.
46
in a tariff phase-out agreement, often granting excessive advantages to certain parties. Most of the
free trade agreements in the hemisphere give quite restrictive treatment to the importation of
products produced under this kind of systems. Therefore, if the most dynamic exporting sectors in
some countries are those that operate under these regimes (in the most serious cases, up to 70%
of national exports originate under these regimes), it is clear that this will be a very important issue
in market access negotiations. An attenuating factor is that many regimes become unnecessary in
a free trade area, precisely because intra-area imports of inputs and equipment are not subject to
trade barriers. However, some inputs will be obtained outside the area, either directly or in more
economic terms. Discussion of this issue has a multilateral dimension: certain aspects of these
regimes with export subsidies were discussed at the recent WTO Ministerial Conference in Doha in
November 2001. After a tough campaign by developing countries, there was an agreement to
extend certain export incentives and subsidy programs for a few years. Some of these programs
are essential parts of special regimes.
IV.4. Balancing inter-group concessions
As we noted above, the Negotiating Group on Market Access plays a prominent role in the FTAA.
In many ways, it not only establishes the steps to be followed in certain sub-issues, but also acts
as a central axis around which the discussions of many other FTAA groups rotate. As a result, the
group’s ability to reach agreements may depend in part on countries having the impression that on
balance they are achieving something positive in many other areas of negotiation outside the
group.
There will have to be a certain amount of confidence in the dispute settlement mechanism
eventually negotiated in the FTAA. It is widely acknowledged that little can be accomplished
through the negotiation of disciplines and tariff concessions if in the end there is no efficient, easilyaccessible, quick and low-cost system for dealing with the disputes arising among FTAA countries.
Opportunities to break into a specific market are very often hampered by the existence of export
subsidies that distort the market, generally to the detriment of the countries with the least ability to
subsidize, and often with a clear competitive advantage in the production of specific products. As
part of effective access to markets, countries want a guarantee that they will not have to face these
distortions, which can bring down export production plans.
Some countries will want to prepare internal strategies so that the disciplines governing intellectual
property rights and competition policy complement tariff and non-tariff concessions. Effective
access to markets very often depends, for example, on the absence of restrictive business
practices (cartels, among others), or on a country’s ability to protect a trademark, a patent for a
specific product, a denomination of origin or an industrial secret. The market access negotiators,
when negotiating conditions for certain products, will certainly consider the conditions negotiated
on many of these other issues in other FTAA negotiating groups.
Ultimately, the FTAA negotiations are an attempt to obtain an overall balance between
concessions that can be given and received, not only in terms of access to commodity markets. In
fact, as we have seen, access to commodity markets is only one aspect of negotiations that
include services, investment, and government procurement, among other issues. The main
challenge for all the negotiators – not only those dealing with market access – will be to obtain an
overall balance of concessions. It is clearly understood that each country has its own specific
interests. For example, the countries with the greatest material resources, the highest
technological level, and the greatest ability to add value to production, will try to obtain concessions
in the area of high tech goods and services that require highly skilled labor or very large volumes of
47
capital. Less developed countries will generally try to obtain favorable access conditions for their
export products and services, which generally include agricultural products, textiles, light
manufactured goods, and services requiring unskilled labor. Given the complementarity among
many of the economies of the hemisphere, there is considerable space in the FTAA for the
exchange of concessions. However, there are also other sectors where competition is tough and
protectionist tendencies are common. Very tough negotiations will be necessary to obtain
concessions in these areas.
This explains why the ministers have chosen to make these negotiations a “single undertaking”. In
other words, nothing will be agreed until everything has been agreed. For this reason, FTAA
negotiations will likely go on until a global balance has been reached between the concessions
given and received. Market access is at the heart of the issue.
IV.5. What interactions are there with the WTO?
As we have mentioned repeatedly, neither the Market Access negotiations in particular, nor the
FTAA negotiations in general, are self-contained. There are very often interactions among different
trade negotiations, especially when these are going on simultaneously or sequentially. Right now
there are countries in the FTAA that are simultaneously negotiating the FTAA hemispheric
agreement, mutual trade agreements, agreements with other countries or regions outside the
FTAA, and multilateral agreements. Harmonizing all these is perhaps one of the most complex
challenges facing trade policy makers and designers of negotiation policy in these countries.
In the case of market access negotiations, some issues involve very intense interactions, while
other sub-issues do not. For example, the FTAA enjoys relative autonomy on tariff issues because
it has set out to accomplish something that the WTO has not planned, at least in the foreseeable
future: establishing a free trade zone. Therefore, despite certain WTO disciplines that must be
respected (Article XXIV of the GATT of 1994 and its Understanding), relatively little coordination
with the WTO is necessary. This does not mean, however, that there is no interaction at all. WTO
issues are often present in market access negotiations. For some countries, there is very little or no
difference between the applied tariff and the WTO bound tariff, meaning that they lack the buffer or
maneuvering space available to many Latin American and Caribbean countries in their tariff
negotiations. As a result, all negotiating positions in both forums must be carefully coordinated.
As we mentioned earlier, the trade ministers reached an understanding in Doha, in November
2001, to the effect that certain export subsidies could possibly be extended for a few more years.
This understanding among trade ministers in the WTO will most likely be taken into consideration
during negotiations on these issues or on issues involving special regimes.
The question of interactions is much clearer in other FTAA negotiating groups. Agriculture, for
example, is perhaps the group where this dynamic is most critical. Some countries will probably be
willing to advance on the hemispheric front to the extent that they see advances on the multilateral
front. Meanwhile, others will think that certain issues must be discussed at the hemispheric level
without waiting for the WTO, while still others are of exactly the opposite opinion, that is, that the
issue must be resolved exclusively by the WTO. The most critical areas in this respect are perhaps
those involving agricultural domestic support, although certain aspects of export subsidies will most
likely be subject to the same discussion.
There is a wide range of interactions available to deal with the issues of regionalism and
multilateralism (Granados, 1999). If both forces are used to their full advantage, advances can be
made toward the goals of both, while at the same time minimizing disruptions.
48
The recently launched Doha round of multilateral negotiations is ideal for observing the interplay of
these interactions. Its broad agenda of negotiations means that countries will have to move with
great care when negotiating issues that are also under negotiation in other forums, (which is the
case with almost every issue!). There will be sequential strategies, cross conditioning, the use of a
forum as a laboratory before passing the matter on to another forum, the complete transfer of a
topic from one forum to another, and so on. It would be useful to carry out a case-by-case analysis
in order to study these interactions in more detail.
IV.6. The road ahead
As is the case with Market Access, each step of the FTAA negotiations is subject to a very complex
decision-making process. Market Access is only one group among many, though certainly one of
the most complex. Hopefully, this very brief presentation of some of the difficult issues involved has
made it a little clearer why the FTAA is a process designed to be negotiated over a 10-year period.
The FTAA requires a very ambitious effort to integrate trade among 34 countries in the hemisphere
with very different economic conditions. It entails an effort to unravel the spaghetti bowl of trade
agreements in the hemisphere and, put simply, to rationalize and simplify the trade system in the
hemisphere. It requires an effort to bring together very different commercial traditions, for example,
the technical approaches of NAFTA-type agreements as compared to the approaches used in the
ALADI framework. Finally, it requires that the countries must improve the coordination of their
goals, positions and results in the multilateral and bilateral negotiations now underway. Meanwhile,
there are many sensitive economic and political points within each country to be considered.
The FTAA brings with it the promise of better conditions for taking advantage of the productive
capacity of each country and better chances for growth and economic development. Ultimately, the
FTAA can even aspire to be an important mechanism for eradicating poverty in Latin America and
the Caribbean. The negotiating process has advanced a great deal and the cost of going back is
rising continuously. The final goal is quite clear. To get there, however, there is still a lot of work to
be done.
49
ANNEX 1
Methodology Used to Calculate Non-tariff Measures
The methodology of NTM calculation follows UNCTAD-TRAINS methodology. The national tariff
lines (usually 8 or 10 digits) are assigned a weight of 0 (no coverage), 50 (partial coverage of the
tariff line), or 100 (full coverage of the tariff line). For example, if a country’s 6-digit tariff line for
010210 consists of 01021010 and 01021090, with the former having partial NTM coverage, and
the latter having full coverage, then the incidence for 010210 will be (50+100)/2=75%. If there is
only one measure covering a national tariff line, and the data denotes partial coverage of that tariff
line, then that measure will be weighted as partial. If more than one measure applies to a national
tariff line, however, then coverage is automatically considered to be complete. A simple average is
then performed on the national tariff lines to find an incidence at the corresponding 6-digit tariff line.
Finally, this measure at the 6-digit level is used as a baseline for further averaging into more
aggregated measures (SITC). See Estevadeordal and Shearer (2002) for a detailed
methodological discussion.
Table A1. NTM Classification
Unctad
Code
2400
Description
NTM
Decreed Customs Valuation
Core Quant Charges Govt Customs Tech
X
X
3110
Minimum Import Prices
X
X
3310
Variable Levies
X
X
3410
Antidumping Investigations
X
X
3420
Antidumping Duties
X
X
3430
Price Undertakings
X
X
3520
Countervailing Duties
X
X
5100
Import Licence
X
5200
Import Monitoring
X
6110
Licence with no specific ex-ante Criteria
X
X
X
6141
Purchase of Local Goods
X
X
X
X
X
X
6160
6171
6172
6173
6174
6175
6176
6177
6178
6179
Licence Combined with or Replaced by Special Import
Authorization
Prior Authorization for Sensitive Product Categories
(Human Health)
Prior Authorization for Sensitive Product Categories
(Animal Health)
Prior Authorization for Sensitive Product Categories (Plant
Health)
Prior Authorization for Sensitive Product Categories
(Environment)
Prior Authorization for Sensitive Product Categories
(Wildlife)
Prior Authorization for Sensitive Product Categories (Drug
Abuse)
Prior Authorization for Sensitive Product Categories
(Human Safety)
Prior Authorization for Sensitive Product Categories
(National Security)
Prior Authorization for Sensitive Product Categories
(Purposes n.e.s.)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
6211
Global Quotas: Unallocated
X
X
X
6212
Global Quotas: Allocated to Exporting Countries
X
X
X
6274
Quotas for Sensitive Product Categories (Environment)
X
X
6278
Quotas for Sensitive Product Categories (National
Security)
X
X
6290
Quotas n.e.s.
X
X
X
6310
Total Prohibition
X
X
X
50
6340
6371
6372
Temporary Prohibition
X
Prohibition for Sensitive Product Categories (Human
Health)
Prohibition for Sensitive Product Categories (Animal
Health)
X
X
X
X
X
X
6373
Prohibition for Sensitive Product Categories (Plant Health)
X
X
6374
Prohibition for Sensitive Product Categories
(Environment)
X
X
6375
Prohibition for Sensitive Product Categories (Wildlife)
X
X
6376
Prohibition for Sensitive Product Categories (Drug Abuse)
X
X
X
X
X
X
X
X
6377
6378
6379
Prohibition for Sensitive Product Categories (Human
Safety)
Prohibition for Sensitive Product Categories (National
Security)
Prohibition for Sensitive Product Categories (Purposes
n.e.s.)
6900
Quantity Control Measures n.e.s.
X
7110
State Trading Administration
X
7120
7176
7178
7179
Sole Importing Agency
Single Channel for Imports for Sensitive Product
Categories (Drug Abuse)
Single Channel for Imports for Sensitive Product
Categories (National Security)
Single Channel for Imports for Sensitive Product
Categories (Purposes n.e.s.)
X
X
X
X
X
X
X
X
X
X
8100
Technical Regulations
X
X
8110
Product Characteristics Requirements
X
X
8111
Product Characteristics Requirements (Human Health)
X
X
8112
Product Characteristics Requirements (Animal Health)
X
X
8113
Product Characteristics Requirements (Plant Health)
X
X
8114
Product Characteristics Requirements (Environment)
X
X
8115
Product Characteristics Requirements (Wildlife)
X
X
8116
Product Characteristics Requirements (Drug Abuse)
X
X
8117
Product Characteristics Requirements (Human Safety)
X
X
8119
Product Characteristics Requirements (Purposes n.e.s.)
X
X
8120
Marking Requirements
X
X
8130
Lebelling Requirements
X
X
8140
Packaging Requirements
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
8151
8152
8153
8155
8156
8158
8159
8170
8172
8173
Testing, Inspection and Quarantine Requirements (Human
Health)
Testing, Inspection and Quarantine Requirements (Animal
Health)
Testing, Inspection and Quarantine Requirements (Plant
Health)
Testing, Inspection and Quarantine Requirements
(Wildlife)
Testing, Inspection and Quarantine Requirements (Drug
Abuse)
Testing, Inspection and Quarantine Requirements (Human
Safety)
Testing, Inspection and Quarantine Requirements
(Purposes n.e.s.)
Technical Measures for Senstive Product Categories
Technical Measures for Senstive Product Categories
(Animal Health)
Technical Measures for Senstive Product Categories
(Plant Health)
8180
Technical Measures for Political Reasons
X
8200
Pre-Shipment Inspection
X
X
8300
Special Customs Formalities
X
X
*The NTM and Core definitions replicate as closely as possible those outlined on page
102 ot "A User's
Manual for TRAINS, Dos Version 4.0. The other five definitions are an ad-hoc approximation of
Deardorff
And Stern's categories.
51
X
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