Developing Countries Issues and Concerns within the WTO

Arlington, Virginia 24 February 05 Session on Farm and Trade Policy : Globalization and the Role of the WTO Developing Countries Issues and Concerns within the WTO Marcos Sawaya Jank President, Institute for International Trade Negotiations (ICONE) Professor, School of Economics, University of São Paulo (USP)

Outline The Doha Development Agenda (DDA) and developing countries concerns. Market Access issues. Subsidies: export competition and domestic support. Conclusions.

GATT-WTO Negotiating Rounds and Number of Members Rounds Doha Uruguay Tokyo Kennedy Dillon Geneva Torquay Annecy Geneva Nb. members 150 140 130 1 110 100 90 80 70 60 50 40 30 10 0 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 01 04 07 Source: WTO

Members 160 140 1 100 80 60 40 0 WTO membership: increased developing country Developing Developed 1986 1995 04 Source: WTO. Elaboration: ABARE-Australia.

From Doha (01) to Hong Kong (05) Strong ambition in the Doha Mandate (01). Setbacks in US Farm Act 02 and timid EU Fischler CAP Reform in 03 (partial decoupling). Joint EC/US proposal: Defensive interests of the US (domestic support) and EU (market access) emergence of the New Variable Geometry: From QUAD to FIPS US, EU Japan, Canada G- US, EU Brazil, India, Australia

Doha Round: A Snapshot High Initial Proposals US Deadlock Cancún (September 03) Framework (July 04) Modalities (??) Ambition Level Doha Mandate Satisfactory Cairns Harbinson G- Derbez FIPS Hong Kong? Low EC Japan Castillo EC-US Multifunctionals G-10 Special Products G-33

Agricultural Negotiations at the Doha Round Risk of re-interpretation of the Doha Mandate Doha Mandate: Substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. Re-interpretation of the Doha Mandate: Substantial improvements in market access, with exceptions for sensitive and special products; reduction of, with a view to phasing out, all forms of export subsidies, if there is full parallelism on all forms of export competition; and substantial reductions in trade-distorting domestic support, allowing no reduction in less trading distorting support. Doha Development Round: broadening exceptions and loopholes in agriculture?

Developing Countries Concerns Complexity, heterogeneity and conflict of interests MARKET ACCESS 1. No commitments Around 32 countries (LDCs): already decided 2. Preference Erosion, Special Products: Largest group: LDCs, G-90, G-33. Ex.: sugar case/eu (developing countries divided) 3. Large consumers & rural populations India, China, Indonesia, (central role?) 4. Free-traders Net exporters: Brazil, Argentina, Chile, Central America, South Africa, Thailand, (< 15 countries)

Developing Countries Concerns Complexity, heterogeneity and conflict of interests DOMESTIC SUBSIDIES 1. Net food importers 56 countries 2. Unfair competition from subsidies in EU, US,... EU "greening" its subsidies for internal reasons (budget constraints, enlargement) US increasing its subsidies: doubled in 02 Farm Act No round if the US does not "decouple subsidies. Ex.: cotton case (US vs. rest of the World).

Agriculture in the Doha Round Domestic Support Market Access Export Competition

Agriculture in the Doha Round Domestic Support Market Access Date? Export Competition

Agriculture in the Doha Round Domestic Support (??) Market Access (??)

Agricultural Trade Negotiations: Main Issues Market Access: Domestic Support: Tariff Peaks & Tariff Overhang ( water ) Tariff Escalation Specific Duties (conversion to ad valorem) Tariff-Rate Quotas Special Safeguards (SSG, SSM) Amber Box payments Blue/New Blue Box payments Green Box disciplines De Minimis payments Overall cut of all distorting support Export Competition: Export Subsidies Export Credits Abuse of Food Aid programs State Trade Enterprises & Monopoly Power Other Issues: Geographical Indications Differential Export Taxes (DET) Sectoral Initiatives

MARKET ACCESS Main Issues in the Doha Round Work Program Progressivity: deeper cuts in higher tariffs. Proportionality: of tariff reductions between developing and developed members (S&D treatment). Neutrality: with respect to tariff structures. Flexibility: take into account the sensitive nature of some products: sensitive products, special products. Tariff cappings. Tariff Escalation. Conversion of specific tariffs. Tariff Rate Quotas: expansion, administration. Special Safeguards: SSG, SSM.

Applied Agricultural Tariffs Mean Median Standard Deviation Coefficient of Variation Maximum Tariff Minimum Tariff N Positions 100% N Positions 30% Total of Positions Tariffs 100%/Total Tariffs 30%/Total BRAZIL 10.2% 10.0% 6.0% 0.6 55.0% 0.0% - 4 959-0.4% USA 12.3% 4.4% 29.6% 350.0% 0.0% 167 1829 1.7% 9.1% 152 633 91 7.3% 30.3% 130 1044 12.4% 7.8% 92.8% Notes: 1. Specific tariffs were converted into ad valorem (AVE) equivalents, based on ICONE s methodology, which utilizes unitary export values from COMTRADE (UM) database. 2. Statistics calculated for the US take into account both intra and extra quota tariffs. For EU-15, only extra-quota tariffs are considered. 3. Brazilian numbers consider individual exceptions to Mercosul s Common External Tariff. 4. Coefficient of Variation is the standard deviation divided by the mean. The higher the CV, the higher is the data dispersion. Source: ICONE, elaborated with data from USITC (03), TARIC (03), TEC Mercosul, MDIC (03) and Chinese and Indian Governments (02). 2.4 31 EU-15 29.5% 14.7% 40.3% 1.4 277.2% 0.0% CHINA 18.3% 17.5% 13.6% 0.7 71.0% 0.0% - - INDIA 36.9% 30.0% 25.8% 0.7 182.0% 0.0% 54 641 690

UNITED STATES Tariff Structure: Distribution According to HS Chapters EAV Tariff 375% 350% 325% mean dispersion Tobacco 300% 275% 250% 225% 0% 175% 150% 125% Dairy Grapes Peanuts Sugar Orange Juice 100% 75% 50% 25% 0% Source: USITC 1 2 2 4 4 4 4 4 4 5 7 7 7 7 8 8 8 9 11 12 12 15 15 16 17 18 18 19 19 21 21 22 23 24 24 41 50 52 Chapter

EAV Tariff 300% 285% 270% 255% 240% 225% 210% 195% 180% 165% 150% 135% 1% 105% 90% 75% 60% 45% 30% 15% 0% Meats EUROPEAN UNION Tariff Structure: Distribution According to HS Chapters mean dispersion Dairy Garlic Banana Processed Grains Olive Oil Sugar Mushroom Prepared Vegetables Wine Starch 1 1 2 2 2 2 2 4 4 4 4 6 7 7 7 8 8 8 9 10 11 11 12 12 15 15 15 16 17 18 19 21 22 22 22 22 23 24 33 35 51 Tariff Lines (8 digits)

AVE Tariff Rates 300 280 260 240 2 0 180 160 140 1 100 80 60 40 0 Tariff Profile Mean Median Standard Deviation Maximum INDIA AG TARIFF PROFILE (Bound and Applied Rates) Bound 116.0% 100.0% 52.5% 300.0% Applied 36.9% 30.0% 25.8% 182.0% 1 1 2 2 2 4 5 7 7 7 8 8 8 9 9 10 11 12 12 13 15 15 15 17 19 21 22 23 24 35 43 52 HS Chapter Bound 04 water in tariffs Applied 02 Note: Specific tariffs were converted into ad valorem (AVE) equivalents, based on ICONE s methodology, which utilizes unitary export values from COMTRADE (UM) database. Source: IDB/WTO and WTO Schedules. Elaboration: ICONE, Brazil.

Issues in Export Competition EXPORT SUBSIDY European Union EXPORT CREDITS United States X TRADE MONOPOLY Australia & Canada FOOD AID United States Parallelism

DOMESTIC SUPPORT: Early Uruguay Round Trade Distorting Subsidies Not Allowed No or Minimally Trade Distorting Allowed

DOMESTIC SUPPORT: Early Uruguay Round Trade Distorting Subsidies Monitored, Global Capping No or Minimally Trade Distorting Allowed

DOMESTIC SUPPORT: End of the Uruguay Round Trade Distorting Subsidies Monitored, Global Capping 1992 CAP Reform Trade Distorting Subsidies with supply control Temporarly Allowed No or Minimally Trade Distorting Allowed

DOMESTIC SUPPORT: Prospects for the Doha Round Product & Box-Shifting! Most Trade Distorting Subsidies Monitored, Global Capping 02 Farm Bill 03 CAP Reform Less Trade Distorting Subsidies with NO supply control Allowed, Global Capping: 5% PV No or Minimally Trade Distorting Allowed, monitoring

Notes: (e) Estimates by ICONE Source: WTO. Elaboration: Icone billion 80 70 60 50 40 30 10 0 EC15: Total Trade Distorting Domestic Support (marketing year) AMS Commitment 95 96 97 98 99 00 01e 02e AMS De Minimis Blue reen Box G

USD billion 25,0 22,5,0 17,5 15,0 12,5 10,0 7,5 5,0 2,5 0,0 US: Total Trade Distorting Domestic Support (Marketing Year) AMS Commitment 95 96 97 98 99 00 01 02e 03e AMS De minimis Blue Low prices 05-06 Farm Bill 08? Notes: (e) Estimates CCP (Counter Cyclical Payments) included in de minimis

(USD billion) 34 32 30 28 26 24 22 18 16 14 12 10 8 6 4 2 0 1986 FSA 1985 1987 1988 1989 US: Total CCC Net Outlays (fiscal year) 1990 1991 FACT 1990 1992 Net Outlays 1993 1994 Notes: FSA: Food Security Act (1985); FACT: Food, Agriculture, Conservation and Trade Act (1990); FAIR: Federal Agricultural Improvement & Reform Act (1996); FSRIA: Farm Security & Rural Investments Act (02) *US nominal farm gate prices of barley, corn, cotton, oats, rice, sorghum, soybeans and wheat. Prices are weighted according to the share of each crop in the total value of production (1994-04 average). (e) Estimate (b) Budget provisions. Source: USDA CCC. Elaboration: ICONE 1995 1996 1997 FAIR 1996 FSRIA 02 1998 1999 00 01 Price Index (Weighted Average) 02 03 04 (1994=100) 05e 130 1 110 100 90 80 70 60 50

(USD billion) 11 10 9 8 7 6 5 4 3 2 1 0 US: CCC Net Outlays by Selected Commodities (fiscal year, Oct-Sept) 1997 1998 1999 00 01 02 03 04 05e 06b Corn Wheat Upland Cotton Soybeans Notes: * Barley, Oats, Sorghum, and products. (e) estimate (b) budget provisions. Source: USDA CCC. Elaboration: ICONE

180% 160% 140% 1% 100% 80% 60% 40% % 0% Share of Ag Subsidies in US Production (by commodity) 1995 1996 1997 1998 1999 00 01 Source: USDA. Cotton Corn Rice Soybean Wheat

Market Access: Developing Countries Issues and Concerns CONCLUSIONS Free vs. Preferential trade interests Defensive positions in China, India but new offensive Subsidies interests in industrial goods (China), services (India). Export competition: problem for DCs (parallelism) Domestic Support Expectations of reduction/decoupling in the next US Farm Bill EU and G could follow US movements (trade-offs)

Marcos S. Jank Email: msjank@iconebrasil.org.br Homepage: www.iconebrasil.org.br Phone: 55 11 3021 0403