In 1992, at the end of the Uruguay Round negotiations, the EU instituted reforms, significantly lowering support prices for grain and beef and compensating farmers by paying them directly. Lowering prices enabled the EU to allow the volume of subsidized exports to be reduced through reductions in surpluses.

The EU has subsequently continued its reform process. In the 2000 reform, it reduced the support price of cereals by 15 percent, and in the 2003 reform reduced the support prices on dairy products, with the price of skimmed milk powder being lowered by 15 percent and that for butter by 25 percent.

In the 2005 reform, the EU finally reduced the support price for sugar (previously unchanged for 40 years) by 36 percent, and switched to direct payments corresponding to 64 percent of the price reduction. For these reasons, the EU could make a commitment to eliminate export subsidies for sugar, dairy products, cereals and beef, and could tolerate 100 percent tariff caps in the current Doha Round of negotiations.

Since the 1960s, price support has dominated Japan’s agricultural policy, supporting farmers’ incomes but placing a huge burden on consumers. In order to maintain high prices, Japan has had to rely on tariffs and non-tariff measures so as to isolate its domestic market from the international market.

In the Uruguay Round, the country resisted tariffication and resorted to special treatment stipulated in Annex 5 of the Uruguay Round Agreement on Agriculture (URAA), compensating for not tariffying rice by providing more minimum access than would have otherwise been required. Japan, however, finally recognized that it could no longer bear the excessive minimum access burden and applied tariffication in 1999.

The Japanese position in this Round has not changed much from the Uruguay Round, since the country has not changed many of its domestic policies. In 2000, Japan introduced direct payments for farmers in disadvantaged regions. In 2007, it changed the 70 percent of deficiency payments for wheat, barley, sugar and some other dry farming products into green box payments. These policy reforms, however, did not change the domestic prices of agricultural products. Japan therefore has to continue to rely on high tariffs in order to maintain those prices and protect its agricultural sector.

To what extent would a successful conclusion of this Round along the lines of the Revised Draft Modalities paper issued by the chair of the agriculture negotiations, Ambassador Falconer, require changes in Japanese agricultural policies?

How much increased market access is likely to be generated as a result of tariff cuts and tariff rate quota expansion? Could Japan play a more aggressive role in the world market, taking advantage of the expansion of market access generated in other countries?

This paper makes attempts to address these issues by exploring the implications of the Revised Draft Modalities paper.

In addition to quantitative analysis of the extent to which tariffs would be reduced, this paper attempts to analyze the probable and possible effects of the paper on Japanese agriculture and agricultural policies, taking into accounts recent developments in the world market.

The first section of the paper gives an overview of the current state of Japanese agriculture and agricultural policies, insofar as these relate to the disciplines introduced in the Uruguay Round Agreement on Agriculture (URAA). The second section reviews briefly the Japanese positions in this Round. The next three sections discuss in more detail the implications of the domestic support, market access and export competition modalities.

The following section tries to point out several legal drawbacks to the proposed commitments on subsidies, the lack of disciplines on export tax, and the overly lenient disciplines on export quantity restrictions. It also refers to some environmental concerns which are just as important as trade concerns. The final section makes an overall assessment of the impacts of the suggested modalities on Japan.

This study summarizes the key issues and methodologies used in the negotiations; it employs a set of indicators and domestic consumption data to identify tariff lines likely to be declared sensitive; and it suggests which countries are most likely to be affected. The work also looks at how different scenarios will lead to varying degrees of market opening through quota expansion and specifies which exporting countries and products will be most affected.

*Due to the number and breadth of tables generated by this paper they are also available as a seperate file included in this post.

This study attempts to assess the extent to which the proposals contained in the latest draft text would affect countries’ ability to access the SSM, and the extent to which it would be effective in bridging the gap between domestic and international prices. For this purpose, a simulation model was developed utilizing monthly data on imports of 27 agricultural commodities in six developing countries from 2000 to 2005. These monthly data were used as proxies for individual shipments.

In order to determine the extent to which countries would have access to the SSM, the study calculated the percentage of months during which the volume or price-based SSM would allow additional safeguard duties to be applied, based on varying levels of thresholds and other conditions. To measure the effectiveness of the SSM, the study first calculated the number of “problematic months” – those during which import prices plus bound tariffs fell below domestic prices by more than ten percent. The effectiveness rate was considered to be the percentage of problematic months in which additional safeguard duties could be applied and could prop up import prices beyond this ten percent threshold.

The study first analysed a ‘baseline scenario’, which adopted a number of the provisions of the SSM draft text, such as the lower settings for ‘thresholds’ and higher ones for the additional safeguard duties (or ‘remedies’) that countries would be allowed to impose. In this scenario, the SSM was accessible in an average of about 4½ out of every twelve months, but was effective in only one out of every four “problematic” months. Adjusting thresholds and remedies to mid-range levels did not have major effects on access and effectiveness rates, indicating some room for compromise on these aspects. Changes in thresholds however tended to have more discernible effects on the quality of the SSM than alterations in remedy levels. Notably, effectiveness rates did not exceed 46 percent of “problematic” months in any scenario, pointing to the limited utility of the measure even under the most ideal parameter settings.

Imposing caps based on Doha Round starting bound tariffs, current Uruguay Round bindings or applied tariffs clearly had a more debilitating effect, with access rates effectively cut in half, and the effectiveness rate plunging from the baseline level of 27 percent to only 2 percent of “problematic” months. Countries with relatively low tariffs were particularly vulnerable to such caps, which effectively limited remedial duties to the extent of tariff cuts per year in absolute percentage terms. Further simulations indicate that caps in the form of percentages of bound tariffs or absolute percentage points may yield less controversial results, although the actual effect will depend on the tariff profile of a country.

The proposed option allowing for foreign currency exchange adjustments in case of abnormal depreciation of the local currency did not significantly influence access or effectiveness rates. The 12-month maximum imposition period for the volume-based safeguard, coupled with the chair’s proposal for applying the price-based safeguard on a shipment-by-shipment basis, appeared to be superior to a 6-month or end-of-year alternative imposition period, although not by an overly significant degree. The ‘cross-check’ requirement, which disallows the use of the price-based safeguard if imports are declining, had a perceptible impact on access rates but affected the effectiveness of the SSM less significantly.

Given the fact that safeguard duties cannot be imposed on imports falling within tariff rate quota (TRQ) commitments, access and effectiveness rates may be enhanced if TRQs created in the Uruguay Round are not carried over to the Doha Round. This will however require, at the very least, a lowering of bound tariffs to in-quota levels and verification as to whether such a unilateral move is compliant with WTO rules. Finally, reclassifying special or regular products as ‘sensitive’ had detectable effects on the performance of the SSM, mainly due to the creation of new TRQ commitments, but access and effectiveness rates did not vary much with changes in the degree of deviation from the normal tiered tariff reduction formula.

The value chain approach has become an increasingly important framework for examining changes in the global trade of commodities and their implications for primary producers. Rather than describing the broad patterns of global exchange and assessing their consequences for producers and consumers exclusively through market mechanisms and equilibrium price changes, the global value chain (GVC) framework encompasses the production, processing, distribution and marketing of specific globally-traded commodities, and identifies the main stakeholders involved at each stage. It also highlights governance patterns (how these different stages are coordinated) and specifies the role of lead firms in determining market access, defining products and value across the chain (Schmitz, 2005).

The commodity studies in this paper focus on four themes: changes in the geography of production, changes in chain governance, new developments in trade agreements and their impacts on primary producers in different developing countries, and initiatives towards sustainable production, ethical trade and worker welfare. With regard to changes in production, the paper provides insights into new developments in the production of bananas, sugar, palm oil and cut flowers, which have been driven by changes in trade agreements and new investment patterns. In several of the commodities concerned, an important development has been the rise of new low cost producers who will play a role in shaping the global market for these commodities.

This paper was produced under an ICTSD dialogue and research project which seeks to address the opportunities and challenges of the full liberalisation of trade in tropical and diversification products, and explores possible areas of convergence between different groupings and interests in WTO negotiations. The project seeks to generate solutions-oriented analyses and possible policy responses from a sustainable development perspective.

Multilateral discussions on the full liberalization of trade in tropical and diversification products have focused almost exclusively on the reduction of tariffs, and tariff escalation for those products and the overlap with the mandate on preference erosion. There has been no debate and analysis on NTBs and more specifically on SPS measures and technical barriers to trade (TBTs). This is surprising, since as the following paper reveals, imports of tropical and diversification products from African, Caribbean and Pacific (ACP) countries and some Latin American countries are particularly affected by SPS and TBT measures.

The following work, entitled “Trade Effects of SPS and TBT Measures on Tropical and Diversification Products,” also reveals that ACP countries are the exporters for which the most sectors are influenced negatively and significantly by SPS measures and TBTs. As such, this paper represents a contribution to a knowledge-based discussion in this area.

This study analyzes the trade effects of SPS measures and TBTs on tropical and diversification products. The authors examine to what extent and for what products SPS and technical requirements under public law represent barriers for exports of tropical and diversification products to enter developed countries’ markets, namely the European Union (EU), the United States (US), Japan, Canada, Australia and Switzerland. The objective of the study is also to generate solution-oriented analyzes and to identify possible policy responses.

By way of introduction, the paper provides information on the SPS and TBT agreements, the private sector requirements and NTBs to trade. The paper presents case studies documenting the effects of SPS and TBT measures on producers and exporters. These cases studies are based on surveys and interviews. They focus on production and export of bananas and pineapples in Ecuador, bananas, melons and pineapples in Costa Rica, coffee in Ethiopia and cut flowers in Kenya.

The paper provides a statistical analysis of SPS and TBT measures applied by main developed countries on their imports of tropical and diversification products. Results of the surveys and case studies are not easily generalized. The main advantage of the statistical analysis is to be more exhaustive. This analysis reveals information on the types of measure used (authorizations, technical measures), the motives to impose SPS and TBT measures on tropical and diversification products, the number of notifications by country, the stringency of SPS and TBT measures, and the affected exports. Furthermore, the paper presents econometrical estimations of the trade impacts of public standards through the gravity equation.

Finally, the paper describes the existing technical assistance programmes to help farmers and exporters of developing countries to conform with SPS and TBT requirements adopted by main developed markets. It assesses their strengths and weaknesses, and it provides recommendations to improve their efficiency. The paper analyses how the Aid for Trade initiative can help developing countries to meet these standards. Additional policy responses resulting from the study are also suggested.

This paper was produced under an ICTSD dialogue and research project that seeks to address the opportunities and challenges of the full liberalisation of trade in tropical and diversification products, and to explore possible areas of convergence between different groupings and interests in WTO negotiations. The project aims to generate solutions-oriented analyses and possible policy responses from a sustainable development perspective. This paper is reflective of this objective.

A large number of countries still depend on the export of a few commodities, the prices of which show high volatility and long-term decline. Commodity dependence, the expected erosion of preferences that some countries depend on for their export earnings, as well as increased food import prices due to the elimination of export subsidies, will make it difficult for these countries to guarantee their growing populations the food they need. In this context, safeguarding domestic food production capacity has become an essential component of food security strategies in an increasing number of countries.

These concerns were first raised at the World Trade Organization (WTO) in the context of the “Development Box” debate, in which developing countries tabled a set of proposals aiming at providing flexibility for countries to enhance domestic food production and adopt measures to protect the livelihoods of resource-poor farmers. These proposals included concrete measures to address dumping and import surges. Some were eventually reflected in the so-called 2004 July package. The provisions for special and differential treatment under Paragraphs 41 and 42 of the Framework Agreement are probably the most innovative from a sustainable development perspective. They specify that “developing country Members will have the flexibility to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment.” The Framework Agreement further states that a “Special Safeguard Mechanism (SSM) will be established for use by developing country Members.”

However, key aspects of these instruments – such as the selection and treatment of Special Products (SPs), or specific modalities for a new SSM, including product coverage, possible trigger mechanisms and remedies – were left for future negotiations. As a contribution to this highly controversial debate, the International Centre for Trade and Sustainable Development (ICTSD) Project on Special Products and a Special Safeguard Mechanism aims to generate knowledge and options to better articulate and advance the concepts of SP and SSM from a sustainable development perspective.

The present Issue Paper (No. 10), on “Implications of proposed modalities for the Special Safeguard Mechanism: a simulation exercise”, by Raul Montemayor seeks to evaluate various proposals for a Special Safeguard Mechanism (SSM) that would allow developing countries to defend themselves from import surges and prices depressions. The study aims to analyse the proposal made by the G-33 developing country group at the WTO, and those of other trading partners, by examining how the imposition of different requirements might affect the use of the safeguard in six different country case studies.

A large number of countries still depend on the export of a few commodities, the prices of which show high volatility and long-term decline. Commodity dependence, the expected erosion of preferences that some countries depend on for their export earnings, as well as increased food import prices due to the elimination of export subsidies, will make it difficult for these countries to guarantee their growing populations the food they need. In this context, safeguarding domestic food production capacity has become an essential component of food security strategies in an increasing number of countries.

These concerns were first raised at the World Trade Organization (WTO) in the context of the “Development Box” debate, in which developing countries tabled a set of proposals aiming at providing flexibility for countries to enhance domestic food production and adopt measures to protect the livelihoods of resource-poor farmers. These proposals included concrete measures to address dumping and import surges. Some were eventually reflected in the so-called 2004 July package. The provisions for special and differential treatment under Paragraphs 41 and 42 of the Framework Agreement are probably the most innovative from a sustainable development perspective. They specify that “developing country Members will have the flexibility to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment.” The Framework Agreement further states that a “Special Safeguard Mechanism (SSM) will be established for use by developing country Members.”

However, key aspects of these instruments – such as the selection and treatment of Special Products (SPs), or specific modalities for a new SSM, including product coverage, possible trigger mechanisms and remedies – were left for future negotiations. As a contribution to this highly controversial debate, the International Centre for Trade and Sustainable Development (ICTSD) Project on Special Products and a Special Safeguard Mechanism aims to generate knowledge and options to better articulate and advance the concepts of SP and SSM from a sustainable development perspective.

The present Issue Paper (No. 8), on “South-South trade in Special Products”, by Christopher Stevens, Jane Kennan and Mareike Meyn, is intended as a contribution to the discussion on the selection of Special Products and their treatment in the WTO. The paper aims to bring empirical evidence on South-South trade to bear on the controversial debate about the protection of SPs in the WTO Doha Round, by helping trade negotiators, policy makers and other stakeholders identify the extent to which the designation of products as SPs might affect other developing country exporters.

The present Issue Paper (No.9) on “A Comparison of the Barriers faced by Latin American and ACP Countries’ Exports of Tropical Products”, by Jean-Christophe Bureau, Anne-Célia Disdier and Priscila Ramos, is intended as a contribution to a knowledge-based discussion in this area. The purpose of the study is to shed a light on the reality of market access conditions for tropical products in the main import markets, namely the EU, the US, Japan and Canada, for both the ACP and the group of LA countries. To do so, the paper focuses not only on most favoured nation (MFN) tariffs but also analyses trade under different preferential schemes as well as bilateral free trade agreements. The paper, however, does not enter in a discussion on the pros and cons of multilateral liberalisation versus a more selective liberalisation under preferential schemes. Nor does it address prospects for the possible evolution of such schemes in the near future.

With those limitations in mind, the paper indicates that a detailed analysis of the tariffs faced by tropical products in major developed countries shows that the situation looks very different depending on whether one focuses on bound tariffs or on applied tariffs. LA countries, as well as most Asian countries, are often seen as being discriminated against by the EU and US preferential schemes that ACP countries benefit from. However, the study indicates that a thorough analysis of applied tariffs shows that the LA group benefit from tariff concessions in the EU, US, Canadian and Japanese markets that are quite similar to the ones granted to ACP countries.

This study establishes a list of products for which both groups face high tariffs, and where they might have common interest in pursuing further trade liberalisation. With a complete liberalisation, LA and ACP countries would gain more access to the Japanese market, and eliminate the remaining tariffs barriers in EU and US markets. They would also benefit from a more predictable environment thanks to the binding of low tariffs under the WTO. Full multilateral liberalisation would nevertheless reduce the benefits LA countries currently draw from their preferential access to OECD markets relative to third countries.

Furthermore, because of the various preferential regimes, tariff escalation does not appear to be a serious issue for the ACP and the LA, with the exception of the Japanese market. Both the ACP and the LA groups would probably benefit from more relaxed rules of origin so as to allow sourcing of material in other developing countries. Because of the complexity of the overlapping preferential agreements, these possibilities of sourcing materials in other countries eligible to similar preferential agreements are presently limited. In several cases, non tariff barriers, including the sanitary, phytosanitary and technical barriers seem to be the main obstacles preventing their exports to enter developed countries markets.

This paper was produced under an ICTSD dialogue and research project which seeks to address the opportunities and challenges of the full liberalisation of trade in tropical and diversification products, and explores possible areas of convergence between different groupings and interests in WTO negotiations. In doing so the project seeks to address legitimate concerns associated with particularly controversial products such as sugar or bananas, and generate solution oriented analysis and possible policy responses from a sustainable development perspective.

As tariff protection is progressively dismantled (for whatever reason), this automatically leads to an erosion of the margin of tariff-preferences from which ACP countries benefit. Currently, the ACP agricultural trade preferences are being eroded by five distinct processes: the EU’s Common Agricultural Policy (CAP) reform, the ‘Everything but Arms’ (EBA) scheme for Least Developed Countries (LDCs) and revisions of the Generalised System of Preferences (GSP), EU bilateral trade agreements, multilateral agreements on tariff reductions, and World Trade Organization dispute settlement rulings.

Research suggests that erosion of all preferences would have a substantial impact on some countries, especially those with a high concentration of exports in heavily protected commodities. Relatively bigger impacts are concentrated in small island economies and a number of LDCs dependent on sugar, bananas and, to a lesser extent, garment exports. Reducing preferences for ACP exports will lead to losses for most of these suppliers, as higher production costs mean that these countries and regions can only sell profitably to a protected market. Caribbean ACP banana countries and main ACP sugar exporters (mainly Belize, Fiji, Guyana and Mauritius) worry that, as a result of preference erosion, they will loose their competitiveness against the largest Latin American banana producers (including Colombia, Costa Rica, Ecuador and Guatemala) and sugar exporters (Brazil).

WTO Members recognised the need to help developing countries take advantage of trade liberalisation and for complementary measures to address adjustment costs. The WTO Framework Agreement, adopted in the context of the Doha negotiations in July 2004, recognises the importance of long standing preferences and mandates that the issue of preference erosion be addressed. The Hong Kong Ministerial Declaration also states that «[WTO Members] reaffirm that nothing [they] have agreed here compromises the agreement already reflected in the Framework on other issues including…longstanding preferences and preference erosion.»

Assistance for preference erosion to help developing countries benefit from trade liberalization and improve their ability to use trade for development includes possible trade-related and non-traderelated measures. Trade-related measures that have been suggested in the WTO Agriculture negotiations consist of measures such as a longer implementation period for the tariff reductions, a deferral of the start of the implementation period, lower tariff reductions for affected products, and expanded market access for products, which are of vital export importance to preference-receiving Members. However, these measures might conflict with the current WTO mandate on the fullest liberalisation of trade in tropical agricultural products (such as sugar and bananas) that is also mandated in the market access negotiations.

Non-trade-based measures include targeted technical assistance programmes to assist long-standing preference-receiving countries to diversify their export base, and additional financial assistance and capacity building to address supply constraints, promote diversification and assist in adjustment and restructuring. These measures are targeted «Aid for Trade» (A4T) measures in support of the trade adjustments that will be required as a result of preference erosion.

The present Issue Paper (No. 7) on “The ACP experience of preference erosion in the banana and sugar sectors and possible policy responses to assist in adjusting to trade changes», by Paul Goodison, is intended as a contribution to the discussion on trade-related adjustment under A4T. The purpose of this paper is to situate the process of preference erosion in ACP-EU trade relations in the context of internal EU policy adjustments designed to prepare the EU agricultural and food products sector for trade liberalisation at the multilateral and bilateral levels.

The paper seeks to analyse the sources and impacts of preference erosion on ACP banana and sugar sectors and reviews the experience of the EU policy response to the impact of preference erosion in ACP economies and societies. It also seeks to draw lessons from the various experiences of the policy response to preference erosion in the different circumstances faced in ACP countries, with a view to identifying the elements which could form part of a more comprehensive A4T approach to assisting ACP economies and societies in meeting the challenges thrown up by the ongoing process of both trade liberalisation and preparations for trade liberalisation within the EU and the consequent process of preference erosion.