Introduction to the Agreement on Agriculture and to the Negotiating Process

Introduction to the Agreement on Agriculture and to the Negotiating Process

Agriculture Subsidies and Trade 600 500 166 US$ Billion 400 300 200 21 378 100 210 0 Total subsidies Total exports Developed countries Developing countries 2

% Average Tariffs 70 60 50 62 40 30 20 29 10 17 9 0 MFN Bound Agriculture MFN Applied Industrial 3

Why the Agreement on Agriculture? Agriculture in GATT but... exemptions for agricultural products (import restrictions, domestic support, export subsidies allowed) market access difficult Research - inefficiency of policies Trade tensions and disputes Punta del Este Declaration (1986) Uruguay Round Negotiations (7.5 years) Agreement on Agriculture 4

Legal Framework Modalities + Supporting Tables Legally Binding Commitments Agreement on Agriculture Schedules of Commitments Other WTO Agreements Protocol of Accession ACC/4 5

Structure of the Agreement Market access Domestic support Export competition Tariffs Tariff Quotas Special Safeguard Green Box Blue Box Article 6.2 Development Programmes Amber Box Export subsidies Anti-circumvention Export prohibitions and restrictions Other rules: S&D, Peace Clause, commitment to reform, NFIDC Decision Agreement on the Application of Sanitary and Phytosanitary Measures 6

Uruguay Round Reduction Commitments Time period Market access Tariff reduction Domestic support Total AMS reduction De minimis S&D exemption Developed 6 years 36% average, 15% minimum 20% 5% Developing 10 years 24% average, 10% minimum 13.3% 10% Article 6.2 (investment, input and diversification subsidies) Export competition Export subsidy reduction S&D exemption 36% value, 21% volume 24% value, 14% volume Article 9.4 (transport and marketing subsidies) No reduction commitments for least-developed countries 7

Long-term Objective... establish a fair and market-oriented agricultural trading system... Uruguay Round reform programme Major achievements but also some unfinished business Mandate for further reform - Article 20 Committee on Agriculture role to monitor implementation of UR commitments - matters raised under Article 18.6 - review of notifications preparatory work analysis/exchange of information mandated negotiations - Special Sessions (since 2000) 8

The Doha Ministerial Declaration Comprehensive negotiations aimed at: substantial improvements in market access reductions of, with a view to phasing out, all forms of export subsidies substantial reductions in trade-distorting domestic support S&D - integral to negotiations and outcome Non-trade concerns to be taken into account Deadlines March 2003 modalities 5th Ministerial Conference - draft Schedules 1 January 2005 - conclusion Framework modalities - July 2004 9

Market access Objective substantial improvements in market access 10

Sample MFN tariffs (%) Simple average bound tariff Maximum ad valorem Share of non-ad valorem tariff lines Simple average applied tariff Maximum ad valorem Share of nonad valorem tariff lines European Communities 5.8 75.0 40.8 5.9 75.0 39.9 United States 6.9 350.0 49.6 5.1 350.0 1.4 Japan 6.9 62.0 22.7 7.3 50.0 22.6 Canada 3.5 238.0 26.0 3.1 238.0 20.1 Brazil 35.5 55.0 0.0 11.7 55.0 0.0 China 15.8 65.0 0.0 19.2 71.0 0.6 Kenya 100.0 100.0 0.0 20.1 100.0 0.1 Barbados 111.2 223.0 0.0 33.0 243.0 8.5 Indonesia 47.0 210.0 0.4 8.2 170.0 0.7 Malaysia 12.2 168.0 27.4 2.1 30.0 4.9 Saint Lucia 114.6 250.0 0.0 14.8 45.0 0.0 Myanmar 102.8 550.0 0.6 8.5 40.0 0.6 Source: World Trade Report 2004, WTO 11

Export competition Objective reductions of, with a view to phasing out, all forms of export subsidies 12

3,000 Export Subsidy Expenditures 2000 2,500 2,509 2,000 US$ Million 1,500 1,000 500 0 189 55 0 17 45 0 EC US Japan Korea Switz-Liech. Norway Brazil 13

Domestic support Objective substantial reductions in trade-distorting domestic support 14

Globally 280 210 Billion US$ 140 70 0 1995 2001 NOR, CAN, CHE, BRA 17.7 12.1 Korea 8.3 6.5 Japan 69.6 26.7 United States 60.9 72.1 EC 116.5 75.6 Data for Korea are for the year 2000. 15

The Doha Round negotiations Many proposals but deadline for modalities missed in March 2003 Alliances (G-20, G-90, G-33, G-10, C-4) Framework approach explored but Cancún Ministerial ends in deadlock Signs of flexibility & momentum for a framework text in mid-2004 General Council Decision adopted on 1 August 2004 to guide progress in the negotiations and the work programme WT/L/579 Work towards first approximation by July 2005 but no result New proposals to move negotiations forward in fall of 2005 Hong Kong Ministerial Declaration puts the Round back on track but a new deadline to establish modalities in April 2006 is missed Despite intensive efforts to narrow the differences, negotiations suspended at the end of July 2006 February 2007 back to full negotiating mode July 2007 circulation of possible draft modalities by the Chair Job(07)/128; 17 July 2007; later revised as TN/AG/W/4; 1 August 2007, TN/AG/W/4/Rev.1; 8 February 2008, TN/AG/W/4/Rev.2; 19 May 2008 February 16

Market Access

Market Access - Outline Current disciplines Tariffs and tariffication Tariff quotas Special safeguard The Framework and the negotiations 18

Tariffs and Tariffication Tariffs bindings, reduction Non-tariff measures converted to tariffs Tariff only regimes 19

Tariffs Implementation period DEVELOPED 6 years 1995-2000 DEVELOPING 10 years 1995-2004 Average cut -36% -24% Minimum cut -15% -10% No reduction commitments for LDCs 20

Tariffication Formula E = (P i - P e ) / P e * 100 E = Tariff equivalent P i = Internal price (representative wholesale) P e = External price (c.i.f. unit values) Base period average: 1986-88 Ceiling bindings for developing country Members 21

Tariff Only Regimes Prohibition to maintain, resort or revert to: Quantitative restrictions Variable levies Minimum import prices Discretionary import licensing NTMs maintained through STEs Voluntary export restraints Similar border measures [...] BUT... Special Treatment (Annex 5) for Japan, Korea, Philippines, Israel and Chinese Taipei 22

Tariffs only but... Peaks Morocco: Minimum tariff 0% Maximum tariff 289% Canada: Minimum tariff 0% Maximum tariff 238% Escalation Chinese Taipei: Tomatoes, fresh 10% Tomato juice 30% EC: Cocoa beans 0% Cocoa paste 9.6% Chocolate 18.7%+ Ad valorem (15%) Various Forms Non-ad valorem: Specific (2$ per kg), Compound (10% plus 2$ per kg), Mixed (10% or 2$ per kg, whichever is higher), Technical (9% plus EA MAX 18.7% plus ADS/Z) 23

Tariffs only but MFN Tariffs (%) Simple average bound tariff Maximum ad valorem Share of non-ad valorem tariff lines Simple average applied tariff Maximum ad valorem Share of nonad valorem tariff lines European Communities 5.8 75.0 40.8 5.9 75.0 39.9 United States 6.9 350.0 49.6 5.1 350.0 1.4 Japan 6.9 62.0 22.7 7.3 50.0 22.6 Canada 3.5 238.0 26.0 3.1 238.0 20.1 Korea, Republic of 52.9 887.0 4.8 42.1 897.0 3.0 India 114.5 300.0 0.3 36.9 182.0 0.3 Thailand 35.5 226.0 45.5 29.0 65.0 3.3 Suriname 19.9 20.0 0.0 23.5 50.0 43.6 Jamaica 97.4 100.0 0.3 15.9 75.0 0.1 Guyana 100.0 100.0 0.0 20.1 100.0 0.0 Benin 61.8 100.0 0.0 14.5 20.0 0.0 Nigeria 150.0 150.0 0.0 53.9 150.0 0.3 Zambia 123.3 125.0 0.0 18.8 25.0 0.0 Source: World Trade Report 2004, WTO 24

Tariff Quotas Current and Minimum Access Opportunities 3% - 5% of domestic consumption Low tariff for limited volumes Tariff rate 60% Out-of of-quota duty 20% In-quota duty Quota volume Imports (MT) 25

Tariff Quotas but... 100 80 60 40 20 0 % Domestic consumption Minimum / Current Access Fill rate - 60% Tariff quota TQ fill 26

The rules The methods Applied tariffs First-come, first-served Licence on demand Historical importers Producer groups Imports by STEs Auctioning Other TQ Administration Possible causes for TQ underfill? 27

Special Safeguard Additional import duty on over-quota imports, temporarily, if: Tariffication SSG in Schedule Volume or price triggers (notification) Volume-based SSG Trigger: import surges Extra duty: 1/3 of applied rate Price-based SSG Trigger: price falls Extra duty depends on price 28

Negotiations Objective substantial improvements in market access Technical elaboration of modalities for further commitments Tariffs Tariff quotas TQ administration Importing STEs Other market access issues 29

Tariffs Main issues Tariff reductions Average and minimum cut UR formula Harmonizing formula Swiss formula a*t/(a+t) Tariff band approach Other methods: request and offer, zero-for-zero Tariff peaks and escalation, forms of tariffs S&D: Special Products (objective criteria or self-designation; tariff reductions) Trade preferences Preference erosion Tropical and diversification products Fullest liberalization of trade 30

UR Formula vs. Swiss Formula 31

Tariff Quotas Main issues Tariff quota expansion Expand by x% (e.g. 20%) Current TQ = 100 t New TQ = 120 t Expand by y% (e.g. 6%) of domestic consumption Current TQ = 100 t, Domestic consumption = 2000 t New TQ = 100 t + 120 t Expand to z% (e.g. 15%) of domestic consumption Current TQ = 100 t, Domestic consumption = 2000 t New TQ = 2000*15% = 300 t In-quota tariff reduction S&D: Duty-free access for key products; Special Products no TQ expansion TQ administration 32

Special Safeguard Main issues Current SSG Retain Abolish and when Special Safeguard for developing country Members: What products What measures (price-based, volume-based) What about other developing country Members 33

Framework modalities Tariff reduction - Tiered formula 1 Principles Tariff reductions from bound rates All Members, except LDCs, to contribute Deeper cuts for higher tariffs; flexibilities for sensitive products; substantial improvements in market access for all products 2 3 Thresholds and type of tariff reductions to be negotiated Tariff cap? 4 bands for tariff cuts - agreed at Hong Kong 34

Tariff Reductions Proposals: Developed Country Members Bands ACP G-10 EC G-20 US Levels cuts Levels cuts Levels cuts Levels cuts Levels cuts A 0-20 23% 0-20 27% 0-30 35% 0-20 45% 0-20 55-65% B 20-50 30% 20-50 31% 30-60 45% 20-50 55% 20-40 65-75% C 50-80 35% 50-70 37% 60-90 50% 50-75 65% 40-60 75-85% D 80+ 42% 70+ 45% 90+ 60% 75+ 75% 60+ 85-90% Other Average reduction: 36% More flexibility in each band: some tariff could be cut more deeply to allow others to be reduced less in the same band Flexibilities in the band A of between 20-45% Average reduction: 54%. 35

Tariff Reductions Proposals: Developing Country Members Bands ACP G-10 EC G-20 US Levels cuts Levels cuts Levels cuts Levels cuts Levels cuts 1 2 0-50 50-100 15% 20% 0-30 30-70 0-30 30-80 25% 30% 0-30 30-80 25% 30% 0-20 20-40 slightly less than cuts for developed countries 3 100-150 25% 70-100 80-130 35% 80-130 35% 40-60 4 150+ 30% 100+ 130+ 40% 130+ 40% 60+ Other Maximum average cut: 24% Low ceiling bindings Maximum average cut: 36%. 36

Sensitive products 1 Number of sensitive tariff lines - to be negotiated 2 Substantial improvement will apply to each product 3 Tariff quota commitment + tariff reduction 4 Base for tariff quota expansion criteria to be developed 37

Tariff Quota Fill - 2002 Average fill rate (%) 100 90 80 70 60 50 40 30 20 10 0 EC US Japan Thailand Barbados Morocco Colombia 91 54 20 23 36 67 67 Numer of tariff quotas Data for Barbados are for 2000. 38

Special Products and SSM Special Products Selection: appropriate number Treatment: more flexible treatment Special Safeguard Mechanism Selection Trigger Remedy Duration 39

Other flexibilities LDCs: Access to all S&D provisions No reduction commitments Developed Members, and developing country Members in a position to do so, should provide duty-free and quota-free access for LDCs Duty-free quota-free access for at least 97% of products from LDCs - agreed at Hong Kong Concerns of recently acceded Members - to be addressed 40

Preferential Schemes Para. 16 of TN/AG/W/1/Rev.1 Maintain, to the maximum extent technically feasible, the nominal margins of tariff preferences Exception to the tariff reduction modality: - Longer implementation (by the preference-granting Members) of tariff reductions affecting long-standing preferences in respect of products which are of vital export importance for developing country beneficiaries - First instalment of the reduction deferred to year [3] of implementation Products concerned - to account for at least [20] per cent of the total merchandise exports of any beneficiary Interested beneficiaries to notify the Committee on Agriculture, Special Session and submit relevant statistics In-quota duties for these products - to be eliminated Preference-providing Members to undertake targeted technical assistance to support preference-receiving countries in efforts to diversify their economies and exports 41

Other elements Reduction/elimination of in-quota tariffs Improvements in TQ administration Tariff escalation to be addressed Tariff simplification, special agricultural safeguard (SSG) remain under negotiation 42

S&D 1 Lesser tariff reduction or TQ expansion commitments 2 Flexibility to designate Special Products to address food security, livelihood security & rural development needs 3 Special Products eligible for more flexible treatment 4 5 6 Special Safeguard Mechanism (SSM) Fullest liberalization of trade in tropical and diversification products to be addressed Erosion of trade preferences - to be addressed (reference - paragraph 16 of TN/AG/W/1/Rev.1) 43

Tariff Reduction Proposal: Chairman Crawford TN/AG/W/4/Rev.2; 19 May 2008 Bands Developed cuts in 5 instalments (Average cut - 54%) Developing cuts in 8 instalments (Average cut 36%) Levels cuts Levels cuts 1 0-20 50% 0-30 33.3% 2 20-50 57% 30-80 38% 3 50-75 64% 80-130 42.7% 4 75+ 66-73% 130+ 44-48.7% 44

Other Market Access Issues Chair s s Draft Modalities Sensitive Products Number: [4] [6] per cent of [dutiable] tariff lines or [6] [8] per cent where over 30 per cent of the developedcountry tariff lines are in the top band or where tariff concessions have been scheduled at the 6 digit level Developing countries can designate one-third more of tariff lines as sensitive Treatment: ⅓, ½ or ⅔ deviation from envisaged normal cuts. Thus if developed countries have to reduce their tariffs by 66%, the resulting cuts would be 44%, 33% and 22%, respectively. 45

Other Market Access Issues Chair s s Draft Modalities Tariff Quota Expansion Where ⅔ deviation is used, the TQ shall result in new access opportunities equivalent to no less than [4] [6] per cent of domestic consumption Where ½ or ⅓ deviation is used, the TQ shall result in new access opportunities equivalent to no less than [3.5][5.5] and [3][5] per cent of domestic consumption, respectively Members can choose to designate more sensitive products (by 2 percentage points 6% or 8%). In that event, additional access of 0.5% of domestic consumption has to be granted Where a Member has more than 4% of its tariff lines in excess of 100%, it shall, for all its sensitive products, apply a further expansion of [0.5%] of domestic consumption Tariff Simplification Bound in-quota tariffs and TQ administration strengthened disciplines 46

Special Products Other Market Access Issues Chair s s Draft Modalities Minimum entitlement of 8 per cent of tariff lines / a maximum entitlement of 20 per cent If maximum entitlement is 20%, then 8% would be minimum and not subjected to the agreed indicators food security, livelihood security and rural development Eligibility for no cuts two options 40% of the designated products (8% out of the maximum 20%) or no exemption at all Treatment for remaining tariff lines A minimum cut of 12% and a maximum cut of 20% of each tariff line Overall average cut should be 15% SVEs and RAMs Flexible treatment 47

Other Market Access Issues Chair s s Draft Modalities Special Agricultural Safeguard (SSG) Developed-country Members not to have the right to use SSG Reduction to 1.5% of scheduled tariff lines the number of tariff lines eligible for SSG Developing countries - to be reduced to no more than 3 per cent Terms and conditions of the SSG to remain unchanged from the URAA terms and conditions. However, tariff rates to be updated to reflect Doha outcome 48

Other Market Access Issues Chair s s Draft Modalities Special Safeguard Mechanism (SSM): To be available for all products in principle. However, not to be invoked for more than [3][8] products in any given 12-month period TRIGGERS: Both price and volume-based SSM will be available. The two may not be imposed at the same time. Neither can any one of them be imposed in respect of a product which is the subject of a safeguard measure, including under Art 5 of the AoA, an anti-dumping or countervailing measure Detailed rules on volume and price triggers and their remedies 49

TROPICAL PRODUCTS Annex G Deeper tariff cuts [Where the scheduled tariff is less or equal to 25% ad valorem, it shall be reduced to zero [Where the scheduled tariff is greater than 25% ad valorem, the applicable tariff cut shall be 85%] [Where the scheduled tariff is greater than or equal to 10%, the applicable tariff cut shall be [66][73]%], except for tariffs in the top band, which shall be reduced by the tariff escalation tariff cut for that band increased by 2% [Where the scheduled tariff is less than 10%, it shall be reduced to zero] [Tropical products shall not be designated as sensitive] [Implementation by developed-country members in 4 equal instalments] Developing countries in a position to do encouraged to do more 50

PREFERENCE EROSION Annex H [No tariff cuts on the items listed in Annex for 10 years Tariff cuts to be implemented thereafter over 5 years in equal instalments] [Where a product is listed in the Annex and the ff conditions are met, the implementation period will be 10 years (8+2) [the pre-doha MFN tariff is greater than 10% ad valorem] [the total value of trade over a 3 year representative period is greater than $50,000 or constitutes [3]% of the long standing preference-receiving country s total agricultural trade to the market concerned] [there is unlimited long-standing preference eligibility in the market concerned] Provisions to prevail where there is overlap with provisions on tariff escalation / tropical products Targeted technical assistance 51

TARIFF ESCALATION [Tariffs on processed products to be reduced more steeply. Instead of taking the cut that would otherwise apply to final bound tariffs in the band to which the processed product belongs (with the exception of the top band), the processed product shall take the cut applicable to tariffs that fall in the next highest band [Products falling in the top band to be reduced by a cut that would otherwise have been applicable according to the tiered formula increased by 6 ad valorem points] Supplementary cuts to be moderated in two situations: First, where the absolute difference between the processed and primary product after the application of the normal tariff formula would be 5 ad valorem percentage points or less in any given tier except the bottom tier no additional tariff escalation adjustment to be required Second, the application of adjustment formula should not lead to a higher tariff on the primary product than the processed product 52

COMMODITIES Where problems persist after the application of the formula, including the tariff escalation adjustment formula, Members are to engage with commodity-dependent producing countries to ensure satisfactory solutions Identification of products for the purpose of applying the tariff escalation formula specific targets; non-ad valorem duties to be converted and bound Elimination of NTBs Joint action intergovernmental commodity agreements etc 53

LDCS LDCs: No reduction commitments DFQF 100% : By 2008 or the start of the implementation period; where there are difficulties, 97% at the beginning to be increased gradually to 100% Developing countries in a position to do so encouraged to grant DFQF phase in of commitments Cotton Market Access: DFQF for LDCs 54

SVEs The term SVEs to apply to Members with economies that, in the period 1999 to 2004, had an average share of: World merchandise trade of no more than 0.16% or less World trade in non-agricultural products of no more than 0.1% World trade in agricultural products of no more than 0.4% SVEs could moderate the two-thirds cut by developing countries by a further 10 ad-valorem points in each band Flexibility in the designation of special products SVEs can deviate from the tiered formula cut for as many tariff lines as they choose to designate as SPs provided they meet the overall average cut of 24% Products designated as SPs need not be subject to a minimum tariff cut nor designation be guided by the indicators 55

RAMs Entitled to moderate tariff cuts in the top 2 bands by 10 ad-valorem percentage points and by 5 ad valorem percentage points in the bottom two bands Saudi Arabia, Macedonia, Vietnam and Tonga exempted from undertaking cuts For other RAMs, where there is an overlap between accession commitments and commitments associated with modalities, the start of the IP shall be one year after the end of the accession commitment Implementation period shall be 10 years (8+2) Flexibility in the designation of special products one tenth greater than the amount to be designated by developing countries. Relevant cust for the designated tariff lines may be further reduced by 2 ad-valorem points 56

Domestic Support

Domestic Support - Outline Current disciplines Green Box Blue Box Article 6.2 Development Programmes Amber Box The Framework and the negotiations 58

The Boxes Green Box Annex 2 Blue Box Article 6.5 No more than minimally trade or production distorting Production-limiting programmes Article 6.2 Measures Amber Box Development programmes: investment, input, diversification Subject to reduction commitments De minimis allowance 59

How much domestic support? 300 250 200 US$ Billion 150 100 50 0 1995 2001 Canada 3.0 3.0 Norway 3.3 2.5 Brazil 5.5 2.8 Switzerland-Liecht. 5.9 3.8 Korea 8.3 6.5 Japan 69.6 26.7 US 60.8 72.1 EC 116.9 75.6 Data for Korea are for the year 2000. 60

Categories of support - 2001 90,000 75,000 60,000 45,000 Million US$ 30,000 15,000 0 EC US JPN KOR CHE BRA NOR CAN Current Total AMS 35,151 14,413 5,328 1,495 1,632 0 1,187 1,791 De minimis 773 7,045 257 463-976 - 164 Blue Box 21,231-728 - - - 813 - Article 6.2 - - - 45-332 - - Green Box 18,489 50,672 20,355 4,469 2,190 1,462 480 1,088 Data for Korea are for the year 2000. 61

Green Box No, or at most minimal, trade-distorting effects or effects on production Basic criteria Assistance: - Provided through publicly funded government programme - Not involving transfers from consumers - Not resulting in price support to producers 62

Green Box Scope General services, including: research pest and disease control training extension/advisory services inspection marketing and promotion infrastructural services Public stockholding for food security purposes Direct payments, including: decoupled income support income insurance and income safety-net relief from natural disasters structural adjustment assistance producer retirement resource retirement investment aids environmental programmes regional assistance programmes Domestic food aid 63

Policy-specific decoupling X Amount of payments X Type of production Volume of production Domestic prices International prices Factors of production In any year after the base period 64

Blue Box Direct payments under production-limiting programmes exempt from reduction if: based on fixed area and yields; or made on 85% of base level of production; or livestock payments are made on a fixed number of head 65

Article 6.2 Development programmes exempt from reduction: investment subsidies generally available to agriculture input subsidies generally available to low-income or resource poor producers support to encourage diversification from growing illicit narcotic crops 66

Amber Box Sample Scheduled Reduction Commitment Schedule LXXIX - THAILAND PART IV - AGRICULTURAL PRODUCTS: COMMITMENTS LIMITING SUBSIDIZATION (Article 3 of the Agreement on Agriculture) SECTION I - Domestic Support: Total AMS Commitments BASE TOTAL AMS Years of implementation Annual and final bound Relevant Supporting Tables and (million Baht) 1995-2004 commitment levels document reference (million Baht) 1 2 3 22,126.18 1 21,816.41 AGST/THA 2 21,506.64 Supporting Tables 4, 5, 8 and 9 3 21,196.87 4 20,887.10 5 20,577.33 6 20,267.56 7 19,957.79 8 19,648.02 9 19,338.25 10 19,028.48 What if there is no commitment? - Article 7 67

AMS Reduction Commitment % cut in aggregate terms Implementation period DEVELOPED 6 years 1995-2000 DEVELOPING 10 years 1995-2004 Cut in Total AMS -20% -13.3% De minimis allowance 5% 10% No reduction commitments for LDCs 68

80 EC and the CAP Reform 60 Euros Billion 40 20 0 1995 1996 1997 1998 1999 2000 2001 2002 2003* Green 18.8 22.1 18.2 19.2 21.9 21.8 20.7 20.4 22.1 Blue 20.8 21.5 20.4 20.5 19.8 22.2 23.7 24.7 24.8 Amber 50.0 51.0 50.2 46.7 47.9 43.7 39.3 28.5 30.9 WTO limit 78.7 76.4 74.1 71.8 69.5 67.2 67.2 67.2 67.2 * This notification covers support to the European Union after enlargement on 1 May 2004. Price gap calculations are performed on EU25 production levels for a 12 month period and include direct payments to 25 member States. Total AMS commitment level for 2003 ( 67,159 million) is without prejudice to the EC25 commitment to be presented in the new EC25 schedule after enlargement. 69

US and the Farm Bill 60 50 US$ Billion 40 30 20 10 0 1995 1996 1997 1998 1999 2000 2001 Green 46 51.8 51.3 49.8 49.7 50 50.1 Blue 7 0 0 0 0 0 0 De minimis 1.6 1.2 0.8 4.8 7.4 7.3 7 Amber 6.2 5.9 6.2 10.4 16.9 16.8 14.4 WTO limit 23.1 22.3 21.5 20.7 19.9 19.1 19.1 70

Calculating the Current Total AMS Market price support Non-exempt direct payments (e.g. loan deficiency payments, grants, compensatory payments) Other non-exempt measures All product-specific EMS Water subsidies Fertilizer subsidies Crop insurance Subsidized credits Product-specific support + Non-product-specific support De minimis allowance Current Total AMS 71

Negotiations Objective substantial reductions in trade-distorting domestic support Technical elaboration of modalities for further commitments The Boxes S&D elements 72

The Boxes Main issues Green Box Cap/reduce or maintain without limits Tighten or relax criteria Expand scope to address: NTCs, developing country concerns Blue Box should it stay or should it go? Article 6.2 further flexibilities to pursue targeted development needs Amber Box Reduce or eliminate AMS Maintain, reduce or increase de minimis Establish specific flexibilities (S&D, economies in transition, recently acceded Members) Key issue - Size of cuts 73

Framework modalities - Overall trade-distorting distorting domestic support Overall reduction Base level Tiered formula, with 20% downpayment in the first year of implementation Final Bound Total AMS Permitted de minimis (half product specific and other half non-product specific) + + Agreed Blue Box level Deeper cuts for higher levels of support 74

OTDS - Proposals and main issues Members proposals Tier 1 (EC) Tier 2 (Japan and US) Tier 3 (Other Members with Total AMS) EC 70% 60% 50% US 75% 53% 31% G20 80% 75% 70% G10 75% 65% 45% Developing country Members (all in tier 3) to make lesser reductions over a longer implementation period. Main issue - Size of cuts 75

Framework modalities Trade-distorting distorting domestic support Individual elements Final Bound Total AMS tiered formula Product-specific AMS caps - average level to be agreed - base period to be agreed Reduction in de minimis Capping of the Blue Box 76

Final Bound Total AMS Proposals and main issues Members proposals Tier 1 (EC) Tier 2 (Japan and US) Tier 3 (Other Members) EC 70% 60% 50% US 83% 60% 37% G20 80% 70% 60% G10 70% 60% 40% Developing country Members (all in tier 3) to make lesser reductions over a longer implementation period. Main issues: - Size of cuts in Final Bound Total AMS - Base period for product-specific AMS caps (1999-2001 or 1995-2000) 77

Hong Kong Ministerial Declaration Trade-distorting distorting domestic support Bands for reductions Member with highest level of support Members with 2nd and 3rd highest levels of support Other Members Developed country Members in lower bands with high relative level of Final Bound Total AMS to make an additional effort Developing country Members with no AMS commitments exempt from reductions in de minimis and the overall cut Higher linear cuts in higher bands 78

De minimis Reduction in de minimis (by 50% or 80% or such reduction as to adjust to the rate of cut in OTDS) S&D: Developing countries that allocate almost all de minimis support for subsistence and resource-poor farmers will be exempt from reduction Use of de minimis - 2001 % of value of agricultural production 4.0 3.0 2.0 1.0 0.0 EC US JPN KOR CHE BRA NOR Product-specific Non-product-specific Data for Korea are for the year 2000. 79

Blue Box Direct payments under: - production-limiting programmes or - no requirement to produce - additional criteria to be negotiated Blue Box not to exceed 5% of a Member s average total value of agricultural production during an historical period % of value of agricultural production 40 35 30 25 20 15 10 5 0 Blue Box - 2001 813 mln $ 21,231 mln $ 728 mln $ 0 mln $ EC US JPN NOR 5% cap 80

Blue Box - Proposals and main issues Lower the Blue Box cap 2.5% of VOP (or less) Develop additional criteria: - non-concentration via double trigger - offsetting mechanism - other? Main issues: - how to ensure less trade-distortion - how to design effective disciplines on old and new Blue Box 81

Green Box Review and clarify criteria Ensure basic concepts, principles and effectiveness remain; take due account of non-trade concerns Strengthen monitoring and surveillance Green Box expenditure - 2001 60,000 50,000 US$ million 40,000 30,000 20,000 10,000 0 EC US JPN KOR CHE BRA NOR CAN Data for Korea for the year 2000. Main issue: what amendments should be made, if any 82

Hong Kong Ministerial Declaration Cotton All forms of export subsidies to be eliminated by developed countries in 2006 Developed countries to give duty and quota free access for cotton exports from LDCs from the start of implementation period Trade-distorting domestic subsidies to be reduced more ambitiously and implemented over a shorter period of time than generally applicable Development assistance aspects: - Consultative Framework process (bilateral donors, multilateral and regional institutions) - explore a possibility of establishing a mechanism to address income declines in the cotton sector - Director General to furnish a third Period Report at the next Ministerial Conference Follow-up and monitoring Director General to set up an appropriate mechanism High-Level Session of the Director-General s Consultative Framework Mechanism on Cotton to take place on 15-16 March 2007 in Geneva 83

1 2 S&D Longer implementation period Lower reduction coefficients for all types of tradedistorting support 3 Access to Article 6.2 Development programmes 4 De minimis support for subsistence and resource-poor farmers exempt from reduction 84

Chairman s s Draft Modalities- TN/AG/W/4/Rev.2 Base overall trade-distorting domestic support (OTDS) shall be the sum of: (i) final bound total AMS; (ii) 10% of value of production in the 1995-2000 base period representing 5% for product-specific support and 5% for non-product specific support; for developing countries 10% each: base period either 1995-2000 or 1995-2004 (iii) the higher of average Blue Box payments or 5% of the average total value of production (1995-2000) Thus for some developed countries, the base level would be Amber box commitment plus 15% of production 85

Bands Chair s s Proposed Draft Modalities - OTDS Range Proposed Cuts 1 - EC $60 billion [75] [85] % 2 US and Japan $10 billion and 60 billion [66] [73] % 3 Others Developed and Developing $10 billion [50] [60] % 86

DOMESTIC SUPPORT Chair s s Draft Modalities Under the Chairman s proposal, US OTDS will be reduced from $48.2 billion to between $13 and $16.4 billion. Under its own proposal, it will be reduced to $22.5 billion According to the recent notification by the US, its payments on OTDS amounted to $ 16.3 billion in 2002, $10.2 billion in 2003, $18.1 billion in 2004 and $18.9 billion in 2005 Estimated that because of high commodity prices last year, the US payments on OTDS amounted to $11 billion. Figure not confirmed by the US 87

DOMESTIC SUPPORT Chair s s Draft Modalities The EC s current ceiling is estimated at 110.3 billion ($152 billion). Cut will bring the ceiling down to 27.6 billion or 16.5 billion Japan expected to do more, as its overall support is more than 40 per cent of the total value of its agricultural production a cut halfway between the cuts of the top and the second tiers 88

DOMESTIC SUPPORT Chair s s Draft Modalities Implementation period and staging: Developed countries: six steps over 5 years. For the EC, US and Japan, the base OTDS will be reduced by one-third on the first day of implementation and the remainder to be reduced in five equal instalments For developed Members in the third tier, the base OTDS will be reduced by 25 per cent on the first day of implementation and the remainder to be reduced in five equal instalments Developing countries with no Final Bound Total AMS commitments exempted from undertaking reduction commitments with respect to their base OTDS. Those with AMS commitments will undertake twothirds of the reduction made by developed countries Reductions by developing countries shall be implemented in nine steps over 8 years. The base OTDS shall be reduced by 20 per cent on the first day of implementation and the remainder in eight equal instalments RAMs which recently acceded exempted, so also are small lowincome RAMs with economies-in-transition. For other RAMs, treatment comparable to that of other developing countries twothirds cut and a transitional period of 8 years 89

Chair s s Proposed Draft Modalities - AMS Bands Range Proposed Cuts 1 $40 billion [70] % 2 $15 billion and 40 billion [60] % 3 $15 billion [45] % 90

Domestic Support Chairman s s proposals Under the Chairman s proposal, the amber box limit of the EC will be reduced from 67.1 billion ($92.5 billion) to 20.1 billion The amber box limit of the US will be reduced from $19.1 billion to $7.6 billion Developed countries whose Amber Box support is more than 40% of the value of their agricultural production to make a bigger cut, i.e. a cut halfway between the cut of their tier and the tier above According to figures provided by the US, AMS payments for 2002, 2003, 2004 and 2005 were $9.6 billion, $6.9 billion, $11.6 billion and 12.9 billion, respectively. Brazil and Canada are alleging in the dispute settlement proceedings that the US exceeded its WTO limits for most of these years, a claim the US denies. 91

Domestic Support Chairman s s proposals Implementation period and staging: The EC, US and Japan to cut 25% from the start. All other cuts to be made over 5 years in 5 equal instalments For other developed countries, reductions to be implemented in six equal instalments over 5 years, commencing on the 1 st day of implementation Developing countries expected to reduce their support by two-thirds of the formula cut. Implementation in nine equal instalments over 8 years, commencing on the 1 st day of implementation RAMs which recently acceded exempted from cuts, so also are small low-income RAMs with economies-in-transition. Some allowed to exclude investment subsidies from Amber Box calculations. Other RAMs to make two-thirds of the normal cut 92

Domestic Support PRODUCT-SPECIFIC AMS CAPS average applied during the UR implementation period (1995-2000) For the US average between 1995-2004 and 1995-2000 S&D for developing countries base period (1995-2000 or 1995-2004) DE MINIMIS: to be reduced by [50] [60] per cent by developed countries i.e. cap at 2.5 or 2 per cent of the value of production S&D for developing countries: some exempted, others to make two-thirds of the cuts of developed countries BLUE BOX: maximum permitted value not to exceed 2.5 per cent of the average total value of agricultural production Lesser cut if over 40% of Member s support placed in the blue box Deeper cut in AMS support for cotton 93

Export Competition and the Marrakesh NFIDC Decision

Export Competition - Outline Current disciplines Export subsidies Anti-circumvention Export prohibitions and restrictions The Framework and the negotiations The Marrakesh NFIDC Decision 95

Definition Export Subsidies Article 1(e): Subsidies contingent upon export performance, including the export subsidies listed in Article 9 Legal Framework Export subsidies allowed only if listed in the Schedule and subject to reduction commitments (volume and budgetary outlays) Roll-over provisions (now expired) S&D: subsidies for marketing and internal transport (during the implementation period) Anti-circumvention provisions 96

Policy Coverage - Article 9.1 Direct subsidies contingent on export performance Sale or disposal for export by governments or their agencies of non-commercial stocks at prices below domestic market price Payments on exports financed by government action (including producer financed subsidies) Subsidies to reduce cost of marketing, including handling, upgrading, international transport and freight Favourable internal transport and freight charges on export shipments Subsidies on agricultural products contingent on their incorporation in exported products 97

Export Subsidies Implementation period DEVELOPED 6 years 1995-2000 DEVELOPING 10 years 1995-2004 Cut in budgetary outlays Cut in subsidized quantities -36% -24% -21% -14% No reduction commitments for LDCs 98

Members with Scheduled Reduction Commitments Number of products Australia (5) Bolivarian Republic of Venezuela (72) Brazil (16) Bulgaria (44) Canada (11) Colombia (18) Cyprus (9) Czech Rep. (16) EC (20) Hungary (16) Iceland (2) Indonesia (1) Israel (6) Mexico (5) New Zealand (1) Norway (11) Panama (1) Poland (17) Romania (13) Slovak Rep. (17) South Africa (62) Switzerl-Liecht. (5) Turkey (44) United States (13) Uruguay (3) 99

3,000 Export Subsidy Expenditures 2000 2,500 2,509 2,000 US$ Million 1,500 1,000 500 0 189 55 0 17 45 0 EC US Japan Korea Switz-Liech. Norway Brazil But what about the Panels? 100

Export Subsidies Article 10 to prevent circumvention of export subsidy commitments Other forms of export subsidies Export credits, insurance and guarantees Develop internationally agreed disciplines But... negotiations with no result - OECD Arrangement on Officially Supported Export Credits does not cover agriculture Food aid Specific criteria, Food Aid Convention, FAO But... is it always genuine aid or dumping? Other ways to evade commitments? - Taxes, production quotas - Domestic support - Other 101

Export Prohibitions and Restrictions Article XI.1(a) of GATT provision for the temporary application of an export prohibition or restriction Article 12 of the AoA when applying GATT Article XI.2(a): Give due consideration to impacts on importing Members food security Advance written notice, consultations on request Not applicable to developing countries which are not net exporters of the specific foodstuff concerned 102

Negotiations Objective reductions of, with a view to phasing out, all forms of export subsidies Technical elaboration of modalities for further commitments Export subsidies Export credits, insurance and guarantees Food aid Exporting STEs Export restrictions and taxes 103

Main issues Reduce/eliminate export subsidies Parallel elimination of all forms of export subsidies: Export credits, insurance and guarantees - Reduction commitments vs. rules-based approach; Disciplines in favour of LDCs and NFIDCs Food aid - Genuine aid vs. surplus dumping; Need declaration vs. response to an appeal; Concessional vs. grant form State trading enterprises - Tackle the enterprises or specific measures Export restrictions and taxes - Reduce/eliminate export restrictions; Export taxes not for negotiation? Key issue End export subsidies at a date certain 104

Framework modalities Credible end e date Parallel elimination of: Export subsidies Export credits, guarantees & insurance with repayment periods > 180 days Export credits, guarantees & insurance with repayment periods 180 days which are not in accordance with disciplines to be agreed Trade-distorting elements of export STEs Food aid that is not in conformity with operationally effective disciplines to be agreed Implementation - Annual instalments 105

1 2 3 4 S&D Longer implementation periods Access to Article 9.4 (marketing & transportation subsidies) Disciplines on export credits, guarantees or insurance programmes - provision for differential treatment in favour of LDCs and NFIDCs STEs - Special consideration for maintaining monopoly status 106

Hong Kong Ministerial Declaration Parallel elimination of all forms of export subsidies 2013 Substantial part to be eliminated by the end of the first half of the implementation period Disciplines: Export credits, insurance and guarantees 180 days - Should be self-financing, reflecting market consistency and of sufficiently short duration so as not to effectively circumvent real commercially-oriented discipline Food aid - Safe box for bona fide food aid in emergency situations - Eliminate commercial displacement via effective disciplines on in-kind food aid, monetization and re-exports State trading enterprises - Disciplines to also cover future use of monopoly power Access to Article 9.4 for developing country Members for five years after the end-date for elimination of all forms of export subsidies 107

Export Competition Chair s Draft ModalitiesTN/AG/W/4/rev1 Elimination of all forms of export subsidies by 2013. Budgetary outlays- 50% reduction by 2010 and the rest in equal instalments Reduction commitments also on quantity of exported products S&D for developing countries - 2016 Developing countries to benefit from the provisions of Article 9.4 until 5 yrs after the end of the implementation period Proposed strengthened disciplines on agricultural exporting STEs and international food aid Elimination of all forms of export subsidies for cotton... 108

The Marrakesh NFIDC Decision Recognize possible negative effects of reform programme: availability of adequate food supplies from external sources, on reasonable terms short-term difficulties in financing normal levels of commercial imports WTO list of NFIDCs: Least-developed countries (UN list) plus Barbados, Bolivarian Republic of Venezuela, Botswana, Côte d'ivoire, Cuba, Dominica, Dominican Republic, Egypt, Gabon, Honduras, Jamaica, Jordan, Kenya, Mauritius, Mongolia, Morocco, Namibia, Pakistan, Peru, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Sri Lanka, Trinidad and Tobago, Tunisia 109

The Marrakesh NFIDC Decision Food aid: review by the Committee on Agriculture new Food Aid Convention 1999 extended to 30 June 2007 notifications (quantity and concessionality) Consideration given to requests for assistance to improve agricultural productivity and infrastructure Export credits (negotiations ongoing) Short-term difficulties in financing commercial imports of basic foodstuffs - access to resources of international financial institutions, e.g. IMF and the World Bank 110

The Marrakesh NFIDC Decision Inter-agency Panel of finance and commodity experts from IMF, World Bank, FAO, IGC, WTO explore ways for improving access to multilateral programs and facilities to assist with short-term difficulties in financing normal levels of commercial imports of basic foodstuffs Discussions in the Committee on Agriculture concept and feasibility of proposal to establish an ex-ante financing mechanism May 2003 - Round-table of experts to: explore the need for a safety net identify appropriate mechanisms Recommendations for the IFIs and the Committee on Agriculture 111