In keeping with the general theme of the Doha Round of trade negotiations as a “development” round, the recent U.S. and EU proposals on agriculture have significant implications for developing countries. While developing countries as a group would have fewer obligations under the WTO rules, more advanced developing countries are called upon to have trade policies more similar to developed countries. Two-thirds of the 148 member countries of the WTO are considered developing countries.
Treating developing countries differently than developed countries is not a new idea. Under the Agreement on Agriculture of the Uruguay Round agreement completed in 1994, developed countries were required to cut agricultural tariffs an average of 36 percent with a minimum cut of 15 percent for each product. Developing countries were required to have average tariff cuts of 24 percent with a minimum cut of 10 percent for each product. Domestic support programs were required to be cut by 20 percent in developed countries and 13 percent in developing countries. Export subsidies were required to be cut 36 percent in value and 21 percent in quantities for developed countries, and developing countries were required to have cuts of 24 percent and 14 percent, respectively.
Countries are allowed to self-elect themselves as “developing.” This puts countries with highly developed, export competitive agricultural industries like Brazil, Argentina and Thailand in the same group as the poorest, landlocked countries in Africa. The EU proposal makes reference to three groups of developing countries. A group of “least developed countries” would have access to developed country markets similar to the EU “Everything But Arms” (EBA) initiative. (The UN has designated as least developed 32 countries that are members of the WTO.) They would have access to developed country markets with zero tariffs and no quotas. This group of countries would also have a “round for free” with no obligatory tariff cuts.
At the other end of the developing country spectrum, the EU expects “advanced developing countries” to compete on trade terms closer to the conditions set for developed countries. EU Trade Commissioner Peter Mandelson in an October 13 speech stated, “There are other reasons why today’s liberalization cannot be carried predominantly by the industrial counties alone. For one, our residual protection is relatively low. Global growth through trade liberalization now depends critically on reducing the higher barriers in the more advanced developing countries. But secondly, in the last ten years it is this group of countries that has benefited more than others from the open trading system.”
Under the EU proposal, the middle group of developing countries would be provided considerable flexibility on which import tariffs are cut and by how much and on the level of additional access to developed country markets. Both the U.S. and EU proposals recognize that “one-size-fits-all” will not work for these countries that are on the edge of more rapid economic growth.
The U.S. proposed the same tiers or bands of tariffs be used for tariff reductions for both developed and developing countries (0-20%, 20-40%, 40-60% and 60%+). While specific percentage cuts for the four bands were proposed for developed countries, none were made for developing countries. India and Brazil as leaders of the G20 group of developing countries are expected to make proposals for the percentage reductions in each of the four bands. While developed countries would have a tariff cap of 75 percent, a cap for developing countries was not set. The G20 group had previously suggested a cap of 150 percent. The G20 has agreed with the U.S. that “sensitive products” exempt from the tariff limits should not exceed 1 percent of the products of a country. Developing countries would be allowed to have transitional protection against import surges while increasing market access.
The U.S. has also suggested that obligations for developing countries reflect their status as competitors with developed countries and as potential markets for agricultural products. A country like Brazil that is a major exporter of a host of agricultural products would have larger obligations than a developing country with little export potential. The same would be true on market access for a country like India with a rapidly growing middle class and increasing demand for food.
The U.S. and EU proposals also encourage agreement on a trade related assistance package for developing countries similar to those discussed at the Gleneagles G8 summit this summer and recommended by the International Monetary Fund/World Bank Trade Progress Report. While the WTO has no official role in this area, market access means little for least developed countries if they are not able to attract capital to produce for international trade.
An analysis from the World Bank released this past summer estimates that 93 percent of the global benefits from removing distortions in agriculture would come from increased market access. Over half the gains for developing countries would come from liberalization of developing countries themselves, an increase in “south-south” trade. While cutting domestic subsidies and tariffs by developed countries gets much of the attention, increased trade among developing countries should not be overlooked.
For their own self interest, developing countries need to use the agendas offered by the U.S. and the EU as the basis for making market access changes that would be good for developing and developed countries.