Agricultural Subsidies Again Emerge as Top Priority of New WTO Round

from BRIDGES Monthly Vol. 3 No. 3 April 1999

The WTO General Council met on 12 April to discuss concrete objectives for the Seattle Round of trade negotiations slated to begin early next year. During this 'phase two' of preparatory meetings, Members are expected to come up with specific proposals based on the more general position papers they presented during the first phase of the Ministerial Meeting preparations. Due to the lion's share of Members' attention currently diverted to the appointment of the new WTO Director- General, the meeting only lasted half a day instead of the scheduled two, and yielded a limited number of proposals on the implementation of existing WTO Agreements, as well as agriculture and - to a lesser extent - services and textiles.

Agriculture

The most concrete papers were tabled by Australia and Pakistan. All of Australia's proposals, presented on behalf of the Cairns Group1 , dealt with negotiation goals regarding further liberalisation of the agricultural sector. The first of these (WT/GC/W/166) stated that 'the objective for the agriculture negotiations be, by a specified date, to put trade in agricultural goods on the same basis as trade in other goods and establish a fair and market oriented agricultural trading system which corrects and prevents restrictions and distortions.'

The proposal drew immediate opposition from the European Union and Switzerland who argued that Article 20 of the Agreement on Agriculture expressly recognises that non-trade concerns must be taken into account when further liberalising agricultural trade, and thus implicitly acknowledges that agriculture is different from other sectors covered by WTO disciplines. The Chair of the WTO Agriculture Committee reminded Members that the second preparatory stage of the Ministerial process was meant for tabling concrete proposals, not for deciding their inclusion in the post- 2000 trade negotiation agenda.

Australia's second proposal (WT/GC/W/167) was that 'the principle of special and differential treatment for developing country Members remain an integral part of the agriculture negotiations. The resulting framework for liberalisation must continue to support the economic development needs of these WTO Members, including flexibility to implement their commitments, technical assistance and improved export opportunities for products of particular interest to developing countries.'

In its paper on agriculture (WT/GC/W/ 161), Pakistan said that 'developing countries will look at mandated negotiations as an opportunity to minimise flexibility in domestic support by developed countries and providing more flexibility in this regard to developing and least-developed countries.' It proposed that the Agreement on Agriculture be clarified or amended so that developing countries 'be excluded from the discipline of import control and domestic support in the food product sector.'

Egypt warmly welcomed Pakistan's suggestion that industrialised countries contribute to a revolving fund to help net food-importing developing countries meet their rising food import bills. New Zealand strongly supported Pakistan's negotiating objective on securing agreement that 'developed countries refrain from "backsliding" towards higher and selective agricultural and industrial protectionism.' Among implementation issues that must be 'addressed and resolved before the new negotiations commence', Pakistan highlighted tariffication through overvaluation of tariff equivalents, developed countries' use of aggregate domestic support schemes, discriminatory and nontransparent quota administration, as well as fulfilment of commitments under the Ministerial Decision on Net Food- Importing Developing Countries.

Australia also suggested that, 'Members agree to the immediate elimination and prohibition of all forms of export subsidies' (WT/ GC/W/168), and Pakistan called for the 'immediate elimination of all kinds of domestic support, product specific subsidies and all kinds of export subsidies by the developed countries' (WT/GC/W/161).

US, Cairns Group Spell out Goals

US trade and agricultural officials have also highlighted the elimination of export subsidies and more control over domestic subsidies among their major negotiation goals. Others include greater disciplines on state trading enterprises and the administration of tariff rate quotas. Speaking at a Canadian Agricultural Trade Conference on 19 April, US Secretary of Agriculture Dan Glickman said that the negotiations should 'forcefully address the questions surrounding emerging issues such as biotechnology products. [...W]e must guard against using science as a disguise for trade barriers. Particularly controversial issues - such as proper use of biotechnology - can help feed a hungry world in a reasonable fashion using less pesticides and less water; but we also have to measure the public trust to ensure the independence of the process.' At the same conference, Canada's International Trade Minister Sergio Marchi admitted that his country had some difficulty in developing a consensus on a negotiating position on agricultural trade issues. Although Canada is a Cairns Group member, Minister Marchi said that there was 'a great diversity of often competing interests' between national and regional priorities, as well as between agricultural producers and food exporters.

In a related development, the Cairns Group on 19 April issued a Ministerial Statement expressing disappointment in the European Union's agricultural reform package adopted in March. While reducing market-distorting price support, the Agenda 2000 agricultural reforms would increase other distorting forms of support, such as direct compensation payments, with the result that EU producers would continue to be shielded from international market signals, the ministers said. 'It is important that the EU fully participate in the move towards a market-oriented agricultural system which puts trade in agricultural goods on the same basis as trade in other goods. The Agenda 2000 agricultural reforms will not provide a sufficient contribution by the EU to the forthcoming WTO agricultural negotiations. It is not acceptable to the Cairns Group that the most efficient agricultural producers are penalised while barriers to capital, technology and industrial goods are reduced to a minimum or eliminated.'

In response to the Cairns Group statement, EU Agriculture Commissioner Franz Fischler said that 'it must be clear to all of our WTO partners that the outcome of Agenda 2000 is not an opening bid on the part of the EU for the WTO negotiations but rather the policy with which the outcome of these negotiations must be compatible. If the sentiments expressed by the Cairns Group are an accurate reflection of their position in the forthcoming negotiations, then it is quite clear that we have large differences to narrow between both parties.'

Services

Regarding the mandated negotiations on services, Pakistan submitted a paper (WT/GC/W/160) on the movement of natural persons under the General Agreement on Services (GATS). It identified the use of economic needs tests (ENTs) as a major impediment to the movement of natural persons, as they 'imply that the relevant government agency would grant access if certain conditions were met that reflected the economic needs of the population or their demand for such services.' It suggested that countries agree on certain services sectors where the movement of natural persons would be exempted from the ENT requirement, as well as on more transparent and objective implementation of visa and work permit regimes, and mutual recognition of qualification and licensing regulations.

In late March, Canada's International Trade Minister Sergio Marchi said the forthcoming services negotiations should review how trade remedies, such as anti-dumping rules, might be applied to services. The Canadian magazine industry, struggling to keep Canadian editions of foreign magazines out of the market, is pressing the government to examine how such rules could be extended to the advertising sector (for more information on the magazine dispute, see Bridges Year 3 No.1, page 8).

Textiles

In a paper on the implementation of the Agreement on Textiles and Clothing (WT/GC/W/159), Pakistan highlighted the minimal market openings provided by the Agreement so far, due to industrialised countries' back-loading the removal of quotas on commercially significant items to the very end of the process in 2005, as well as their frequent recourse to safeguard and anti-dumping measures. However, Pakistan did not propose re-opening the Agreement. Instead, it suggested that countries that restrain textile imports 'undertake to implement positive measures to manifest their commitment towards liberalising trade in this sector.' Among such measures, restraining countries should include 'at least 50 percent of the products under restraint, spread equally over all four groups (i.e. yarns, fabrics, made-up textiles and clothing, ed.), in the third phase of integration.' The third phase, currently running, will end on 1 January 2002. In addition, Pakistan called for a reaffirmation that the restraining countries would refrain from frequent and repeated recourse to safeguard and anti-dumping action, and for the implementation of positive measures in favour of small suppliers and least-developed countries. Pakistan also submitted a paper on the Dispute Settlement Understanding. For a summary of the highlights, please see page 8.

Next: Proposals on New Issues

The General Council will meet on 3-4 May to discuss proposals regarding the so-called 'new issues' that Members may want to include in the next round of trade talks. These include the development of WTO disciplines on investment, competition policy and the transparency of government procurement rules. Members are divided on whether to extend the negotiations into these areas; the EU is the most ardent advocate for their inclusion, with India, Pakistan and Egypt leading the opposition. That the negotiations will involve further reductions in industrial tariffs seems practically a foregone conclusion, as the main trading powers - the US, the EU, Japan and Canada - have expressed support for it. Other new issues could involve trade and environment, labour and institutional reforms regarding the WTO's relations with civil society. For a summary of Members positions on 'new issues', please see Bridges Year 3 No.1, page 1.

On 20-21 May, Members will hold a formal Special Session to review the proposals put forward in phase two so far, with further discussions taking place from 7-8 June (see box below).

1 The Cairns Group consists of Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, Philippines, South Africa, Thailand and Uruguay.

Second Phase of the Preparatory Process for the 3rd WTO Ministerial Meeting (30 November to 3 December 1999)

May 3-4 Informal Meeting of the WTO General Council

May 20-21 WTO General Council Special Session: Suggested focus: All subjects of the preparatory phase (i.e. implementation, the built-in agenda and the issues of the April session). 7-8 June Informal Meeting of the WTO General Council

June 21-22 WTO General Council Special Session. Suggested focus: proposals on organisation and management of the future negotiations, including the scope, structure and time-frames.

July 6-7 Informal Meeting of the WTO General Council

July 9 WTO General Council Special Session. Suggested focus: proposals regarding all items above (i.e. March, April, May & June meetings).

July 28-29 WTO General Council Special Session. Suggested focus: proposals regarding all items above and organisation of future work, i.e. phase three of the preparatory process and drafting of the Seattle Ministerial Declaration.