A guide to the WTO Framework Agreement.

A week or so ago, I “predicted”:http://www.inquit.com/article/290/wto-framework-looks-safe that the ‘frame­work’ agree­ment for the con­tin­u­a­tion of the WTO nego­ti­a­tions looked ‘safe’, despite the inevitable “manoeuvring”:http://www.inquit.com/article/294/manoeuvring-on-the-framework-text of WTO mem­ber­gov­ern­ments to set the best pos­si­ble spin on future direc­tions, from their own per­spec­tive. My assess­ment was con­firmed, although it was a minor­i­ty view—to judge from the much more skep­ti­cal view of “the major­i­ty experts”:http://www.inquit.com/article/295/experts-gloomy-on-wto-agriculture-framework in Gene­va and in Mem­bers’ cap­tials. Good! In the fol­low­ing, I attempt a first eval­u­a­tion of the Frame­work Agree­ment. The his­to­ry of it’s devel­op­ment has been cov­ered else­where– in ear­li­er sto­ries “here”:http://www.inquit.com/article/305/second-grosser-text and “here”:http://www.inquit.com/article/297/wto-framework-text-to-be-revised and dili­gent­ly record­ed on a dai­ly basis by “Ben Muse”:http://www.acsalaska.net/~benmuse/blog/. My ear­li­er “explanation”:http://www.inquit.com/article/286/a-guide-to-the-annex-on-agriculture of what was going on in the Annex on Agricu­lutre remains rel­e­vant, too, because the main ele­ments of that pro­pos­al have not changed in the final agree­ment. h4. Why the Frame­work was ‘safe’ By far the most dif­fi­cult com­po­nent of the frame­work was the text on Agri­cul­ture; the same top­ic that would have been the most dif­fi­cult hur­dle to jump in Can­cún, had the African/Caribbean group not first tripped-up on a tiny bump : the ‘Sin­ga­pore’ issues[1]. Mem­ber gov­ern­ments found a solu­tion this week in Gene­va to the conun­drums of nego­ti­at­ing modal­i­ties for agri­cul­ture that would prob­a­bly have elud­ed them last Sep­tem­ber.  There were two key rea­sons:

*A com­pelling offer*
The EU’s deci­sion to stop being _coy_ about its future farm sup­port pro­gram and to acknowl­edge that it was pre­pared not only to _reduce_ but to _eliminate_ export sub­si­dies by a cer­tain date cre­at­ed a huge coun­ter­weight to hes­i­ta­tion. The threats (from France) that it might try to reverse the deci­sion once the cur­rent Com­mis­sion has stepped-down (next Novem­ber) made it obvi­ous to nego­tia­tors that they had to ‘lock-in’ the Com­mis­sion offer as soon as pos­si­ble

*The right ‘par­ents’*
There’s no advan­tage com­pa­ra­ble to the advan­tages of birth. The pro­posed text on agri­cul­ture at Cancún—the infa­mous ’ ”joint text”:http://www.inquit.com/article/185/eu–us-plan-will-keep-barriers-in-place’—was a *bas­tard child* of a hasty elope­ment by the EU Trade Com­mis­sion­er and the US Trade Rep­re­sen­ta­tive about a fort­night before the Min­is­te­r­i­al Meet­ing. It was an ugly pas­tiche of devices intend­ed to acco­mo­date EU and US agri­cul­tur­al poli­cies with­out putting too much pres­sure on either.

The Annexe on Agri­cul­ture to the Frame­work agree­ment, how­ev­er, is a *more robust hybrid*. It reflects not only wide con­sul­ta­tions by the Chair­man of the nego­ti­at­ing group on Agricu­lutre, but the pri­vate con­sen­sus of the ‘Five Inter­est­ed Par­ties’ (the *FIPS* are Aus­tralia, Brazil, EU, India, USA) on how to move for­ward on agri­cul­ture. Of course, in any co-oper­a­tive ven­ture like the WTO, the _exercise of influence_ by a small ‘inside’ group is like­ly to pro­voke dis­qui­et among mem­bers who are ‘out­siders’ . But on this occa­sion, a _ménage_ com­pris­ing the most influ­en­tial ‘stake­hold­ers’ on the issue of agri­cul­ture ensured that, when the pro­pos­als final­ly saw the light of day, they had suf­fi­cient momen­tum to sur­vive.

My own pre­dic­tion that the frame­work was ‘safe’ fol­lowed infor­ma­tion that, fol­low­ing their first dis­cus­sion of the Chairman’s pro­pos­als, none of the FIPS mem­bers intend­ed to dis­sent from it. *Bing*!

h4. Where are we head­ed on agri­cul­ture? Although the Frame­work agree­ment is more robust, its ambi­tions are not much greater than those evi­dent at Can­cún, apart from the elim­i­na­tion of export sub­si­dies by pro­gres­sive steps. This Frame­work is more cred­i­ble than the pro­posed Can­cún agree­ment on the modal­i­ties of reform because the pro­pos­als on domes­tic sup­port and mar­ket access, espe­cial­ly, are sim­pler and more straight for­ward. It also pro­vides for an extend­ed mon­i­tor­ing and sur­veil­lance mech­a­nism that may help min­i­mize the cir­cum­ven­tion and ‘inven­tive arith­metic’ that plagued the imple­men­ta­tion of reforms in the Uruguay Round. But there is no over­all ambi­tion: the Frame­work does not tell us by how much the detailed agree­ments still to be reached will cut bar­ri­ers to world agri­cul­tur­al mar­kets or reduce trade-dis­tort­ing pay­ments such as those on Cot­ton.

Mar­ket access
Cut­ting bar­ri­ers to imports is the key to reform of world trade in agriculture[2]; abu­sive export sub­si­dies and exces­sive sup­port for the local farm indus­try _cannot be sustained_ in the face of import com­pe­ti­tion. The Frame­work repeats the com­mitt­ment of WTO mem­ber coun­tries at Doha to ‘sub­stan­tial’ improve­ments in mar­ket access, but it’s still not clear what that means. All that the Frame­work does is lay down a way even­tu­al­ly to implic­it­ly define ‘sub­stan­tial’, but in doing so it’s _much_ more con­cerned with *main­tain­ing pro­tec­tion* for cer­tain high­ly pro­tect­ed mar­kets than with cre­at­ing new oppor­tu­ni­ties for healthy com­pe­ti­tion in world food trade.

In one of the _shabbier fictions_ of the Frame­work, the Mar­ket Access sec­tion _says_ that it is based on a ‘sin­gle approach’ but then imme­di­ate­ly cre­ates dif­fer­ent approach­es for *three dif­fer­ent cat­e­gories* of agri­cul­tur­al prod­uct : nor­mal, ‘sen­si­tive’, and ‘spe­cial’.
# tar­iff pro­tec­tion for *nor­mal* prod­ucts will be cut ‘sub­stan­tial­ly’ by a method that cuts high­est tar­iffs by more than low­er tar­iffs. This is the ‘har­mo­niza­tion’ approach I “described”:http://www.inquit.com/article/286/a-guide-to-the-annex-on-agriculture in the first ver­sion of the Frame­ork. The Frame­work doesn’t say how big the cuts will be nor what a high tar­iff is or what a low tar­iff is. It does not men­tion the pos­si­bilty of expand­ing any tar­iff quo­tas applied to ‘nor­mal’ prod­ucts, so the cuts to high­er tar­iffs could well do no more than *take out the “water”* from some high tar­iffs, hav­ing no impact at all on import com­pe­ti­tion
# Mem­bers may des­ig­nate a num­ber (to be agreed) of *sen­si­tive prod­ucts* on which they will have to achieve ‘sub­stan­tial’ but some­how _less_ sub­stan­tial cuts in bor­der bar­ri­ers. They will do this by a com­bi­na­tion of tar­iff cuts and expan­sion of tar­iff quo­tas; the Frame­work sug­gests that the small­er the tar­iff cut, the big­ger the expan­sion of tar­iff quo­ta
# So-called *spe­cial prod­ucts* are a num­ber (to be agreed) of prod­uct lines nom­i­nat­ed by devel­op­ing coun­tries that will enjoy still greater ‘flexibilty’—that is, even less dan­ger of fac­ing addi­tion­al import sup­ply. Devel­op­ing coun­tries will also access a ‘Spe­cial Safe­guard Mech­a­nism’ that will allow them to tem­porar­i­ly reduce imports into any agri­cul­tur­al prod­uct mar­ket.
Domes­tic sup­port
The gen­er­al prin­ci­ple in reduc­tion of trade-dis­tort­ing domes­tic sup­ports to farm pro­duc­tion is that the *high­est lev­els* of sup­port for pro­duc­tion in any coun­try are *cut by more* than the low­er lev­els of sup­port: _harmonization_ again. The Frame­work does not say by how much these trade-dis­tort­ing sup­ports will be cut but puts most of it’s efforts into defin­ing ways to pre­vent _circumvention_ of what­ev­er cuts are even­tu­al­ly agreed includ­ing by reduc­ing the _de minimis_ sup­port pro­grams that, at present, do not have to be count­ed when con­sid­er­ing what sup­port to cut.

The most hot­ly con­test­ed issues sur­round the *blue box*. These are sup­ports that would fall into the ‘trade dis­tort­ing’ (_amber box_) cat­e­go­ry except for the fact that they are being used to _put a low­er ceiling_ on the lev­el of trade dis­tort­ing pro­duc­tion under par­tic­u­lar pro­grams such as the EU’s live­stock culling pro­grams. As a result of changes to the way the ‘blue box’ is defined, the USA will be able to include its ‘counter-cycli­cal’ pay­ments to farm­ers in the blue box although these payments—such as the pro­vi­sions of the US Farm Bill (2002) on peanuts—don’t require any lev­el of pro­duc­tion at all, and there­fore don’t impose an explic­it pro­duc­tion ceil­ing.

The size of the blue box will be capped at 5 per­cent of some his­tor­i­cal total val­ue of agri­cul­tur­al pro­duc­tion (to be agreed). This is, of course, a _huge_ num­ber of dol­lars in the USA, EU or even Japan.
Export Sub­si­dies
All forms of trade dis­tort­ing gov­ern­ment sup­port for exports of agri­cul­ture (sub­si­dies, sub­si­dized export cred­its, sub­si­dies deliv­ered through state-spon­sored export trad­ing com­pa­nies, food aid that has a com­mer­cial aspect) *will be elim­i­nat­ed* in (pos­si­bly un-equal) annu­al steps by a “cred­i­ble end date.” This lat­ter phrase sug­gests that the end for all sub­si­dies may be fur­ther off, for exam­ple, than the end of the imple­men­ta­tion peri­od for mar­ket access cuts.

[ … to be con­tin­ued] h4. Is there any progress on NAMA or ser­vices? h4. ‘Devel­op­ment’ and ‘imple­men­ta­tion’: the big issues at Doha fn1. It may seem provoca­tive to say that the ‘Sin­ga­pore issues’—competition, invest­ment, trans­paren­cy in gov­ern­ment pro­cure­ment and trade facilitation—were only a ‘bump’. But con­sid­er how quick­ly EU Trade Com­mis­sion­er Lamy extract­ed agree­ment from his Min­is­te­r­i­al boss­es to pull most of them off the table in a last-minute attempt to keep the Can­cún meet­ing on the rails. He would not have even con­sid­ered try­ing to by-pass prob­lems on agri­cul­ture. fn2. Open­ing up mar­kets, as I argued “here”:http://www.inquit.com/article/206/access-is-the-key-to-trade-reform and in my recent “pamphlet”:http://www.inquit.com/article/283/market-access-matters for the Aus­tralian Nation­al Farm­ers’ Fed­er­a­tion, grows glob­al demand, cre­at­ing a big­ger ‘pie’ in which everyone’s share is more gen­er­ous.

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