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first time that the multilateral trade liberalizing process was applied to
agriculture was during the Uruguay Round of negotiations. There
were major concerns about the costs and distortions caused by protections
including border restrictions (tariffs or quotas), domestic subsidies and
export subsidies. To combat these problems a framework was put in place to
address the three areas of support to agriculture. These areas of support
are known as pillars. They deal with market access;
domestic support and export subsidies.
The
goal for the Uruguay Round was to reduce support under each pillar. This
was done with limited success. Reductions were made in each area but many
loopholes in the agreement allowed countries to remain highly subsidized,
market access gains were very limited and export subsidies were still
causing major distortions so overall, little was accomplished.
In
the Doha Round of negotiations a new framework agreement was reached in
July 2004. It covered all three pillars of support. The framework called
for substantial market access improvement for all products and stated that
tariffs would be reduced by a tiered formula, deep cuts to domestic
support would be implemented and there would be complete elimination of
export subsidies. Negotiations to establish modalities, (specific
numeric targets and associated rules) has been going on since
October 2004.
A
particular stumbling block to this process has been the Market
Access pillar. Work in
this area is going painfully slow. The issues are multifaceted and
extremely complicated. One area in particular should be of great concern
to everyone. It is the provision that allows Members to designate an
“appropriate” number of tariff lines as “sensitive”.
(Canada’s
sensitive products consist of dairy, eggs, and poultry meat.)
This would allow different reduction commitments to be placed on these
products as compared with “non-sensitive” products. The
sensitivity loophole is a serious flaw. Members would most likely
designate as “sensitive” those products with higher
tariffs, special safeguard provisions or with tariff rate quotas. These
of course are the products for which the most gains would be realized from
market access improvement!
Recommendations:
- Eliminate
or severely limit the number of “sensitive” tariff lines allowed
by each country.
- Push
for Canada to lead by example and demand tariff
reduction for all products and implementation of tariff caps.
- Push
for Canada to allow greater market access to our “sensitive
products.”
- Remind
Canada that 90% of agriculture in Canada depends on trade or is
directly associated with the export side
and the market access issue relates directly to each and everyone’s
bottom line. The idea of protecting 10% to the detriment of 90% is not
only unacceptable it is also economically unsound reasoning.
- Push
for Canada not to align itself with protectionist countries or
interfere with progress in the talks towards an ambitious outcome in
market access.
Under
the Domestic Support pillar the
WTO requires all its member countries to notify producer support given
each year to its farmers. (Page
5, Understanding WTO Notifications). The support given to farmers is broken down into three boxes:
Green
Box, Blue Box,
and Amber
Box.
There
are provisions for meaningful reductions in Total AMS (Aggregate
Measurement of Support). AMS is the monetary measurement of the
amount of trade distorting support that each country is allowed. The
tiered formula and the harmonization approach in domestic support
reduction will require the highest support providers to make the largest
reductions. This will go a long ways to leveling the playing field for
producers in Canada. (The major concern for farmers domestically is
to make sure what is left to them in subsidies is fairly applied to each
industry. One industry or one provincial program should not be allowed to
monopolize the domestic support available to all areas of agriculture.)
Green
Box:
In
order to qualify, green box subsidies must not distort trade, or at most
cause minimal distortion. They have to be government-funded (not by
charging consumers higher prices) and must not involve price support. They
tend to be programs that are not targeted at particular products, and
include direct income supports for farmers that are not related to (are
“decoupled” from) current production levels or prices. They also
include environmental protection and regional development programs. (Most
of Canada’s CAIS program could be housed here) Green Box AMS is
calculated but not included in Total AMS.
Blue
Box:
This
is the “amber box with conditions” designed to reduce distortion. Any
support that would normally be in the amber box is placed in the blue box
if the support also requires farmers to limit production. At present there
are no limits on spending on blue box subsidies. The framework agreement
limits the blue box to 5% of the value of production of all products for
each country. (Canada has never used the Blue Box and has no programs
to date that fit Blue Box criteria.) Blue Box AMS is calculated but
not included in Total AMS.
Amber
Box:
All
domestic support measures considered to distort production and trade (with
some exceptions) fall into the amber box. These include for example
measures to support prices, or subsidies directly related to production
quantities. The Amber Box is broken down into two parts: Product-Specific
AMS and Non-Product-Specific AMS.
Product-Specific
AMS: (This
is the area where market price support to dairy and direct government
support to individual products in Quebec’s ASRA program are notified. The
framework proposal calls for an overall reduction in AMS plus
product-specific caps. A low percentage/value of production cap on
product-specific AMS would ensure that one sector of agriculture or one
program does not receive the majority of the AMS. All support in the
Amber Box is calculated and included in Total AMS unless it is excluded
under the de minimis exemption.
De
Minimis
- policy support below a certain percentage of the value of production
that is exempt from discipline. Currently, government support
given a product-specific commodity is exempt from being included in
current total AMS if it is below 5% of the total production value of
that commodity. Here is an example: In 1999 the total
value of production of wheat across Canada was notified at $3.2
billion dollars. Canada notified direct support to wheat of
$61.3 million dollars but because the $61.3 million was only 2% of
the dollar value of production, wheat was exempt from
being included in total AMS under the de minimis exemption.
Non-Product-Specific
AMS: The de minimis exemption is also extended to
Non-Product-Specific AMS. In this category the total value of
production is taken on all commodities combined. Here is an
example: In 1999 the total value of production on all
commodities across Canada was notified to the WTO at $28.6
billion dollars. Canada notified all non-product-specific AMS at $932.5
million dollars but because this amount was only 3% of the dollar
value of production on all commodities combined across Canada, it
was excluded from total AMS under the de minimis exemption.
If
a WTO agreement is ratified the de minimis percentage is expected to be
cut from 5% to 2.5% in both product–specific and non-product specific
areas.
Recommendations:
- Push
Canada to support high overall cuts and a low percentage/value of
production cap on product-specific AMS. Attempts by Canada to preserve
the level of Market Price Support within AMS should not be at the cost
of an ambitious outcome.
- Push
Canada to support the reduction of the de minimis exemption.
- Encourage
Canada to continue to push for strict criteria on blue box support,
and stringent revision of the green box.
- Demand
that the CFA (Canadian Federation of Agriculture) stop insisting that
they speak on behalf of Western Canada when they push their policy to
the International Communities. Grains, oilseeds, cattle, pork, and
vegetable producers need to be much more vocal on the international
and national levels of the WTO trade talks. We need people from all
industries in Geneva, Beijing and Hong Kong.
The
third and final pillar is Export Subsidies. This is the most
ambitious provision of the Doha Framework because it calls for the
elimination of all export subsidies and subsidy elements of other forms of
export competition including export credits, food aid and export state
trading enterprises (STEs). The agreement would require Canada to abolish
the statuary financial privileges of the Canadian Wheat Board in areas
such as loan guarantees and underwriting of losses. The fate of the
monopoly power of the CWB would be decided in the next phase. Canada has
indicated that it will continue to defend the CWB but a large portion of
industry has been urging Canada not to block the opportunity of getting
export subsidies eliminated in this round and not to forfeit negotiating
leverage in other areas because of its intransigence on the issue of the
monopoly powers of the CWB.
Recommendations:
- Push
Canada to reaffirm its original negotiating position on the
elimination of all forms of export subsidies in the fastest possible
time.
- Encourage
Canada to neither waste negotiating energy nor jeopardize the
elimination of all forms of export subsidies by intransigence on the
monopoly power of the CWB.
- Push
Canada to be prepared to negotiate the export monopoly powers of the
CWB in return for substantial commitments in reduction of domestic
support and market access from our trading partners.
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