Download Lecture19_URAA

The Uruguay Round Agreement on
Agriculture
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
participants
 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
tariffs…
 … 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
negotiations
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
consumption;
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
possible
 Cairns Group: consisting of 14 agricultural exporters from
both the developed and developing world keen on
liberalisation
 Other developing countries – concerned about the cost of
food imports
 Other high-income countries – anxious to avoid
liberalisation
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.
rebalancing)
 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
 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
commitments.
 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
imports.
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'
policies.
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
1986-1990.
 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
Round.
 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
Agreement
 peace clause
 special and differential treatment for developing countries
 among developing countries, concerns that net foodimporting 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
Reading
 WTO guide to the agriculture agreement
 Healy, Pearce and Stockbridge FAO Manual
 Ingersent, Rayner and Hine
 Swinbank and Tanner
 Josling, Tangermann and Warley