The Uruguay Round Agreement on Agriculture

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					The Uruguay Round Agreement on

   Lecture 19. Economics of Food Markets
              Alan Matthews
                 Topic objectives

 to understand the reasons for the disarray in agricultural trade
  prior to the Uruguay Round agreement
 to be familiar with the alternative approaches to introducing
  disciplines on agricultural trade proposed by the main UR
 to know the outcome of the UR Agreement on Agriculture and
  to be able to critically evaluate its impact
 to understand the implications for the EU’s Common
  Agricultural Policy of the Uruguay Round Agreement
              From GATT to WTO

 Bretton Woods institutions intended to be complemented
  by International Trade Organisation – stillborn in 1946
 GATT came into being as an interim arrangement 1947
 Successive rounds of GATT negotiations to reduce
 … culminating in the Uruguay Round which established
  the World Trade Organisation 1994
               WTO general norms (1)
 Non-discrimination
   – Most Favoured Nation (MFN) treatment of like products
   – (BUT exceptions for free trade arrangements)
   – National treatment
   – The products of the territory of any contracting party imported into the
     territory of any other contracting party shall be accorded treatment no less
     favourable than that accorded to like products of national origin in
     respect of all laws, regulations and requirements affecting their internal
     sale, offering for sale, purchase, transportation, distribution or use.
   – (BUT exceptions for government procurement, domestic subsidies)
 Reciprocity
   – the political economy justification for multilateral trade
                WTO general norms (2)

 Transparency
    – Preference for tariffs rather than other forms of import barriers
    – Trade Policy Review Mechanism
 Predictability
    – Tariffs are bound in Schedules of commitments
 Safety valves
    – restrictions in the case of serious balance-of-payments difficulties or to
      support infant industries
    – Article XX - general exceptions allowing trade restrictions
    – provisions allowing for restrictions against unfair trade
    – safeguard provisions against import surges
                     Art.XX exemptions
   necessary to protect public morals;
   necessary to protect human, animal or plant life or health;
   relating to the importations or exportations of gold or silver;
   necessary to secure compliance with laws or regulations which are not
    inconsistent with the provisions of this Agreement, including those
    relating to customs enforcement, the enforcement of monopolies operated
    under paragraph 4 of Article II and Article XVII, the protection of patents,
    trade marks and copyrights, and the prevention of deceptive practices;
   relating to the products of prison labour;
   imposed for the protection of national treasures of artistic, historic or
    archaeological value;
   relating to the conservation of exhaustible natural resources if such measures
    are made effective in conjunction with restrictions on domestic production or
      Structure of the WTO Agreements

 General Agreement on Tariffs and Trade (GATT 1994)
    – Multilateral Trade Agreements, including
        • Agreement on Technical Barriers to Trade
        • Agreement on Agriculture
        • Agreement on Sanitary and Phytosanitary Standards
        • Agreement on Textiles and Clothing
        • Agreements on Subsidies and Anti-Dumping (measures
          against unfair trade)
    – Plurilateral Trade Agreements
 General Agreement on Trade and Services (GATS)
 Trade-Related Aspects of Intellectual Property Rights
Exclusion of agriculture from the GATT
 Few agricultural tariffs bound, and agriculture remained outside the
  tariff-cutting GATT negotiations
 Quantitative import restrictions, banned for all other commodities,
  could be used for agricultural commodities, provided that domestic
  production of the commodity was subject to certain restrictions
  (Article XI on import quotas)
    – 1955 US waiver
 Use of agricultural export subsidies was explicitly permitted,
  conditional on observance of ‘equitable market shares’, but impossible
  to define (Article XVI on export subsidies)
 Grey area measures proliferated, i.e. mechanisms such as variable
  import quotas, voluntary export restraints and domestic subsidies not
  explicitly covered by GATT
 No disciplines on non-tariff barriers such as import controls for food
  safety and animal and plant health reasons
    Background to the Uruguay Round
 World agriculture in disarray - growing US-EU tension on
  farm subsidies
 The growing costs of agricultural protectionism
 Launch of Uruguay Round 1986
  "to achieve greater liberalisation of trade in agriculture and
  bring all measures affecting import access and export
  competition under strengthened and more operationally
  effective GATT rules and disciplines"
 Significance of the Uruguay Round
   – the most comprehensive coverage of all negotiating rounds to date
   – included the participation of more than 100 countries
        Players in the Uruguay Round
 The US : moving away from dependent agriculture
  paradigm to a competitive agriculture paradigm, and see
  access to export markets as the underpinning for this
 The EU: anxious to avoid escalating budget cost of farm
  support and wanting a deal as compatible with the CAP as
 Cairns Group: consisting of 14 agricultural exporters from
  both the developed and developing world keen on
 Other developing countries – concerned about the cost of
  food imports
 Other high-income countries – anxious to avoid
  Progress of Uruguay Round negotiations
 The opening negotiating positions
    US proposed the ‘zero option’ – all agricultural subsidies and
     quantitative restrictions be phased out over ten years
    EU – wanted to negotiate on commodity by commodity basis (e.g.
 the stalled Montreal Mid-Term Review in December 1988
    Cairns Group walked away from tentative agreements in other areas
     because no serious engagement on agriculture
 Geneva Accord – April 1989 : US dropped zero option and
  agreed negotiations should proceed along three pillars
 Heysel meeting December 1990: breakdown because of EU
  unwillingness to limit export subsidies
Progress of Uruguay Round negotiations
 Dunkel ‘draft Final Act’ in end-1991
     Covered all aspects of the negotiations
     First text with quantitative proposals in each of the three pillars
 [MacSharry CAP reform May 1992]
 Blair House I agreement November 1992
     Lessened extent of export subsidy cuts, protected EU and US
      compensation payments under production limiting programmes (‘blue
      box’) and introduced peace clause
 Blair House II agreement December 1993
     Made some concessions to EU to mollify France
 Geneva Agreement, December 1993
     Following which verification process of country schedules
 Marrakesh Final Act, April 1994
     Single undertaking
 Tariffication required countries to convert their existing
  NTBs into tariff equivalents. These tariff equivalents are
  established for the base period (1986-1988) and are entered
  in the Country Schedules as the base rate of tariff.
 Developing countries had the choice of offering tariff
  bindings instead of establishing tariff equivalents.
 It discourages future use of NTBs, subject to certain
  exemptions. These exemptions are defined under the
  Special Treatment provision that allows countries to claim
  exemption from tariffication commitments for certain
  sensitive products.
                   Tariff reduction
 For developed countries, an unweighted average of 36
  percent, subject to a minimum reduction of 15 percent in
  each tariff line over a six year implementation period.
 For developing countries the commitments are 24 percent
  and 10 percent respectively, and the implementation period
  extends to ten years.
 For least-developed countries there were no reduction
 Special Safeguards provisions, that enable a country which
  has used tariffication to apply additional tariffs to certain
  specified commodities, where import prices are
  particularly low, or where there is a sudden surge in
             Market access commitments
   Countries are required to maintain
    current levels of access, for each
    individual product, where the
    current level is based upon the
    volume of imports during the base
    period (1986-88).
   For commodities subject to
    tariffication, a minimum access
    should be established at not less
    than 3 percent of domestic
    consumption during the base
    period. This minimum level is to
    rise to 5 percent by the year 2000
    in the case of developed countries,
    and by 2004 in the case of
    developing countries.
       Domestic support commitments

 Divided domestic support policies into three types:
 Policies deemed to have a substantial impact on the
  patterns and flow of trade are classified in what is called
  the 'amber box‘ and are subject to reduction commitments;
 policies that are not deemed to have a major effect on
  production and trade are placed in the 'green box';
 policies that fall into neither of these categories, but are,
  perhaps, somewhere in between, are known as 'blue box'
      Disciplining amber box policies
 All domestic support deemed to have a distortionary effect
  on trade is summed and included in a measure called the
  Aggregate Measure of Support (AMS);
 AMS includes
   – Market price support where support provided by administrative
     support prices e.g. intervention (but not if provided by tariff
     protection alone)
   – Calculated on the basis of world reference prices in 1986-88
   – Coupled direct payments
 De minimis exemptions – 5% for product specific and 5%
  for non-product specific support
 Progressive reduction in AMS levels by 20% over 6 years.
                    The blue box

 Direct payments under production-limiting programmes
  are exempted from AMS reduction if:
 such payments are based on fixed area and yields; or
 such payments are made on 85 percent or less of the base
  level of production; or
 livestock payments are made on a fixed number of head.
           Export subsidy commitments
 No new export subsidies can be introduced
 Developed countries committed to reducing the volume of subsidised
  exports by 21 percent and the expenditure on subsidies by 36 percent,
  both over a six-year implementation period (1995-2000).
 For export subsidies the base period is generally taken to be the period
 However, an exception to this was negotiated between the US and the
  EC, under what was called the "front loading" accord, which was part
  of Blair House II in December 1993, just before the conclusion of the
 This allowed that the starting level of export subsidy reduction
  commitments could be the level of subsidies prevailing in 1991-92,
  providing that the level of subsidies at this time exceeded those in the
  base period.
          Other aspects of the URAA
 sanitary and phytosanitary provisions addressed in the SPS
 peace clause
 special and differential treatment for developing countries
 among developing countries, concerns that net food-
  importing countries would lose out because of terms of trade
  effects. Decision on Measures Concerning the Possible
  Negative Effects of the Reform Programme on Least
  Developed and Net Food Importing Developing Countries
  included to meet their concerns.
 agreement to reopen negotiations in 2000

 WTO guide to the agriculture agreement
 Healy, Pearce and Stockbridge FAO Manual

 Ingersent, Rayner and Hine
 Swinbank and Tanner
 Josling, Tangermann and Warley

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