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AoA negotiations and members' positions
Roshan Malik
Economic indicators show that our economy is based on agriculture production, and this sector is central to our food security and rural employment. The promotion of trade liberalisation as structured in Agreement on Agriculture (AoA) is a great challenge for developing countries like Pakistan. The growing influence of transnational corporations on the global agriculture economy under the umbrella Multilateral Negotiation Systems is also a threat for family farmers.
The Ministry of Commerce recently organised a workshop in pursuance of Doha Mandate round of multilateral trade negotiations, which also include trade in agriculture. The objective was consultation between stakeholders invited from relevant government and private sector including civil society organisations and NGOs for the assessment of various options open to Pakistan in the negotiations.
The resource persons (Rashid Kaukab, S I M Nayyar) were not only experts in this area but also Pakistani officials actually involved in these negotiations and currently serving in Geneva.
AoA has three main pillars. In the area of Market Access, by the process of tariffication, all the non-tariff measures will be included in the tariffs. The tariffs will be reduced 36% by the developed countries and 24% by the developing countries. The base rate for tariffs cuts bound rate before 1 January 1995. While for unbound tariffs the base rate was the actual rate charged ie September 1986.
Domestic support commitments aimed at reducing expenditures, like input subsidies on fertilisers, seed, pesticides and electricity, to domestic producers (farmers). It is to be reduced by 20% and 13.3% by developed and developing countries, respectively. The domestic support measures in the AoA are Amber Box ie payments and subsidies paid to producers are to be reduced, but not yet eliminated. These measures are based on Aggregate Measurement Support (AMS), which is cash equivalent to total government support for agriculture producers.
Blue Box is certain direct payments to farmers aimed at limiting production that are not currently subject to any reduction. Green Box is a list of domestic payments that are exempt from Amber Box. This list includes payments linked to environmental programmes, research and development programmes, pest control, infrastructure development and domestic food aid.
Export subsidies are to reduce by 36% for developed countries and by 24% for developing countries. There must also be reductions of 21% and 14% respectively on the volume of exports subsidised.
Developed countries have to fulfill these reductions over the period of six years, which ran out on 31 December 2000; while developing countries have 10 years period. Some 29 LDCs have been given special and differential treatment and they are exempted from the time period.
In WTO negotiations countries move in lobbies and groups. In the current negotiations' scenario on trade in agriculture, major countries and groups' positions, for example US, include market access for its agriculture exports, elimination of export subsidies' reduction in trade distorting domestic subsidies and promotion of GMOs and biotechnology. Protectionists (EU, Japan, Korea etc) propose reduction in export subsidies with disciplines for export credits and food aid, reduction in domestic support linked to non-trade concerns, improve market access and concerns about GMOs.
Cairns Group (Australia, Canada and New Zealand, Latin America) proposes elimination of export subsidies, improvement in market access, hostile to non-trade concerns, reduction in trade distorting domestic support and S&D treatment for developing countries. Developing countries group includes some members of Cairns group like Latin America, Net Food Importing Developing Countries (NFIDCs) and demands for the compensation for the negative effect on food import bills, proposal for development box which is for better market access for exports and flexibility to protect agriculture livelihoods. The objective of developing countries is effective disciplines on all forms of export competition, reduction in trade distorting domestic support, market access for products of export interest, flexibility through S&D treatment concerns of NFIDCs.
In the area of Market Access, tariffs by the developed world were used as a tool to restrict import rather than market access for developing countries. Similarly anything beyond 15% high of the tariff line or three times higher than the national tariff is considered tariff peak. A system of protection whereby the greater degree of processing that a commodity undergoes, the greater levels of protection that are applied to it in the form of a tariff is called tariff escalation. This system is an impediment for developing countries to enter into agricultural industrial exports of high value added products. Tariff Rate Quotas (TRQs) is a two-tier tariff regime in-quota tariff (generally low and applicable to within the in-quota regime) and out of quota tariffs (high and applied to imports occurring above import quota fixed for a product).
A number of developing countries, including Pakistan, did not undertake the tariffication under article 4(2) of AoA; they chose to set fixed bound tariff ceilings that do not decline over the years. Pakistan, on the other hand, reduced its tariffs under the commitments of Structural Adjustment Programme (SAP) of World Bank and IMF.
There is a need of objective analysis and futuristic projection of our exports and imports requirements profile of agricultural products. The level of tariff protection is required to provide to our farmers against cheap imports. Major barriers to our exports in potential market need to be identified.
China and a group of eight developing countries led by Pakistan previously have called for developing countries to receive special and differential treatment in meeting new commitments to reduce agricultural tariffs.
Domestic Support is a matter of great concern for the developing countries and poor small farmers are suffering, while developed countries are cleverly providing very huge amount of domestic support to their agriculture sector. US provided $247bn AMS in the late 1980s. In 1996, developed countries like US provided $21,246m, Japan $25,020m and EC $26,598m. While developing countries are providing very limited domestic support due to their meager financial resources. Developing countries are supporting the idea of Development Box to be induced in AoA, which provides domestic support on food crops.
Pakistan is one of the leading supporters of Development Box in trade negotiations in agriculture. Paradoxically, government has signed an agreement of $300m loan, with Asian Development Bank (ADB) to liberalise the agriculture sector by closing the food procurement departments within five years and reduce government role in purchasing the crops from the farmers and leave them on the mercy of miser market forces.
Similarly, government has imposed General Sales Tax (GST) on chemical fertiliser, which directly effected the poor small farmers. On the other hand, it has provided huge subsidies to fertilisers' industry. It is a sorry state that more than 50% of our budget for agricultural development was not used by the ministry, while our farmers direly need infrastructure development in the agriculture sector in order to capacitate themselves against the upcoming arena of free trade.
In the area of export subsidies, the developed countries are providing export credits to the exporters, while governments in the developing countries are unable to provide assistance to their farmers. Though US favours the elimination of export subsidies, but proposes base year for reduction should be 2000. On the other hand EU is for the reduction of export credits and to bring them into the export subsidies. Developing countries are demanding exemption from commitments in the article 9:1(a) and 9:1(c) as long as subsidies are provided for achieving developmental goals and food security objectives. Similarly developing countries should be exempt from export subsidies as long as they have not achieved export competitiveness.
Developing countries have flexibility to provide subsidies for marketing, internal transport in article 9:4 and "Roll-over" of export subsidies (article 9:2b) means if a member has under-utilised its export subsidy commitment levels, the unutilised portion could be rolled over the next year.
Out of all members of WTO, 35 have the right to subsidise export of their agricultural products, which they have mentioned in their national schedule. Most of them are developed countries. Pakistan is not entitled to provide export subsidies other than transportation and marketing.
The forthcoming round in trade negotiations is of great importance for a country like Pakistan. The consultation process, which the Ministry of Commerce has adopted, must be appreciated and all the other institutions are expected to follow suit before taking the decisions of national interest.
Permanent co-ordination among the government departments needs to be improved, so that the decision and policy made in one department should not clash with the other like the proposal of Development Box in WTO and the loan agreement with ADB. The government should simultaneously identify and improve the competitive exports of interest based on empirical research based data. There must be viable policies for the development of agriculture sector to facilitate the farmers.
Most developing countries are unable to use Special Safeguard Measures (SSG) provided under AoA because of the fiscal constraints of their government and require considerable legal and institutional capacity to apply SSG measures. Small farmers in developing countries are very vulnerable because of temporary fluctuations in the markets, and desperately require protection measures from their government. The low elasticity of demand for agriculture goods and its dependence on weather further enhances their vulnerability.
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