Tough talk, tougher targets
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CTA. 2002. Tough talk, tougher targets. Spore 101. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/47686
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore101.pdf
With the Cotonou Agreement having to be shoe-horned into the rules of the World Trade Organisation (WTO), it s hard for ACP countries to know which way to turn. They have to unravel complex topics, forge negotiating strategies and harmonise their...
With the Cotonou Agreement having to be shoe-horned into the rules of the World Trade Organisation (WTO), it s hard for ACP countries to know which way to turn. They have to unravel complex topics, forge negotiating strategies and harmonise their positions. A lot is at stake, no less than their producers share of internal and world markets. A guide to the rules of engagement. For most ACP countries, agricultural trade is vital: it is still the main source of foreign currency, although its share of world trade has shrunk continuously over the past three decades. Whereas 30 years ago, the European Union the major customer of ACP countries sourced 8% of imports from them, now it is a mere 3%. This is despite the system of preferences which the EU has been giving to imports from ACP countries, in the form of lower import duties than those imposed on non-ACP countries. What lies behind this shrinking market share? Simple enough: world prices have followed a downward trend for ages, as has world demand for primary products. Against this background, almost three quarters of the agricultural exports of ACP countries are made up of just 10 primary products. Top of the list is the trio of tropical drinks (cocoa, coffee and tea) which represent about 32% of Africa s gricultural exports; for the Caribbean and Pacific regions, with cotton and tobacco accounting for 19%; sugar accounts for 13% of the exports of the Caribbean and Pacific regions. At the same time, ACP countries have not been able to take full advantage of the commercial preferences granted to them; most have even become net importers of food products. Free trade, free competition This was the situation facing ACP countries when the liberalisation of world trade in agricultural products got underway in the 1990s. In 1994, the WTO s Agreement on Agriculture (AoA) was signed at the end of the Uruguay Round which had regulated world trade. It required, for the first time, that countries remove such trade barriers as quotas and import restrictions, as well as reduce customs duties, internal support mechanisms and subsidies on agricultural exports (see box on Uruguay round). From the perspective of ACP countries, what were the consequences? Before the AoA was implemented, it had been predicted that ACP countries would meet stiff competition in the world market and see net losses in export earnings of 1.3% in 2001 and 1.7% in 2005. In the European market, they were to see, from 1996 to 2000, a reduction of 16% of the preferential margin they had enjoyed, this being the difference between the level of customs duties on their products (often set at 0%) and on products from non-ACP countries. This erosion of the margin covered tropical drinks and beef mainly. No assessment has been made of the actual effects since the AoA came into force. Some case studies have, however, pointed to a deterioration of developing countries agricultural trade. Furthermore, buffeted by sudden shifts in world prices and by growth in imports, they have been hard put to keep their domestic markets stable. In September 2002, the EU and the Group of ACP countries started to negotiate new Economic Partnership Agreements (EPA) which will radically change their trading relations. The nub is that, to be compatible with the WTO, the EPAs are introducing the principle of reciprocity. This means that products from the EU will enjoy the same low or zero-level duties in ACP markets as ACP products will in the European market. For ACP countries to open up their markets in this way could well lead to a loss of customs revenue and increased competition between domestic and European producers in their national markets. Parallel to these ACP-EU discussions, negotiations have resumed in the WTO. There, each time the EU lowers or removes its trade barriers to conform to the multilateral framework, the relative value of EU preferences for ACP countries is eroded. The same rules for everyone? When the first 6-year period of the AoA ended in 2000, new negotiations began in the WTO to continue the reduction of customs duties, internal support and export subsidies. The goals of the negotiations were agreed at the Ministerial Conference held in Doha, Qatar, in November 2001. During the first phase of the WTO negotiations, from February 2000 to November 2001, two tendencies emerged. One group of countries, led by the United States of America, wanted to apply the same trading rules to agriculture as to other sectors. Another group (EU, Japan, Norway) felt that agriculture should enjoy certain exceptions in view of the value of its non-trading aspects, particularly with regard to rural development and the environment. As for the developing countries, their prime wish was to have a more effective arrangement for Special and Differentiated Treatment (SDT) which is an integral part of the AoA. In the area of food security, for example, they could be exempt from reductions on certain products; this is the so-called proposed development box . They also want better access to developed country markets so as to benefit more from the opportunities of liberalised trade. This would require eliminating the highest trade tariffs ( peak tariffs ) and using progressive duties whereby higher rates are applied to processed goods than to primary or raw materials. The 54 ACP country members of the WTO were spread around in various working groups in these negotiations. The African group pushed for the SDT to be extended to non-trade issues such as lower customs duties for the least-developed countries, and more technical and financial assistance. Mauritius and the Caribbean countries, forming the group of small island developing states, emphasised their geographical vulnerability and pushed for exemption from their obligations in the event of a natural disaster. The discussions on SDT and non-trade issues grew more intensive when the second phase of the negotiations started in February 2002. The developed countries and some developing countries want to avoid any semblance of a two-track agreement, and to apply the same basic rules to all members, with some more flexible transitional measures for developing countries. The area of non-trade issues is more fraught with difficulty: should they hold solely for developing countries or should they, as proposed by the EU, Japan and Norway, also apply to developing countries? And how should they be handled? The general line seems to be that they should be discussed within a redefined green box . Care would have to be taken to ensure that the non-trade concerns of some do not become the trade concerns of others. The third and final phase of the negotiations, surely the most difficult, is to put figures to these discussions and draw up specific rules. These will be needed for setting out the initial lists of commitments by WTO member states in March 2003. Choosing a strategy The special space wanted by ACP countries is to be able to have clearly defined objectives and more help in becoming integrated. They have to negotiate with the WTO whilst keeping their aim firmly on the EU. They need better access to agricultural and thus European markets for those products which currently attract high duties and have good export potential (such as temperate zone products). The crux of the matter is that, at the multilateral level, more openings to the European market mean more competition from non-ACP countries. In addition, given the vulnerability of their agriculture to external forces, the ACP countries need more flexibility within the SDT. That flexibility should include longer periods of transition to the new agreements and, in the case of so-called sensitive areas such as staple food crops, case-by-case protection. [caption to illustrations] Far from the geopolitics of world trade, unseen and unheard on the trading floors of commodity exchanges, producers and small traders feel the pinch when all they want to feel are a few more pennies in their pocket.