Strengthening the multilateral trading system

EThe 15Initiative

Draft version, not for citation

Do Yesterdays Disciplines Fit Todays Farm Trade?Challenges and Policy Options for the Bali Ministerial Conference

Jean-Christophe Bureau and Sbastien Jean

Draft Issue Paper for the E15 Expert Group on Agriculture and Food Security

DRAFT NOT FOR CITATION

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Do Yesterdays Disciplines Fit Todays Farm Trade? Challenges and Policy Options for the Bali Ministerial Conference

Jean-Christophe Bureau (AgroParisTech and CEPII, Paris) and Sbastien Jean (CEPII and INRA, Paris)

This version: 22 May 2013

TABLE OF CONTENTS

ABBREVIATIONS AND ACRONYMS .................................................................................... 2

LIST OF FIGURES ................................................................................................................ 3

LIST OF TABLES .................................................................................................................. 3

EXECUTIVE SUMMARY ...................................................................................................... 4

1 INTRODUCTION ........................................................................................................ 6

2 THE NEW PICTURE OF AGRICULTURAL TRADE ........................................................ 6

2.1 The increasing importance of developing countries in agricultural trade ....... 7 2.2 A new characteristic of world markets: higher prices ...................................... 8 2.3 New linkages with non-food markets ............................................................... 9 2.4 Structural and policy determinants ................................................................ 11

3 MARKET ACCESS ..................................................................................................... 11

3.1 Tariffs .............................................................................................................. 11 A gap between applied and bound protection. ....................................................... 12 Protection as measured through price gaps ........................................................... 13

3.2 Non-tariff measures ........................................................................................ 14 3.3 Development in preferential trade regimes ................................................... 15

4 DOMESTIC SUPPORT .............................................................................................. 18

4.1 Trends toward more production-neutral farm support in developed countries, and turnarounds .................................................................................................. 18

4.2 Developing countries: domestic support to agriculture also emerges .......... 19 4.3 Loopholes in the domestic support provisions .............................................. 23

5 EXPORT COMPETITION .......................................................................................... 25

5.1 Export subsidies .............................................................................................. 25 5.2 Export restrictions .......................................................................................... 25

6 ISSUES FOR THE NEXT WTO MINISTERIAL MEETING ............................................. 26

6.1 Making the Agenda realistic -The need for cooperation through multilateralism ...................................................................................................................... 26

Finding even modest agreement in agriculture ...................................................... 26

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Limiting the social and political costs of liberalization ............................................ 27 Integrating RTAs in the multilateral framework ..................................................... 28 Dealing with concerns about environmental issues ................................................ 28

6.2 Balancing gains ............................................................................................... 29 The role of agriculture in a global deal .................................................................... 29 Rethinking Special and Differential Treatment ....................................................... 29

6.3 Tackling food security concerns seriously ...................................................... 31 Making world markets reliable providers ................................................................ 31 Coping with price volatility ...................................................................................... 31 An effective discipline on export restrictions ........................................................... 32 Strengthening the code of conduct for land grabbing ............................................ 33

7 Concluding remarks ............................................................................................... 33

References ...................................................................................................................... 34

ABBREVIATIONS AND ACRONYMS

AMS Aggregate Measure of Support

ASEAN Association of South-East Asian Nations

EU European Union

GDP Gross Domestic Product

GSP Generalised System of Preferences

LDC Least-developed Country

MFN Most Favoured Nation

NFIDC Net Food Importing Developing Country

OECD Organisation for Economic Co-operation and Development

PPP Purchasing Power Parity

PSE Producer Support Estimate

PTA Preferential Trade Agreement

RTA Regional Trade Agreement

SDT Special and Differential Treatment

SPS Sanitary and Phytosanitary

TBT Technical Barrier to Trade

TSE Total Support Estimate

US United States

WTO World Trade Organization

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LIST OF FIGURES

Figure 1: The share of non-LDC developing countries in world trade of food and agricultural products .................................................................................................................. 7

Figure 3. Nominal protection coefficient for agricultural commodities in selected developed and emerging countries (1995, 2002 and 2011) .................................................... 14

Figure 4. Share of trade between RTA signatories in global trade, by major sector (%, 19982009) .............................................................................................................................. 16

Figure 4. Producer Support Estimate (PSE) in selected developed and emerging countries (1995, 2009 and 2010, in % of total receipts) .......................................................... 20

LIST OF TABLES

Table 1. The use of agricultural commodities for biofuels ............................................. 10

Table 2: Preferential, applied and bound tariff duties, and share in world imports, for agricultural products, by group of countries ........................................................................... 13

Table 3. Mean base rate and preferential margin by HS chapter and by time elapsed since entry into force of the agreement (in percent) .............................................................. 17

Table 4. PSE in nominal value, real value and percentage of farm receipts, 2010 ........ 22

Table 5. Total Support Estimate in nominal value, real value and percentage of farm receipts and GDP, 2010 ............................................................................................................ 22

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EXECUTIVE SUMMARY

This note explores how trade and trade policies have evolved over the last decade and consider the possible implications for the Doha negotiations.

We first describe the new picture of agricultural trade. Since the Doha Round was launched, the importance of developing countries in world trade of agricultural products has increased dramatically. Developing countries markets cannot be considered peripheral anymore. Higher prices have also emerged as a new characteristic of world markets, after trending downward for decades. The development of biofuels has been another major feature, with considerable impact upon price levels, as well as upon market adjustment mechanisms, with the risk of rigidifying crop demand.

Market access has been characterised by a downward trend in applied tariffs, as a result of unilateral liberalisations as well as regional trade agreements. Remarkably, despite a significant number of protectionist measures, the recent economic crisis has not reversed this trend. As bound tariffs remained almost unchanged, though, the binding overhang, i.e. the gap between bound and applied rates has been widening over the period, with two important consequences: any realistic cut in developing countries bound tariffs is unlikely to alter significantly the applied tariff protection; and a considerable raise in tariff protection is technically possible without infringing current WTO rules. Measuring protection through price gaps delivers a different picture, with a decline in rich countries and an increase in emerging countries. Non-tariff measures also spread, especially in emerging countries. And the unabated multiplication of regional trade agreements has increasingly influenced international trade patterns.

The importance of domestic support is sometimes understated. In this area, the asymmetry between richer and poorer countries is no longer obvious.