5. The Challenge of the Agriculture
Trade Negotiations in the WTO Doha
Round
Alan Swinbank
In spite of the failure of the Seattle WTO Ministerial Meeting in December
1999 to launch a new Round of multilateral trade talks, agricultural trade
negotiations did begin in Geneva in March 2000, as mandated by Article 20
of the Uruguay Round Agreement on Agriculture. Furthermore, when the
Fourth WTO Ministerial Meeting was held in Qatar in November 2001, the
Doha Development Agenda was inaugurated. This Chapter focuses upon the
course and likely outcome of the agricultural component of these
negotiations. It also discusses the diminished role that the EU and the United
States will undoubtedly play in the agricultural negotiations compared to
their pre-eminent position in the ‘old’ GATT.
5.1
THE WTO AGREEMENT ON AGRICULTURE
ARTICLE 20 NEGOTIATIONS
The WTO Agreement on Agriculture established a Committee on Agriculture
that has met regularly in Geneva to monitor the implementation of the
Agreement. These agricultural negotiators have been well informed and the
process has appeared to advance relatively smoothly, at least it did so in its
early stages. This contrasts greatly with the procrastinations of the Uruguay
Round negotiations. Mindful of the commitment in Article 20 and at the
suggestion of the Committee, the Singapore WTO Ministerial Meeting of
November 1996 established a process of analysis and information exchange
(AIE). This became an informal part of the Committee’s work (WTO, 1999).
Many ideas and concerns were voiced in the non-papers and discussions that
constituted the AIE process, such that delegates were well versed in the
issues at stake in further agricultural trade liberalisation. The AIE process
was concluded in preparation for the Seattle Ministerial Meeting.
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The 1999 WTO Seattle Ministerial Meeting
A number of position papers were circulated before the Seattle Ministerial
Meeting in November 1999. The agriculture negotiating group, under the
chairmanship of Singapore’s trade minister George Yeo, made quite good
progress in reconciling the interests of developed economies. In preparing his
compromise papers however, Yeo is reported to have said that he was
walking a tightrope between the various concerns of WTO Members (Agra
Europe, 1999a). The text discussed ‘substantial reductions in all forms of
export subsidies’ and emphasised the importance of ‘non-trade’ issues.
One of the key sections of the draft Seattle Declaration concerned
agriculture (Luke, 2000). The omens were not good however. The Ministerial
Meeting had been ill prepared and the streets of Seattle were filled with
protestors and riot police. Further, President Clinton’s call for the WTO
system to respect ‘core labor standards’ and his wish to bring ‘labor concerns
into our trade debate’ (Clinton, 1999) antagonised many developing
countries.
On 3 December 1999, just before the break-up of the Seattle
Ministerial Meeting, profound disquiet was reported on the part of the
Organisation for African Unity (OAU) (Agra Europe, 1999b). The OAU had
complained that African countries had been ‘marginalised and generally
excluded on issues of vital importance for our peoples and their future’. They
had warned that ‘under the present circumstances we will not be able to join
the consensus required to meet the objectives of this Ministerial conference’.
Specifically, the OAU wanted ‘flexibility to pursue adequate food security
policies’ and binding commitments on Special and Differential treatment. A
group of Latin American and Caribbean countries also warned that they
might not be able to join the consensus. The Seattle Ministerial Meeting was
aborted late on the Friday night.
The draft Ministerial Declaration on agriculture had no legal standing
but is indicative of what the chairman of the agriculture negotiating group
thought possible.1 It had not been formally accepted by participants and
certainly not by those excluded from the ‘Green Room’ meetings, where this
and other drafts had been developed. Although the word ‘multifunctionality’
did not survive the drafting sessions in Seattle, it remained a potent concept
around which the debates on the Article 20 negotiations subsequently took
place. The Seattle text referred to:


Substantial reductions in export subsidies and domestic support.
Significant improvements in market access – particularly for
developing countries.
The Challenge of the Agriculture Negotiations in the Doha Round


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Recognition that non-trade concerns should be addressed through
WTO-consistent measures.
The need for Special and Differential treatment to be embodied in the
schedules of concessions and commitments of Members, while
allowing developing countries to take account of their development
needs – including food security and rural development.
It also envisaged a conclusion of the agriculture negotiations by 15 December
2002.
India emerged as a major player in Seattle. The Indian Minister of
Commerce and Industry, Murasoli Maran, was mandated to resist attempts to
include core labour rights and environmental standards in the WTO system.
Subsequently, he called for a ‘manageable’ – rather than a Millennium –
Round, with non-trade issues removed from the agenda (Financial Times,
2000).
In Doha by way of contrast, India was described as the ‘only real loser
… [it] achieved no obvious gains, except for the dubious pleasure of delaying
the close of the meeting. Its relentless negative and obstructive approach left
it isolated and exasperated other poor countries, weakening its claim to lead
them in a North–South struggle in the WTO’ (Financial Times (2001a).
Brazil, on the other hand, was described as a ‘star performer’.
After Seattle: the Work Programme for Agriculture
Following the debacle in Seattle, it was quickly agreed that the Article 20
negotiations would proceed within the framework of the existing Committee
on Agriculture. These were to take place in Special Sessions, formally
separate from the regular business of the Committee, held either immediately
before, or after, regular meetings of the Committee.
Unfortunately, the opening of the negotiations was marred by an
unseemly row between the EU and others over the appointment of a chairman
of the Special Sessions. The EU objected to Brazil’s Ambassador to the
WTO taking the chair in 2000, on the grounds that someone from the Cairns
Group should not take on such an important role (Agra Europe, 2000a). The
WTO’s General Council then intervened, appointing the Peruvian
Ambassador, Jorge Voto-Bernales, as chairman of the Agriculture
Committee, with the responsibility of chairing the Article 20 negotiation
meetings. The Agriculture Committee itself was to be chaired by its ViceChairman, Yoichi Suzuki from Japan. On the insistence of the Cairns Group
however, Mr. Suzuki was barred from chairing the Article 20 negotiations
should Mr. Voto-Bernales be unavailable (Agra Europe, 2000b)!
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At the first meeting of the Special Session in March 2000, it was
agreed that Members would submit their negotiating proposals by the end of
December 2000, with a stocktaking at the March 2001 Meeting. On that
occasion, a further work programme through to March 2002 was agreed, at
which time a further ‘review of progress’ would be undertaken. 2
The participants however, did not yet have a common vision of how
and when the Article 20 negotiations would end. Some argued that Article 20
provided a mandate for a ‘stand-alone’ negotiation on agriculture to be
undertaken and concluded. The demise of the Peace Clause in 2003/04 was
considered to set the natural end-date for the process (the provisions of the
Peace Clause are reviewed later, in Box 5.1). Others argued that they could
not accept a deal on agriculture alone. Instead, they wished to see the
agriculture negotiations subsumed into a larger round in which trade-offs
between sectors would be possible.
The WTO Press Release after the first Article 20 meeting in March
2000 therefore reported that:
Several Cairns Group members … stressed that they consider the agriculture
negotiations to be ‘stand-alone’ because they obtained the commitment to
resume negotiations in return for the moderate reforms agreed in the Uruguay
Round. European countries, Japan, The Republic of Korea, and some others
said they believe agreement in the agriculture talks will need a comprehensive
round that covers a wide range of topics. (WTO, 2000a)
5.2
THE DOHA DEVELOPMENT AGENDA
In January 2001, Qatar was chosen as the location for the Fourth WTO
Ministerial Meeting. At the time, the Article 20 negotiations were
progressing in Geneva. Pascal Lamy, the EU’s Trade Commissioner,
‘pleaded for the launching of a new comprehensive Round of WTO
negotiations as soon as possible’, claiming that ‘this approach offered the
best prospect of reaching a deal on further liberalisation of agricultural trade’
(Agra Europe, 2001a). By April 2001, pressed by Japan and the EU,
President George W. Bush was talking of using the Fourth Ministerial
Meeting in Qatar to launch the stalled Millennium Round (Financial Times,
2001b). The 11 September terrorist attacks threatened to derail the process,
with delegates unhappy to travel to a potential war zone, but a strong steer
from the US Vice-President, Dick Cheney, ensured that the meeting went
ahead (Financial Times, 2001c). In spite of earlier pessimistic prognoses, the
Doha Round – to be known as the Doha Development Agenda – was
launched.
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91
Substantive negotiations began with the first meeting of the Trade
Negotiations Committee on 1 February 2002 and the Round was to be
concluded by 1 January 2005. This is a rather tight timetable given that a
number of complex issues have to be accepted unanimously by the WTO’s
140-plus Members. It was to be a single undertaking: that is, all countries
would be expected to accept all aspects of the final package.
Agriculture in the Doha Round
There were to be seven negotiating bodies, dealing with: i) agriculture, ii)
services, iii) non-agricultural market access, iv) WTO rules, v) trade and
environment, vi) geographical indications for wines and spirits under the
TRIPs Agreement and vii) reform of the Dispute Settlement Understanding.
The agriculture negotiations were to proceed in the Special Sessions of the
Agriculture Committee, as already established (WTO, 2002b).
On agriculture, Paragraph 13 of the Ministers’ Doha Declaration reads:
We recognize the work already undertaken in the negotiations initiated in
early 2000 under Article 20 of the Agreement on Agriculture, including the
large number of negotiating proposals submitted on behalf of a total of 121
Members. We recall the long-term objective referred to in the Agreement to
establish a fair and market-oriented trading system through a programme of
fundamental reform encompassing strengthened rules and specific
commitments on support and protection in order to correct and prevent
restrictions and distortions in world agricultural markets. We reconfirm our
commitment to this programme. Building on the work carried out to date and
without prejudging the outcome of the negotiations we commit ourselves to
comprehensive negotiations aimed at: substantial improvements in market
access; reductions of, with a view to phasing out, all forms of export
subsidies; and substantial reductions in trade-distorting domestic support. We
agree that special and differential treatment for developing countries shall be
an integral part of all elements of the negotiations and shall be embodied in
the Schedules of concessions and commitments and as appropriate in the rules
and disciplines to be negotiated, so as to be operationally effective and to
enable developing countries to effectively take account of their development
needs, including food security and rural development. We take note of the
non-trade concerns reflected in the negotiating proposals submitted by
Members and confirm that non-trade concerns will be taken into account in
the negotiations as provided for in the Agreement on Agriculture. (WTO,
2001b)
France fought tenaciously to have the words ‘without prejudging the outcome
of the negotiations’ inserted in the text but the Cairns Group still succeeded
in writing in ‘reductions of, with a view to phasing out, all forms of export
subsidies’ (emphasis added). The EU was pleased that the text referred to all
forms of export subsidies, as this could be taken to include export credits, and
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to the non-trade concerns notified by WTO Members (that is,
multifunctionality and animal welfare in the case of the EU) (Agra Europe,
2001b). The truth however, is that everything was still to play for, and – with
the EU needing to negotiate an extension of the Peace Clause – it was not
negotiating from a position of strength.
Paragraph 14 of the Doha Ministerial Declaration, referring to the
agriculture negotiations, specifies that:
Modalities for the further commitments, including provisions for special and
differential treatment, shall be established no later than 31 March 2003.
Participants shall submit their comprehensive draft Schedules based on these
modalities no later than the date of the Fifth Session of the Ministerial
Conference. The negotiations, including with respect to rules and disciplines
and related legal texts, shall be concluded as part and at the date of conclusion
of the negotiating agenda as a whole. (WTO 2001b)
The phrase ‘Modalities for further commitments’ basically relates to the
structure of the new Agreement: how are the new commitments to be
expressed and implemented? This was supposed to have been determined by
31 March 2003. The then Chair of the Special Session of the Committee on
Agriculture, Stuart Harbinson, was charged with producing a first draft of the
‘modalities’ (WTO, 2003a). The deadline was not met however, because the
text failed to command the support of WTO Members. Some WTO Members
felt that the Harbinson text lacked ambition while others thought that its
proposals were too radical (Swinbank, 2003). The Harbinson text however,
was the basis for the subsequent attempts to develop the modalities
throughout 2003.
Negotiations continued throughout the summer of 2003 in the hope
that an agreement could be concluded at the Fifth WTO Ministerial meeting
in Cancùn (Mexico) in September 2003. By then, according to the Doha
timetable, WTO Members were supposed to have submitted their
‘comprehensive draft Schedules based on these modalities’. In August 2003,
the EU and the United States produced a joint paper on an outline agreement
on agriculture (EU and the United States, 2003),3 that lacked the suggested
numbers of the Harbinson text and fell short of many the expectations of
many WTO Members. Furthermore, a number of countries were suspicious
of the motives of the EU and the United States in taking the initiative on this
issue.
A draft Ministerial text was prepared for Cancùn by the chairman of
the WTO General Council, based largely upon the EU–US text (WTO,
2003b). This carried the rather less ambitious title Framework for
Establishing Modalities in Agriculture, reflecting the fact that much of the
detail of the Harbinson text had been omitted. This prompted a group of
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93
developing countries led by Brazil (the Group of 21, although membership
has varied,4 to table its own more radical proposals. These would have
demanded more adjustment by developed countries (WTO, 2003c).
In Cancùn, a draft Ministerial text was further refined. This would
have provided a framework for further negotiations on agriculture had it been
adopted but the different perspectives on the need for, and scope of,
agricultural policy reform could not be reconciled. Negotiations at the
Cancùn Ministerial Meeting ended without consensus. This was because of
the difficulty of reconciling entrenched positions on the so-called ‘Singapore’
issues: trade and investment, trade and competition policy, transparency in
government procurement and trade facilitation. Although the ostensible cause
of the collapse of the Cancùn Ministerial Meeting was not agriculture, the
lack of progress on the agriculture dossier and US intransigence on cotton
subsidies were nevertheless contributory factors.
The Doha Ministerial Declaration made clear that it was the intent of
WTO Members that completion of the agriculture negotiations should be part
and parcel of the single undertaking. Nevertheless, it did not rescind the
provisions of the Agreement on Agriculture. If the Doha Round staggers on
long after its planned completion date, there may well be WTO Members
who would press for an earlier completion of the agriculture dossier and –
with the demise of the Peace Clause – they will be better able to press their
case.
The EU and US in the Doha Negotiations on Agriculture
A major theme of this Chapter is that the EU and the United States can no
longer dominate the WTO agenda. They remain important players however,
and their domestic political calendars therefore may well affect proceedings.
It may be recalled that the drama of Blair House, in November 1992,
was played out in the closing phases of the Presidency of George Bush
(Senior) and a presidential election. The Clinton Administration that took
office in January 1993 inevitably involved new players as Secretary for
Agriculture and US Trade Representative. In the EU, the second Commission
headed by Jacques Delors, in which Ray MacSharry (as Commissioner for
Agriculture) had taken the lead in the agricultural trade negotiations, was
replaced in January 1993 by the third Delors Commission in which Sir Leon
Brittan (as Commissioner for Trade) took the lead.
Pascal Lamy, the current EU Trade Commissioner, and Robert
Zoellick, the US Special Trade Representative, are colleagues of long
standing. The successful outcome of the Doha Ministerial Meeting is credited
in part to their personal rapport (Financial Times, 2001a). They are expected
to stay in post until the scheduled completion of the Doha Round at the end
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of 2004. A legacy of Cancùn is that this deadline will almost certainly not be
met in spite of recent US attempts to resuscitate the talks, culminating in the
next WTO Ministerial Meeting in Hong Kong before the end of 2004
(Financial Times, 2004).
In November 2004 however, the US Presidential election will see the
re-election of George W. Bush or the presidency of another candidate. The
present European Commission, headed by Romano Prodi, will have handed
over to its successor. A new team of negotiators will take the stage and it will
be 2005, or later, before the Round can be concluded.
5.3
UNFINISHED BUSINESS IN THE AGRICULTURE
NEGOTIATIONS
The agricultural sector is firmly anchored into the WTO process by five
characteristics of the Uruguay Round Agreements, identified in Chapter 4.
These have either explicitly or implicitly defined the agenda for the new
negotiations in the Doha Development Round. In addition, a number of
countries believe that some issues were either neglected or ignored in the
Uruguay Round; and others, that commitments entered into have apparently
been forgotten.
Special and Differential Treatment and the Least-Developed and Net
Food-Importing Countries
The overall scope and content of the Uruguay Round Agreements were
undoubtedly determined by the need to reconcile the competing interests of
the EU and the United States. Other interests however – for example, the
Cairns Group – also played a part.
Two observations flow from the debacle in Seattle. First, the street
demonstrations – although hijacked by extremists – reflected a perception
that the WTO process lacked democratic accountability. But second, a
democratic deficit within the system was revealed. Many developing
countries believed themselves to have been marginalised by an inner group of
participants, dominated by the EU and the United States, negotiating behind
closed doors. How these twin concerns of an internal and an external
democratic deficit could be addressed was unclear. One conclusion can be
drawn however. For there to be a positive outcome to the Doha Development
Round, a consensus must prevail. This implies that the positive assent of the
vast majority of WTO Members – predominantly developing economies –
must be sought. This consensus failed to materialise in Cancùn.
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With respect to both the Agreement on Agriculture and the Agreement
on the Application of Sanitary and Phytosanitary Measures (the SPS
Agreement), many developing countries believe that they were shortchanged. These countries are determined that their concerns should be
addressed in the current Round. Nevertheless, there was some Special and
Differential treatment in the Uruguay Agreements. The least-developed
countries were not obliged to increase their commitments under the
Agreement on Agriculture. They were also given a five-year period of grace
before they were obliged to bring their import procedures into conformity
with the SPS Agreement. The Agreement on Agriculture also imposed less
onerous reductions in commitments upon a self-selecting group of
‘developing’ countries.
In addition, under the SPS Agreement, developed country Members
were urged to take into account the special needs of developing countries –
and, in particular, the least-developed countries – in developing their SPS
measures. They were also to ‘encourage and facilitate the active participation
of developing country Members in the relevant international organizations’.
The developed countries are judged by many in the developing world to have
failed to deliver on both promises (Henson and Loader, 2001).
Moreover, the reform programme initiated by the Agreement on
Agriculture was expected to result in an increase in world market prices. 5
Recognising this, the WTO Ministers in Marrakesh adopted a Decision on
Measures Concerning the Possible Negative Effects of the Reform
Programme on Least-Developed and Net-Food-Importing Developing
Countries.6 The belief in the developing world is that the commitment has
not been kept, although it has been debated on a number of occasions in the
Committee on Agriculture. Many countries are determined that this issue
should have high priority in the Doha Round.
Export Credits
The Agreement on Agriculture laid down specific export subsidy
commitments and the prevention of circumvention of those commitments.
The most that could be achieved with respect to export credits and export
credit guarantees was that Members would ‘work toward the development of
internationally agreed disciplines’. These negotiations were to be undertaken
in the OECD but they have not been concluded.
The EU, in particular, believes that its export subsidy provisions are
transparent and subject to the disciplines of the Agreement on Agriculture. In
contrast, other agricultural exporters make use of subsidised export credit
schemes to, in effect, circumvent the Agreement. Although the EU, Canada
and Australia make some use of export credits, it has been estimated that the
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United States accounts for the bulk of the subsidy element across OECD
countries (88 per cent in 1998). The subsidy element on the export of
agricultural commodities in 1998 averaged 3.6 per cent (Josling et al., 2001).
State Trading Enterprises: Single Desk Buyers and Sellers
Similar sorts of concerns relate to export marketing boards and other single
desk sellers. It is here that the United States has expressed its concerns most
forcibly, particularly with respect to Canadian practice. The United States,
and others, also wants to develop disciplines relating to single desk buyers.
This issue is discussed at length by McCorriston and MacLaren (2002). The
fear is that entry arrangements under the multiplicity of tariff rate quotas that
characterise the agricultural sector can be distorted, and that imports over the
MFN tariff can be impeded, because of the lack of commercial competitors.
5.4
A (GROSSLY) SIMPLIFIED VIEW OF THE
AGRICULTURE ISSUES TO BE RESOLVED IN THE
DOHA ROUND
At the risk of gross over simplification, the principal agriculture issues to be
resolved can be grouped into three categories:



Changing the numbers.
Changing the rules.
Extending the life of the Peace Clause.
Changing the Numbers: Agriculture Tariff Reductions
As a result of the Uruguay Round, the bulk of tariffs on agricultural products
are bound. Some 25 WTO Members have export subsidy reduction
commitments, with the EU commanding most of the ‘rights’ to subsidise
exports, and 30 countries have AMS reduction commitments (WTO, 2002a).
An arithmetical reduction could conceivably be applied to each of these
bindings, as was the case in Marrakesh. The Cairns Group, for example, has
proposed the ‘elimination and prohibition of all forms of export subsidies for
all agricultural products’, from a date to be determined. This will include ‘a
substantial down-payment in terms of reduction (e.g. not less than 50 per
cent) of outlays and volumes of export subsidies during the first year of the
implementation period’ (Cairns Group, 2000).
On tariffs, many countries would like to see a higher reduction
percentage applied to tariff peaks and a reduction in the degree of tariff
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97
escalation on semi-processed and processed products. Initially, the United
States and the Cairns Group advocated sweeping cuts using the ‘Swiss 25’
formula. Under this formulation, the new tariff, T1, is a function of the old
tariff, T0, and a coefficient a (= 25 in the US proposal) according to
expression:
T1 = (T0 * a)/(T0 + a)
The effect is to reduce larger tariffs (tariff peaks) by a proportionately greater
amount than smaller tariffs; the maximum tariff will never exceed a. Thus, if
T0 is 1,000 per cent, then T1 becomes 24.4 per cent (Swinbank, 2003).
Offsetting these nearly unanimous calls for cuts (which doubtless conceal a
wide gap between what countries believe to be acceptable) however, some
developing countries have expressed concerns that tariff reductions would
reduce the trade preferences they currently enjoy – for example, on sugar to
the EU.
Changing the Rules: Renegotiating the Agreement on Agriculture
The suggestions that the rules embodied in the Agreement on Agriculture
should be renegotiated are even more contentious than the suggested
tweaking of the numbers (the size of the reductions, their scope and the
timeframe). Whether or not new rules on export credits and state trading
enterprises could, or should, be built into the Agreement is not easily
resolved, particularly given that these issues are not confined to the
agricultural sector.
Special Safeguard Provisions
Whether Article 5 on Special Safeguard Provisions to limit imports can be
renegotiated is also unclear. The Special Safeguard provisions can only be
invoked on tariff lines that were subject to tariffication in the Uruguay Round
and for which the country concerned entered the symbol SSG in its schedule
of bound tariff rates at Marrakesh. 38 WTO Members make use of this
provision, which allows them greater discretion to impose contingency
restrictions on agricultural imports than would otherwise be permitted under
the Agreement on Safeguards.
This discretion has two elements. Additional import taxes can be
applied, on a consignment basis, when the price falls below the import price
recorded in the base period or additional import charges can be applied when
an import surge is experienced. Secondly, ‘it is not necessary to demonstrate
that serious injury is being caused to the domestic industry’ (WTO, 2002a).
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These provisions would lapse if the reform process, provided for in Article
20, were to cease.
There are three groups of protagonists. First, those who benefit from
its provisions and will not voluntarily agree to change. Second, those who do
not benefit but would like the rules to be amended so that they can. A number
of developing countries have argued that such a facility would enable them to
follow price stabilisation programmes in the pursuit of food security. Finally,
those who would like to abolish or, at the very least, weaken the provisions.
This group argues that they were a necessary sweetener at Marrakesh to
allow tariffication to proceed but that this justification has now gone.
Special and Differential Treatment
The rhetoric of the developed world suggests that it is willing to do
something with respect to the question of Special and Differential treatment
for the least-developed and net-food importing countries. This is reflected in
the Harbinson text and its subsequent elaborations. The EU has taken the lead
with its Everything But Arms initiative. Under this, the world’s 48 leastdeveloped countries will gain duty free access to the EU’s market for all
products except armaments but including bananas from 2006 and sugar and
rice from 2009 (McQueen, 2002). Whether this and other initiatives will be
sufficient to assuage the sceptics in the South, so that an overall package can
be agreed, remains to be seen. Further, the extent to which developed
countries will be willing to allow any country that declares itself to be
‘developing’, as has been the previous practice in the WTO, to benefit from
any meaningful expression of Special and Differential treatment also remains
to be seen.
Non-Trade Concerns
Perhaps the biggest quagmire in which the negotiations have become boggeddown relates to the phrase ‘non-trade concerns’ that appears in Article 20 and
the parallel suggestions that the Green and Blue Boxes, agreed at Marrakesh,
should be renegotiated. When the EU stresses the importance of
multifunctionality, it has in mind that public goods – such as the environment
– and agricultural raw materials are joint products of farming and cannot be
produced separately.
Norway has been a particular forceful advocate of multifunctionality.
This is because it:
… faces unusually high production costs for a number of reasons. All the
disadvantages stemming from a harsh climate, long distances, a difficult
topography, a low population density and a small-scale structure, combined
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99
with a general high cost level, result in high costs and a very low degree of
competitiveness at world market prices. (WTO, 2001a)
From this, the Norwegians conclude that the non-trade concerns of countries
with ‘disadvantaged and unfavourable production conditions’ cannot readily
be achieved without substantial support for the farm sector. Further, Green
Box measures may be inappropriate for this purpose.
The Republic of Korea, Japan, and others, would extend this list of
public goods to include food security. This group would also therefore like to
see a widening of the scope of the Green Box. India has invoked the concept
of Special and Differential treatment to argue that:
Developing countries … need to be allowed greater flexibility in providing
domestic support to the agricultural sector to meet the challenges of rural
employment and food security. State support to low income and resource poor
farmers is also essential as it constitutes an integral part of the poverty
alleviation programmes in these countries. (WTO, 2000b)
A number of developing countries have therefore argued for the creation of a
special ‘Development’ or ‘Food Security Box’.
Other developing countries have claimed that the Green Box already
offers too great a scope for developed economies to subsidise their
agricultural and rural sectors. They point out that EU expenditure on Green
Box policies has grown over the last decade. There are demands therefore,
that the Blue Box be abolished – with future expenditure on Blue Box
policies becoming part of the constrained AMS – and the Green Box
slimmed.
The default position, of course, is that both the Green and Blue Boxes
will remain unchanged unless and until there is a consensus in the WTO to
modify these provisions. How valuable the Blue and Green Box and export
subsidy provisions would be, post-2004, if the Peace Clause was not renewed
however, is a matter of conjecture. The Doha Ministerial declaration did not
change the status of the Peace Clause and it was not extended at Cancùn. Its
protection lapses at the end of 2003/4, as mandated in the Agreement on
Agriculture. The Peace Clause is reviewed in Box 5.1.
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BOX 5.1
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THE PEACE CLAUSE (ARTICLE 13 OF THE
AGREEMENT ON AGRICULTURE, ‘DUE
RESTRAINT’)
The Peace Clause applied during a nine-year implementation period expiring
at the end of the 2003/04 ‘calendar, financial or marketing’ year listed in the
Member country’s schedule of commitments. It relates only to the domestic
subsidy provisions listed in Annex 2 (the Green Box) and Article 6 (covering,
inter alia, Blue and Amber Box payments) and to the export subsidy
payments detailed in Part V of the Agreement. It does not cover other
provisions, for example on market access. As yet, the Peace Clause has not
been tested by a Dispute Settlement panel.
Green box payments
These provisions are straightforward. Provided the measure conforms fully to
the provisions of Annex 2, then the payment is a non-actionable subsidy for
the purpose of countervailing duties (GATT Article VI and Part V of the
Agreement on Subsidies and Countervailing Measures; it is exempt from
actions based on GATT Article XVI and Part III of the Subsidies Agreement;
and it is exempt from actions based on ‘non-violation nullification or
impairment’ of the benefits of tariff concessions enjoyed by other Members.
Of course, if Green Box payments are truly decoupled, then this
protection should not be necessary. It is conceivable however, that a measure
could satisfy the provisions of Annex 2, with ‘minimal trade-distorting
effects or effects on production’, that did give rise to concerns elsewhere. In
this circumstance, the Peace Clause would be a useful defence. It is difficult
to see that developed country Members will object to an extension of the
Peace Clause for Green Box measures but developing country Members
might.
Blue and amber box (and de minimus) measures
These provisions are much less protective. Again, there is a requirement that
the provisions of Article 6 are fully respected as well as the commitments in
the Member’s Schedule. ‘Due restraint’ is to be shown in initiating
countervailing duty investigations and measures are exempt from the
imposition of countervailing duties unless ‘a determination of injury or threat
thereof is made’. Measures are exempt from actions based on GATT Article
XVI.1 and Articles 5 and 6 of the Subsidies Code, provided that ‘such
measures do not grant support to a specific commodity in excess of that
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101
decided during the 1992 marketing year’. Measures are exempt from action
based on ‘non-violation nullification or impairment’ of tariff concessions,
again subject to the proviso that 1992 support levels are not exceeded.
Export subsidies
Those that are paid in full conformity with Part V of the Agreement and of
the commitments in the Member’s Schedule, also benefit from the Peace
Clause. For countervailing measures, the wording is slightly different to that
applying to the Blue Box but seems to have the same effect. Actions based on
GATT Article XVI and various articles of the Subsidies Code, cannot be
brought.
While the Peace Clause is therefore operative, it over-rides GATT
Article XVI. If the Peace Clause were to lapse, then the provisions of either
Article XVI or those of the Agreement on Agriculture must prevail. For
primary products, either the Member’s Schedule (which, for most countries,
would forbid the use of export subsidies), or the contentious provisions on an
‘equitable share of world trade’ would apply. A renewed challenge to the
EU’s use of export subsidies on sugar could be expected. For processed
products, such as pasta, the Article XVI prohibition on the payment of export
subsidies on non-primary products would presumably apply. This is
notwithstanding the more permissive wording of Article 11 of the Agreement
on Agriculture and the fact that some Members (notably the EU) have an
export subsidy ‘entitlement’ on ‘incorporated’ products written into their
Schedule. The EU’s food industries must be reflecting on this with concern.
Again, it is a matter of conjecture as to what the EU would be willing to pay,
and what its trading partners will demand, for an extension of the Peace
Clause to cover export subsidies.
Extending the Life of the Peace Clause
It is the third area of negotiation therefore, that holds the key to the first two
issues. Admittedly, the protection offered by the Peace Clause to Green Box
policies is of potential value to the vast majority of WTO Members. A
limited extension of its provisions can therefore eventually be readily
envisaged. An extension of its provisions to include export subsidies
however, can only be envisaged if substantial progress is achieved in
reducing the tariff ‘numbers’, referred to above, and an explicit link with the
export subsidy commitment must, surely, be made.
The trade-off for an extension of the Peace Clause that will therefore
undoubtedly be demanded by the Cairns Group and the Group of
(approximately) 21 will be improved market access and substantial
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reductions in export subsidies. Under this scenario, it seems inconceivable
that the provisions of the Green Box can be widened to embrace the EU’s
concept of multifunctionality. Indeed, the reverse might be envisaged if the
Cairns Group can extract a sufficiently high price from the EU for their
acceptance of a continuation of the Peace Clause.
It is not just the Cairns Group that has to accept an extension of the
Peace Clause. A consensus of WTO Members has to emerge, and this must
include the developing world. The price that they will wish to extract is
Special and Differential treatment but how successful their negotiating
strategies will prove to be remains to be seen. Given these conflicting
interests, it is difficult to believe that the EU will be able to make much
progress on its concerns about animal welfare or the protection of the
geographical names of traditional foods.
5.5
AGRICULTURE POLICY CHANGE IN THE EU AND
THE UNITED STATES
This chapter argues that the pivotal role played by the EU and the United
States in agricultural trade negotiations in the second half of the 20 th century
is unlikely to be replicated in the future. This is in spite of their attempts to
expedite the modalities negotiations in the summer of 2003. Nevertheless,
both remain important players in the evolving drama outlined here. Some
further exploration of their respective positions and margins of manoeuvre is
therefore appropriate.
Agriculture Policy Issues in the EU
Following the 1992 Blair House Accord and in the run-up to Marrakesh,
there was much debate in the EU as to the compatibility of the MacSharry
Reforms with the GATT commitments entered into. Would the MacSharry
Reforms suffice? This debate however, was soon overtaken by a surge in
world cereal prices, tempering the immediate impact of the export subsidy
constraints, and the prospect of enlarging the EU to embrace ten states from
Central and Eastern Europe.
The perceived need to reform the CAP to enable this Enlargement to
proceed led to the Agenda 2000 reforms. In spite of this, the European
Commission was as mindful of the need to respect the export constraints
embodied in the Agreement on Agriculture and to prepare the EU for the new
round of trade negotiations, as it was of the challenges of Enlargement. The
package of reforms eventually agreed in March 1999 fell short of even the
Commission’s modest proposals (Swinbank, 1999; Ackrill, 2000). In
The Challenge of the Agriculture Negotiations in the Doha Round
103
deferring price cuts on milk and ignoring sugar, the EU failed to bring change
to these sectors commensurate with the timeframe implicit in either
Enlargement or the WTO talks. The reinforcing of the arable area and
headage payments, introduced into the CAP in 1992, confirmed the EU’s
dependence upon the continuance of Blue Box payments, much criticised in
the WTO. It also failed to resolve the issue of whether or not such payments
would be made in the Eastern European EU Members. In retrospect, it is
clear that neither Enlargement nor the pending WTO talks were sufficiently
pressing to exercise real leverage on the EU Council of Ministers. They
settled on a weak compromise that, in theory, would carry the CAP through
to 2006.
By 2000, both EU Enlargement and the pending demise of the Peace
Clause were now more pressing. The EU’s second BSE crisis (in Germany),
which broke in the autumn of 2000, weakened German support for a
continuation of the ‘old’ CAP. The views of the new German Minister from
January 2001 Renate Künast (a member of the Green Party in the German
coalition) however, did not necessarily carry much resonance in the Farm
Ministries of the Cairns Group. Following the French Presidential and
parliamentary elections in July 2002, the European Commission launched its
mid-term review (MTR) of Agenda 2000. In June 2003, the EU Council of
Ministers adopted a modified version of this package – which could be
dubbed the Fischler Reforms. As a result, a new and more decoupled Farm
Income Payment will largely replace the EU’s area and headage payments
from 2005. From then, the EU’s use of the Blue Box will therefore be much
diminished since the Farm Income Payment will qualify as a decoupled
payment in the Green Box (Commission of the European Communities,
2003).
Agriculture Policy Issues in the United States
In the United States, a new Farm Bill was agreed in 1996 - the Federal
Agricultural Improvement and Reform (FAIR) Act. This decoupled payments
for the main arable crops, creating AMTA (Agricultural Market Transition
Assistance) payments. These no longer fell within the Blue Box, as their
predecessor deficiency payments did, but instead into the Green Box. This
meant that the EU’s main ally in the defence of Blue Box payments had
gone.
With depressed commodity prices between 1998 and 2001 however,
the United States made emergency payments to farmers that were clearly not
decoupled. To EU farmers, this was seen as a duplicitous act that undermined
the moral stance of the United States on trade reform. Apparently, the Clinton
Administration could not decide how these 1998 payments should be
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declared. In June 2001, the Bush Administration admitted that they were
Amber Box payments. The US Agricultural Secretary, Ann Veneman,
declared that ‘we set an open and above the board tone as we move toward a
challenging new round of trade negotiations’ (quoted in Agra Europe,
2001c).
There is a schism in policy formation in the United States just as in the
EU, where the European Commission sometimes has difficulty in convincing
the Member States, in the Council of Ministers, to follow its lead. In the
United States, it is the Executive that takes the lead in trade policy
negotiations, and the Legislative branch that tends to take the lead on
domestic policy.
The Clinton Administration had been unable to secure Congressional
approval for trade negotiations; the Presidential mandate to negotiate trade
agreements had lapsed in 1994 with the conclusion of the Uruguay Round. In
August 2002, the Bush Administration did obtain a ‘fast-track’ (‘trade
promotion authority’) negotiating mandate (United States, 2002).
The vote in the House of Representatives was close, having been won
by a narrow margin (215 to 214 votes). This was for a three-year period to
negotiate the Doha Round and the Free Trade Area of the Americas
(Financial Times, 2001d). It was therefore far from clear that the United
States was in a position to conclude a Doha Round deal that would be
endorsed by Congress.
In the meantime, Congress was attempting to write a new Farm Bill.
The FAIR Act expired in 2002 and old programmes were predicted to return
(Ayer, 1996). The Commission on 21st Century Agriculture, mandated by the
1996 FAIR Act to report on the future direction of farm policy,
recommended a continuation of AMTA payments and the development of a
Supplemental Income Support programme (Commission on 21st Century
Agriculture, reported in USDA 2001).
The Democrat Chair of the Senate Agriculture Committee, Kent
Conrad, had argued that, by matching the Europeans in support of
agriculture, the United States would gain ‘greater leverage in forcing cuts in
EU farm subsidies in the current WTO negotiations’ (Agra Europe, 2001d).
Lobby groups had been advancing ingenious schemes that would provide
counter-cyclical support to the US farm sector. Although the House of
Representatives passed a 10-year package - amounting to some $73.5 billion
in support – in October 2001, it was not until January 2002 that the Senate
was able to conclude its deliberations on a 5-year package. These two Bills
were eventually be merged into one and the Farm Security and Rural
Investment Act (FSIRA) became law in May 2002. Petit commented:
The Challenge of the Agriculture Negotiations in the Doha Round
105
In the WTO, the credibility of the US government may be damaged because it
has couched many of its arguments in favour of agricultural policy reform
under a pro free-trade ideological mantel. Now the President has signed a new
law which is hardly consistent with that ideology … The new law … may
hamper the ability of the US administration to pursue an aggressive reform
agenda because of doubts about its ability to deliver on new liberalisation
commitments. (Petit, 2003)
5.6
CONCLUSION OF THE NEGOTIATIONS
When, and how, will the WTO agriculture negotiations conclude? The
European Commission is clearly reluctant to contemplate a stand-alone deal
on agriculture. It fears that any deal acceptable to its WTO partners would be
unacceptable to the EU Council of Agriculture Ministers and a vocal farm
lobby. It would be far easier to push through such a deal if other interest
groups perceived that their interests were at stake in the context of an
agreement covering a number of sectors. Indeed, the EU might even believe
that it can negotiate a balanced deal invoking fewer ‘concessions’ on
agriculture, offset by more generous ‘concessions’ elsewhere.
Clearly, this is only one of a large number of possible future scenarios.
For example, it could conceivably be the case that, although the negotiations
on agriculture now proceed well after the delays of 2003 and are, in effect,
concluded in 2004 or 2005, this cannot then be embedded in a comprehensive
agreement because of lack of progress in other sectors. It is therefore still
possible that a separate, ‘stand-alone’, agreement on agriculture could be
agreed.
If the assent of all WTO Members is to be achieved, both of the
scenarios outlined above imply radical cuts in farm support in developed
countries together with a rash of special and differential measures promised
(if not delivered) for least-developed economies.
An alternative would be for the EU and others with protected farm
sectors to sit it out beyond 2004, resisting a deal on agriculture, and persist
with their agricultural policies. This prospect is not appealing. Without the
protection of the Peace Clause, a flood of Dispute Settlement proceedings
regarding the policies of the EU and others would undoubtedly be launched.
If unresolved, this would further undermine the credibility of the WTO
process. This is a very pessimistic scenario but one that cannot be dismissed.
5.7
CONCLUDING COMMENTS
This chapter is far from comprehensive in its coverage of issues that are
likely to impinge upon the agriculture negotiations over the coming years.
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Agricultural trade reform clearly remains a major and complex issue with
which WTO Members must grapple. The Uruguay Round began a long-term
reform process. The crucial question is whether that reform process can
proceed in the Doha Development Agenda within the framework defined by
Article 20 or whether it might falter, with potentially disastrous consequences
for the legitimacy of the WTO system. Delays in the Doha timetable, in
particular the failure to agree the agriculture modalities in 2003 and the lack
of progress in Cancùn, were not good omens. Whatever the outcome, the
debate over agricultural trade policy reform will continue to command centre
stage in the WTO.
NOTES
1.
2.
3.
4.
5.
6.
The text is reproduced in Agra Europe (1999b). ‘Green Room’ discussions were a
distinctive feature of GATT/WTO negotiations up until, and including, the Seattle
Ministerial Meeting. The Seattle Meeting was organised around five ‘open’ working
groups, including one on agriculture – to which a sixth, contested, working group on
labour standards was been added – and the so-called Committee of the Whole. Much of
the discussion however, actually took place in ‘Green Room’ consultations between
selected delegations (Luke, 2000). See also comments on the exclusion of many
developing countries from the negotiations by Kerr (2002).
Informal meetings were planned for May and July 2001 and February 2002. Formal
meetings of the Special Session were programmed for September and December 2001
and March 2002 (WTO, 2001a). Unfortunately, the transparency of the process appears
to have suffered in that the WTO’s web site does not carry the documents of these
informal Special Sessions although all the papers from the formal Special Sessions
appear to have been released in the document series G/AG/NG/W/##. A useful
summary of the work of the Special Sessions and of the proposals and submissions
tabled, has been prepared by the Secretariat (WTO, 2002a).
This would appear to be a non-paper but, at the time of writing, it can be found on the
European Commission’s web site.
The original grouping was Argentina, Bolivia, Brazil, Chile, China, Colombia, Costa
Rica, Cuba, Ecuador, El Salvador, Guatemala, India, Mexico, Pakistan, Paraguay, Peru,
the Philippines, South Africa, Thailand and Venezuela. Egypt quickly joined, to make
21; but there have been subsequent defections.
In practice, of course, world price movements have been dominated by fluctuations in
demand and supply. World wheat prices increased sharply in 1995/96, but by 1999 they
had fallen, in nominal terms, to their lowest level since 1990 (WTO, 1999, Chart 1 in
Annex II).
In addition to the 49 least-developed countries defined by the UN
(http://www.unctad.org/ldcs/), in 1996 the WTO established a list of 19 other
developing country Members who were net-food importers (WTO, 1999, Annex II).
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