WORLD TRADE
ORGANIZATIONWT/GC/W/374
15 October 1999
(99-4441)
General Council Original:  English
PREPARATIONS FOR THE 1999 MINISTERIAL CONFERENCE
Agriculture
Proposal under Paragraphs 9(a)(i) and 9(a)(ii) of the Geneva Ministerial Declaration
Communication from Cuba, Dominican Republic, Egypt, El Salvador, Honduras,
Sri Lanka, Uganda and Zimbabwe
The following communication, dated 7 October 1999, has been received from the Permanent
Mission of the Dominican Republic.
_______________
Outcome of the Agreement on Agriculture Imbalanced for Developing Countries
1. The Agreement on Agriculture is fraught with inequities and imbalances for developing
countries. In terms of the balance of rights and obligations flowing from the Uruguay Round
Agreements, agriculture was one of the few sectors where it was predicted that developing countries
would benefit. Unfortunately, this has not materia lised. In fact, a recent FAO study has shown that it
has brought more problems than benefits for developing countries, since their imports have increasedsignificantly but their exports have not. According to the FAO, "The findings were contrary to what
was expected. Developing countries had a lot of expectations (in terms of increasing their exports)
from the Uruguay Round agreement. Many of their fa rmers are now finding it very difficult to cope
with the surge in imports of basic foodstuffs".
1  "On the whole, few studies reported improvements in
agricultural exports in the post-UR period – the typical finding was that there was little change in thevolume exported or in diversification of products and destination."
2 At the same time, the same report
observed that "Food imports were reported to be rising rapidly in most case studies".
2. In terms of the overall economic impact, the FAO has said that the period since the
conclusion of the UR has been too short to assess fully the long-term impact on economies studied.
However, experiences from structural adjustment policies point to the same direction. "A commonreported concern was a general trend towards the concentration of farms, in a wide cross-section of
countries. While this led to increased productivity and competitiveness with positive results, in the
                                                     
1Financial Times "Uruguay Round Agreement: Imports Boosted, Not Exports", 28 September 1999.
2FAO 1999 "Agriculture, Trade and Food Security: Issues and Options in the Forthcoming WTO
Negotiations From the Perspective of Developing Countries", pp. 3 and 4, FAO Symposium,
23-24 September 1999, Geneva.WT/GC/W/374
Page 2
virtual absence of social safety nets, the process also marginalized small producers and added to
unemployment and poverty."3
The Importance of Agriculture in Developing Countries’ Economies
3. The present imbalance is a cause of concern since agriculture has a particular place in the
economies of developing countries.
- Agriculture is a major source of employment and livelihood. There is usually no
alternative source of employment for small farmers if they are displaced.
- Countries do not have adequate foreign exchange to rely extensively on food imports
for their daily sustenance.
- People in developing countries who had relied more on the subsistence agricultural
economy would most likely not have the purchasing power to procure food from the
market.
4. The free market in theory is the best tool for responding to the forces of demand and supply.
However, the reality is that the market is incapable of ensuring the availability of food to all people.
Food is also unlike other goods in that it is an absolute necessity for all people.
Implementation Issues5. The Agreement as it stands reinforces the inequities in favour of the developed countries. This
has happened despite commitments aimed at reducing tariffs, domestic subsidies and export subsidies.
This has taken place in various ways because of the many loopholes the agreement allowed:
(a) It endorsed the tariff peaks and tariff escalations  in the developed countries. Tariff
peaks were aggravated by the practice of dirty tariffication which the Agreementendorsed. This has resulted in tariff rates for developed countries for major
agricultural products being two or more times higher than those of the developing
countries.
This problem of setting high initial bound tariffs has been compounded by the fact
that tariff reductions were aggregated and it became common practice that developed
countries minimised their tariff reductions for the more sensitive products whilereducing tariffs on those products which did not have high tariffs in the first place.
(b) Other benefits which developing countries had expected to benefit from, but which
have not materialised, are the minimum access opportunities  in developed country
markets. The administration of these quotas have not been transparent.  Traders indeveloping countries reported a lack of information about export opportunities under
market access measures.
4  Also, we now know that there has been an "underfill" of
                                                     
3 FAO 1999 "Agriculture, Trade and Food Security: Issues and Options in the Forthcoming WTO
Negotiations From the Perspective of Developing Countries", p. 4, FAO Symposium, 23-24 September 1999,Geneva.
4 FAO 1999, "Agriculture, Trade and Food Security: Issues and Options in the Forthcoming WTO
Negotiations From the Perspective of Developing Countries", FAO Symposium, 23-24 September 1999,
Geneva.WT/GC/W/374
Page 3
these quotas, i.e. market opportunities which should have been made available to
developing countries have not materialized.
(c) High levels of subsidies  in developed countries have increased significantly, even as
the markets of developing countries were opened. The Producer Subsidy Equivalentlevel for OECD countries has risen from US $247 billion in the base reference period
(1986-88), to US $270 in 1997, to US $274 billion in 1998. One of the loopholes
which allowed this is that countries reinstrumented their subsidy programmes, from
prohibited programmes to AoA legal subsidies. In the US, subsidy levels have
increased significantly, from US$ 41.4 billion in 1986-88 to $50 billion in 1998. The
problem with the AoA is that these subsidy increases have been possible even though
commitments have bound countries to reducing their AMS supports. There aretherefore obviously loopholes which the AoA permits, which are extremely market
distorting.
In contrast, 61 out of 71 developing countries reported zero AMS support levels. The
FAO has commented that while some developed countries over-reported their AMSlevels for the base period, some developing countries probably under-reported them.
5
The imbalance here is that developing countries have been disallowed to raise theirsupport levels above these zero or negligible levels.
(d) Non-tariff barriers  have reduced the export opportunity of developing countries.
For example, the EU’s complex system of entry prices for vegetables is aimed at
protecting their domestic producers from competitive prices from abroad during
certain seasons.
The other significant barrier to agricultural trade is in the area of food standards.
(While this is dealt with under the SPS agreement, it nevertheless is closely related to
the Agreement on Agriculture and should be addressed as part of the complex web of
factors affecting agricultural trade). SPS standards set by developed countries have
often not been transparent, and have been used to block developing countries’
imports. Fair implementation of the agreement requires both financial and technical
resources which developing countries lack. There have been few attempts to establish
equivalence of standards with those of developing countries, and no attempts toprovide the special and differential treatment promised. These are an integral part of
the benefits developing countries had expected they would have under the SPS
Agreement.
FAO studies have shown that these measures are playing an increasingly important
role in trade.
"Among the major problems encountered included lack of mutual recognition of
inspections and standards, with several large importing countries often asking for
‘sameness’ in the process rather than ‘equivalence’. As a result, ‘trade harassment’was considered a common problem… There were few cases of concrete technical and
financial assistance from outside, as promised in the SPS/TBT agreements".
6
                                                     
5 Konandreas and Greenfield (1996), Food Policy Vol. 21 No. 4/5 1996; 441.
6 FAO 1999, "Agriculture, Trade and Food Security: Issues and Options in the Forthcoming WTO
Negotiations From the Perspective of Developing Countries", p.3, FAO Symposium, 23-24 September 1999,
Geneva.WT/GC/W/374
Page 4
(e) Even though export credit guarantees are obvious examples of export subsidies, the
AoA does not recognise this and the US, for example, has been able to provide such
supports without constrain.
(f) The Special Safeguard Provision has been used only by developed countries. Some of
the trigger prices were set at rather high levels, which allowed the SSG to be invoked
relatively easily. To date, it has been used about 200 times and only by developed
countries.
(g) The Due Restraint Clause: Annex 2 subsidies which are used mostly by the developed
countries are "non-actionable". They are completely immune from counter measures
and countervailing duty.
Conversely, the supports which developing countries use, such as de minimis
supports and input and investment subsidies are not given the same level of protection
from GATT challenges. They have in fact been treated on par with production
limiting (blue box) subsidies. Blue box subsidies are widely seen as trade distorting.It is therefore only reasonable that the Special and Differential Treatment subsidies
allowed to developing countries are not treated in the same category as blue box
subsidies, and should be given the immunity from challenge similar to green box
measures.
(h) The Marrakesh Decision: This was a significant component of the agricultural
negotiations during the Uruguay Round. Many developing countries fearful of sharp
rises in their import bills and other consequences of agricultural liberalization  agreed
to the AoA because they felt that the Marrakesh Decision would address, at least to
some extent, the problems they would face as a result of implementation of the AoA.However, there has been no political will on the part of the developed countries to
activate this Decision, even in the face of significantly higher import bills for
NFIDCs. There is therefore a sense that the developed countries have not kept their
part of the balance of rights and obligations in the area of agriculture.
(i) Special and Differential Treatment (S and D): The Special and Differential treatment
provisions in the AoA have been inadequate in dealing with the particular position ofagriculture for the economies of developing  countries. Under the S and D provisions,
developing countries have to undertake two-thirds of the reduction commitments of
developed countries, and their commitments stretch over 10 years instead of 6. In
terms of domestic supports, they have been allowed to provide investment and input
subsidies, but not in excess of their 1992 levels.
Like S and D provisions generally, a longer transition period and tariff and support
reduction commitments which are 2/3 those of developed countries are arbitrary
targets which do not actually take into account the real economic development of
many countries. Even after 10 years, developing countries’ economies would nothave reached the position of the developed economies, hence, the idea of providing
these benefits to level the playing field w ould not have been met. Furthermore, it has
been found that developing countries would require more innovative support policies
than merely being allowed input and investment subsidies. While these are useful,
they do not go far enough to address the problems and special position of agriculturein developing countries. The WTO secretariat has found that for developing countries
providing S and D related supports, the majority of countries provide below 1 per
cent of these supports as a percentage of their agricultural GDP (See Table 1).WT/GC/W/374
Page 5
In order for S and D provisions to be more than cosmetic remedies to an imbalanced
playing field, it would be necessary to provide developing countries with provisions
that address their development needs and the special place of agriculture in their
economies. This is likely to require more than a market approach to a sector which is
the main source of livelihood and employmen t in developing countries. It would also
be necessary if we are to adequately address the increasing poverty and
unemployment which FAO has concluded the current liberalization trends are
causing.
Table 1: Expenditures on domestic support measures as percentage of agricultural GDP
(number of countries under each range)
Per cent range nil 0-5 5-20 20-50 Over 50 Total
Green Box-related support
· Developing
· Developed1
nil16
  nil4
83
2nil
nil24
10
SDT-related support· Developing 11 13 nil nil nil 24
AMS-related support
· Developing
· Developed61
 1 4
 14
22
5nil
871
17
Source: WTO, Supporting tables relating to commitments on agricultural products in Part IV of the Schedules,
G/AG/AGST/Vols 1-3. WTO, Geneva.
(j) Food Security : The food security needs of countries is mentioned in the preamble of
the agreement. However, the AoA seems to ha ve paid only lip service to this. It is
largely presumed that the programmes allowed under Annex 2 (Green Box) wouldprovide members with the necessary flexibility to deal with their special needs.
However, we know now that most of the green box measures are beyond the reach of
developing countries, either because of budgetary constraints, or because they are
limited by structural adjustment programmes and obligations. The FAO has drawn
this conclusion:
"It is clear that by and large the list of Green Box policies was drawn up with the
developed countries in mind, as every single Green box policy is much more common
in developed countries than in developing countries."
7
For most developing countries which use the Green Box, outlays are less than 5 percent of agricultural GDP (WTO, G/AG/AGST/Vols. 1-3).
As discussed above, the S and D provisions also have not gone far enough to address
in any adequate manner, this issue of food security, and the fact that about 800million people today still live in a situation of undernourishment.
The experience of developing countries so far with the AoA has not generally been
positive in terms of addressing their food security needs. It has instead led to the
                                                     
7 Konandreas and Greenfield (1996), Food Policy Vol. 21 No. 4/5 1996.WT/GC/W/374
Page 6
marginalization of small farmers without providing safety nets or alternative
employment. In this situation, food security  is certainly being put in jeopardy as it
leaves small farmers which have been pushed out without the necessary financial
resources to procure the food they need for their subsistence, even though food may
be available on the world market.
Article 20 of the Agreement on Agriculture
6. There are 2 main elements in Article 20 of the Agreement on Agriculture.
(a) It commits countries to "substantial progressive reductions in support and protection
resulting in fundamental reform".
(b) But, "…taking into account", inter alia , non-trade concerns and special and
differential treatment to developing country Members.
7. In the light of both these elements, as well as the experience of developing countries so far in
implementing the AoA, we propose the following as the main agenda for the coming agriculturalnegotiations.
Implementation Issues To Be Addressed Before/At Seattle.
(Paragraph  9(a)(i) of the Geneva Ministerial Declaration)
(a) Assessment of the AoA
8. Even before negotiations commence, there must be an assessment of the effects of the AoA
on developing and developed countries. The preliminary study of the FAO cited above shows that
poverty and unemployment in developing countries is on the rise as a result of the type of agricultural
liberalization that the AoA has implemented.
9. A thorough assessment must be undertaken before further negotiations begin so as:
(i) to provide both developed and developing countries a clearer picture of the exact
impact of agricultural trade liberalization and hence clarify what the priorities should
be in the coming agricultural negotiations;
(ii) to ascertain where the present imbalances and needs of countries are, so as to know
how the agreement can be rebalanced such that benefits will flow equally to thedeveloping countries, in a manner that will not exacerbate the rural poor, but will in
fact raise living standards of even the small farmers.
(b) Market Access
10. The TRQ administration should be made transparent, equitable and non-discriminatory, in
order to allow new/small-scale developing country exporters to obtain market access. Notifications
submitted to the Committee on Agriculture shall include details on guidelines and procedures of
allotment of TRQ.
11. The Special Safeguard Provision should be made permanent for use by all developing
countries as part of Special and Differential Treatment. However, the "triggers" must be tightened so
that the Special Safeguard Provision is not abused. Developed countries should depend on the general
safeguard provisions of the GATT 1994.WT/GC/W/374
Page 7
(c) Domestic Supports
12. Some developing countries made some genuine mistakes in the calculation of their country
schedules (tariff rates, AMS – base period, currency base etc). They should be allowed to recalculatetheir AMS levels to reflect a more accurate picture of their support and tariff levels.
13. Countries with under-utilised product specific de minimis levels should be able to "transfer"
this credit to their "non-product specific" de minimis amounts. This will be fair to the developing
countries that are reluctant to provide product-specific de minimis as this might raise product prices.
(d) Special and Differential Treatment Provisions
14. Developing countries must be allowed the flexibility to use domestic supports and transparent
import controls as national governments see fit, to encourage domestic food production for domestic
consumption.
15. Developing countries should have the flexibility in the areas of import restraint and domestic
support to protect and provide support to small farmers and household farmers. This will not be trade
distorting since what is produced by this sector is used for subsistence and is not traded on theinternational market.
16. Where people are highly dependent on a very small number of export commodities for their
livelihoods, flexibilities must be allowed in providing the needed domestic supports for these
commodities.
17. Open up the existing Special Treatment Clause for use by all developing countries for food
security purposes.
(e) Marrakesh Decision
18. The Marrakesh Decision is at present only an enabling and best endeavour provision. It
should be revised in order to ensure its effective implementation through the incorporation ofconcrete, operational and contractual measures, including provisions for technical and financial
assistance that are both effective and responsive to the special needs of LDCs and NFIDCs. In the
area of financial assistance, all agricultural e xporting developed countries must be obligated to
contribute to a fund for NFIDCs (as a proportion of their export earnings). This fund should also be
used by NFIDCs to increase their domestic production, so that they can be less dependent on food
imports especially in staple products.
(f) Sanitary and Phytosanitary Standards
19. When developed countries introduce new and higher sanitary and phytosanitary standards,
these conditions must be met:
(i) prompt notification and commitment by developed countries to take into account the
comments by developing countries on the changes made;
(ii) that standards revised by developed countries must not disrupt imports from
developing countries. If they prove to be prohibitive, it is incumbent on the developed
country setting those standards to provide the financial and technical assistance
needed to exporting developing countries to comply with the new standards. TheWT/GC/W/374
Page 8
importing developed country with revised standards will not be allowed to curb the
inflow of imports from developing countries based on the change in regulation.
Built-in Agenda Issues to be Addressed After Seattle
(Paragraph 9(a)(ii) of the Geneva Ministerial Declaration)
(a) Market Access
20. Eliminate tariff peaks in developed countries on all agricultural products. As a result of
tariffication and tariff peaks, market access opportunities for major agricultural products have not
materialised for developing countries.
21. Eliminate tariff escalations in developed countries. This has been a major factor which has
prohibited developing countries from developing their food processing industries which they could
easily be competitive in.
22. Tariff reductions should not be aggregated. Because of this, developed countries have not
lowered tariffs on sensitive products. Where there are tariff cuts, tariffs on the sensitive products for
developed countries must also be lowered.
(b) Domestic Supports
23. The various domestic support boxes which were intended to aid subsidy reductions have not
served their purpose since overall domestic support levels have not been reduced. The boxes in fact
are problematic because they complicate issues and provide room for many of the loopholes andpolicy reinstrumentation by the developed countries.
All domestic supports should be combined into one box. Support levels should be brought
down to a common level within a specified period, no matter what their historical levels of support
have been in the past.
24. Should the existing domestic support boxes remain, the following changes should be made to
the present provisions:
(i) The calculation of the Base AMS should be changed so that it excludes production
limiting subsidies and de minimis supports.
(ii) AMS supports in developed countries must be made product specific rather than
aggregated. This will ensure that the presently high support levels provided to
sensitive products are also reduced. It will also bring more transparency andpredictability to commodity markets. For the developing countries, the aggregation of
AMS should be applicable.
(iii) All AMS supports should be brought down to a common percentage of production
costs, rather than be reduced from former support levels.
(iv) Green Box policies must be re-examined. The definition of "minimally trade
distorting" must be clarified. Various supports, for example, direct decoupled
payments and export credits and guarantees which have an effect of increasing
production output must be removed from the Green Box category and be placed inthe AMS and export subsidy categories respectively.WT/GC/W/374
Page 9
(v) Green Box subsidies should be limited to a certain percentage of production costs and
this percentage should be higher for developing countries.
(vi) The Blue Box, or production limiting programmes should be placed in the AMS and
should be disciplined accordingly.
(c) Export Subsidies
25. All export subsidies should be eliminated except those included under the special and
differential treatment for developing countries.
 (d) Development Box26. Given the fact that there is no level playing field between countries, and that food is different
from other forms of goods in that it is an absolute daily necessity, there should be a Development Box
under which developing countries can, for development and food security reasons, deviate from their
AoA commitments in order to meet these development and food security needs.
27. A Development Box will also put all S and D provisions in one place and will serve these
purposes:
(i) clearly distinguish between the rights of developing and developed countries;
(ii) avoid possible use of such rights by members other than the developing countries;
(iii) provide legal certainty;
(iv) monitor and enforce implementation.
28. Provisions on the following can be included in the Development Box:
(i) domestic support and transparent import controls for the protection of domestic
production;
(ii) protection of small and household farmers;(iii) input and investment subsidies;
(iv) food security; and
(v) measures in favour of NFIDCs.
__________