The Impact of the Agreed Framework on the forthcoming Negociations of the Doha Development Agenda (DDA)
OECD Trade Committee Consultations With Civil Society Organisations
Paris, 19 October 2004
Views of the International Federation of Agricultural Producers (IFAP)
IFAP is the world farmers’ organisation representing over 500 million farm families grouped in 100 national organisations in 70 countries. It is a global network in which farmers from industrialised and developing countries exchange concerns and set common priorities.
IFAP has worked on trade issues for some time. We have found a consensus on many of the areas of concern. This appears in the consolidated trade statement that has been provided as an input into this consultation.
Farmers’ demands for the DDA
Concerning the modalities framework that was agreed in July, IFAP sent a letter to the Ambassador Tim Groser, Chair of the WTO Committee on Agriculture Special Sessions, saying that it would be judging the adequacy of the WTO agricultural modalities paper on whether it met six critical objectives for farmers. These objectives are:
1.An improvement in world agricultural trade that brings real benefits to all farmers.
2.Significant progress and balanced commitments over all three pillars.
3.Sufficient flexibility in the modalities framework allowing countries to use the most appropriate instruments according to their specific national circumstances to meet agreed, measurable and equitable outcomes. Agriculture, and the role expected of agriculture, is not the same everywhere and WTO rules must accommodate these differences.
4.Space for farmers to receive domestic support, so long as that support has no, or at most minimal, distorting effects on production and trade.
5.Improvements in market access for all farmers, in particular those in developing countries and Least-Developed Countries.
6.Due prominence and recognition of the broad role that agriculture plays in many countries, ensuring not only food production but also many other functions, including the sustainability of rural areas and environmental protection.
We were also lobbying for rules on Trade and Competition policy to regulate the behaviour of the large multinational companies that now dominate both the distribution side and the input side of the agri-food chain. WTO rules deal with distortions caused by certain types of government policies. However, it is not paying attention to the market distortions caused by the concentration of market power in the hands of a few large multinational companies. This is not on the Doha agenda, but IFAP is convinced that trade liberalisation in a context of markets that do not function competitively will not bring the expected benefits
Overall, it seems that the DDA Modalities Framework that was agreed in July gives all countries adequate negotiating flexibility to cover their concerns. It has put the negotiations back on track. Some of our member organisations feel that the Framework is a lost opportunity to make more progress on their particular concerns, while other member organisations are relieved that they did not get something more constraining at this early stage.
The impact of the DDA will now depend on what is negotiated within this framework, and farmers will be very vigilant as negotiations move forward to the substantive issues.
The DDA is only the second round of trade negotiations in agriculture. Realistically, negotiators will have to recognise that it will take further Rounds to solve all the problems of agriculture. In fact the WTO Agreement on Agriculture recognises the point that trade negotiations are a “long-term, ongoing process”.
To come to the specifics of the Framework proposal, starting with domestic support.
Domestic support
Reductions in trade-distorting domestic will be much larger in the DDA that in the previous Round. The main effect of the 1995 WTO Agreement on Agriculture was to bring agriculture under GATT rules, and start the reform process. This time, under the DDA trade-distorting domestic support will be reduced substantially, starting with a 20 per cent cut in the first year. Many industrialised country governments have anticipated this development and market price support to farmers has been reduced significantly under reforms of national agricultural policies. For example, the various CAP reform measures in the EU have reduced trade-distorting support by 70 per cent.
Safety-nets
Farmers are more and more exposed to the volatility of world market prices. It is therefore important for WTO rules to allow for the development of cost-effective and non-trade distorting measures to help farmers to better manage economic risk, such as crop insurance and safety net programs. Under the present Agreement on Agriculture, many of these programs are subject to reduction commitments.
Public goods
In addition to food production, agriculture has an important role in environmental protection, in food security, in preserving rural traditions and culture, and in contributing to the socio-economic viability of the rural areas.
In today’s environment of more open global markets and increased competition, market forces will not be able to deliver the multiple functions expected by society from agriculture. Government programs need to be developed to reward farmers for the provision of benefits to society that appear concurrently with agricultural production, but which cannot be traded economically. Not all of these programs can be totally decoupled, and so will be subject to reduction commitments. In fact the Framework paper does not provide for modalities for commitments on ‘non-trade concerns’.
Local production for local markets
Within IFAP, there is much support for the idea that negotiators should distinguish in the Agreement on Agriculture between government support directed at products domestically-consumed in countries that are not self-sufficient in those products, from government support for exported products. It was pointed out that WTO rules are intended for the less than 10 per cent of global agricultural production that enters world trade. However, in practise WTO rules apply equally to traded and non-traded products, causing problems for high-cost, net importing countries that wish to maintain local agricultural communities to supply a part of their local markets. This issue is not addressed in the Framework.
Trade remedy measures for developing countries
Farmers in developing countries, who are rarely able to receive domestic support for their agriculture, feel particularly vulnerable in competing with imports from countries that provide trade-distorting support to their exports. Farmers in developing countries therefore wanted the establishment of rules in WTO that would enable their country to secure redress and protection if and when distortive subsidies in other countries result in harm to their domestic markets. This demand may be covered by the proposal for a Special Safeguard Measure under the Market Access provisions. But it depends on how the SSM will be made operational.
Export competition
Most farmers acknowledge that direct and indirect government export subsidies, non-commercial export credits, tied food aid and other such measures distort international trade. These different types of support for exports are used as market balancing measures.
The Framework agreement provides for the elimination of export support by a credible end date. This means that there must be space in the DDA to develop other, non-trade distorting, mechanisms to meet this market-balancing objective, when required. The Framework does not address this problem.
Market access
Improved market access for agricultural products is vital for countries heavily reliant on farm-based export industries for their future economic development and growth, and particularly developing countries. However, liberalisation of agricultural markets may also destabilise fragile rural economies. It is therefore important that further opening of world markets be carried out in a balanced fashion, which grants equitable opportunities to all countries in their exports of agricultural products, and gives due regard to the needs of importing countries, and especially to certain sensitive products. Also, it is critical that any trade preferences granted to developing countries actually benefit the farmers in those countries. Developing countries that receive increased preferential access for their exports should therefore be implementing national anti-poverty programs.
The DDA is mandated to give special consideration to agricultural products - including value-added products - of developing countries. It is critical therefore that the DDA allows developing countries to protect their local markets while they address their food security, rural poverty and livelihood needs. WTO is not set up for these cases, and so they have to be treated as exceptions with exemptions to the trade rules. The Framework paper does this by giving developing countries the possibility to designate a number of “Special Products” that will be given “more flexible treatment”. Also, a new Special Safeguard Mechanism (SSM) will be established for use by developing countries.
Assessment of the Modalities Framework
Most farmers appreciate that the DDA will not be the final Trade Round for agriculture. However, they expect significant progress in “levelling the playing field” so that international trade is less distorted by government policies.
Trade can be a significant motor for development, but trade liberalisation should not be considered as an end in itself. Freer trade needs to be imperatives accompanied by other measures to promote development, or it could end up as more serving to widen income gaps rather than contributing to global economic development. Such accompanying measures include:
- Competition policy. It is not only government policies that cause distortions. The highly concentrated nature of the retail distribution sector, and other private sector industries upstream and downstream of agriculture are also causes of market distortions. The actions of the huge multi-national companies that dominate the food chain lead to most of the market risks being borne by farmers and consumers. Transparency and competition are therefore fundamental issues for the success of the policy reform process, and the multilateral trading system.
- Technical assistance for developing countries. Farmers in developing countries need not only market opportunities, but they also need to be able to exploit these opportunities. Thus, at the same time as agricultural markets are opened to developing countries, technical assistance programs must be put in place by OECD countries to build the capacity of developing countries to meet the food safety and traceability standards for international trade.
Trade liberalisation in a context of markets that do not function correctly will not bring the expected benefits. Unfortunately, the Framework paper does not address such issues.