Appendix: The Agreement on Agriculture

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1 Appendix: The Agreement on Agriculture Source: Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Marrakesh, 15 April 1994; Annex 1A Multilateral Agreements on Trade in Goods. KEY TERMS AMS Tariffication Rice Clause Amber Box Blue Box Green Box Red Box Peace Clause Articles 1 and 6, Annex 3 Article 4.2 (border measures) Article 4.2 and Annex 5 Article 6 and Annex 3 (domestic policies) Article 6.5 (domestic policies) Article 7 and Annex 2 (domestic policies) Article 8 (third country competition) Article 13 CONTENTS Article Definition of Terms Product Coverage Incorporation of Concessions and Commitments Market Access Special Safeguard Provisions Domestic Support Commitments General Disciplines on Domestic Support Export Competition Commitments Export Subsidy Commitments Prevention of Circumvention of Export Subsidy Commitments Incorporated Products Disciplines on Export Prohibitions and Restrictions Due Restraint Sanitary and Phytosanitary Measures Special and Differential Treatment Least-Developed and Net Food-Importing Developing Countries Committee on Agriculture Review of the Implementation of Commitments Consultation and Dispute Settlement Continuation of the Reform Process Final Provisions

2 The Agreement on Agriculture 165 Annex 1 Product Coverage Domestic Support: the Basis for Exemption from the Reduction Commitment Domestic Support: Calculation of Aggregate Measurement of Support Domestic Support: Calculation of Equivalent Measurement of Support Special Treatment with Respect to Paragraph 2 of Article Ministerial Decisions and Declarations 196 Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries Excerpts Members, Having decided to establish a basis for initiating a process of reform of trade in agriculture in line with the objectives of the negotiations as set out in the Punta del Este Declaration; Commentary The Punta Declaration (Ministerial Declaration on the Uruguay Round, reproduced in Croome, 1995, pp ) said: The CONTRACTING PARTIES agree that there is an urgent need to bring more discipline and predictability to world agricultural trade by correcting and preventing restrictions and distortions including those related to structural surpluses so as to reduce the uncertainty, imbalances and instability in world agricultural markets.' 'Negotiations shall aim to achieve greater liberalization of trade in agriculture and bring all measures affecting import access and export competition under strengthened and more operationally effective GATT rules and disciplines, taking into account the general principles governing the negotiations, by: (i) improving market access through, inter alia, the reduction of import barriers; (ii) improving the competitive environment by increasing discipline on the use of all direct and indirect subsidies and other measures affecting directly or indirectly agricultural trade, including the phased reduction of their negative effects and dealing with their causes [...]

3 166 Appendix Excerpts Recalling that their long-term objective as agreed at the Mid-Term Review of the Uruguay Round 'is to establish a fair and market-oriented agricultural trading system and that a reform process should be initiated through the negotiation of commitments on support and protection and through the establishment of strengthened and more operationally effective GATT rules and disciplines'; Recalling further that 'the abovementioned long-term objective is to provide for substantial progressive reductions in agricultural support and protection sustained over an agreed period of time, resulting in correcting and preventing restrictions and distortions in world agricultural markets'; Committed to achieving specific binding commitments in each of the following areas: market access; domestic support; export competition; and to reaching an agreement on sanitary and phytosanitary issues; Having agreed that in implementing their commitments on market access, developed countiy Members would take fully into account the particular needs and conditions of developing country Members by providing for greater improvement of opportunities and terms of access for agricultural products of particular interest to these Members, including the fullest Commentary The Punta Declaration called for negotiations to be completed within four years, and created the possibility for the Trade Negotiations Committee to meet at Ministerial level for a mid-term review. The Ministerial meeting of the TNC in Montreal in December 1988 was designed as a mechanism both to maintain political momentum in the negotiations and to allow for an 'early harvest' in areas where agreement had already been reached. The Brussels Ministerial of 1990 was intended to be the conclusion of the Round. The mid-term review, held in Montreal in 1988, showed there was still conflict between the objectives of stabilization and liberalization; and still difficulty drawing common conclusions about policy implications of the Farm War. Note that reductions and liberalization are tools, not objectives. This language is from the 1991 framework agreement. This language was in the Modalities section of the Draft Final Act. The Punta declaration had called for the 'fullest liberalization' of tropical products, and had allowed for the possibility a of early implementation, notwithstanding the Single Undertaking. In the Secretariat's initial assessment of the bindings in country schedules, the overall tariff

4 The Agreement on Agriculture 167 Excerpts liberalization of trade in tropical agricultural products as agreed at the Mid-Term Review, and for products of particular importance to the diversification of production from the growing of illicit narcotic crops; Noting that commitments under the reform programme should be made in an equitable way among all Members, having regard to non-trade concerns, including food security and the need to protect the environment; having regard to the agreement that special and differential treatment for developing countries is an integral element of the negotiations, and taking into account the possible negative effects of the implementation of the reform programme on least-developed and net food-importing developing countries; Commentary reduction for all Members amounted to 36 per cent for all agricultural products and 42 per cent for tropical products (GATT, 1993a, Table 20). These commitments are given limited effect in Articles 12,15, 16, 20(c) and the related Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least- Developed and Net Food-Importing Developing Countries. Hereby agree as follows: Part I Article I Definition of Terms In this Agreement, unless the context otherwise requires: (a) 'Aggregate Measurement of Support' and 'AMS' mean the annual level of support, expressed in monetary terms, provided for an agricultural product in favour of the producers of the basic agricultural product or nonproduct-specific support provided in favour of agricultural producers in general, other than support provided under exempt programmes that qualify as exempt from reduction under Annex 2 to this Agreement, which is: (i) with respect to support provided during the base period, specified in the relevant tables of supporting material incorporated by reference in Part IV of a Member's Schedule; and (ii) with respect to support provided during any year of the implementation The AMS reduction commitment is in Article 6 below, see also Article 1 (h) below. The base period for the AMS is ; for export subsidies, the base period is , with a possibility of using levels. 'Methodology' refers to the 'Modalities for the Establishment of Specific

5 168 Appendix Excerpts period and thereafter, calculated in accordance with the provisions of Annex 3 of this Agreement and taking into account the constituent data and methodology used in the tables of supporting material incorporated by reference in Part IV of the Member's Schedule; (b) 'basic agricultural product' in relation to domestic support commitments is defined as the product as close as practicable to the point of first sale as specified in a Member's Schedule and in the related supporting material; (c) 'budgetary outlays' or 'outlays' includes revenue foregone; (d) 'Equivalent Measurement of Support' means the annual level of support, expressed in monetary terms, provided to producers of a basic agricultural product through the application of one or more measures, the calculation of which in accordance with the AMS methodology is impracticable, other than support provided under programmes that qualify as exempt from reduction under Annex 2 to this Agreement [...]; (e) 'export subsidies' refers to subsidies contingent upon export performance, including the export subsidies listed in Article 9 of this Agreement; (0 'implementation period' means the six-year period commencing in the year 1995, except that, for the purposes of Article 13, it means the nine-year period commencing in 1995; (g) 'market access concessions' includes all market access commitments undertaken pursuant to this Agreement; (h) 'Total Aggregate Measurement of Support' and Total AMS' mean the Commentary Binding Commitments under the Reform Programme' which was originally Part B of the Draft Final Act, was modified by the Blair House Accord, but which is not part of the Agreement. General rules are in the agreement, but specific commitments are in the schedules. Tax expenditures can be a subsidy - the definition of a subsidy in the Agreement on Subsidies and Countervailing Measures, Article 1.1 (a)(1)(h). Such support must be calculated in accordance with Annex 4 and then specified in a country's Schedules. In accordance with Article 21 of this Agreement, the definition of 'subsidy' is that found in Article 1 of the Agreement on Subsidies and Countervailing Measures, the first time the GATT has had a definition of 'subsidy.' Article 13 is the 'Peace Clause' which means that 'due restraint' must be exercised until 4 years after the scheduled start of the new negotiations specified in Article 20. In paragraph 1 (a) above, the AMS is product specific as a result of Blair

6 The Agreement on Agriculture 169 Excerpts sum of all domestic support provided in favour of agricultural producers, calculated as the sum of all aggregate measurements of support for basic agricultural products, all non-productspecific aggregate measurements of support and all equivalent measurements of support for agricultural products [...]; Article 2 Product Coverage This Agreement applies to the products listed in Annex 1 to this Agreement, hereinafter referred to as agricultural products. Part II Article 3 Incorporation of Concessions and Commitments 1. The domestic support and export subsidy commitments in Part IV of each Member's Schedule constitute commitments limiting subsidization and are hereby made an integral part of GATT Subject to the provisions of Article 6, a Member shall not provide support in favour of domestic producers in excess of the commitment levels specified in Section I of Part IV of its Schedule. Commentary House. The EU insisted on basing the reductions in Article 6 below on a 'Total AMS' which allows for some reinstrumentation' or 'rebalancing' of support (on rebalancing, see McDonald, 1990, 307; see also Odell, 1993; Odell and Matzinger-Tchakerian, 1993). There is still no definition of 'agriculture' other than by reference to tariff lines. 'Tropical products' are included, but not industrial commodities like rubber, jute, sisal, abacu or coin. The principles of this Agreement, including the obligation to reduce domestic support, do not apply to products properly covered under other goods agreements. Agricultural policy is hereby explicitly acknowledged to be subject to all GATT disciplines, though much of the rest of the Agreement is a framework for walling agriculture off from the GATT. The basis of the Agreement is the detailed commitments in the Schedules, which are relatively easy to monitor, rather than complex rules, which require interpretation (for an overview of the new commitments in the schedules on tariffication, the AMS and export subsidies, see GATT, 1994c, pp. 19, 21, 22, 24, 26,76,77). Support for agriculture is capped - cannot increase in future. 3. Subject to the provisions of There may be peaks and valleys during paragraphs 2(b) and 4 of Article 9, the transition.

7 170 Appendix Excerpts a Member shall not provide export subsidies listed in paragraph 1 of Article 9 in respect of the agricultural products or groups of products specified in Section II of Part IV of its Schedule in excess of the budgetary outlay and quantity commitment levels specified therein and shall not provide such subsidies in respect of any agricultural product not specified in that Section of its Schedule. Part III Article 4 Market Access 1. Market access concessions contained in Schedules relate to bindings and reductions of tariffs, and to other market access commitments as specified therein. Commentary No new subsidies can be introduced where the product concerned was not subsidized during the base period. The 'Modalities' require a formula cut (not 'request and offer') in all tariffs of an average of 36 per cent over the 6 year transition (24 per cent over ten years for developing countries), with a minimum cut in any line of 15 per cent (10 per cent for developing countries) There must also be tariff quotas providing an 'opportnity' for minimum market access of 3 per cent to 5 per cent of consumption for all products. An 'opportunity' is a policy rather than a quantity commitment. In the case of the EU, for example, much of the minimum access is allocated to existing preferential arrangements, such as the Lome convention, just as in Canada it has gone in some instances to New Zealand. The reductions are not 'trade-weighted' so countries have taken large cuts in tariffs that affect small amounts of trade while taking the minimum cut in tariffs on 'sensitive' products. 'Bindings' or 'bound rates' refer to tariff rates that result from GATT negotiations and are incorporated in a country's schedule of concessions. Bindings, therefore, are enforceable and form an

8 The Agreement on Agriculture 171 Excerpts Commentary integral part of the GATT. Many bindings, however, are at levels higher than the actual or applied rate, which might allow some Members to use measures similar in effect to the now-banned variable levies. 'Tariff-rate quota' (TRQ) is a two-tiered tariff. Imports up to a certain value limit (the quota) face one duty ('in-tariff quota rates') and imports in excess of that level face a second, higher duty ('over-quota tariff rates'). 2. Members shall not maintain, resort to or revert to any measures of the kind which have been required to be converted into ordinary customs duties,* except as otherwise provided for in Article 5 and Annex 5. This is the 'tariffication' provision: all NTBs have to be converted to tariff equivalents based on the difference between world market prices and internal prices. (There is a description of the technique and of the aggregate results in GATT, 1994c, pp ) All of these tariffs are now bound, and so cannot be raised, nor can new ones be introduced. * Note 1: These measures include quantitative import restrictions, variable import levies, minimum import prices, discretionary import licensing, non-tariff measures maintained through state-trading enterprises, voluntary export restraints, and similar border measures other than ordinary customs duties, whether or not the measures are maintained under country-specific derogations from the provisions of GATT 1947, but not measures maintained under balance-of-payments provisions or under other general, non-agriculture-specific provisions of The last clause of this sentence is the 'rice clause' introduced at the last minute for Japan and Korea - it has also apparently been invoked by Israel and the Philippines, however. These measures are all Non-tariff Barriers (NTBs) some of which were GATT-legal in the past (e.g. import restrictions under Article XI:2[c]) and some of which were so-called 'grey area' measures. The base period was one of relatively low dollar prices, so EU tariffs denominated in ecu were relatively high, allowing the cuts to start from a high level (Ockenden and Franklin, 1995, p. 58). The fact that tariffs seem high, however, does not mean that they will be prohibitive. The effect of the tariff depends on the gap between

9 172 Appendix Excerpts Commentary GATT 1994 or of the other Multilateral Trade Agreements in Annex 1A to the WTO Agreement. Article 5 Special Safeguard Provisions 1. Notwithstanding the provisions of paragraph 1(b) of Article II of GATT 1994, any Member may take recourse to the provisions of paragraphs 4 and 5 below in connection with the importation of an agricultural product, in respect of which measures referred to in paragraph 2 of Article 4 of this Agreement have been converted into an ordinary customs duty and which is designated in its Schedule with the symbol l SSG" as being the subject of a concession in respect of which the provisions of this Article may be invoked, if: (a) the volume of imports of that product entering the customs territory of the Member granting the concession during any year exceeds a trigger level which relates to the existing market access opportunity as set out in paragraph 4; or, but not concurrently: (b) the price at which imports of that product may enter the customs territory of the Member granting the concession, as determined on the basis of the c.lf. import price of the shipment concerned expressed in terms of its domestic currency, falls below a trigger price equal to the average 1986 to 1988 reference price for the product concerned. domestic and world prices (OECD, 1995d). Some new tariffs are set in both percentage and nominal terms, in effect continuing the now-banned minimum import prices which, in combination with the special safeguards in the next article, will in practice limit new market access by preserving the wedge between domestic and import prices. This provision, which allows for the imposition of higher duties in the event of a surge in imports, is an exception to Article II of the GATT, which prohibits duties in excess of those in a country's schedule. There has been some concern about this clause, because while it does promote some stability in markets, it risks encouraging managed trade. In its schedules, the EU has reserved the right to use this provision for most producers formerly subject to variable levies, and it has set high trigger prices. 8. Where measures are taken in conformity with paragraphs 1 through 7 above, Members undertake not to have recourse, in respect of such measures, to the provisions of Note that here again Agriculture is walled off from the GATT.

10 The Agreement on Agriculture 173 Excerpts paragraphs 1(a) and 3 of Article XIX of GATT 1994 or paragraph 2 of Article 8 of the Agreement on Safeguards. 9. The provisions of this Article shall remain in force for the duration of the reform process as determined under Article 20. Part IV Article 6 Domestic Support Commitments 1. The domestic support reduction commitments of each Member contained in Part IV of its Schedule shall apply to all of its domestic suport measures in favour of agricultural producers with the exception of domestic measures which are not subject to reduction in terms of the criteria set out in this Article and in Annex 2 to this Agreement. The commitments are expressed in terms of Total Agreement Measurement of Support and 'Annual and Final Bound Commitments Levels'. 2. [deleted] 3. A Member shall be considered to be in compliance with its domestic support reduction commitments in any year in which its domestic support in favour of agricultural producers expressed in terms of Current Total AMS does not exceed the corresponding annual or final bound Commentary This paragraph, by limiting the duration of the special safeguards, provides an inducement to continue negotiations after the transition period. Note that the 20 per cent cut required by the Modalities is not mentioned in the text. The deleted paragraph contains an exception for developing countries as part of the commitment to 'special and differential treatment' in Article 15 (below) on the grounds that measures of assistance, whether direct or indirect, to encourage agricultural and rural development, including investment and input subsidies, are an integral part of the development programmes of developing countries. Subsidies to encourage diversification from growing illicit narcotic crops are also exempt. The negotiated schedule takes precedence over any rule. There can be no dispute over the legitimacy of a particular measure. The only issue will be whether the level of support, which should be relatively easy to measure, is consistent with commitments in the schedule.

11 174 Appendix Excerpts Commentary commitment level specified in Part IV of the Member's Schedule. 4. (a) A Member shall not be required to include in the calculation of its Current Total AMS and shall not be required to reduce: [support that does not exceed 5 per cent] (b) For developing country Members, the de minimis percentage under this paragraph shall be 10 per cent. 5.(a) Direct payments under production-limiting programmes shall not be subject to the commitment to reduce domestic support if: (i) such payments are based on fixed area and yields; or (ii) such payments are made on 85 per cent or less of the base level of production; or (iii) livestock payments are made on a fixed number of head. (b) The exemption from the reduction commitment for direct payments meeting the above criteria shall be reflected by the exclusion of the value of those direct payments in a Member's calculation of its Current Total AMS. Article 7 General Disciplines on Domestic Support 1. Each Member shall ensure that any domestic support measures in favour of agricultural producers which are not subject to reduction commitments because they qualify under the criteria set out in Annex 2 to this Agreement are maintained in conformity therewith. 2. (a) Any domestic support measure in favour of agricultural producers, including any modification to such de minimis provisions are sensible, and help to stop trivial harassment. The calculation is product-specific but the reduction is by Total AMS, which allows flexibility. It also allows countries to choose their own mix of quota and price adjustments. This provision is part of the 'special and differential treatment' for developing countries. This is the Blue Box created by the Blair House Accord. Note that it is an exception from the Amber Box not an addition to the Green Box. (i) is the exemption for US set asides and deficiency payments; (ii) and (iii) are exemptions for EU CAP reform. There is no question that this provision makes the Agreement easier to accept for the two largest Members since it allows them to meet their AMS targets more easily. But note below: the limitation in the peace clause to 1992 levels means that the real value of the Blue Box will erode over time. This provision is the Green Box; it is comparable to the non-actionable category of the Subsidies Agreement, but because Green Box measures though 'minimally trade distorting' are 'specific' they might be actionable in the Subsidies Agreement were they not exempted by Article 13. There could be many disputes over the eligibility of measures for inclusion in the Green Box, though the three-way criteria

12 The Agreement on Agriculture 175 Excerpts measure, and any measure that is subsequently introduced that cannot be shown to satisfy the criteria in Annex 2 to this Agreement or to be exempt from reduction by reason of any other provision of this Agreement shall be included in the Member's calculation of its Current Total AMS. (b) Where no Total AMS commitment exists in Part IV of a Member's Schedule, the Member shall not provide support to agricultural producers in excess of the relevant de minimis level set out in paragraph 4 of Article 6. Part V Article 8 Export Competition Commitments Each Member undertakes not to provide export subsidies otherwise than in conformity with this Agreement and with the commitments as specified in that Member's Schedule. Article 9 Export Subsidy Commitments 1. The following export subsidies are subject to reduction commitments under his Agreement: Commentary in Annex 2 should help reduce conflict. Note that developing countries cannot afford most Green Box policies, though over time they may develop cost-effective decoupled support as alternatives to current price-based measures. In the Subsidies Agreement, this would be the Red Box for 'prohibited' subsidies conditional on export performance, except that Article 3.1 of that Agreement explicitly defers to this Agreement. In light of Article 3.3 of this Agreement, the Red Box can be read as a general prohibition of export subsidies, for new products, with exceptions for products subsidized in the base period, a period of low prices. Discipline on export subsidies is the basis for the ceasefire in the Farm War. By specifying existing subsidies in their schedules, there can no longer be debates about the level of subsidies. More important, there is no reference to 'equitable shares of world markets' as in Article XVI:3 of GATT The listing of specific rather than illustrative criteria in Article 9 is fairly exhaustive of export subsidies currently in use. The provision is thought to be easy to implement and to monitor - though the commitments aggregate subsidies for each

13 176 Appendix Excerpts (a) the provision by governments or their agencies of direct subsidies, including payments-in-kind, to a firm, to an industry, to producers of an agricultural product, to a cooperative or other association of such producers, or to a marketing board, contingent on export performance; (b) the sale or disposal for export by governments or their agencies of noncommercial stocks of agricultural products at a price lower than the comparable price charged for the like product to buyers in the domestic market; (c) payments on the export of an agricultural product that are financed by virtue of governmental action, whether or not a charge on the public account is involved, including payments that are financed from the proceeds of a levy imposed on the agricultural product concerned or on an agricultural product from which the exported product is derived; (d) the provision of subsidies to reduce the costs of marketing exports of agricultural products (other than widely available export Commentary exporter, which means there could be nasty fights over specific import markets. Article 13(c) seems to move these direct and indirect subsidies from the Red or 'prohibited' category into the 'actionable' or Amber category of the Subsidies Agreement and Article VI of the GATT 1994; they would only be at risk of countervailing duties, therefore, if there was a determination that the subsidy caused injury or serious prejudice to another party. NB There is no restriction on 'unsubsidized' exports. Some think that the potential exists to evade the Agreement by moving support to other measures (Folmer et al, 1995, p. 226). This provision would apply to the Canadian Wheat Board. State-trading enterprises were not a major focus of negotiations though they are (loosely) subject to the Agreement (see also Note 1 to Article 4.2.). Such firms are also subject to the Uruguay Round Understanding on the Interpretation of Article XVII, which deals with State-Trading.

14 The Agreement on Agriculture 177 Excerpts Commentary promotion and advisory services) including handling, upgrading and other processing costs, and the costs of international transport and freight; (e) internal transport and freight charges on export shipments, provided or mandated by governments, on terms more favourable than for domestic shipments; (f) subsidies on agricultural products contingent on their incorporation in exported products. 2. (a) Except as provided in subparagraph (b), the export subsidy commitment levels for each year of the implementation period, as specified in a Member's Schedule, represent with respect to the export subsidies listed in paragraph 1 of this Article: (i) in the case of budgetary outlay reduction commitments, the maximum level of expenditure for such subsidies that may be allocated or incurred in that year in respect of the agricultural product, or group of products, concerned; and This provision applied to Canada's decades old 'Crow Rate.' The annual C$560 million subsidy to the railways under the Western Grain Transportation Act was eliminated in A package of transition measures was provided, however, including a payment of C$1.6 billion to owners of Prairie farm land. This change, taken as much for fiscal as trade reasons, makes it easy for Canada to meet its reduction commitments, since the Crow Rate was red, but the new payment is green. This provision creates ceilings on future subsidization. There is no possibility of ex ante adjudication, however: parties can only tell if limits were exceeded at the end of a period, after the damage has been done. The base period in this case is see Article 9.2 (b) (iv). There is a provision in the Modalities, apparently added in a so-called second Blair House in 1993, allowing to be used as the base period where subsidized exports had increased since the earlier base period, allowing some countries higher subsidized exports in the first years of the transition than would otherwise have been the case - with no effect on the final levels. For example, wheat in the EU, US, and Canada; dairy in the EU, Australia, and Canada (OECD, 1995d). The 'commitments' as specified in the 'Modalities' are a reduction of 36 per cent in expenditure during the transition and 21 per cent in volume of subsidized exports (for developing countries the figures are 21 per cent and 14 per cent over ten years). The

15 178 Appendix Excerpts (ii) in the case of export quantity reduction commitments, the maximum quantity of an agricultural product, or group of products, in respect of which such export subsidies may be granted in that year, (b) In any of the second through fifth years of the implementation period, a Member may provide export subsidies listed in paragraph 1 above in a given year in excess of the corresponding annual commitment levels in respect of the products or groups of products specified in Part IV of the Member's Schedule, provided that: [sub-paragraph deleted] 3. Commitments relating to limitations on the extension of the scope of export subsidization are as specified in Schedules. 4. During the implementation period, developing country Members shall not be required to undertake commitments in respect of the export subsidies listed in subparagraphs (d) and (e) of paragraph 1 above, provided that these are not applied in a manner that would circumvent reduction commitments. Article 10 Prevention of Circumvention of Export Subsidy Commitments 1. Export subsidies not listed in paragraph 1 of Article 9 shall not be applied in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments; nor shall noncommercial transactions be used to circumvent such commitments. 2. Members undertake to work toward the development of internationally agreed disciplines to govern the Commentary Dunkel text had specified a volume cut of 24 per cent, which would have been harder for the EU to accept. These commitments are apparently oriented to quantities not policies, but see the discussion in the text. p. 131 These provisions were agreed in the Blair House accord at the request of the EU. The base period is It has no effect on the final bound levels at the end of the transition. The effect is to 'frontload' the reductions which allows some subsidized reduction of stocks overhanging the market (see Table II. 10 in GATT, 1994c). 'Special and differential' treatment for developing countries. To the extent that subsidies hurt the exporter not the importer, this exception does not necessarily help developing country governments. Export credits, long subject to disciplines at the OECD, have proved difficult for GATT/WTO.

16 The Agreement on Agriculture 179 Excerpts provision of export credits, export credit guarantees or insurance programmes and, after agreement on such disciplines, to provide export credits, export credit guarantees or insurance programmes only in conformity therewith. 3. Any Member which claims that any quantity exported in excess of a reduction commitment level is not subsidized must establish that no export subsidy, whether listed in Article 9 or not, has been granted in respect of the quantity of exports in question. 4. Members donors of international food aid shall ensure: (a) that the provision of international food aid is not tied directly or indirectly to commercial exports of agricultural products to recipient countries; (b) that international food aid transactions, including bilateral food aid which is monetized, shall be carried out in accordance with the FAO 'Principles of Surplus Disposal and Consultative Obligations', including, where appropriate, the system of Usual Marketing Requirements (UMRs); and (c) that such aid shall be provided to the extent possible in fully grant form or on terms no less concessional than those provided for in Article IV of the Food Aid Convention Commentary See also (below) the Marrakesh Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed And Net Food-Importing Developing Countries It is essential to ensure that food aid is not a disguised production-related subsidy, used only for transactions that would not otherwise take place. The first question is to whom aid is given, where the issue is the extent of effective demand, if any, in the recipient country. This provision would tend to limit food aid in situations where a recipient might otherwise be able to purchase food in favour of those countries where effective demand (that is, people with money to buy food) is low or non-existent. The FAO CSD and the World Food Programme UMR are explicitly designed to try to limit the trade distorting potential of food aid. The second question is in what form the aid is given, where the issue is how the food is acquired by the donor - cash grants through multilateral agencies for open market purchases are obviously the least trade distorting (for a discussion of the issues, see Magiera etal, 1990, pp. 22-4).

17 180 Appendix Excerpts Commentary Article 11 Incorporated Products In no case may the per-unit subsidy paid on an incorporated agricultural primary product exceed the per-unit export subsidy that would be payable on exports of the primary product as such. Part VI Article 12 Disciplines on Export Prohibitions and Restrictions 1. Where any Member institutes any new export prohibition or restriction on foodstuffs in accordance with paragraph 2(a) of Article XI of G ATT 1994, the Member shall observe the following provisions: (a) the Member instituting the export prohibition or restriction shall give due consideration to the effects of such prohibition or restriction on importing Members' food security; [There are provisions in subparagraph (b) for notification and consultation. Paragraph 2 contains an exemption for developing countries.] Article XI 2(a) of the GATT 1997 allows 'Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.' Greater discipline on this provision was important to Japan. Any claims for food security were strenuously rejected by the Cairns Group and by the USA, which submitted a separate paper on the subject in 1988 (see Stewart, 1993, pp , 183-4, 186-9). Japan and Korea had wanted to eliminate Article XI 2(a) of the GATT This Article maintains the provision because of the food security concerns of certain LDCs, but puts constraints on its use in the interests of Japan and Korea. Part VII Article 13 Due Restraint During the implementation period, notwithstanding the provisions of GATT 1994 and the Agreement on Subsidies and Countervailing Measures (referred to in this Article as the 'Subsidies Agreement'): This article is the 'Peace Clause.' It is an exception from the GATT good for 9 years - that is, until well after the next round of negotiations is supposed to have started. This sunset provision is an inducement, therefore, to resume negotiations and to conclude them expeditiously. The inducement is increased by the fact that there is no inflation adjustment. It may have been easy to agree to the first round of

18 The Agreement on Agriculture 181 Excerpts (a) domestic support measures that conform fully to the provisions of Annex 2 to this Agreement shall be: (i) non-actionable subsidies for purposes of countervailing duties; (ii) exempt from actions based on Article XVI of GATT 1994 and Part III of the Subsidies Agreement; and (iii) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of GATT 1994, in the sense of paragraph 1(b) of Article XXIII of GATT 1994; (b) domestic support measures that conform fully to the provisions of Article 6 of this Agreement including direct payments that conform to the requirements of paragraph 5 thereof, as reflected in each Member's Schedule, as well as domestic support within de minimis levels and in conformity with paragraph 2 of Article 6, shall be: (i) exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations; (ii) exempt from actions based on paragraph 1 of Article XVI of GATT 1994 or Articles 5 and 6 of the Subsidies Agreement, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year; and Commentary reductions, but the bound limits will inevitably become constraining at some point. For further certainty, these exceptions are explicitly mentioned in the Subsidies Agreement. See commentary on Article 19. This provision is a complete but time limited exemption for the Green Box 'Nullification and impairment' provisions give states recourse when otherwise legal actions eliminate a benefit obtained in a negotiation. This provision is the exemption for the Amber and Blue Boxes, ensuring that e.g. CAP reform cannot be challenged in the GATT during the transition even if the subsidy involved would normally be actionable, unless a particular measure causes injury to another Member. This provision tends to limit increases in support for an commodity because it is not based on 'Total AMS'.

19 182 Appendix (Excerpts iii) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of GATT 1994, in the sense of paragraph 1 (b) of Article XXIII of GATT 1994, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year; (c) export subsidies that conform fully to the provisions of Part V of this Agreement, as reflected in each Member's Schedule, shall be: (i) subject to countervailing duties only upon a determination of injury or threat thereof based on volume, effect on prices, or consequent impact in accordance with Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations; and (ii) exempt from actions based on Article XVI of GATT 1994 or Articles 3, 5 and 6 of the Subsidies Agreement. Commentary This section in effect exempts the Red Box from certain challenges. This provision is dependent on an effects test, but has the virtue of specifying how injury is to be determined. Agriculture export subsidies would be 'prohibited' under the Subsidies agreement without this exemption. Part VIII Article 14 Sanitary and Phytosanitary Measures Members agree to give effect to the Agreement on the Application the the Sanitary and Phytosanitary Measures. Part IX Article 15 Special and Differential Treatment 1. In keeping with the recognition that differential and more favourable treatment for developing country Members is an integral part of the negotiation, special and differential treatment in respect of commitments shall be provided as set out in the The Punta Declaration and the Single Undertaking c eate the requirement for this political recognition of the need for differentiation (whether developing countries should delay reform is another question). The precise obligations as specified in Articles of the

20 The Agreement on Agriculture 183 Excerpts relevant provisions of this Agreement and embodied in the Schedules of concessions and commitments. 2. Developing country Members shall have the flexibility to implement reduction commitments over a period of up to 10 years. Least-developed country Members shall not be required to undertake reduction commitments. PartX Article 16 Least-Developed and Net Food- Importing Developing Countries 1. Developed country Members shall take such action as is provided for within the framework of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries. 2. The Committee on Agriculture shall monitor, as appropriate, the follow-up to this Decision. Part XI Article 17 Committee on Agriculture A Committee on Agriculture is hereby established. Commentary 'Modalities' are incorporated in the Agreement here, in the Preamble, and in Articles 4.1, 6.1, 6.2, 6.4 (b), and 9.4 (for a listing of all the examples of special treatment, see GATT, 1993a, pp. 70-4). In the 'Modalities,' developing countries are generally allowed to make reductions only two thirds the size of developed countries, and least-developed countries are allowed to make none (see Article 9.2 [a][i]). Note, however, that all developing countries are required to adopt the new rules as a whole, with no exemptions, so that their policies are disciplined in the same way as those of developed countries. It is also significant that for many developing countries, their policies are also shaped by IMF Structural Adjustment Programs (SAPs), which also tend to push policy away from price-based measures and towards support for investment in agricultural infrastructure. SAPs and the Uruguay Round will push policy in a reform direction, 'special and differential treatment' notwithstanding (FAO, 1994, pp. 73-4). In the Tokyo Round participants were unable to create such a body though a

21 184 Appendix Excerpts Article 18 Review of the Implementation of Commitments 1. Progress in the implementation of commitments negotiated under the Uruguay Round reform programme shall be reviewed by the Committee on Agriculture. Commentary limited-mandate Committee on Agriculture was later set up by the 1982 GATT Ministerial, and it made an important contribution in preparing for the Uruguay Round. Surveillance is an essential part of trade agreements, useful for clarifying understandings, ensuring transparency and as a guide to domestic policymakers. Compare Article 18.6 below. Consistent with well-established GATT practice, there may well be derogations from the 'mles,' if agreed by the Members themselves. 2. The review process shall be undertaken on the basis of notifications submitted by Members in relation to such matters and at such intervals as shall be determined, as well as on the basis of such documentation as the Secretariat may be requested to prepare in order to facilitate the review process. Members were to notify their tariff rates and show how they intended to implement their quota commitments, All significant agricultural traders to whom this applies, except Brazil, India, and Mexico, had notified by 27 November In addition to the notifications to be submitted under paragraph 2, any new domestic support measure, or modification of an existing measure, for which exemption from reduction is claimed shall be notified promptly. This notification shall contain details of the new or modified measure and its conformity with the agreed criteria as set out either in Article 6 or in Annex In the review process Members shall give due consideration to the influence of excessive rates of inflation on the ability of any Member to abide by its domestic support commitments. Tangerman stresses that macroeconomic factors can affect the outcome of the Agreement. The definition of the reference price, for example, makes the AMS a nominal amount in domestic currency, which makes it vulnerable to domestic inflation. Tangerman thinks that if countries with high inflation feel

22 The Agreement on Agriculture 185 Excerpts Commentary too much pressed by these provisions, the Committee may have to develop some sort of exemption formula during the review process, which could be contentious. 5. Members agree to consult annually in the Committee on Agriculture with respect to their participation in the normal growth of world trade in agricultural products within the framework of the commitments on export subsidies under this Agreement. This provisions risks a return to the old Article XVI:3 debates on 'an equitable share of world export trade'. 6. The review process shall provide an opportunity for Members to raise any matter relevant to the implementation of commitments under the reform programme as set out in this Agreement. 7. Any Member may bring to the attention on of the Committee on Agriculture any measure which it considers ought to have been notified by another Member. Article 19 Consultation and Dispute Settlement The provisions of Articles XXII and XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding, shall apply to consultations and the settlement of disputes under this Agreement. Part XII Article 20 Continuation of the Reform Process Recognizing that the long-term objective of substantial progressive reductions in support and protection resulting in fundamental reform is an ongoing process, Members agree that negotiations for continuing the process will be initiated one year Agriculture has its own surveillance procedures (Article 18), though it is subject to the TPRM, but disputes will be part of the new WTO integrated dispute settlement system. This reality made the peace clause essential since agriculture policies would otherwise be subject to challenge under other WTO rules, rather than just under this Agreement, as intended. Tariffs, domestic support and export subsidies are left at relatively high levels by the Agreement. The real achievement is in creating the basis for future negotiations without time-consuming debate about a framework and modalities.

23 186 Appendix Excerpts before the end of the implementation period, taking into account: (a) the experience to that date from implementing the reduction commitments; (b) the effects of the reduction commitments on world trade in agriculture; (c) non-trade concerns, special and differential treatment to developing country Members, and the objective to establish a fair and market-oriented agricultural trading system, and the other objectives and concerns mentioned in the preamble to this Agreement; and (d) what further commitments are necessary to achieve the above mentioned long-term objectives. Part XIII Article 21 Final Provisions I. The provisions of GATT 1994 and of other Multilateral Trade Agreements in Annex 1A to the WTO Agreement shall apply subject to the provisions of this Agreement. Commentary It is not clear whether there will be another overall 'Round' in which to incorporate the results and the necessary trade-offs of an Agriculture 'mini-round.' The implementation period in this case is six years. Note that the agreed standard of evaluation is the 'effect' of the agreement on trade. As discussed in the text, this provision makes agriculture explicitly part of the GATT, with some continued exceptions. Agriculture is still walled off from the GATT, in other words, but: (a) the provisions are now clear; (b) the provisions mostly mirror the rest of GATT; and (c) the difference in treatment of manufactures and agricultural products is much less than before. 2. The Annexes to this Agreement are hereby made an integral part of this Agreement.

24 The Agreement on Agriculture 187 ANNEX 1 PRODUCT COVERAGE 1. This Agreement shall cover the following products: (i) HS Chapters 1 to 24 lessfishand fish products, plus* ii) HS Code (mannitol) HS Code (sorbitol) HS Heading (essential oils) HS Headings to (albuminoidal substances, modified starches, glues) HS Code (finishing agents) HS Code (sorbitol n.e.p.) HS Headings to (hides and skins) HS Heading (raw furskins) HS Headings to (raw silk and silk waste) HS Headings to (wool and animal hair) HS Headings to (raw cotton, waste and cotton carded or combed) HS Heading (raw flax) HS Heading (raw hemp) * The product descriptions in round brackets are not necessarily exhaustive.

25 188 Appendix ANNEX 2 DOMESTIC SUPPORT: THE BASIS FOR EXEMPTION FROM THE REDUCTION COMMITMENTS Excerpts 1. Domestic support measures for which exemption from the reduction commitments is claimed shall meet the fundamental requirement that they have no, or at most minimal, tradedistorting effects or effects on production. Accordingly, all measures for which exemption is claimed shall conform to the following basic criteria: (a) the support in question shall be provided through a publicly-funded government programme (including government revenue foregone) not involving transfers from consumers; and, (b) the support in question shall not have the effect of providing price support to producers; plus policyspecific criteria and conditions as set out below. Government Service Programmes 2. General services Policies in this category involve expenditures (or revenue foregone) in relation to programmes which provide services or benefits to agriculture or the rural community. They shall not involve direct payments to producers or processors. Such programmes, which include but are not restricted to the following list, shall meet the general criteria in paragraph 1 above and policy-specific conditions where set out below: (a) research [...] (b) pest and disease control [...] (c) training services, including both general and specialist training facilities; (d) extension and advisory services [...] (e) inspection services [...] (f) marketing and promotion services [...]; and Commentary This annex is the operational definition of the Green Box. This part is general; below there are illustrative and specific criteria. The key ideas, and the basis for monitoring in the Committee on Agriculture will be the need not to distort trade and to move towards direct decoupled support.

26 The Agreement on Agriculture 189 Excerpts (g) infrastructural services [...]. 3. Public stockholding for food security purposes 4. Domestic food aid Expenditures (or revenue foregone) in relation to the provision of domestic food aid to sections of the population in need. Commentary Footnote: 'governmental stockholding programmes for food security purposes in developing countries whose operation is transparent and conducted in accordance with officially published objective criteria or guidelines shall be considered to be in conformity with the provisions of this paragraph.' Footnote: 'For the purposes of paragraphs 3 and 4 of this Annex, the provision of foodstuffs at subsidized prices with the objective of meeting food requirements of urban and rural poor in developing countries on a regular basis at reasonable prices shall be considered to be in conformity with the provisions of this paragraph.' 5. Direct payments to producers Support provided through direct payments (or revenue foregone, including payments in kind) to producers for which exemption from reduction commitments is claimed shall meet the basic criteria set out in paragraph 1 above, plus specific criteria applying to individual types of direct payment as set out in paragraphs 6 through 13 below. [...] 6. Decoupled income support (a) Eligibility for such payments shall be determined by clearly-defined criteria such as income, status as a producer or landowner, factor use or production level in a defined and fixed base period. (b) The amount of such payments in any given year shall not be related to, or based on, the type or volume of production (including livestock units) undertaken by the producer in any year after the base period. (c) The amount of such payments in any given year shall not be related to, or based on, the prices, domestic or 'Decoupled' means that support has no relation to production. This innovation should provide governments the flexibility to ease the process of adjustment in agriculture as farmers continue to exit the sector.

27 190 Appendix Excerpts Commentary international, applying to any production undertaken in any year after the base period. (d) The amount of such payments in any given year shall not be related to, or based on, the factors of production employed in any year after the base period. (e) No production shall be required in order to receive such payments. 7. Government financial participation in income insurance and income safety-net programmes [...] 8. Payments (made either directly or by way of government financial participation in crop insurance schemes) for relief from natural disasters [...] 9. Structural adjustment assistance provided through producer retirement programmes. 10. Structural adjustment assistance provided through resource retirement programmes. 11. Structural adjustment assistance provided through investment aids (for restructuring). 12 Payments under environmental programmes. 13. Payments under regional assistance programmes. ANNEX 3 DOMESTIC SUPPORT: CALCULATION OF AGGREGATE MEASUREMENT OF SUPPORT Excerpts Commentary 1. Subject to the provisions of Definition of the Amber Box. Article 6, an Aggregate Measurement of Support (AMS) shall be calculated on a product-specific basis for each basic agricultural product receiving market price support, non-exempt direct payments, or any other subsidy not exempted from the reduction

28 The Agreement on Agriculture Excerpts commitment ('other non-exempt policies'). Support which is nonproduct specific shall be totalled into one non-product-specific AMS in total monetary terms. 2. Subsidies under paragraph 1 shall include both budgetary outlays and revenue foregone by governments or their agents. 3. Support at both the national and sub-national level shall be included. 4. Specific agricultural levies or fees paid by producers shall be deducted from the AMS. 5. The AMS calculated as outlined below for the base period shall constitute the base level for the implementation of the reduction commitment on domestic support. 6. For each basic agricultural product, a specific AMS shall be established, expressed in total monetary value terms. 7. The AMS shall be calculated as close as practicable to the point of first sale of the basic agricultural product concerned. Measures directed at agricultural processors shall be included to the extent that such measures benefit the producers of the basic agricultural products. 8. Market price support: market price support shall be calculated using the gap between a fixed external reference price and the applied administered price multiplied by the quantity of production eligible to receive the applied administered price. Budgetary payments made to maintain this gap, such as buying-in or storage costs, shall not be included in the AMS. 9. The fixed external reference price shall be based on the years 1986 to 1988 and shall generally be the average f.o.b. unit value for the basic agricultural product concerned in a Commentary This provision was important for the EU. By calculating in domestic currency with reference to a fixed past price, fluctuations in exchange rates and world prices will not affect producer expectations. This is the base period.

29 192 Appendix Excerpts Commentary net exporting country and the average c.i.f. unit value for the basic agricultural product concerned in a net importing country in the base period. The fixed reference price may be adjusted for quality differences as necessary. 10. Non-exempt direct payments: non-exempt direct payments which are dependent on a price gap shall be calculated either using the gap between the fixed reference price and the applied administered price multiplied by the quantity of production eligible to receive the administered price, or using budgetary outlays. 11. The fixed reference price shall be based on the years 1986 to 1988 and shall generally be the actual price used for determining payment rates. 12. Non-exempt direct payments which are based on factors other than price shall be measured using budgetary outlays. 13. Other non-exempt measures, including input subsidies and other measures such as marketing-cost reduction measures: the value of such measures shall be measured using government budgetary outlays or, where the use of budgetary outlays does not reflect the full extent of the subsidy concerned, the basis for calculating the subsidy shall be the gap between the price of the subsidized good or service and a representative market price for a similar good or service multiplied by the quantity of the good or service. ANNEX 4 DOMESTIC SUPPORT: CALCULATION OF EQUIVALENT MEASUREMENT OF SUPPORT [text of this annex deleted]

30 The Agreement on Agriculture 193 ANNEX 5 SPECIAL TREATMENT WITH RESPECT TO PARAGRAPH 2 OF ARTICLE 4 Excerpts Section A 1. The provisions of paragraph 2 of Article 4 shall not apply with effect from the entry into force of the WTO Agreement to any primary agricultural product and its worked and/or prepared products ('designated products') in respect of which the following conditions are complied with (herein after referred to as 'special treatment'): (a) imports of the designated products comprised less than 3 per cent of corresponding domestic consumption in the base period ('the base period'); (b) no export subsidies have been provided since the beginning of the base period for the designated products; (c) effective production-restricting measures are applied to the primary agricultural product; (d) such products are designated with the symbol 'ST-Annex 5' in Section I-B of Part I of a Member's Schedule annexed to the Marrakesh Protocol, as being subject to special treatment reflecting factors of nontrade concerns, such as food security and environmental protection; and (e) minimum access opportunities in respect of the designated products correspond, as specified in Section I-B of Part 1 of the Schedule of the Member concerned, to 4 per cent of base period domestic consumption of the designated products from the beginning of the first year of the implementation period and, thereafter, are increased by 0.8 per cent of corresponding domestic consumption in the base period per year for the remainder of the implementation period. Commentary Japan's 'rice clause' allows a delay in the impact of the agreement as it affects the domestic rice market. It contains detailed provisions providing for the snap-back to the reform programme later on. Rice imports had been effectively banned - and Japan had not been an exporter under any terms. 'Food security' is the standard justification for farm support policies. The minimum market access required in Article 4 varies from 3 per cent to 5 per cent. This provision requires 4 per cent for Japan, but it also implies a considerable increase in market access every year. Note that if Japan agrees to tariffy under paragraph 6 below, paragraph 2 below allows this annual increase in market access to be cut in half, providing some inducement to conform to the new rules.

31 194 Appendix Excerpts Commentary 2. At the beginning of any year of the implementation period a Member maycease to apply special treatment in respect of the designated products by complying with the provisions of paragraph 6. In such a case, the Member concerned shall maintain the minimum access opportunities already in effect at such time and increase the minimum access opportunities by 0.4 per cent of corresponding domestic consumption in the base period per year for the remainder of the implementation period.[...] 3. Any negotiation on the question of whether there can be a continuation of the special treatment as set out in paragraph 1 after the end of the implementation period shall be completed within the time-frame of the implementation period itself as a part of the negotiations set out in Article 20 of this Agreement, taking into account the factors of non-trade concerns. 4. If it is agreed as a result of the negotiation referred to in paragraph 3 that a Member may continue to apply the special treatment, such Member shall confer additional and acceptable concessions as determined in that negotiation. 5. [deleted] 6. Border measures other than ordinary customs duties maintained in respect of the designated products shall become subject to the provisions of paragraph 2 of Article 4 with effect from the beginning of the year in which the special treatment ceases to apply. Such products shall be subject to ordinary customs duties, which shall be bound in the Schedule of the Member concerned and applied, from the beginning of the year in which special treatment ceases and thereafter, at such rates as would have been The Rice Clause is linked to the continuation clause. There is evidently a price to be paid for continued failure to play by the same rules as everybody else. Provisions for tariffication and snap-back.

32 The Agreement on Agriculture 195 Excerpts applicable had a reduction of at least 15 per cent been implemented over the implementation period in equal annual installments. These duties shall be established on the basis of tariff equivalents to be calculated in accordance with the guidelines prescribed in the attachment hereto. Section B 7. The provisions of paragraph 2 of Article 4 shall also not apply with effect from the entry into force of the WTO Agreement to a primary agricultural product that is the predominant staple in the traditional diet of a developing country Member and in respect of which the following conditions, in addition to those specified in paragraph 1(a) through 1 (d), as they apply to the products concerned, are complied with: (a) [deleted! (b) appropriate market access opportunities have been provided for in other products under this Agreement. 8. [deleted] 9. If it is agreed as a result of the negotiation referred to in paragraph 8 that a Member may continue to apply the special treatment, such Member shall confer additional and acceptable concessions as determined in that negotiation. 10. In the event that special treatment under paragraph 7 is not to be continued beyond the 10th year following the beginning of the implementation period, the products concerned shall be subject to ordinary customs duties, established on the basis of a tariff equivalent to be calculated in accordance with the guidelines prescribed in the attachment hereto, which shall be bound in the Schedule of the Member concerned. In other respects, the provisions of paragraph 6 shall apply as modified by Commentary Korea's 'rice clause' allows a delay in the impact of the agreement as it affects the domestic rice market. It contains detailed provisions providing for the snap-back to the reform program later on. In comparison to Japan, this provision allows a longer period and follows slightly different principles. There will be a continuing increase in minimal access to the domestic rice market. Korea must otherwise be playing by the rules. There is evidently a price to be paid for continued failure to play by the same rules as everybody else. When the snap-back happens, there will be a special effort to ensure that there will be no water in the new tariffs, which implies that tariffication for Japan and Korea when it eventually happens might be more painful than if they had simply accepted the Agreement at the outset.

33 196 Appendix Excerpts Commentary the relevant special and differential treatment accorded to developing country Members under this Agreement. Attachment to Annex 5 Guidelines for the Calculation of Tariff Equivalents for the Specific Purpose Specified in Paragraphs 6 and 10 of this Annex [deleted] Ministerial Decisions and Declarations Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed And Net Food-Importing Developing Countries Excerpts 1. Ministers recognize that the progressive implementation of the results of the Uruguay Round as a whole will generate increasing opportunities for trade expansion and economic growth to the benefit of all participants. 2. Ministers recognize that during the reform programme leading to greater liberalization of trade in agriculture least-developed and net food-importing developing countries may experience negative effects in terms of the availability of adequate supplies of basic foodstuffs from external sources on reasonable terms and conditions, including short-term difficulties in financing normal levels of commercial imports of basic foodstuffs. 3. Ministers accordingly agree to establish appropriate mechanisms to ensure that the implementation of the results of the Uruguay Round on trade in agriculture does not adversely affect the availability of food aid at a level which is sufficient to continue to provide assistance in meeting the food Commentary The 'Ministers' in this case are from food importers, who recognize the view of OECD countries that everyone will be better off after the implementation of the reform programme. The 'Ministers' in this case are from food exporters, who recognize the worries of food importers that the full application of trade principles could hurt traditional recipients of food aid. The main undertaking is to keep these issues under review, but the principles of Article 10:4 will apply. The intent of the Decision seems to be to butress the FAO and other development oriented organizations.

34 The Agreement on Agriculture 197 Excerpts Commentary needs of developing countries, especially least-developed and net food-importing developing countries. To this end Ministers agree: (i) to review the level of food aid established periodically by the Committee on Food Aid under the Food Aid Convention 1986 and to initiate negotiations in the appropriate forum to establish a level of food aid commitments sufficient to meet the legitimate needs of developing countries during the reform programme; (ii) to adopt guidelines to ensure that an increasing proportion of basic foodstuffs is provided to leastdeveloped and net food-importing developing countries in fully grant form and/or on appropriate concessional terms in line with Article IV of the Food Aid Convention 1986; (iii) to give full consideration in the context of their aid programmes to requests for the provision of technical and financial assistance to leastdeveloped and net food-importing developing countries to improve their agricultural productivity and infrastructure. 4. Ministers further agree to ensure that any agreement relating to agricultural export credits makes appropriate provision for differential treatment in favour of least-developed and net food-importing developing countries. 5. Ministers recognize that as a result of the Uruguay Round certain developing countries may experience short-term difficulties in financing normal levels of commercial imports and that these countries may be eligible to draw on the resources of international financial institutions under existing facilities, The intent of this provision appears to be to ensure the use of the procedures available to decide what level of food aid is necessary, which means non-trade distorting.

35 198 Appendix Excerpts or such facilities as may be established, in the context of adjustment programmes, in order to address such financing difficulties. In this regard Ministers take note of paragraph 37 of the report of the Director-General to the CONTRACTING PARTIES to GATT 1947 on his consultations with the Managing Director of the International Monetary Fund and the President of the World Bank (MTN. GNG/NG14/W/35). 6. The provisions of this Decision will be subject to regular review by the Ministerial Conference, and the follow-up to this Decision shall be monitored, as appropriate, by the Committee on Agriculture. Commentary When Ministers come to review this provision, they may discover that the availability of food aid has been adversely affected by market developments, but not by the Agreement, precisely because the Agreement delivered less liberalization than expected.

36 Notes 1 It could be argued that agriculture has become so industrialized that it makes no sense to consider it as a separate sector. If that argument were accepted, it might limit potential explanations of why agriculture and industry appeared to have been treated separately in the GATT to a consideration of differential patterns of interest group representation, which is not the approach adopted in this book. The counter argument, which I adopt, is that the organization of farming, especially the social organization, differs from other sectors, as do the relations of farmers with the rest of society and the state, 2. The connections to the burgeoning literature on the relation between trade and war are obvious, but also too complex to detain us here. I discuss the question in Wolfe, forthcoming. 3. Polanyi was a central European Christian socialist (Polanyi-Levitt, 1990) and economic sociologist, one of the seminal contributors to this literature concerned with the historical trajectory of the capitalist system (Piore, 1996; Kindleberger, 1974). His work on anthropology, notably his analysis of the economy as an instituted process (Polanyi, 1957), is still widely influential. His critical analysis of the dehumanizing consequences of market liberalism has been taken up by the New Left, but his organic conception of society can also be seen as deeply conservative (Ruggie, 1995, p. 507), and his ideas still have appeal for Christian ethicists (Baum, 1996). He was arguably a theorist of international stability, though I use his work in a way that is unusual in the Polanyi literature (see, for example, Mendell and Salee, 1991). Other than Ruggie (1983), only Wallerstein, in his work on world systems theory, has considered Polanyi's normative interest in the basis for international order (Block and Somers, 1984, p. 73) or modern world history, although some aspects of his work have been used by other scholars in the field of International Political Economy (IPE) (for examples, seehettne, 1995). 4. I owe the graphic vector imagery to Charles Pentland, who had in mind both the neofunctionalism of Ernst Haas (e.g. The Uniting of Europe, 1958), and earlier pluralists, beginning with Arthur F. Bentley (e.g. The Process of Government, 1908). 5. Most scholars attribute the idea of issue-areas not to Haas but to Rosenau (Keohane, 1986b, p. 188; Pentland, 1973, pp ). Rosenau, who never contributed to the regime literature, was grappling with the interrelations of national and international 'political systems.' He argued that 4 the boundaries of political systems ought to be drawn vertically in terms of issue-areas as well as horizontally in terms of geographic areas' (Rosenau, 1966, p. 74). 6. My evidence pertains only to the governance of the global trading system. The extent to which embedded liberalism characterized the governance of the monetary system is a separate issue (Helleiner, 1994; Cerny, 1994). 199

37 Notes EU refers to the European Union, created in Nevertheless, for simplicity I use this term throughout, even when at the time, as in this instance, EC, referring to the European Community, would be more appropriate. This section was completed before the publication of Josling, Tangermann and Warley (1996). 'Distortion' when applied to trade means that the pattern of transaction flows will differ from one determined only in the market. It is in this sense that it is used in the 'domestic distortions' context. The term carries the implication that government interventions are inappropriate by definition. I use the term uncritically because it was used by the negotiators - see, for example, the first paragraph of the agricultural section of the Punta Declaration. I argue that the issue-area had become trade, making the trade regime the relevant focus for analysis, but few attempts have been made to use regime analysis on this set of issues, however they are aggregated. Hopkins has long argued for a food or a food aid regime (Hopkins and Puchala, 1978; Hopkins, 1992; Puchala and Hopkins, 1983). Cohn's knowledgeable survey of the issues at stake in the history of farm trade uses an explicitly theoretical regimes framework in which to compare the benefits to Canada of pursuing unilateral, bilateral, plurilateral, and multilateral approaches (Cohn, 1992). Marlin-Bennett shows how in the period considerable sectoral conflict led actors in a single food dispute to think themselves governed by different regimes (Marlin-Bennett, 1993, especially Chapter 6). Zacher refers to a 'commodity regime' (Zacher, 1987). Although McLin refers to a 'wheat regime' operating during the 1950s and 1960s, in my terms what he means is that the US/Canadian duopoly was a surrogate for a genuine multilateral regime - in the postwar period the FAO Committee on Surplus Disposal (CSD) played an important stabilization role in the absence of wheat agreements (McLin, 1979). Uvin tries to focus on hunger, but he finds himself having to analyze a shifting pattern of 'issue-areas' within the 'international food regime' or the development regime. He finds four at least: international assistance to family planning, structural adjustment, international food flows, and food trade/food aid. The trade regime dominates food flows, and there is no evidence that concerns for food security or hunger have had any influence on the evolution of the regime (Uvin, 1992; Uvin, 1994, pp , 119). Lumsdaine does not seem to spend much time on definitional issues, but he clearly thinks there is a foreign aid issue-area and that a foreign aid regime developed after World War II based on principles and values - a shared 'moral vision' of necessary and appropriate action. Lumsdaine has no index entry for food or food aid. In his view, evidently, it was not part of the developmentally oriented regime (Lumsdaine, 1993). An alternative to the regime concept in the domain of interest in this paper might be the idea of a 'food order'. From the standpoint of the regulation school, the issue is generally food, not the relations among states (Tubiana, 1989). The issue can also be the relations between agriculture and other sectors under a globalizing regime of capitalist accumulation (Le Heron, 1993; Whatmore, 1994). Friedmann develops what she explicitly sees as an alternative formulation to that of issue-area when she argues that 'Analysis may be simplified in a more useful way than

38 Notes 201 usual if we can understand the price of one commodity in relation to the international specialization, trade, and productive relations of that same commodity, including class politics affecting its production and consumption in various countries' (Friedmann, 1982, p. s254; see also Friedmann, 1995). Friedmann's food order might well simplify analysis, but it does so at the expense of including the participants' intersubjective understandings of the issue-area. Similarly, Murphy's use of an analogous concept, 'political economy issue areas,' offers considerable analytic insight, but only by sacrificing a focus on states in order to consider social conflict and the governance of a capitalist industrial economy as it grows across territories and societies. One of the conflicts to be managed is between industry and agriculture (Murphy, 1994) owe this insight to John Curtis. 12. Legal centralism argues that only lawyers and judges know what 'law' is and that only they are competent to know when something is 'fair' (see Arthurs, 1985). Arthurs traces the origins of this view to Dicey, but it is of course common in the American public choice view of government - politicians and bureaucrats being self-serving at best, 'administrative review' is needed to ensure that Leviathan does not get out of control. 13. Quotations are from the Chairman's texts as provided to the Press by Canada's Department of External Affairs on 8 April They were later incorporated in MTN.TNC/11 of 21 April Comparisons are to the text drafted before the Ministerial by the chair, Art de Zeuw of the Netherlands, Report by the Chairman of the Negotiating Group on Agriculture MTN.GNG/16, 30 November Article XII (Roman numeral) is a reference either to the GATT 1947 or to the GATT 1994, while Article 12 (Arabic numeral) is a reference to the Agreement on Agriculture. 15. It was not possible to evaluate the Singapore Ministerial Conference of December 1996 before completion of this manuscript.

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