THE LEGAL REGIME FOR AGRICULTURAL TARIFFS AND SUBSIDIES AS A BARRIER TO WORLD TRADE LIBERALIZATION: A CASE FOR DOHA ROUND TRADE TALKS
BY
NTEGYEREIZE ALAUTERIO
05/U/1129
A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF A DEGREE OF BACHELOR OF LAWS OF MAKERERE UNIVERSITY, KAMPALA
JUNE 2009
DECLARATION
I, Ntegyereize Alauterio, declare that this dissertation is entirely an original product of my efforts and that has never been submitted to any institution for any academic ward, be it a diploma or a degree.
……………………………
NTEGYEREIZE ALAUTERIO
05/U/1129
Date………………………
……………………………
MR. ROBERT KIRUNDA
SUPERVISOR
Date…………………………
DEDICATION
In memory of my father the late Damazo Njunwoha, who, despite his unmatched efforts to educate me since my childhood could not live to witness my graduation. May his soul rest in eternal peace. I cannot forget my mother who bore and raised me.
Special dedications go to Mr. Nuwagaba Elias and Mr. Tugume Joseph for their brotherly, unfettered support during my career development. May the Lord reward them abundantly? This dissertation is also dedicated to my brothers and sisters who have relentlessly supported and encouraged my studies since my childhood.
Further dedication goes to my friends and discussion group-mates; Chris, Dixon, Jackie, Tabitha, Dorothy and Joselyn, for their good interaction has enabled me achieve this wonderful academic career. ACKNOWLEDGEMENT
This work is a result of combined efforts by different parties whose knowledge and commitment have enabled its compilation. I wish to sincerely acknowledge my parents, brothers, sisters, relatives for the facilitation they extended to me both financial and moral. Special thanks go to Mr. Kirunda Robert for his tireless effort, guidance and time forgone when he supervised the entire work.
I am highly indebted to all my friends, thanks for their respective efforts accorded to me in furtherance of the compilation of the dissertation.
My thanks also go to Professors Oloka and Barnacle for sparing the valuable time and shading more light on the problem of subsidies and tariffs in agricultural trade.
Finally, I acknowledge the authors and publishers of articles referred to in my work for their unselfishness when they uploaded their materials on the Internet and allowed me free access. Their efforts in promoting education are invaluable and therefore deserve appreciation. LIST OF ACROYNMS
ACP Countries - African, Carribean and Pacific Countries
AGOA - African Growth and Opportunity Act
AoA - The Agreement on Agriculture
C.I.F - Cost, Insurance and Freight
CEM - Commercial Export Milk Mechanism
COMESA - Common Market for Eastern and Southern Africa
CRS - Congress Research Service
DDA - Doha Development Agenda
EAC - East African Community
EC - European Community
EU - European Union
FSRI Act - Farm Security and Rural Investment Act
GATT - General Agreement on Trade and Tariffs
GDP - Gross Domestic Product
GSP - Generalized System of Preferences
ICTSD - International Centre for Trade and Sustainable Development
IDEAS Centre - International Trade Development, Economic Governance, Advisory Services Centre, Geneva, Switzerland
IMF - International Monetary Fund
LDCs - Less Developed Countries
NAMA - Non- Agriculture Market Access
NGOs - Non-Governmental Organizations
NLCIFT - National Law Center for Inter-American Free Trade
OECD - Organization for Economic Development
SADC - Southern African Development Community
SCM - The Agreement on Subsidies and Countervailing Measures
SG Agreement - The Agreement on Safeguards
TBT - The Agreement on Technical Barriers to Trade
TRALAC - Trade Law Centre for Southern Africa
UN - United Nations
UNCTAD - United Nations Conference on Trade and Development
UR - Uruguay Round
US - United States of America
WTO - World Trade Organization
TABLE OF CONTENTS
DECLARATION.. i
DEDICATION.. ii
CASES CITED IN THIS STUDY.. viii
ABSTRACT.. x
CHAPTER ONE. 1
1.1. Background.. 1
1.2. Problem statement.. 4
1.3. Objectives of the Study.. 5
1.3.1 General Objectives.. 5
1.3.2 Specific Objectives.. 5
1.4. Scope of the study.. 5
1.5. Significance of the study.. 6
1.6. Methodology.. 6
1.7. Chapter Summary.. 7
1.8. Literature review... 10
CHAPTER TWO.. 17
WTO AND AGRICULTURAL TRADE LIBERALISATION.. 17
2.0. THE LEGAL FRAMEWORK FOR AGRICULTURAL SUBSIDIES AND TARIFFS UNDER THE WTO SYSTEM 17
2.1. Introduction.. 17
2.2. A glance at the legal framework for Domestic support.. 18
2.3. Export subsidies under the Agreement on Agriculture. 19
2.4. What then is the legal framework for tariffs?. 20
2.5. Arguments for protectionism and retention of subsidies and tariffs.. 23
2.6. Arguments in favor of agricultural liberalization. 28
2.7. A critical Analysis of the effects of Subsidies and Tariffs.. 30
2.8. Conclusion.. 31
CHAPTER THREE. 33
SELECTED CASES ON DISPUTE AREAS OVER SUBSIDIES AND TARIFFS IN AGRICULTURE IN THE WORLD TRADE ORGANIZATION.. 33
4.1. Introduction.. 33
4.2. The loggerheads between developed countries inter-se. 33
4.3. Newly Industrialized Countries (NIC’s) versus Developed Countries.. 40
4.5. What Lessons do negotiators at Doha draw from these disputes?. 48
CHAPTER FOUR.. 46
CONCLUSIONS AND RECOMMENDATIONS.. 46
4.1. Summary of findings.. 46
4.2 Conclusion.. 49
4.3 Recommendations.. 50
Bibliography.. 53
CASES CITED IN THIS STUDY
Short title
Full Case title and citation
Canada-Continued Suspension
Panel Report, Canada-Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321/R, adopted 14 November 2008, as modified by Appellate Body Report WT/DS321/AB/R
Canada-Diary
Panel Report, Canada-Measures Affecting the Importation of Milk and the Exportation of Diary Products, WT/DS103/R, WT/DS113/R, adopted 27 October 1999, as modified by the Appellate Body Report WT/DS103/AB/R, WT/DS113/AB/R, DSR 1999: VI, 2097
EC-Bananas III
Appellate Body Report, European Communities- Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997: II 591.
EC-Hormones
Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998,
DSR 1998:I, 135
US-Continued Suspension
Panel Report, Canada-Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321/R, adopted 14 November 2008, as modified by Appellate Body Report WT/DS321/AB/R.
US-Upland Cotton
Panel Report, United States-Subsidies on Upland Cotton, WT/DS267/R, Corr.1, and Add. 1 to Add.3, adopted 21 March 2005, as modified by Appellate Body Report WT/DS276/AB/R, DSR 2005: II, 299
US-Upland Cotton
Appellate Body Report, United States-Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005, DSR 2005: 1, 3
ABSTRACT
This study examines the legal regime for Agricultural Tariffs and Subsidies and how it has derailed Doha Trade Talks. It also analyzes their implications, explores arguments advanced in favor and against agricultural liberalization and makes recommendations to the negotiators. The GATT 1947 did not prohibit subsidies and tariffs in Agriculture. It was only during the Uruguay Round that Members committed themselves to liberalize agriculture. Despite these commitments however, subsidies remain at obscene levels in OECD countries, including developed countries. This has undermined the current Doha agricultural talks as developed countries exhibit unwillingness to end subsidy support which perpetrates dumping and affects the incomes of farmers in developing countries as a result of price suppression. The study among others, recommends for the amendment of the Agreement on Agriculture and the integration of non-trade concerns into the negotiations if a comprehensive deal on agriculture is to be reached.
CHAPTER ONE
1.1. Background
The question of Agricultural liberalization is a new phenomenon in the International trading system.[1] This is partly because, unlike the Agreement on Agriculture, the GATT (General Agreement on Trade and Tariffs) 1947 only regulated trade in industrial products.[2] The GATT only prohibited subsidies and quantitative restrictions for manufactured goods and left agriculture highly subsidized and restricted.[3] Subsidies give an unfair advantage to farmers or exporters in international trade because they will be able to increase production and export more at the expense of other exporters on the world market who may not have accessed like support. It is no wonder therefore that this attracted considerable criticism from developing and least-developed countries like African Cotton producing countries, Brazil and Non-Governmental Organizations (NGOs).[4]
The Uruguay Round, marked the turning point in the legal regime for agriculture, for it was the first time issues on agriculture came to be included in trade negotiations.[5] The Uruguay Round was partly aimed at reforming the agriculture by progressively reducing domestic support and culminated into the Agreement on Agriculture (AoA), which envisages the commitments agreed upon, by the participants. Under Article 20[6] of the AoA members committed themselves to progressively continue the reform process on reduction of domestic support by taking into account the effects of these commitments on world trade Agriculture.
Pursuant to Article 20[7] of the Agreement on Agriculture, Doha Development Agenda negotiations were launched in early 2000.[8] The negotiations are, among others, aimed at achieving liberalization of global agricultural trade by strengthening market access through substantial reductions in Agricultural subsidies and protection, reductions of export subsidies with a view of phasing out all forms of subsidy and domestic support especially the support that distorts trade.[9] However, as it stands, efforts to reach this deal have stalled because despite the commitments under the UR, farmers in developed countries continue to receive support from their respective countries.[10]
This study seeks to explore the legal framework for agricultural subsidies and tariffs with the primary aim of establishing why and how they have hampered world trade liberalization. In particular, the study will look at the implications of subsidies and tariffs. It has been contended by writers that it is the poor countries which are holding back the progress as they are reluctant to open up their agricultural and industrial sectors to free trade.[11] The researcher equally shall explore this question in order to determine the propriety of this assertion.
1.2. Problem statement
Agricultural trade liberalization has met resistance in the Doha talks as poor and developing countries demand non-trade concerns like food security and poverty alleviation to be exempted from the commitments. In the alternative, they call for a safeguard mechanism to provide recompense for loss they are likely to suffer when they open up their agricultural markets. Developed countries on the other hand demand that decoupled (green box) payments be exempted from the calculation of a ceiling for permissible payments.
Over the years, WTO negotiators have narrowed differences on technical barriers relating to export competition. For instance, the new framework texts on modalities for agriculture and non-agricultural market access (NAMA) proposed a ban on a range of payments that boost fisheries capacity, with various exemptions, especially for developing nations. The biggest challenge however, is how to determine the formulae and figures for tariff cuts. It is upon this ground that the researcher picked interest in studying the legal regime for agricultural subsidies and tariffs and how it has posed a threat to agricultural liberalization. The study shall explore the different arguments advanced by the critics and proponents of agricultural liberalization.
1.3. Objectives of the Study
1.3.1 General Objectives
The main objective of the study is to establish the aims and objectives behind the call for liberalization of Agriculture, the extent to which the negotiations at Doha have tackled it, how subsidies and tariffs have impeded world agricultural trade liberalization. Overall, the study is expected to contribute to the existing debate on the ongoing question of agricultural trade liberalization.
1.3.2 Specific Objectives
i. To examine the legal framework for global Agricultural subsidies and tariffs.
ii. To analyze the implications of these subsidies and tariffs.
iii. To explore different arguments as to why developed and developing countries have insisted on maintaining and removal of agricultural subsidies and tariffs respectively.
iv. To suggest appropriate recommendations necessary for achieving agricultural liberalization.
1.4. Scope of the study
The study will center on the WTO’s regime on Agriculture with specific focus on subsidies and tariffs and their legal framework, arguments for and against subsidies and tariffs and finally the researcher will propose recommendations on how best agricultural trade liberalization can be achieved. The Study will also look at how Doha negotiations intend to reconcile these opinions in order to achieve real agricultural liberalization in a manner that is all-inclusive of these opinions. The study will focus on the period stretching from the launch of the talks in 2000 to date.
1.5. Significance of the study
Although a lot of literature has already been written about agriculture, the researcher believes that this study is likely to supplement the existing knowledge about world trade agricultural policies. Particularly, it is likely to serve as a reference guide for academicians, scholars, policy makers, and agriculturalists, the business community, notably importers and exporters and students when confronted with issues of international economic law on how best to tackle them.
1.6. Methodology
This study will be qualitative. The researcher will mainly conduct desk research to study and analyze existing literature on the liberalization of world agricultural trade. The study shall rely on stratified sampling, archival searches and documentary analysis as research methods. Although the study will be largely desk research, informal interviews will be conducted with as many available key personnel as possible at the Ministry of Agriculture, Tourism, Trade and Industry, and Uganda Investment Authority. Informal interviews shall also be conducted with experts on International Trade and International Law.[12]
The key sources of information for this study will be the Internet research, University Libraries-Makerere University Main Library, Faculty of Gender and Women Studies Library and Agricultural policy papers.
1.7. Chapter Summary
Chapter One: Background To The Study
This chapter will comprise of the introduction to the study, the problem statement, objectives, scope, significance of the study, the methodology adopted by the researcher and the views of different scholars on the subject as reviewed by the researcher.
Chapter Two: WTO and Agricultural Trade Liberalization
In this chapter, the study will give an overview of the WTO and the concept of free trade. It will also analyze the legal framework for agricultural subsidies and tariffs, explore the arguments advanced in favor of and against agricultural trade liberalization, and then critically analyze the effects of subsidies.
Chapter Three: Dispute Areas over Subsidies Illustrated
This chapter will capture and illustrate areas where disputes have arisen over subsidies. In so doing, it will help illustrate the negative impact of agricultural subsidies to the economies of the aggrieved countries. Cases to be reviewed will be differentiated into three categories, namely; (i) those between developed nations and (ii) those between developed and less-developed countries and (iii) then disputes between newly industrialized and developed countries.
Chapter Four: Summary of Major Findings, Recommendations And Conclusion
This chapter will contain a summary of major findings, the researcher’s recommendations on how agricultural trade liberalization should be handled and a conclusion.
1.8. Literature review
Davis[13] argues for liberalization because to her agricultural protection increases financial expenditure, export opportunities are lost and encourages trade friction; that elimination of agricultural protection and support could increase global economic welfare. She criticizes industrialized nations for unfairly subsidizing their farmers at the expense of their counterparts in developing countries.[14] Nevertheless, she credits the international negotiations for providing a critical avenue for adding pressures on developed countries to reduce these subsidies and trade barriers. This study will agree with Davis on this issue. Indeed, the Doha negotiations present an appropriate avenue through which poor and developing countries should fight for their concerns to be recognized.
According to the European Commission[15] liberalization of trade must not sideline poorer countries. This is because improving their access to global markets for agricultural products is crucial to their development. Whereas the publication advocates for the focus on development, betterment of the world, the EU wants a ‘level playing field’ for all countries and clear ‘rules of the game.’[16] This publication is relevant to this study because it seeks to correct the imbalances within the WTO system and devise means on how best to address the concerns of developing countries. However, it is the researcher’s view that by insisting on this position, the EU is partly to blame for the collapse of Doha negotiations on agriculture because if adopted, it will perpetuate dumping in developing countries thereby subjecting poor farmers to unfair competition with cheap imports as well as compromising national food security-an issue that the latter countries seek to be exempted from agricultural liberalization.
Hanson[17] has followed trade talks and avers that the issue of the formulae and figures for tariffs and subsidy cuts is the major setback to the conclusion of Doha talks. Hanson notes that even Pascal Lamy, the WTO Director General has recognized this.[18] Hanson singles out the United States as a stumbling block to the success of the talks because its political will is anti-Doha talks.[19] This study will rely on this article to emphasize the major problem to agricultural trade liberalization and explore in detail the nature of the formulae preferred by developed countries and its effects to the developing nations.
Heinisch[20] writes that even developmental International Agencies are in favor of agricultural liberalization. The World Bank for example argued for the removal of subsidies, as did IMF and UNCTAD.[21] Likewise, in 2003, the former UN Secretary General Kofi Annan criticized the international trading system’s inequality for keeping people in poverty, calling for developed countries to “live up to market principles about which they so eloquently preach to the poor.”[22] The article shows the negative effects of subsidies to third world countries. It is particularly important since it addresses the plight of African Cotton farmers in West Africa. By alluding to issues of poverty alleviation, the author and development agencies appreciate the need to integrate non-trade concerns into agriculture. Furthermore, this literature will be of benefit when the researcher is illustrating disputes over subsidies. However, it does not analyze the effect of tariffs. This study will in addition to subsidies explore the effect of tariffs to international agricultural trade.
Khor[23] argues that the livelihoods of small farmers and local food production in developing countries could be threatened by agricultural liberalization through cheap imports thereby making them perpetual dependants on imports for their supplies; that this would erode their national food security. This article is important since it attempts to address non-trade concerns, which are crucial for the third world countries. It is in agreement with Ratnakar and Verma[24] who proposed that non-trade concerns like food security, environment, structural adjustment, rural development, poverty alleviation should guide Doha negotiations if an agreement is to be reached. The researcher will rely on this literature to propose that negotiations should reach a position that will allow poor and developing countries flexibility in implementing their obligations under the AoA. As Khor states many developing countries, including India, Indonesia, Egypt, Sri Lanka, Uganda, Zimbabwe, El Salvador proposed that food they produce for domestic consumption and the products of small farmers be exempted from import liberalization, domestic support and subsidies. It should be noted that these articles were written prior to the commencement of the negotiations and so do not capture the current progress of the talks as to show that non-trade concerns have been sidelined. This study will go a step further to establish whether non-trade concerns have actually been ignored by the negotiations or not so as to make informed recommendations.
Ratnakar and Verma[25] reveal that agriculture remained distorted by subsidies and restrictive quotas under the GATT 1947. They attribute this distortion to weak rules that regulated agriculture at the time. The study will rely on this literature to trace the history of agricultural liberalization, the rationale behind it and the lacunae in the AoA. The authors argue for the integration non-trade concerns into the negotiations. In this regard, the paper is relevant in as far the authors predicted that if Doha talks resolve that agriculture should only be governed by trade concerns, then there would be no agreement. Indeed, this partly accounts for the stalemate in the talks.
Sandrey[26] asserts that the AoA set the scene for the liberalization of global agriculture. In this paper, Sandrey analyzed the achievements of the AoA ten years since its inception. This paper is important in as far as it questions the reality of eliminating farm subsidies in the global agricultural trade. This is because despite the commitments in the AoA reached in the Uruguay Round, agricultural subsidies remain at obscene levels within the OECD countries thereby accentuating harm to efficient producers on the world markets.[27]
In his book “Making Globalization Work”, Stiglitz’s[28] ‘, surveys inequalities of the global economy. He looks at mechanisms by which developed countries exert an excessive influence over developing nations. He argues inter alia that through tariffs and subsidies the world is being destabilized. He calls for strong, transparent institutions to address these problems. This exposes the weaknesses of the WTO. The study will agree with Stiglitz that indeed, there is no transparency within agricultural negotiations. The Harbinson Proposal on the Modalities Agreement, which was drafted without members’ prior deliberations on it-only to be tabled for their adoption, illustrates this. This view is shared by Kapoor[29] noting that western hegemony in trade negotiations is still evident; that at the 1999 Seattle Ministerial Meeting for example, several developing-country delegates were not invited to meetings of direct interest to them.
Surya[30] clearly points out that WTO members committed themselves to substantially improve market access for agricultural goods, reduce tariffs and subsidies with a view of phasing out all forms of export subsidies for agricultural products and substantial reductions in trade-distorting domestic support. This article explains why agriculture was one of the main items in the negotiations. At the same time it clarifies on the prohibited and permissible support. The study will agree with Surya on these commitments as it projects the future of international agricultural trade.
Susan B. Epstein[31] argues that the general reduction in agricultural subsidies is expected to improve market access and developing country competitiveness in a sector of importance to most developing countries. The report also points out some of the arguments advanced in favor of quotas as the option for developing countries to counteract the effect of subsidies by developed countries. She states, however, that despite the many gains from the new trade rules, developing countries are concerned about loss of market access due to erosion of preferential treatment, possible increase in food prices, loss of protection for domestic producers and consumers, and possible loss in value of certain exports. This paper will study and rely on this report to emphasize that agriculture is important to both the poor and developing economies and that therefore Doha negotiations should take into account the negative effects that agricultural liberalization might inflict on them.
In conclusion, from the above literature it is apparent that the most outstanding obstacle to the negotiations on agricultural liberalization is the failure of negotiators to recognize non-trade concerns of the poor and developing countries. These countries demand that they should be allowed to maintain import quotas for purposes of maintaining food security and to shield their weak farmers from unfair competition from cheap imports that are likely to inundate their local agricultural markets if they fully open up to other member countries. At the same time, developed countries demand that decoupled payments (“green box” payments) should be exempted from the calculation of a ceiling for permissible payments because to them this would help them comply with their obligations as they also tackle the political pressure from local farmers.
CHAPTER TWO
WTO AND AGRICULTURAL TRADE LIBERALISATION
2.0. THE LEGAL FRAMEWORK FOR AGRICULTURAL SUBSIDIES AND TARIFFS UNDER THE WTO SYSTEM
2.1. Introduction
One of the main features of the agreement on Agriculture is that it allows members to pay subsidies contrary to the provisions of the Agreement on Subsidies and Countervailing Measures.[32] The agreement classifies support measures into two major categories: domestic support measures and export subsidies. The former are subsidies that are given by the government to encourage a producer to grow more of a certain crop, assist farmers who are not making a profit, promote environmental protection, and respond to the needs of farmers when natural disasters occur.[33] In the U.S domestic support takes the form of farm payments, conservation payments and disaster payments.[34] Export subsidies on the other hand are payments given by the government to farmers to enable them export their products abroad. They ensure that those who want to export their goods will have the credit necessary to do so.[35]
2.2. A glance at the legal framework for Domestic support
Under the Dunkel Proposal, domestic support measures are classified by blue and yellow boxes and this also includes general support which is exempt from reduction commitments as denoted by the green box. The agreement on Agriculture makes a distinction between support programmes that stimulate production directly and those that are considered to have no direct effect.
The fundamental criterion is that domestic support must be economically neutral. According to part 1 of Annex 2 to the AoA such support must not have or at most have minimal trade-distorting effects or effects on production.[36] If support has a negative effect on trade or production, then it must be cut back. Otherwise, measures with minimum support can be used freely and these are classified by the “green box.”[37] They include government services such as research, disease control, and infrastructure and food security.[38] They also include payments made directly to farmers that do not stimulate production, such as certain forms of direct income support, assistance to help farmers restructure agriculture, and direct payments under environmental and regional assistance programmes.[39]
Also permitted, are direct payments to farmers where they are required to limit production (sometimes called “blue box” measures), certain government assistance programmes to encourage agricultural and rural development in developing countries, and other support on a small scale (“de minimis”) when compared with the total value of the product or products supported.
2.3. Export subsidies under the Agreement on Agriculture
The Agreement on Agriculture prohibits export subsidies on agricultural products unless the subsidies are specified in a member’s lists of commitments.[40] Where they are listed, the agreement requires WTO members to cut both the amount of money they spend on export subsidies and the quantities of exports that receive subsidies.[41] The general principle is enshrined in Article 8 to the effect that each Member undertakes not to provide export subsidies otherwise than in conformity with this Agreement and with the commitments as specified in that Member's Schedule.[42] During the Uruguay Round Members undertook to reduce export subsidies listed in Article 9.1[43] of the Agreement on Agriculture. Further, pursuant to Article 10.1,[44] they undertook not to circumvent their reduction commitments by using other export subsidies than those listed in Article 9.1. It should be borne in mind that the granting of export subsidies referred to in Article 9.1 is subject to the limitation under Article 3.3 of the AoA. In the first place, article 3.3 prohibits provision of export subsidies listed in article 9.1 to agricultural products not listed in the Members’ schedules. In its second part, Article 3.3 provides that a member “shall not provide such subsidies in respect of any agricultural product not specified in that Section of its Schedule.” Secondly, where a Member pays export subsidies listed in Article 9.1, to products specified in its schedule, it may not exceed the quantitative and budgetary commitment levels indicated therein.
2.4. What then is the legal framework for tariffs?
Prior to the Uruguay Round some agricultural imports were restricted by quotas and non-tariff measures.[45] In order to ensure transparency in the trading system, the new rules on market access allow for use of tariffs only. The contracting parties must convert domestic protective measures into customs duties through the process of tariffication.[46] This obligation is enshrined in Article 4.2 of the AoA, which prohibits members from maintaining import restrictions save for those that they have converted into ordinary custom duties and those bound into their schedules of tariff concessions.[47] These tariff commitments took effect in 1995 with the completion of negotiations of the Uruguay Round, which gave birth to the Agreement on Agriculture.[48] The only major exemption to this tariffication obligation is provided in Annex 5 to the AoA under which the conversion may be deferred to six years for certain products. This clause was specifically intended to allow Japan and Korea to temporarily exempt measures applicable to imports from any tariffication obligation, albeit provisionally.[49]
Also, under Article 5 of the AoA, members are permitted to impose additional import duties that are easier to meet than those under the Agreement on Safeguards (SG Agreement).[50] However, agricultural safeguard measures can be imposed if the volume of imports is higher than a trigger level of 105–125 percent of the average level of imports during the preceding three years or if the c.i.f. price of these imports is lower than the average reference price for the period 1986–88. The aim is to facilitate the imposition of safeguard measures in cases where substantial concessions have been made and to make them more difficult to adopt when market access is limited.[51] It should be borne in mind that for imposition of additional import duties to be valid, a member imposing such duties must notify the Committee on Agriculture in advance as far as it practically possible or in any case with 10 days after the implementation of such action. This is envisaged in Article 5.7 of the AoA and its rationale is to ensure transparency in the operation of special guards. This provision is unfair to poor and developed countries in as much as it mandates a member imposing safeguard measures to compensate Members whose trade has been affected. This downplays the essence of a special treatment mechanism allowed to developing countries in imposing them, for their very nature, poor and developing countries may be unable to raise compensation due to resource constraints. Moreover, the option for compensation is like to lead developed countries into unreasonably restricting imports from poor and developing countries since they are able to pay such compensation. As if that is not enough, the definition of “serious injury” as used in the SG Agreement raises difficulties in determining which injury is serious and which one is not. This affords Contracting Parties a leeway to restrict imports even though the product may not be having or threatening any serious negative effect to domestic industry.
Article 9 of the AoA is weak in as far as it requires states parties to employ regulations that affect trade in the “least restrictive manner”. This test could ultimately derail WTO into national debates on alternative approaches to important problems.
2.5. Arguments for protectionism and retention of subsidies and tariffs
First and foremost Delcros[52] contends that through subsidies and tariffs governments protect local producers from the effects of the ever fluctuating agricultural prices; that this is the primary objective as to why countries have always levied customs duties. To him this would guarantee a fixed price in the domestic market. He asserts that this has been the practice in the European Community and the United States where such guarantee is in the form of loans to farmers or an insurance mechanism that guarantees the producers minimum income irrespective of fluctuations in world prices. It is not in dispute that by its very nature, agriculture world over is affected by price fluctuations and accounts for low Gross Domestic Product (GDP) in agricultural countries. Trade liberalization should not be pursued in isolation of non-trade concerns. Individual countries are vested with the responsibility to maintain stability in their economies through inflationary measures. To pursue agricultural liberalization at the expense of non-trade concerns would attract unwarranted criticism domestically. Indeed as Delcros notes, protectionism is politically influenced.[53]
One of the major reasons raised against agricultural liberalization is that it threatens food security in domestic economies which is a core issue at national level.[54] Unfortunately, the AoA does not take food security at national level as an issue that deserves priority in the global agricultural trade as corporate profits are given priority over the health of the planet. As a result, global farmers have been pushed poverty and hunger.[55] The report on the conference about “Policies against Hunger III: Liberalization of Agricultural- A solution?” notes that there is considerable distrust towards agricultural liberalization in a sense that a large number of people believe that it has actually not improved but worsened food security for the poor. According to the majority of the conference participants, the way liberalization is being implemented may not benefit the poor.[56] Indeed, since agricultural liberalization is aimed at promoting export trade, food security which as a national concern is disregarded. This means that countries will focus on export production and shun subsistence agricultural, thereby causing hunger and making developing countries perpetual importers of food products. Even then, with hunger, developed countries will now come in to provide food aid. In such circumstances, inequality rather than fairness in international trade relations will even be worth. With all these negative effects in mind, the negotiations ought to take non-trade concerns in account if a comprehensive deal on agricultural liberalization is to be achieved.
The argument on food security is supported by Sekhar.[57] To Sekhar, the call to integrate the question of food security in Doha talks derives its veracity from the fact that agricultural prices are volatile in international markets. Thus, it is her argument that agricultural liberalization would lead to transmission of this volatility into domestic markets thereby causing serious implications for food security of the poor. This view is shared by Tim Conway, in his article entitled “Doha Development Agenda: Impacts on trade and poverty, October 2004, where he argues for protectionism as crucial for safeguarding the incomes and food security of the poor against shocks of rapid market opening.[58] His argument is that the barriers in the South are due to trade distortions created by Northern protection and that therefore given this past record, it is reasonable to demand that developed countries liberalize earlier and faster while allowing developing countries to retain protectionist measures for an extended period of time. Indeed, liberalization of agricultural trade would force domestic producers to increase prices for their products since then they are assured of obtaining higher prices through exporting to newly-opened markets. This is likely to hurt the poor farmers as food is indispensable to them, for they do not have alternative sources of income since they are not engaged in formal employment.
Another fundamental issue of concern to developing countries is the possible erosion of tariff preferences such as those granted under the Generalized System of Preferences (GSP).[59] The idea behind this is that the GSP scheme is not associated with reciprocal arrangement unlike WTO rules which call for reciprocity in a sense that member countries are obliged to open their markets to each other’s products. This view is shared by Bjөrnskor and Lind.[60] Although this arrangement is laudable, the problem is that it is politically influenced and developed countries may be constrained from fully demanding for their share of world agricultural trade for fear of annoying their so-called sympathizers. Thus, we are likely to have a section of developing countries rallying behind developed countries against liberalization in a bid to retain their benefits under these non-reciprocal preferential trade arrangements. The GSP has also been attacked by Bureau[61] on the basis that its coverage of agricultural produce is limited. Indeed most of the preferential schemes like AGOA cover textiles at the expense of agriculture.
Besides, industrial countries justify their protection of agriculture in order to contain domestic political pressure[62] arguing that farm sector demands are politically stronger than consumer interests even though this leads to a net welfare loss of the country. This view is corroborated by Bureau[63] when he presents the EU and US as arguing that if decoupled payments are not be exempted from the calculation of the total “Aggregate Measure of Support” used to put a ceiling on permitted aid, this would put them in serious trouble vis-à-vis their farmers.[64]
On the whole, agricultural trade liberalization is criticized on the basis that it externalized basic national issues in the AoA and makes issues of national concern such as social and environmental sustainability as non-trade issues.[65] Rena vehemently asserts that developing countries should be allowed to have freedom in fixing tariffs in agriculture especially in the face of high Northern subsidies. Rena maintains that introducing restrictions on imports or raising tariffs is the only safeguard for poor peasants and poor countries in the face of the trade-distorting subsidies and dumping practiced by rich countries. According to him, this is what Countries such as India, Argentina and the Philippines have proposed in the negotiations. Unfortunately, Mr. Harbinson’s draft proposal completely ignores these proposals to regulate imports as a self-defense strategy against dumping. Instead, it proposes removing even the temporary rights to safeguards under Article 5.5 AoA. To Rena what needs elimination is not Article 5 but Article 4.2 on market access, which enacts that “members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary custom duties except as provided in Article 5.11.[66]
2.6. Arguments in favor of agricultural liberalization.
Critics of agricultural subsidies argue that subsidies promote poverty in developing countries by artificially driving down world prices.[67] Tim Conway[68] contends that in subsistence rural economies where food must be bought, liberalization of agriculture is likely to exert downward pressure on the prices of basic consumption goods as barriers to cheap imports are removed while competition increases.
Baskin[69] is also against protectionist subsidies. He argues that while subsidies may appear at first glance to help the general population in a sense that they lower consumer prices, the burden of raising funding is borne by the tax payers. Thus, all of the benefits that result from agricultural subsidies are canceled out by the costs of the support programs; that even then, while in certain circumstances, protectionist measures are potentially positive domestically, they unequivocally have a negative effect on consumers by raising prices for both domestic and imported foodstuffs. For instance, he asserts that tariffs and quotas as mechanisms for limiting the importation of food from other countries result in a supply shortage, thereby increasing the prices to the detriment of consumers, as well as the price which farmers can obtain for their goods domestically.[70] From his arguments, Baskin therefore supports agricultural liberalization because to him it would eliminate supply shortages on the world agricultural market thereby giving consumers the benefit of buying foodstuffs at lower costs (emphasis mine).
Panagariya[71] argues for agricultural trade liberalization because it would encourage developing countries to specialize in the production of exportable products. To her, this would in turn increase the wages of farmers.[72] She maintains that the current regime keeps the prices of agricultural exports high and imports low relative to what would prevail under a liberalized regime and that as the vast majority of developing countries (LDCs) are net food importers, the low import prices are to their advantage. Whereas specialization in exportable products is laudable, it will not work if developed countries continue supporting their local farmers. Without elimination of subsidies, unfair competition will persist because cheap products from developing countries will out compete those from poor and developing countries where the cost of production is high.
According to the 2007 United Nations Simulation by Brown University,[73] agricultural subsidies are also widely criticized for harming developing countries, for which farming is still a very important form of economic activity. Baskin maintains that by depressing world prices, agricultural subsidies decrease the prices that farmers in developing countries receive for their goods.[74] Furthermore, developed nations with lower subsidies resent the subsidies provided by the US, Europe and Japan, as they make it harder for farmers in other countries to remain competitive.
2.7. A critical Analysis of the effects of Subsidies and Tariffs
As seen from the preceding discussion, for a country to join the World Trade Organization it is required as a must to lower barriers to trade, such as tariffs and quotas to certain levels, and in general open up its market to increased trade. Baskin argues that this has a number of positive and potentially negative effects.[75]
The Simulation of the United Nations 2007[76] shows that contrary to the popular belief that by joining the WTO countries will be able to access new export-markets for their domestic producers lowering tariffs disables countries from shielding uncompetitive domestic producers from international competition.[77] Indeed, elimination of tariffs means products from member countries shall receive equal treatment with domestic products. This is so irrespective of the fact that production costs in poor and developing countries are high as compared with developed countries. Thus, giving like products like treatment would affect the sales of domestic products in circumstances where their prices are high as compared with imported products.
Subsidies result into dumping in the South making it difficult for farmers to even compete in their local markets. This perpetuates poverty for many farmers in the Global South.[78] Moreover, domestic support encourages production since with government support more and more farmers will want to produce the same product. This will force the governments to dispose of the surplus in the global market at lower prices, which is typically agricultural dumping. Trust me, it will be difficult for small farmers in developing countries to survive in the market[79] However, it is argued that elimination of subsidies per-se will not necessarily benefit developing countries while other distortions remain in place. Many regions stand to lose from the elimination of subsidies; the gains appear to go to developed countries and those that are net agricultural exporters such as Latin America[80] Indeed, developing countries might not benefit from liberalization for the reasons that they are poor at resource allocation and they do not have the necessary finance to modernize their primitive agriculture. There is need to add value to their products for them to be competitive in the global market.
2.8. Conclusion
As discernible from the preceding discussion, it is clear that subsidies and tariffs have negative effects. That is why different countries are pursuing their different objectives and goals. The attempts by Harbinson proposal to remove non-trade issues from the negotiations raise a point of concern to the poor and developing countries and ought to be given due consideration in the agriculture negotiations. This is because as several writers above have noted agricultural liberalization is likely to suppress prices, thereby negatives affecting the earnings of farmers in poor and developing countries. In such circumstances, the only self-help remedy available to them is to counteract by levying additional import duties and quotas to offset the effect through earning revenue to the domestic economies. However, this is not to say that agricultural liberalization is uncalled for, but rather as the AoA enacts under Article 20.c, negotiations should take into account non-trade concerns. In other words, having regard to financial incapacitation of poor and developing countries, they should be allowed to maintain restrictions for purposes protecting their national economies. Moreover, they owe this obligation to their citizens.
CHAPTER THREE
SELECTED CASES ON DISPUTE AREAS OVER SUBSIDIES AND TARIFFS IN AGRICULTURE IN THE WORLD TRADE ORGANIZATION
4.1. Introduction
This chapter will capture and illustrate areas where disputes have arisen over subsidies. In so doing, it will help illustrate the negative impact of agricultural subsidies to the economies of the aggrieved countries. Cases to be reviewed will be categorized into three, namely; (i) those between developed nations and (ii) those between developed and less-developed countries and (iii) then disputes between Newly Industrialized and developed countries.
4.2. The loggerheads between developed countries inter-se
It is important to appreciate the fact the disputes over trade-distorting agricultural protectionism do not only affect poor and developing nations but experience shows that the superpowers often challenge each other’s policies which they perceive to be inconsistent with WTO rules.[81] No wonder there have been a series of disputes between these countries. Notable of these is the Canada-Milk Case[82], EC Beef Hormones Case[83] and EC-Bananas III Case[84], to mention but a few. The analysis will however be limited to the first two cases and shall not analyze the Chiquita Banana Case.
Canada-Milk Case
In the Canada-Milk Case, the fundamental question raised was whether payments in kind which are not granted by government should be regarded as export subsidies for inclusion in Members’ commitments.
New Zealand and the United States accused Canada of adopting a system enabling processors for export to obtain milk supplies at reduced prices from domestic producers. This system was managed by the professionals from the sector, without direct intervention by the state.[85] The Appellate Body had to answer the following two questions: is the measure enabling processors to obtain milk supplies at reduced prices an export subsidy? If the reply to this question was in the affirmative, the second question was then to determine whether this subsidy was of the type referred to in Article 9.1of the Agreement on Agriculture (AoA).[86]
Canada claimed that the Canadian measure was not a subsidy because the benefit conferred on the milk processors was not given by a governmental agency but by private bodies-the “provincial marketing boards” managed by the farmers themselves.[87] The Appellate Body rejected Canada’s argument and considered that there was governmental action since without such intervention, the system could not function and processors could not buy milk at reduced prices. It confirmed the Panel’s analysis and established that these boards indeed had the status of a government agency, because they were set up by governmental intervention and enjoyed powers delegated to them by the government. The Appellate Body concluded that the Canadian measure was in fact a subsidy because the aid was granted by a governmental action and conferred an advantage on the recipients.
Furthermore, the Appellate Body noted that payment need not be funded by government resources provided they are financed by virtue of governmental action;[88] that Article 9.1 (c) of the AoA contemplates that payment may be made and funded by private parties, without the type of governmental involvement ordinarily associated with a subsidy.[89]
The standard for determining the existence of "payments" under Article 9.1(c) had to be identified after careful scrutiny of the factual and regulatory setting of the measure.[90] Clearly, from the circumstances, the Canadian government had aided the creation of an environment through which milk processors could purchase milk from domestic producers at a cheap cost.[91] This is read from the fact that the aforesaid processors were prohibited from selling in the local market, products processed from such milk, indicating its involvement although indirectly. The AoA under Articles 3.3 and 8 imposes an obligation on Canada to ensure that subsidies are provided in conformity with the Article 9.1 of the same Agreement and the commitments provided in the Member’s Schedule. Accordingly, it was held that irrespective of the role of private parties under Article 9.1(c), the obligations imposed by Article 3.3 and 8 of the AoA remained Canada’s obligations and that it was Canada not private parties, which was responsible for ensuring that it respects its export subsidy commitments under the AoA. Moreover, Canada had failed to prove as required under Article 10.3 of the AoA that the governmental actions complained of were not demonstrably linked to the financing of the payments, thus supporting a prima facie case for New Zealand and the United States.[92]
The Appellate Body thus upheld the Panel's finding, in paragraphs 5.89 and 5.135 of the Panel Report, that Canada, through the combination of the supply of Commercial Export Milk and the operation of Special Milk Class 5(d) and (e), acted inconsistently with its obligations under Article 3.3 and Article 8 of the Agreement on Agriculture by providing export subsidies listed in Article 9.1(c) of that Agreement in excess of the quantity commitment levels specified in Canada's Schedule.[93] However, with regard to Article 9.1 (a) the Appellate body did not uphold the Panel’s reasoning but reserved its judgment as to whether classes 5(d) and 5(e) conferred export subsidies within the meaning of Article 9.1 (a) of the AoA.[94] The Appellate thus recommended that Canada bring those measures found to be inconsistent with its obligations under the AoA into conformity with that agreement.[95] The implementation of the Appellate Body ruling resulted into Canada eliminating special milk class 5(e) and restriction of class 5(d) to export of diary products within Canada’s export subsidy commitment levels.[96]
Canada-Milk Case was concerned with subsidies. It is therefore necessary to analyze the EC-Beef Hormones Case[97], a case concerning restrictive measures against imports.
In 1980s, as a result of consumer concern over reports of harm caused by eating hormone-treated meat, the EU instituted a series of bans on the use of growth hormones in meat production and, subsequently, on the import of meat from animals treated with such hormones.[98] On 26 January 1996, the United States requested consultations with the European Communities claiming that measures taken by the EC under the Council Directive Prohibiting the Use in Livestock Farming of Certain Substances Having a Hormonal Action [99]restrict or prohibit imports of meat and meat products from the United States, and are apparently inconsistent with GATT Articles III or XI[100], SPS Agreement Articles 2, 3 and 5,[101] TBT Agreement Article 2[102] and the Agreement on Agriculture Article 4.[103] The Panel found that the EC ban on imports of meat and meat products from cattle treated with any of six specific hormones for growth promotion purposes was inconsistent with Articles 3.1[104], 5.1 and 5.5 of the SPS Agreement because the EU had not definitively demonstrated that the beef would cause harm to consumers.[105] While the EU argued that it had the right to protect its citizens against uncertain risks from the hormones, the panel concluded that the WTO rules require proof of such harm before trade can be restricted.[106] Despite the Appellate Body's determination that the European hormone ban violated the WTO rules, the EU refused to rescind the ban. As a result, the WTO granted the United States permission to impose $116.8 million in retaliatory trade sanctions each year that the EU maintains its ban.[107]
The EC appealed on issues of law and legal interpretations developed by the Panel but the Appellate Body upheld the Panel’s finding that the EC import prohibition was inconsistent with Articles 3.3 and 5.1 of the SPS Agreement.
This decision has been criticized on the ground that by rejecting the panel’s view of the relationship between Articles 3.1 and 3.3, the Appellate body affirmed WTO Members’ sovereign right to establish their desired level of risk protection. Further that by overturning the panel’s finding that the risk assessment should be based on international standards, the Appellate Body established room for national flexibility in the application of sanitary and phytosanitary measures.[108]
In my opinion, by shifting the burden of proof to EU the Appellate Body rightly reached the decision because this way its was trying to protect the main objective of WTO, that is to say, to promote fairness in international trade. This strengthened by the requirement of assessment of the risk as required by the SPS Agreement. If countries are left to impose import restrictions at will without proving an assessment of the likely effect of the products sought to be restricted, this would stifle free international trade.
4.3. Newly Industrialized Countries (NIC’s) versus Developed Countries
US-Upland Cotton Case[109]
On 27 September 2002 Brazil requested consultations with the US regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).[110]
Brazil contended that these measures were inconsistent with the obligations of the US under the following provisions: Articles 5(c)[111], 6.3(b), (c)[112] and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2[113] of the SCM Agreement; Articles 3.3[114], 7.1[115], 8[116], 9.1[117] and 10.1[118] of the Agreement on Agriculture; and Article III: 4 of GATT 1994.[119] Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied. Brazil contended that the aforesaid measures had depressed world market prices for upland cotton causing overproduction by U.S producers and artificially increased U.S upland cotton world market prices. The consultations could not yield a mutually satisfactory solution. Thus, Brazil requested the WTO Dispute Body to establish a panel to hear its grievances. Although it was first denied, on a second request, the Director General constituted a panel to investigate this complaint and to prepare an advice to the Appellate Body, the decision-making organ of the WTO.[120] The panel concluded that indeed, US subsidies were a violation of the Agreement on Subsidies and Countervailing measures (SCM).[121] The Appellate Body agreed with the Panel’s decision that US subsidies were causing serious prejudice to Brazil and were therefore illegal in a WTO framework.[122]
Nature of the US Measures that were challenged
United States measures that formed the basis of the complaint are found in the United States Agricultural Act, 1949 and the Agricultural Adjustment Act of 1938 which make up what is known as the “ permanent law” that provides for income and commodity price support. The Congress enacts recurring farm bills that expire after four to six years. These Farm Bills amend the provisions of permanent law to make changes to Agricultural sector support programmes.[123] The three relevant Farm Bills for this case were introduced in 1990, 1996, and 2002.[124] The last of the farm bills was the Farm Security and Rural Investment Act, 2002 (FSRI Act) which authorized payments for the 2002 to 2007 crop years for Agricultural crops which included Upland Cotton.
The main channels of US domestic support are direct payments (known as production flexibility contracts under the 1996 Farm Bill), marketing loan program payments (through the loan rate mechanism), crop insurance, subsidies to domestic mills (through the so-called "Step-2" program), and emergency payments. They are also known as marketing loss assistance payments that were introduced in 1998 to compensate for the loss of income due to low commodity prices but became “permanent”-now called countercyclical payments under the 2002 Farm Bill.
Direct payments are based on historical enrolled areas of cotton which were introduced with the 1996 Farm Bill in order to compensate for the “losses” resulting from the elimination of deficiency payments (which were tied to production of specific commodities). Marketing loan program payments (or coupled payments) are designed to compensate cotton growers from the difference between the adjusted world price and the loan rate when the latter exceeds the former. User (Step-2) market payments are made to eligible cotton exporters and domestic end users of cotton when domestic US prices exceed North Europe c.i.f prices by a certain level and the world price is within a certain level of the base loan rate.
The objective of the Step 2 payment is to bridge the gap between higher US domestic prices and world prices so that U.S. exporters and mills maintain their competitiveness.
Major findings and the Ruling of the Appellate Body
In March 2005, the WTO Appellate Body upheld all the critical elements of Brazil’s challenge to US cotton subsidies as found by the initial panel on 8 September 2004.[125] The ruling indicates that the US had exceeded its negotiated limit on cotton subsidies and as a result it had lost protection of the Peace Clause.[126] The Dispute Body found out that these subsidies had injured Brazilian producers by suppressing world market prices. It agreed with the Panel that US export credit guarantees on cotton met the definition of an export subsidy as defined in WTO rules and were prohibited since the US had not scheduled to provide them in its AoA Uruguay Commitments.[127] The Appellate Body rejected US arguments that the AoA serves as an exception for export credits from export subsidy commitments.[128] Furthermore, the Appellate Body agreed with the Panel that the US “step 2 programs” violated WTO rules when the US paid producers the difference between the US price and the world market price in order to ensure that the US cotton can be sold in the global market at a profit.[129] It agreed with the Original Panel that the US should eliminate export credits for other commodities that receive this support but were not scheduled to get export subsidies under the US Uruguay Commitments.[130]
This decision has been criticized by economists. Vandenbussche[131] argues that from the economic point of view, it is not enough to show that the US subsidies are a cause of serious prejudice, but that it must be shown that, taken in isolation, the subsidies cause serious price suppression. Vandenbussche[132] therefore opined that the Panel should have tried to separate the effect of a US subsidy on world market prices for Upland cotton from other potential causes of price depression such as demand supply elasticity.
It is indeed true that the serious prejudice test is confusing. However, it would be imprudent to leave the question to be determined by economists. Moreover, the interpretation of the law by the Panel and Appellate Body show that the US had extended subsidies in excess of its commitment levels. This has the effect of increasing production and consequently supply of excess upland cotton to the world cotton market at reduced prices. This in itself has the effect of depressing domestic prices. It is no wonder therefore that Brazil complained that its upland cotton prices had been suppressed by US support measures. To me, the Appellate Body had rightly reached its decision because exportation of excess cotton by US exporters would definitely depress prices for unsubsidized cotton exporters from other countries. Secondly, whereas economists may be equipped with economical analytical knowledge, they are also likely to find difficulties in interpreting the law-a task which falls within the realm of lawyers. Rather, I highly recommend that the Judges of the Panel and the Appellate Body be trained in economic analysis for them to be able to integrate the knowledge of law and economics. This is crucial as trade law issues revolve around economics.
Perhaps the visible weakness is that neither of the Original Panel nor Appellate Body have powers to enforce compliance of their verdicts. This is based on the fact that since the adoption of the decisions, the US has not taken steps to eliminate the impugned subsidies.[133] This leaves Brazil and other cotton exporting countries with no remedy. It is my considered view that DSU rules be strengthened to allow the dispute body jurisdiction and a mechanism be put in place through which it can enforce compliance with its directives, lest it remains ‘ceremonial’. It is also my view that Brazil be allowed to retaliate, but this can only be possible if the SCM Agreement, TBT and the AoA are amended to fully allow imposition of countervailing measures without restrictions. This would force the United States to cease these subsidies.
The dispute between the United States and Brazil in the US-Upland Cotton case attracted the participation of West African Cotton-producing Countries as third parties because they thought the dispute had given them an opportunity to also fight US cotton subsidies which had undermined the subsistence cotton sectors in both West Africa and Central Africa.[134] This served to bolster Brazilian case.
Meanwhile, as the Brazilian case was under consideration, the West African States took other steps. In April 2003, Benin, Burkina Faso, Chad and Mali wrote to the WTO Director General introducing their ‘Poverty Reduction: Sectoral Initiative in Favor of Cotton (WTO 2003a). The initiative presented by the Burkina Faso president Compaore to the WTO Trade Negotiations Committee on 10 June 2003 and supported by 13 other African countries called for two decisions to be taken at the Cancun ministerial meeting in September of the year; (i) The West African Countries requested the phase-out of support measures for cotton production and export and (ii) that until subsidies were eliminated, financial compensation for the Least Developed and West African cotton producers. In fact, according to the OECD Report (2004) and Heinisch,[135] this later led to the collapse of Cancun meeting following the failure to reach an agreement on cotton.
After a 31 July 2004 meeting, the WTO Director General announced that members had agreed to substantial reductions (20%) in domestic support although there was no agreed upon time table for its implementation. Nonetheless, the General Council had recognized the importance of cotton to developing countries and pledged to address the issue ambitiously and expeditiously in the Negotiations.
Aside of formal challenges, West African Cotton producing adopted other avenues to advocate for the removal of subsidies. These include establishment of a regional coalition to defend the region’s interests within the multilateral institutions,[136] acting as a group while presenting their complaint.[137] West African Cotton producing countries also succeeded in winning support from UN representatives, International Financial Institutions and Non-governmental organizations (NGOs) which rallied behind them in the fight against cotton subsidies. The World Bank for example argued for the removal of subsidies in reports and in public statements (Becker 2003a; Cobb 2003a, 2003c; Stern 2002; Williams; as did IMF and UNCTAD, 2003.[138] Similarly, Oxfam, ICTSD and IDEAS Centre scheduled a discussion at a WTO public symposium in June 2003 to raise awareness of the problems facing West African Cotton growers due to subsidies and to mobilize international expertise to advance West African Countries’ sustainable development objectives.[139]
4.5. What Lessons do negotiators at Doha draw from these disputes?
These dispute signal danger to the Doha Development Agenda. As seen from the Cancun experience, the issue of subsidies continues to be a stumbling block to the success of the Doha negotiations on agriculture and it is until it has been addressed that Doha will yield a comprehensive agreement on agricultural trade liberalization. Thus, it is fundamental for negotiations to address the issue of subsidies if a comprehensive agreement is to be reached, lest the negotiations on agriculture are poised to sink into oblivion in the same way Cancun meeting ended in a stalemate. This is because developing countries have not changed their position on subsidies since then and continue to press for the same in the agriculture negotiations at Doha.[140] Moreover, it appears that countries are beginning to prefer litigation as the most practical route to expeditious and successful fight against trade-distorting policies and may do this at the expense of consensus- based Doha negotiations. However, it is my considered opinion that whereas the WTO provides the options of challenging subsidies and other unfair trading practices, this should not be pursued at the expense of the negotiations. Instead member countries should use the negotiations to press and negotiate for their rightful share of world trade. I support the negotiation for the sole reason that they provide a level-playing field for the members alike and this provides an opportunity especially to poor and developing countries which are the worst hit by subsidies to vehemently call for their elimination.
CHAPTER FOUR
CONCLUSIONS AND RECOMMENDATIONS
4.1. Summary of findings
The objectives of the study was to examine the legal framework for global agricultural subsidies and tariffs, examine their implications, explore different arguments as to whether or not and why they should be removed and to suggest appropriate recommendations to achievement of agricultural liberalization.
On the legal framework for agricultural subsidies and tariffs, the study revealed that contrary to Articles 3.2 and 5 of the Agreement on Subsidies and Countervailing Measures which prohibit contracting Parties from granting or maintaining subsidies to the detriment of their counterparts, under the AoA contracting parties are allowed to grant subsidies. The study further found that under the AoA support is classified into domestic support and export subsidies which is described in terms of boxes. Domestic support measures are denoted by blue and yellow boxes while export support is denoted by green boxes. The study revealed that either support is legal provided it has minimal trade-distorting effects. Part 1 of Annex 2 to the AoA requires that support to be neutral and should not have the effect of stimulating overproduction directly.
As regards export subsidies, the study discussed that subsidies on agricultural products are prohibited, save for where they are provided in the list of member’s commitments.
The study further revealed that under Article 10.1 of the AoA Members are enjoined from circumventing their reduction commitments by resort to subsidies that are not listed in their schedules. Even where a member pays subsidies to products specified in the schedule of reduction commitments, according to Article 3.3 of the AoA, it shall not exceed quantitative and budgetary outlay specified in its schedule.
On the whole, the study discovered that support for agricultural products in the list of member’s commitments is not actionable and shall not be subjected to due restraint through countervailing measures. In other words, a member who provides subsidies in conformity with Articles 9.1 and 3.3 of the AoA shall not be taken to have violated her obligations under the AoA because Article 13 of the same agreement and Article 5 of the Agreement of Subsidies and Countervailing Measures exempt this support from being challenged. However, the study also discovered that Article 13 of the AoA was meant to apply during the implementation period which elapsed in 2000 and 2004 for developed and developing countries respectively.[141] Its legality is therefore put in question.
The study also revealed that the AoA does not define the term “subsidy” and therefore to give it its full legal effect, it must be read together with the provisions of the Agreement on Subsidies and Countervailing Measures (SCM). Thus, in order to determine whether a subsidy exists within the meaning of the AoA, it must be shown that all the constituent components of a subsidy as defined by Article 1.1 of the SCM Agreement in fact exist.
The study also revealed that members are prohibited from maintaining import restrictions except where they have converted them into ordinary custom duties. Even then, they must indicate them in their tariff concession schedules. This is the spirit of Article 4.2 of the AoA. In essence, import restrictions are legal as long as members comply with this requirement. Furthermore, the fact that under Article 5 of the AoA members are allowed to impose additional import duties is likely to downplay the aims of agricultural liberalization. To me liberalization means free trade without restrictions of any kind. On the whole, allowing member countries options to subsidize and impose extra import duties is a weakness because it is likely to perpetuate inequalities between developed and developing countries in a sense that the former will exploit this loophole in the legal framework to support their farmers and exporters at the expense of the latter which have constraints in financial resources making them unable to provide like support to their farmers and exporters. The bottom-line is that the current legal framework benefits developed countries at the expense of the developing countries and needs to be rethought if the benefits of agricultural liberalization are to be realized in an equitable manner.
Agricultural liberalization has been attacked on the basis of the negative effects it is likely to inflict on member countries, especially poor and developing countries. This study revealed the most feared effects to be possible erosion of benefits that some developing countries are already enjoying under the preferential trade schemes which do not call for reciprocal obligations on their part as opposed to commitments under the AoA where reciprocity is paramount.
Secondly, the study revealed that agricultural liberalization is likely to compromise national food security and other non-trade national concerns like the need to protect the environment, animal and human life as well as the incomes and livelihood of domestic farmers. To this end, developing countries are calling for the integration of non-trade concerns into the negotiations if a comprehensive deal is to be reached. Accordingly, as seen in the preceding chapters, Sandrey and Susan had predicted that talks would stale if non-trade concerns are not accorded due consideration.
The above negative effects notwithstanding, the study discovered that agricultural liberalization holds good for world trade member countries because it would help bail out developing countries from the bondage of poverty. This is because agricultural liberalization would encourage countries to specialize in producing export-oriented products which would increase their export earnings thereby bettering the lives of producers and exporters. Besides, the study revealed that net-food importing countries would benefit from low priced. That this outweighs the argument that liberalization of agricultural will lead to suppression of commodity prices due to overproduction.
4.2 Conclusion
To a large extent is important to appreciate the achievements of the negotiations so far. As it stands, the negotiators have made progress in tackling technical issues relating to export competition.[142] Despite these strides however, some developed countries, especially the US have intimated their political unwillingness to comply with their commitments and the possibility of eliminating subsidies remains slim. In all, the problem is political, for it is until politicians have changed their attitudes that Doha negotiations will yield fruits for the entire WTO member countries alike. The United States stands out as the stumbling block to the final conclusion of the talks.[143] From the trend of events, even if draft proposals succeed in the talks, chances to woe Washington into signing the multilateral remain uncertain. For instance, in an interview with the Financial Times, the former presidential aspirant Hillary Clinton[144] expressed her hesitation in deciding whether or not to pursue Doha Round talks.[145] It is a trite indication of lack of political will in the pursuit of Doha Development Agenda. This finding therefore dispels Wafula’s argument that it is the poor countries that are holding back the progress of the talks.[146] The real stumbling blocks are developed countries such as the United States and until they swallow their pride will negotiations succeed. This is because as seen from the previous chapters, developing countries are determined to fight what they believe should be they fair share of world agricultural trade. As a result, they garnered sympathy from not only NGOs but also influential personalities like the former UN secretary General Kofi Annan. It is my considered view that developing countries are justified in demanding for the incorporation of non-trade concerns into the negotiations and indeed exploit these negotiations to bargain for what is due to them.
4.3 Recommendations
In the first instance, it is deduced from the previous discussions that the success of Doha talks is predicated on the political will of negotiating governments. Therefore, there is need for respective governments to take positive steps to honor their obligations under the AoA, lest the agreement remains a scarecrow.
Secondly, the negotiators need to follow the guidelines laid down by Article 20 of the AoA; they need to take into account the experience to-date in a sense of what effects have subsidies so far caused to developing countries; non-trade concerns such food security should be integrated in the negotiations.
Also, special and differential treatment for developing countries should not be sidelined having regard to the state of financial constipation in these countries-implying a likely difficulty in their implementation of their commitments if they are not given special consideration.
The research revealed that member countries are resorting to litigation as the most effective and shortest route to challenging subsidies head-on. This has the effect of derailing the negotiations which take a long process. It is the researcher’s view however that much as litigation is important, it should not be preferred at the expense of the negotiations. Instead, developing countries should embrace the talks as they offer them a platform through which they can vehemently demand for their rightful share of world agricultural trade.
Also, developing countries are encouraged to collaborate amongst themselves because it is through such collaboration that they can reach a common negotiating position before going for the talks. Such collaboration may take the form of regional blocs like the East African Community, SADC, COMESA, to mention but a few. As these regional blocs pursue their regional interests, it would be better if Africa as a Continent established a single negotiating bloc to champion her interests. This will eliminate the possibility of developing countries opposing themselves during the negotiations.
In Chapter two, the study revealed that some developing countries shun agricultural liberalization for fear of losing out on benefits accruing from non-reciprocal preferential trade schemes with developed countries. The negotiators need to come up with a scheme providing aid to poor and developing Members as one of way of persuading them to accept agricultural liberalization. This way, rather relying on preferential trade schemes, developing countries will be able to modern their agricultural sectors and become competitive in the global market.
Most importantly, there is need to separate politics from trade if agricultural trade liberalization is to be achieved for the benefit of all contracting parties.
Suffice to note that the AoA holds a lot of lacunae and therefore need to be overhauled for the benefit of agricultural liberalization. The agreement does not define what amounts to a subsidy. For this reason, cross-references have to be made to the SCM in order to interpret it. This, together with Article 9.1 has raised problems in interpretation as Article 9.1 does not expressly outlaw indirect support by the governments. Notable of such problems was encountered in the Canada-Milk case where the decision of the Panel had to be reversed on the ground that it did not make reference to the SCM Agreement. It is my submission that had the AoA been conclusive on what amounts to a subsidy, the Panel would have disposed off the matter once and for all, thereby saving the Appellate Body of its valuable time. Besides, this would put an end to the vice of developed countries attempting to appeal the Panel’s decisions when they know that they are in the wrong, but for the weaknesses in the law, they [developed] chose to appeal.
Furthermore, there is need to revisit Article 13 of the AoA- commonly known as the “Peace clause” and allow countries, especially developing countries, to apply countervailing measures where their domestic farms are threatened by cheap imports dumped by developed countries. Currently, as subsidies falling under Article 13 are exempted from being challenged as illegal and accordingly, the contracting parties are enjoined from invoking the Article 3 and 5 of the SCM Agreement, yet the this clause was supposed to apply during the implementation which elapsed in 2000 and 2004 for developed and developing countries respectively. If left intact, there is a likelihood that member countries will continue to invoke it for their protection in situations where they have dishonored their commitments, ultimately undermining the prime objective of achieving a fair international trading system.
In conclusion, although the elimination of subsidies and inclusion of non-trade concerns into the agenda of the talks is crucial, developing countries will not benefit if their negotiators are not trained. There is therefore need to train negotiators in International trade and equip them with advocacy skills. Once trained, they will able to identify loopholes that developing countries may be exploiting to cheap them through the talks. This, coupled with advocacy skills, they will ably champion the interests of their respective countries.
Bibliography
Books
Joseph E. Stiglitz. Globalization and Its Discontents (2002), W.W. Norton and Company, Penguin Books, United States
Joseph E. Stiglitz. Making Globalization Work (2006), W.W. Norton and Company Inc., United States.
Reports
Charles E. Hanrahan. The African Cotton Initiative and WTO Agriculture Negotiations, Congress Research Service (CRS) Report for Congress, January 2004, pp.1-2, 6.
Nicholas Imboden, Liberalization of Agricultural- A solution? A Report of the Conference Rapporteur on Policies Against Hunger, IDEAS Centre Geneva Berlin, 22.10. 2004
Susan B. Epstein, GATT: The Uruguay Round Agreement and Developing Countries, Congressional Research Service Report. See http://www.natlaw.com/pubs/gatt.htm
Watkins K. and Braun. J. V, Time To Stop Dumping On The World Poor, 2002-2003 IFPRI Annual Report Essay, accessed from : http://www.ifpri.org/pubs/books/ar2002/ar2002_essay01.htm
Working Papers
CSC Sekhar, Volatility of Agricultural Prices: An analysis of major International and Domestic markets, Indian Council for Research on International Economic Relations, Working Paper No. 13, June 2003.
Ratnakar Adhikari and Navin K. Verma, Agricultural Liberalization: Boon or Bane?, Briefing Paper No.4 /2001 of South Asia Watch on Trade, Economics and Environment.
Sandrey R. Agriculture and The WTO-10 years on, Tralac Working Paper No. 1/2006. Trade Law Centre for Southern Africa
Watkins K. The Impact of United States Cotton Subsidies on Africa, Oxfam Briefing Paper No. 30 of 2002, p.23
Articles
Adam Blake, Andrew Mckay and Oliver Morrissey, The Impact on Uganda of Agricultural Trade Liberalization, Centre for Research in Economic Development and International Trade, University of Nottingham, Credit Research Paper No.01 of 2007
Amartya S. Rigged Rules and double standards: Trade, Globalization and the Fight against poverty (2002), Make trade fair, Oxfam.
Bjөrnskov and Lind. Underlying Policies in the WTO, the Harbinson Proposal and the Modalities Agreement (2005), Revue ‘economique, Vol.56, No.6, pp.1385-1411; Sciences Po University Press, Accessed: 21/21/2009 07:11 from http://www.jstor.org/stable/25046504.
Davis C. International Institutions and Issue Linkage: Building capacity for Agricultural trade Liberalization (2004), The American Political Science Review, Vol. 98, No.1, pp.153-169. Accessed on 17/02/2009 02:22. http://www.jstor.org/stable/4145303
Delcros. The Legal Status of Agriculture in the World Trade Organization: State of Play at the start of Negotiations, Journal of World Trade (2002) Vol. 36(2), at pp.233-234, Kluwer Law International.
Farm Subsidies: Support for Farmers or Catalysts of Poverty?, Accessed from: www.pcusa.org/trade/downloads/subsidies.pdf
Fasan O. Global Trade Law: Challenges and Options for Africa (2003), Journal of African Law, Vol. 47, No. 2, pp.143-173. Cambridge University Press. Accessed: 17/02/2009 02:20
Green and Griffith. Globalization and Its Discontents (2002), Royal Institute of international Affairs, Vol.78, No.1, and pp.49-68 Accessed: 09/03/2009 06:16. http://www.jstor.org/stable/3095974
H. E. Zunckel. The African Awakening in United States-Upland Cotton, Journal of World Trade, Vol.39 No.6 of 2005, pp.1071-1093, Kluwer Law International, The Netherlands.
H’elio Tollini, EU Takes First Step to clarify Beef Hormones Science, Bridges, Year 12 No.6 December 2008-January 2009, p.14, A Publication of ICTSD.
Heinisch L., West Africa Versus The United States On Cotton Subsidies: How, Why And What Next? (2006). Journal of Modern African Legal Studies, Vol. 44, Issue 2 pp..251-274. Cambridge University Press
http://www.acpsugar.org/old/wto.htm
Ilan Kapoor (2004), Deliberative Democracy and the WTO, Review of International Political Economy, Vol. 11, No. 3, pp. 522-541,Taylor & Francis, Ltd. http://www.jstor.org/stable/4177509 Accessed: 13/04/2009 12:52
John Baffes. Brazil vs. US: Cotton Subsidies and Implications for Development (July, 2004) accessed from http://siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/TradeNote16.pdf.
Kropp D.J, Harry de Gorter and Just R.D in their draft analysis of Consumer Financed Export Subsidies and the Agreement on Agriculture dated March 5, 2009.
McMahon. International Agricultural Trade Reform and Developing Countries: The Case of the European Community (1998), The International and Comparative Law Quarterly, Vol. 47, No.3, pp.632-646, Cambridge University Press. Accessed: 04/04/2009 03: 55
Raymond Hopkins., Food Fights over Free Trade: How International Institutions Promote Agricultural Trade Liberalization
Rena Ravinder. “WTO and Agricultural Trade Liberalization-A Focus on China”, Ujjain (India): Madhya Pradesh Journal of Social Sciences, Vol. 11 No.1 (January-June 2006).
Surya P. The Road from Doha: The Issues for the Development round of the WTO and the Future of International Trade (2003), The International and Comparative Law Quarterly, Vol. 52, No.2, pp.425-446, Cambridge University Press. Accessed on: 16/02/2009 05:38 from http://www.jstor.org/stable/3663115
Tim Conway, Doha Development Agenda Impacts on Trade and Poverty, Overseas Development Institute, October 2004, Accessed from http://www.odi.org.uk/publicationsbriefing/doha/
Vandenbussche. H., (2008), Comment on the US-Upland Cotton Case, prepared for the ALI Project on the case law of the WTO, World Trade Review, Vol. 7, No.1, pp.211-217, United Kingdom.
WTO, Understanding the WTO: The Agreements, Agriculture; fairer Markets for Farmers. Accessed from http://www.wto.org/english/theWTO_e/whatis_e/tif_e/agrm3_e.htm (4/5/2009)
Policy Papers
Bridges, year 12 No.6 December 2008-January 2009, pp.7-21, A Publication of the International Centre for Trade and Sustainable Development (ICTSD)
Hanson V., Doha Deal Slated For 2008, But Prospects Remain Slim, Special Edition Of Trade Negotiations Insights, Vol.6 No.8 December 2007 And January 2008. ICTSD Publication.
Panagariya A. Agricultural Liberalization and the Least developed Countries: Six Fallacies (2005), Global Trade Policy
Zaino C., Prospects for a late year mini-ministerial disintegrate. Trade Negotiations Insights, Vol.7 No.10 December 2008/January 2009. A publication of the International Centre for Trade and Sustainable Development (ICTSD).
News Paper Articles
“US blamed as Trade Talks end in acrimony”, Financial Times, 2006-06-24. Accessed from http://en.wikipedia.org/wiki/agricultural_subsidies≠cite_ref-7
Andrew Cassel, Why U.S. Farm Subsidies Are Bad for the World, (2002-05-06), Philadelphia Inquirer.
Ian Goldin. Agricultural Trade Liberalization: Threat or Promise, OECD Observer, Vol.9, 1990
Wafula W. WTO abandons plans for trade talks (Monitor December 29, 2008)
Presentations
Anderson K. Trade Liberalization, Agriculture, and Poverty in Low-Income Countries, World Institute for Development Economics Research, Discussion Paper No. 25 of 2003
Beghin, Holst and Van der Mensbrugghe, Global Agricultural Trade and the Doha Round: What Are the Implications for North and South?, Centre for Agricultural and Rural Development, Iowa State University, Working Paper No 2-WP 308, June 2002.
Jean-Christophe Bureau, The consequences of Agricultural trade liberalization for developing countries: Distinguishing between genuine benefits and false hopes, Discussion paper No.73/ April 2005 for the Institute for International Integration Studies.
Khor M., Rethinking Liberalization And Reshaping The WTO, Presentation At The World Economic Forum, Davos, 28 January 2000, Africa Policy E-Journal. Accessed From:Http://Www.Africaaction.Org/Docs00/Twn0001b.Htm
Publications
Jacob Baskin, Brown University Simulation of the United Nations, 2007
Making Globalization Work For Everyone, The European Union And World Trade (2003). A Publication Of The European Commission. Accessed On 09/03/2009 From Http://Ec.Europa.Eu/Publications/Booklets/Move/37/En.Pdf
Mercado. Back to Basics: Market Access Issues in the Doha Agenda,. A publication of UNCTAD, 2003, p.44
Legal Documents referred to
1. The Agreement on Agriculture (AoA)
The Agreement on Safeguard measures (SG Agreement)
The Agreement on subsidies and Countervailing Measures, Apr.15, 1994, Marrakesh Agreement Establishing the World Trade Organisation, Annex 1A, Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts 264 (1994)
The Agreement on Technical Barriers to Trade (TBT Agreement)
The Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement)
6. The General Agreement on Trade and Tariffs 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A [GATT 1994]
7. The General Agreement on Trade and Tariffs (GATT), 1947
[1] This is because in the aftermath of the Second World War, almost all countries in the world restricted imports in their countries with the intention of protecting their respective economies. Agriculture was regarded as a sector of economic importance for purposes of achieving food security and dealing away with the experience of food shortages caused by the War. Thus, besides restricting imports, developing countries continued to support their domestic farms through subsidies and this explains why rules on Agriculture under the GATT 1947 were weak compared to those that regulated manufactured goods. See Making Globalization Work For Everyone, The European Union And World Trade (2003), p.5. A Publication Of The European Commission. Accessed On 09/03/2009 From Http://Ec.Europa.Eu/Publications/Booklets/Move/37/En.Pdf. Also see, Sandrey. R, Agriculture and the World Trade Organisation-10 Years On, TRALAC Working Paper No.1/ January, 2006, p.1.
[2] Surya, P.426. See Surya P, The Road From Doha: The Issues For The Development Round Of The WTO And The Future Of International Trade, The International And Comparative Law Quarterly, Vol. 52, No.2 (Apr., 2003), Pp.425-446, Cambridge University Press. Accessed On: 16/02/2009 05:38 From Http://Www.Jstor.Org/Stable/3663115. As Is Evident From Sandrey’s Working Paper, Provision For Agricultural Products Into The GATT Agreements Remained Absent Not Until The Uruguay Round. See Sandrey R. Agriculture And The WTO-10 Years On, TRALAC Working Paper No. 1/2006. Trade Law Centre For Southern Africa. To Mcmahon, Global Agricultural Policy And Trade Is Critical To Sustainable Development And Poverty Alleviation In Developing Countries As Agriculture Is The Important Source Of Income, Employment And Export Earnings And Central To The Livelihood Of Their Inhabitants. See Mcmahon, International Agricultural Trade Reform And Developing Countries: The Case Of The European Community, The International And Comparative Law Quarterly, Vol. 47, No.3 (Jul., 1998), Pp.632-646, Cambridge University Press. Accessed: 04/04/2009 03: 55
[3] Sandrey. R, Agriculture and the World Trade Organisation-10 Years On, TRALAC Working Paper No.1/ January, 2006, p.1. This was partly because rather than being driven by purely economic principles, there was a continuous ideology that agriculture enjoyed a different status.[3] Indeed, as Sandrey notes, domestic agricultural policies were driven by a perceived need for self-sufficiency in food security, war time shortages memories and strong government decision-making representation. This resulted into excess production for which the governments had to provide further subsidies to dispose off surplus products on world markets.
[4] See Amartya S. Rigged Rules and double standards: Trade, Globalization and the Fight Against Poverty (2002), Make Trade Fair, A Publication of Oxfam; Heinisch L., West Africa Versus The United States On Cotton Subsidies: How, Why and What Next? (2006), Journal of Modern African Legal Studies, Vol.44, Issue 2, pp.251-274, Cambridge University Press
[5] Panagariya, P.1 Reiterates The View That It Was The Uruguay Round Which Brought Agriculture Within The Purview Of Global Trading System. That However Its Success In Opening Up The Sector For Global Competition Was Limited And This Explains Why It Is A Top Priority At Doha Negotiations. See: Panagariya A. Agricultural Liberalization And The Least Developed Countries: Six Fallacies (2005), Global Trade Policy. Sandrey Supports This View By Asserting That Agricultural Products Were For The First Time Comprehensively Included In The Multilateral Trade Negotiations At Uruguay Round. See Ron Sandrey, Agriculture And The WTO-10 Years On, Tralac Working Paper No. 1/2006. Trade Law Centre For Southern Africa. It should however be recognized that the preceding Rounds contributed substantially to the development of trade law. For instance the Tokyo Round is applauded for producing the Anti-dumping and Subsidies Agreement which dealt with non-trade barriers and incorporated a system of generalized system of preferences into the GATT 1947 and for Kennedy Round dealt with problems of developing countries through the introduction of special differential treatment provision in the GATT-see Articles 36-38 of the GATT 1947. In all, GATT 1947 is applauded for successfully lowering tariffs which were initially a major barrier to free trade because under it the first five rounds of multilateral negotiations succeeded in lowering tariff barriers substantially though not completely. However, inspite of these achievements agriculture remained the highly distorted sector as protectionism continued to thrive emphasis being put at supporting farm production with a view of rectifying food shortages in the aftermath of the Second World War. See Panagariya (2005); Sandrey (2006) and Ratnakar and Verma (2001)
[6] 20.Continuation Of The Reform Process: “Recognizing That The Long-Term Objective Of Substantial Progressive Reductions In Support And Protection Resulting In Fundamental Reform Is An Ongoing Process, Members Agree That Negotiations For Continuing The Process Will Be Initiated One Year Before The End Of The Implementation Period, Taking Into Account: (A) The Experience To That Date From Implementing The Reduction Commitments; (B) The Effects Of The Reduction Commitments On World Trade In Agriculture; (C) Non-Trade Concerns, Special And Differential Treatment To Developing Country Members, And The Objective To Establish A Fair And Market-Oriented Agricultural Trading System, And The Other Objectives And Concerns Mentioned In The Preamble To This Agreement; And (D) What Further Commitments Are Necessary To Achieve The Above Mentioned Long-Term Objectives”
[7] Article 20 Mandates The Member States To Progressively Continue The Reform Process On Reduction Of Domestic Support By Taking Into Account The Effects Of These Commitments On World Trade On Agriculture And Among Others The Special And Differential Treatment Of Developing Members.
[8] Www.Wto.Org/English/Thewto_E/Whatis_E/Tif_Doha1_E.Htm#28. The Objective Of The WTO Agreement Is To Reform Trade In The Agricultural Sector And To Make Policies That Are More Market-Oriented.
[9] Under Articles 3(2) And 6 (1) Of The Agreement On Agriculture Export Subsidies On Agricultural Products Are Prohibited Unless They Are Specified In A Member’s List Of Commitments. Even Then, Where They Are Listed, The Agreement Requires WTO Members To Cut Both The Amount Of Money They Spend On Export Subsidies And The Quantities Of Exports That Receive Subsidies. Also See Delcros, The Legal Status Of Agriculture In The World Trade Organization: State Of Play At The Start Of Negotiations, Journal Of World Trade (2002) Vol. 36(2), At Pp.233-234, Kluwer Law International.
[10] On p. 3, Sandrey (supra) notes that agricultural subsidies remain at obscene levels in OECD countries.
[11] Walter Wafula; WTO Abandons Plans For Trade Talks (Monitor December 29, 2008)
[12] These including Prof. Peter Barnacle-a visiting Professor from Saskatchewan University, Professor J. Oloka Onyango Director, Human Rights and Peace Center, Makerere University and Professor Nuwagaba, of the Faculty of Social Sciences, Makerere University and Executive Director, Reev Consult and a renowned analyst of development policies.
[13] Davis C., International Institutions And Issue Linkage: Building Capacity For Agricultural Trade Liberalization (2004), The American Political Science Review, Vol. 98, No.1, Pp.153-169. Accessed On 17/02/2009 02:22. Http://Www.Jstor.Org/Stable/4145303
[14] Ibid, p.16. Davis Further Notes That Industrialized Nations Spend Over $ 300 Billion Per Annum Subsidizing Their Farmers. No Doubt This Distorts Global Trade (Emphasis Mine).
[15] Making Globalization Work For Everyone, The European Union And World Trade (2003). A Publication Of The European Commission. Accessed On 09/03/2009 From Http://Ec.Europa.Eu/Publications/Booklets/Move/37/En.Pdf
[16] Ibid, p.5. The European Union calls for a system that is transparent and fully open in a sense that it is open to public scrutiny; its strategy is to open up its market as other WTO member countries do likewise.
[17] Hanson V., Doha Deal Slated For 2008, But Prospects Remain Slim, Special Edition Of Trade Negotiations Insights, Vol.6 No.8 December 2007 And January 2008. ICTSD Publication At P.23
[18] While Addressing Trade Ambassadors In Geneva At The End Of November 2008, Lamy Vividly Stated That Reaching A Compromise On The Formulae And Figures For Tariffs And Subsidy Cuts Is The ‘Gateway To Concluding Doha Round Table Talks.
[19] This Anti-Doha Political Will Is Discernible From The Words Of Former Presidential Aspirant Hillary Clinton When She Openly Pronounced That She Would “Take A Hard Look” Before Deciding Whether Or Not To Pursue The Doha Round Once Elected President.
[20] Heinisch L., West Africa Versus The United States On Cotton Subsidies: How, Why And What Next? (2006). Journal Modern African Legal Studies, Vol. 44, Issue 2 Pp.251-274. Cambridge University Press
[21] Ibid p.264
[22] Quoted In Heinisch (2006) Supra P.264
[23] Khor M., Rethinking Liberalization And Reshaping The WTO, Presentation At The World Economic Forum, Davos, 28 January 2000, Africa Policy E-Journal. Accessed From:Http://Www.Africaaction.Org/Docs00/Twn0001b.Htm
[24] Ratnakar Adhikari and Navin K. Verma, Agricultural Liberalization: Boon or Bane?, Briefing Paper No.4 /2001 of South Asia Watch on Trade, Economics and Environment., p.7
[25] Ibid.
[26] Sandrey R. Agriculture and The WTO-10 years on, Tralac Working Paper No. 1/2006. Trade Law Centre for Southern Africa
[27] Supra, p.3
[28] Joseph E. Stiglitz. Making Globalization Work (2006), W.W. Norton And Company Inc., United States.
[29] Ilan Kapoor (2004), Deliberative Democracy and the WTO, Review of International Political Economy, Vol. 11, No. 3, pp. 522-541,Taylor & Francis, Ltd. http://www.jstor.org/stable/4177509 Accessed: 13/04/2009 12:52
[30] Surya P. The Road From Doha: The Issues For The Development Round Of The WTO And The Future Of International Trade (2003), The International And Comparative Law Quarterly, Vol. 52, No.2, Pp.425-446, Cambridge University Press. Accessed On: 16/02/2009 05:38 From Http://Www.Jstor.Org/Stable/3663115
[31] Susan B. Epstein, GATT: The Uruguay Round Agreement and Developing Countries, Congressional Research Service Report of NLCIFT (1998). See http://www.natlaw.com/pubs/gatt.htm
[32] Ibid, p.235.Under Article 3.2 of the Agreement on Subsidies and Countervailing Measures, the Contracting Parties are prohibited from granting or maintaining subsidies-whether contingent, in law or in fact, solely or as part of other conditions except as provided for in the Agreement on Agriculture and Article 5 which outlaws use of subsidies to injure or to the detriment of another member country expressly states that the Article does on apply to subsidies as on agricultural products as provided in Article 13 of the Agreement on Agriculture. See. Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organisation, Annex 1A, Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts 264 (1994) [SCM Agreement].
[33] www.pcusa.org/trade/downloads/subsidies.pdf.
[34] Farm payments in the United States are usually cash payments or special loans made directly to participating producers and are generally given only to the producers of certain commodities including corn, wheat, soybeans, rice, upland cotton, and oilseeds. According to http://www.ewg.org/, farm payments given to support the production of certain commodities totaled over $11 billion in 2003. Conservation payments are given to farmers engaged in sustainable agriculture practices for purposes of protecting environmental resources. On the other hand, disaster payments are made to crop producers when either planting is prevented or crop yields are abnormally low because of problematic weather conditions.
[35] www.pcusa.org/trade/downloads/subsidies.pdf (supra)
[36] Delcros (supra), p.237-238
[37] http://www.wto.org/english/theWTO_e/whatis_e/tif_e/agrm3_e.htm. Further economic conditions are considered by Delcros (supra) at p.238 that support must be “provided through a publicly-funded Programme (including government revenue foregone) not involving transfers from consumers”; and that it “shall not have the effect of providing price support to producers”. These are specifically provided for under Paragraphs (a) and (b) of Point 2 of Annex 2 to the Agreement on Agriculture. It should further be noted that domestic support must not only be neutral from the economic point of view, rather they must also be included among the policies listed in part 2 Annex 2.
[38] Delcros(supra), p.238
[39] To guarantee economic neutrality of the payments, the text of Annex 2 to the AoA adds that these programmes must not involve direct payments measures that vary according to turnover or output. Also see Delcros (supra), p.238
[40] Delcros (supra), p.235.
[41] ibid.
[42] Also see Delcros (supra), p.240-248 for an in-depth discussion of export subsidies. In this article he discusses the legal status of Agriculture in international Trade.
[43] According to Article 9.1 of the AoA, the following export subsidies are subject to reduction commitments: (a) the provision by governments or their agencies of direct subsidies, including payments-in-kind, to a firm, to an industry, to producers of an agricultural product, to a cooperative or other association of such producers, or to a marketing board, contingent on export performance; (b) the sale or disposal for export by governments or their agencies of non-commercial stocks of agricultural products at a price lower than the comparable price charged for the like product to buyers in the domestic market; (c) payments on the export of an agricultural product that are financed by virtue of governmental action, whether or not a charge on the public account is involved, including payments that are financed from the proceeds of a levy imposed on the agricultural product concerned or on an agricultural product from which the exported product is derived; (d)the provision of subsidies to reduce the costs of marketing exports of agricultural products (other than widely available export promotion and advisory services) including handling, upgrading and other processing costs, and the costs of international transport and freight; (e) internal transport and freight charges on export shipments, provided or mandated by governments, on terms more favorable than for domestic shipments and (f) subsidies on agricultural products contingent on their incorporation in exported products.
[44] Article 10.1 of the Agreement on Agriculture is to the effect that export subsidies not listed in paragraph 1 of Article 9 shall not be applied in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments; nor shall non-commercial transactions be used to circumvent such commitments.
[45] WTO, Understanding the WTO: The Agreements, Agriculture; fairer Markets for Farmers. Accessed from http://www.wto.org/english/theWTO_e/whatis_e/tif_e/agrm3_e.htm (4/5/2009)
[46] Delcros (supra), p.233.
[47]ibid, p.233.
[48] http://www.wto.org/english/theWTO_e/whatis_e/tif_e/agrm3_e.htm (supra)
[49] Delcros (supra), p.233.
[50] The Agreement on safeguards applies pursuant to Article XIX of GATT 1994. As such, safeguard measures can only be applied in emergency situations and further still in circumstances where an increase in imports of a particular product has caused or threatens to cause serious injury to the importing Member’s domestic industry. It should be noted that such measures must be temporary, applied in a non-selective basis and the Member imposing them must be ready to compensate members whose trade is affected by the safeguard measures. See Articles 1 and 2 thereof.
[51] Ibid, p.234.
[52] Supra pp.219-220
[53] In the Brown University Simulation of the United Nations, 2007 at p.3, Jacobs asserts that in the United States, Japan, France and other Agricultural EU Nations subsidies are a must-have political tool. In Germany, the weight of farming interests in the south of the country was decisive in keeping Chancellor Kohl in power while in France the rural electorate still influences a very large share of the vote although farmers account for only some 5 percent of the working population. Similarly, in Japan or Canada the political systems encourage over-representation of rural rather than urban areas while in the United States the thinly populated states of the farm belt have as many senators as densely populated states like California. Also see www.pcusa.org/trade/downloads/subsidies.pdf where it is said that because U.S farmers are well organized and wield significant political power finding political will to reform U.S agricultural subsidies be quite difficult.
[54] In his 28th January 2000 presentation to the World Economic Forum at Davos entitled “Rethinking Liberalization and Reshaping the WTO”, Martin Khor had predicted that agricultural liberalization would expose farmers in developing countries to global competition, drive out those unable to compete with cheap imports, but particularly he noted that local food production could also be threatened by cheaper imports. Accordingly, developing countries would then become more dependent on imports for their food supplies thereby eroding their national food security. Ratnakar and Verma also support the foregoing argument. This is because, they argue, agricultural growth is essential for ensuring food security and alleviating poverty. See Ratnakar Adhikari and Navin K. Verma, Agricultural Liberalization: Boon or Bane?, Briefing paper No.4/ 2001 of South Asia Watch on Trade, Economics and Environment.
[55] Rena Ravinder. “WTO and Agricultural Trade Liberalization-A Focus on China”, Ujjain (India): Madhya Pradesh Journal of Social Sciences, Vol. 11 No.1 (January-June 2006).
[56] Report of the Conference Rapporteur, IDEAS Centre Geneva Berlin, 22.10. 2004, p.3
[57] CSC Sekhar, Volatility of Agricultural Prices: An analysis of major International and Domestic markets, Indian Council for Research on International Economic Relations, Working Paper No. 13, June 2003.
[58] P.1
[59] Bouẽt (2004c) quoted in Jean-Christophe Bureau, p.3. Bouẽt for instance argues that a reduction in tariffs in developed countries would generate an erosion of preferences to the detriment of African countries. He asserts that agricultural liberalization contradicts the objectives of preferential agreements such as African Growth Opportunity Act (AGOA) under the auspices of the United States. The same effect would be inflicted on the Cotonou Agreement between the EU and African, Carribean and Pacific (ACP) countries. See. The consequences of Agricultural trade liberalization for developing countries: Distinguishing between genuine benefits and false hopes, Discussion paper No.73/ April 2005 for the Institute for International Integration Studies.
[60] Bjөrnskor and Lind argued that developing countries risk loosing out on preferential agreements, notably tariff preferences since under the multilateral trading system all contracting parties to the Agreement on Agriculture are equal; there is a leveled ground and the developing countries do not expect concessions. See Bjөrnskor and Lind, Underlying Policies in the WTO, the Harbinson Proposal and Modalities Agreement, Revue ẽconomique, Vol.56, No.6, Nov. 2005, p, Sciences Po University Press.
[61]supra
[62] Raymond Hopkins., Food Fights over Free Trade: How International Institutions Promote Agricultural Trade Liberalization
[63] Supra, p.9.
[64] According to Jacob Baskin in the Brown University Simulation of the United Nations at p.2, Agri-business lobbies in the United States and European Union are politically strong that the possibility of their countries compromising the subsidies they advance to them in favor of full agricultural liberalization is so slim.
[65] Rena (supra), p.3
[66] On p.5, Rena concludes by asserting that in the face of rising subsidies and increasing dumping, import restrictions and countervailing duties are a right and a survival necessity; that through the AoA, the WTO robbed countries of this right through Article 4 and now would like to rob them of even of temporary safeguards by proposing to eliminate Article 5. He called upon countries to focus on stopping dumping by eliminating Article 4 of the AoA which is the basis of the destruction of security and livelihoods in the third world through dumping; that once this crippling clause is removed, countries can start building a global system on citizen’s initiatives and national priorities that ensures sustainability, support small farmers, ensures just prices, prevent dumping, protects the countryside and environment and ensures good, safe, adequate food for all.
[67] http://en.wikipedia.org/wiki/agricultural_subsidies≠cite_ref-7. “US blamed as Trade Talks end in acrimony”, Financial Times, 2006-06-24. It is argued that low prices encourage developing countries to be dependent buyers of food from wealthy countries. Instead of improving the agricultural and economic self-sufficiency of their home countries, local farmers are forced out of the market. Also see Andrew Cassel, Why U.S. Farm Subsidies Are Bad for the World, (2002-05-06), Philadelphia Inquirer.
[68] Supra p.2
[69] Supra, p.2
[70] Jacob Baskin, Brown University Simulation of the United Nations 2007, p.2
[71] Supra.
[72] P.23
[73] Jacob Baskin, Brown University Simulation of the United nations, 2007.
[74] Ibid p.2. Baskin was mainly concerned with the analysis of U.S subsidy program, EU and Japan and its effect. At page 2, he argues that subsidies at widely criticized for decreasing the prices that farmers in developing countries in Asia and Africa would receive for their goods.
[75] supra , p.5
[76] supra, p.5
[77] supra, p.5. This view is also supported by Martin Khor (supra) to the effect that reduction of subsidies and tariff cuts would impose global competition on the domestic farm sector thereby driving out those who are unable to compete with cheaper imports.
[78] see www.pcusa.org/trade/downloads/subsidies.pdf (Farm Subsidies: Support for Farmers or Catalysts of Poverty?, p.1
[79] Baskin (supra), p.2 corroborates my view.
[80] Mercado. Back to Basics: Market Access Issues in the Doha Agenda, p.44., A publication of UNCTAD, 2003
[81] This is corroborated by Ratnakar and Verma in their second paragraph to the introduction of their Briefing Paper entitled “Agricultural Liberalization: Boon or Bane?” No.4 of 2001. A Publication of South Asia Watch on Trade, Economics and Environment. The authors state that Agricultural Liberalization is not a North-South Issue unlike other issues at WTO. By implication, this means that disputes as well are not confined to North-South differences, but even the North itself attack each other’s agricultural policies as will be illustrated in the Canada –Milk and Hormone-Treated Beef Cases.
[82] Panel Report, Canada-Measures Affecting the Importation of Milk and the Exportation of Diary Products, WT/DS103/R, WT/DS113/R, adopted 27 October 1999, as modified by the Appellate Body Report WT/DS103/AB/R, WT/DS113/AB/R, DSR 1999: VI, 2097
[83] Panel Report, Canada-Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321/R, adopted 14 November 2008,as modified by Appellate Body Report WT/DS321/AB/R
[84] Appellate Body Report, European Communities- Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997: II 591.
[85] As found out by the original panel, Canada provided export subsidies through Special Milk Classes 5(d) and 5(e) within the meaning of Article 9.1(c) for quantities of exports in excess of quantity commitment level its schedule of commitments. By way of implementation, Canada abolished Special Milk Class 5(e) but restricted export subsidies under Special Milk Class 5(d) to its commitment levels. At the same time, Canada established a new class of milk, Class 4(m), under which over-quota milk could be sold as domestic animal feed. Canada otherwise left unchanged its domestic milk supply management system, under which domestic milk supply was controlled through the allocation of quota to individual milk producers by government agencies. Generally, a producer could sell milk domestically only within the limits of its quota. The only exception is that a producer could sell over-quota milk in the new Class 4(m) as domestic animal feed, but for a much lower price. The price of domestic milk was fixed by government agencies. Government agencies also marketed domestic milk, collected the sales proceeds and distributed these proceeds among producers. At the same time Canada introduced a new category of milk for export processing, known as "commercial export milk" ("CEM"). Sales of CEM were made by Canadian producers to Canadian processors, for processing of that milk into various dairy products for export. These sales were made pursuant to "pre-commitment" contracts, that is, contracts concluded in advance of milk production. Canadian producers could sell any quantity of CEM to processors on terms and conditions freely negotiated between the producer and the processor. Sales of CEM did not require a quota or any other form of permit from the Canadian government or its agencies. Revenues derived from sales of CEM were collected directly by producers, without government involvement. However, if a dairy product derived from CEM was sold on the domestic market, the processor would be financially penalized for diverting the dairy product into the domestic market.
[86] Delcros (supra), p.243.
[87] Ibid.
[88] The phrase “by virtue of governmental action” under Article 9.1 (c) of the Agreement on Agriculture was interpreted to imply that the Canadian Government had sanctioned the private program and that therefore could not be allowed to abdicate its responsibility. This view has been supported by Kropp D.J, Harry de Gorter and Just R.D in their draft analysis of Consumer Financed Export Subsidies and the Agreement on Agriculture dated March 5, 2009.
[89] This view is shared by Kropp, Gorter and Just in their draft analysis of consumer Financed subsidies and the Agreement on Agriculture dated March 5, 2009. At page 7, they emphasize that support does not have to be provided directly by the government but that can also be provided by a governmental agency, including marketing boards. Further, at page 30, they rubbish the current definition of an export subsidy which requires a benefit to be conferred, the benefit to be contingent upon exports and the benefit to be financed the government as misleading. They call for the adoption of this modified definition of an export subsidy in future trade agreements and negotiations. Based on their analysis they criticized the Appellate Body for its failure to rule that Milk class 5abc support by the Canadian government amounted to an export subsidy within the meaning of Article 1(c) of the Agreement on Agriculture which defines the term “budgetary outlays” to include revenue foregone because to them this provision means that the government can finance an export subsidy simply by not collecting a tax or levy. See page 6 of the article. See also www.4.ncsu.edu/.../Kropp_deGorter_Just_Consumer_Financed_Export_Subsidies.pdf
[90] In para.120 of its decision, the Appellate Body notes that at every stage in the supply of milk under special classes 5(d) and 5(e) government action was not simply involved but that this was in fact indispensable to enable the supply of milk to processors for export and hence the transfer of resources to take place; that according to the regulatory framework, government agencies stood so completely between the producers of milk and the processors or exporters; that in these circumstances, it had no doubt that the transfer of resources took place by virtue of government action. See also Delcros. F. , The Legal Status of Agriculture in the World Trade Organization, The state Play at the Start of Negotiations, Journal of World Trade, Vol. 36 No.2 of 2002, p.244, footnote 64.
[91] Ibid, p.244. According to Delcros, the Appellate Body held that there was support because with out governmental intervention, the system could not have functioned and processors (exporters) could not have managed to buy milk at reduced prices. see Paragraph 120 of the Appellate Body’s decision.
[92] Panel Report, para. 5.89. see also Canada-Measures Affecting the Importation of Milk and exportation of Diary Products, Recourse to Article 21.5 of DSU by New Zealand and the United States, Panel Report, pp.32-33 where it confirmed the panel’s decision. There, it was stated that the Panel has properly assessed the evidence and therefore there was no valid reason to warrant an interference with its decision. The Appellate Body stated that it could only interfere with the assessment only where the Panel had exceeded its discretion as the trier of facts granted under Article 11 of DSU.
[93] Appellate Body Report, para. 144 (b).
[94] Ibid, para.144 (a).
[95] Id, para. 145.
[96] Canada-Measures Affecting the Importation of Milk and the Exportation of Diary Products, Recourse to Article 21.5 of the DSU by New Zealand and the United States, Report of the Panel, paragraph 11 (ii), p.11. Also refers to Part II of Canada Gazette, Vol. 135, and No.1: Regulatory Impact Analysis Statement for the Regulations under the Canadian Diary Commission Act amending the Diary Products Marketing Regulations.
[97] Panel Report, Canada-Continued Suspension of Obligations in the EC-Hormones Dispute, WT/DS321/R, adopted 14 November 2008, as modified by Appellate Body Report WT/DS321/AB/R.
[98] H’elio Tollini, EU Takes First Step to clarify Beef Hormones Science, Bridges, Year 12 No.6 December 2008-January 2009, p.14, A Publication of ICTSD.
[99] http://www.wto.org/english/tratop_E/dispu_e/cases_e/ds26_e.htm
[100] Under Article XI of GATT 1947 as amended by GATT 1994, States Parties are enjoined from prohibiting or restricting the importation or exportation or sale of any product from the territory of another contracting party, except for duties, taxes or other charges. This is because under Article III of GATT 1947 such products are supposed to be accorded the same treatment the moment they enter another contracting party’s territory. Accordingly, any attempt at differential treatment from domestic products is a contravention of WTO rules.
[101] Under Article 2 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) members are allowed to take sanitary and phytosanitary measures if it is necessary in the circumstances to protect human, animal and plant life. However, such measures shall not be applied as a disguised restriction of international trade. Accordingly, before they are applied, there shall be caused, an assessment of the risk the product sought to be restricted is likely to cause to the human, animal or plant life. Thus, under Articles 3 and 5 of the same Agreement, sanitary and phytosanitary measures will be deemed illegal if there is no such assessment. Moreover, there must be scientific evidence justifying imposition of such measures.
[102] Under Article 2 of the Agreement on Technical Barriers to Trade (TBT Agreement) although members are allowed to apply technical regulations, this shall only be done for legitimate reasons and not in a restrictive manner as to obstruct international trade.
[103] Paragraph 2 of Article 4 of the AoA bars members from maintaining, resorting to measures of the kind which have been required to be converted into ordinary customs duties except as allowed in Article 5 and Annex 5 of the AoA. Article 5 allows members to apply safeguard measures in specific circumstances and this mainly takes the form of additional custom duties as seen from paragraph 4 of that article.
[104] Members shall base their sanitary and phytosanitary measures in conformity with international standards, guidelines or recommendations based on scientific evidence as provided for under paragraph 3 is available.
[105] Ibid. See also the summary of the Panel and Appellate Body’s findings, p.7.
[106] ibid
[107] ibid
[108] Ibid,p.5.
[109] Panel Report, United States-Subsidies on Upland Cotton, WT/DS267/R, Corr.1, and Add. 1 to Add.3, adopted 21 March 2005, as modified by Appellate Body Report WT/DS276/AB/R, DSR 2005: II, 299
[110] http://www.wto.org/english/tratop_E/dispu_e/cases_e/ds267_e.htm
[111] It is stated under this Article that no member shall use subsidies as defined in Article 1 of the same agreement as to cause serious prejudice to the interests of another member.
[112] Describes the circumstances under which serious prejudice in the context of para. (c) of Article 5 of SCM may arise, notably that it may inter alia arise where; (b) the effect of the subsidy is to displace or impede the exports of alike product of another product Member from a third country market or (c) where the effect of the subsidy is a significant price undercutting by the subsidized product as compared by the price of alike product of another Member in the same market or significant price suppression, price depression or lost sales in the same market or (d) where the effect of the subsidy is an increase in the world market share of the subsidizing Member in a particular subsidized primary product or commodity as compared to the average share it had during the previous period of three years and this increase has follows a consistent trend over a period where subsidies have been granted.
[113] Article 3.1 (a) and (b) of the SCM prohibits the grant of subsidies described in Article 1 whether contingent in law or in fact and whether solely or as part of several other conditions upon the use of domestic over imported goods. A Member shall not grant these subsidies save as provided for in the Agreement on Agriculture.
[114] According to this Article, a Member is enjoined from providing export subsidies listed in paragraph 1 of Article 9 in respect of agricultural products or groups of agricultural products specified in section II of part IV of its schedule in excess of the budgetary outlay or quantity commitment levels specified therein and the same applied to those agricultural products not scheduled.
[115] Each Member is obligated to ensure that any domestic support measures in favor agricultural products which are not subject to reduction commitments are maintained in conformity with the provisions of Annex 2 to the AoA.
[116] Under this Article, Members undertook to provide export subsidies in conformity with the AoA and the commitments as specified in their respective Member’s schedules
[117] Article 9.1 explains the export subsidies that are subject to reduction commitments under the AoA.
[118] Under Article 10.1 of the AoA even if an export subsidy is not subject to reduction commitments under paragraph 1 of Article 9, it shall not be applied in a manner which results or threatens to lead to circumvention of export subsidy commitments, nor shall non-commercial transactions be used to circumvent such commitments.
[119] The Article requires that “like products” produced domestically and abroad be given equal treatment.
[120] See the summary of the dispute as at 21 January 2009. Accessed at http://www.wto.org/english/tratop_E/dispu_e/cases_e/ds267_e.htm
[121] Appellate Body Report, para.763 (e) (iv), reference being made to the Original Panel Report, para. 7.869.
[122] Ibid.
[123] Hilton E. Zunckel. The African Awakening in United States-Upland Cotton, Journal of World Trade 39 (6): pp11071-1093, 2005, Kluwer Law Internal, The Netherlands, p.1073.
[124] John Baffes. Brazil vs. US: Cotton Subsidies and Implications for Development (July, 2004) accessed from http://siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/TradeNote16.pdf.
[125] Appellate Body Report, para.763(c) (i).
[126] See Original Panel Report, para. 8.1 (d) (i)
[127] ibid. see also, The Appellate Body Report, p.2 where the findings of the Panel are recapitulated.
[128] ibid
[129] Ibid, para. 8.1 (g) (i). The Original Panel also found that section 1207(a) of the Farm Security and Rural Investment Act, 2002 providing for step 2 payments to exporters of Upland cotton constituted a subsidy that was inconsistent with the United States obligations under Article 3.3 and 8 of the Agreement on Agriculture and prohibited by Articles 3.1 (a) and 3.2 of the SCM Agreement. Besides, the panel concluded that section 1207(a) of the FSRI Act of 2002 providing for step 2 payments to users of upland cotton constituted an import substitution subsidy prohibited by Articles 3.1 (b) and 3.2 of the SCM Agreement. (see ibid, para. 8.1 (e) and (f).
[130] Ibid, para.8.3(a). The Original Panel recommended that pursuant to Article 19 of the DSU, the United States should bring the export credit guarantees found to inconsistent with its obligations into conformity with the Agreement on Agriculture. Further, that as required by Article 4.7 of SCM Agreement, the United States withdraws the export credit guarantees that were found to be prohibited subsidies without delay, in any case not later than six months after the adoption of the Panel report. See also Appellate Body Report, Recourse to Article 21.5 of the DSU, p.3.
[131] Vandenbussche. H., (2008), Comment on the US-Upland Cotton Case, prepared for the ALI Project on the case law of the WTO, World Trade Review, Vol. 7, No.1, pp.211-217, United Kingdom.
[132] Ibid, pp.211-212.
[133] Appellate Body Report, Recourse to Article 21.5 of DSU, para. 1.8, pp.4-5.
[134] According to Zunckel, p.1076 and as found out by the WTO Panel the United States share of world cotton exports increased from 23.5 percent in 1999 to 39.9 percent in 2002 while that West African Cotton producers fell from 10.2 percent in 1998 to 8.1 percent in 2002, accounting for a loss of 2.1 percent of world market share. According to Watkins, Benin’s cotton export earnings in 2001 were US $ 124 million, but that it is estimated that had the US subsidies been withdrawn the earnings would have been US $ 157 million. Therefore, Benin lost US $ 33 million. That similarly, in absence of US subsidies Chad would have earned $ 79 million in 2001 instead of US $63million. The cumulative loss of export earnings for both Benin and Chad during the period 1999-2001 was $61 million and $ 28 million respectively. It is my considered view that these countries for all intents and proposes were justified in challenging the United States. For Details, see, Watkins K. The Impact of United States Cotton Subsidies on Africa, Oxfam Briefing Paper No. 30 of 2002, p.23 and H. E. Zunckel. The African Awakening in United States-Upland Cotton, Journal of World Trade, Vol.39 No.6 of 2005, pp.1071-1093, Kluwer Law International, The Netherlands.
[135] Lynn Heinisch. West Africa versus The United States on Cotton Subsidies: how, why and what next? p.262.
[136] This was recommended by the Agriculture ministers in the West and Central Africa at Abidjan (2002).
[137] According to Heinisch (supra, p.263), acting as a group gave the West African Countries more clout unlike if one of them had gone it alone.
[138] Quoted in Heinisch, supra, p.264.
[139] ibid
[140] The four cotton producing African Countries- Benin, Burkina Faso, Chad and Mali- have proposed in the WTO Agriculture negotiations the complete elimination of trade-distorting domestic support and export subsidies for cotton. See. Charles E. Hanrahan. The African Cotton Initiative and WTO Agriculture Negotiations, Congress Research Service (CRS) Report for Congress, January 2004, pp.1-2, 6.
[141] http://www.acpsugar.org/old/wto.htm
[142] Hanson (supra), p.23. According to the Chairman of the agricultural negotiating committee Crawford Falconer, once the modalities for agriculture and non-agriculture market access (NAMA) are adopted, the final deal will be possible. Besides, WTO rules on fisheries subsidies, use of anti-dumping duties had received a boost following a proposal to ban subsidy payments especially those that boost fishing capacity or in some way create incentives to fish such as subsidy granted to costs of construction, operating and fuel costs of fishing vessels. There has also been proposed various exemptions especially for developing countries. Also see Zaino, Prospects for a late year mini-ministerial disintegrate, Trade negotiations Insights, Vol.7. No.10, December 2008/ January 2009, p.16.
[143] Ibid
[144] Currently the Secretary of State in President Obama’s administration.
[145] Edward Luce, Clinton doubts benefits of Doha revival, Financial Times, December 3 2007.
[146] Walter Wafula, WTO abandons plans for trade talks, Daily Monitor, December 29, 2008.
No comments:
Post a Comment