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Regional and Bilateral Negotiations

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An increasing number of countries are adopting a trade policy strategy that targets multiple fronts, including not only the World Trade Organization (WTO) but also regional and bilateral trade agreements. There are over 250 regional and bilateral trade agreements worldwide, and most of these have been negotiated since the creation of the WTO in 1995. This number continues to grow.

Regional and bilateral trade agreements may bring faster results than negotiations under the WTO, particularly as WTO negotiations have faltered at times in recent years. Regional and bilateral trade agreements may also lead to greater trade liberalization than would be possible under any probable WTO agreement. On the other hand, regional and bilateral trade agreements may distort trade patterns by encouraging trade among member countries to the exclusion of trade with other countries. Concerns have also been raised that they may weaken the commitment of countries to multilateral negotiations.

Agricultural Policies in OECD Countries 10 Years After the Uruguay Round: How Much Progress?

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By Stefan Tangermann

In the Uruguay Round, a major step forward was made in terms of agreeing international rules and commitments for agricultural policy making. After four decades of largely unsuccessful attempts at establishing effective and operational rules for agriculture in the GATT, the Uruguay Round negotiations achieved a breakthrough. Nearly tens years have now passed since the conclusion of these negotiations. How have agricultural policies during this period responded to the new international framework of rules and commitments? Have the Uruguay Round negotiations on agriculture been successful in achieving their objectives? How have agriculture policies developed under the newly established Agreement on Agriculture?

This paper makes a modest attempt at providing at least some partial answers to these questions, regarding policy developments in the thirty member countries of the Organization for Economic Co-operation and Development (OCED). This paper starts by providing some quantitative evidence on agricultural policy developments in the OCED countries. This section includes a series of graphs demonstrating such concepts as price and producer support level, commodity compositions, support composition, and support levels and cumulative production value. The paper then looks toward discussing the WTO and domestic policy decisions from the direction that the Uruguay Round Agreement on Agriculture has interacted with agriculture policy making in the OCED area. The author concludes with careful evolutionary analysis for the agenda of agricultural policy dialogue in the OECD.

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Domestic Support and the WTO: Comparison of Support Among OECD Countries

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By Edwin Young, Mary Burfisher, Frederick Nelson, and Lorraine Mitchell

Domestic farm support policies are a source of market and trade distortions. As members of the WTO, countries committed to limit their spending on domestic agricultural programs presumed to be the most trade distorting and to exempt other programs from any limitations under a set of special conditions. The continuing challenge for WTO negotiations on domestic farm policy will be to obtain effective commitments to reduce agricultural trade distortions, while allowing countries flexibility to use minimally trade distorting policies to achieve their own national priorities. Part of the task facing trade negotiators is determining where and how to draw the line between benign policies and trade distorting policies.

This paper develops a database that classifies support into production and trade distorting categories that are useful in describing and comparing the structure of policy across countries and commodities for a consistent time frame. The classification design aims to show differences in the types of programs used to implement agricultural policy and differences in the potential for each program type to distort production and trade.

Results show that the type and level of agricultural support varies widely across countries and commodities. The distorting effect of policies depends upon both the economic incentives created by program parameters and the total amount of support provided.

As the two largest agricultural sectors, the EU and the United States dominate the results, accounting for 70 percent of total value of agricultural production for the included commodities, total support, and total amber type support. Over half of measured total support and over threefourths of amber type support in the 12 OECD countries is market price support, with Korea providing over 95 percent of its support as market price support. While the level of support varies widely among countries, considerable variation in the overall level of support exists among commodities, with milk and sugar generally receiving the highest support.

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Domestic Farm Policies and the WTO Negotiations on Domestic Support

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By Tim Josling

The Uruguay Round was the first multilateral negotiation on domestic agricultural policy. The Uruguay Round Agreement on Agriculture (URAA) provided a negotiated framework into which domestic farm policies must fit if conflicts are to be avoided and penalties are not to be assessed. At first this framework appeared rather permissive, requiring few changes by individual countries. Over time the noose has tightened somewhat. The current agricultural trade negotiations, as they relate to domestic support, are to decide in essence whether to continue this process or to loosen the constraints to allow countries more flexibility to pursue domestic objectives.

Domestic policies toward other sectors are disciplined in a different way. Subsidies are constrained by the Agreement on Subsidies and Countervailing Measures (SCM Agreement) also negotiated in the Uruguay Round. Agricultural programs that grant subsidies are sheltered from this discipline by the Peace Clause (Article 13 of the URAA). Unless renewed, the protection afforded by the Peace Clause will lapse at the end of 2003. This opens up an interesting set of issues related to the compatibility of domestic farm policies with these different, and in many respects more strict disciplines. The reconciliation of any conflicts may end up being determined by decisions of the Dispute Settlement Body (DSB) as it considers and enforces the reports of dispute settlement panels.

The process of litigation (as opposed to legislation) has, however, already begun in advance of the expiration of the Peace Clause. The dispute between New Zealand and the United States and Canada over the impact of Canadian dairy policy was primarily over export subsidies. But the outcome of that case could have a profound effect on the way in which domestic support programs are treated in the WTO. The complaint by Brazil over subsidies to cotton farmers in the United States will also have a direct impact on the interpretation of WTO rules on domestic support, as will the case brought by Australia, Brazil and Thailand over the European Union’s sugar regime.

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