PROCEEDINGS No. 5

of theAgricultural Policy Forum

on

WTO Negotiations on Agriculture: Implications for Developing Countries

held in Damascus on October 12, 2002

With the support of

Project GCP/SYR/006/ITA – Phase II

Proceedings No.5-WTO. Negotiations on Agriculture: Implications for Developing Countries

Introduction

As part of the Agricultural Policy Forum promoted by the National Agricultural Policy Centre (NAPC) with the support of the Project GCP/SYR/006/ITA-Phase II1, a seminar on “WTO Negotiations on Agriculture: Implications for Developing Countries” was held in Damascus on October 12, 2002. The Agricultural Policy Forum aims at promoting the debate on agricultural policy issues among national and international experts, stakeholders and policy makers, in order to provide technical background for the policy making process, and to obtain suggestions for NAPC research and policy advice activities.

The seminar was introduced by Mr. A. El Hindi, director of the NAPC, who welcomed the guests and thanked them for their participation, especially Mr. Mahmoud Taher, the FAO representative in Syria, and Mr. Andrea Cascone, the Commercial Counsellor of the Italian Embassy (see Annex 1 for a comprehensive list of participants). Mr. Hindi briefly presented the activities carried out by the NAPC with the support of the Project GCP/SYR/006/ITA-Phase II. Mr. El Hindy highlighted the role of the Policy Forum initiative in stimulating the debate and gathering opinions on agricultural policy issues and priorities for Syrian agricultural policy making, and introduced the lecturer, Dr. Hag Elamin Nasredin, FAO-ESCP (Rome), and the two invited discussants Dr. M. Gassan Habash, deputy Minister of Economy and Dr. M. Tawfeek Sammak, economist.

Summary of the invited interventions

Mr. Nasredin Hag Elamin started his lecture by highlighting that the Uruguay Round was a turning point in the evolution of agricultural policy, as for the first time a large majority of countries agreed on a set of principles and disciplines to reduce trade distortions caused by agricultural policies. He indicated that the focus of the lecture was on the assessment of the experience of the WTO member countries with the implementation of the Uruguay Round Agreement on Agriculture (AoA) since 1995, and on the major agriculture-related issues in the WTO Ministerial Conference at Doha and the on-going WTO negotiations on agriculture.

Concerning the experience with the implementation of the AoA and its impacts on policies and trade, the lecturer stressed that it is difficult to identify winners and losers because of the relatively small policy changes that have occurred and the variety of market and policy impacts that have affected global commodity prices and trade since the AoA implementation began. However, he drew some conclusions looking at the changes implied by the AoA, in isolation from the other factors that have influenced markets, as follows:

There have been only small reductions in the levels of production and trade-distorting support and protection provided by the OECD countries, and in many cases underlying market factors have obscured the effects of these small policy changes. Nevertheless, the AoA has established a framework for the further reduction in distorting supports and protection to agriculture which would be expected to benefit non-subsidized farmers in developing countries and elsewhere.

Although the food import bills for low-income food-deficit developing countries (LIFDCs) rose sharply in the first few years of implementation, along with the spike in commodity prices, they have since declined.

11 The Project GCP/SYR/006/ITA-Phase II “Assistance for Capacity Building through Enhancing Operation of the NAPC” is funded by the Italian Government and executed by the Food and Agriculture Organization (FAO) of the United Nations in close cooperation with the Syrian Ministry of Agriculture and Agrarian Reform (MAAR).

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Exporters of temperate-zone products have seen some improvement in market access (particularly through TRQ allocations) and some disciplines on domestic support policies and on export subsidies (particularly, dairy products and beef). However, the gains have been limited.

Exporters under preferential trade arrangements have experienced an erosion of the value of these preferences as general tariffs have come down. This erosion has been small thus far, but this is an issue of concern for the future as further cuts in general tariffs are implemented. On the other hand those countries that did not enjoy preferential access to major markets have seen a modest benefit.

Mr. Elamin indicated that some developing countries have experienced import surges (in some cases due to subsidized exports) in various products, which have reportedly damaged their import-competing sectors. Many developing countries have raised tariffs to protect their producers (within their bound rates) in response to the sharp declines in many commodity prices since the peaks of 1995-96. In the absence of alternative appropriate safeguard measures, some countries have found it difficult to live with a tariff-only regime and many are reluctant to accept further cuts in tariffs.

The lecturer referred to the Sanitary and Phyto-Sanitary (SPS) measures and to the Technical Barriers to Trade (TBT) indicating that, as traditional market access barriers are lowered, developing countries have expressed concern regarding the potential of SPS and TBT measures to restrict their exports. Their concern is two-fold: first, that they lack the technical and financial capacity to fully participate in activities of international standard-setting bodies such as the Codex Alimentary Commission (CAC) and the International Plant Protection Convention (IPPC), and, second, that they lack the supply-side capacity to meet the increasingly strict standards being adopted by the industrial countries.

Mr. Elamin discussed the Agreement on Trade Related Intellectual Property Rights (TRIPS) pointing out that the main aspect of this Agreement relevant to agriculture is the requirement to provide protection by intellectual property rights to plant varieties. Many countries, particularly, the developing countries have been facing two sets of difficulties in this area: the lacking scientific capability to innovate so to benefit really benefit from the Agreement, and inadequate institutional setting and managerial expertise to implement the IPRs as a tool for development.

In the second part of his presentation, Mr. Elamin discussed the Fourth World Trade Organization (WTO) Ministerial Conference held in Doha, Qatar from 9 to 14 November 2001. In this occasion, the WTO Members agreed to undertake “comprehensive negotiations aimed at: substantial improvements in market access; reductions, with a view of phasing out, of all forms of export subsidies; and substantial reductions in trade-distorting domestic support”. Special and differential treatment is to be provided for developing countries to enable them to take account effectively of their development needs, including food security and rural development. Non-trade concerns are to be taken into account. Modalities for the further commitments are to be established no later than 31 March 2003 and comprehensive draft Schedules of Commitments based on these modalities submitted no later than the date of the Fifth Session of the WTO Ministerial Conference (which must be held before the end of 2003). The negotiations on agriculture have to be concluded as part and at the date of conclusion of the negotiating agenda of the round as a whole. The lecturer mentioned that about 44 proposals have been submitted in the current round of negotiations on agriculture. Developing countries proposal call for leveling of the playing field between developed and developing countries and for more operationally effective special and differential treatment for developing countries.

Mr. Elamin ended his lecture noting that for Syria there is a strong need to determine its future policy and commitments to capture the potential benefits expected from further integration in international trade.

Opening the discussion on the lecture, Mr. M. Gassan Habash thanked Mr. Elamin for the comprehensive presentation and for the occasion to discuss on an issue of special interest to Syria. He stated that trade liberalization has a good impact on the economy in terms of price reduction, but it

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needs specialization and efficiency to gain the capacity to compete and to attract investments. Referring to the classical economist David Ricardo, Mr Habash, made a point on the fact that each country has come kind of comparative advantage. In this sense, even though large countries economies can benefits more from trade, there is no reason to fear from engaging in trade with them. Historical experiences demonstrated that even very small countries can benefit from trade and increased economic integration, while the economic cost of isolation is evident for in the economies that followed this economic pattern. Accordingly, participating in international trade is economically advantageous for all countries, and the decision to participate in multilateral trade agreements like the GATT is determined by political and economic motivations.

Mr. Habash stressed that Syria, before withdrawing, had been one of the 23 founding members of the GATT and that now should join the WTO to avoid the risks deriving form economic isolation and to capture the potential gains of enhanced integration in international trade. Indeed, Syria enjoys comparative advantages in many products and can compete in the international market. In particular, the availability of cheep labour can constitute a valuable advantage. He added that the risk of falling tariff revenues is not an argument against joining WTO as the members are not asked to eliminate all tariffs, but only to provide full information on protection measure and to implement full tariffication and, thereafter, a certain level of tariff reduction. He also noticed that the argument of infant industry cannot be used to justification for endless protection to domestic industries. On the contrary, by opening to international markets, domestic industries can exploit economy of scale deriving from participating in larger markets. They are also compelled to improve qualities of their products and to reduce production costs to the benefits for domestic consumers. Thereafter Mr. Habash identified the requirements for Syria to enter GATT as follows:

- Convert non tariff restrictions to trade into tariffs and eliminate all other trade barriers;

- Reform the taxation system so to allow Syrian industries to be competitiveness with their closer competitors, such as Lebanon, that benefit from lower taxation levels;

- Review investment laws, complete the exchange rate unification and eliminate controls on hard currency use, so to encourage foreign investors;

- Protect the intellectual property rights;

- Liberalize the service sector, which is essential for effective participation in international trade and can significantly contribute to employment.

In conclusion, and with specific reference to the agricultural sector, Mr. Habash stressed the need for policies able to promote productions that enjoy comparative advantages. In this regard he stressed the need to re-consider a number of issues such as the real need to keep subsidizing both producers and consumers; the net benefits of expanding the production of water consuming crops like cotton and wheat; the benefits of keeping expanding olive plantation with the existing oil surplus that needs to be exported. He also stressed the need to conclude trade agreements able to provide preferential access to markets characterized by higher prices.

Mr. Sammak opened his intervention by describing the concept of trade liberalization as “a world without trade barriers”. He said that the advocates of this concept look at trade liberalization as means for more efficient trade flow which, in turn, leads to better living standards and use of production potentials.

Turning his attention to the role of WTO, Mr. Sammak briefly recalled the history of the agreement to highlight the importance of participating in WTO as in all other international organizations. He also highlighted that 15 Arab countries are already members of the WTO or have applied for membership and are negotiating their membership, whereas the list of non members includes 7 Arab counties: Syria, that has applied for membership in October 2001, Iraq, Libya, Djibouti, Moon Island, and Somalia. He pointed out that Syria was among the countries that founded GATT in 1947, but it withdrew in 1951 because of the accession of Israel. However, after the Uruguay Round Syria has lost

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the chance given to former GATT members to resume their membership and has applied now for WTO membership based on the provisions of Article 12.

In conclusion, Mr. Sammak referred to the WTO as one of the faces of globalisation and that Syria, together with the other southern countries, have three options: i) challenging this force which is a losing battle due to the imbalanced forces; ii) isolation which has unpredictable consequences; and iii) adaptation which doesn’t mean taking things for granted, but dealing with the situation hoping that the balance of forces will change and better conditions can be created.

Summary of Debate

The three invited interventions were followed by an animate debate that can be summarized according to the following main points raised by the audience and commented by the speakers.

1. The process and the constraints that Syria will face to enter GATT

WTO membership is open to all countries. First, an application is to be submitted to the WTO for review and acceptance by the General Council, which will then establish a “working party” for accesssion of the specific country. The applicant country has to provide full details on its economic policies and foreign trade regime. This will be followed by bilateral market access negotiations on goods and services, as well as other terms of accession. As result of this process the applicant country, e.g. Syria, often would be required to present its initial offer in terms of a schedule including all proposed commitments, to be negotiated bilaterally with interested WTO members.. The participants generally felt that Syria faces several challenges in its effort to complete its accession to the WTO. First, technical skills are required for effective negotiations. Indeed, adequately trained technical support to the negotiators is needed to prepare and assess alternative negotiating proposals, which should be based on the country’s long-term strategy for food security and agricultural development and should draw from the experiences of other WTO member countries of comparable economic situation. Second, there is a need to provide precise information of current policy, including the estimation of the amount of past and current support to agriculture. This requires full coordination between all Ministries and other relevant institutions and it is also related to the technical skills in negotiating commitments that will serve the long-term interest of the country. Third, in preparing and negotiating commitments the Syrian negotiators would need to bear in mind the need for more flexibility in future policy making regarding protection and support in the Syrian agriculture and to leave adequate room for maneuver in future negotiations within the WTO.

2. The provision on multinational companies in WTO

All the agreements signed under the GATT emphasize the role of government policies rather than private companies, including multinationals. However, it is often not governments that trade but traders and transnational companies. Participants raised the concern that only a handful of large transnational companies today are controlling the bulk of the food and agricultural trade and that they influence prices, production, marketing and distribution of gains. Several studies have highlighted and suggested that the AoA should be revised to take this issue into account by at least considering issues relating to competition in agricultural markets.

3. Environmental related issues in the WTO agreement.

There is no single agreement in the WTO that deals with environmental issues. However, Article XX of the GATT gives WTO member countries the right to take measures to protect the environment. In the AoA, environment payments are allowed under the Green Box exemptions. Environment related

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issues, however, are becoming more important now with the launching negotiations on trade and the environment as mandated by Doha Ministerial Conference in November 2001.

4. Subsidies to Syrian farmers compared to domestic production costs and to subsidies provided in various forms by developed countries.

It was clarified that under the GATT production subsidies refer essentially to the difference between prices received by the farmers and world market prices, rather than to the relationship between domestic cost of production and prices. This implies that if domestic costs are high the focus should be on reducing them, rather than increasing domestic prices. It was also noticed that subsidizing farmers to produce an export crop, part of the benefit will be captured by the consumers in the importing country, while the subsidizing government will bear the cost. In other words a transfer form government budget to foreign consumers will take place. This calls for proper targeting of domestic support to producers. Similarly, on the consumer side, subsidies should be targeted to poor consumers in order to avoid high budgetary costs and benefits spillover on rich consumers. Expensive interventions, like export subsidies, are affordable for rich countries but not for developing countries, whose consumers can even benefit from this type of subsidies. However, it must be recognized that developed countries’ support policies depress international market prices with negative effects for producers in developing countries. WTO can and should actively contribute in mitigating this unfair competition as well as in improving access of developing countries’ agricultural products to the developed country markets.

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Annex 1 - List of Participants

Agricultural Chambers' FederationAl Alou Mohammed, President

Al Thawra DailyMalouf, Fawsi, Journalist

Embassy of ItalyCascone, Andrea

Food and Agriculture OrganizationTaher, Mahmoud, FAO Representative Zahoueh, Salim, National Professional Officer

Ministry of EnvironmentBagdash, Rafik, Natural Resources Dept.Saad, Mayada, Agriculture Engineer

Ministry of IrrigationAl Agawany, Ehssan, Deputy Director, Technical Affaires Dept.

State Planning CommissionTourk, Farid, Directors' AssistantAl Jawabra,Tareq, AgronomistEzhelly, Mounir, Director of Agriculture Planning

Syrian TelevisionMourshed, Kaled, Editor

Adan, Sahar, EditorMouhamad, Ali, PhotographerMouhamad, Yaser, PhotographerAlali, Dathar, Photographer

Tishreen DailyHamdan, Hany, Journalist

University of Damascus, Faculty of AgricultureYassin, Mahmoud,ProfessorAbd Al assis, Ali, Professor

Houmsy, Aeham, ProfessorSyria Times Daily

Fateh,Tamador, JournalistSyrian Arab News Agency (SANA)

Esmail, Rafif, JournalistJdid, Samer, JournalistAl Moutem, Ahmad, Photographer

Ministry of agriculture and Agrarian ReformAl Bahra, Mohammad Ehsan, Deputy Director ,Ali Al Ali ProjectAl Dihnee, Mouhamad Fouad, General Establishment for FeedAl Gadban, Ali, General Establishment for PoultryAl Kabas, Mouhamad Nazir, Agricultural economics Dept.Al Kateb, Mouhamad Marwan, Agricultural Affairs Dept.Al Salaim, Oubed, Agricultural Affairs Dept.Al Shawwa, Haitham, Extension Dept.Al Madany, Abdulhamid, Agricultural Economics Dept.Assaf, Saed, Deputy Director, Ali Al Ali ProjectEisso, Adnan, Director, Ali Al Ali ProjectHusni, Wafica,National Agricultural Policy Centerkatana, Hasan, Agricultural Economics Dept.Khouri, Sahar, Ali Al Ali ProjectMalab, Carolin, Press OfficeMansour, Fayez, General Commission for Agricultural Scientific ResearchMansour, Antoon, Ali Al Ali Project

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�ٍSukkar, Lina, Agricultural Affairs Dept.

The seminar was also attended by 25 of the NAPC trainees

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Annex 2 – Slides of the presentation delivered by Mr. Elamin

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