Seattle 99 • Volume 2 • Number 8 • November 1998
Preparing for Negotiations on the Built-In Agenda: Non-Trade Concerns Loom Large for Agriculture Talks
WTO Members in November outlined their positions on liberalising trade in agriculture and services, the main items of the ‘built-in agenda’ of the multilateral trade negotiations slated to start in the year 2000. In addition to new negotiations on agriculture and services, the ‘built-in agenda’ consists of reviews of several other WTO Agreements, including those on sanitary and phytosanitary measures, technical barriers to trade and traderelated intellectual property rights. Members met in October to consider future work on the implementation of existing Agreements (see Bridges Vol.2 No.7, page 1). In January 1999, governments will present their views on possible new areas to be included in the post-2000 trade talks, thus completing the initial review of negotiation positions and goals.
In view of the widely diverging priorities of the WTO membership, intense negotiations will be required to reach a consensus on the scope of the post-2000 agenda. Those will start at the February Special Session of the General Council and, after a series of intersessional meetings, culminate at the Third WTO Ministerial Meeting in early December 1999, which will adopt the negotiation agenda and timeframe.
The European Union, Japan and Korea lead the push for a ‘Millennium Round’, with simultaneous negotiations on a broad range of areas conducted as a ‘single undertaking’. Many members of the Cairns Group of developed and developing country agricultural producers also support broad-ranging multilateral trade negotiations, but stress that negotiations on agriculture and services must not ‘be held hostage to agreement on a comprehensive round’. The US and Canada, wary of launching a long round where ‘nothing is agreed until everything is agreed’, propose to complement the built-in agenda with separate sectoral negotiations on topics where Members agree that results could be achieved.
India, Pakistan, Cuba and Egypt are the strongest advocates for focusing future work in the WTO on effective implementation of existing agreements rather than on further liberalisation of trade beyond the builtin agenda. At the November meeting, Members agreed that General Council Chair, Ambassador John Weekes of Canada, should hold consultations on India’s and Egypt’s request that the Secretariat prepare an analytical paper on the impact of the Uruguay Round on developing countries.
Export Subsidies, Domestic Support and Market Access
A large number of countries want the agriculture negotiations to lead to the elimination of export subsidies and a drastic reduction of production subsidies. The EU, Japan and – to a lesser extent – South Korea are the main targets of this drive. The Cairns Group and developing countries largely agree on measures primarily aimed at opening developed country markets. In addition to the removal of export subsidies, they will aim at deep cuts to all tariffs, including mechanisms to address tariff peaks and tariff escalation. Other priorities include elimination of prohibitive tariffs and entry price mechanisms that act as disguised export subsidies.
Chile called for a clear prohibition of roll-over of export subsidies, a position shared by other developing countries and the Cairns Group. The latter and the US also said the negotiations should finalise provisions under Article 10.2 of the Agriculture Agreement on export credits and guarantees, and come up with means to prevent circumvention of export subsidy commitments.
The Cairns Group will also seek major reductions in in-quota tariff rates and ‘substantial increases’ on rate quota volumes. The Group, together with the US and Pakistan, called for simpler and more transparent tariff rate quota management leading to a gradual elimination of import quotas. The US also said that ‘Members should agree to pursue additional approaches that address market access issues for biotechnology products.’
Regarding domestic support, the US said Members should agree to strengthen the rules so that all production-related support is subject to discipline. The proposal is targeted towards the elimination of the so-called ‘blue box’ subsidies, which Members agreed during the Uruguay Round were trade-distorting but nevertheless temporarily exempted from WTO subsidies in order to accommodate the EU’s production-related agricultural subsidies.
Developing countries, whether Cairns Group members or not, made an important distinction between industrialised countries’ subsidies which distort world markets and those used by developing countries to attain high enough standards for exports or to ensure food security. For instance, Cuba, the Dominican Republic, El Salvador, Honduras and Nicaragua said that the new round should provide developing countries with flexibility and facilities to assist them in using domestic support in the agricultural sector provided such support was aimed at improving marketing, transport and diversification of agricultural production or ensuring compliance with sanitary and phytosanitary regulations. See also special and differential treatment, non-trade concerns and food security below.
Pakistan and India called for future negotiations to address the imbalance between highly-protected industrialised countries’ right to maintain import restraints, as well as domestic and export subsidies, and the prohibition for developing countries – which did not have such measures before the Uruguay Round – to introduce them beyond a 10 percent de minimis level. The Dominican Republic and Honduras presented a paper on the special needs of developing countries with small and vulnerable economies, such as small island nations. According to observers, however, the possibility that other developing country WTO Members would agree to create a new category of states eligible for preferential tariffs is remote.
Special and Differential Treatment
Article 20 of the Agreement on Agriculture, which mandates Members to initiate new agricultural negotiations before the year 2000, also provides that such negotiations take into account ‘nontrade concerns’ and ‘special and differential treatment to developing country Members’. At the November meeting, India and Pakistan stressed the need to strengthen and, above all, implement the Agriculture Agreement’s provisions for ‘special and differential treatment’ (SDT). In future negotiations, India said it might be necessary to adopt a ‘market plus’ approach for developing countries with ‘a significant percentage of the population not only dependent on the agricultural sector for its livelihood, but also just surviving above the poverty line.’ A ‘market plus’ approach would take into account non-trade concerns such as maintenance of the livelihood of the agrarian peasantry and production of sufficient food to meet domestic needs. Other developing countries made similar interventions, and Pakistan said that the special and differential treatment provisions of the SPS Agreement should be translated into more specific obligations to take developing countries’ infra-structural handicaps into account and assist them in achieving appropriate levels of SPS protection in their export markets.
All countries recognised that SDT measures would be an important part of the outcome of the negotiations, although the Cairns Group did not entirely follow India’s arguments on their usefulness in addressing food security and other non-trade concerns.
Non-trade concerns
‘Non-trade concerns’ are emerging as one of the major battlefields of what observers think will be the most difficult trade negotiations ever held. The European Union, Japan and Norway argue that agriculture cannot be treated the same way as other GATT disciplines because of its ‘multifunctional’ role. According to these countries, the Agriculture Agreement’s ‘green box’ of permissible subsidies should be retained and expanded to cover government support to environmentally-sound agricultural production, rural employment, development and culture, preservation of agrarian landscapes and other environment-related concerns. The so-called ‘green box’ specifies the subsidies that Members have agreed do not distort trade and are thus allowed under WTO rules.
While Korea shares the characteristic of a highly protected agricultural sector with the other advocates of agriculture’s unique multifunctional role, unlike the European Union, it is a net food importer. It called for only gradual and partial removal of trade barriers, such as high tariffs or tariff quotas, as well extending the green box to cover measures related to multifunctionality and food security.
This approach will be strongly fought by the Cairns Group and practically all developing countries. Australia argued that existing green box provisions (such as public stockholding for food security purposes, domestic food aid, environmental programmes, support for rural amenities and pest control) were sufficient to address legitimate non-trade concerns, and that there was no reason for ‘mainly rich, developed, protectionist countries’ to use them as ‘an excuse to avoid liberalising trade in agriculture’. The United States said that so far, contrary to some initial fears, the green box has not been abused by countries adopting broad definitions of allowable subsidies, but that it would fight against expanding green box coverage.
Argentina put the Cairns Group’s and developing countries’ objections to the EU’s conception of non-trade concerns in forceful terms, stating that ‘[n]either consumer concerns nor protection of the countryside, rural culture or the environment need to lead to mountains of surpluses that are subsequently tipped on the world market at prices with which we cannot compete and which ultimately generate yet more marginalisation and poverty in our countries.’ Chile also said it could not under any circumstances accept trade barriers based on environmental reasons, and argued that environmentally harmful agricultural practices would best be remedied through reforming agricultural subsidies and import restrictions. Similar proposals have been made in the Committee on Trade and Environment, notably by Argentina, in the context of discussions on environmental benefits of removing trade barriers.
Food security
For most developing countries food security is the priority ‘nontrade concern’ that should be addressed by the next round, particularly with regard to net food-importing developing countries (NFIDCs). Chile said the new round should result in a prohibition of export restrictions as such measures disrupt food supplies, effecting NFIDCs in particular. Cuba, the Dominican Republic, El Salvador, Honduras and Nicaragua called for improved market access for products from net food-importing countries so that they can increase their export earnings and hence be in a position to face higher food-import bills.
Both India and Pakistan pointed out the shortcomings of the principle that countries should import food from abroad if this was cheaper than the cost of domestic production. This, India and Pakistan argued, was only possible for countries with sufficient foreign exchange reserves to pay for such imports. In those developing countries that could not generate enough foreign exchange through their exports, government support to local farmers, producing for domestic consumption, was necessary to ensure food security, and a legitimate ‘non-trade concern’ justifying subsidies. Along the same lines, Pakistan said that the WTO Subsidies Agreement should allow countries producing mainly for food security, ‘the freedom to retain their own internal regime of subsidies which are basically aimed at protecting the farmers and achieving a greater degree of self-sufficiency in food.’
In contrast, the Cairns Group maintained that while not sufficient in itself, trade liberalisation was ‘a necessary part of the solution’ to achieve food security. It would help ‘reduce domestic trade distorsions and provide improved market access and higher prices for [developing country] exports.’ Only least-developed and netfood importing countries might need some long-term assistance to cope with the effects of agricultural liberalisation.
Timeline and forum
A consensus seems to be forming that the agricultural negotiations should be completed by the end of 2003 when the so-called ‘peace clause’ expires. This provision in the Uruguay Round Agreement on Agriculture was designed to restrain countries from initiating countervailing duty investigations during this period. The US and Argentina also called for setting intermediary deadlines within the negotiation process. Only India stressed it was more important to arrive at an acceptable new Agreement than to conclude the negotiations on deadline. It also remains to decided whether the agriculture negotiations will be conducted by the WTO Agriculture Committee, a special body set up for the purpose, or the General Council itself.
Services: Scope and sectors
Australia, Norway, the Czech Republic and the European Union strongly stressed that the upcoming services negotiations should be comprehensive and cover all services sectors, as well as urged broad developing country participation in the talks. ‘A comprehensive approach offers better prospects of trade-offs and of a package agreement with substantive gains for all Members,’ Australia noted. Japan seemed to take a cautious attitude, stressing that liberalisation should be ‘progressive’ and based on an assessment of trade in services yet to be conducted.
Brazil pointed out that developing countries were mainly importers of services, and that service-related agreements had not created new or enhanced export opportunities for them. Together with other developing countries, India stressed that the services negotiations ‘must take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors.’ Both countries emphasised that the ‘progressive liberalisation’ principle of the GATS Agreement explicitly provided individual developing country Members the flexibility to open fewer sectors, liberalise fewer types of transactions and progressively extend market access in line with their development situation. Brazil said that while it would not a priori exclude any services sectors from the negotiations, the level of expectations could not be the same for all sectors, with the financial services sector offering ‘less room for significant increase in the level of commitments.’
Many countries highlighted areas of particular interest to their economies. Financial, telecommunications, environmental, educational and distribution services were among some of the developed country priorities, while developing countries stressed, inter alia, professional services, health-related and social services, as well as construction and engineering and tourism-related services.
The European Union, Australia and Czech Republic were among those that strongly stressed the importance of clear, transparent and predictable regulatory environments to service provides and, with a particular reference to the recent financial crisis, the need for adequate, proportionate and transparent domestic regulation. Australia said it would seek to give legal effect to disciplines affecting domestic regulation for professional services.
Chile called for the services negotiations to prioritise subsidies: Members should establish a regime that clearly distinguishes between service-related subventions justified by legitimate development policy objectives and actionable subsidies oriented towards gaining a commercial advantage. Many developing countries, including Chile and Brazil highlighted the importance of clarifying safeguard provisions: emergency safeguards should essentially be temporary, and only be used in unforeseen circumstances of increased imports of a given service.
Movement of natural persons
Movement of natural persons is the area of interest to developing countries in the services context. It is also one where the least progress has been made since the completion of the Uruguay Round. The issue is sensitive because of its links to immigration policy and fears that freer movement of service providers might lead to permanent employment and settlement in the host country. At the November meeting, Pakistan and India – supported by a large number of developing countries – focused on the need for further liberalisation in this area, highlighting particularly the need to curtail the use of ‘economic needs tests’ (ENTs), lack of mutual recognition agreements for professional service providers and cumbersome work permit and visa requirements. India called ENTs ‘a huge barrier to the movement of natural persons as service suppliers,’ and said it was looking forward to the negotiations bringing about ‘the total elimination of ENT from the horizontal commitments of developed country Member states.’ For a discussion on the issues involved in movement of natural persons in liberalising services, please see Bridges Vol.2 No.4, page 13.
TRIPS/TRIMS
Venezuela called for more coherence between the reviews of the Agreement on Trade-related Investment Measures (TRIMs) and the Agreement on Trade-related Intellectual Property Rights (TRIPs), as well addressing lacks in competition disciplines. From a developing country perspective, Venezuela said these themes had in common the potential to contribute to the structural transformation of developing country economies through their participation in investment flows and technological development. However, developing countries will need to fight industrialised countries’ tendency to rigidify investment and technology rules and incentives to acquire them. Too rigid investment and intellectual property regimes would curtail developing countries’ right to apply active economic development policies as practically all such instruments would distort trade flows. India noted that the purpose of the TRIPs and TRIMs reviews was not to impose additional burdens and commitments on developing countries but, on the basis of experience gained, to provide relief to Members.
The US stressed ensuring compliance with TRIPs provisions when the transition period ends for many developing countries in 2000. It also called on Members to ‘consider the desirability of broadening the [TRIMs] Agreement by expanding the disciplined list of TRIMs to include export performance requirements, technology transfer requirements and product management requirements.’ The European Union also would like to tighten TRIMs disciplines in these areas.