Jan 21, 1998

 

UNCLEAR TEXT OF WTO AGRICULTURE AGREEMENT

BHAGIRATH LAL DAS*

 

New Delhi 19 Jan (TWN) -- The WTO and its annexed agreements have drafting deficiencies at several places, but those in the Agreement on Agriculture are particularly noticeable.  

It is likely that these problems occurred mainly because of the hurry with which these texts were prepared and also due to the extreme sensitivity of the subject which prevented any editing of the language of the agreed formulations.

But an occasion will come, and should make use of, during the review of the agreement in 1999 for correcting the mistakes and deficiencies and for bringing in more clarity.  

Without being exhaustive, some examples of defecting drafting in the agreement needing attention can be cited.

Article 4 of the Agreement deals with market access. 

The lack of clarity about the obligations in this paragraph has been well brought out by the recent report of the Banana Panel and the connected report of the Appellate Body in the WTO.  

Whereas Art. 3 of the agreement lays down clear obligations in respect of the domestic support and export subsidy, the obligations relating to the market access are not clearly mentioned in the Art. 4. This makes the pre-eminent position of the agreement, as stipulated in Article 21, infructuous in respect of the market access commitment schedules. 

During the negotiations, the normal understanding appeared to be that these commitments would be fully enforceable; but the vague wording of the Article 4 makes them conditional on their conformity with the general obligation under GATT 1994.  

Article 5 of the Agreement encompasses Special Safeguard Provisions

Special safeguard is an important part of the agreement; but the language of Article 5 covering it is extremely vague.

There is no clear stipulation anywhere that a Member can apply special safeguard provisions. Article 5.1 says that "...any Member may take recourse to the provisions of paragraphs 4 and 5 below...".  

But these two paragraphs do not define what the provisions are.  

Paragraph 4 says that "any additional duty imposed under subparagraph 1(a) shall only be maintained until.....". There is a similar reference in paragraph 5 about subparagraph 1(b).  

However, neither of these two subparagraphs specifically provide for the permission to impose the additional duty; all that they do is to lay down certain pre-conditions for imposing such duty. 

Hence, neither paragraph 1 nor paragraph 4 specifically empowers a Member to impose additional duty. These two provisions appear to create a circular confusion, each referring to the other, and neither of them having any clear provision granting the authority to impose the additional duty.  

Annex 3 of the Agreement deals with the calculation of Aggregate Measurement of Support.

Annex 3 is referred to in the definition in Article 1(a)(ii). It is meant to provide the basis of calculating the annual Aggregate Measurement of Support (AMS). 

Paragraph 5 onwards in this annex, however, gives the basis of calculation of the AMS for the base period. It is unnecessary and redundant as the AMS for the base period is to be found in part IV of the Member's schedule, in accordance with the definition contained in Article 1(a)(i). 

It is likely that an earlier version of this annex, which was a part of the modalities for the calculation of the levels of commitments, has been allowed to be retained in the final version of the agreement by mistake.

There are also other minor drafting defects.

Article 5.9, says that the provision of Article 5 shall remain in force for the duration of the reform process as determined under Article 20.  

But Article 20, however, does not determine any duration for the reform process. In fact "the duration of the reform process" has not been defined in the agreement. What has been defined is "the implementation period" of the agreement.

Article 5.2, says: "Imports under current and minimum access commitments established as part of a concession referred to in paragraph 1 above shall be counted for the purpose of determining the volume of imports...".

But current and minimum access commitments have not been defined in the agreement, and as such this provision becomes totally unclear.  

These terms were perhaps there in some earlier version of the text, and the mistake lies in retaining them, even though these concepts formally ceased to be an explicit part of the market access commitments.  

Article 5.4, gives the calculation for the trigger for special safeguards. Two parameters are relevant, viz., import and consumption.  

The stipulation is that "... additional duty may be imposed in any year where the absolute volume of imports....exceeds ...", certain specified level. But the period for which the volume of import is to be examined against this criterion is not quite clear.  

Under Article 13(b), some domestic support measures are "exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is made...".  

It appears redundant as countervailing duty cannot in any case be imposed without the determination of injury or its threat.  

It has further been said that such measures are "exempt from action based on...., provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year;..".

The use of the word "decided" does not appear appropriate here; what is perhaps meant is the level of support prevalent in 1992.  

Under Art. 13(c), some export subsidies are "exempt from actions based on .....Articles 3, 5 and 6 of the Subsidies Agreement."  

The reference here is to the dispute settlement route for getting remedy; hence the correct Articles to be mentioned here are 4 and 7 of the Agreement on Subsidies and Countervailing Measures. 

During the review of the agreement in 1999, it may be appropriate to correct these drafting deficiencies. 

(*The author is a former Ambassador and Permanent Representative of India to GATT. Later he also worked as Director of International Trade Programmes in UNCTAD.) 

Finance: Paris club to debate Mozambique debt relief Washington, Jan 20 (IPS/Abid Aslam) -- The world's wealthiest government lenders, are scheduled to decide Wednesday the fate of Mozambique, widely considered as one of the most deserving candidates for debt relief.  

Members of the 'Paris Club' of creditor governments, meeting in the French capital, are likely to write off their share of the war-ravaged Southern African nation's debts.  

Wealthy nations could balk, and instead try to force the World Bank to make up the difference with money from its soft-loan window, the International Development Association (IDA). "In other words, the Nepals and Malawis of this world would be bailing out the Paris Club," Veena Siddharth, a debt analyst with the non-governmental Oxfam International, told IPS.  

At issue is a gap of some US $ 350 million between what the Paris Club so far has been willing to write off under the debt initiative for Heavily Indebted Poor Countries (HIPCs), and what the lenders have agreed would be the Club's fair share.  

The initiative's purpose is to reduce Mozambique's debt burden to less than 200-220% of the value of its exports, a level deemed 'sustainable' by the World Bank and International Monetary Fund (IMF). For that to happen, the Paris Club - which holds three-fourths of Mozambique's debts - must reduce up to 90% of debt not previously relieved or rescheduled by its members.  

"The Paris Club must provide more generous terms than it has for any previous country and there are worries about setting precedents," Siddharth said. The Club offered Uganda, Bolivia, Burkina Faso, and Guyana 80% or less.

 Paris Club members, seeking alternatives to increasing their own write-offs, have suggested that multilateral lenders - the Bank, IMF and African Development Bank (ADB) - commit more than their proportional share.

The IMF has signalled its unwillingness to increase its contribution and the ADB, effectively insolvent, has had to rely on World Bank financing to come up with its share, analysts and officials noted. If the World Bank bows to pressure from the industrial powers to come up with the money, this could result in reducing the no-interest-IDA-loans for other member states.  

Other options open to the Paris Club include saving money by raising the 'sustainability' threshold to around 220% of export value; manipulating economic projections to show that sustainability could be achieved with less debt relief; and putting off the date on which the relief would be provided.  

Activists and World Bank staffers alike said they would oppose such moves, and noted that, even if the Paris Club agreed to 90% relief, Mozambique still would receive poorer terms than those extended to Germany after World War II.

Russia, Mozambique's largest Paris Club creditor, has favoured extending the least possible relief. It has yet to determine exactly how much it is owed, however, and its voice is less influential than that of France, the largest creditor among the 'Group of Seven' industrial powers, who form the Paris Club's core, analysts said. 

The French have been reluctant to go beyond 80% and have favoured putting off any relief until the year 2000. The US administration, which has proclaimed African trade and development to be among its top priorities, is currently preoccupied with economic turmoil in Asia, analysts said.

Japanese finance minister Eisuke Sakakibara, in a letter to World Bank President James Wolfensohn last month, said Tokyo would oppose any advance on 80% from the Paris Club. Sakakibara offered to lower finance charges on official development assistance (ODA) lending, which is not covered by the Club, subject to parliamentary approval. 

Paris Club creditors could come up with an additional US $ 120 million if they all agreed to write off their ODA claims - but this still would leave a gap of US $ 230 million in the Mozambique package, IMF and IDA staffers said in a confidential Dec. 29 study, a copy of which was obtained by IPS.  

"While the IMF and World Bank are fully prepared to provide proportional assistance, Paris Club creditors so far have only reached a consensus to provide 80% stock reduction on eligible debt," IMF Managing Director Michel Camdessus complained in a Dec. 19 letter to G-7 finance ministers.  

Mozambique is "one of the poorest and most heavily indebted HIPCs and has established a track record of good policy performance that qualifies it for a debt relief decision now," Wolfensohn argued in an earlier letter to the ministers.

"The current uncertainty over whether Paris Club creditors are able to provide their proportional share of the costs of assistance for Mozambique will unavoidably delay Mozambique's decision point," the IMF-IDA paper warned.

The 'decision point' is the date on which a country is officially approved for relief under the HIPC initiative. Actual debt relief follows at the 'completion point', when creditors are satisfied with the country's implementation of market-friendly reforms. This usually takes 1-3 years but lenders can force a country to repeat the process before receiving any relief.

In Mozambique's case, a decision point could have been reached in mid-1997 but was delayed by negotiations over Russia joining the Paris Club last June, and by the creditors' cost-sharing squabbles ever since.

Mozambique, which has survived 16 years of war and a decade of structural adjustment, ranks 166th out of 175 countries on the U.N. Development Programme's 'Human Development Index'. It spends roughly twice its education budget and four times its health budget on debt payments, according to Oxfam International.