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2016 | OriginalPaper | Buchkapitel

Trade in Agricultural Products: Should Developing Countries Give Up on the WTO Promise for a Fair and Market-Oriented Agricultural Trading System? A Historical and Theoretical Analysis

verfasst von : Melaku Geboye Desta

Erschienen in: European Yearbook of International Economic Law 2016

Verlag: Springer International Publishing

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Abstract

Although the World Trade Organization (WTO) can rightly claim credit for establishing the first ever truly multilateral framework of rules for trade in agricultural products in the form of the Agreement on Agriculture (AoA), the AoA itself recognizes that it is only the first step in a long process aimed at establishing a “fair and market-oriented agricultural trading system.” The Doha negotiations have been increasingly looking irrelevant to agriculture until the 10th Ministerial Conference in Nairobi in December 2015, which adopted several decisions pertaining particularly to agriculture. Despite this recent development, and considering the manifest divergence of positions among the membership on the future of the Doha negotiations, it is clear that the present AoA, as modified by these latest Ministerial Decisions, is likely to remain the only framework governing agricultural trade for the indefinite future. Developing countries in general, and the poorest amongst them in particular, will be the primary losers of such an outcome. Reflecting on the history of agricultural trade regulation over the last two centuries, this article aims to demonstrate that the treatment of agriculture as an exception to the general rules of international trade has a long pedigree, both in economic theory and regulatory practice, often used by powerful states against the less fortunate. If multilateral negotiations fail to deliver on agriculture, developing countries cannot look to bilateral and regional agreements for solution. The article concludes that developing countries cannot afford to give up on multilateralism, for only a multi-sectoral and multilateral forum such as the WTO allows all countries, whether they are for or against agricultural liberalisation, to make progress in this area through issue linkages and cross-sectoral trade-offs.

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Vorheriges Kapitel From Fragmentation to Constitutionalisation of International Economic Law? Comments on Schneiderman’s ‘Constitutionalism’

Nächstes Kapitel Agricultural Trade: How Bad Is the WTO for Development?

Agreement on Agriculture in Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Marrakesh, 15 April 1994, para. 2.

By agriculture I mean the production of food and non-food items through farming or animal husbandry. For purposes of WTO law, Annex 1 of the Agreement on Agriculture provides a list of the covered products by reference to the Harmonized Commodity Description and Coding System, the product nomenclature developed by the World Customs Organization (WCO). See http://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs_nomenclature_2012/hs_nomenclature_table_2012.aspx (last accessed 6 August 2015).

The AoA contains 21 articles and five annexes. Of the 21 articles, Article 1 defines the key terms; Article 2 defines the concept of agricultural products; Articles 3, 6–11, and 13 are all about agricultural subsidies. Articles 4 and 5 on market access are the only other substantive provisions in the AoA; the remaining being: Article 12 on export restrictions, Article 14 cross-referring to the SPS Agreement; Articles 15 and 16 on special and differential treatment; Articles 17 and 18 on institutions; Article 19 on dispute settlement; Article 20 on the built-in agenda to continue the reform process and Article 21 incorporating the annexes to become an integral part of the AoA and governing the AoA’s relations with the rest of the multilateral agreements in the WTO system.

See World Bank (2007) World Development Report 2008: Agriculture for Development, http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf (last accessed 27 July 2015), p. 69.

The Food and Agriculture Organization’s (FAO) index of international food commodity prices reached its highest recorded level in February 2011. See FAO and OECD (2011) OECD—FAO Agricultural Outlook 2011–2020, http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2011_agr_outlook-2011-en (last accessed 5 October 2015), p. 20.

Between 2008 and 2011, a large number of countries, including Argentina, China, India, Russia, Ukraine, and Vietnam, have imposed export restrictions on agricultural products. See Demeke M, Pangrazio G, Maetz M (2009) Country Responses to the Food Security Crisis: Nature and Preliminary Implications of the Policies Pursued, http://www.fao.org/3/a-au717e.pdf (last accessed 7 August 2015) (noting that 25 countries, not all of them WTO members, had restricted or banned exports as of December 2008). See also Kim J (2010) Recent Trends in Export Restrictions. OECD Trade Policy Working Paper No. 101, TAD/TC/WP(2009)3/FINAL, http://www.oecd-ilibrary.org/docserver/download/5kmbjx63sl27.pdf?expires=1438759955&id=id&accname=guest&checksum=05CF1D2847070816D91D95CAD828F31B (last accessed 27 July 2015).

Following the 2007–2008 food crisis, the FAO surveyed the policy responses of 81 developing countries; it found that 43 countries had reduced import taxes; 25 either banned exports or increased taxes on them; 45 implemented measures to provide relief or partial relief from high prices to consumers in the form of cash transfers, direct food assistance or increases in disposable income (by reducing taxes or other charges), or some combination of these measures; a significant number of countries also granted support to producers in order to offset rapidly rising input costs, such as fertilizer and animal feed for livestock producers. See FAO, IFAD, IMF, OECD, UNCTAD, WFP, World Bank, WTO, IFPRI, UN HLTF, Price Volatility in Food and Agricultural Markets: Policy Responses. 2 June 2011, http://www.oecd.org/tad/agricultural-trade/48152638.pdf (last accessed 7 August 2015), para. 37. As Javier Blas et al. noted, the 2007–2008 food crisis caused widespread unrest and open riots in more than 30 countries around the world. See Blas J, Farchy J, Weaver, C, Mundy S, Fears Grow Over Global Food Supply. Financial Times, 3 September 2010, http://www.ft.com/intl/cms/s/0/5f6f94ac-b6bc-11df-b3dd-00144feabdc0.html#axzz3oA3RFXwT (last accessed 5 October 2015).

See, e.g., UNCTAD (2009) World Investment Report 2009: Transnational Corporations, Agricultural Production and Development, http://unctad.org/en/docs/wir2009_en.pdf (last accessed 5 October 2015), noting that the long-running decline in foreign direct investment flows to agriculture in developing host countries has been reversed in recent years, even suggesting a resurgence may be under way. The report also noted that “some forms of foreign participation—not least the so-called ‘land grabs’ by investors—are causing concern by some quarters in the development community”, p. 95. UNCTAD attributes this turn mainly to three major factors: the 2008 food crisis, new investment to meet the Millennium Development Goal to halve, between 1990 and 2015, the proportion of people who suffer from hunger, and the rise of biofuel production, pp. 103–105, 110. For a recent analysis linking ‘land grabs’ in Cambodia with the EU’s Everything but Arms (EBA) system of preferences for goods coming from LDCs, see Bradsher K, Sugar Industry Highlights Conflicts Over Trade Pacts and Land. New York Times, 30 September 2013, http://www.nytimes.com/2013/10/01/business/international/in-cambodias-cane-fields.html?_r=0 (last accessed 5 October 2015).

According to the FAO and the OECD, agricultural commodity prices are expected to fall from the peaks recorded in early 2011, but they are projected to average around 20–30 % higher in real terms over the 2011–2020 period compared to the last decade. See FAO and OECD (2011) OECD—FAO Agricultural Outlook 2011–2020, http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2011_agr_outlook-2011-en (last accessed 5 October 2015), p. 25.

See, e.g., Meyer G, Russia’s Wheat Supply Turnaround Stalks US Prices. Financial Times, 27 January 2012, p. 32 (noting that the world’s wheat supply “has gone from grave to generous” within a matter of months and showing a 24 % fall in the price of wheat within a year).

See OECD/FAO (2015), OECD-FAO Agricultural Outlook 2015, http://www.fao.org/3/a-i4738e.pdf (last accessed 6 August 2015), p. 15.

In the US, 40 % of annual maize crop is used for ethanol production. See FAO and OECD (2011) OECD—FAO Agricultural Outlook 2011–2020, http://www.oecd-ilibrary.org/agriculture-and-food/oecd-fao-agricultural-outlook-2011_agr_outlook-2011-en (last accessed 5 October 2015). See also Trostle R (2008) Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food Commodity Prices, Revised. A Report from the Economic Research Service of the US Department of Agriculture (WRS-0801), http://www.ers.usda.gov/media/218027/wrs0801_1_.pdf (last accessed 7 August 2015).

The world population is expected to reach nine billion by 2050. In order to meet the food needs of this increased population, it is believed that annual agricultural production will have to rise by around 70 %. See Murray S, Small Farmers Have a Critical Role. Financial Times: Special Report on World Food 2011, 13 October 2011, http://www.ft.com/intl/cms/s/0/f98fbb7c-f00c-11e0-bc9d-00144feab49a.html#axzz3oA3RFXwT (last accessed 5 October 2015). See FAO, IFAD, IMF, OECD, UNCTAD, WFP, World Bank, WTO, IFPRI, UN HLTF, Price Volatility in Food and Agricultural Markets: Policy Responses. 2 June 2011, http://www.oecd.org/tad/agricultural-trade/48152638.pdf (last accessed 7 August 2015), para. 18 (forecasting the expected demand for food in 2050 to increase by between 70 % and 100 %).

For more on this, see Blandford (2012), pp. 223–249. Note, however, that agriculture is not expected to suffer in all countries because of climate change. As a recent Interagency Report noted, there is “widespread agreement that agriculture, particularly in developing countries, will be for the most part negatively affected by climate change”. See Interagency Report to the Mexican G20 Presidency (2012) Sustainable Agricultural Productivity Growth and Bridging the Gap for Small-Family Farms, http://www.oecd.org/tad/agricultural-policies/50544691.pdf (last accessed 7 August 2015), pp. 9–10. For a recent extensive assessment of the risks posed by climate change, including to agriculture in the UK, see UK Department for Environment, Food and Rural Affairs (Defra) (2012) The UK Climate Change Risk Assessment 2012: Evidence Report, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/69487/pb13698-climate-risk-assessment.pdf (last accessed 7 August 2015). The report found both threats and opportunities from climate change, including the following: Threats: Crop losses and other impacts on high quality agricultural land due to flooding; Higher summer soil moisture deficits, increasing demand for irrigation to maintain crop yields and quality; Increased competition for water resources in the summer and pressures to reduce abstractions; Potential for increased potency in existing, or introduction of new livestock diseases; and More intense rainfall with greater potential for soil erosion. Opportunities: Increased yields for current crops (e.g., wheat and sugar beet, potatoes) due to warmer conditions and/or CO₂ effects; Increased grass yields benefiting livestock production; New crops and tree species may be able to enter production, due to warmer conditions; Opportunities to grow a wider range of non-food crops for energy and pharmaceuticals; and Increased yields of rain-fed potatoes due to greater CO₂ and climate effects, p. 73.

Orden et al. (2011), p. 4.

Food and Trade: The New Corn Laws. The Economist, 15 September 2012, http://www.economist.com/node/21562912 (last accessed 26 July 2015).

“The Doha trade talks are dead”, declared The Economist in 2012, with agriculture once again the main culprit: “The villains are powerful lobbies, notably in agriculture, such as America’s cotton and sugar industries and Japan’s rice farmers and fishermen.” See Goodbye Doha, Hello Bali. The Economist, 8 September 2012, p. 12, Online edition: http://www.economist.com/node/21562196 (last accessed 26 July 2015).

For more on this, Lamy (2008).

Jeffrey Dunoff summarised what he calls “the leading economic, game theoretic and political science models that are commonly used to explain the trade regime” as follows: (1) the ‘efficiency model’ based on the theory of comparative advantage and gains from trade; (2) the ‘collective action model’ under which countries use the trading system as a way to overcome prisoner’s dilemma type coordination problems, and (3) the ‘embedded liberalism model’ under which countries were allowed to continue to exercise their regulatory powers internally while avoiding ‘mutually destructive protectionist policies’ in international trade. See Dunoff (1999), pp. 733–762.

Smith (1776), p. 364.

See Irwin (1996), p. 90. While the credit for developing the theory of comparative advantage often goes to David Ricardo and his 1817 book entitled On the Principles of Political Economy and Taxation, Irwin argues that it was Robert Torrens who “first recognized the essence of the comparative advantage argument” in a book he wrote in 1815, 2 years before Ricardo’s famous book came out, p. 90.

WTO (1998), p. 38 (emphasis added).

WTO (1998), p. 38. For an interesting illustration with the help of examples as to how a country that is less efficient in absolute terms at producing everything can still have comparative advantage in some products and can potentially benefit from trade, see Krugman and Obstefeld (1997), p. 14.

“In many industrial processes”, writes Samuelson, “when you double all inputs, you may find that your output is more than doubled; this phenomenon is called ‘increasing returns to scale’”. Samuelson (1976), p. 28 (italics in original). See Krugman and Obstefeld (1997), pp. 13–37.

Samuelson (1948), p. 539 (emphasis in original).

In one of his often-quoted paragraphs, Adam Smith wrote the following: “As every individual … endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” Smith (1776) p. 477.

A ‘full laissez faire’ situation is defined by Paul Samuelson as a situation of “complete governmental noninterference with business.” Samuelson (1976), p. 28 (italics in original). Carr credits Smith as the founder of the ‘laissez-faire school of political economy’. Carr (1939), p. 43.

In the words of Alan Sykes, “[t]he normative economic case for free trade … in one way or another rest[s] on the premise that government intervention into international trade flows creates economic ‘inefficiency’ and that inefficiency is a bad thing.” Sykes (1998), p. 57.

See Dunoff (1999), p. 737.

See WTO (1998), p. 38; Krugman and Obstefeld (1997), p. 13; and WTO (2001) Introduction to the WTO: Trading into the Future, 2nd rev. ed., https://www.wto.org/english/res_e/doload_e/tif.pdf (last accessed 26 July 2015), p. 9.

According to Trentmann, Britain ‘gave’ free trade to the world. See Trentmann (2008), p. 2. Note also that, as Carr noted in 1939, universal free trade was “an imaginary condition which has never existed”. Carr (1939), p. 7.

Carr (1939), p. 46.

Carr (1979), p. 76. Until WW I, Britain avoided tariffs or other measures that discriminated against imports. Describing the situation at the beginning of the twentieth century, Trentmann wrote: “Free Trade in Britain meant that there were no tariffs at all that discriminated against imports in order to assist any branch of industry or agriculture. Customs duties were for revenue only. To prevent any protectionist effect, they were always matched by an excise tax on equivalent domestic goods. Britain stuck to Free Trade irrespective of the protectionist measures of other countries.” See Trentmann (2008), p. 6. According to Professor Azar Gat, Britain used its economic and military power “to negotiate with and pressurize foreign political authorities in order to secure free trade or at least low tariff barriers for British goods. Although requesting no preference over other powers, the British were of course positioned to gain the most from the lifting of trade sanctions.” See Gat (2006), p. 546.

As Paul Bairoch has shown, the special treatment of agriculture in international trade policy had its roots in the desire to balance food security on the one hand and agricultural protection on the other in most European countries. In the United Kingdom, wrote Bairoch, “the political struggle between supporters of free trade and those in favour of protectionism began … in 1815… when the gentry voted in a new Corn Law aimed at protecting local agriculture against grain imports. It should be noted that ‘Corn Laws’ were a quasi-permanent feature of tariff history in most European countries. They had always aimed at a precarious balance between protecting local agriculture and preventing the price of bread from rising too steeply. In England, the first national laws of this kind date back to 1436.” Bairoch (1989), pp. 7–8. For more on the Corn Law, Bairoch (1989), pp. 7–13.

Smith (1776) Book III Chapter IV, p. 443. One can also learn from this book that subsidies on the exportation of corn from England, called by then ‘bounties’, were introduced in 1688. There was an “act for … encouraging the exportation of corn,” the preamble of which states that “it hath been found by experience, that the exportation of corn and grain into foreign parts, when the price thereof is at a low rate in this kingdom, hath been a great advantage not only to the owners of land but to the trade of this kingdom in general.” Smith (1776) Book I, Ch. XI, p. 215.

Jackson (1977), p. 435.

For a useful summary of the mercantilist trade literature, see Irwin (1996), p. 26–44.

As Trentmann put it, when peace returned in 1918, “the global trade system was in tatters.” See Trentmann (2008), p. 189.

Krugman and Obstefeld (1997) call it “a remarkably irresponsible tariff law.” See p. 237. According to Kindleberger, the origins of the Hawley-Smoot Tariff Act ‘reach back to 1928 when Herbert Hoover, campaigning for the presidency, promised to do something to help farmers suffering under the weight of agricultural prices.’ See Kindleberger (1989), p. 170.

Paul Bairoch reported that “in 1932 the revenue raised from goods liable to import duty amounted to 59.1 % of their value.” See Bairoch (1989), p. 144.

Canada, Cuba, France, Mexico, Italy, Spain, Australia, and New Zealand may be mentioned as examples. See Hudec (1975), p. 5. Bacchus traced the history of the US agricultural subsidies programme to the New Deal economic programmes of the 1930s, which were introduced as “emergency measures during the depths of the Great Depression, when the nation was awash with farm surpluses and in agony over plummeting farm prices.” It is interesting to note that by the late 1930s, President Franklin D. Roosevelt’s administration “began to ‘fear it had created a Frankenstein monster’ in agricultural subsidies. ‘Rural pressure groups called for larger and larger subsidies,’ and, in 1939, Roosevelt lamented that ‘the silly Congress gave me three hundred million dollars more than I wanted for farm subsidies.’” Bacchus J (6 July 2011) Time to Cut Farm Subsidies Now. The Hill, http://thehill.com/blogs/congress-blog/economy-a-budget/169807-time-to-cut-farm-subsidies-now (last accessed 7 August 2015).

WTO (1998), p. 37.

Wilcox (1949), pp. 8–9.

See Kindleberger (1989), pp. 193–194. Note that the use of bilateral treaties to regulate trade between states has had a long and difficult history. See, for instance, the treaty of commerce between England and Portugal, concluded in 1703 and reproduced in Adams (1776) Vol. II Book IV Chapter IV, pp. 54–55.

See, e.g., Irwin et al. (2008), p. 5.

For an enlightening review of European trade policy in the 100 years preceding WW I, see Bairoch (1989), pp. 1–160. For trade policy during the inter-War period, see Kindleberger (1989), pp. 160–196. See also Hudec (1975), p. 4.

US President Truman is quoted to have said in 1947 that “trade and peace are inextricably linked.” See WTO (1998), p. 37. According to Professor Hudec, “the postwar design for international trade policy was animated by a single-minded concern to avoid repeating the disastrous errors of the 1920s and the 1930s.” Hudec (1975), p. 4.

Final Act of the United Nations Conference on Trade and Employment (held at Havana, Cuba from 21 November 1947 to 24 march 1948) UN doc. E/Conf. 2/78 (hereafter the Havana Charter) Article 1, first paragraph. Article 1 provides the other purposes and objectives of the ITO and may be summarized as follows: to attain higher standards of living, full employment and conditions of economic and social progress and development; to assure a large and steadily growing volume of real income and effective demand, to increase the production, consumption and exchange of goods, and thus to contribute to a balanced and expanding world economy; to foster and assist industrial and general economic development, particularly of those countries which are still in the early stages of industrial development, and to encourage the international flow of capital for productive investment; to further the enjoyment by all countries, on equal terms, of access to the markets, products and productive facilities which are needed for their economic prosperity and development; to promote on a reciprocal and mutually advantageous basis the reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce; to enable countries, by increasing the opportunities for their trade and economic development, to abstain from measures which would disrupt world commerce, reduce productive employment or retard economic progress; and to facilitate through the promotion of mutual understanding, consultation and co-operation the solution of problems relating to international trade in the fields of employment, economic development, commercial policy, business practices and commodity policy.

Hudec (1975), p. 4.

Hudec (1975), pp. 5–6. International trade economists still uphold the validity of this conclusion. According to Alan Winters, “[h]istory has definitely taught us one huge lesson: closed and tightly managed economies do not prosper.” Winters A (1999) Trade Policy as Development Policy: Building on 50 Years’ Experience. Paper prepared for the UNCTAD X High-Level Round Table on Trade and Development, Bangkok, 12 February 2000, http://unctad.org/en/Docs/ux_tdxrt1d2.en.pdf (last accessed 26 July 2015).

See Article 86.1 of the Havana Charter; on specialized agencies in the UN system, see Article 57 of the UN Charter.

Note that the General Agreement entered into force on the basis of a document entitled ‘Protocol of Provisional Application of the General Agreement on Tariffs and Trade’ according to which contracting parties undertook to apply “provisionally on and after 1 January 1948” Parts I and III of the GATT, and “Part II of that Agreement to the fullest extent not inconsistent with existing legislation.” PPA (Geneva, 30 October 1947) para. 1(a) and (b) (italics added).

Bairoch (1989), p. 10.

According to Paul Bairoch, the date 15 May 1846, when the Corn Laws were repealed, “is rightly held to mark the beginning of the free trade era in the United Kingdom.” See Bairoch (1989), p. 13. Bairoch further noted that the repeal of the Corn Laws meant that import duties were abolished for livestock and nearly all meat but, “contrary to what is generally thought, grains remained liable to duties until 1869.” Bairoch (1989), p. 13. See also WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 36.

See Irwin et al. (2008), p. 43.

Irwin et al. (2008), p. 53.

Wilcox (1949), p. 35.

Wilcox (1949), pp. 35–36.

See Kindleberger (1989), p. 194.

See League of Nations, League of Nations Official Journal, 86th Session of the Council, Fourth Meeting (24/V/1935), June 1935, p. 631. The representative described his country, Australia, as “a new, young and undeveloped country.”

See Irwin et al. (2008), p. 6 noting that the US “bore some responsibility” for the collapse of international trade starting in 1929: “What started out in 1929 as a legislative attempt to protect farmers from falling agricultural prices led to the enactment of higher import duties across the board in 1930. The Hawley-Smoot tariff of that year pushed already high protective tariffs much higher and triggered a similar response by other countries.”

See Irwin (1996), p. 95.

Irwin (1996), p. 95.

Hillman (1978), p. 35. According to Hillman “[o]ne may also detect in certain free-trade arguments—e.g., in Ricardo—a selective attitude in the deliberate writing off of land lords as too reactionary to make good economic agents in comparison with entrepreneurs. The implication is that ‘agriculture is different’ and must be treated differently.” It is notable however that other theorists, such as John Stuart Mill and Friedrich List, who argued in favour of infant industry protection in the industrial sector did not recommend protection for the agricultural sector. See WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 36.

See, inter alia, ITO Charter Articles 20 (on quantitative restrictions), and 27 and 28 (on export subsidies on primary products).

As Stewart put it, GATT rules on agriculture were drafted “to be consistent with the agricultural policies of the major signatories rather than vice versa.” Stewart (1993), p. 134.

See inter alia Krugman and Obstefeld (1997), p. 5. The special treatment of agriculture in the General Agreement reflected the power and influence of the US at the end of the Second World War. As Dam observed “no treaty that impinged upon the U.S. Farm program could receive the constitutionally-required senatorial approval.” See Dam (1970), p. 260.

Hillman (1994), p. 29. Further back in history, opposition from US agricultural interests had served as one of the main causes for US cancellation in 1865 of what is known as the ‘Reciprocity Treaty’ of 1854 between Canada and the US. See Trebilcock and Howse (1999), p. 38. More general concerns were also at play here. As Professor Robert Howse observed, it was ‘sovereignty concerns’ in the US that “foiled … the proposed governance mechanism for trade” under the ITO Charter. See Howse (2002), pp. 96–97.

The other notable case in this respect is Switzerland whose protocol of accession effectively exempted its agriculture from GATT disciplines.

Jackson (1977), p. 981.

Journal de Genève, quoted in GATT Focus Newsletter. No. 41, October 1986, p. 8 (italics added).

See Corbet (1979), p. V.

Weisman J, Talks for Pacific Trade Deal Stumble. The New York Times, 31 July 2015, http://www.nytimes.com/2015/08/01/business/tpp-trade-talks-us-pacific-nations.html (last accessed 5 October 2015).

See Porter E, Banana Wars: Editorial Notebook. New York Times, 29 December 2009, http://www.nytimes.com/2009/12/29/opinion/29tue4.html?_r=0 (last accessed 26 July 2015).

See Lamy (2013), p 74.

See Sumner et al. (2010), p. 405. They further observed that: “Early supply control policies were developed together with trade barriers that insulated domestic markets from imports. Exports were important for products such as wheat, and economists recognised that programs that caused high domestic prices would reduce or eliminate commercial exports (i.e., a relatively elastic export demand). The proposals therefore included stocks management and government export dumping policies to shift production out of the domestic market”, p. 406.

See League of Nations (1935), p. 631.

GATT, Working Party on Structural Adjustment and Trade Policy: Report to the Council (L/5568, 20 October 1983), para. 30.

Christina Davis argues that “high levels of agricultural protection have arisen because farm lobbies are an influential pressure group” and quotes Peter Lindert as saying: “the farm sector gets the most protection when it employs 3–4 % of the employed labor force” because “as their numbers decline, farmers become better organised and have greater incentives to seek protection, and governments can more easily subsidize the small group of remaining farmers.” See Davis (2003), p. 5.

See Krueger (2004), p. 488.

See Samuelson (1948), p. 561.

Samuelson (1976), p. 412. Southgate observed that nineteenth century export subsidies to sugar led to ‘dumped exports’ that reduced the London price for raw sugar “from £35 10s. in 1872 to £7 5 s. in 1902. As a result, the sugar-producing colonies and refining industries were in great difficulty, but industries based on sugar developed rapidly. … After several abortive technical conferences, the Brussels Convention met in 1901 and by the agreement of 1903 the bounties were abolished.” Southgate (1967), pp. 599–600.

For a recent analysis of this concept in the context of EU agriculture policy, see Cardwell (2012), pp. 27–299. Japan’s use of multi-functionality in agriculture has been described recently as a ‘protectionist banner’. See Sutton M, Reconstruction and Healing Must Precede Entry into TPP [Trans-Pacific Partnership]. The Japan Times, 7 November 2011, http://www.japantimes.co.jp/print/eo20111107a1.html (last accessed 8 November 2011).

See European Commission, Communication From the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions the CAP towards 2020: Meeting the Food, Natural Resources and Territorial Challenges of the Future. COM(2010) 672 final, 18 November 2010, http://ec.europa.eu/agriculture/cap-post-2013/communication/com2010-672_en.pdf (last accessed 26 July 2015). Another EU Commission study reported that EU agriculture was responsible for about 471 million tonnes of CO₂ equivalents, which represented 9.6 % of the EU emissions of greenhouse gases in 2008. See EU Commission, Situation and Prospects for EU Agriculture and Rural Areas. December 2010, http://ec.europa.eu/agriculture/publi/situation-and-prospects/2010_en.pdf (last accessed 7 August 2015), p. 18. The same report noted that the average annual greenhouse gas emissions from agriculture have decreased at a rate of 0.7 % per year between 2000 and 2008 as a result of “improved production methods and diminishing cattle numbers”, which represents a much quicker pace than GHG reductions in other sectors of the economy, p. 18.

Krueger (2004), p. 491.

See Matthews (2012), pp. 104–132.

See First Ministerial Meeting of the Group of 77: Charter of Algiers, Algiers, 10–25 October 1967, at http://www.g77.org/doc/algier~1.htm (last accessed 7 August 2015).

The EU is a textbook example of this development. See, inter alia, Krugman and Obstefeld (1997), p. 199 (italics added). Recent data from the EU Commission show that the EU imported annually an average of €81 billion in 2007–2009, making the EU by far the largest importer; with a yearly average export of about €76 billion in 2007–2009, the EU is at a par with the US as one of two leading agricultural exporters. See EU Commission, Situation and Prospects for EU Agriculture and Rural Areas. December 2010, http://ec.europa.eu/agriculture/publi/situation-and-prospects/2010_en.pdf (last accessed 7 August 2015), p. 27.

Sutherland P, GATT Focus Newsletter. No. 102, October 1993, p. 2.

A recent appraisal by the EU Commission described the CAP as “very successful in meeting its objective of moving the EU towards self-sufficiency” but also acknowledged that “by the 1980s the EU had to contend with almost permanent surpluses of the major farm commodities, some of which were exported (with the help of subsidies), others of which had to be stored or disposed of within the EU.” EU Commission, Situation and Prospects for EU Agriculture and Rural Areas. December 2010, http://ec.europa.eu/agriculture/publi/situation-and-prospects/2010_en.pdf (last accessed 7 August 2015), p. 73. The Commission also listed some of the other major problems associated with the CAP, including high budgetary cost, distortion of world markets, growing unpopularity with consumers and taxpayers, and environmental sustainability concerns.

See IMF and World Bank (2001) Market Access for Developing Countries’ Exports, https://www.imf.org/external/np/madc/eng/042701.pdf (last accessed 7 August 2015), p. 4.

World Bank (2007) World Development Report 2008: Agriculture for Development, http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf (last accessed 27 July 2015), p. 14.

See Arthur Dunkel, as quoted in GATT Focus News Letter. No. 41, October 1986, p. 8.

Matsushita et al. (2003), p. 135.

See Rodrik (2011), p. 72.

It has been reported that “of the 82 disputes submitted to the dispute settlement process between 1980 and 1990, 60 % concerned agriculture.” Steenblik R, Previous Multilateral Efforts to Discipline Subsidies to Natural Resource Based Industries. Paper Prepared for the Workshop on the Impact of Government Financial Transfers on Fisheries Management, Resource Sustainability, and International Trade, 17–19 August 1998, Manila, Philippines, http://www.oecd.org/greengrowth/fisheries/1918086.pdf (last accessed 27 July 2015), p. 11.

WTO (2003), pp. 26–44, 152.

GATT (1958), pp. 81–83.

See GATT (1958), p. 102.

100

See WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 183.

101

WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 184. Referring to significance of the Kennedy Round, the FAO also observed: “Although the major part of the tariff reductions concerned industrial products, agriculture was included in a comprehensive manner in trade negotiations for the first time in the 20-year history of GATT.” See FAO (1967), p. 42.

102

WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 184.

103

The IGA had two distinct components, the Wheat Trade Convention and the Food Aid Convention. The FAO called the IGA “the main achievement [of the Kennedy Round] in the agricultural field”, whose main objective was managing the market for cereals by setting minimum export prices and maximum prices at which exporters will provide agreed quantities to importers. See FAO (1967), p. 42. The International Wheat Conference translated these basic objectives into reality in the form of the IGA. The 1967 Wheat Trade Convention was however a failure. As the FAO later observed, the price provisions of that Convention “were virtually ineffective from the start to prevent international wheat prices from falling below the agreed minima.” FAO (1971), p. 23. The new International Wheat Agreement (IWA), and its Wheat Trade Convention (WTC), which in 1971 replaced the 1967 IGA and its WTC, contained no price-related obligations because “no agreement could be reached either on the range of prices to be established or on the definition of a reference wheat to which prices of other wheat would be related.” The new WTC thus effectively became a framework agreement with mechanisms for cooperation and consultation through a new advisory subcommittee to keep the world wheat market under constant review. See FAO (1971), p. 23.

104

The result of the Kennedy Round negotiations on these key agricultural products was summarised in a 1968 GATT Report as follows: “The negotiation of cereals resulted in agreement on basic minimum and maximum prices for wheats of major importance in international trade and the provision of food aid for developing countries to the amount of [4.5] million metric tons of grains each year initially for a period of 3 years. These agreements were subsequently incorporated in the International Grains Arrangement 1967 negotiated under the auspices of the International Wheat Council in co-operation with UNCTAD. Some bilateral arrangements were concluded on meat. In the case of dairy products very little was obtained in the negotiations.” See GATT, Second United Nations Conference on Trade and Development, New Delhi, February-March 1968: Activities of GATT in the Field of Trade and Development 1964–1967 (L/2967 7 February 1968), p. 15.

105

The Working Party was mandated to “conduct, on behalf of the CONTRACTING PARTIES, consultations under Article XXII:2 on urgent problems in international trade in dairy products with a view to arriving at mutually acceptable solutions to these problems and to report to the Council.” See GATT, Working Party on Dairy Products (L/2951, 8 December 1967).

106

See GATT, Arrangement Concerning Certain Dairy Products (L3324, 12 January 1970).

107

See GATT, Arrangement concerning Certain Dairy Products—Entry into Force on 14 May 1970—[Addendum] (L/3324/Add.1, 20 May 1970). This Arrangement entered into force for eight contracting parties: Australia, Canada, Denmark, the EEC, Japan, New Zealand, South Africa, and the UK.

108

The GATT Secretariat was of the view that the Arrangement worked’ satisfactorily’. See GATT, Safeguards for Maintenance of Access: Factual Note by the Secretariat (COM.IND/W/104, 13 April 1973), p. 4.

109

GATT, Protocol Relating to Milk Fat (L/3855, 2 April 1973).

110

See GATT, Multilateral Trade Negotiations Group “Agriculture” Sub-Group Dairy Products: New Zealand Statement (MTN/DP/W/25, 7 October 1977).

111

See generally GATT, Group 3(d)—Safeguards for Maintenance of Access: Factual Note by the Secretariat (MIN/3D/2, 30 August 1974), p. 4.

112

GATT, Australia—Proposed International Meat Consultative Group (L/4119, 26 November 1974).

113

See GATT, Participation in the Work of the International Meat Consultative Group: Note by the Secretariat (L/4171, 9 April 1975).

114

For more on this, see GATT, Agriculture in GATT: Note by the Secretariat (CG. 18/W/59, 15 September 1981).

115

See FAO (1979), pp. 1–59.

116

WTO (2007) World Trade Report 2007, https://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report07_e.pdf (last accessed 26 July 2015), p. 186. The same report also shows that besides the two largely unsuccessful product-specific agreements (on bovine meat and dairy products), the only agricultural ‘success’ story to come out of the Tokyo Round related to tropical products, in which ‘a majority’ of developed countries acceded to the request of developing countries for the removal of all trade barriers faced by tropical products in developed countries.

117

GATT Multilateral Trade Negotiations: Trade Negotiations Committee, Multilateral Agricultural Framework (MTN/27, 11 April 1979).

118

Efforts to create a similar Code for wheat were not successful, however. See FAO (1979), pp. 1–58. The negotiations for a successor to the 1971 IWA were conducted under the auspices of the United Nations Negotiating, which could not reach agreement “because of differences on a number of major issues regarding the size and distribution of reserves, prices and special assistance to developing countries.”

119

See Santana and Jackson (2012), p. 466. Santana and Jackson then refer to a 1972 GATT Secretariat Working Paper (COM.AG/W/77, 26 March 1972) as having reflected “most of the elements now contained in the UR Agreement on Agriculture.”

120

Hillman describes this fear as follows: “If substantial agricultural adjustment is not achieved soon and if agricultural protectionism is not reduced or checked there is a danger that, as on two occasions in the past the agriculture sector will be associated with a mass movement toward general economic protection, trade wars, and political breakdown.” Hillman (1978), p. 35.

121

GATT, Thirty-Eighth Session at Ministerial Level: Ministerial Declaration (L/5424, BISD 29S/9-22) adopted on 29 November 1982, p. 10.

122

GATT, Thirty-Eighth Session at Ministerial Level: Ministerial Declaration (L/5424, BISD 29S/9-22) adopted on 29 November 1982, p. 16. See also Statement by Mr. A. Dunkel, Director-General, to the Punta del Este Ministerial Conference (MIN(86)/5) 15 September 1986.

123

See GATT, Thirty-Eighth Session at Ministerial Level: Ministerial Declaration (L/5424) adopted on 29 November 1982, p. 9. The Committee was constituted by the Council on 26 January 1983. See GATT Council, Minutes of Meeting Held in the Centre William Rappard on 26 January 1983 (C/M/165, 14 February 1983).

124

See GATT Committee on Trade in Agriculture, Recommendations Adopted by the Committee Meeting at Senior Policy Level on 15 November 1984 (L/5732).

125

GATT, Ministerial Declaration on the Uruguay Round (MIN.DEC) adopted in Punta del Este, Uruguay, on 20 September 1986, often referred to as the Punta del Este Declaration, reproduced in, GATT Focus Newsletter. No. 41, October 1986, p. 4.

126

See United States Department of Agriculture (December 1996), p. 22.

127

See Trachtman (2002), pp. 78–79. See also Daemmrich A (2011) The Evolving Basis for Legitimacy of the World Trade Organization: Dispute Settlement and the Rebalancing of Global Interests. Harvard Business School Working Paper 12-041, http://www.hbs.edu/faculty/Publication%20Files/12-041.pdf (last accessed 7 August 2015), p. 8 describing the Uruguay Round agreement as a new deal under which the OECD countries “would open their markets to agricultural and labor-intensive manufactured goods, including foodstuffs and clothing; in exchange, developing countries would enforce IP and open financial markets to outside investors”.

128

For more on this, see Desta (2002) and McMahon (2006).

129

For a discussion of the SPS Agreement, see Scott (2007).

130

See GATT (1957), pp. 81–83.

131

See Article 2 and Annex 1 of the AoA. As the Appellate Body observed more recently, “it is undisputed that the Uruguay Round tariff negotiations for agricultural products were held on the basis of the Harmonized System and that all WTO Members have followed the Harmonized System in their Schedules to the GATT 1994 with respect to agricultural products.” Appellate Body Report, European Communities—Customs Classification of Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted 27 September 2005, and Corr. 1, DSR 2005:XIX, p. 9157, para. 198.

132

See UNCTAD, Recent Commodity Market Developments: Trends and Challenges: Note by the UNCTAD Secretariat. (TD/B/C.I/MEM.2/2, 23 December 2008), http://unctad.org/en/Docs/cimem2d2_en.pdf (last accessed 27 July 2015), p. 13 para. 33.

133

Harbinson S (2009) The Doha Round: “Death-Defying Agenda” or “Don’t Do it Again”? ECIPE Working Paper No. 10/2009, http://www.ecipe.org/app/uploads/2014/12/the-doha-round-a-death-defying-act.pdf (last accessed 27 July 2015), p. 5.

134

See Pretzlik C, View from the Top: Peter Sutherland. Financial Times, 14 December 2007, p. 18, Online version: http://www.ft.com/intl/cms/s/0/151f7e72-a9e9-11 dc-aa8b-0000779fd2ac.html#axzz3oA3RFXwT (last accessed 5 October 2015).

135

In the 2000s 0.5 % of the EU GDP was spent on supporting EU farmers and rural areas; in 2009 that stood at 0.45 %. See EU Commission, Situation and Prospects for EU Agriculture and Rural Areas. December 2010, http://ec.europa.eu/agriculture/publi/situation-and-prospects/2010_en.pdf (last accessed 7 August 2015), p. 12.

136

Krueger (2004), p. 488.

137

See Anderson and Valenzuela (2007), p. 1290.

138

Anderson and Valenzuela (2007), p. 1292.

139

Sachs (2005), pp. 281–282.

140

Rodrik (2007), pp. 184, 222.

141

Rodrik (2011), p. 258.

142

Lamy (2008), pp. 5–14.

Lamy (2008), p. 9.

Lamy (2008), p. 9.

Lamy (2008), p. 10.

Bacchus said: “the stubborn refusal of the United States to make additional cuts in our agricultural subsidies is by far the biggest obstacle to a global trade breakthrough.” See Bacchus J, Time to Cut Farm Subsidies Now. The Hill, 6 July 2011, http://thehill.com/blogs/congress-blog/economy-a-budget/169807-time-to-cut-farm-subsidies-now (last accessed 7 August 2015). Bacchus quoted figures from the US Congressional Budget Office which showed that, in 2011, US taxpayers would pay about $16 billion in aid to farmers through various programs and argued that this was the time to cut these ‘unneeded subsidies’ because: the US was under enormous budgetary pressure; the money was going to some of the largest corporate farmers; the price of agricultural products on the market was high enough for the farmers to sell their produce profitably without any need for subsidies; these subsidies are making a Doha deal impossible, and thereby preventing enormous opportunities for overall economic gain for the US and the rest of the world; and that some of the US’s subsidy programmes could easily be found illegal under WTO rules. In a more recent article, Paul Krugman, the Nobel Prize Winning Economist, wrote that farm subsidies in the US have become “a fraud-ridden program that mainly benefits corporations and wealthy individuals.” See Krugman P, Hunger Games, U.S.A. New York Times, 14 July 2013, http://www.nytimes.com/2013/07/15/opinion/krugman-hunger-games-usa.html?_r=0 (last accessed 27 July 2015).

147

See WTO, Agriculture Negotiations: Informal Meeting, WTO members remain divided on how to advance agriculture negotiations (news item 22 July 2015) https://www.wto.org/english/news_e/news15_e/agng_22jul15_e.htm (last accessed 5 August 2015).

148

Epps and Trebilcock observed that “While there is debate over the precise extent to which liberalization of agricultural markets will contribute to growth of the sector in developing countries, there is a strong consensus that the outcome of the Doha Round negotiations in agriculture is critical for developing countries.” See Epps and Trebilcock (2009), p. 326.

149

Food and Trade: The New Corn Laws. The Economist, 15 September 2012, http://www.economist.com/node/21562912 (last accessed 26 July 2015).

150

See Lamy P, speech delivered on the tenth anniversary of the World Trade Institute, University of Bern, 1 October 2010, https://www.wto.org/english/news_e/sppl_e/sppl173_e.htm (last accessed 7 August 2015).

151

For example, “agricultural support in 22 industrialised countries rose from an average of about $98 billion per year during the period 1979–1986 to an estimated $ 163 billion in 1993.” United States General Accounting Office (1994), p. 133. See also Jackson (1977), p. 981.

152

According to UNCTAD, between 2003 and 2007, agriculture accounted for as little as 3 % of global GDP. This average of course masks a wide range between different countries and groups—less than 2 % in developed countries and less than 6 % in Latin America and the Caribbean, but about one third in West and East Africa. See UNCTAD (2009) World Investment Report 2009, http://unctad.org/en/Docs/wir2009_en.pdf (last accessed 27 July 2015), p. 101.

153

According to WTO sources, while the share of agricultural exports fell from 47 % of total merchandise exports in 1970 to just 12 in 1996, the corresponding share of manufactures rose from 38 % to 77 % over the same period. See WTO (1998), p. 34.

154

The share of agricultural disputes in GATT for the 1950s was 23 % of all disputes, while its share for the following three decades (from 1960 to 1989) stood at 50 %. See Hudec (1993), p. 327.

155

See World Bank (2007) World Development Report 2008: Agriculture for Development, http://siteresources.worldbank.org/INTWDR2008/Resources/WDR_00_book.pdf (last accessed 27 July 2015), p. 98.

156

Food and Trade: The New Corn Laws. The Economist, 15 September 2012, http://www.economist.com/node/21562912 (last accessed 26 July 2015).

157

Terazono E, Thai Farm Subsidy Creates Rice Mountain. Financial Times, 18 July 2013, p. 8, Online version: http://www.ft.com/intl/cms/s/0/644225ee-e3f5-11e2-b35b-00144feabdc0.html#axzz3oA3RFXwT (last accessed 5 October 2015). Comparing this to the impact of EU agricultural policy, Teranozo observed: “Europe has had its butter mountain and wine lake. Now the Thai government is sitting on a rice hoard large enough to supply half of global imports for a year…”

158

Odell (2005), pp. 425–448, 437.

159

Yeutter (1998), p. 61.

160

See Pay to Play in Trade. Financial Times, 22 June 2010.

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Titel: Trade in Agricultural Products: Should Developing Countries Give Up on the WTO Promise for a Fair and Market-Oriented Agricultural Trading System? A Historical and Theoretical Analysis
verfasst von: Melaku Geboye Desta
Verlag: Springer International Publishing
Buch: European Yearbook of International Economic Law 2016
Print ISBN: 978-3-319-29214-4

Electronic ISBN: 978-3-319-29215-1

Copyright-Jahr: 2016
DOI: https://doi.org/10.1007/978-3-319-29215-1_4

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