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Agriculture Summary Papers Links

Agriculture Summary

When the Cancun Ministerial Conference collapsed in September 2003, WTO members had made no progress in agriculture negotiations. Decisions on major issues such as export subsidies, trade access, and domestic support hang in the balance as trade delegates scramble to get negotiations back on track. The Chairman of the General Council has renewed negotiations through a series of General Council meetings in Geneva in which trade delegates will plan the timely conclusion of the Doha Round that was initially set for 2005.

Cancun and Beyond

Instead of bringing delegates closer to an agreement, they seemed more polarized than ever at the Ministerial Conference. Leading up the meeting, developing countries and agriculture exporting countries, such as the Cairns Group, demanded that developed nations move to liberalize their markets by phasing out export subsidies and massive domestic supports, both of which distort trade in agriculture products. The developed countries, specifically the US, EU, and Japan, are reluctant to remove these supports because of concerns for the social and environmental consequences of an open agriculture market. Particularly in the US and EU, the trade representatives also face pressure from strong agriculture lobbies who oppose the removal of the subsidies and supports that are the lifeline of the farming industry in those countries.

At Cancun, the US and EU tabled the Derbez Proposal (that called for gradual reforms), but it was rejected by developing countries as not progressive enough. The G-20+, a negotiating bloc of developing countries, circulated an alternative proposal that prescribed a more aggressive set of deadlines and methods for phasing out subsidies and supports. However, the talks ended before they could officially introduce this proposal.[1] Now, trade representatives have the difficult task of renewing negotiation efforts if they want to make any progress on agriculture during this trade round. First and foremost, they will need to come to a consensus on which proposal to work with before negotiations can proceed.

The Legacy of the Agreement on Agriculture (AoA)

The 1994 Agreement on Agriculture (AoA) laid the groundwork for agriculture negotiations in the Doha Round. The AoA was one of the major achievements of the Uruguay Round of multilateral trade negotiations: it was the first agreement to impose strict disciplines on agricultural trade. The AoA focuses on four areas of reform: market access, domestic support, export competition, and sanitary/phytosanitary issues. Under the agreement, members commit themselves to reducing import tariffs, export-promoting subsidies, and total aggregate support to agricultural producers. The agreement also takes into account the particular needs and conditions developing countries face and allows them a more gradual course of liberalization. The AoA exempts rural development programs and development-oriented domestic support when calculating total aggregate support, thus allowing countries to maintain certain subsidies and supports during the process of liberalization.

Another legacy of the AoA is the ‘Peace Clause,’ which protects the US and EU from being challenged by other WTO members on certain subsidies that could be seen as violating WTO rules. Since the clause expired in December 2003, members will be able to file suit against nations that have ‘trade distorting’ subsidies in place. The US and EU had hoped to extend the ‘Peace Clause’ at Cancun, but the talks ended before they had a chance to negotiation on this issue.[2]

Agriculture Subsidies

In June 2003, the EU took a step towards liberalizing trade in agriculture by approving reforms to its Common Agriculture Policy (CAP). Prior to these reforms, the CAP provided European farmers with market price supports, direct payments, and rural development schemes aimed at raising the standard of living of agriculture workers, ensuring adequate food supply, and adopting measures toward environmentally sustainable farming.[3] The reforms are geared toward severing the tie between production and farm subsidies that have been the most trade distorting, while still allowing for support for the farming sector through other kinds of payments. However, the reforms also call for gradual phasing-out of all direct payments, particularly in areas like tobacco and sugar that were previously protected under CAP.[4]

The US and Japan how no signs of compromise on agriculture subsidies. In fact, US added more subsidies when it passed the 2002 Farm Bill that increased government aid to agriculture by 80%. Although the US argues that this aid falls within the WTO limit on US subsidies, most countries agree that the bill violates the spirit of the Agreement on Agriculture.[5]WTO members have also complained about Japan’s exceptionally high tariffs it places on certain agriculture goods, such as rice. These goods may have tariffs of several hundred times their selling price imposed upon them. Both nations seeming unwillingness to compromise has slowed the progress of agriculture in the Doha Round.[6]

Linkages between Agriculture and other Issues

In the heated weeks before Cancun, many developing countries and even developed nations began to imply that they are linking progress in agriculture negotiations to the outcome of investment talks. The EU has repeatedly stressed that the Doha round is a ‘single undertaking,’ a WTO principle that all members must agree on all issues for the Round to succeed. Its strong words against removing investment sends the subtle message to other WTO members that concessions in agriculture will only come when investment talks begin. Developing countries, such as Thailand and Chile, have implied that they will hold out on investment negotiations until developed countries propose a more aggressive agriculture agreement.[7] Not only does this linkage put undue pressure on both agriculture and investment negotiations, it undermines the multilateral framework of the WTO. It also calls into question the principle of ‘single undertaking’ in the WTO if the principle enables members to hold the trade round hostage until they get the concessions they want. Similarly, the US and EU have made the extension of the ‘Peace Clause’ a pre-condition for renewing negotiations, while the developing world refuses to agree to an extension before negotiations resume.[8]

Implications for the WTO as an Institution

The WTO may reach a consensus despite the polarization and stalemate of agriculture negotiations, but there is more at stake for the WTO as an institution. As multilateral negotiations get bogged down, member nations find it easier and in their best interest to turn to regional and bilateral agreements that weaken and bypass the WTO. Furthermore, on sensitive issues, developing countries that are negotiating regional agreements with developed nations are relying on multilateral rules to defend their special needs. For example, without further agriculture liberalization through the WTO, the US will retain its subsidies and supports in the Free Trade Area of the Americas, which would drastically reduce the benefit of the agreement for Latin American countries. Lastly, agriculture negotiations in the WTO is a clear example of increasing polarity in the WTO. Divisions between developed and developing countries, food exporting and food importing countries, regional blocs, and political allies threaten to deadlock the Doha round. If this rift cannot be bridged, it could potentially make the WTO obsolete.

For information on other aspects of the AoA, such as Biotechnology and Sanitary/Phytosanitary Issues, please visit the following Issue Summary sections of this website:

Biotechnology

Sanitary and Phytosanitary Issues

[1,8]“WTO Agriculture Negotiations: Perplexity on all sides” BRIDGES Weekly Trade Digest, Vol. 7, Number 31, 25 Sept. 2003

[2]"Ditching the peace," The Economist Global Agenda, January 1, 2004.

[3]Common Agricultural Policy (CAP): From Creation to the Present Day

[4]“EU Policies: The CAP, Natural Resources, and Illegal Logging,” BRIDGES Trade BioRes Weekly, Vol. 3, Number 18, 16 October 2003

[5]“WTO may demand U.S. rewrite farm bill,” Associated Press, 13 September 2003.

[6]“WTO on a sticky wicket against Japan’s rice bowlers,” The Age, 12 September 2003.

[7]“Singapore Issues: Staunch Opposition,” BRIDGES Weekly Trade News, Vol. 7, Number 28, 21 August 2003 and “Third World Network Info: WTO decision process criticized,” TWN Info Service on WTO Issues, 17 June 2003.

Last updated January 2004