At the end of the latest round of meetings of the
agricultural negotiations committee of the WTO, the
optimism that negotiators would meet the March 31
deadline for working out numerical targets, formulas
and other ''modalities" through which countries
can frame their liberalisation commitments in a new
full-fledged round of trade negotiations has almost
disappeared. That target was important for two reasons.
First, it is now becoming clear, that even more than
was true during the Uruguay Round, forging an agreement
in the agricultural area is bound to prove extremely
difficult. Progress in the agricultural negotiations
was key to persuading the unconvinced that a new 'Doha
Round' of trade negotiations is useful and feasible.
Second, the Doha declaration made agricultural negotiations
one part of a 'single undertaking' to be completed
by January 1, 2005. That is, in a take 'all-or-nothing'
scheme, countries had to arrive at and be bound by
agreements in all areas in which negotiations were
to be initiated in the new round. This means that
if agreement is not worked out with regard to agriculture,
there would be no change in the multilateral trade
regime governing industry, services or related areas
and no progress in new areas, such as competition
policy, foreign investment and public procurement,
all of which are crucial to the economic agenda of
the developed countries.
The factors making agriculture the sticking point
on this occasion are numerous. As in the last Round,
there is little agreement among the developed countries
themselves on the appropriate shape of the global
agricultural trade regime. There are substantial differences
in the agenda of the US, the EU and the developed
countries within the Cairns group of agricultural
exporters. When the rich and the powerful disagree,
a global consensus is not easy to come by.
In this round of negotiation, the complexity of the
situation is likely to increase because a number of
developing country including Cuba, Chile, Kenya, India,
Nigeria, Pakistan, Sri Lanka, Uganda and Zimbabwe
has taken a very pro-active role in the negotiations
and have often expressed vies which are significantly
different from the views expressed by the big three.
The extent of disagreement among different country
groups can be gauged from a recent paper by the Chairman
of WTO Agriculture Committee Stuart Harbinson. This
paper is based on the country proposals submitted
during the current round of agricultural negations
and the follow up consultations among the WTO Members
conducted after Doha ministerial. The objective of
this paper is to summarize the main features and results
of the consultations and to provide a basis for working
towards the establishment of modalities for the further
commitments. This paper shows that not only there
are still wide gaps in the positions among participants
regarding fundamental aspects of the further negotiations
but there also exist significant differences in the
level of ambition among the member countries. What
is even more worrying for the future of the agricultural
negotiation is that even the latest round of talks,
countries are not showing any inclination towards
reconciliation. According to reports published in
the International Trade Daily, after a negotiating
group session held during 22-24th January 2003, Harbinson
noted that the meeting was intended to "build
bridges" between opposing camps and push the
WTO talks forward as members head towards their March
31 deadline for finalizing negotiating modalities.
Instead, he adds, "we have made very little headway
in building bridges".
It is expected that with members failing to mend their
differences, the first draft of a methodology framework
for agricultural negotiations will be chair driven
and is expected to be circulated before a mini-Ministerial
scheduled for Tokyo Feb. 14-16. Given the progress
so far, it seems virtually impossible that the March
31st deadline of finalizing the modalities will be
met.
But that is not all. Even if an agreement is stitched
up between the rich nations, through manoeuvres such
as the Blair House accord, getting the rest of the
world to go along would be more difficult this time.
This is because the outcomes in the agricultural trade
area since the implementation of the Uruguay Round
(UR) Agreement on Agriculture (AoA) began have fallen
far short of expectations. In the course of Round,
advocates of the UR regime had promised global production
adjustments that would increase the value of world
agricultural trade and an increase in developing country
share of such trade.
As Chart 1 shows, global production volumes continued
to rise after 1994 when the implementation of the
Uruguay Round began, with signs of tapering off only
in 2000 and 2001. As is widely known, this increase
in production occurred in the developed countries
as well.
Chart
1 >>
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Not surprisingly, therefore, the volume of world trade
continued to rise after 1994 (Chart 2). The real shift
occurred in agricultural prices which, after some
buoyancy between 1993 and 1995, have declined thereafter,
and particularly sharply after 1997. It is this decline
in unit values that resulted in a situation where
the value of world trade stagnated and then declined
after 1995, when the implementation of the Uruguay
Round began.
Chart
2 >>
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As Table 1 shows, there was a sharp fall in the rate
of growth of global agricultural trade between the
second half of the 1980s and the 1990s, with the decline
in growth in the 1990s being due to the particularly
poor performance during the 1998 to 2001 period.
Table
1
>> Click
to Enlarge
Price declines and stagnation in agricultural trade
values in the wake of the UR Agreement on Agriculture
were accompanied and partly influenced by the persisting
regionalisation of world agricultural trade. The foci
of such regionalisation were Western Europe and Asia,
with 32 and 11 per cent of global agricultural trade
being intra-Western European and intra-Asian trade
respectively (Chart 3). What is noteworthy, however,
is that agricultural exports accounted for a much
higher share of both merchandise and primary products
trade in North America and Western Europe (besides
Latin America and Africa) then it did for Asia. Thus
despite being the developed regions of the world,
agricultural production and exports were important
influences on the economic performance of North America
and Western Europe.
Chart
3
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It is therefore not surprising that Europe is keen
on maintaining its agricultural sector through protection,
while the US is keen on expanding its role in world
agricultural markets by subsidising its own farmers
and forcing other countries to open up their markets.
The problem is that the US has been more successful
in prising open developing country markets than the
large EU market. Thus out of $104 billion worth of
exports from North America in 2001, $34 billion went
to Asia and $15 billion to Latin America, whereas
exports to Europe amounted to $14 billion (Table 2).
Table
2
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to Enlarge
The Cairns group of exporting countries (Argentina,
Australia, Bolivia, Brazil, Canada, Chile, Colombia,
Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand,
Paraguay, Philippines, South Africa, Thailand and
Uruguay), for some of who at least agricultural exports
are extremely important, want world market to be freed
of protection as well as the surpluses that
result from huge domestic support in the US and the
EC. We must note that $35 billion of the $63 billion
of exports from Latin America went to the US and the
EU. More open markets and less domestic support in
those destinations is therefore crucial for the region.
The fact that Europe has been successful in its effort
at retaining its agricultural space with the help
of a Common Agricultural Policy that both supports
and subsidises its agricultural producers is clear
from Chart 4, which shows that intra-EC trade which
accounted for 74 per cent of EU exports in 1990, continued
to account for 73 per cent of total EU exports in
1995 and 2001. But North America, with far fewer countries
in its fold, has also been quite insular. Close to
a third of North American exports are intra-regional.
Little has changed since the Uruguay Round Agreement
on Agriculture.
Chart
4
>>
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