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An
end-July meeting of trade officials of the WTO's 142
member nations at Geneva, laid bare the constraints
to the efforts of those pushing for the launch of a
new, ninth round of international trade talks at the
Ministerial Meeting scheduled for November at Doha,
Qatar. Heading the drive for a new round is the US,
which would like to see further reduction in barriers
to its exports of industrial goods as well as more progress
in the ongoing negotiations on freeing trade in agriculture
and services. Any acceleration on trade liberalisation
on these fronts it feels can only be achieved by incorporating
negotiations on these
matters into a new round of talks that cannot but end
with agreement on freer trade.
Needless to say, few are convinced by the US' proclaimed
commitment to free trade. Not only does it continue
to support its agricultural sector with huge transfers
that fall outside the scope of the definition of subsidies
under the Uruguay Round's Agreement on Agriculture (AoA),
but it has buckled under domestic political pressure
to provide virtually no concessions to developing country
exports of textiles and has unwarrantedly used ''anti-dumping''
levies to protect domestic producers of commodities
like steel, against competition from developing country
exporters. The net effect is that movements in world
trade are not in keeping with the expectations of the
developing countries. Although world trade as a whole
as grown much faster that world GDP (Chart 1), this
is more true of manufacturing trade and production than
of agriculture (Charts 2 & 3). Hence, benefits to
developing countries, if any, have been concentrated
among the few who are major exporters of non-traditional
manufactures.
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Chart
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It was the US which initiated in the 1980s the process
of substituting measures of support that directly impinge
on agricultural prices with income support measures,
which are ostensibly ''decoupled'' from prices. One example
of such decoupled support is "deficiency
payments" made to farmers
when actual prices rule below target prices. Since these
payments, which are linked to specific crops and to
farm area, allow farmers to remain in production despite
incurring higher costs, they do affect the level of
production and therefore must influence prices and trade.
Yet the Uruguay Round Agreement excluded these payments
from the list of subsidies that distort trade.
The lead provided by the US was followed by the European
Union, which made the shift from price to income support
the principal plank of the reform of its Common Agricultural
Policy. Not surprisingly, these two powerful forces
came together and ensured that these types of support
to agriculture, categorised as ''green box subsidies'',
were excluded from computing the Aggregate Measure of
Support (AMS), which nations were committed to reduce
under the AoA, on the grounds that they were not trade-distorting.
What is more, under the Peace Clause included in the
AoA, no disputes could be raised regarding the "green-box
policies" and other AoA
conforming support and subsidy measures, during the
phase when the agreement was being implemented.
The OECD, however, periodically computes the total subsidies
provided to agriculture by its member countries, which
it terms ''producer subsidy equivalent''. In practice,
while AMS commitments have been met, the PSE has remained
at extremely high levels. To quote the WTO: "In
1999, the OECD estimated total support to agriculture
at f306 billion, up 5.6% over 1998, a rise explained
by ‘low world commodity prices, and the resulting pressure
they put on farm incomes, [which] led many OECD countries
to introduce new measures or to provide additional support
to farmers'. Producer support granted in the area was
estimated at f236.7 billion, of which the largest single
share is accounted for by the European Union (45%),
followed by Japan (23%) and the United States (21%);
it should be noted that the OECD figures do not segregate
less from more distorting measures of support, notably
support in the 18 "green
box" categories of Annex
2 of the Agreement on Agriculture. The OECD notes that
producer support levels have risen to match previous
highs established a decade ago, when the Uruguay Round
was under way."
What is more, prior to 1986-88, which was taken as the
base period for the benchmark figure in the Uruguay
Round from which duty reductions had to be implemented,
the US and other developed countries had substantially
raised the support they provided to agriculture, making
the base value extremely high. Thus, the producer subsidy
equivalent in the US is estimated to have risen from
8 per cent of the value of agricultural production in
1979 to 45 per cent in 1986, and from 45 to 66 per cent
in the EC (10). The net result of such protection has
been an extremely slow growth of world agricultural
trade during the 1990s (Chart 4).
Chart
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As mentioned earlier, it was not only in agriculture
that the US resorts to protection under the veneer of
being a votary of free trade. For example, from the
point of view of the developing countries, the most
visible and "multilaterally" accepted non-tariff
barrier arrangement is the Multi-Fibre Arrangement.
That arrangement was the end-result of a series of negotiated
agreements starting in the 1960s, all of which sought
to provide the developed countries with the time needed
to restructure their industries so that competitive
textile exports from lower-cost developing countries
do not "disrupt" their markets. Despite three
decades of agreement on that principle and periodic
revisions of the deadline for ending import restrictions,
textiles still are not permitted free entry in developed-country
markets. The case for an immediate end to such restrictions,
under a new multilateral trade regime was therefore
strong. However, though the Uruguay Round agreement
on textiles and clothing provided for the phasing out
of restraints stemming from the Multi-fibre Arrangement,
it once again delayed the process of liberalisation.
The process that was to occur in four stages over a
ten-year period starting 1995 was heavily "back-loaded",
in the sense that most of the liberalisation was to
occur during the last stages. The four stages defined
involved the following:
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In the first stage, beginning on the date on which the
Uruguay Round became effective, each signatory nation was required to
remove quotas only on products that account for 16 per cent of its
total volume of imports of four categories of textiles and clothing in
1990 (tops and yarns, fabrics, made-up textiles products and
clothing);
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In the second stage, beginning three years and one
month after the agreement enters into force, quotas are to be removed
on a further 17 per cent of the total volume of 1990 imports;
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In the third stage, which begins four years later,
quotas are to be removed on products that account for not less than 18
per cent of the total volume of 1990 imports;
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Finally, after 10
years and one month, all other quota restrictions on imports
accounting for 49 per cent of the total are to be eliminated.
This
prolonged and back-loaded agreement in a labour-intensive
area in which the developed countries had agreed to
open up markets four decades back, points both to the
relative positions of power of developed and developing
countries in the Uruguay Round negotiations as well
as to the extent of commitment of the latter to offer
greater market access as a quid pro quo for the
rapid liberalisation of trade and investment rules in
the developing countries. The developed countries have
exploited the back-loaded schedule, by liberalising
in the initial phases textile products that do not appear
in the export basket of the developing countries. As
a result even after six years of the start of implementation
of the Uruguay Round, the access of developing country
textile exporters to developed country markets remains
restricted. As Chart 5 shows, the growth of textile
exports has collapsed during the 1990s, as compared
with the second half of the 1980s. Further, there has
been little change in the distribution of textile and
clothing exports between major regions (Charts 6 and
7).
Chart
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Chart
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Chart
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