WORLD TRADE
ORGANIZATIONG/AG/NG/W/20
14 July 2000
(00-2901)
Committee on Agriculture
Special SessionOriginal:  Spanish
SECOND SPECIAL SESSION OF THE COMMITTEE ON AGRICULTURE
29-30 June 2000
Statement by Argentina
Subject:  Presentation of a proposal on "Export Subsidies"
We are now embarking on the first stage of negotiations on continuing the process of
reforming the multilateral rules governing production and trade in agricultural products, as called for
in Article 20 of the Agreement on Agriculture that we adopted in the Uruguay Round.
The Agreement gave us for the first time an in ternational framework within which to regulate
this sector, but it left considerable leeway for so me industrialized countries to continue the practice of
supporting domestic production and granting subsidies for the export of the surpluses generated as a
result of their support policies.
Furthermore, in 1997 when the financial crisis began in some Asian countries and
international demand for agricultural products fell, instead of curbing production some of these
industrialized countries made even greater use of production subsidies, leading to larger surpluses,
which then meant subsidized prices in an internat ional market that was already saturated.  The result
was to increase the downward trend in prices and exacerbate the balance-of-payments difficulties in
developing countries.
Allow me to substantiate this statement with figures.  According to the latest estimates
published by the OECD1, in 1997 when the aforementioned crisis began, support for agriculture as a
whole by member countries of the OECD amounted  to US$329 billion.  In 1998, this figure rose to
US$352 billion and in 1999 increased still further to US$361.5 billion.  In other words, since the
Asian financial crisis began, despite the Agreement on Agriculture, subsidies have risen by
9.95 per cent, almost a 10 per cent increase.  This represents a transfer to rural producers in OECDcountries of 1.4 per cent of the GDP of the richest countries in the world every year.
Allow me, Mr. Chairman, to give one example of what we could no doubt call irresponsible
use of subsidies.  In 1997 and 1998, some Member States decided to utilize accumulated export
subsidies, that is to say "balances" not used in 1995 and 1996.  For example, in 1997 and again in1998 the EU exceeded its annual limits for export s ubsidies for sugar, both as regards budgetary
outlay and volume.
2  This had a negative effect on the earnings of exporting developing countries,
which were already affected by the crisis.
                                                     
1 Agricultural Policies in OECD Countries, Monitoring and Evaluation 2000.  PSE Tables and
Supporting Materials, 6 June 2000.
2 According to EU's notifications to the WTO G/AG/N/EEC/20 (97/98), G/AG/N/EEC/11 (96/97),
G/AG/N/EEC/5/Rev.1 (95/96) in 1997, it overshot commitments by 22 per cent and 18 per cent, in budgetary
outlays and volume respectively.  In 1998, it overshot commitments by 34 per cent and 12 per cent, in budgetaryoutlays and volume respectively.  See G/AG/N/G/5, Background paper presented by the WTO Secretariat,
11/5/00.  The EEC also raised the subsidies equivalent from 15 per cent in 1996 to 164 per cent in 1997 (no1998 figures available).G/AG/NG/W/20
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The global consequences of these subsidies and production support policies are very serious.
To take the example of the Common Agricultural Policy, according to a recent study published in the
Journal of the Institute of Economic Affairs, it costs the world US$75 billion annually, two thirds in
subsidies and higher prices paid by taxpayers and consumers in member countries of the EU andone third in loss of production and earnings for the other producing countries.  What the study did not
calculate, and this is a matter on which we must express our concern, are the effects of export
subsidies on production and producers' earnings in the countries into which these subsidized exports
are imported.  A recent study by the World Bank ha s described the impact on agricultural production
in African countries in dramatic terms.
We could say the same about the impact on production and earnings in exporting countries.
In Argentina, for example, if the prices of our agricultural exports in 1999 had been equivalent to
prices in 1990/1994 – when we negotiated the Agreement on Agriculture - Argentina would have
exported an additional US$1.4 billion.
3  This represents around 5 per cent of the total value of
Argentina's exports.
How much of this loss is due to the subsidy policies of the major partners in this system?  It is
difficult to determine, but in any event the OECD4 has estimated some effects of the elimination of
certain subsidies.  For example, if the EU did no t subsidize wheat exports, the price per tonne would
be 4 per cent more today.  If the EU did not subsidize maize exports, the price would be  per cent
higher per tonne.  Again, if the United States had not made greater use of domestic subsidies knownas "marketing loan gains" and "loan deficiency payments", today soya beans would be worth 6 to
7 per cent more.  These estimates are limited to assessing "the price-impact" of only two types of
subsidies for three important products that play a major role in our exports.  Nevertheless, the trend
towards a reduction in these "commodities" undoubtedly affects the prices of substitute products;  for
example, palm oil or substitute products for wheat and maize.
Article 20 of the Agreement on Agriculture points out that "further commitments are
necessary to achieve" the conclusion of the reform process begun in the Uruguay Round.  This is why
today, as members of the Cairns Group, we ha ve put forward a document that proposes the
elimination of all forms of export subsidies.
For the reasons explained, and essentially due to the need to end the inequitable situation in
which we in the developing countries are paying for the consequences of policies that only serve to
increase the resources of some industrialized countries at the expense of rural producers in the
developing world and in other developed countries that are efficient producers and do not receive
subsidies for their production, the Cairns Group has put forward a proposal to end export subsidies
within a reasonable but time-bound period.
We are ready to negotiate on the time-frame and the form in which such elimination should
be brought about.  We only pose one condition.  The outcome of the negotiations must not erode our
rights under the current text of the Agreement on Agriculture.
According to the so called "Peace Clause", until 31 December 2003 we are obliged to allow
some Members to make use of the export subsidies listed in Article 9.1, provided that:
1. The budgetary outlay reduction commitments specified in the respective national
schedules are observed;  and
                                                     
3 Source:  Centre for International Economics, Mercosur Panorama, No. 4, Buenos Aires,
November 1999.
4 OECD Agricultural Outlook 2000-2005.G/AG/NG/W/20
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2. Subsidies are not granted for products not listed in the respective national schedules.
As of 31 December 2003 export subsidies listed in Article 9 and all other forms of export
subsidies referred to in Article 10 of the Agreement will be subject to the provisions inArticles 3, 5 and 6 of the Agreement on Subsidies.
To summarize, as of 1 January 2004, export subsidies for products covered by the Agreement
on Agriculture will become "prohibited subsidies" in accordance with the provisions in the Agreement
on Subsidies and Countervailing Measures and, as such, will be subject to the action provided in
Article 4 of the latter Agreement.
As far as export subsidies are concerned, we should like to emphasize that there is an
outstanding account which must be closed before 31 December this year, when the period for
implementing the Uruguay Round Agreements ends.  I am referring to the commitment under
Article 10.2 of the Agreement, that is to say the undertaking to develop disciplines on export credits,
export credit guarantees and insurance programmes.  For the time being, the lack of political will inone country has prevented the OECD negotiations from reaching a conclusion acceptable to the
others.  This position seeks its justification in the ongoing and intensified use of export subsidies
made by other countries.  Although this correlation is not without economic rationale, we should
remember that Article 10 of the Agreement on Agriculture was adopted in order to prevent
"circumvention of export subsidy commitments".  Consequently, if we are unable to adopt disciplineson export credits, export guarantees and insurance programmes by the end of this year, these practices
should be deemed equivalent to other forms of export subsidies, in other words, subsidies that have a
direct impact on the price of exported products.  In this connection, it should be emphasized that, at
the last OECD Council meeting, it was agreed that these negotiations should (and I quote)
"be resumed and successfully concluded by end of July if possible and by the end of 2000 at thelatest".
As I said at the outset, developing countries only have access to the legitimate tools of
competition:  quality and price.  If we want to sell our products, we have to make efforts to produce
more at lower cost.  Consequently, for us it is equally unacceptable for the major global exporters to
enjoy the privilege of "special and differential treatment" and to keep us out of the market by
subsidizing prices and payment terms for what they export.
This situation is now compounded by doubts concerning the continuity of the reform process
initiated in the Uruguay Round.  Some Member States declare that, without a round, there will not be
any results in the agricultural negotiations.  As we  all know, for the time being there is no round and
the prospects are not very bright.  However, without prejudice to the position held by each ofcountries concerning the possible launching of a round, in 1995 we all agreed to continue the
agricultural reform process initiated during the Uruguay Round.  For this purpose, we undertook to
initiate a negotiating process one year before the end of the period of implementation.  The
negotiations on agriculture have been initiated, but their duration depends to a large extent on those
who now tell us that "without a round there will not be any results".  There are no guarantees
(putting it optimistically) that these countries will pursue their tariff and subsidies reductions during
the negotiating process.
In other words, in practice the Member States that subsidize the most have it within their
power to interrupt the process of reforming agri culture throughout the whole negotiating process.
This affects the objective of the Agreement, set out in Article 20, which is to ensure the
continuation of the reform process through substantial and progressive reductions in support and
protection.G/AG/NG/W/20
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It is precisely to ensure this continuity and to prevent further deterioration of the current
situation that the proposal by the Cairns Group also calls on countries that are entitled to use export
subsidies to limit and reduce their use to the maximum.  We are asking them to show a sense of
responsibility while we agree on the disciplines essential to end the present situation.  We are
confident that an agreement can be reached on this particular point, i.e. a self-limitation undertakingby countries entitled to use export subsidies, during this year, as proof of their determination to ensure
the continuity of the negotiating process.
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