DEVELOPMENT FOCUS FOR AGRICULTURAL NEGOTIATIONS?

Dec 10, 1987

DEVELOPMENT FOCUS FOR AGRICULTURAL NEGOTIATIONS?

GENEVA DECEMBER 9 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The Uruguay round negotiating group on agriculture has reportedly agreed to give high priority to discussion of issues relating to the role of agriculture in development and its implications in framing strengthened and more operationally effective GATT rules and disciplines.

Discussions and proposals tabled in the group so far have been between two major contending viewpoints: with the U.S. and the Cairnes group for "free trade" and end to all domestic and export supports for agriculture, and the viewpoints of Europe and Japan which envisage some disciplines for supply management but not all domestic supports.

While the proposals are mainly related to the problems of Temperate Zone agriculture trade, they have been couched in terms to apply to all agricultural trade.

At earlier meetings of the group some of the food-importing third world countries like Egypt and Mexico had spoken of their intention to put forward their own viewpoints and proposals but have so far failed to do so.

India injected the "development" issue and the question of implementing the general principle of S and D treatment (special, differential and more favourable treatment to third world countries), mandated in the Punta del Este declaration, and agreed to elaborate its ideas in detail before the next meeting of the group.

The group, chaired by Netherlands’s Aart De Zeeuw, ended Tuesday for fourth cycle of meetings, and agreed to carry forward into 1988 further examination of proposals, including examination of technical issues like Producer Subsidy Equivalent (PSE) and finding an aggregate measure of this, and the issue of delinking support for agriculturists from their effects on the market. The development and S and D issue is also to be given high priority in the 1988 discussions.

At the meetings this week, the Nordic countries tabled their own proposals to prevent "an increase in excess supply", through adoption, preferably by December 31, 1988, of "immediate measures" by all participants exporting, with the help of any direct or indirect government support, agricultural commodities in excess supply internationally.

The U.S. negotiator, Daniel Amstutz, who reportedly agreed informally with the importance of some of the issues raised by India, has indicated that the U.S. would formulate and table its own proposals for S and D treatment.

Japan, which had announced at last week’s Contracting Parties session that it would formulate its own proposals, has not done so, but is expected to put it in before the end of the year.

The negotiating mandate agreed upon at Punta del Este calls for "greater liberalisation" of trade in agriculture and bringing "all measures affecting import access and export competition under strengthened and more effective GATT rules and disciplines", taking into account the general principles governing the negotiations.

The liberalisation in trade is to be through improved market access by reduction of import barriers, and improving the competitive environment by increasing disciplines on use of all direct and indirect subsidies and other measures affecting agricultural trade.

In raising the development issue and S and D treatment, Indian delegate, Amb. S.P. Shukla reportedly said that many of the proposals and concepts, developed in the context of agricultural trade among OECD countries, and sought to be injected into the GATT negotiations, had no relevance to the third world.

India, Shukla argued, agreed with the main approach of the proposals on the table, namely, liberalisation of trade through removal of distortions and restrictions. But the basic shortcoming in the proposals was the failure to elaborate on the development dimension.

The proposals of the Cairnes for S and D treatment only provided for a longer time-frame for implementation by third world countries, and enabled support measures by these countries in relation to their domestic programmes for economic and social development which were not explicitly linked to exports.

The EEC’s proposals merely talked of involvement of all Contracting Parties "to match their levels of development" and for S and D treatment to match these levels.

The Nordic proposals tabled this week contained no reference to this issue, though in the earlier Nordic statement to the group there had been the call for such S and D.

The U.S., Canadian and Swiss proposals did not deal with the issue at all.

The issue of development and S and D treatment was a basic general principle of the Uruguay round, and should be addressed "by all participants, developed and developing".

In any set of rules and disciplines for agriculture, the development dimension should be explicitly and adequately incorporated. It could not be treated as identical with removal of trade restrictions and trade distortions.

To the extent that improved rules and disciplines facilitated increased exports of third world agricultural exports to industrial country markets, it would facilitate the tasks of development.

However, this was not enough. It was necessary to recognise the role of agriculture in the development process as a whole, and this should be reflected in any scheme of rules that might be ultimately developed to deal with trade with trade in agriculture.

In many third world countries, large segments of their population, and as high as 70 percent in the case of India, was employed in agriculture.

Programmes and plans for development hence essentially meant increasing the productivity and production of the agricultural sector. These involved a wide range of measures – provision of inputs at reasonable costs, state-supported agricultural research and extension services, provision of credit at cheap rates, and above all ensuring remunerative support prices.

To group all such measures under the "simplistic label of producer subsidies, devised in the context of agricultural trade in the OECD countries, would not only be unrealistic but wrong" Shukla said.

"What is an integral part of the development process cannot be equated with restrictive and distortive measures in trade. An approach based on the PSE, referred to in many of the proposals, would be inappropriate from the point of view of developing countries. Measures adopted by developing countries for agricultural development will have to be excluded altogether from any definition of aggregate measure of trade distortion".

The central role of agriculture in third world development also meant that any measure adopted by third world countries "to use most effectively their domestic market resource for accelerating their development should be distinguished from measures which are categorised as those restricting import access ... in third world countries, domestic markets should continue to be available to domestic agricultural producers without impairment".

The issue of "food security" was important in a wider concept, and had special significance for development, since it alone provided "stable economic environment for development".

Promoting development therefore required ensuring food security, and this factor would have to be taken into account in elaborating any S and D treatment for third world countries.

On the issue of exports, the Indian delegate argued that the present market structures made access of third world countries to markets of industrial countries more difficult. Markets in industrial countries were dominated by a handful of transnational corporations and their oligopolistic combinations.

Third world countries would have to aid and support the export efforts of their exporters in order to overcome these inherent market difficulties, and the new rules in agriculture would hence have to recognise the need of third world countries to subsidise their exports.

On the issue of growth of trade being of benefit to all, Shukla noted that many of the proposals on the table envisaged greater imports of agricultural products by third world countries, who would be quite willing to do so, consistent with their finance, trade and development needs.

However, in the case of third world countries restrictions on imports flowed from, and were necessitated by their Balance-Of-Payments (BOP) difficulties.

These BOP problems in turn were due to the inadequate or restricted access for their exports in the markets of the industrial world.

"If I am not able to sell more of my textiles in the markets of industrial countries, where will I get the foreign exchange to pay for increased imports of agricultural products? Therefore, those who wan rapid progress in agricultural trade liberalisation would have to make it possible to achieve progress in the negotiations on textiles and in safeguards".

In responding to India, the U.S. reportedly agreed that there had been "a good discussion" on development problems. While the U.S. proposals had implicitly dealt with the question, it took note of the issues raised and would come up with a paper on the S and D issue before the next meeting.

Australia’s Peter Fields reportedly said the main aim in the negotiations should be the reduction of assistance and protection for agriculture, and the approach should be multi-country and multi-product. No distinction should be drawn between "net-exporting and net-importing" countries, and the basic need in the negotiations was to increase competitiveness.

Some third world participants said that Australian remarks were aimed mostly against Japan and Europe, and appeared to steer clear of the "development" issue raised by India, despite that fact that Australia is the chief spokesman of the Cairnes group, which includes a number of third world countries too.

But Argentina, a member of the group reportedly agreed that the point raised by India was important. Third world countries could not be classified as net-importers and net-exporters. Even a country like Argentina imported some agriculture products and exported others. But the "development dimension" was a valid point vis-a-vis third world countries, and the experience of some third world countries was relevant to this issue.

The distortions caused to international prices by the support and subsidisation policies of industrial countries, Argentina argued, had created problems of development and debt for the third world, and the high priority in negotiations should be to remove such distortions.