INTERNATIONAL COOPERATIVE AGRICULTURAL ORGANIZATION 2000 ICAO SEMINAR THE STRATEGIC APPROACH OF AGRICULTURAL COOPERATIVES TO W.T.O. AGRICULTURE NEGOTIATIONS ISSUES AND PROSPECTS OF WTO AGRICULTURE NEGOTIATIONS By: NESTOR OSORIO LONDOÑO Rio de Janeiro, Brazil December 4-2000 Former Ambassador of Colombia to the WTO Former Chairman of the Committee on Agriculture of the WTO. INTERNATIONAL COOPERATIVE AGRICULTURAL ORGANIZATION 2000 ICAO SEMINAR THE STRATEGIC APPROACH OF AGRICULTURAL COOPERATIVES TO W T O AGRICULTURE NEGOTIATIONS ISSUES AND PROSPECTS OF WTO AGRICULTURE NEGOTIATIONS By: Nestor Osorio Londoño INTRODUCTION It is a great pleasure and a privilege to have the opportunity to address this important gathering of women and men devoted to the noble activity of the work of the land which contributes in such a decisive way to the wealth and progress of nations. At the occasion of this interesting seminar organised by ICAO, I would like to share with you some views and perceptions concerning “Issues and Prospects of World Trade Organization Agriculture Negotiations that are currently taken place in Geneva. PROCESS OF NEGOTIATION As the first phase of the process of negotiation has concluded, it is important to have a look at the developments occurred in the Special Sessions of the Committee on Agriculture. Revising the different proposals introduced by Members, one can say that in a way this formal process has been a repetition of the informal one known as the AIE (Analysis and Information Exchange). Former Ambassador of Colombia to the WTO Former Chairman of the Committee on Agriculture of the WTO. 2 Nothing wrong with that, simply that what Members announced in the previous two years informally, has been now elevated to official positions. Prior to the Ministerial Conference in Seattle, a good number of proposals submitted, reflected profound differences of approach. These differences concern not only the aspirations in concrete areas of trade of agricultural products, but also in a more general and philosophical conception about the scope and nature of the reform process. I would say that these differences refer mainly to the depth and pace of the reform. Proposals and statements of delegations preach and recognise the need to move towards liberalisation, but in fact, the reality of policies, both in developed and developing countries are showing a revival of protectionist influences. This is due mainly to the changes occurred in the last three years as some important economical and financial crisis resulted in recession and negative effects in the economies of many developing countries. I think the liberalisation fever of the early nineties has receded losing some degrees of its previous high temperatures. Indeed, many governments responding to the pressure of independent forces are now rethinking their policies and slowing their process of liberalisation. The failure to launch a round of negotiations in Seattle confirmed the political unrediness to move forward in such direction. It is accurate to indicate that this reluctance was observed in both, developed and developing countries. In these circumstances the agricultural negotiations, together with services, as mandated in the Agreement rest in the ground as an isolated sector. Without the framework of a round that includes other critical areas like the industrial sector and disciplines concerning competition and investment providing room for trade off and political justifications, it is highly improbable that substantial progress could be attain in the agricultural negotiation. Recently the Cairns Group composed now by eighteen countries (developed and developing countries exporters of agricultural products), stressed in its communiqué of the Ministerial meeting held in Banff, Canada, that “fundamental reform of world agricultural and agri-food markets is necessary to ensure sustained improvements in the well-being of all the world’s people”. Commissioner Fischler of the European Communities, invited to address this gathering, said that Agenda 2000 constitutes a substantial reform of the 3 Common Agriculture Policy (CAP) and that some OECD studies have already shown that "the system of direct payments is far less trade distorting than former market price support". An issue of fundamental discrepancy is the one related to the objective of the negotiation. The highest goal of the reform process in terms of the end result, is given by the Cairns Group, with the affirmation that trade on agricultural products should be submitted to the same multilateral rules and disciplines applicable to other goods in order to eliminate restrictions and distortions in world agricultural market. This vision is supported by United States but strongly rejected by the European Community and other important members like Japan, Switzerland Korea and Norway. Equally, by some developing countries, specially net food importers that are not quite certain about the consequences of a total integration of agriculture to the GATT/WTO system. The concept of multifunctionnality of agriculture has been advanced to oppose the moves towards liberalisation and total integration. SCOPE OF PROPOSALS An overview of proposals submitted during the four Special Sessions of the Committee on Agriculture shows that no aspect covered by the Agreement has been left out. There have been around 20 proposals involving nearly 80 countries. It is important to underlined the fact that good number of them come from developing countries. They have now a clearer vision about their interests and objectives in the agricultural negotiations. As we look at the different areas of the Agreement to which proposals refer, we can establish substantial divergences among members, but it is fair to say that some common interests have also emerged. 1- On Market Access there is a general call to simplify trade conditions and restrictions by cutting tariffs. This means to address the remaining problem of tariff peaks, tariff escalation and the complexities of TRQ´s and its administration. Discussions about how to approach the cut of tariffs are yet to be held. Different formulas like “across the board”, “zero for zero”, or the “Swiss formula”, have to be examine measuring the impact on both, tariff structure and trade flows. 4 The Special Safeguard has deserved some consideration. Given the fact that only few countries like United States, European Union and Japan have reserved the right to use this mechanism, some members have ask to extend the use of the safeguard. It is clear that there is an imbalance that goes against developing countries and in one way or another it will be necessary to level the situation by eliminating discrimination. 2- On Export Subsidies the call for elimination or substantial reduction is almost general. Such call is complemented by proposals aiming to avoid circumvention of commitments by including disciplines concerning export credits, food aid and operations of single exporters. As the negotiation flows, all forms of export competition will required analysis in order to establish which forms are the most trade distorting, and to introduce the appropriate corrections. Some developing countries, food importers, have expressed their worries about the potential impact on food prices as a result of elimination of subsidies. Some have responded arguing that such action could be in their benefit thanks to the competition that will push prices down. 3- On Domestic Support most proposals are oriented to reduce and simplify the trade distorting measures specially in developed countries. An study of OECD shows that total transfers to agriculture in its member countries had risen in the last five years, although most of them had utilised less than half of their permitted AMS commitments which means that they have the potential to increase support level further. At the same time developing countries are asking more flexibility to allocate resources and to enhance green box provisions. Other two dominant topics covered by proposals refer to Special and Differential Treatment and Non Trade Issues, both directly linked to domestic support and market access regimes. The purpose of SDT is to help and encourage developing countries to be better integrated and to participate more fully in the WTO system, ensuring that they share the benefits of trade. It is been repeatedly said that the current negotiation should aim to levelling the playing field in terms of reducing the disparity between developed and developing countries in the use of support and protection and improving market access conditions for developing countries. Developing countries are focusing on how to introduce or enhance internal protection instead of how to 5 get a better access to markets. In my opinion this is what really matters, specially if one takes into account the fact that developing countries resources are very limited. In many cases the possibilities of providing support is just theoretical, because in practice the money allocation is not even made at the level of national budgets. This means that concessions at the multilateral level become meaningless and indeed a cheap bargain for developed countries. Market access is the key issue and here is where the SDT will have some real sense. The Non Trade Concerns have become a mayor concern in the negotiations. Paradoxically, non-trade issues are taken the central stage of a trade negotiation. This illustrates my early point and remarks related to the return of protectionism. Important members talk about multifunctionality of agriculture as the concept to serve as basis of support measures. So far this has been done in pure abstract terms. It’s well known that the green box provides the framework to implement policies in pursuit of the various functions of agriculture. So, what is needed now is that those who talk about multifunctionality translate in concrete proposals the measures that will developed the concept. Then the discussion and the negotiation will be more tangible and it will be possible to see to what degree such measures are or are not trade distortive. The European Community has already introduced a proposal on animal welfare that will serve the purpose of this test. You would guess that initial reactions have not been sympathetic at all. POLITICAL ISSUES Finally, let me touch on two pending issues of a political nature that require close attention. One is the entrance of China to the World Trade Organization. Although there is not a precise date that could be announced for this country to become a member, the fact is that mayor obstacles have been already surmounted and its membership could be protocolized in the first half of next year. China has already gone to a complex process of bilateral negotiations with WTO members that include trade on agriculture. Once she becomes a member she will undoubtedly be a significant player in the negotiation and will influence the way many countries will approach this process. 6 The other important political factor is related to the United States new administration and its eventual commitment to a new round of negotiations. It will take some time before a productive and specific dialogue could be established between the new American government and the main players of international trade. This will be relevant, specially to influence the way to conduct the forthcoming second phase of the negotiations. The elections result indicates that the new President will not control Congress, which is neatly divided, therefore it will take some time before the political conditions are ripe, if ever, to request from Congress fast track authority. To do so, he has to be pretty sure about a positive outcome because a failure will result in a set back with negative consequences in terms of leadership and ability to conduct trade liberalisation at multilateral and regional level. One has also bear in mind that a new round can only be launch by a Ministerial Conference. Before calling such meeting, it will be necessary to laid solid foundations for a consensus. Nevertheless there is a mandate to convene a Ministerial Conference every two years, which means that this meeting will have to take place by the end of 2001. If there are not political conditions to launch a round at this occasion then the agenda will be dominated by implementation issues, area in which developing countries have good number of complains and grievances. Members and also the Director General have to be pragmatic and realistic about what could be achievable and prepare that meeting accordingly. Another Seattle debacle will hurt seriously the multilateral trade system. Given the facts and the substantive differences concerning the integration of agriculture to GATT/WTO disciplines, it is difficult to forecast mayor developments during the year 2001. Only as the expiration of the so call “Peace Clause” approaches (end of 2003), one could think about some sense of urgency. There are important differences among WTO members and many questions to be solved, but one positive aspect of the process so far is the substantive contributions and proposals submitted to the Committee on Agriculture. This shows the will to address and discuss the mayor issues related to the reform process. What rest to be seen is if there is a real political will to negotiate. Thank you very much.