The Regulation of Agricultural Subsidies in the World Trade Organization Framework. A Developing Country Perspective
©2016
Textbook
210 Pages
Summary
The Agreement on Agriculture (AoA) was adopted to eliminate the illegitimate use of trade distorting agricultural subsidies and, thereby, reduce and avoid the negative effects subsidies have on global agricultural trade. However, the AoA has been fashioned in a way that is enabling developed countries to continue high levels of protectionism through subsidization, whilst many developing countries are facing severe and often damaging competition from imports artificially cheapened through subsidies.
The regulation of subsidies by the World Trade Organisation (WTO) has been a highly sensitive issue. This is mainly due to the fear of compromising on food security, especially by developed countries. Developing countries have suffered negatively from the subsidy programmes of developed countries, which continue to subsidize their agricultural sector. This position of developing countries in the global trade system, which has been described as weak, has drawn criticism of the WTO, namely that it does not protect the interests of the weak developing nations, but rather strengthens the interests of the strong developed nations.
The green box provisions which are specifically designed to regulate payments that are considered trade neutral or minimally trade distorting have grossly been manipulated by developed countries at the mercy of the AoA. Developed countries continue to provide trade distorting subsidies under the guise of green box support. This is defeating the aims and objectives of the AoA.
The study examines the regulation of WTO agricultural subsidies from the developing countries’ perspective. It looks at the problems WTO member states face with trade distorting subsidies, but focuses more on the impact these have on developing states. It scrutinizes the AoA’s provisions regulating subsidies by adopting a perspective to identify any loopholes or shortcomings which undermine the interests and aspirations of developing countries. This is against the background that some of the provisions of the AoA are lenient towards the needs of developed countries at the expense of developing countries.
The regulation of subsidies by the World Trade Organisation (WTO) has been a highly sensitive issue. This is mainly due to the fear of compromising on food security, especially by developed countries. Developing countries have suffered negatively from the subsidy programmes of developed countries, which continue to subsidize their agricultural sector. This position of developing countries in the global trade system, which has been described as weak, has drawn criticism of the WTO, namely that it does not protect the interests of the weak developing nations, but rather strengthens the interests of the strong developed nations.
The green box provisions which are specifically designed to regulate payments that are considered trade neutral or minimally trade distorting have grossly been manipulated by developed countries at the mercy of the AoA. Developed countries continue to provide trade distorting subsidies under the guise of green box support. This is defeating the aims and objectives of the AoA.
The study examines the regulation of WTO agricultural subsidies from the developing countries’ perspective. It looks at the problems WTO member states face with trade distorting subsidies, but focuses more on the impact these have on developing states. It scrutinizes the AoA’s provisions regulating subsidies by adopting a perspective to identify any loopholes or shortcomings which undermine the interests and aspirations of developing countries. This is against the background that some of the provisions of the AoA are lenient towards the needs of developed countries at the expense of developing countries.
Excerpt
Table Of Contents
TABLE OF CONTENTS
ABSTRACT ... i
DEDICATION... ii
ACKNOWLEDGEMENTS ... iii
LIST OF ABBREVIATIONS/ACRONYMS ... ix
CHAPTER 1
1 1 BACKGROUND OF AGRICULTURAL SUBSIDIES IN THE WTO ... 1
1 2 RESEARCH PROBLEM ... 5
1 3 RESEARCH AIMS/OBJECTIVES ... 6
1 4 SIGNIFICANCE OF THE STUDY ... 6
1 5 RESEARCH QUESTIONS ... 7
1 6 LITERATURE REVIEW ... 8
1 7 RESEARCH METHODOLOGY ... 10
1 8 OUTLINE OF CHAPTERS ... 11
1 9 DELINEATION OF THE RESEARCH ... 11
1 10 REFERENCING STYLE ... 12
1 11 POSSIBLE ETHICAL IMPLICATIONS OF THE RESEARCH ... 12
CHAPTER 2
2 1 INTRODUCTION... 13
2 2 AN OVERVIEW OF AGRICULTURAL POLICIES PRIOR TO THE WTO ... 14
2 3 AGRICULTURAL TRADE UNDER THE GATT ... 17
2 3 1 Initial Negotiating Positions on Agricultural Trade ... 19
2 3 2 Implications of Agricultural Trade Liberalisation for Developing Countries ... 21
2 3 3 Developing Countries' Interests in the Agricultural Trade Negotiations ... 23
2 4 TOKYO ROUND: AGRICULTURAL NEGOTIATIONS ... 28
2 5 URUGUAY ROUND: AGRICULTURAL NEGOTIATIONS ... 30
2 5 1 Uruguay Round: Aims and Objectives ... 33
2 5 2 Results of the Uruguay Round... 34
2 6 THE IMPACT OF THE AOA ON DEVELOPING COUNTRIES ... 34
iv
2 6 1 Rise of Subsidies in Developed Countries ... 38
2 6 2 Increase of Food Imports in Developing Countries ... 40
2 7 CONCLUSIONS ... 42
CHAPTER 3
3 1 INTRODUCTION... 44
3 2 THE MAIN PILLARS OF THE AOA ... 45
3 2 1 Market Access ... 45
3 2 2 Domestic support commitments ... 47
3 2 3 Export Subsidies ... 48
3 3 AGRICULTURAL SUBSIDIES... 49
3 4 DOMESTIC SUPPORT MEASURES: GREEN BOX SUBSIDIES ... 49
3 4 1 Green Box Subsidies: The Concept ... 51
3 4 2 Green Box: Legal Issues ... 55
3 5 DOMESTIC SUPPORT MEASURES: AMBER BOX SUBSIDIES ... 60
3 6 EXPORT SUBSIDIES ... 65
3 6 1 Definition of Agricultural Export Subsidies ... 65
3 6 2 Export Subsidies Listed in Article 9 as Supplementing the Definition ... 67
3 6 3 Categories of Agricultural Export Subsidies: Listed vs. Non-Listed ... 68
3 6 4 Non-Listed Agricultural Export Subsidies and their Legal Status ... 69
3 7 REDUCTION COMMITMENTS ... 72
3 7 1 Product categories ... 73
3 7 2 Cut of Rates ... 74
3 7 3 Products with no specific reduction commitment ... 74
3 8 ANTI-CIRCUMVENTION: ARTICLE 10 ... 74
3 9 NOTIFICATION OBLIGATIONS: EXPORT SUBSIDIES ... 75
3 10 EXPORT RESTRICTIONS ... 76
3 11 PEACE CLAUSE ... 76
3 12 RESOLVING DISPUTES... 77
3 13 CONTINUATION CLAUSE: ARTICLE 20 OF THE AOA ... 78
3 14 SPECIAL AND DIFFERENTIAL TREATMENT... 79
3 15 EXEMPTIONS... 81
v
3 15 1 Developmental measures ... 81
3 15 2 Blue Box ... 81
3 15 3 De minimis ... 82
3 16 NOTIFICATION OBLIGATIONS ... 82
3 17 CONCLUSIONS ... 83
CHAPTER 4
4 1 INTRODUCTION... 86
4 2 CANADA - MEASURES AFFECTING THE IMPORTATION OF MILK AND
THE EXPORTATION OF DAIRY PRODUCTS ... 87
4 2 1 Conclusions and Lessons Learnt from the Canada Dairy Case ... 90
4 3 PERU ADDITIONAL DUTY ON IMPORTS OF CERTAIN AGRICULTURAL
PRODUCTS ... 92
4 3 1 Issues ... 93
4 3 2 The PRS and how it operated ... 94
4 3 3 Main Arguments of the Third Parties ... 97
4 3 4 Assessment by the Panel: Article 4.2 of the AoA ... 102
4 3 5 The Panel's Conclusions and Recommendations ... 105
4 4 EUROPEAN COMMUNITIES EXPORT SUBSIDIES ON SUGAR ... 108
4 5 UNITED STATES SUBSIDIES ON UPLAND COTTON ... 111
4 5 1 Lessons Learned from the US Cotton Case ... 116
4 5 2 Implications of Cotton Decisions for Future Challenges to US and EU Agricultural
Subsidy Programs ... 120
4 5 2 1 Challenges to US Annual Recurring Domestic Support Subsidies ... 120
4 5 2 2 Challenges to Total Aggregate Measurement of Support ... 122
4 5 2 3 Challenges to Prohibited Local Content Subsidies ... 123
4 6 CONCLUSION: LESSONS LEARNT FROM CASE LAW ... 124
CHAPTER 5
5 1 INTRODUCTION... 127
5 2 THE DOHA DECLARATION: WHAT IS IT ABOUT? ... 129
5 2 1 Other Areas of Negotiations ... 131
5 2 1 1 Cotton ... 131
5 2 1 2 Services ... 132
vi
5 2 1 3 Non-Agricultural Market Access (NAMA) ... 132
5 2 1 4 Rules ... 133
5 2 1 5 Other Negotiating Issues ... 134
5 3 ROLE OF DEVELOPING COUNTRIES IN AGRICULTURAL NEGOTIATIONS ... 134
5 3 1 US Economic and Agricultural Interests ... 135
5 3 2 The Demise of the 2008 Geneva Ministerial Conference ... 137
5 4 REFLECTIONS ON DOHA'S FAILURE: WHAT WENT WRONG? ... 140
5 4 1 The Primary Cause: Irreconcilable Agendas of Development and Mercantilism ... 141
5 4 2 The Secondary Cause: The Sterile Environment for Trade Talks ... 144
5 5 THE DOHA FAILURE AS THE WTO'S LEGITIMACY CRISIS ... 145
5 6 A DISCUSSION ON THE BALI PACKAGE ... 148
5 6 1 Public Stock-holding for Food Security Purposes under the Bali Agreement ... 152
5 7 THE FUTURE OF THE DOHA ROUND AND BEYOND: COULD
DEVELOPMENT SURVIVE DOHA? ... 153
5 7 1 The Need for a Doha Success ... 153
5 7 2 With or Without Doha: Developing Countries' Own Initiatives ... 158
5 8 CONCLUSION ... 165
CHAPTER 6
6 1 INTRODUCTION... 169
6 2 SUMMARY OF CHAPTERS ... 170
6 3 CONCLUSIONS ... 172
6 3 1 Exclusion of Developing Countries from the Negotiating Process ... 173
6 3 2 Manipulation of Green Box measures by Developed Countries ... 174
6 3 3 Failure of the Dispute Settlement Body and the WTO Panels to accommodate the
developmental needs of developing countries ... 175
6 3 4 Lack of commitment by WTO Members to complete the Doha Agricultural
Negotiations ... 177
6 4 RECOMMENDATIONS ... 180
6 4 1 Introducing proper enforcement mechanisms ... 180
6 4 2 Pursuing a compromise between the demands of developed and developing
countries: Need for a Doha understanding... 181
vii
6 4 3 Need to review "Greenbox" Measures ... 182
6 4 4 Need for dispute settlement mechanisms to embrace the developmental needs of
developing countries ... 182
7 BIBLIOGRAPHY
7 1 BOOKS ... 184
7 2 JOURNALS AND SCHOLARLY ARTICLES ... 185
7 3 ONLINE RESOURCES/PUBLICATIONS ... 189
7 4 WTO JURISPRUDENCE: PANEL AND APPELLATE BODY REPORTS ... 196
viii
LIST OF ABBREVIATIONS/ACRONYMS
AB - Appellate Body
AD Agreement on Antidumping
AoA - Agreement on Agriculture
AU - African Union
CBI Caribbean Basin Initiative
CVA Customs Valuation Agreement
DDA Doha Development Agenda
DSU- Understanding on Rules and Procedures for the Settlement of Disputes
EC - European Community
EU - European Union
FICCI Federation of Indian Chambers of Commerce and Industry
FTA Free Trade Agreement
GATS - General Agreement on Trade in Services
GATT - General Agreement on Tariffs and Trade
GSP Generalized System of Preferences
LDCs Least Developed Countries
MFN Most Favored Nation
MTNs Multilateral Trade Negotiations
NAM US National Association of Manufacturers
NAMA Non-Agricultural Market Access
ix
NORAD Norwegian Agency for Development Cooperation
NTBs Non Tariff Barriers
PRS Price Rating System
SCM - Agreement on Subsidies and Countervailing Measures
SDT- Special and Differential Treatment
SSM Special Safeguard Mechanisms
STEs State Owned Enterprises
TBT - Technical Barriers to Trade
TPA Trade Promotion Authority
TRIPS Agreement on Trade Related Aspects of Intellectual Property Rights
UNCTAD United Nations Conference on Trade and Development
US - United States
USD United States Dollar
USTR United States Trade Representatives
WTO World Trade Organization
x
CHAPTER 1
Introduction and Overview of the Study
1 1 BACKGROUND OF AGRICULTURAL SUBSIDIES IN THE WTO
A subsidy in the World Trade Organization (WTO) context may be defined as a financial
contribution by a government or a public body, which confers a benefit.
1
Agricultural Subsidies
under the WTO legal framework are mainly regulated by three separate agreements. These are the
General Agreement on Tariffs and Trade (GATT), the Agreement on Subsidies and Countervailing
Measures (SCM) and the Agreement on Agriculture (AoA). Ongoing disputes over subsidies that
violate existing WTO rules have led to the largest amount of authorized retaliation in GATT/WTO
history.
2
They present more complex issues for policy makers than other instruments subject to
GATT/WTO rules
3
because they are used by different countries in pursuit of a variety of
objectives.
4
Even though some of the objectives are fully legitimate, this does not make them legal
in the WTO legal framework. Subsidies can distort free trade as they are capable of flooding
foreign markets with cheap or dumped products and also restrict market access.
5
The AoA contains a comprehensive outline of rules on agricultural subsidies. On April 14, 1994,
trade ministers from more than 100 countries met in Marrakesh, Morocco, and signed "The Final
Act embodying the results of the Uruguay Round of Multilateral Negotiations".
6
Prior to the
Uruguay Round, agricultural commodities were largely exempted from the application of GATT
requirements.
7
In developing countries, the agricultural sector was taxed in order to earn badly
1
Van Den Bossche The Law and Policy of the World Trade Organization (2013) at 560 para 3. A more detailed
definition of the concept is found in Article 1.1 of the Subsidies and Countervailing Measures Agreement (SCM) in
which the presents of a subsidy is deemed to exist where there is a financial contribution by a government or any
public body within the territory of a Member. The SCM agreement further lists examples of when a subsidy is deemed
to exist. These include a government practice which involves a direct transfer of funds (e.g. grants, loans, and equity
infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees); when government revenue that is
otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits) among others.
2
Bagwell "Subsidy Agreements" http://www.nber.org/papers/w10292.pdf?new_window=1 (accessed on 27/04/14).
3
See WTO World Trade Report Subsidies Trade 2006 available at
http://www.wto.org/english/res_e/booksp_e/anrep_e/wtr06-2a_e.pdf (accessed on 27/04/14).
4
In most cases the objectives are fully legitimate and necessary. For example most countries introduce agricultural
subsidies to ensure food security and employment security.
5
WTO "World Trade Report Subsidies and the WTO" 2006 http://www.wto.org/E23B7EF9-82CD-4A8C-8A8D-
AD1C1530D902/FinalDownload/DownloadId-04A744801BAC228AE8C05294EA164779/E23B7EF9-82CD-
4A8C-8A8D-AD1C1530D902/english/res_e/booksp_e/anrep_e/wtr06-2f_e.pdf . (Accessed on 29/04/14 at 21:19).
6
WTO "A Summary of the Final Act of the Uruguay Round" at
http://www.wto.org/english/docs_e/legal_e/ursum_wp.htm (accessed on 22/04/14).
7
Gonzalez "Institutionalizing Inequality: The WTO Agreement on Agriculture, Food Security, and Developing
Countries" 2002 Columbia Journal of Environmental Law 433-489.
1
needed revenue whilst developed countries utilized a variety of instruments to enhance agricultural
production, including export subsidies, import tariffs, import quotas, and other non-tariff barriers.
8
Under the pre-Uruguay Round GATT, agricultural policy in developed countries was
characterized by high levels of protectionism and by a transfer of income from urban consumers
and tax payers to the agricultural sector.
9
These policies enhanced agricultural production for both
domestic and international markets.
10
In contrast to the trend of agricultural policy in developed countries towards favouring agricultural
producers at the expense of urban consumers, agricultural policy in developing countries under the
pre-Uruguay Round was characterized by a transfer of income from rural areas to urban areas.
11
Policies that conveyed income from farmers to consumers included taxes on agricultural exports,
subsidies on agricultural imports, and the payment to farmers of less than world market prices by
state purchasing agencies.
12
In general, developing countries lacked the necessary financial
resources to subsidize agriculture
13
and frequently viewed agriculture as less important than
industry in the competition for limited government funds and as an important source of revenue
for industrialization.
14
The effect of agricultural subsidies employed in developed countries was
devastating to free trade and largely prejudiced the developing world.
15
This led to the proposal of the WTO AoA which was shaped by the intense rivalry between the
United States (US) and the European Union (EU) for world agricultural markets.
16
Developing
8
Bilal "Agriculture in a Globalizing World Economy, in Negotiating The Future Of Agricultural Policies; Agricultural
Trade And The Millennium WTO Round" as referenced by Gonzalez "Institutionalizing Inequality: The WTO
Agreement on Agriculture, Food Security, and Developing Countries" 2002 Columbia Journal of Environmental Law
434-489.
9
Stewart The GATT Uruguay Round: A Negotiating History 1986-1992 (1993) 120-150.
10
Ibid.
11
Gonzalez 2002 at 435-489.
12
Hathaway "Agricultural Liberalization and the Uruguay Round, in The Uruguay Round and the Developing
Countries" http://elibrary.worldbank.org/78881611-3465-4346-A23C-5075449F48F1/FinalDownload/DownloadId-
F82C89A4285339E02F5C4871F365B28C/78881611-3465-4346-A23C-5075449F48F1/doi/pdf/10.1596/0-8213-
3469-7 (accessed on 27/04/14).
13
Ibid.
14
See Gonzalez 2012 at 444 para 2. Also see Bilal "The Political Economy of Agricultural Policies and Negotiations"
2000 Kluwer Law International at 1-13.
15
See Steward 1993 at 120-150 stating developing countries were responsible for a significant share of global food
production, and relied on agriculture as a major source of export earnings. Consequently, they were harmed by tariff
and non-tariff barriers that excluded their exports from developed country markets and by subsidies that undermined
the competitiveness of developing country exports in world markets.
16
Schoenbaum "Agricultural Trade Wars: A Threat to the GATT and Global Free Trade" 1993 GATT and Trade
Liberalization in Agriculture at 93.
2
countries were almost entirely left out of the negotiating process. The negotiations occurred in the
background of robust competition between the United States and the European Union to expand
their respective shares of world agricultural markets.
17
The EU had transformed itself from a net
food importer to a net food exporter, and was rapidly gaining market share by dumping surplus
production on world markets through a combination of domestic price support measures and export
subsidies adopted pursuant to its Common Agricultural Policy.
18
United States on the other hand made agricultural reform a high priority in GATT negotiations
because it faced budgetary pressure to reduce agricultural subsidies and it was looking forward to
protecting its domestic producers by curbing EU subsidies.
19
This led the EU and the US to be the
major players in agricultural negotiations. It is therefore possible that developing countries might
have been left out of the negotiations and the AoA addressed the concerns of developed countries
and failed to fully address the problems faced by developing countries. It is also likely that the
AoA created a biased world agricultural policy which favoured those who were at the centre stage
of negotiating and drafting it.
20
The reduction of export subsidies which became the critical issue
in the negotiations and the final agreement incorporating agriculture into the multilateral trade
regime was a result of compromises between the US and the EU.
21
The intended objectives of the AoA is to liberalize agricultural trade in three significant respects.
First, the Agreement expands market access by requiring the conversion of all Non-Tariff Barriers
(NTBs) to tariffs (tariffication) and the binding and reduction of these tariffs.
22
Second, the
agreement requires the reduction of both the volume of and expenditures on subsidized exports.
23
Third, the Agreement requires the reduction of trade-distorting domestic subsidies.
24
The
Agreement also provides for the negotiation of further agricultural reforms, beginning in early
17
O'Brien "Subsidy Regulation and State Transformation in North America, The GATT and the EU" 1997 132
carefully describes the conflict between the U.S. and the E.U. over world export markets.
18
Ibid.
19
See Schoenbaum 1993 at 93-94.
20
Clapp "Developing Countries and the WTO Agriculture Negotiations" 2006 available at
https://www.cigionline.org/sites/default/files/Developing%20Countries%20and%20the%20WTO%20Agriculture%2
0Negotiations.pdf (accessed on 19/03/14).
21
Ibid.
22
McNiel "Agricultural Trade Symposium: Furthering the Reforms of Agricultural Policies in the Millennium Round"
2000 Global Trade at 41-61. The tariff reduction and other market access obligations are spelled out in individual
country schedules rather than in the body of the Agreement. See Agreement on Agriculture article 4.
23
AoA Part V article 8.
24
AoA Part IV article 6.
3
2000, and exempts both domestic subsidies and export subsidies from certain provisions of the
GATT 1994 and the SCM agreement until 2003.
25
However, concerns have been raised that the AoA has been fashioned in a way that is enabling
developed countries to continue high levels of protectionism through subsidization, whilst many
developing countries are facing severe and often damaging competition, from imports artificially
cheapened through subsidies.
26
This problem is supposedly defeating the aims of the Agreement
on Agriculture. Agricultural subsides are imposing heavy burdens on developing countries even
though they are sometimes legitimately used.
27
This is certainly not surprising as there have been
distressing calls about the failure of the world trading system to deliver visible benefits of
international trade to the majority of developing countries and address the gap between these
nations and developed countries.
28
This position of the developing countries in the global trade
system which has been described as weak, has drawn criticism that the WTO as it currently
operates does not protect the interests of the weak developing nations, but rather strengthens the
interests of the strong developed nations.
29
In principle the AoA should not lead to adverse effects on developing countries but it should rather
facilitate global trade and serve as a means to discipline agricultural subsidies.
30
It is against this
background that the AoA must be assessed to find out whether its regulatory framework,
interpretation and implementation advance the interests of developing countries. It is possible that
the interests of developing countries may be frustrated because of the gaps or loopholes that the
regulatory framework of this Agreement might have.
This study therefore seeks to examine the AoA, to establish whether the agreement has really
managed to discipline export subsidies and trade distorting domestic subsidies in the agricultural
25
Part VII article 13 of the AoA
26
Martin. "The WTO Agriculture Agreement: Features, Effects, Negotiations, and What is at Stake?" www.twn.org.
27
Van Den Bossche 2013 560-561.
28
Staiger What can Developing Countries Achieve in the WTO? A Book Review of Jawara and Kwa Behind the Scenes
at the WTO (2005) generally.
29
Ibid.
30
United Nations Conference on Trade and Development: Trade and Environment Review 2013
http://unctad.org/FEFD153439264A48FB8/FinalDownload/DownloadIdC19482F4764CD1C1A554F820A5B82BE
C/FEFD1536-7542-4887-8EEE-439264A48FB8/en/PublicationsLibrary/ditcted2012d3_en.pdf (Accessed on
07/05/14).
4
sector. It will focus on (i) Domestic Support Commitments,
31
(ii) Export Subsidy Commitments,
32
(iii) Special and Differential Treatment,
33
(iv) Due Restraint,
34
and (v) Continuation of the Reform
Process.
35
It will further examine the shortcomings encountered in negotiating and drafting the
AoA as well as some of the loopholes in the AoA and it will also highlight the consequences
thereof. The ultimate aim of the study is to assess the weaknesses of the WTO agricultural
subsidies regulation framework from a developing countries perspective. Emphasis will be on the
AoA since it primarily aims to regulate agricultural trade.
1 2 RESEARCH PROBLEM
The use of agricultural subsidies in developed countries has clearly weakened the agricultural
sector in most developing countries.
36
It has proved difficult for developing countries to integrate
into the world trading system because of subsidizing policies adopted by developed countries
37
that have led to devastating effects on developing countries' agricultural sector. Developing
countries are excessively burdened by the implementation of the related requirements of the AoA
and as a result fail to derive visible benefits from the Agreement. Both developed and developing
countries are required by the AoA to reduce agricultural subsidies but evidence shows that most
developed countries are still massively subsidising agriculture whilst developing countries are
reducing subsidies.
38
Agricultural subsidies in developed countries have therefore been regarded
as a significant barrier to developing country's exports on the global markets.
39
The AoA is supposed to open up the world agricultural market for all countries by fairly reducing
the use of subsidies by all member states. However, regardless of the commitments made to place
the special needs of developing countries at the core of the international trading system, developing
countries are still lagging behind. The regulatory framework of the WTO AoA, its application and
implementation should provide an effective means by which agricultural subsidies are not used
31
Part IV article 6 of AoA
32
Part V article 8 of AoA
33
Article 15 of AoA
34
Article 13 of the AoA
35
Article 20 of the AoA
36
Mousseau "Inequity in International Agricultural Trade: The Marginalization of Developing Countries and Their
Small Farmers" http://www.oaklandinstitute.org/node/2299 (Accessed on 24/04/14).
37
This largely applies to United States and the European Union countries.
38
Gonzalez. "Institutionalizing Inequality: The WTO Agreement on Agriculture, Food Security, and Developing
Countries" 2002 Columbia Journal of Environmental Law 450-489.
39
Martin. "The WTO Agriculture Agreement: Features, Effects, Negotiations, and What is at Stake?" www.twn.org
(Accessed on 15/04/14).
5
unfairly or in a prejudicial manner. It should advance market access as well as reduce trade
distorting subsidies whilst ensuring better living standards for the developing member countries.
A pertinent question therefore is: whether the AoA can be said to be effective in the pursuit of that
objective?
In short, the research problem to be addressed is whether the WTO AoA is facilitating the interests
and meeting developmental needs of developing countries through the proposed reduction of
subsidies? The study thus looks at the nature and content of the WTO regulatory framework
especially the AoA which was designed to facilitate free agricultural trade. It further interrogates
whether the AoA is assimilating developing states into global trade, and benefiting developing
countries? Hence the study investigates the shortcomings/gaps and loopholes of the relevant AoA
provisions and the impact these might be having on developing states.
1 3 RESEARCH AIMS/OBJECTIVES
It is the objective of this study to examine the regulation of WTO agricultural subsidies from the
developing countries' belvedere. It looks at the problems WTO member states face with trade
distorting subsidies, but focuses more on the impact these have on developing states. It seeks to
scrutinize the AoA's provisions regulating subsidies, with a view to identifying any loopholes or
shortcomings which might undermine the interests and aspirations of developing countries.
Furthermore, it will explore the challenges faced by the WTO member states, in particular
developing countries, in implementing the AoA and how these are linked to the nature of its
regulatory framework and the after effects of its implementation. In addition it seeks to establish
whether there are benefits developing countries can gain from compliance with the Agreement.
1 4 SIGNIFICANCE OF THE STUDY
The reduction of subsidies in developed countries can lead to socio-economic development
40
in
developing countries through increased market access.
41
This however depends on the ability of
developing countries to participate in global trade and the willingness of developed countries to
40
Raghavan "Agriculture: Liberalization needs to address socio-economic effects"
http://www.twnside.org.sg/title/socio-cn.htm (accessed on 10-05-14).
41
Ibid. Most developing countries are still have agro based economies. Their fiscus largely depends on agricultural
exports. If developing countries reduce subsidies, they will open the market for imports which will in turn benefit
developing countries. Examples of countries like these are Zambia and Malawi among others.
6
open up their markets. Subsidy policies in developed countries are clearly affecting developing
countries through a massive reduction of exports, increase of imports and dumping of agricultural
products in developing states.
42
Developing country exporters seeking access to foreign markets
will have to compete with local producers who are massively supported by illegal subsidies thereby
creating unfair competition. It is therefore important that the AoA pays appropriate attention to
developing countries' special circumstances, in order to allow them to gain noticeable benefits
from the Agreement.
This study is significant because it examines whether the AoA was fashioned in way to protect
and uplift developing countries. It investigates the possibility of loopholes and gaps in the AoA
which could have possible adverse impacts on the developing countries. It is therefore important
that it be established whether the AoA effectively accommodates the special circumstances of
developing countries; if not then why it is not capable or failing to do so? It is crucial for developing
country members to know the nature and content of the global trading system's regulatory
framework capable of accommodating their developmental needs or interests. This study should
make a valuable contribution to that effort.
1 5 RESEARCH QUESTIONS
The study seeks to raise questions on how the WTO regulatory framework has dealt with trade
distorting agricultural subsidies from a developing country perspective. It will explore the legal
constraints behind the failure of developing countries to fully engage in global agricultural trade
and maximise the opportunities created by the AoA. Thus it pursues the following questions:
1. What are the problematic aspects of the nature and content of the AoA and other WTO
regulations related to agricultural subsidies?
2. What are the problems of implementing the AoA in developing countries?
3. How are the developing countries' interests and special circumstances accommodated in
the AoA.
4. Whether the AoA has gaps which might result in the undermining of developing countries'
interests?
42
Diao "The Impact of Agricultural Trade Policies on Developing Countries" 2003 http://www.ifpri.org/FEFD1536-
7542-4887-8EEE-439264A48FB8/FinalDownload (Accessed on 08-05-14).
7
1 6 LITERATURE REVIEW
A substantial amount of literature has been written about the negative impact of developed
countries' agricultural subsidies on most developing countries. The scope of literature identifies
the challenges faced by developing nations to integrate into the world agricultural trading system
because of a significant amount of subsidies provided to farmers in developed countries. The
literature also highlights the problems developing countries have with the current implementation
of the AoA and how these are linked to the gaps in the regulatory framework of the Agreement.
The literature also covers how some provisions of the AoA are open for possible abuse by
developed countries and other protectionists.
Young and Wilmer
43
assess the 2005 land mark case in which the WTO found in favour of Brazil
in its complaint against US cotton subsidies, the first case pressed by a developing country against
a developed country's agricultural policy. The writers further look at West African cotton-
producing nations' proposal for compensation for damages caused by US cotton subsidies in the
WTO agricultural negotiations. The paper examines the two cases from a world system perspective
in an effort to evaluate whether the relative power of semi-peripheral states compared to peripheral
states can account for Brazil's potential for success in utilizing the legal rules of the WTO to curb
hegemonic domination of the WTO by the US.
Cardwell and Rodgers
44
examine the EU law of the Common Agricultural Policy against the
background of the domestic support reduction commitments contained in the 1994 Uruguay Round
Agreement on Agriculture. They question the extent to which the single farm payment scheme
fulfils the requirements for `green box' exemption from such commitments. Options for the re-
negotiation of the Agreement on Agriculture are discussed, including measures to improve the
justiciability of its terms and to exclude discriminatory and trade-distorting domestic support
which have an impact on the developing countries.
An article written Economist
45
discusses the World Trade Organization's summit discussions in
Doha, Qatar. It exposes the talks about cutting tariffs and agricultural subsidies, in addition to
43
Young "WTO Challenges to Core Country Agricultural Policies: A World Systems View" 2006 Conference Papers
International Studies Association 1.
44
Cardwell "Reforming the WTO Legal Order for Agricultural Trade: Issues for European Rural Policy in the Doha
Round" 2006 International & Comparative Law Quarterly at 805-838.
45
Economist "The Doha round...and round...and round." 2008. http://www.economist.com/node/1184859 (Accessed
9/04/14).
8
liberalising agricultural trade services which began in 2001. It however, expresses that no
consensus has been achieved as of the 2008 summit. The writer submits that Uruguay Round
results on sub subsidies affected these discussions, and that developing countries argue that
proposed regulations favour developed countries.
Lee-David
46
examines the factors that are believed to be instrumental in the trade imbalance
between the European Union and the developing world in the agricultural sector. The study focuses
on the main reason for the existence of this imbalance which is the continued use of export
subsidies by the European Union. The discussion attempts to highlight the inadequacies which
exist in the current trade relationship between the European Union and developing nations, in
particular South Africa, with regard to agricultural produce.
Bhala
47
exposes why developed countries stand accused of selfish adherence to domestic support
and export subsidies that impoverish farmers in developing countries. Developing countries are
blamed for self-inflicted wounds, caused by stubborn adherence to protectionist policies, covering
both agricultural and industrial sectors. He argues that agricultural subsidy cuts, as well as
increased market access, are politically impossible for developed countries to concede without
reciprocal access from developing countries, not only on farm products, but also in non-
agricultural markets and service sectors.
Matthews
48
explains the four themes in the developing countries' position in WTO agricultural
trade negotiations as follows. (i) They are seeking meaningful improvements in market access for
their agricultural exports. (ii) They have highlighted the asymmetry of current WTO obligations
under the Uruguay Round Agreement on Agriculture, and are seeking greater equality of outcomes
in the new round. (iii) Meaningful concessions on special and differential treatment will be
necessary to satisfy the interests of both exporters and importers, especially on the scope to be
allowed for tariff protection of domestic food production. (iv) Innovative and reliable guarantees
46
Carolissen "An analysis of the impact of the European Union's policy of export subsidies has on South Africa's
Agricultural sector".
47
Bhala "Empathizing with France and Pakistan on Agricultural Subsidy Issues in the Doha Round" 2007 Vanderbilt
Journal of Transnational Law 949-985.
48
Matthews "Developing Countries' Position in WTO Agricultural Trade Negotiations, Development Policy Review"
2001 at 75-90.
9
will need to be provided to the least developed food importers to protect them against the risk of
world price volatility.
Jensen
49
exposes how the on-going Doha Development Round under the World Trade
Organization (WTO) has its main focus on development. This is due to the widespread
disappointment with the results from the former Uruguay Round Agreements. Developing
countries have not reaped the benefits of free trade. For this current Round to be a success,
developing countries have to be more integrated into the multilateral trading system. One of the
means of integrating them is Special and Differential Treatment (SDT). SDT is a deviation from
the basic principle of Most Favoured Nation, positing that developing countries can have more
flexibility than others. The writers investigate the positions on SDT taken by WTO members. The
analysis gives some insights into the negotiations. First, it reveals the fact that the positions of
WTO members are relatively close to each other. This could indicate that countries in fact agree
that sensitive areas are maintained will not be affected. Second, being able to sustain a certain level
of tariff rates attracts most interest from developing countries. Third, higher income developing
countries want to retain their right to support domestic producers. Finally, the writer identify the
July Package right in the middle of the positions which indicate a future agreement.
1 7 RESEARCH METHODOLOGY
The research methodology to be used in this study is the qualitative research method. This will be
done through library research, use of internet sources and case law. The WTO's AoA will be the
main primary source of regulatory information. Other primary sources to be consulted are the
GATT and the SCM agreement.
The secondary sources will consist of research papers, reports, journals, articles and books. The
research papers and journals that explore the relevant provisions for this study will be examined.
The research will employ scholarly works which scrutinize the possible gaps in the AoA regulatory
framework. To enrich the analysis, academic work which supports the regulatory framework of
the agreement will also be used.
49
Jensen "Special and differential treatment in the WTO agricultural negotiations: Analysis and Policy
Recommendation" 2005 at 87-98.
10
Case law from the WTO will be used as the main source from which the interpretations and
applications of the relevant AoA, GATT and SCM provisions will be drawn.
1 8 OUTLINE OF CHAPTERS
This study will be divided into six chapters.
Chapter one deals with the general overview of the study. It outlines the aims objectives, problem
statement, rationale and limitations of the research and the methodology.
Chapter two discusses the historical and socio-economic background of agricultural subsidies
regulation on a global level. It looks into its negotiating history and also establishes the historical
origins of the AoA and of subsidies.
Chapter three discusses the key elements of the AoA. It then isolates the most problematic
provisions for developing countries. It explores the relevant provisions for possible deficiencies or
gaps.
Chapter four explores the WTO agricultural subsidies disputes mainly dealing with trade distorting
export and domestic subsidies. It analyses whether the interpretations adopted by the DSB
accommodate the developmental needs of developing states.
Chapter five exhumes what is taking place in Doha Development Round. It examines the demands
of both developed countries and developing countries and attempts to highlight the problems
affecting the negotiations.
Chapter six of the study presents the conclusions and the findings of the study on whether the
WTO AoA adequately caters for the developmental needs of developing countries.
Recommendations for developing countries will also be made in this chapter.
1 9 DELINEATION OF THE RESEARCH
The major limitation in this research is that it does not seek to evaluate the entire AoA regulatory
framework. Instead it focuses on some of the most relevant and problematic provisions of the
Agreement. The provisions which were designed to keep out protectionism and ensure
participation of developing countries will be particularly scrutinised. The study will only look at
trade distorting subsidies which consequently have an impact on developing countries. It will not
cover the entire SCM agreement since it will specifically focus on agricultural subsidies.
11
The study will mainly focus on (i) Domestic Support Commitments, (ii) Export Subsidy
Commitments, (iii) Special and Differential Treatment, (iv) Due Restraint, and (v) Continuation
of the Reform Process. It will proceed further to highlight the shortcomings encountered in
negotiating and drafting the AoA as well as some of the loopholes in the AoA and it will also
indicate the consequences thereof.
1 10 REFERENCING STYLE
The referencing style used is that of Speculum Juris, an accredited journal which is published by
the Nelson R Mandela School of Law, University of Fort Hare. The study will therefore not have
any intellectual property implications in terms of copyright law as all works used will be
acknowledged.
1 11 POSSIBLE ETHICAL IMPLICATIONS OF THE RESEARCH
The study at hand will not involve any ethical implications, as questionnaires or interviews will
not form part of this research. The research will be qualitative and proper referencing will be
employed to acknowledge sources used.
12
CHAPTER 2
Historical Background and Impact on Developing Countries
2 1 INTRODUCTION
Prior to the inception of the World Trade Organisation (WTO) Agreement on Agriculture (AoA),
there was no single treaty or convention that regulated agricultural subsidies.
50
The General
Agreement on Tariffs and Trade (GATT) had a few provisions on the regulation of agricultural
trade, but the provisions were vague and subject to manipulation.
51
Interpretation of these
provisions was quite problematic. Countries employed trade distorting subsidies which were
devastating on free trade.
52
Most of the agricultural policies of developed countries, as well as
developing countries, were protectionist and most countries were unwilling to open up their
agricultural markets due to the political sensitivity of agricultural markets.
53
Most of the
justifications of agricultural protectionism had to do with food security.
54
Hence negotiators of the
present agricultural agreement were faced with the task of trying to strike a balance between
liberalising the agricultural sector whilst ensuring food security.
This chapter explores the history of agricultural subsidies regulation from the 1947 GATT. The
essence of this is to scout for the reasons behind the present agricultural subsidies regulation
framework. The chapter addresses the question why the use of agricultural subsidies needed to be
regulated. The chapter also exposes the negotiating process that led to the formation of the AoA.
The purpose is to identify any possible flaws in the negotiating process. The last part of the chapter
50
Fernando "The Cumulative Application of the Agreement on Agriculture and the Subsidies and Countervailing
Measures Agreement: An Approach to Agricultural Subsidies Based on its Effects" 2007 International Law Journal
page 209.
51
Article XVI of the GATT basically provided that "any subsidies affecting exports to and imports from Members
should be notified in writing. Members should recognise the deleterious impact of subsidies and avoid their general
and specific use. In the case of primary products, it merely required that export subsidies shall not be applied "in a
manner which results in that contracting party having more than an equitable share of world trade in that product,
account being taken of the shares of the contracting parties in such trade in the product during a previous representative
period, and any special factors which may have affected or be affecting such trade in the products".
52
WTO "World Trade Report: Subsidies and the WTO". http://www.wto.org/E23B7EF9-82CD-4A8C-8A8D-
AD1C1530D902/FinalDownload/DownloadId-04A744801BAC228AE8C05294EA164779/E23B7EF9-82CD-
4A8C-8A8D-AD1C1530D902/english/res_e/booksp_e/anrep_e/wtr06-2f_e.pdf . (Accessed on 29/04/14 at 21:19).
53
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries"
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf. (Accessed on 27/04/14).
54
Fernando 2007 at 209-210.
13
deals with the impact of subsidies on developing countries. The impact of subsidies is included in
this study because it informs the law and helps to identify any possible loopholes in the law.
2 2 AN OVERVIEW OF AGRICULTURAL POLICIES PRIOR TO THE WTO
Prior to the WTO multilateral trade regime, agricultural trade was regulated by the GATT 1947.
55
The differences between the approach to agriculture and the approach to trade in manufactures in
the GATT 1947 are fundamental in understanding the special role of agriculture in the GATT.
56
For this, it is vital to look into the agricultural policy background in major trading countries during
that period. The United States (US), which was the main agricultural exporter at the time the GATT
was introduced, had its Agricultural Adjustment Act of 1933 fully operational by 1947.
57
This Act
permitted authorities to resort to tariffs and quantitative import controls and export subsidies where
required in order to stabilize domestic producer prices.
58
The European Community (EC) did not
exist then and its Common Agricultural Policy (CAP) did not come into full force until the early
1960s. A majority of other countries that have now become major traders were either recovering
from war or were newly independent.
55
With specific reference to subsidies, the GATT 1947 only had a section that required the contracting parties to report
"any subsidy, including any form of income or price support, which operates directly or indirectly to increase exports
of any product from, or to reduce imports of any product into its territory, to other parties". Thus, originally there was
no prohibition on subsidies, domestic or export. This became what is now Article XVI: 1. Later, the prohibition against
export subsidies on other than primary products
was added as Article XVI: 4.
56
Sharma "Multilateral Trade Negotiations on Agriculture: A Resource Manual I. Introduction and General Topics
Agriculture in the GATT: A Historical Account".
www.fao.org%2Fdocrep%2F003%2Fx7352e%2Fx7352e04.htm&ei=Yo3oU_KPDMye7AbXvYCwDQ&usg=AFQj
CNFd-jvPB9lJ-RXUPE0Rb3Vzv-GSNQ&sig2=vAiJmvT-jNEwExn-Pe6uow&bvm=bv.72676100,d.ZWU .
(Accessed on 11 August 2014).
57
The goal of the Agricultural Adjustment Act was restoring farm purchasing power of agricultural commodities or
the fair exchange value of a commodity based upon price relative to the pre-war 1909-14 level, and it was to be
accomplished through the use, by the Secretary of Agriculture, of a number of methods. These included the
authorization (1) to secure voluntary reduction of the acreage in basic crops through agreements with producers and
use of direct payments for participation in acreage control programs; (2) to regulate marketing through voluntary
agreements with processors, associations or producers, and other handlers of agricultural commodities or products;
(3) to license processors, associations of producers, and others handling agricultural commodities to eliminate unfair
practices or charges; (4) to determine the necessity for and the rate or processing taxes; and (5) to use the proceeds of
taxes and appropriate funds for the cost of adjustment operations, for the expansion of markets, and for the removal
or agricultural surpluses.
58
The policy had a negative impact on trade since it imposed massive tariffs on trade as well as export subsidies in
order to stabilize the domestic economy. This crippled free trade.
14
Domestic political and social pressures were also important factors behind some contracting
parties seeking exemptions for agriculture.
59
In richer countries, agriculture was in decline as
industry expanded rapidly.
60
The resulting difficulties in maintaining farm incomes and
populations emerged as a politically sensitive issue.
61
Agriculture was seen as a unique sector of
the economy which could not be treated like other sectors.
62
Sharma
63
states that, given this
environment, not only did agriculture receive "special treatment" in the GATT, but this treatment
appeared to have been tailored, to fit the US farm programmes then in existence.
The GATT 1947 contained several important differences with respect to the rules that applied to
agricultural primary products as opposed to industrial products. It permitted countries to use export
subsidies on agricultural primary products whilst export subsidies on industrial products were
prohibited.
64
Article XI: 2(c) of the GATT allowed countries to resort to import restrictions for
instance, import quotas under certain conditions, notably when these restrictions were necessary
to enforce measures to effectively limit domestic production. This exception was also conditional
on the maintenance of a minimum proportion of imports relative to domestic production.
65
However, in practice many non-tariff border restrictions were used by members to reduce imports
without any effective counterpart limitations on domestic production and without maintaining
minimum import access.
66
In some cases this was achieved through the use of measures not
specifically provided for under Article XI.
67
In other cases it reflected exceptions and country-
specific derogations such as grandfather clauses, waivers and protocols of accession.
68
In still other
59
Sharma "Multilateral Trade Negotiations on Agriculture: A Resource Manual I. Introduction and General Topics -
Agriculture in the GATT: A Historical Account" http://www.fao.org/docrep/003/x7352e/x7352e04.htm (Accessed on
23/04/14).
60
Dale Agriculture and the GATT: Rewriting the Rules (1997).
61
Ibid.
62
Ibid.
63
Sharma "Multilateral Trade Negotiations on Agriculture: A Resource Manual I. Introduction and General Topics -
Agriculture in the GATT: A Historical Account" http://www.fao.org/docrep/003/x7352e/x7352e04.htm.
64
The only conditions were stated in Article XVI: 3 of GATT which stated that agricultural export subsidies should
not be used to capture more than an "equitable share" of world exports of the product concerned.
65
Sharma.
66
WTO "The WTO Agreements Series 3: Agriculture". http://www.wto.org/FDA5F5E0-CA85-4273-9BDF-
11A5AE9317C6/FinalDownload/DownloadId-D7801155E7BB232A41142B27CA043082/FDA5F5E0-CA85-4273-
9BDF 11A5AE9317C6/english/res_e/booksp_e/agrmntseries3_ag_e.pdf . (Accessed on 26-05-14).
67
Ibid.
68
Ibid.
15
cases non-tariff import restrictions were maintained without any apparent justification.
69
The result
of all this was a proliferation of impediments to agricultural trade, including by means of import
bans, quotas setting the maximum level of imports, variable import levies, minimum import prices
and non-tariff measures maintained by state trading enterprises.
70
This caused a massive restriction
on trade thereby distorting the free trade principle which underpinned multilateral trade.
71
The protection of domestic markets was partly the result of domestic measures originally
introduced following the collapse of commodity prices in the 1930s great depression.
72
Additionally, after the Second World War many governments were concerned primarily with
increasing domestic agricultural production so as to feed their growing populations.
73
With this
objective in mind and in order to maintain a certain balance between the development of rural and
urban incomes, many countries, particularly in the developed world, resorted to market price
support and farm prices were administratively raised.
74
Import access barriers ensured that
domestic production could continue to be sold.
75
In response to these measures and as a result of productivity gains, self-sufficiency rates rapidly
increased. In a number of cases, expanding domestic production of certain agricultural products
not only replaced imports completely but resulted in structural surpluses.
76
Export subsidies were
progressively used to dump surpluses on the developing world market, thus depressing global
market prices.
77
On the other hand, low food price policies in favour of urban consumers and
certain other domestic measures implemented in developed countries, reduced in a number of
69
WTO "The WTO Agreements Series 3: Agriculture". http://www.wto.org/FDA5F5E0-CA85-4273-9BDF-
11A5AE9317C6/FinalDownload/DownloadId-D7801155E7BB232A41142B27CA043082/FDA5F5E0-CA85-4273-
9BDF 11A5AE9317C6/english/res_e/booksp_e/agrmntseries3_ag_e.pdf . (Accessed on 26-05-14).
70
WTO "The WTO Agreements Series 3: Agriculture". http://www.wto.org/FDA5F5E0-CA85-4273-9BDF-
11A5AE9317C6/FinalDownload/DownloadId-D7801155E7BB232A41142B27CA043082/FDA5F5E0-CA85-4273-
9BDF 11A5AE9317C6/english/res_e/booksp_e/agrmntseries3_ag_e.pdf (Accessed on 26-05-14).
71
Ibid.
72
Marchildon The Impact of the Great Depression on the Global Wheat Trade (2010) 15-23. It is worth noting some
of the domestic policies and the socio economic environment that prevailed prior to the coming in force of the GATT.
The depression had a strong impact on the on the GATT specifically on agriculture because of food security measures
that were implemented by states. After the Second World War new states were formed and there was a rapid increase
in population. The states had to come with measures to protect the domestic agricultural industry.
73
See Bailey "From the Corn Laws to Free Trade: Interest, Ideas and Institutions in Historical Perspective"
2006.
74
Ibid.
75
Ibid.
76
WTO "The WTO Agreements Series 3: Agriculture" 2003 World Trade Organization Documents generally.
77
Ibid.
16
developing countries the incentive for farmers to increase or even maintain their agricultural
production levels.
78
It can be clearly noted that the GATT 1947's regulatory system was weak and
it did not adequately protect the developing world from the negative effects of agricultural
subsidies. It is submitted that the developed countries continued to distort free trade by heavily
subsidizing their domestic farmers and dumping their surplus on developing countries.
79
2 3 AGRICULTURAL TRADE UNDER THE GATT
80
One of the reasons attributed to the failure in agricultural trade liberalisation during the GATT
period is that special rules applied to agriculture.
81
Most of the GATT rules were intended to set
down how governments may intervene to protect domestic markets and industries.
82
Once these
rules were agreed, governments were expected to bring their policies/practices in line with them.
However, for agriculture, the process was exactly the opposite. The GATT rules were written to
fit the agricultural programmes then in existence, especially in the United States.
83
Even though
special treatment for agriculture was clear particularly on subsidies and quantitative restrictions, it
is submitted that this was not beneficial to developing countries as it further tightened the screws
of protectionism in developed countries.
84
Subsidies under the GATT were regulated by Article XVI. It specifically prohibited export
subsidies on all products other than primary products. In the case of primary products, it merely
required that export subsidies shall not be applied "in a manner which results in that contracting
party having more than an equitable share of world trade in that product, account being taken of
the shares of the contracting parties in such trade in the product during a previous representative
period, and any special factors which may have affected or be affecting such trade in the products".
The vagueness of this injunction was obvious, as it gave plenty of latitude to exporters to use such
78
WTO "The WTO Agreements Series 3: Agriculture" 2003 World Trade Organization Documents generally.
79
More on this will be fully discussed in Chapter 3. It is argued that developing countries lacked the resources to fully
benefit from the SDT provisions hence the gap between the agricultural sector of developing and developed countries
continued to widen.
80
The following work is largely dependent of Allan Matthews's work. Acknowledgement is therefore given to all his
work as well as other writers who have also made incredible contributions to this topic.
81
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries"
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf (Accessed on 27/04/14).
82
Ibid.
83
Hathaway Agriculture and the GATT: Rewriting the Rules (1987).
84
Ibid.
17
subsidies.
85
There were attempts was to tighten up this provision in the negotiations on the
Subsidies Code during the Tokyo Round , but it went in vain.
86
More importantly, there were no
prohibitions in the GATT against domestic subsidies.
87
It merely imposed an obligation to report
such subsidies if they were likely to affect trade.
The GATT rules relating to quantitative restrictions on trade were another area where agriculture
received special treatment, as set out in Article XI.
88
These rules permitted countries to impose
quotas on imports of agricultural or fishery products, provided domestic commodity programmes
to limit domestic production were also put in place.
89
Although this formulation of the rules was
written to fit the US agricultural programmes existing at the time, the US later found that it could
not live with it.
90
In 1955 it insisted upon and received a temporary waiver which allowed it to
impose import restrictions without the necessity for similar domestic restrictions.
91
The US sugar
and dairy programmes were under this waiver until the Uruguay Round. It is quite ironic that US
was leading the campaign for freer agricultural trade when it was largely at its insistence that the
special rules for agriculture were put adopted in the first place.
92
The EC controlled imports not
through quantitative restrictions but through a variable levy which, in practice, may have been
even more restrictive. Technically, the status of the variable levy under the GATT was never
determined.
93
From the beginning, agriculture was accorded special treatment in the GATT.
94
The reason for this
differential treatment can be attributed to the specific nature of agricultural protection.
95
Protection
for industry
96
is intended to provide a margin of support for domestic industry against lower-cost
85
Matthews 1988.
86
Ibid.
87
Matthews 1988.
88
Trebilcock The Regulation of International Trade (2005).
89
Ibid.
90
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf (Accessed on 27/04/14 at 13:17).
91
Ibid.
92
Ibid.
93
Ibid.
94
Healy "The Implications of the Uruguay Round Agreement on Agriculture for Developing Countries".
www.fao.org/docrep/004/w7814e/w7814e00.htm (Accessed on 28/07/14).
95
Ibid.
96
This applies to secondary and tertiary industries.
18
competition from abroad.
97
Agricultural protection, however, functioned primarily in support of
domestic price support policies intended to redistribute income to agriculture.
98
Agricultural trade
barriers can be reduced only if there is a willingness to reduce domestic farm prices and to put in
place farm income support measures which do not distort trade.
99
It is the interaction of agricultural
trade policy and the use of commodity price policy to support farm incomes which makes the
removal of agricultural trade barriers so difficult.
100
A difference that existed between industrial and agricultural protection is that tariffs were the
predominant form of protection for the industrial sector.
101
On the other hand quantitative
restrictions and various other forms of non-tariff barriers were used in the agricultural sector.
102
Tariffs are easily measured, and comparisons of the degree of tariff protection on commodities and
countries easily made.
103
Countries can relatively easily weigh up the gains and losses from
particular tariff-cutting proposals, and thus multilateral tariff reduction negotiations can be
conducted in a transparent way.
104
In the case of non-tariff barriers, their protective effect is much
more difficult to assess, and the wide variety of measures in use makes it much more difficult for
countries to evaluate and monitor proposals for their removal.
105
2 3 1 Initial Negotiating Positions on Agricultural Trade
During the negotiating stage, participating countries were called to deposit their proposals on how
the agricultural negotiations should proceed.
106
The negotiations were mainly centred between the
United States and the European Community, which accounted for the bulk of world agricultural
exports of temperate zone commodities.
107
Both countries had different views on how the
97
Healy The Implications of the Uruguay Round Agreement on Agriculture for Developing Countries: A Training
(1998).
98
Matthews 1988.
99
Healy 1988
Manual Food & Agriculture Org.
100
Ibid.
101
Zietz The Growth of Agricultural Protection http://www.nber.org/chapters/c8073 (accessed on 30-06-14).
102
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" Trocaire
Development Review 1988. http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-
developing-countries-uruguay-round.pdf (Accessed on 27/04/14).
103
Ibid.
104
Ibid.
105
Edward "The political economy of Non-Tariff Barriers : A cross national analysis"
http%3A%2F%2Ffaculty.georgetown.edu%2Fmlb66%2FIO.pdf&ei=iTLWU7OeA_LQ7Abp_YCwDw&usg=AFQj
CNGpiwrWUYSjoRTyq2H0A-3M4FLO9w&sig2=817BOm_2fbgeKF6fRbuVzA&bvm=bv.71778758,d.ZWU.
(Accessed on 24/03/14).
106
Matthews 1988.
107
Matthews 1988.
19
negotiations should proceed and what their eventual outcome would be.
108
Once common ground
reached between these two US and EU and, to a lesser extent, with Japan would become the
accepted outcome.
109
However, other countries, especially the developing world were struggling
to make their voices heard partly because of the economic and political prowess of the US and the
EU.
While countries were concerned and affected by the state of world agricultural markets, there were
different views of how to address the fundamental problem of overcapacity in the agricultural
sector, whether by lower agricultural support or by taking steps to blunt its consequences for world
markets.
110
Japan, the Nordic countries and some EC members favoured the managed approach to
world markets, which aimed at regulating world trade so as to limit the extent of the distortions
introduced by domestic subsidy programmes.
111
Quantitative controls would be used to restrict
production, and market access for other exporting countries would be dealt with through bilateral
or multilateral access agreements for specific quantities of specific commodities.
112
This would
mean that member countries would have domestic intervention programmes which implied
restrictions on international trade.
113
Another suggested approach, was the alternative approach which strived for an agreement on the
elimination of all import restrictions and production subsidies which would affect international
trade and open up agricultural trade to market forces.
114
This approach would utilise some overall
measure of protection, such as aggregate Producer Subsidy Equivalent (PSE), agree to limit it and
then gradually reduce it over time.
115
This was proposed by the United States, which was supported
108
Ibid.
109
Ibid. These countries dominated international lobby groups who protected their interest. Developing countries were
left out because of the significant contributions to agricultural trade made by the US and the EU.
110
Franklin "Rich Man's Farming: The Crisis in Agriculture" 1988.
111
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf .
112
Matthews 1988.
113
Ibid.
114
Ibid.
115
Stefan "Is the Concept of the Producer Support Estimate in need of Revision?"
http://www.oecd.org%2Fdataoecd%2F6%2F49%2F35091989.pdf&ei=f2DXU6q_CYb17AaMloHYAw&usg=AFQj
CNGiCpY0lec5JNgilJojcIZiZTbmrw&sig2=92xsK8gSPWsuaIPcOkAg-w&bvm=bv.71778758,d.ZWU (Accessed
on 04 July 2014). Stefan also states that the level of protection provided to an industry by tariffs is traditionally
measured by indicators such as the nominal and effective rates of protection. Because of the complexity of agricultural
support mechanisms, in which tariff protection is just one and not necessarily the most important component, there
has been an attempt to define more comprehensive measures of support in the case of agriculture. In 1987 the OECD
20
by the Cairns group of agricultural exporting countries, whose membership included both
developed and developing countries (Philippines, Argentina, Australia, Colombia Canada, Chile,
Hungary, Uruguay, Indonesia, Malaysia, New Zealand, Thailand and Brazil).
116
The US also lobbied for a complete removal of all import barriers and agricultural subsidies over
a ten-year period, but with the exceptions of income subsidies unrelated to production and bona
fide food aid and food assistance programmes.
117
They proposed a two-stage negotiating process.
In the first stage, it was suggested that the level of support provided by each country would be
measured.
118
In the second stage, 'implementation plans' would be agreed for each country setting
out how it intends to move from its present support level to complete elimination over the ten-year
period.
119
These plans would be bound in GATT and subject to appropriate monitoring.
120
It is
argued that the US proposal would take agricultural trade to a position where it would be far more
liberal than even industrial trade.
121
However, politically, the domestic agricultural income and
agricultural price stability implications of this approach would make it unattractive to many
governments.
122
It was not even clear whether the US, which is the sturdiest proponent of this
approach, could in fact carry such a proposal through Congress during that period.
123
2 3 2 Implications of Agricultural Trade Liberalisation for Developing Countries
Much of the developing countries' interest in agricultural trade liberalisation was created by the
effects of the agricultural subsidising policies of the developed countries.
124
Policies of agricultural
protection affected developing countries primarily through their impact on the level, pattern and
stability of world prices.
125
However, due to the close interrelationship between agricultural
products in both production and consumption, the impact of trade liberalisation on commodity
introduced two measures, the Producer Subsidy Equivalent (PSE) and the Consumer Subsidy Equivalent (CSE), which
in those years became the de facto standard for the measurement of agricultural support levels.
116
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf . (Accessed on 29/07/14)
117
Ibid.
118
Ibid.
119
Ibid.
120
Ibid.
121
Valdes "Agriculture in the Uruguay Round: Interests of developing countries" 1987 World Bank Economic Review
at 571-593.
122
Valdes 573-593.
123
Valdes ibid.
124
Matthews, "The Common Agricultural Policy and the Less Developed Countries" 1985.
125
Matthews 1985.
21
prices was not always obvious.
126
It was generally expected that agricultural trade liberalisation
will lead to an increase in world market prices because total agricultural production would be
smaller than before.
127
But there were exceptions to this. A clear example of this was the high
protection given to cereals in the EC which created a demand among animal feed compounders
for imported cereal substitutes, at low or zero duties.
128
In this case, agricultural trade liberalisation
would eliminate this trade, and exporters would suffer as a result.
129
Furthermore, the effects of liberalizing the cereals livestock sector as a whole was even more
complex.
130
Negotiators were afraid that lower support to cereals producers would lead to the rise
of world cereal prices because fewer cereals would be grown.
131
If livestock production was to be
reduced because its support was lowered, this would have the indirect effect of reducing the
demand for cereals for animal feed.
132
A lesson that can be derived from this is that the
interdependencies between agricultural commodities should not be neglected when assessing the
impact of trade liberalisation.
133
If the consequences of lowered protection for markets other than the market immediately affected
were ignored, then the impact on particular developing countries would depend solely on whether
the developing countries concerned were importers or exporters of the commodity in question.
134
Higher world market prices as a result of agricultural trade liberalisation by industrial countries
implied more expensive imports for food importing countries, and it was anticipated that they
would suffer in terms of trade loss.
135
However, higher world market prices would benefit
126
Matthews ibid.
127
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf . (Accessed on 29/07/14).
128
Ibid.
129
Ibid.
130
Ibid.
131
Ibid.
132
Ibid.
133
Williams "Rethinking Agricultural Development: The Caribbean Challenge".
http://www.ccmfuwi.org%2Ffiles%2Fpublications%2Fconference%2F1004.pdf&ei=3zDaU6_3HbOv7AbR1ID4Aw
&usg=AFQjCNFJsOHkULqZXu7TMiCm0_u0u0B4qA&sig2=bymEg24pAeb1RE2ldUgvA&bvm=bv.72185853,d.
ZGU&cad=rjt . (Accessed on 25/06/14).
134
Matthews "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf . (Accessed on 29/07/14).
135
Matthews 1988.
22
agricultural exporters, who were expected to experience a consistent trade gain.
136
The welfare
consequences of these terms of trade bearing in developing countries were expected to be
influenced, in addition, by the extent to which countries would permit their domestic prices to
respond to the rise in world prices, by their flexibility in shifting resources between production
sectors, and by the structure of production and consumption of the commodity, among other
factors.
137
2 3 3 Developing Countries' Interests in the Agricultural Trade Negotiations
During the Uruguay Round all countries at least agreed or rather believed that there was a problem
in global agricultural markets and that trade liberalisation was the only available solution.
138
However, for most developing countries, the major question was whether they should participate
in this undertaking by opening up their own agricultural markets to world market trends.
139
For
Least Developed Countries (LDCs)
140
, strict compliance with the outcome of the negotiations was
not necessarily required.
141
When the Uruguay Round started, as was the case with previous GATT
negotiations, developed countries agreed that special and differential treatment should be provided
for developing countries, and that the LDCs would not be required "to make contributions which
are inconsistent with their individual development, trade and financial needs".
142
In the past this
was interpreted to allow LDCs to maintain tariff barriers against imports as part of their
development strategies.
143
This of course was of great interest to developing countries as they
argued on similar grounds, that they should not be restricted in their use of whatever agricultural
136
Ibid.
137
Ibid.
138
WTO "Participation of developing countries in World Trade: Overview of major trends and underlying factors".
http%3A%2F%2Fwww.wto.org%2Fenglish%2Ftratop_e%2Fdevel_e%2Fw15.htm&ei=sZDoU4fbJbKv7Aar-
YHwDQ&usg=AFQjCNE_v0e5TNcoujjBNeai2a51I5oO0g&sig2=dtjZ9sCd68VEUBqrQtnVXw&bvm=bv.7267610
0,d.ZGU . (Accessed on 08/07/14).
139
World Savvy "International Trade Policy"
http://www.google.co.za/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CBsQFjAA&ur
l=http%3A%2F%2Fworldsavvy.org%2Fmonitor%2Findex.php%3Foption%3Dcom_content%26view%3Darticle%2
6id%3D345%3Ainternational-trade-
policy%26catid%3D143%3Atools%26Itemid%3D544&ei=3pHoU6qgJOSu7Abn3oGYAQ&usg=AFQjCNESix1U
O_Zlhwi0ZS91qzPE008AbA&sig2=VFt9qRvr0mwxkEEjtiz9bg&bvm=bv.72676100,d.ZGU (accessed on
13/07/14).
140
For the purposes of this research, LDC hereafter will referred to as developing countries. However, where certain
aspects are unique to them, they will be referred to as LDC.
141
World Savvy.
142
WTO "Framing Development at the GATT and WTO: Development at the World Trade Organization" 2014.
143
Matthews, "The Agricultural Negotiations in the Uruguay Round and the Developing Countries" 1988.
http://www.trocaire.org/sites/trocaire/files/resources/policy/1988-agriculture-developing-countries-uruguay-
round.pdf . (Accessed on 29/07/14).
23
policies they deemed necessary to pursue food security, rural development and their economic
development objectives.
144
Agricultural policies in most developing countries were far from homogeneous.
145
The major
difference was seen on export crops in which domestic policies of most developing nations often
resulted in negative protection.
146
Among some of the rapidly industrialising, middle income
developing countries, there was evidence of positive agricultural protection.
147
Government
intervention, whether positive or negative, invariably imposed costs on developing countries. A
study done by the World Bank in 1986 estimated that liberalisation by developing countries
themselves, of their own agricultural policies could benefit them by around $18 billion.
148
The
study revealed that, these gains would come about because resources would be used more
productively, consumers would be better off and developing countries would make better use of
scarce foreign exchange.
149
Some commentators argued that the benefits from negative protection
of developing countries' agriculture were worth these costs, as witnessed by many developing
countries which had embarked on reforms of their agricultural pricing policies in those days.
150
What posed difficulties during the Uruguay Round negotiations, were the concerns of developing
nations that provided positive protection to their agricultural sectors.
151
The major contention was
whether they should dismantle this protection as part of a global move towards liberalisation.
152
The arguments in favour of positive agricultural protection, especially in those middle-income
developing countries which were in a position to envisage transfers from the urban to the rural
144
Matthews 1988.
145
Tangermann, "OECD Area Agricultural Policies and the Interests of Developing Countries Organization for
Economic Co-operation and Development".
https://www.google.co.za/?gfe_rd=cr&ei=n5DoU8WcMKTd8gfl1YHYDg&gws_rd=ssl (Accessed on 04/08/14).
146
Matthews 1988.
147
Ibid.
148
Ibid.
149
Anderson "Public and Private Roles in Agricultural Development Proceedings of the Twelfth Agricultural Sector
Symposium".
https://www.tcd.ie%2FEconomics%2Fstaff%2Famtthews%2FFoodCourse%2FCourseMaterials%2FReadings%2FT
angermann_DCs.doc&ei=q5joU92jKrDn7Aa4r4DQDQ&usg=AFQjCNGe6UU6dbLLF0CxKqCnD8BEC5jotg&sig
2=oWZJT91TZmitotOylRrDRQ&bvm=bv.72676100,d.ZGU.
150
Ibid.
151
Michalopoulos "Trade and Development In the GATT and WTO: The Role of Special And Differential Treatment
for Developing Countries".
http://www.wto.org%2Fenglish%2Ftratop_e%2Fdevel_e%2Fsem01_e%2Fcosta_e.doc&ei=M6DoU8OaEYfy7Aagt
IGYDQ&usg=AFQjCNGoLfpsu3Ly4q-
6GW9Mb8wFBn5TiA&sig2=h7CPgu2Z15y11he4zfcUNA&bvm=bv.72676100,d.ZGU (Accessed on 02/08/14).
152
Ibid.
24
sector, included arguments of food security, the maintenance of rural populations and the
redistribution of income towards a low-income sector.
153
The weight of the evidence on the costs
and distributional consequences of agricultural protection strongly suggested that these developing
countries, in their own interests, would find it beneficial to at least place a ceiling on the amount
of support provided as a prelude to its ultimate dismantling, possibly over a longer time span than
that agreed for developed country policies.
154
Another vexing question during the Uruguay Round was the question of reciprocity.
155
As
discussed above, the industrial countries had accepted that developing countries could benefit from
tariff reductions on the most-favoured-nation principle in the past, without requiring that these
countries extend reciprocal concessions in return.
156
Indeed, under the General System of
Preferences, developing countries were entitled to more favourable treatment for much industrial
trade on a unilateral basis.
157
However, it is argued that this 'privilege' was not good for developing
countries during the negotiation process as it marginalised them and reduced their ability to argue
for concessions in areas of particular interest to them.
158
In the light of the increasing export success of a number of the middle-income developing
countries, the industrial countries were keen to introduce the notion of 'graduation' in the Uruguay
round which entailed that the more successful among the developing countries would no longer be
exempt from the GATT rules and should become subject to the same disciplines as apply to
them.
159
This would imply differentiating the rights and obligations of smaller, low-income
developing countries from those of the larger, middle-income developing countries.
160
153
Matthews 1988.
154
Ibid.
155
Capling "Australia and the Global Trade System: From Havana to Seattle".
http://books.google.co.za/books/about/Australia_and_the_Global_Trade_System.html?id=GHHa5pN2KAkC .
(accessed on 27/07/14 at 10:30 am)
156
Matthews ibid.
157
Michalopoulos "Trade and Development in the GATT and WTO: The Role of Special and Differential Treatment
for Developing Countries".
http://www.wto.org%2Fenglish%2Ftratop_e%2Fdevel_e%2Fsem01_e%2Fcosta_e.doc&ei=M6DoU8OaEYfy7Aagt
IGYDQ&usg=AFQjCNGoLfpsu3Ly4q-
6GW9Mb8wFBn5TiA&sig2=h7CPgu2Z15y11he4zfcUNA&bvm=bv.72676100,d.ZGU (Accessed on 02/08/14).
158
Matthews ibid.
159
Matthews 1988 Ibid.
160
Ibid.
25
It is argued that LDCs faced a similar danger of marginalisation in the context of the agricultural
trade negotiations.
161
As pointed out by Valdes, there is a possibility that the three big powers, the
US, EC and Japan striked a deal among themselves before starting negotiations with the
developing countries.
162
He believed that to become influential the developing countries had to
offer some incentive to the major powers to take their interests into account.
163
This argument
would seem to be particularly important for the middle income developing countries associated
with the Cairns group.
164
These countries had a particular interest in more liberal market
arrangements for beef and sugar, for example, which had a lower priority for the developed country
negotiators.
165
Reciprocity and graduation were two areas where these middle-income developing countries had
bargaining chips.
166
The reduction in positive agricultural protection and industrial tariffs
167
were
two areas which these developing countries traded to gain concessions in agricultural areas of
particular interest to them.
168
The lower-income developing countries, which had little to gain from
increases in world food prices, could nonetheless support this move on the grounds that it would
mean the available preferences in industrial trade would not be reserved exclusively for them.
169
If this argument about negotiating strategy was accepted, then a corollary was that developing
countries would not oppose the preference of some industrial countries to hive off the agricultural
negotiations into a separate, self-contained box, because this would limit the developing countries'
ability to offer concessions on graduation and reciprocity.
170
In terms of the two competing philosophies of how to deal with this crisis, developing countries
were expected to side with countries like Japan, the Nordic economies and some EC members
which would prefer to manage world trade in ways which were consistent with maintaining high
161
Valdes "Agriculture in the Uruguay Round: Interests of developing countries" 1987 The World Bank Economic
Review 575-593.
162
Valdes 1987 at 575-590.
163
Ibid.
164
Matthews 1988.
165
Ibid.
166
Ibid.
167
Tariffs were often instituted in support of import substitution industrialisation strategies but increasingly continued
because of the power of vested interests.
168
Tangermann "Multilateral negotiations on farm- support levels" 1987 World Economy 265-279.
169
Matthews ibid.
170
Matthews Ibid.
26
levels of domestic price support.
171
Such an approach would have to be based on a series of
international commodity agreements which would specify the minimum import obligations of
importers and the maximum export quantities of exporters.
172
Developing countries were strong
supporters of commodity agreements in the 1970s and were expected to favour this approach in
the 1980s.
173
The previous experience with commodity agreements, however, did not hold much
hope for the long-term success of this approach to managing world trade.
174
The lack of enthusiasm
for the Integrated Programme for Commodities, even among developing countries, and the lessons
from the collapse of the International Tin Agreement in 1986, suggested that developing countries
were increasingly aware of the limitations of this approach.
175
Developing countries were therefore
better advised to support the negotiating approach which would seek to use a single measure of
support and to reduce it over time.
176
For food importing developing countries, whose balance of payments was already in a critical
condition because of high debt repayments and low commodity prices, the prospect of higher world
food prices could not be viewed with composure.
177
Within the Uruguay Round negotiations
Jamaica had articulated the fears of this group (developing countries) without, however, making
any specific proposals to alleviate any adverse consequences which such countries could face.
178
Two possibilities were to be considered. The then existing IMF Compensatory Financing Facility,
was designed in part to assist food importing countries faced with an unexpected rise in cereal
prices.
179
The restrictive conditions of access to this facility, together with inadequacies in the rules
for calculating foreign exchange shortfalls, made it less useful than it could be for this purpose,
and developing countries lobbied for the agreement of the industrial countries for reform of this
facility within the context of a GATT agreement.
180
Alternatively, provision could be made for a
171
Valdes 1987 at 577-593.
172
Valdes "Agriculture in the Uruguay Round: Interests of developing countries" 1987 The World Bank Economic
Review 577-593.
173
Matthews 1988.
174
Ibid.
175
Ibid.
176
Ibid.
177
Tangermann "Multilateral negotiations on farm- support levels" 1987 World Economy at 265-279.
178
Ibid.
179
Tangermann "Multilateral negotiations on farm- support levels" 1987 World Economy at 265-279.
180
Ibid.
27
special fund which could be used to increase food aid shipments or to cap the rise in cereal prices
over a specified period, at least for the developing countries.
181
2 4 TOKYO ROUND: AGRICULTURAL NEGOTIATIONS
In an effort to address the flaws in the 1947 GATT, the Tokyo Round was launched on the 14
th
of
September 1975 at a Ministerial meeting in Tokyo. The ministerial declaration setting out the
ambit for the negotiations foresaw work aimed at reducing or eliminating non-tariff measures,
negotiations in agriculture, taking into account the special characteristics and problems in this
sector, inter alia. The Tokyo Round negotiations were dominated by events within the United
States, the European Economic community (EEC), Japan and the relations between them.
182
The developing countries were much more involved in the negotiating process as compared to the
Kennedy round which was largely dominated by the developing world.
183
This was a time of
heightened developing country expectations in that it coincided with preparations for the New
International Economic Order initiative. However, even though the necessary preparatory work
was done between 1973 and early 1977, there were no real developments in the negotiations until
the new United States administration had formulated its policies and appointed its negotiating
team.
184
This already showed an imbalance in the negotiations because the US had to place its
house in order first for the negotiations to take place. Negotiations only began in July 1977
following a meeting between the US and the EEC, which levelled out some of their major
differences on policy and procedure.
185
181
Matthews 1988.
182
The EEC and US had some of the worst protectionist policies that massively distorted trade and Japan had achieved
its transformation into a first-rate trading power and had become the subject of protectionist pressures in many
economies. See World Trade Review "Tokyo Round 1973 to 1979".
http://worldtradereview.com/webpage.asp?wID=438 (accessed on 31-05-2014).
183
However, the interests of developing countries were not served. For instance it was the aim of EC negotiators, for
example, to achieve the best possible settlement for the European Community in the fields of non-tariff barriers,
industrial tariffs and agriculture which would safeguard European interests and improve Community export. 'We want
the outcome to be satisfactory for the European Community,' said the chief negotiator, Wilhelm Haferkamp, which is
the world's greatest importer and exporter. No one has a greater interest than ourselves in a satisfactory outcome. See
Kakabadse "The Tokyo Round and After". http://www.jstor.org/stable/pdfplus/40395495.pdf?acceptTC=true.
184
World Trade Review "Tokyo Round 1973 to 1979". http://worldtradereview.com/webpage.asp?wID=438
(accessed on 31-05-2014).
185
World Trade Review "Tokyo Round 1973 to 1979". http://worldtradereview.com/webpage.asp?wID=438
(accessed on 31-05-2014).
28
In July 1978 a large group of developed countries was able to put forward a "Framework of
Understanding" which set out the principal elements they considered necessary for a balanced
outcome to the negotiations.
186
The developing countries objected to this on substantive and
procedural grounds. They objected particularly to what they saw as an attempt to leave them at the
periphery of the negotiations.
187
The package nevertheless was an important factor in maintaining
momentum in the negotiations which were supposed to end by 15 December 1978. The concerns
of developing countries were not taken into cognisance by the developing world. It is submitted
that the developed world played a bullying role by deliberately leaving out the concerns of
developing countries.
A major obstacle which turned up in the form of a provision of the United States Trade Act stopped
the negotiations from ending in 1978.
188
The provision permitted the President to waive a
requirement that countervailing duties be imposed on subsidized imports over the four year period
ending on 3 January 1979.
189
The implication of this was that, if the existing waiver lapsed,
countervailing duties would become automatic.
190
The US congress appeared reluctant to renew
the waiver, but it did so once the EEC declared that it could not conclude the negotiations unless
the United States first solved its internal problems.
191
The Tokyo round in the end was a fight
between the US and the EEC. The Tokyo Round negotiations ended formally on 12 April 1979
after the US had decided to sort out its internal protectionist policies.
After several years of negotiating, little progress was made on systemic issues in the trade of
agricultural products. There was an agreement that, negotiations should be continued after the
round, on the development of a Multilateral Agricultural Framework aimed at avoiding continuing
political and commercial confrontations in this highly sensitive sector.
192
In reality this was
nothing more than a device enabling the conclusion of the round as a whole and, as many expected,
186
Ibid.
187
Ibid.
188
World Trade Review "Tokyo Round 1973 to 1979". http://worldtradereview.com/webpage.asp?wID=438
(accessed on 31-05-2014).
189
Ibid.
190
Kakabadse "The Tokyo Round and After" 1981 The World Today 305.
http://www.jstor.org/action/showArticleImage?image=images%2Fpages%2Fdtc.65.tif.gif&suffix=40395495 .
(Accessed on 27-05-14).
191
Ibid.
192
Kakabadse "The Tokyo Round and After 1981 The World Today" 305.
http://www.jstor.org/action/showArticleImage?image=images%2Fpages%2Fdtc.65.tif.gif&suffix=40395495 .
(Accessed on 27-05-14).
29
it did not lead anywhere once negotiations resumed.
193
Hence, the Tokyo Round did little to
address the problem of trade distorting agricultural subsidies.
194
It rather left the issue hanging,
perhaps because of its highly sensitive political nature.
195
The Tokyo round can however be credited for rebuilding confidence in the multilateral framework
of rules and procedures which would subject trade policies to a system of on-going examination
and consultation. The consultative framework in agricultural trade offered the possibility of
scrutinizing the trade limiting effects of domestic agricultural policies and of encouraging
governmental justification of objectives and measures with the view of gradually lowering levels
of agricultural support and reducing conflict.
196
2 5 URUGUAY ROUND: AGRICULTURAL NEGOTIATIONS
When the Tokyo Round under GATT finally concluded in 1979 after nearly six years of
negotiations, the general feeling among many exhausted negotiators was "never again".
197
But less
than three years, the US raised the idea of a new round which sought the liberalization of world
agricultural trade and multilateral rules for investment and trade in services.
198
Furthermore,
American Multinational Enterprises (MNEs), especially the pharmaceutical industry, were
demanding stronger measures against the infringement of several intellectual property rights.
199
The US administration also saw a new round as a way to counter protectionist pressures that were
stimulated by the large US trade deficit and increasing job losses.
200
The other developed countries had differing views as to the desirability and necessity of starting a
new multilateral trade round.
201
The EU was not particularly interested in supporting new
193
World Trade Review "Tokyo Round 1973 to 1979". http://worldtradereview.com/webpage.asp?wID=438
(accessed on 31-05-2014).
194
Ibid.
195
Ibid.
196
Kakabadse "The Tokyo Round and After 1981 The World Today".
http://www.jstor.org/stable/pdfplus/40395495.pdf?acceptTC=true . (Accessed on 27-05-14).
197
Kleen "So alike and yet so different: A comparison of the Uruguay Round and the Doha Round" 2008.
http://www.ecipe.org/media/publication_pdfs/so-alike-and-yet-so-different-a-comparison-of-the-uruguay-round-
and-the-doha-round.pdf (Accessed on 28-05-14).
198
The Tokyo Round and earlier GATT rounds had failed to fully address the problems faced through international
trade of agricultural products. Subsidies were still distorting global trade and the practice of granting agricultural
subsidies by governments was still dominant in developing countries.
199
Kleen 2008.
200
Ibid.
201
Kleen "So alike and yet so different: A comparison of the Uruguay Round and the Doha Round" 2008.
http://www.ecipe.org/media/publication_pdfs/so-alike-and-yet-so-different-a-comparison-of-the-uruguay-round-
and-the-doha-round.pdf (Accessed on 28-05-14).
30
initiatives in the GATT.
202
Its stance was mainly defensive because of its interests in agriculture.
Japan took the EU stance and hoped that nothing would happen.
203
The other active developed
contracting parties in the GATT Australia, Canada, Sweden and Switzerland inclined towards the
US position.
204
The developing countries were deeply divided. A group of 10 hardliners, under the leadership of
India and Brazil, fiercely opposed a new round, especially the inclusion of services, intellectual
property and investments, which was central to the US's agenda.
205
However, most of the
developing countries were prepared to enter into negotiations under certain conditions. Among the
factors behind the less negative attitudes of these countries were an increasing awareness of the
limitations of their earlier import substitution policies and, perhaps more importantly, the threat of
possible unilateral actions against their exports in the US market.
206
In 1983 the Director General of GATT, Arthur Dunkel, invited an independent group of
businessmen, academicians and civil servants to study and report on problems facing the
international trading system. Fritz Leutwiler, who was then head of the Swiss National Bank,
chaired the group. Its report, Trade policies for a better future,
207
was published in 1985 and
created the ground for a new round of multilateral trade negotiations. The Leutwiler report was
remarkably predictive and included recommendations that were fulfilled in the final settlement of
the Uruguay Round: clearer and fairer rules for agriculture, dismantlement of grey zone measures,
the return of textile and clothing to normal GATT rules, surveillance of individual countries' trade
policy, multilateral rules for trade in services and reinforcement of the dispute settlement
procedures inter alia.
208
202
Ibid.
203
Ibid.
204
Kleen "So alike and yet so different: A comparison of the Uruguay Round and the Doha Round" 2008.
http://www.ecipe.org/media/publication_pdfs/so-alike-and-yet-so-different-a-comparison-of-the-uruguay-round-
and-the-doha-round.pdf (Accessed on 28-05-14).
205
These countries are Argentina, Brazil, Cuba, Egypt, India, Nicaragua, Nigeria, Peru, Tanzania and Yugoslavia.
206
WTO "World Trade report 2007 Six decades
of multilateral cooperation: What have we learnt?" 2007 World Trade
Organization Documents.
207
GATT "Trade policies for a better future - proposals for action `The Leutwiler Report'". 1985 General Agreement
on Tariffs and Trade Documents.
208
GATT "Trade policies for a better future - proposals for action `The Leutwiler Report'". 1985 General Agreement
on Tariffs and Trade Documents.
31
After an inconclusive ministerial meeting held under auspices the GATT in 1982, caused by a lot
of infighting between the proponents and opponents of a new round, the contracting parties of the
GATT in 1985 at least managed to set a date for a ministerial meeting in Punta Del Este, Uruguay,
in September 1986, with the intention of launching the round. However, with reference to the
substantive issues, the deadlock was almost total between the US and EU on the one hand and the
hardliners on the other.
209
This deadlock prompted several outward looking developed and
developing countries to join together in early summer 1986 just a few months before the Punta Del
Este meeting and hammer out their own proposal for a Ministerial Declaration giving a mandate
for the new round.
210
The group of initially more than 40 developed and developing countries got the nickname "Café
au Lait"
211
because it was chaired by the Colombian and Swiss ambassadors.
212
In a short space
of time the US and the EU unofficially joined the discussions without formally associating
themselves with the coalition.
213
The Café au Lait group also comprised most members of the 14
agriculture exporting developed and developing countries. The developing countries involved in
the meeting in Punta Del Este, formed the Cairns Group at a meeting in Cairns, Australia, in August
1986.
214
The formation of this group increased pressure for prioritizing the agricultural sector
issues in the agenda for the Uruguay round.
215
Before the ministerial meeting, the chairman for the
ministerial received two comprehensive papers, one from India and Brazil and the other from the
Café au Lait group.
216
After a couple of days of rancorous discussions, the Chairman decided to
base the negotiations on the Café au Lait paper, which after only minor changes became the
209
Ibid.
210
Kleen "So alike and yet so different: A comparison of the Uruguay Round and the Doha Round" 2008.
http://www.ecipe.org/media/publication_pdfs/so-alike-and-yet-so-different-a-comparison-of-the-uruguay-round-
and-the-doha-round.pdf . (Accessed on 07/06/14).
211
Narlikar "Fairness in international trade
negotiations: Developing countries in the GATT and WTO" 2006 The
World Economy 1005-1029. The English translation of this is, light brown colour of coffee with milk.
212
Kleen 2008 ibid.
213
Kleen 2008 ibid.
214
The Cairns Group is an interest group of 19 agricultural exporting countries, composed of Argentina, Australia,
Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan,
Paraguay, Peru, the Philippines, South Africa, Thailand, and Uruguay.
215
Kleen 2008 ibid.
216
GATT "Communication from the delegations of Colombia and Switzerland" 1986 General Agreement
on Tariffs
and Trade Documents.
32
Ministerial Declaration on the Uruguay Round.
217
Without the efforts of the Café au Lait coalition,
the meeting would likely have ended in failure.
218
2 5 1 Uruguay Round: Aims and Objectives
In the Uruguay Round (UR) the desire was to create "new" frameworks and rules for services, and
eventually for intellectual property. Agriculture was of course one of the main subjects, but it could
hardly be characterized as a new issue since several provisions in the GATT formally covered it.
However, agricultural negotiations were quite sensitive and they dragged the negotiations.
219
The
UR agricultural negotiations aimed at the development and implementation of a framework to
address barriers and distortions to trade in three major policy domains, market access, and
domestic support and export subsidies. One of the chief aims was to establish an overall framework
for the re-instrumentation of agricultural support towards less trade distorting policies.
220
Special and differential treatment (SDT) of developing countries manifested itself in different
ways during the UR. It was not necessarily the aim of the UR but it was mentioned in the Punta
Del Este Declaration although it did not high on the agenda. The outcome of the round led to a
considerable narrowing of the kind of differential treatment which the developing countries had
enjoyed earlier under the GATT.
221
Bringing agriculture, textiles and clothing under normal GATT
rules put an end to the permanent de facto differentiation that for decades had worked against the
developing countries.
222
The decision to affiliate all countries to all agreements as a result of the
creation of the WTO was in a sense also a move to end another kind of differential treatment but
in a way that hardly was anticipated by the "beneficiaries".
223
Both the Subsidies and the AoA
reduced the degree of "informal SDT" that countries felt they had in order to carry out their
217
Kleen 2008 ibid.
218
Kleen "So alike and yet so different: A comparison of the Uruguay Round and the Doha Round".
http://www.ecipe.org/media/publication_pdfs/so-alike-and-yet-so-different-a-comparison-of-the-uruguay-round-
and-the-doha-round.pdf (Accessed on 10/06/14).
219
This is possibly because these negotiations were politically sensitive as they threatened food security in countries
that had hanging memories of the Second World War. It is argued that, no country was willing to open its markets and
reduce subsidies in the agricultural sector if the proposed reduction would affect the country's food security.
220
GATT "Trade policies for a better future - proposals for action `The Leutwiler Report'". 1985 General Agreement
on Tariffs and Trade Documents.
221
Ibid.
222
Kleen "Special and differential treatment of developing countries in the World Trade Organization" 2005 London:
Overseas Development Institute.
223
Kleen 2005 pg 14.
33
industrial policies.
224
This was a potential time bomb for developing countries as it would soon
result in unfair treatment.
225
2 5 2 Results of the Uruguay Round
The UR agricultural negotiations resulted in the adoption of the AoA. One of the main
achievements of UR has been the development and implementation of a framework to address
barriers and distortions to trade in three major policy domains namely market access, domestic
support and export subsidies.
226
New and operationally effective rules were established and
quantitative constraints were agreed upon for all three pillars.
227
In addition, the URAA provided
an overall framework for the re-instrumentation of agricultural support towards less trade
distorting policies. More importantly, the AoA provides the basis for further negotiations.
228
The AoA was regarded a major step towards liberalising agricultural trade and it was the first
multilateral agreement that specifically dealt with disciplining multilateral trade.
229
It marked an
historic point in the reform of the agricultural trade system.
230
For the first time, member
governments committed to reduce agricultural export subsidies and trade-distorting domestic
support. They agreed to prohibit subsidies that exceed negotiated limits for specific products. And
the commitments to reduce domestic support were a major innovation of the AoA and were quite
unique to the agricultural sector. This at least was a dawn to multilateral agricultural trade.
2 6 THE IMPACT OF THE AOA ON DEVELOPING COUNTRIES
The main objective of the AoA is to establish a fair and market-oriented trading system in
agriculture, to increase market access and reduce trade-distorting agricultural subsidies.
231
However it is argued that the agreement has not met these expectations. It has been described as
224
Kleen 2005
225
Ibid.
226
Meléndez-Ortiz "The Future and the WTO: Confronting the Challenges"
http://www.ictsd.org/downloads/2012/07/the-future-and-the-wto-confronting-the-challenges.pdf (Accessed on 04-
11-14).
227
Meléndez-Ortiz "The Future and the WTO: Confronting the Challenges"
http://www.ictsd.org/downloads/2012/07/the-future-and-the-wto-confronting-the-challenges.pdf (Accessed on 04-
11-14).
228
Ibid.
229
Prior to the URAA, agricultural trade rules were scattered in separate agreements. The GATT had provisions
disciplining agricultural trade but they were unclear and ambiguous. The rules did not adequately address the concerns
of developing countries.
230
In the words of the GATT secretariat, the results of the negotiations were described as providing a framework for
long term reform of agricultural trade and domestic policies over the years to come. News of the Uruguay Round
December 1993.
231
See the Preamble of the AoA.
34
Details
- Pages
- Type of Edition
- Erstausgabe
- Year
- 2016
- ISBN (PDF)
- 9783960675594
- ISBN (Softcover)
- 9783960670599
- File size
- 1.3 MB
- Language
- English
- Publication date
- 2016 (June)
- Grade
- Good
- Keywords
- Agreement on Agriculture AoA WTO Agricultural subsidy Developing country Development policy Global trade Globalization Trade distortion Green box Agricultural protectionism International Trade law
