The Uruguay Round Agreement on Agriculture (URAA) calls for the initiation of negotiations for continuing the process of agricultural trade reform in 1999. Article 20 of the agreement states that member countries of the World Trade Organization (WTO) recognize that the long-term objective of substantial progressive reductions in trade-distorting support and protection of agriculture resulting in fundamental reforms is an ongoing process. The 1999 agricultural negotiations set to begin November 30 in Seattle, Washington, are part of the built-in agenda of the WTO. The starting point for this year's formal agenda, yet to be developed, begins with the URAA. Here, then, is a summary of the URAA and the Agreement on the Application of Sanitary and Phytosanitary Measures.
The Uruguay Round Agreement on Agriculture, which entered into force in 1995 along with other Uruguay Round accords, including the agreement to establish the World Trade Organization, was an important step toward applying multilateral rules and disciplines to global agricultural trade. Most assessments of the agreement hail it as a historic shift in the way agriculture is dealt with in multilateral trade agreements. The agreement establishes new multilateral rules governing market access, export subsidies, and domestic support for agriculture. In terms of future trade liberalization, its most important provisions may be those requiring the elimination of quantitative trade restrictions and their conversion to bound tariffs. These bound tariffs, even if some of them are extremely high, can provide a starting point for future negotiations of tariff reductions.
Market Access
The agreement requires all WTO members to convert nontariff trade barriers to tariffs and to reduce them by a simple average of 36 percent over six years (with a minimum tariff reduction per tariff line of 15 percent). The agreement prohibits the introduction of new nontariff barriers to trade. Where nontariff barriers restrict imports, the agreement requires that importing countries offer minimum access of usually 3 percent of consumption rising to 5 percent over the six-year implementation period for the agreement. Under the terms of the agreement, the United States converted quantitative restrictions such as its Section 22 import quotas to tariff-rate equivalents (TRQs). Similarly, the agreement requires the EU to convert its variable levies for agricultural imports to TRQs.
Most assessments of the agreement conclude that it provides little in the way of expanded access for agricultural products. Its importance lies in extending the principle (already applied to trade in industrial products) of protection by bound tariffs to agricultural trade and establishing at least a base for further tariff reductions in future negotiations.
Export Subsidies
The agreement requires that export subsidies be reduced by 21 percent in terms of quantities and by 36 percent in terms of budgetary outlays by the end of the six-year implementation period. WTO members may continue to use their existing export subsidies within the limits established, but may not introduce any new export subsidies. Both the United States and the EU must now operate their respective export subsidy programs in conformity with the export subsidy reduction commitments of the agreement.
Domestic Support
The agreement also includes rules and commitments for domestic support. Domestic subsidies are to be cut by 20 percent from average levels of support aggregated across all commodities for the base period 1986-88. Support reduction commitments are also to be made over the six-year implementation period on the basis of this aggregate measure of support (AMS). Since U.S. and EU support spending was well under the agreement's limits, no reductions in support were required.
Trade policy experts contend that the rules established for domestic support policies are more important than the reduction commitments required. The agreement defines which domestic policies are permitted ("green box" policies), such as income support provided to farmers independently of participation in production-limiting programs, advisory services, or domestic food assistance. Policies that are not eligible for the green box are automatically prohibited ("amber box" policies). U.S. deficiency payments as provided in the 1990 farm bill and EU compensatory payments as provided by the 1992 Common Agricultural Policy (CAP) reforms were excluded from the calculation of the AMS and put into a "blue box" of excluded programs. The 1996 farm bill, which more completely decouples U.S. farm support, effectively removes U.S. support from the blue box, leaving there only the EU's compensatory payments.
Sanitary And Phytosanitary Measures
An Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures reaffirms the right of WTO members to adopt and enforce measures that they deem appropriate to protect human, animal, or plant life or health as long as such measures are not applied in an "arbitrary and unjustified" manner. The agreement states that such measures may not be used as disguised barriers to trade. SPS measures may be based on international standards where they exist. WTO members could impose higher standards than those derived from these sources if based on scientific justification and risk assessment. All WTO members agree to recognize the equivalence of different standards that result in a comparable level of SPS protection. Dispute settlement panels should seek advice from relevant international organizations when scientific or technical matters are at issue.
The SPS Agreement, though binding on WTO members, is stated in broad language. Specifics will come from interpretation of the agreement and adjudication of sanitary and phytosanitary issues in WTO dispute settlement.
Dispute Settlement
New and strengthened dispute settlement procedures agreed to as part of the Uruguay Round also apply to disputes that may arise under either the Agreement on Agriculture or the SPS Agreement. An important change in WTO dispute settlement procedures is the elimination of a member's right to veto a dispute panel's decision and effectively block implementation of the panel's recommendations for resolving the dispute. Potentially this strengthens the ability of the WTO to enforce panel judgments. The right of WTO members to negotiate compensation rather than change its challenged policies remains in place, however.__________
This article was adapted from a Congressional Research Service report for Congress, Agriculture in the Next Round of Multilateral Trade Negotiations, by Charles E. Hanrahan, senior specialist in agricultural policy in the Environment and Natural Resources Policy Division, March 13, 1998.
Economic Perspectives
USIA Electronic Journal, Vol. 4, No. 2, May 1999