By Peter L. Scher, Special Trade Ambassador
Office of the U.S. Trade Representative
"Agricultural trade ... is vital to the survival of producers around the world," says Scher. "The Uruguay Round prepared the field and the teams to move agricultural trade toward a market-based system. The new round of negotiations provides the chance for the world's players to score."
A successful outcome at the November 30-December 3, 1999, World Trade Organization negotiations in Seattle will depend on broad support from all participating countries that recognize that there must be no delays to further agricultural trade liberalization, says Ambassador Peter Scher, responsible for bilateral and multilateral agriculture negotiations on behalf of the United States.
The American vision for trade continues to be that open, global markets are the best way to achieve societies' expectations of agriculture. As the world's largest agricultural producer, the United States has an obligation to ensure that the tremendous benefits of trade are compatible with other goals of our societies -- that U.S. consumers have a secure food supply at a reasonable cost without degradation of our land and other agricultural resources and ensuring a fair reward to our farmers and ranchers.
While the Uruguay Round made a good start -- more was done to liberalize agricultural trade and to bring agriculture into the system than in all previous Rounds combined -- we have to recognize that agriculture still has a long way to go to complete its reform and to be fully integrated into the world trading system.
Prior to the Uruguay Round, agricultural trading rules were not in concert with other sectors. The Uruguay Round Agreement on Agriculture (URAA) made good first steps toward bringing agriculture into conformity with international trade rules governing other goods, but much remains to be done. The United States is one of many countries with fairly ambitious aims for the new WTO agriculture negotiations. We are engaged in extensive consultations with agricultural trade interests to develop goals for the negotiations, and we are an active player as the WTO membership works this year to establish the agenda, scope, content and timetables of the new round of WTO negotiations beginning at the end of November in Seattle, Washington.
The Uruguay Round, of course, required certain reductions in trade-distorting measures, and the implementation of those reforms has proceeded very well. Two other legacies of the Uruguay Round are very important for the new negotiations -- a mandate to continue what was begun, and, second, a structure for achieving liberalization. The WTO's "built-in" agenda includes agriculture. It was recognized from the outset that the first period of reform that we are still implementing was only a down payment.
In addition to the commitment to continue negotiations, the URAA -- focusing on export subsidies, market access and domestic support -- established a structure on which to build. Establishing a three-pillar structure was the most time-consuming undertaking in the Round. Fortunately, we do not need to reinvent that wheel. The structure of the rules provides a logical approach for the negotiations, one on which most seem to agree we should keep and build.
Export Competition
Export subsidies are an illegitimate policy instrument, a symptom of a systemic imbalance in a nation's agricultural policies, the costs of which are borne by others. The costs of domestic policy choices should be borne by the country that chooses them, not foisted onto its trading partners by subsidizing exports. The Uruguay Round made a start at eliminating agricultural export subsidies: 36 percent reduction of budget expenditures on export subsidies and 21 percent reduction of quantities over a six-year implementation period. With experience to show that markets adapt, we should now be able to improve the pace of export subsidy reductions and eliminate the export subsidy scourge from agricultural trade. Export subsidies are not allowed in the WTO rules for any other industry. Their use constitutes a source of trade distortion and degradation to the environment, and there is no valid reason to keep them any longer.
Market Access
The Uruguay Round progress on market access leaves much to be done. It left tariffs too high, and it did not create much new market access. The average non-agricultural tariff is now 4 percent, while the average agricultural tariff is over 40 percent, and tariffs on some products exceed 300 percent. With a few exceptions, non-tariff barriers were converted to tariffs, and members were required to open up at least a small minimum access -- 3 percent of domestic consumption initially and growing to 5 percent by the end of the adjustment period -- under tariff rate quotas.
The stage has been set for real reforms. Let access continue to grow and let all tariffs be reduced to a negotiated maximum level by the end of the transition period. In addition, an examination of the administration of tariff rate quotas should lead to transparent and open systems.
Many WTO members note that importers were required to change non-tariff barriers to tariffs and grant access, while no reciprocal disciplines were imposed on export restraints of exporting countries. Net food importing countries should be able to expect that if they open their border to international markets, those international markets will deliver supplies as reliably to importers as to the domestic markets of exporters. Willingness on the part of leading exporting members to discipline export controls will reassure "food security" countries that expanding market access is not risky.
Domestic Support
The Aggregate Measure of Support was a success as a component of the Agreement on Agriculture and the insistence on reducing trade-distorting measures. The drive toward decoupled support ("green box") is the key. By the end of 1996, the United States had largely decoupled farm programs so that payments to farmers were not linked to a requirement to produce. Other WTO members will also succeed in orienting their policies toward market signals. In the new round, further review and decreases in the aggregate measure of support will clearly lead to market-based agricultural trade.
A new buzzword that some countries are using to justify domestic support is "multifunctionality." It is a buzzword for what everybody in agriculture has known for thousands of years: agriculture serves other purposes besides producing food and fiber. But the real problem with the discussion of multifunctionality is not semantic. It is the confusion between policy goals and policy instruments. If the United States appears skeptical about the implications of multifunctionality for WTO rules, the U.S. objection is not multifunctionality as a factual matter. Each country chooses social objectives for themselves. But, there is no inherent connection between those objectives and trade-distorting agricultural policies.
Obviously WTO rules do not establish the priority of national social goals, but WTO rules do discipline the instruments employed in achieving goals. If non-trade concerns stem from deep social yearnings that must be dealt with in many societies, then the task will be to find ways to accommodate the social goals in decoupled ways that are compatible with free trade.
New Issues
While the Uruguay Round established effective disciplines in traditional problem areas, such disciplines have not yet been established in some new areas.
As monopolies, state trading enterprises (STEs) can distort trade, and they frequently operate behind a veil of secrecy. The agricultural trading system has much to gain from WTO disciplines on STEs, because they allow some countries to undercut exports based on open market transactions and restrict imports.
Biotechnology holds tremendous promise globally for food consumers, producers, and the environment. With the world's population growing by about 2 percent annually, there are 80 million more mouths to feed each year. Some countries threaten to adopt policies regarding the importation and planting of bioengineered crops and the labeling of products containing bioengineered foods that are not based on scientifically justified principles. If our farmers are to meet the challenge of feeding an ever-increasing population with a sustainable agricultural system, then they must have access to the new bioengineered varieties. We need to think about how the WTO can help facilitate this new technology.
Developing Countries
One of the critical components to a successful new round of negotiations will be the full participation of a substantially increased number of developing countries. Open trade in agriculture relieves farmers of developing countries of the burden imposed by protectionism and export subsidies while reducing hunger and offering reliable supplies of food at reasonable prices.
Conclusion
As we enter the 21st century, the opportunities to enhance exports of food and agricultural products are endless. With 96 percent of U.S. customers living outside the United States, the importance of a liberalized agricultural trading system is vital to U.S. farmers and ranchers. Agricultural trade, however, is vital to the survival of producers around the world. The Uruguay Round prepared the field and the teams to move agricultural trade towards a market-based system. The new round of negotiations provides the chance for the world's players to score.
Economic Perspectives
USIA Electronic Journal, Vol. 4, No. 2, May 1999