wto agreements regarding agriculture

Training session - Vietnamese agriculture and WTO - Hanoi - sept. 2005 1

WTO agreements regarding Agriculture

Agreement on AgricultureAgreements on Standards

Agreement on Intellectual Property


General framework of the AoA

• Objective : to ensure a certain discipline in agricultural trade

• Means : restricting the use of agricultural policy tools having negative or distorting effects on trade.

• Came into force 1 July 1995– For 6 years (Developed countries)– For 10 years (Developing countries )

• Three pillars


Coverage of the AoA

• Relevant for agricultural products, raw and processed, including fibres (cotton, wool, silk, flax) and raw skins

• Fish products, wood, agricultural inputs are submitted to the GATT agreement (trade in goods)


General provisions for developing countries

• Developing countries : level of reduction are 2/3 level of reduction for Developed countries

• No reduction for LDCs

• More time for implementation

• Possible use of specific tools


Market access : relevant measures

• Restrict access to national markets– Tariffs barriers : custom duties

• ad valorem, or minimum custom value

– Non tariffs barriers• import quotas• variable entry levies• minimum import prices• import licenses


• Transparency– tariffication: conversion of non tariffs barriers in

custom duties (tariffs equivalents)– binding principle : tariffs bound at a certain level.

Cannot increase.

Market access: transparency


Market access : openness

• Reduction of tariffs– 36% in 6 years for developed countries– 24% in 10 years for developing countries

• Minimum import threshold for tariffied products

• 5% of the average of the internal consumption during the period of reference.


Market access exceptions• Special Safeguard clause : rapid surge in the

volume of imports, or strong fall in domestic prices, possible to add a tax of 30 % (max), for a limited period. For tariffied products only

• Other safeguard provisions in GATT – significant deterioration of the balance of payments– clearly established dumping (sale under the price in the

country of origin)– to protect a newly developing industry (infant industry)– to protect health and life of human, animals, plants


Domestic support (1)• Objective : reducing production supports with distorting

effects on trade• Classification of support into three boxes

– amber box: price support measures– blue box: aides partially discoupled and given to producers

within the framework of a production-limiting programme– green box : subsidies with minimal or no distorting effects

• government services programmes : research, extension, training, infrastructures, pest controls, food security stocks

• direct payment to producers non linked to production level or factor of production. Ex : insurance mechanism (market crisis, natural disasters)

• programmes for protection of the environment and support to less favoured areas


The Amber box• Calculation of the price support : the Aggregated measure of

support (AMS)– AMS = (Domestic price – world price) X volume of production

• Reduction of domestic support in the amber box :– minus 20% on 6 years

– minus 13,3% on 10 years for developing countries

• Exception : the “De minimis” Provision : no reduction– if the value of the support for a given products < 5 % of the total production

value of this product (10 % for DCs)– or– if the value of non product-specific support < 5% of the value of the whole

agricultural production (10% for DCs)


Other boxes (3)

• Blue box : for the EU and the US. Not compulsory to decrease, impossible to increase

• Green box : no limitation (can increase)


Exceptions for developing countries

• Following measures are not subject to reduction– agricultural investment incentives– subsidies for the input of low-income

producers– assistance to replace illicit crops

• Least developed countries are not subject to reduction commitments


Export competition• Objective : to limit export supports• Measures

– Type of support concerned by the AoA• direct export subsidies• stock sale under the domestic price• support to reduce marketing and transport costs

– AoA provided a cut in the budget and in the volume of subsidised export

• Volumes supported cut of 21% (14 % for developing countries)• Budget decreases of 36 % (24 % for developing countries)

– There is no commitment for LDCs


Classification of agricultural policy toolsMarket Export Domestic support access Competi-

tion Amber

box Blue box

Green box

Tariffs Variable entry lev-ies Mini-mum im-port price Import quotas SPS standards TBT re-quire-ments

Export sub-sidies State trad-ing company engaged in export and import Export cred-its Export of stocks under the price of domestic mar-ket Support for marketing and transport

Guaran-tee price Price added support to farmers, linked to products. Subsi-dies for inputs Support to invest-ment

Sup-port given to produc-ers within the frame-work of a produc-tion-limiting pro-gramme

Income guaranty mechanism, in case of special events (market crisis, natural disasters,…) Providing farm credit or subsiding it Inputs subsidies for poor farmers in DCs Crop insurance Expenditure on extension Expenditure on training Expenditure on research Expenditure on plant protection services Expenditure on animal health pro-tection services Expenditure on public infrastruc-ture (irrigation, drainage, slaughter house, ware house) Definition of standards Environment protection programme Food security stocks


Example for ChinaMarket Export Domestic support access Competi-

tion Amber

box Blue box

Green box

Tariffs Import quotas

State trad-ing company engaged in export and import VAT refund for exports (export under domestic price) Support for marketing and transport

De minimis provision : 8.5 ¨of the value of the produc-tion Pur-chase and storage of products

Providing farm credit or subsiding it support to poor farmers Expenditure on extension Expenditure on training Expenditure on research Expenditure on plant protection services Expenditure on animal health pro-tection services Expenditure on public infrastruc-ture (irrigation, drainage, slaughter house, ware house) Definition of standards


The Peace clause

• Most of AoA clauses are not in conformity with GATT

• The Peace clause protects this exception

• Covers a period of nine years (1995 - 2003)

• End on July 2004


Two case of dispute seton the AoA, initiated by Brazil

US / cotton

EU / sugar


The cotton case

US Notification DSB decision Export credits No notified Export susbsidies Step 2 Amber box Export susbsidies Compensatory payment

Amber box Amber box

Counter cyclical Amber box Amber box Direct aid Green box Amber box

Initiated in october 2002 - won in march 2005 (appeal)

Direct aid = 617 M$; Export credits = 1,6 B$ (several products); Step 2 = 415 M$

Total = 3 billions $ in 2002


The sugar case• EU sugar policy:

– Production quota, high price– Part of the producer price is take off, to fund

export support– Preferential import of ACP countries, refined in the

EU and re-exported with export subsidies

• According to the EU: no export subsidies• Decision of the appellate body: they are

export subsidies


WTO agreements on standards


Introduction• WTO agreements on standards : prevent

them from being used as protection tools.• Two agreements:

– TBT : Technical barriers to trade– SPS : Sanitary and Phytosanitary

• TBT existed before the WTO : Tokyo round standards code (1979). Uruguay round : strengthening and clarifying.


SPS agreement• Rules of procedure which define formulation and

implementation of SPS measures in international trade

• Set of measures to protect life and health of human / animals, and to protect plants.

• But : does not define the measure.– Definition in under the responsibility of relevant

international organisations ( Codex alimentarius, Office international des épizooties, International plant protection convention) or member states


Two key principles

• National treatment : non-discrimination between foreign and national products

• Scientific justification : member states have to establish risk assessment, to scientifically justify the relation between a SPS measure and level of sanitary protection.


Modalities International standards

already ratified

Harmonisation on thebasis of internationalstandards

International standardsno ratified

Individual countrymeasures allowed basedon risk assessment

If a country wants toapply a higher level ofsanitary protection

Possible, with respect tothe two principles : non-discrimination andrelevant risk assessment

If scientific proofs areinsufficient

Implementation oftemporary measures isauthorised


Transparency and equivalence

• All measures have to be notified to WTO SPS Committee, before their implementation

• Other members may be allowed to contest scientific proofs

• Members have to accept equivalent SPS measures implemented by other members, if they provide the same level of protection


TBT agreement

• Technical regulations : specific characteristics of a product :– size, design, functions, performance– the way it its labelled or packaged– the way it is produced : more appropriate to

draft technical regulations on the production methods rather than the characteristics per se (case of organic products)


The objectives of the TBT agreement

• Protection of human safety or health

• Protection of animal and plant life or health

• Protection of the environment

• Protection of deceptive practices: to protect consumers through information (labelling requirement)

• Other: quality, trade facilitation.(ex: size of vegetables)


Principles of the TBT agreement• Avoidance of unnecessary obstacles to trade• Non-discrimination and national treatment• Harmonisation: encourage members to use existing

international standards• Equivalence• Mutual recognition of conformity assessment results• Transparency

– notifications– national enquiry point


Distinction between technical regulations and SPS measures

• A measure is SPS if its objective is to protect– human life from risks arising from additives, toxins, plant /

animal disease– animal life from risks arising from additives, toxins, pests,

diseases, disease carrying organisms– plant life from risks arising from pests, diseases, disease

carrying organisms– a country from the risks arising from damage caused by

the entry, establishment or spread of pests

• Measures adopted for other purpose are TBT measures


Special treatment for DCs• Recognition that developing countries may face

difficulties– to conform to developed countries SPS/TBT

measures (access to market)– to implement into their countries SPS measures

• Special treatment (market access)– provide technical assistance to developing countries– in case of implementation of new measures which

may hardly reduce market access, the member have to provide technical assistance

– more time to implement new measures


But• Technical assistance is insufficient

• Restrictive implementation of equivalence:– developed countries look for similarity more than for

equivalence

– loss of flexibility.

• Lack of human resources or expertise to participate to the international organisations :– lack of ownership on SPS measures

– difficulties to harmonise and implement standards.


The TRIPS Agreement• Trade related intellectual property rights

• Obligation to protect inventions and processes . Covers all intellectual property rights

• Defines the areas that should be protected– pesticides, plant varieties, geographical

indications, trademarks,…

• And the means to protect them

• Strong opposition on this agreement


Plant variety protection

• The TRIPS agreement– allows members to exclude living being

from patentability– but a plant variety protection system is

compulsory– for instance the UPOV system– difference between patent and UPOV :

farmers’ right to save seeds.


Geographical indications• Used to identify a good

– as originating of a geographical area– which gives it its characteristic

• Obligation to provide the legal means to prevent inappropriate use of geographical terms

• Art 22 : defines a standard level of protection, all products– GI have to be protected to avoid misleading the public

an prevent unfair competition

• Art 23: higher level of protection for wine and spirits


Geographical indications (cont’d)

• Two issues are debated in the WTO– Creation of a multilateral register for winne

and spirits– Extension of the higher protection to others

products (food and handicrafts), beyond wines and spirits (China, EU, Thailand)


Results of the implementation of WTO on agriculture in

developing countries


Expected results

• More export opportunities due to better access to developed countries markets

• More stable and reliable international markets, due to the reduction of distortion

• Improvement of supply conditions of world market

• BUT


Tariffs obstacles remain

• Still high tariffs in OECD countries – tariffs for agricultural products around 35 %– tariffs for industrial products around 4 %– peak tariffs : up to 300 % (some temperate

products).


Duties in some developed countriesEU

beforeUR

EUafter UR

Japanbefore

Japanafter

USAbefore

UR

USAafterUR

Greencoffee

5 0 0 0 0 0

Cocoabeans

3 0 0 0 0 0

Freshtropicalfruits

9 5 17 4 7 5

Sugar 297 152 126 58 197 91

Wheat 170 82 240 152 6 4

Dairyproducts

289 178 489 326 144 93


Tariffs escalation (Japan)

MFN rate GSP rate

Cocoa beans 0 % 0 %

Cocoa paste not defatted 5.0 % 3.5 %

Cocoa paste defatted 10.0 % 7.0 %

Cocoa powder without sugar

12.9 % 10.5 %

Cocoa powder sugar added 15.0 % 12.5 %

Chocolate 21.3 % 12.5 %


The main obstacles• Standards and quality requirements

• Most of developed countries have strengthened their SPS and TBT measures

• For instance, in the EU– implementation of traceability– review of authorised pesticides : most of

them suppressed


Market prices

• Increasing of amount spent to supporting farmers by developed countries: shift from Amber box and Blue Box to Green Box

• Export support decreased but are still used

• WTO definition of dumping : not the common sense (sell under the cost of production)

• No regulations of trans national corporate


Trends in agricultural exports

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wto agreements regarding agriculture

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