Special Session of the Committee on Agriculture
Informal Meeting, 4-6 February 2002

  Special and Differential Treatment for Developing Countries in the Agreement on Agriculture  
   
Non -Paper by India

1.       One of the objectives of the Uruguay Round was the integration of developing countries into the global trading system. A recognition of the constraints faced by these countries’ on account of a low level of industrialisation, limited access to advanced technologies, inadequate human resource development and woeful lack of adequate infrastructural facilities led to the incorporation of S&D provisions in almost all the Agreements. The preamble to the WTO Agreement also recognised the special needs of developing countries for positive efforts designed to ensure that they secure a share in international trade commensurate with their economic development needs. The Special & Differential provisions in the Agreement on Agriculture are also recognised as an integral element of the negotiations in the reform process. This sentiment has been further strengthened in the Doha Ministerial Declaration.  

2.                 While a listing of the S&D provisions in the Agreement on Agriculture (Annex 1) appears impressive, in implementation however, it has been observed that there are very few provisions, which have been able to translate the broad objectives into concrete provisions, which have benefited developing countries. On the other hand, it needs to be noted that there are a number of exceptions in the Uruguay Round Agreements that benefit producers of developed countries, which lends credence to the arguments of developing countries regarding S&D that special circumstances require specific consideration and trade restrictions can be legitimate and appropriate instruments for development purposes. For instance, despite specific disciplines in the AoA, developed countries continue to provide high levels of domestic support and export subsidies as well as use tariff quotas (TRQs) and the special safeguard clause to control market access of a number of agricultural products. Presentations by Member countries’ in the run up to the negotiations and indeed during the negotiations have amply illustrated this point. Various studies and economic analysis regarding the impact of the AoA have also borne out that the anticipated benefits in terms of increased market access opportunities for developing countries have not materialised due to the prevalent distortions in developed country agricultural policies.  

3. Special and Differential Treatment becomes all the more critical in the case of agriculture as it occupies an important place in the developing countries’ economies and in view of their food security & livelihood requirements. S&D provisions giving more flexibility in agricultural trade policies must therefore be allowed to developing countries as an effective instrument for achieving their economic policy objectives.  For the developing countries the disadvantages originating from various weaknesses in the provisions of the agreement more than offset a few advantages that these countries get through the provisions of the S&D treatment such as a longer implementation period and greater flexibility in reducing domestic support. Thus, more specific provisions relating to nature, depth and substance of their commitments need to be incorporated through the on-going negotiations to meet the challenge of market liberalization.  

4.          Experience in the implementation of the Agreement leads us to conclude that basically the problems can be tackled on two planes, namely:

a) Through positive efforts and binding commitments by Developed countries in undertaking substantive reductions in tariff levels, tariff escalation, trade-distortive domestic support and elimination of export subsidies and tariff peaks etc.

b) Through specific and targeted S& D provisions within the existing framework of the AoA, which would go beyond longer transition periods and reduced rates of reduction, keeping in view the developmental objectives in developing countries.  

5.       While the elements mentioned in 4(a) above have been elaborated by Member countries in the course of their submissions till date, the present proposal discusses a broad framework for strengthening of S&D provisions by making them more meaningful, based on an evaluation of the existing provisions and their relevance in achieving the developmental objectives in developing countries. The main focus of these provisions is on providing real and meaningful increase in market access, greater flexibility in meeting reduction commitments on domestic support and the levels of tariffs and legally binding commitments on technical and financial assistance.  The framework in essence captures all essential elements of the suggestions that have been made by the member countries including India in their proposals filed during the first phase of Article 20 negotiations. 

I.                     Market Access  

6.       Under the market access provisions, developing countries have been allowed a longer transition period and lesser tariff reduction commitments.  Also during the tariffication procedure, developing countries were given an option of declaring ceiling bindings and not going through the tariffication formula. Most developing countries used this approach and declared bound rates. As a result they do not have the right to use the Special Safeguard Mechanism.  Only 38 of the 142 WTO members have the right to use it.  TRQs were also used by countries, which had tariffied their NTBs.  Thus, the TRQ and SSG together have provided better protection and manoeuvrability for countries, which had tariffied.  

7.       There are at least four issues, which are important from the point of view of according SDT to developing countries in the area of market access. These are: (i) Tariff reductions, (ii) Special Safeguards, (iii) Tariff Rate Quotas and (iv) Preferential access to developing country products in developed country markets.  

(i)                Tariff Reductions 

The Uruguay Round negotiations saw tariffication of non-tariff barriers (NTBs), in the first instance, and then an across the board lowering of tariffs. While almost all developing countries have discontinued the use of NTBs in the period since, they have been under pressure to reduce their tariffs on products of export interest to their developed country trading partners. Further, review of the AoA as mandated under Article 20 also includes a re-look at the levels of tariffs maintained by the WTO Members in the agricultural sector. Any agricultural tariff negotiations would need to provide Special and Differential Treatment (SDT) to developing countries, as is the WTO practice. In this regard, the agricultural tariff negotiations could take on board some of the elements of the Doha Ministerial Declaration pertaining to non-agricultural tariff negotiations. The Doha Declaration mandates the consideration of “special needs and interests of developing and least developed country participants, including through less than full reciprocity in reduction commitments, in accordance with the relevant provisions of Article XXVIII bis of GATT 1994. This Article (XXVIII.4 (d) of GATT 1994) recognises “the needs of less-developed countries for a more flexible use of tariff protection to assist their economic development and the special needs of these countries to maintain tariffs for revenue purposes”. It further states that “all other relevant circumstances, including the fiscal, developmental, strategic and other needs of the contracting parties concerned” will also be taken into account. Besides the use of Article XXVIII bis, the market access negotiations in the agricultural sector should also allow the use of Article XXVIII for developing countries on products that are sensitive in nature without having to provide “adequate compensation”. In other words, derogation from Article XXVIII.4 (d) of GATT 1994 should be provided for developing countries.  

Poverty reduction and Food security cannot be achieved in developing countries without enhancing the potential of their agricultural sector.  Developing countries, therefore, require to maintain tariffs, which are consistent with their development, trade, and food security needs.  It would also be observed that a number of developing countries have undertaken tariff reductions autonomously in the interests of trade liberalisation, which should be taken note of as further reductions may not be consistent with their trade, food security and developmental needs.  

The precipitous fall in international commodity prices in the last few years should also serve as a useful guide for effecting reduction commitments. Developing countries should have the flexibility to rationalise and rebalance their tariff bindings on all agricultural products keeping in view their food security & livelihood requirements.  

(ii)             Special Safeguards 

SSG should be extended to developing countries in respect of all agricultural commodities on which Quantitative Restrictions (QRs) have been removed either in the tariffication process or unilaterally or under IMF/World Bank conditions following structural adjustment programmes.   The criteria for invocation of SSG should also be modified to make it more responsive to the needs and conditions of the developing countries.  SSG duties should be levied for longer duration as a longer time-frame (vis-a vis the industrial sector) is required in the agriculture sector to enable the farmers to adjust to increased competition as also to diversify their production in the face of a surge in imports or a decline in prices.  Special safeguard measures can take the form of additional duties or quantitative restrictions on imports.  

(iii)           Tariff Rate Quotas 

Experience in implementation reveals that developing countries have not gained any significant market access despite the operation of TRQs, which were designed to facilitate such access in the post-tariffication phase. It is thus, imperative that rules for administration of TRQs should be amended in such a manner that developing countries’ exports can have improved access opportunities in the markets of WTO Members using TRQs.  

Further, developing countries that are self-sufficient in normal crop years are not in a position to commit pre-determined level of imports without seriously jeopardising the livelihood and income levels of vulnerable farmers. Such countries should therefore be exempted from making commitments on minimum market access.  

(iv)           Preferential Access for developing country products  

The preamble to the AoA explicitly states that in implementing commitments on market access, developed countries are to fully take into account the particular needs and conditions of developing countries by providing for a greater improvement of opportunities and terms of access for agricultural products of particular interest to these countries, including the fullest liberalisation of trade in tropical agricultural products of particular importance for the diversification of production away from that of illicit narcotic crops.  

Although developed countries on average reduced tariffs on tropical products by 43 percent as compared with 37 percent for all agricultural products yet this reduction was not effective as the bulk of imports were already duty free or subject to very low tariffs.  Further, the bound tariffs on these products were relatively high. The on-going negotiations should ensure that appropriate binding commitments are undertaken for providing preferential access to developing countries’ products in the developed countries’ market. In this context, it is imperative to thoroughly review and establish a concrete and binding S&D regime responsive to the development needs of the developing countries and create a level playing field for them.  

II.               Domestic Support  

8.      One of the major points of intervention of the developing countries in the on-going process of review of the Agreement on Agriculture (AoA) has been that the Agreement needs to be re-oriented to address issues of food security and rural livelihood. These issues are particularly important from the point of view of developing countries, where an overwhelming share of the population continues to be dependent on the farm sector and the rural areas. Yet in the recent past developing countries seeking accession to the WTO have had to give up these S&D provisions, which are legitimately available to other developing country members of the WTO.  Experience has also revealed that special and differential treatment would be required as long as there is a gap between the economic capacity and the levels of development of the various WTO members.  

9.       The issues of food & livelihood security, which are of predominant concern for developing countries, need to be addressed at three levels, viz. (i) the households, (ii) regional and (iii) the nation as a whole. While the first two assume significance given the fact that marginalised sections of the peasantry dot the agricultural landscape, the latter becomes an important objective in view of the large requirements of food for the country as a whole. Improvement in the productivity levels and domestic capacity in production of food through adequate flexibility in using domestic subsidies for ensuring adequate supply of food to all sections of the population including the poor who are not able to buy food at market prices should be the objective on which S&D provisions should be built for developing countries. 

10.          Accordingly, the disciplines on domestic support need to be re-defined to address these concerns of the developing countries.  Given the fact that the implementation of Agreement has led to further accentuation of the problems for the developing countries, which has created a situation where these countries find themselves in a more disadvantaged position vis-à-vis their larger trading partners carve-outs for developing countries in the form of Special and Differential Treatment (SDT) become imperative.    

11.     This can be achieved through the following:  

a)         All measures taken by developing countries for food security, poverty alleviation, rural development, rural employment and diversification of agriculture should be exempted from any form of reduction commitment. 

b)        The provisions contained in Article 6.2 of the AoA relating to agricultural investment and input subsidies should not only be continued but also product specific support provided to low income and resource poor farmers should be excluded from the calculation of AMS.

c)         The extent of flexibility in non-product specific support for developing countries is inadequate as given their status of agricultural development, sector-wide support in areas such as agricultural credit, transport, irrigation and fuel are important aspects of their development strategies.  Further it may be noted that a number of developing countries have reported negative, zero or less than de minimis levels of product specific support.  It is thus, imperative that in keeping with the concept of Total Aggregate Measurement of Support, credit should be given for negative product specific support by allowing developing countries to adjust the positive non-product specific support against the same.  Further, while these countries may not be currently constrained by the provisions of the agreement, their policy options for the future may be limited.  Some “credit” for negative product specific AMS should also be given by excluding from AMS calculation specific food security expenditures.

d)        The provisions of Article 6.4 (a) (i) & (ii) of AoA only serve to restrict the flexibility of use of domestic support measures by countries that provide support below de minimis levels. These disciplines are however not applicable to countries that provide domestic support above de minimis levels. This has turned out to be one of the most inequitous provisions of the Agreement and is an undoubted example of S&D in favour of developed countries as it permits highly subsidising countries to support their agriculture beyond the de minimis level while restricting the flexibility of developing countries to enhance their domestic agricultural production. In view of this it is proposed that the operation of Article 6.4 (a) (i)&(ii) be suspended till such time as the domestic support levels of all Members come down to the de minimis levels.

e) On account of inflation and currency depreciation in several developing countries problems are being experienced by them of remaining within their currently allowed AMS levels despite the fact that real level of support to agriculture has not increased.  Thus, inflation must be factored in while calculating the AMS and an appropriate methodology for the same through adoption of a uniform stable currency/ basket of currencies for notifying the domestic support should be devised.

f)      Provisions of para 13 Annex 2 should be revised to permit governments to provide greater assistance to low income/ resource poor producers in pursuance of national poverty reduction strategies;

g) Article 13 should be abolished while exempting measures taken by developing countries under Annex 2 and Article 6.2 from action under the subsidies agreement.

h) It is recognized in AoA that if any meaningful trade liberalization takes place in agriculture, as fallout it is likely that the food prices will increase.  It is necessary that developing countries, particularly food importing developing countries, should be given special privileges to counter this increase in food prices.  Accordingly, Article 16.1 of AoA contains a directive to this effect, which however has been totally ineffective in providing any assistance to the concerned countries.  It remained a 'Best Endeavour' clause only. It needs to be recognized that developing countries are at a different stages of economic development and their capacity to integrate with the global economy is limited.  Therefore, it is of utmost importance that developing countries be allowed additional flexibilities to make this transition smooth and relatively easy.  

III.           Export Subsidies  

12.     The disciplines in the area of export subsidies legitimise the use of export subsidies in agriculture as such subsidies are prohibited in other sectors.  The disciplines clearly favour exporters, primarily in the developed countries, by permitting them to use subsidies (albeit in a reduced form) while prohibiting others from using them.  Developing countries, on the other hand, were only allowed to use subsidies, without reduction commitments, for marketing costs and internal transport and freight costs during the implementation period.   

13.     It may be noted that for developing countries a primary rationale for the use of trade policies is the need to support infant industries.  In view of the severe supply bottlenecks and technological constraints, agriculture export subsidies schemes would be relevant in targeting of incentives to specific agricultural products.  Further, developing countries must be given the right to use export subsidies in so far as these subsidies are helpful in disposing of the surpluses that may appear in any year. By so doing, export subsidies can help in augmenting farm incomes of resource poor farmers.  

(a)     It is thus proposed that the developing countries listed in Annex VII of Agreement on Subsidies and Countervailing Measures (ASCM) should be exempted from the provisions of Article 3.3 of AoA, which prohibits introduction of export subsidies.  Suitable amendments to Article 3.3 and Article 8 could be accordingly made.  

(b)     The current exemption available to developing countries in Article 9.4 should be continued beyond the implementation period ending in 2004. 

IV.          Commitments on Technical and Financial Assistance   

14.     There are essentially two types of issues that need to be addressed in relation to commitments on technical and financial assistance.  One of these issues is related to making provisions of such assistance legally binding for the developed countries.  The second issue is related to making funding arrangements, which means setting up a special fund to support liberalisation or globalisation.  Keeping in view the past experience, there is a dire need for setting up a special institutional mechanism to allocate such funds on a permanent basis so that it does not remain an adhoc arrangement. 

15.     Such a mechanism is extremely essential to build institutions in developing countries to implement reform programmes and also to augment resources for meeting high costs of implementing the provisions needed to make domestic rules conform to the international rules and overcome serious constraints.  

16.   A package of S&D provisions based on these lines will also enable developing countries to effectively take account of their development needs, including food security and rural development, which have been detailed in the proposals submitted by India (G/AG/NG/W/102) as well as the proposals contained in the Development Box, submitted by a Group of Developing Countries. 

  17. Conclusion  

The continued need for strengthening S&D treatment needs to be given further impetus in the current negotiations in agriculture as it is a vital component of an evolving trade regime and is the principal factor involved in making WTO a development sensitive and supportive organisation.  In fact, it is the engine, which would propel the world trading system into the 21^st century with the full participation of the developing countries.  

Annex I  

Special and Differential Treatment provisions (SDT) for developing countries in the Agreement on Agriculture

As Adapted from FAO Manual on Multilateral Trade Negotiations