AGRICULTURE IN THE NEXT ROUND OF MULTILATERAL TRADE NEGOTIATIONS

AGRICULTURE IN THE NEXT ROUND OF MULTILATERAL TRADE NEGOTIATIONS

98-254 ENR
CRS Report for Congress
Received through the CRS Web
Agricultural Negotiations
in the World Trade Organization
Updated December 29, 2000
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
Trade ministers of 135 Member countries of the World Trade Organization (WTO) at the
organizations’s third ministerial conference in Seattle, November 30-December 3, 1999 failed
to agree on an agenda for a new round of multilateral trade negotiations. Nevertheless, WTO
sectoral negotiations on agriculture, as required by Article 20 of the Uruguay Round
Agreement on Agriculture, began early in 2000 in Geneva, Switzerland. Central to these
negotiations is whether and how to further reduce trade barriers and limit export and domestic
subsidies. New issues such as the operations of state trading enterprises and trade in
biotechnology products also seem likely to be brought to the negotiating table. The United
States, the European Union, the Cairns Group of agricultural exporting countries, Japan and
the developing countries all have staked out positions on these issues.

Agricultural Negotiations
in the World Trade Organization
Summary
Trade ministers from 135 Member countries of the World Trade Organization
(WTO) at the organization’s third ministerial conference in Seattle, November 30-
December 3, 1999, failed to agree on an agenda for a new round of multilateral trade
negotiations. Nevertheless, WTO sectoral negotiations on agriculture, as mandated
by the Uruguay Round Agreement on Agriculture, began early in 2000 in Geneva.
The broad objective for the agricultural negotiations, expressed in Article 20 of the
1994 Uruguay Round Agreement on Agriculture (URAA), is to continue the process
of agricultural trade reform beyond 2001.
The URAA established a set of new rules for the conduct of agricultural trade.
It required that quantitative restrictions on trade be converted into tariffs and that
some minimum access for imports be permitted. Rules and reduction commitments
for export subsidies and domestic support for agriculture are also included. Safeguard
provisions protect domestic producers from import surges, and a “peace clause” limits
legal challenges to agricultural subsidy programs during a nine-year period. The
Uruguay Round negotiations also resulted in an agreement on the application of
sanitary and phytosanitary (SPS) measures (those that protect human, plant, and
animal safety) in international trade and on measures to improve the multilateral
dispute settlement process.
Concerns about implementation of the URAA seem likely to be raised as issues
in the agricultural negotiations. Questions have been asked in the WTO's Committee
on Agriculture about the administration of tariffs and quotas established to implement
market access commitments, the use of special safeguards for agricultural imports,
and export subsidy commitments. Some countries have expressed concerns about the
process for settling disputes, including sanitary and phytosanitary disputes.
"Continuing the process of reform" will entail revisiting the issues of market
access, export subsidies, and domestic support that were central to the Uruguay
Round. Negotiations are likely to focus on alternative ways to reduce high tariffs for
agricultural products and/or expanding market access quotas. Further reduction or
elimination of export subsidies will be issues for negotiators. Further reducing trade-
distorting domestic support may also be on the agenda, but will depend on the
direction and pace of domestic policy reform, especially in the European Union and
the United States.
Issues not dealt with or dealt with only partially in the Uruguay Round could also
be on the agenda. This set of issues includes especially devising new rules or
disciplines for the operations of state trading enterprises (STEs) and dealing with
trade in biotechnology products. Developing countries may want to discuss the
Uruguay Round's ministerial decision calling for special attention to the needs of the
least-developed and net-food importing developing countries.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Uruguay Round Agreement on Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . 4
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Special Safeguards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Peace Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Sanitary and Phytosanitary Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dispute Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Implementation Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Administration of TRQs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Special Safeguards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Export Credits and Credit Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Sanitary and Phytosanitary Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Uruguay Round Negotiating Issues
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Domestic Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
New Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
State Trading Enterprises (STEs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Biotechnology Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Other Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Agriculture in Regional Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . 20
Possible Negative Effects on Developing Countries . . . . . . . . . . . . . . . . . 20
Negotiating Positions of the Main Participants . . . . . . . . . . . . . . . . . . . . . . . . . 21
The United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Objective and Framework for the Agricultural Negotiations . . . . . . . 21
Export Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Cairns Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Export Restrictions and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Sanitary and Phytosanitary Measures . . . . . . . . . . . . . . . . . . . . . . . . 26
Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
State Trading Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
The European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Instruments in the Agriculture Agreement . . . . . . . . . . . . . . . . . . . . 27
Key Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Non-Trade Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Special and Differential Treatment for Developing Countries . . . . . . 28
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Multifunctionality of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Food Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Strengthening Export Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Measures for Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . 29
New Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Developing Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conclusion: Agriculture in the Seattle Ministerial . . . . . . . . . . . . . . . . . . . . . . 30

Agricultural Negotiations
in the World Trade Organization
Introduction
Trade ministers of the World Trade Organization at the organization’s third
ministerial conference in Seattle (November 30-December 3, 1999) failed to agree on
an agenda for a new round of multilateral trade negotiations. Among the reasons
cited for the failure of the
Seattle conference are the
inability of the United States
Article 20
and the European Union to
agree on a negotiating agenda
Continuation of the Reform Process
for agriculture, especially on the
issue of export subsidies;
Recognizing that the long-term objective
disagreement between the
of substantial progressive reductions in support
European Union and the United
and protection resulting in fundamental reform
States on the scope of the
is an ongoing process, Members agree that
negotiations, with the former
negotiations for continuing the process will be
opting for a broad negotiation in
initiated one year before the end of the
contrast to the latter’s desire to
implementation period, taking into account:
limit negotiations to a few
specific subjects like agriculture
(a) the experiencing to that date in
and services; and the resistance
implementing the reduction commitments;
of the developing countries to
(b) the effects of the reduction
inclusion of labor and
commitments on world trade in agriculture;
environmental issues on the
(c) non-trade concerns, special and
WTO’s negotiating agenda.
differential treatment to developing country
Members, and the objective to establish a fair
Despite the failure of the
and market-oriented agricultural trading system,
ministerial conference to agree
and the other objectives and concerns
on an agenda that would have
mentioned in the preamble to this Agreement;
launched the ninth round of
and
multilateral trade negotiations
(d) what further commitments are
since the establishment of the
necessary to achieve the above mentioned long-
General Agreement on Tariffs
term objectives.
and Trade (GATT) in 1947,
agricultural negotiations, as
Source: Uruguay Round. Final Texts of the
mandated by the 1994 Uruguay
GATT Uruguay Round Agreements Including
R o u n d A g r e e m e n t o n
the Agreement to Establish the World Trade
Agriculture (URAA) began
Organization as signed on April 15, 1994,
early in 2000. Article 20 of the
Marrakesh, Morocco.

CRS-2
Agreement states that member countries of the World Trade Organization recognize
that the long-term objective of substantial progressive reductions in trade-distorting
support and protection of agriculture resulting in fundamental reforms is an on-going
process. The URAA thus calls for the initiation of negotiations for continuing the
process of agricultural trade reform to begin one year before the end of the
implementation period for the Agreement, i.e., in 2000.
Agricultural negotiations are thus part of the "built-in" agenda of the WTO. The
built-in agenda is a program of work agreed to by Uruguay Round signatories and
endorsed by the WTO Ministerial meeting in Singapore in December 1996. This
agenda, in addition to agriculture, includes further negotiations on trade in services
and on intellectual property, as well as reviews of anti-dumping rules, sanitary and
phytosanitary (SPS) measures, safeguards, dispute settlement, and technical barriers
to trade among others. Agricultural issues could also be taken up in some of these
reviews.
Differences between the United States and the European Union appear to have
been a major reason for the failure of the Seattle ministerial to launch a new round.
In particular, the United States and the EU differed strongly over whether
negotiations on export subsidies should aim toward their reduction or their eventual
elimination. The EU argued for substantially and progressively reducing export
subsidies, while the United States insisted on their ultimate elimination. Similarly, the
EU along with Japan insisted on some recognition of non-trade concerns in the
forthcoming agricultural negotiations, including recognition of the multifunctional role
of agriculture. “Multifunctionality” refers to the provision by agriculture of such
public goods as protection of the environment and maintenance of the vitality of rural
areas. The United States and particularly the Cairns Group1 of agricultural exporting
countries resisted including some of the non-trade concerns, especially
multifunctionality, on the agenda for agriculture.
Issues for the agricultural negotiations have been identified by WTO Members.
One set of issues relates to how the Uruguay Round Agreement has been
implemented. There are concerns about the way some countries are administering
tariff rate quotas (TRQs) established to implement the market access commitments
in the Uruguay Round Agreement on Agriculture.2 Other concerns relate to the use
1Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Fiji, Guatemala,
Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand, and
Uruguay. Formed just prior to the Uruguay Round negotiations to lend support to agricultural
trade liberalization, the Group has maintained its cohesiveness and trade liberalization
objective. Hungary has left the Cairns Group in anticipation of its becoming a member of the
EU. Paraguay, South Africa, Bolivia, Guatemala, and Costa Rica have recently joined.
2 A tariff rate quota (TRQ) combines two policy instruments that countries historically have
used to restrict import: quotas and tariffs. In a TRQ, the quota component works together
with a specific tariff level to proved the desired degree of import protection and market access.
Imports entering under the quota portion of a TRQ are usually subject to a low or zero tariff,
while imports above the quota face a higher (usually prohibitive) rate. TRQs were established
by WTO signatories to the Uruguay Round Agreement on Agriculture to replace quantitative
(continued...)

CRS-3
of safeguards for agricultural products and to charges by some member countries that
export subsidy commitments are being circumvented or not otherwise being met.
Problems raised with respect to dispute settlement, especially of sanitary and
phytosanitary issues, also may come up as an implementation issue.
Implicit in the notion of "continuing the reform" is that negotiators will again
be dealing with market access, export subsidies, and domestic support. These three
issues are likely to be as central to the forthcoming agricultural negotiations as they
were during the Uruguay Round. Issues that were not dealt with or dealt with only
partially in the Uruguay Round may be on the agenda as well. This is likely to include
especially the operations of state-trading enterprises (STEs) and trade in
biotechnology products. Other issues that may be addressed by agricultural
negotiations include the use of export credits and credit guarantees; the treatment of
agriculture in regional negotiations; and the relation between regional free trade
agreements and the WTO. It is also possible that developing countries will want to
revisit the ministerial declaration on meeting the food needs of the least developed
countries.
How are the prospective negotiations viewed by different U.S. interest groups?
Most economists view further agricultural trade liberalization as contributing to global
efficiency and welfare. They see it as a way to hasten the process of reform of
domestic agricultural policies which distort agricultural trade. Many U.S. producers
and exporters of agricultural products and agricultural trade policy officials welcome
the opportunity the negotiations afford to open markets and reduce export subsidies.
They see agricultural exports as an important source of income, particularly as
Government support is phased down according to the provisions of the 1996 farm bill,
(the Federal Agriculture Improvement Act).
Some U.S. agricultural producers oppose or want to slow any agricultural trade
liberalization. These include producers of "sensitive" commodities who contend that
they have been adversely affected by previous trade liberalization in the U.S.-Canada
Free Trade Agreement (FTA) or the North American Free Trade Agreement
(NAFTA) and anticipate further losses from any new reduction in U.S. agricultural
trade barriers.
The call by U.S. agricultural and trade policy officials and interest groups for
further reductions in tariffs and export subsidies is supported by the Cairns Group of
exporting countries (see below). The Cairns countries are pushing for substantial
tariff reductions, elimination of export subsidies, and more limits on trade-distorting
domestic policies. The European Union has introduced some changes to its Common
Agricultural Policy, mainly in the form of priced reductions for grains and beef. The
nature of those reforms will influence its negotiating positions of tariffs, subsidies, and
especially domestic support. Developing countries will bring a diverse array of
interests into the agricultural negotiations. Some, that are agricultural exporters, will,
like the Cairns Group, want improved conditions for their agricultural exports in
world markets, others will perhaps want to trade improved access to their agricultural
2(...continued)
restrictions on imports and to provide some minimum import access.

CRS-4
markets for better access for their processed and industrial products. Still other
developing countries will be primarily concerned about the impact of agricultural
trade reforms on their food security.
The Uruguay Round Agreement on Agriculture
The Uruguay Round Agreement on Agriculture is a point of departure for the
agricultural negotiations that began in 2000. The Agreement on Agriculture, which
entered into force in 1995 along with other Uruguay Round accords, including the
agreement to establish the World Trade Organization, was an important step toward
applying multilateral rules and disciplines to global agricultural trade.3 Most
assessments of the Agreement hail it as an historic shift in the way agriculture is dealt
with in multilateral trade agreements.4 The Agreement establishes new multilateral
rules governing market access, export subsidies, and domestic support for agriculture.
In terms of future trade liberalization, its most important provisions may be those
requiring the elimination of quantitative trade restrictions and their conversion to
bound tariffs. These bound tariffs, even if some of them are extremely high, can
provide a starting point for future negotiations of tariff reductions.
Market Access
The Agreement requires all WTO members to convert nontariff trade barriers to
tariffs and to reduce them by a simple average of 36% over 6 years (with a minimum
tariff reduction per tariff line of 15%). Developing countries agreed to make cuts of
24% over 10 years. Least developed member countries do not have to cut their tariffs
at all. The Agreement prohibits the introduction of new nontariff barriers to trade.
Where nontariff barriers restricted imports, the Agreement requires that importing
countries offer minimum access of usually 3% of consumption rising to 5% over the
6-year implementation period for the Agreement. Under the terms of the Agreement,
the United States converted quantitative restrictions such as its Section 22 import
quotas to tariff rate equivalents (TRQs).5 Similarly, the Agreement required the EU
3The official text of the Uruguay Round Agreement on Agriculture as well as the related
Agreement on the Application of Sanitary and Phytosanitary Measures and the Understanding
on Dispute Settlement can be found at http://www.wto.org.
4Assessments of the Uruguay Round Agreement on Agriculture and discussions of negotiating
issues for agriculture include two reports by the International Agricultural Trade Research
Consortium, The Uruguay Round Agreement on Agriculture: An Evaluation (July 1994) and
Implementation of the Uruguay Round Agreement on Agriculture and Issues for the Next
Round of Agricultural Negotiations (November 1997), both are available at
http://www.uminn.edu/iatrc; Agricultural Trade Policy Reform, by Timothy Josling, Institute
for International Economics, no 53 in the series, Policy Analysis in International Economics,
April 1998; U.S. Department of Agriculture, Economic Research Service, Agriculture in the
WTO, WRS 98-4, December 1998; and International Food Policy Research Institute, Getting
Ready for the Millennium Round Trade Negotiations, Focus issue briefs 1-9, April 1999.
5Section 22 is a provision of permanent agricultural law (Agricultural Adjustment Act
Amendment of 1935) that allows the President to impose import fees or import quotas to
(continued...)

CRS-5
to convert its variable levies for agricultural imports to TRQs. Most assessments of
the Agreement conclude that it provides little in the way of expanded access for
agricultural products. It's importance lies in extending the principle (already applied
to trade in industrial products) of protection by bound tariffs to agricultural trade and
establishing at least a base for further tariff reductions in future negotiations.
Export Subsidies
The Agreement requires that export subsidies be reduced by 21% in terms of
quantities and by 36% in terms of budgetary outlays by the end of the 6-year
implementation period. Developing countries agreed to make cuts of 24% and 14%
respectively over 10 years. Least developed countries need not make any cuts. WTO
members may continue to use their existing export subsidies within the limits
established, but may not introduce any new export subsidies. Both the United States
and the EU must now operate their respective export subsidy programs in conformity
with the export subsidy reduction commitments of the Agreement.
The major export subsidy programs in the United States are the Export
Enhancement Program (EEP) and the Dairy Export Incentive Program (DEIP).6 EEP
has been operated at well below its Uruguay Round reduction commitments. EEP
subsidies in 1997 amounted to $5 million, were zero in 1997, and only around $2
million in 1998. EEP subsidies were $1.4 million in 1999 and $1.6 million in 2000.
DEIP has been authorized by Congress in the 1996 farm bill at the maximum allowed
by Uruguay Round commitments, but actual subsidies have been less. The European
Union subsidizes a wider range of commodities than the United States. For some of
those products, such as wheat, the EU is reaching Uruguay Round allowable limits.
Domestic Support
The Agreement also includes rules and commitments for domestic support.
Domestic subsidies are to be cut by 20% from average levels of support aggregated
across all commodities for the base period 1986-88. Developing country Members
make 13% cuts over ten years, while least developed country Members are not
required to commit to any reduction. Support reduction commitments are also to be
made over the 6-year implementation period on the basis of this aggregate measure
5(...continued)
prevent imports from non-WTO member countries from undermining the price support and
supply control objectives of domestic farm programs. Legislation implementing the Uruguay
Round Agreement on Agriculture (and that implementing the North American Free Trade
Agreement) exempts WTO and NAFTA member countries from Section 22 quotas and fees.
Under both trade agreements, the United States converted then-in-effect Section 22 restrictions
into tariff-rate quotas, thus effectively eliminating Section 22 as a tool to protect domestic
producers from import competition.
6 See Agricultural Export Programs: The Export Enhancement Program (EEP), CRS
Report RS20399 and Agricultural Export Programs: The Dairy Export Incentive Program
(DEIP), CRS Report RS210402.

CRS-6
of support (AMS). Since U.S.
and EU support spending was
well under the Agreement's
Domestic Policy Categories in the Uruguay Round
limits, no reductions in support
Agreement on Agriculture
were required. Trade policy
experts contend that the rules
Amber box policies are domestic policies presumed
established for domestic
to have the largest potential effect on production and
support policies are more
trade. The base period level of amber support
important than the reduction
policies (1986-88 for most countries) was "bound"
commitments required.
in country schedules, meaning that this level was
established as an initial absolute upper limit for
support. Twenty-eight countries, including most
The Agreement defines
major agricultural exporting countries, agreed to
which domestic policies are
phase down the level of support provided by amber
permitted ("green box" policies)
policies (as measured by an aggregate measure of
such as income support
support (AMS) over specified time periods.
p r o v i d e d t o f a r m e r s
Developed countries agreed to a 20% reduction in
independently of participation
amber support over a six-year period, relative to the
i n p r o d u c t i o n l i m i t i n g
base level of support. Developing countries agreed
programs, advisory services, or
to a 13% reduction over a ten-year period; and least
domestic food assistance.
developed countries agreed to not increase support
Policies that are not eligible for
beyond the base period level.
the green box are automatically
prohibited ("amber box"
Green box policies are those considered to have
policies). U.S. deficiency
minimal effects on production and trade. Green
implies a "green light" for countries to go ahead with
payments as provided in the
such policies.
1990 farm bill and EU
compensatory payments as
Blue box policies include production limiting
provided by the 1992 CAP
payments that are not subject to reduction
reforms were excluded from the
commitments for domestic support if the payments
calculation of the AMS and put
are based on fixed areas or yields, or a fixed number
into a "blue box" of excluded
of livestock, or no more than 85% of the base level
programs. The production
of production. The blue box was created to
flexibility payments authorized
accommodate U.S. target price-deficiency payments
in the 1996 farm bill replaced
then in effect and EU compensatory payments.
t a r g e t p r i c e - d e f i c i e n c y
(Production flexibility payments which replaced
payments and are considered to
deficiency payments are in the green box.)
be a green box policy. EU
(Adapted from U.S. Department of Agriculture,
income support is still included
Economic Research service, op. cit., p 15.)
in the blue box.
Special Safeguards
The URAA also permits (Article 5) a WTO Member to impose a special
safeguard–in the form of additional duties–on an agricultural product subject to
tariffication, i.e., formerly protected by a nontariff measure. Unlike, the WTO’s
regular safeguard procedures, the special safeguard does not require an injury
determination. To be eligible for the safeguard, a Member must designate that the
product is subject to a safeguard in its tariff schedule. The Agreement establishes
two types of safeguard. One is a volume-based safeguard that a country may apply
whenever imports exceed a certain quantity. The other is a price-based safeguard that

CRS-7
applies to any shipment of a product whose price is below a price threshold (the price
trigger). If both conditions have been met, a WTO Member can choose which to
apply, but countries may not apply both types of safeguards on an agricultural product
at the same time. Countries are required to operate their special safeguards in a
transparent manner. Trigger levels and supporting information must also be provided
to the WTO Committee on Agriculture. Member countries have an obligation to
consult with their trading partners when they implement a special safeguard.
Peace Clause
The URAA also contains an agreement among WTO Member countries to
refrain from challenging certain of each other’s agricultural subsidy programs either
through WTO dispute settlement procedures or in domestic countervailing duty
proceedings during a nine-year period. This provision (Article 13) also calls on WTO
Members to exercise due restraint in initiating countervailing duty investigations.
Under the peace clause, WTO Members agree to refrain for nine years from
taking actions under domestic countervailing duty proceedings, or initiating WTO
dispute settlement proceedings, alleging adverse effects or serious prejudice resulting
from green box, i.e., permitted, subsidies. Members are also precluded from bringing
dispute settlement proceedings alleging nullification or impairment of Uruguay Round
tariff reductions, when such nullification and impairment results from green box
subsidies. In the case of subsidies outside the green box, that is, amber or blue box
subsidies, WTO Members are to exercise due restraint in initiating domestic
countervailing duty investigations.
In the case of subsidies that fall under the amber box, Members of the WTO may
not initiate challenges so long as spending for a particular commodity does not exceed
the level of spending in the 1992 marketing year. Members could initiate actions in
WTO dispute settlement with respect to adverse effects, serious prejudice or
nullification and impairment of tariff concessions if spending exceeds the 1992 level.
(For example, spending on U.S. loan deficiency payments by particular commodity
would be protected from challenge so long as the level of spending did not exceed the
level in the 992 marketing year.)
The peace clause also applies to export subsidies. If Member countries are
meeting their reduction commitments, their export subsidies are exempt from certain
WTO challenges.
Some WTO observers indicate that the major implication of the peace clause is
the incentive it provides WTO Members to complete agricultural negotiations before
its expiration in 2003. This presumptive deadline is thought to be particularly
important for the EU, which argues in its negotiating position, for the continuation
of the peace clause beyond its expiration date. That is because EU support in all
categories (green, amber, or blue) could become subject to legal challenges if the
peace clause expires.

CRS-8
Sanitary and Phytosanitary Measures
An Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures
reaffirms the right of WTO members to adopt and enforce measures that they deem
appropriate to protect human, animal, or plant life or health as long as such measures
are not applied in an "arbitrary and unjustified" manner. The Agreement states that
such measures may not be used as disguised barriers to trade. SPS measures may be
based on international standards where they exist. WTO members could impose
higher standards than those derived from these sources if based on scientific
justification and risk assessment. All WTO members agree to recognize the
equivalence of different standards that result in a comparable level of SPS protection.
Dispute settlement panels should seek advice from relevant international organizations
when scientific or technical matters are at issue. The SPS Agreement, though binding
on WTO members, is stated in broad language. Specifics will come from
interpretation of the Agreement and adjudication of sanitary and phytosanitary issues
in WTO dispute settlement
The U.S.-EU meat hormone dispute has been a major test of the SPS Agreement
and the dispute settlement process.7 WTO dispute settlement panels have upheld the
U.S. challenge to the EU meat hormone ban in effect since 1989. Both initial and
appellate panels ruled that the ban violates the SPS Agreement's requirements that
SPS measures be based on scientific justification and risk assessment. The appellate
ruling left open the option to the EU of conducting a risk assessment which the EU
did not complete by a WTO deadline to bring its hormone ban into compliance with
WTO rulings. The EU is maintaining, even strengthening, the ban, while its risk
assessment continues. In the meantime, the United States requested and received
authorization to impose prohibitive tariffs amounting on $116 million on certain EU
products as a result of the EU's noncompliance with a WTO dispute settlement ruling.
U.S.-EU negotiations on compensation for lost U.S. export sales have so far been
unsuccessful.
Dispute Settlement
New and strengthened dispute settlement procedures were agreed to as part of
the Uruguay Round. The new procedures also apply to disputes that may arise under
either the Agreement on Agriculture or the SPS Agreement. An important change in
WTO dispute settlement procedures is the elimination of a member's right to veto a
dispute panel's decision and effectively block implementation of the panel's
recommendations for resolving the dispute. Potentially this strengthens the ability of
the WTO to enforce panel judgements. The right of WTO members to negotiate
compensation, rather than change its challenged policies remains in place, however.
The U.S.-EU banana dispute which was ultimately adjudicated in the United
States' favor has proven to be an important test of WTO dispute settlement
7See The European Union's Ban on Hormone-Treated Meat, CRS Report RS20142.

CRS-9
procedures.8 The United States successfully challenged the EU's preferential access
regime for bananas from former European colonies in Africa, the Caribbean and the
Pacific and from certain Latin American countries with which the EU had signed
preferential accords. The U.S. case targeted especially the EU's import licensing
systems which discriminated against major Latin American producers and U.S. firms,
like Chiquita Brands International and Dole Foods, in favor of European banana
importing firms. While the United States has imposed prohibitive tariffs on almost
$200 million of EU imports, the EU has devised an alternative scheme for banana
imports which it says is in accord with WTO dispute settlement decisions. The United
States has not challenged the new regime, but has nevertheless pursued discussions
with the EU about devising a regime more favorable to U.S. banana marketing
companies.
Implementation Issues
Implementation of the provisions of the Agreement on Agriculture by WTO
members has raised several issues which could be on the agenda of WTO agricultural
negotiations. These include administration of the TRQs established under the
Agreement; use of special safeguards for agricultural products; developing and
incorporating disciplines on export credits and credit guarantees into the multilateral
framework of the Agreement; and the way in which some countries have implemented
export subsidy commitments. Implementation of the SPS Agreement in relation to
WTO dispute settlement also has been raised as an issue.
Administration of TRQs
TRQs were intended to help in opening up markets to agricultural imports. Yet
in many instances, the TRQs established have resulted in systems of limited access
for imports and high above quota tariffs which effectively preclude trade. In the
WTO's Committee on Agriculture (which has on-going responsibility for reviewing
implementation of the Agreement), questions have been asked about the way TRQs
have been allocated among importers or exporters and about instances where the
volume imported did not reach the quota limits. Some countries have complained that
procedures for distributing quotas are unnecessarily complicated and burdensome.
WTO agricultural negotiations could focus on ways to improve the administration
of TRQs by spelling out and clarifying procedures for acquiring import quotas. One
proposal is to auction quotas so as to reduce the role of government and limit the
potential for abuse. Countries with import state trading enterprises (see discussion of
STEs below) and those who hold import licenses would be likely to want to maintain
current procedures for administering TRQs.
8See The U.S.-European Union Banana Dispute, CRS Report RS20130, updated May 18,
1999.

CRS-10
Special Safeguards
Some exporting countries have criticized some importing countries' use of
special safeguard measures even when domestic producers were not experiencing
injury. Under the Agreement on Agriculture, special safeguards can be used if low
import prices or surges in imports meet certain criteria. Under regular WTO
safeguards, governments have to show that the lower import prices or increase in
imports are hurting domestic producers. The Agreement on Agriculture does not
require this injury determination. Some exporting countries have proposed applying
the WTO injury determination requirements in the case of agricultural safeguards.
Importing countries who impose safeguards argue that their actions are fully justified
and would be likely to oppose changing the Agreement's safeguard provisions.
Export Subsidies
Implementation of export subsidy commitments by some countries has come in
for criticism. The United States along with several other countries has complained
about what it sees as some other countries' efforts to circumvent export subsidy
reduction commitments. The United States has been critical of two programs that it
considers violate the Agreement's provisions on export subsidies. One is Canada's
new revenue pooling program for milk and milk products that are sold in domestic
and export markets at different prices. Canada argues that the program which
involves sales at lower prices to exporters and to processors facing import
competition is not an export subsidy as defined by the Agreement. The other program
targeted by the United States is the EU's "inward processing" program for processed
cheese exports This program enables subsidized inputs such as milk powder
produced in the EU member country concerned to be "exported" to an export
processing zone in the country where they are made into processed cheese and sold
to other (non-EU) countries. The EU counts the subsidized inputs under its
commitments to limit its export subsidies on these products (where it may not be
bumping up against its Uruguay Round limits), not under its processed cheese exports
(which are close to the Uruguay Round limits).
Export subsidy issues like these are likely to be raised during the agricultural
negotiations. Negotiations then might focus on clarifying and tightening the
definitions of export subsidy and the rules for allocating reduction commitments
where there are reduction commitments both on products used as inputs and on final
products. Countries bumping up against reduction caps would likely oppose efforts
to limit their flexibility in allocating between input and final product categories.
Export Credits and Credit Guarantees
Export credits and credit guarantees can be a form of export subsidy if terms
granted to the importers are more generous than commercial terms would be. Large
exporting countries like the United States, France and several other EU countries, and
Canada, among others, use this form of export financing, which guarantees private
commercial credit for sales of agricultural products. Guarantees on loans vary from
6 months to 10 years with the United States having the greatest range of terms in its

CRS-11
GSM-102 and -103 programs.9 In the wake of the Asian financial crisis, major
exporting countries, especially the United States and Australia, have increased their
reliance on credit guarantees to help maintain demand for their agricultural products
in countries whose economic growth has been slowed drastically by currency and
other financial sector difficulties. Smaller exporting countries with fewer financial
resources consider larger countries' use of guarantees as unfair and subsidized
competition.
The Agreement on Agriculture, however, has no provisions governing the use
of export credit guarantees. WTO members did agree in the Uruguay Round to work
toward establishing disciplines for such programs under the auspices of the
Organization for Economic Cooperation and Development (OECD). These
negotiations have apparently broken down, and the major exporters have not yet
reached any agreement. If negotiations resume and agreement is reached in the
OECD (whose membership is limited to the industrialized countries), an issue for the
agricultural negotiations may be how to multilateralize such an agreement in the
WTO.
Sanitary and Phytosanitary Measures
A number of disputes under the SPS agreement have arisen and the United
States has had some successes, most notably a WTO panel ruling against the EU 's
ban on imports of red meat from animals treated with growth-promoting hormones.
U.S. concerns are about the ability of the WTO to enforce its rulings and about the
willingness of disputants like the EU to change offending policies rather than
negotiate compensation which is allowed under WTO rules.
It is not entirely clear what steps could be taken to strengthen SPS rules or
modify settlement procedures for SPS issues. Some have argued that losers in WTO
dispute settlements should be required to change the offending practices rather than
be allowed to negotiate compensation. The principle of compensation is longstanding
and widely supported by WTO members and could be difficult to modify. However,
tightening up dispute settlement procedures might assuage those concerned about
implementing WTO panel decisions. For example, it can take up to 15 months to
resolve a dispute, and longer, with appeals and arbitration. Some have suggested that
the period be shortened. Some WTO members like the EU countries may resist
efforts to clarify and tighten disciplines on SPS measures; they may argue that their
SPS measures are appropriate to protect health and safety and fully consistent with
their international obligations. Others contend that WTO dispute settlement for SPS
issues should be allowed to develop interpretations of the SPS Agreement and
establish precedents for implementing it before making any changes in the Agreement
itself.
9Agricultural Export and Food Aid Programs, CRS Issue Brief IB98006, updated regularly.

CRS-12
Uruguay Round Negotiating Issues
While much attention is likely to be paid in agricultural negotiations to
implementation issues, critical to "continuing the process of reform" in world
agricultural trade will be renewed negotiations on market access, export subsidies,
and domestic support.
Market Access
Agricultural negotiations are likely to focus on conditions for market access or
lack of it provided by the TRQs established as a result of the Uruguay Round The
conversion of quantitative restrictions to tariff rate quotas left many agricultural
products highly protected. Average tariffs on agricultural products in many major
exporting countries remain high. Tariffs on agricultural products (simple averages)
are 3 to 4 times higher than the 10-15% ad valorem rates for most industrial products;
some reach 100-200% or more. In addition, tariffs on broad classes of agricultural
commodities as shown by simple ad valorem tariffs rates averaged over twenty
countries show relatively high rates. (See following tables for examples of both
average tariffs for agriculture and some specific examples.)
Table 1. Average and Selected Tariffs
for Agricultural Products in Selected Countries
Country
Average Tariff on
Discussion
Agricultural
Products (%)
Japan
11.0
Tariff rates on many agricultural
commodities are low, e.g., oilseeds
are bound at zero, wheat at 5%.
However, rice, according to the
WTO, has an ad valorem equivalent
rate of "several hundred percent."
Tariffs on processed food products at
the end of the phase-in of Uruguay
Round commitments in 2000 will
range from 0 to 232.4%.
European Union
19.5
There are tariff peaks for grains,
meat and meat products, dairy and
poultry, sugar and tobacco products.
Tariffs are above 120% for beef,
pork, and lamb, edible offals, milk
and cream, some cheeses, and
prepared animal feeds. Tariffs on
oilseeds, corn gluten feed, fruits and
vegetables are zero or well below the
average for all agricultural products.

CRS-13
Country
Average Tariff on
Discussion
Agricultural
Products (%)
Canada
20.0
The process of converting
quantitative restrictions to tariff rate
quotas (TRQs), required by the
Uruguay Round Agreement, resulted
in restrictive quotas and very high
tariffs for imported dairy products,
poultry, and eggs, e.g., fluid milk
(260%), cheese (256%), cream and
butter (more than 300% each),
poultry (256%), and eggs (256%).
These rates apply to both NAFTA
(i.e., U.S. and Mexican), and MFN
suppliers.
Mexico
40.0
Mexico also converted its
quantitative trade barriers to TRQs
under the Uruguay Round
Agreement. Most quotas were
allocated to the United States and
Canada. Actual quantities imported
are often higher than the quantities
indicated in Mexico's WTO
schedules. High over-quota tariffs
for both MFN and NAFTA suppliers
apply to animal fats (139%), barley
(128%), beans (139%), corn (215%),
malt (175%), milk (272%), potatoes
(260%), and poultry meat (260%).
South Korea
63.0
While Korea's simple average is
63%, its applied rate is estimated to
be 19% (WTO). Market access is
mainly determined by quotas and
licenses which restrict entry. For
example, beef imports have an in-
quota tariff of 5%, and an out-of-
quota tariff of 42%. The beef quota,
initially set at 51,300 metric tons is
scheduled to rise to just 205,229
metric tons (4%) by 2004. Recently,
Korea has not met its annual beef
quota commitments. For rice,
barley, potatoes and beans, in-quota
tariffs can be augmented by import
mark-ups.

CRS-14
Country
Average Tariff on
Discussion
Agricultural
Products (%)
China
22.0
In bilateral negotiations with the
United States over its accession to
the WTO, China has agreed, once it
becomes a WTO member, to reduce
its average tariff on agricultural
products to 17%. China will also
establish TRQs for soybean oil,
wheat, corn, rice and cotton, with in-
quota tariffs of 1%-3% and high
over-quota tariffs upon accession to
the WTO.
Hong Kong
0.0
Agricultural products enter Hong
Kong duty free, with the exception of
tobacco and alcohol.
Philippines
33.4
The Philippines tariff on cut flowers
is 60%. Tariffs of 50% apply to
corn, sugar, and tobacco among
other products.
Indonesia
47.0
Tariffs on fruits and vegetables
range from 5% to 30%. Tariffs on
many products are low, e.g., wheat
and rice (0), soybeans and soybean
meal (10%), cotton (0), and tobacco
(10%). Although some reforms are
underway, the Indonesian
government still controls the import
and marketing (by granting licenses,
maintaining monopolies and other
restrictions) of many agricultural
imports.
United States
5.9
Agricultural tariffs in the United
States are generally low. However,
the United States uses tariff rate
quotas for beef, dairy, sugar,
peanuts, tobacco and cotton, with in-
quota tariffs substantially lower than
above-quota tariffs. Examples of
out-of- quota tariffs are tobacco
(350%) and peanuts (147%).
Source: World Trade Organization, U.S. Trade Representative, and U.S. Dept. Of
Agriculture.

CRS-15
Table 2. Average Unweighted Ad Valorem Bound Tariff Rates Post- Uruguay
Round for Agricultural Goods, Twenty Countries
Product
Tariff Rate (%)
Product
Tariff Rate (%)
Grains
46.7
Dairy Products
47.1
Oilseeds
41.7
Sugar
48.7
Fats and oils
41.6
Fresh Fruits and
35.5
Vegetables
Meats
39.3
Processed Fruits
35.3
and Vegetables
Milk
40.7
Other Agriculture
24.4
Source: Tim Josling, "Reform of World Agriculture Trade: The Uruguay Round
Outcome," paper prepared for a seminar on the WTO Agricultural Negotiations: The
Lead Up to Seattle, organized by the Cairns Group in Washington, DC, April 30, 1999,
p. 6.
Note: Josling notes that "the table shows the unweighted average ad valorem tariff of the
numerous individual tariff lines relating to all product groups identified. Two cautions should
be noted. First, the unweighted average tariff does not distinguish between the importance of
the individual items either in the current trade basket or in any potential pattern of trade; and
second, the average omits specific tariffs which cannot be averaged without assumptions about
the level of world prices. An ambitions attempt to convert tariffs often found in agricultural
trade into ad valorem equivalents has been proceeding at the World Bank. This exercise
indicates that specific tariffs are often higher than the ad valorem tariffs, though this is not
always the case. More importantly, the Japanese and Korean protection on rice imports is not
yet in the form of a tariff, and is not included in the table. Nor is the EU protection on grains,
as this is limited to a level below the bound tariff. The bound tariffs can overstate the level of
protection on grains actually applied; several Latin American countries apply tariffs which are
well below their bound levels."
Approaches to negotiating expanded market access that have been suggested
include various proposals for reducing tariffs or conversely expanding the minimum
access quantities allowed in at lower or zero levels of duty. Reducing tariffs
according to across the board percentage cuts as was done in the Uruguay Round
would result in some tariff reduction but still leave some tariffs at a very high level.
For example, reducing a 350% tariff on butter by 50% would still leave a prohibitively
high tariff of 175%. A tariff reduction formula that reduces higher tariffs by a greater
percentage than lower tariffs also could be considered. Yet another option could be
negotiating "zero for zero" tariff cuts for certain commodities. This approach was
proposed for oilseeds in the Uruguay Round but not adopted. The zero for zero
approach might permit liberalization in some commodities e.g., oilseeds, but not in
other more sensitive areas, such as dairy products or sugar. An alternative to tariff
reduction could be to increase the minimum access components of TRQs.
Substantial, progressive increases in the quota component of TRQs could lessen and
theoretically eliminate the need to reduce tariffs.
Reducing tariffs or increasing minimum access quotas for agricultural products
is likely be opposed by commodity interests that benefit from the protection afforded
by the existing TRQs. Exporting countries might prefer tariff reduction rather than

CRS-16
expanding minimum access requirements; but their views of alternative approaches
would depend on the relative magnitude of the tariff reductions or the increases in
minimum quantities.
Export Subsidies
Cairns Group countries, especially those that export with little or no subsidy like
Australia or New Zealand, will be pushing the larger exporters like the United States
and the EU toward the complete elimination of export subsidies. The U.S.
Department of Agriculture and the U.S. Trade Representative have also called for the
elimination of export subsidies, but not for "unilateral disarmament." Some producer
groups in the U.S. that have benefitted from such subsidies are not likely to want to
give up a policy tool they have found useful when world market prices and demand
for products eligible for subsidy are low.
As in the Uruguay Round Agreement to reduce export subsidies, an accord
between the United States and the EU may be needed in order to agree upon a rate
and timetable for further reducing or eliminating export subsidies. The outcomes for
export subsidy negotiations also will depend on the interactions between domestic
policies in the United States and the EU and market conditions. If domestic policy
reforms in the United States and EU succeed in reducing the dependence of producers
on government support, then the possibility of agreeing to subsidy reductions or
elimination will be enhanced. Conversely, a continuation of the weak prices for
agricultural products of the last two years, a return to more coupled farm policies,
for example in the United States, or a failure to bring down high support prices for
agricultural products in the EU could reinforce the positions of those who want to
retain exports subsidies if only to have them available when markets sag.

A number of export subsidy issues may be taken up during negotiations. These
include the pace at which export subsidies might be eliminated. In this regard,
negotiations may focus on both the rate by which export subsidies would be reduced
and the time period for phasing in reductions or ultimate elimination. The definition
of export subsidies might also be discussed. Many have posed the question as to
whether the URAA definition of an export subsidy10, covers all the marketing
practices that could be considered export subsidies. Some point to the operations of
state trading enterprises (STEs), discussed below, the use of export credits and
export credit guarantees, previously alluded too, and concessional food aid as possible
candidates for additional WTO rules and disciplines.
Export taxes and other measures to limit or cut off exports may be put on the
agenda for agricultural negotiations as well. Importing countries like Japan and the
developing countries see such policies as destabilizing because they limit availability
10The Uruguay Round Agreement on Agriculture defined several types of export subsidies
subject to reduction, including: direct export payments by governments; sales or gifts of
government stocks at prices lower than acquisition prices; export payments financed through
government action; subsidies to reduce export marketing costs; and subsidies on goods
incorporated into export products. "Bona fide" food aid transactions and export market
promotion and advisory services are excluded from the WTO list of export subsidies.

CRS-17
and increase prices. Such policies, in effect, impede the ability of importers to meet
their food security objectives through trade.
Domestic Subsidies
Further reductions in domestic support, as measured by the AMS, may also be
on the negotiating agenda.. Although the Agreement on Agriculture established the
principle that domestic policies can be trade distorting and should be curbed, the
percentage reductions in AMS required by the Agreement had very little impact on
either U.S. or EU domestic support. As mentioned, the 1996 farm bill moves the
United States' direct import support (production flexibility payments) from the blue
to the green box of permitted policies, leaving the EU alone in linking farm income
support to participation in production programs. Reforms adopted by the European
Union in "Agenda 2000", especially the proposed reductions in support prices for
grains and beef, seem unlikely to move EU compensatory income support from the
blue to the green box. The limited nature of EU policy reforms in Agenda 2000 could
mean that the EU would argue for a continuation of the blue box exemptions or
something like them. The United States and the Cairns countries may argue,
however, that the blue box was intended to be temporary and that coupled EU
support should be considered subject to domestic support reduction commitments.

The next stage in U.S. agricultural policy reforms is expected in 2002 when
authorities for current farm programs expire, although current weak prices and
deteriorating economic conditions for U.S. agriculture may push Congress and the
President to accelerate the process of devising an agricultural policy to follow the
1996 FAIR Act. The willingness of the United States and the EU to further limit
support may depend on the nature of their respective domestic policy reforms. That
in turn depends on a number of factors including world market conditions,
development of alternatives to current support policies such as risk management
tools, crop or revenue insurance, and rural development and environmental programs.
Some have noted that as countries rely less on export subsidies and amber box
policies, reliance on green box and permitted export policies has increased. Examples
for the United States include market loss payments authorized in emergency and
supplemental appropriations legislation in the last three fiscal years and increases in
food aid via Section 416 and P.L. 480 Title I during 1998 and 1999. Expanded use
of export credit guarantees, especially by the United States, is also cited as an
example of increased reliance on permitted export programs. The EU also increased
its green box spending on agriculture.11 This situation raises the issue of possible
production and trade effects of green box programs. Because of the possible
production effects of large green box programs, some have suggested that such
programs be evaluated as to whether they are truly minimally trade distorting or
whether some new disciplines might be required.

Proponents of agricultural policy reform argue that further tightening of the
AMS is needed to keep the United States on the path of decoupled income support
and to encourage the EU to make greater reforms in the CAP and to make them
11See USDA, ERS, op. cit., p. 19.

CRS-18
permanent. On the other hand, reduction in domestic support could be less of an
issue or off the negotiating table altogether if both the United States and the EU are
making and maintaining policy reforms. The Cairns Group, however, seems unlikely
to agree to keeping what it regards as trade-distorting domestic policies off the
agenda.
New Issues
State Trading Enterprises (STEs)
Rules in the General Agreement on Tariffs and Trade (GATT 1947) for STEs
were not changed by the Agreement on Agriculture as they were for quantitative
import restrictions, exports subsidies, and domestic support. GATT 1947 recognized
the existence of STEs and required that they make purchases and sales solely in
accordance with commercial considerations and in a nondiscriminatory manner.
(Article XVII). The Understanding on the Interpretation of Article XVII in the
Uruguay Round requires that STEs be notified to the WTO, but imposes no new
disciplines. Although some countries are making substantial changes in the way STEs
operate, some continue to be important in world agricultural trade. On the export
side, STEs include the Canadian Wheat Board (CWB), the Australian Wheat Board
(AWB), and the New Zealand Dairy Board (NZDB). Import STEs are important in
Japan (the Japanese Food Agency) and Mexico, although Mexico has not notified its
food importing STE to the WTO. Importing STEs are also important in China and
Russia, two countries whose membership in the WTO is pending.
Two issues dominate the discussion of STEs in international trade. One is the
lack of transparency in pricing practices and marketing operations. The second is the
exclusive rights granted STEs to export products, in the case of exporting STEs, and
to import and distribute products, in the case of importing STEs.
There are a few suggestions of negotiating approaches to the issues raised by
STEs to make their operations more transparent. One suggested approach to dealing
with importing STEs is to strengthen GATT rules that relate to the pricing practices
of STEs on the domestic market to limit their monopoly over imports. This would
entail enforcing Article II (4) that states that no mark-up from a state-trading importer
should be larger than the bound tariff. Enforcing this rule would make it difficult for
countries to use importing STEs to protect the domestic market from imports.
Another approach would not act on STEs directly but would emphasize further
reductions in export subsidies and tariff reduction/expansion of minimum access
quotas as ways of cutting into their monopoly power.
The agreement between the United States and China on the terms of its
accession to the WTO illustrate how exclusive import and distribution prerogatives
of importing STEs might be dealt with.12 In its accession commitments, which would
12April 8, 1999 Market Access Commitments of the Government of China on Goods,
Services, and Agriculture, available at http://www.ustr.gov/release/1999/04/index.html and
(continued...)

CRS-19
become effective upon its becoming a member of the WTO, China agreed to eliminate
restrictions on trading rights for both agricultural and industrial products over a three-
year period. At the end of that transition period, all foreign and domestic enterprises
would have trading rights. Full trading and distribution rights will enable U.S. firms
to deal directly with Chinese customers rather than through intermediary Chinese
companies that have had exclusive rights to import and market products.
Biotechnology Products
One area not dealt with specifically during the Uruguay Round was trade in
biotechnology products or genetically modified organisms (GMOs). GMOs are
rapidly being introduced into U.S. agriculture; more than 20 bioengineered crops are
now sold commercially and others are being developed. European and some other
countries have been slower to accept and introduce GMOs, although the EU has an
approval process and has approved genetically modified varieties of soybeans and
corn for use in cultivation. Many in the United States, especially producers of corn
and soybeans, are concerned that the EU and other countries are adopting policies
regarding the importation and planting of GMO's and the labeling of products
containing GMOs that will adversely affect U.S. commodity exports.

Some in the United States want the WTO to establish rules that require any
restrictions on GMOs to be scientifically justified just as SPS measures must be under
the SPS Agreement. Others may argue that new rules are not needed. If
biotechnology products are restricted on the basis that they could potentially harm
human, plant or animal health, then the provisions of the SPS Agreement could apply.
Labeling issues might be addressed under the WTO/GATT Technical Barriers to
Trade (TBT) Agreement. The TBT Agreement prohibits the use of technical
regulations, such as labeling, that create "unnecessary obstacles" to trade. Some
might argue that if restrictions like requiring labels for products containing GMOs are
imposed to educate consumers about the food they eat, then no special multilateral
rules or disciplines would be needed either.
The cautiousness which some express about broaching biotechnology issues in
agricultural negotiations is based on concerns that raising the issue will permit the EU
and other trading partners to raise so-called "other legitimate factors" in considering
the food safety of particular measures. Consideration of such other issues, some
think, could ultimately weaken both the SPS and TBT Agreements. The EU, for
example, argued both during the Uruguay Round negotiations and more recently in
deliberations of the Codex Alimentarius Commission13 that certain other factors
should be taken into account in judging food safety measures. These include
consumer perceptions of risk and health; social preferences for risk management;
12(...continued)
Agriculture and China's Accession to the World Trade Organization, CRS Report RS20169,
April 21, 1999.
13The Codex Alimentarius Commission is a joint commission of the UN Food and Agriculture
Organization and the World Health Organization. The Commission drafts nonbinding
standards for food additives, veterinary drugs, pesticide residues, and other substances that
affect consumer food safety.

CRS-20
provision of information about the mode of manufacturing or production to give
consumers freedom of choice; preservation of economic and social balance (i.e., how
foods are produced and distributed); animal welfare considerations; and protection of
the environment. In addition, the EU has often advocated that food safety decisions
be based on a "principle of precaution", which means that countries should exercise
specific caution (e.g., ban imports of a particular product) in the case of uncertainty
in the risk assessment process. The EU's recent refusal to lift its ban on hormone-
treated meat has been justified, at least in part, by the EU on the basis of the principle
of precaution.
Other Issues
Agriculture in Regional Trade Agreements
The place of agriculture in regional trade agreements and the relationship of
regional agreements to multilateral agreements also may be on the agenda. In the
past, agriculture or key agricultural sectors were left out of regional trade agreements
because of political or economic "sensitivities." There was an unwillingness on the
part of governments to expose politically important constituencies to competition
from cheaper imports from outside the country. Recent regional agreements,
however, include provisions for freeing trade in agricultural products. The North
American Free Trade Agreement (NAFTA), the Common Market of the South or
Mercosur, and EU association agreements with the central and eastern European
countries (CEEC) all contain agricultural provisions. The U.S.-Canadian agricultural
trade agreement incorporated into NAFTA does exclude some sensitive commodities
and the EU maintains some quantitative limits on imports from CEECs. An issue for
many is whether regional agreements promote or impede the process of agricultural
trade liberalization. Although some think that creation of regional blocs will impede
global agricultural trade liberalization, others think they may promote it as regional
trade agreements impose pressure on member countries to reform domestic policies
and open up to trade within the region. An issue for multilateral agricultural
negotiations may be that of mitigating or eliminating trade barriers maintained against
countries that are not members of a regional trade agreement.
Possible Negative Effects on Developing Countries
The Uruguay Round accords include a "ministerial decision" on measures
concerning the possible negative effects of the reform program on least-developed and
net food-importing developing countries. The decision states that WTO members
recognize that liberalization of agricultural trade may result in negative effects on the
availability of adequate food supplies in the developing countries. The decision
includes an agreement to "establish appropriate mechanisms" to ensure that food
needs are met through food aid and through technical assistance to increase
agricultural productivity.
Although food aid, especially U.S. food aid, increased in 1998, many developing
countries remain concerned that developed WTO members may have lost sight of
their long-run needs for both food aid and technical assistance to improve agricultural

CRS-21
productivity. Developing countries may want to revisit these issues in the context of
the ministerial decision in future agricultural negotiations. There are other
international mechanisms for dealing with the food aid needs of the developing
countries. The International Food Aid Convention, which establishes minimum
commitments of food aid by donor countries provides a framework for addressing
food aid issues of the developing countries.
Negotiating Positions of the Main Participants14

Many WTO member countries staked out their negotiating positions prior to the
1999 Seattle Ministerial Conference. While some of these positions lack the
specificity of ultimate negotiating positions, they nevertheless indicate the general
thinking of major players in the negotiations on issues that are likely to be on the
agenda. These negotiating positions are starting points and may change over time as
negotiations proceed. The following discussions are based on documents submitted
by Member countries to the WTO.
The United States
Objective and Framework for the Agricultural Negotiations. The U.S.
objective for agricultural negotiations is to expand trade opportunities by ensuring
further deep reduction in support and protection, while encouraging non-trade-
distorting approaches for supporting farmers and the rural sector and strengthening
the rules governing trade in agriculture. Pursuit of this objective is based on the
existing framework in the WTO Agreement on Agriculture which includes binding
commitments in market access, export competition and domestic support, and which
provides the basis for further reform. The Agreement should be supplemented as
needed by additional disciplines. The United States will encourage WTO members
to present specific proposals beginning in January 2000.
Export Competition. The United States lists two objectives for negotiations
on export competition in agriculture:
! to completely eliminate, and prohibit in the future, all remaining export
subsidies as defined in the Agreement on Agriculture; and
! to clarify rules on other measures that can act to circumvent export subsidy
disciplines and to create disciplines for other practices that distort export
competition.
As areas where clarification of the rules and new rules are needed, the United
States cites improving transparency in the operation of exporting state trading
enterprises (STEs) and stronger disciplines on monopoly activities of STEs, including
pricing policies that support cross-subsidization and price undercutting in export
14 WTO Member country negotiating positions as well as other documentation relevant to the
Seattle Ministerial can be found at www.wto.org/minist/seatdocs.htm

CRS-22
markets. In addition, the U.S. position calls for terminating the use of export taxes
applied to specific agricultural products.
Market Access. For the United States, the objective of the WTO negotiations
on agricultural market access is to maximize improvements in market access
opportunities and to make more uniform the structure of tariff bindings for all WTO
members. To achieve this objective, the United States notes that a variety of
approaches will be needed to accomplish this objective, including:
! lower tariff rates and bind them, including, but not limited to zero/zero
initiatives for agriculture;
! expanded market access opportunities for products subject to tariff rate quotas
(TRQs);
! reductions in the disparity between applied and bound tariff rates;
! simplification of complex tariff regimes;
! greater certainty and transparency in the operation of tariff regimes;
! disciplines governing administration of TRQs and transparency and
competition for import STEs; and
! improved market access through a variety of means to the benefit of the least-
developed Members by all other WTO Members.
Domestic Support. The U.S. objective for domestic support is that the
negotiations result in substantial reductions in trade-distorting support and stronger
rules that ensure all production-related support is subject to discipline, while
preserving criteria-based “green box” policies that can provide support to agriculture
in a manner that minimizes distortions to trade.
The U.S. communication emphasizes that Governments have the right to support
farmers if they choose, but stresses the importance of providing such support in a
manner that causes minimal distortions to production and trade.
Biotechnology. The United States proposes that the negotiations include
addressing disciplines to ensure trade in agricultural biotechnology products is based
on transparent, predictable, and timely processes.
The U.S. statement points out that although trade in biotechnology products is
a relatively new aspect of international trade, the basic issues related to it are already
covered under the WTO framework. The Agreement on Agriculture, according to
the U.S. document, establishes specific disciplines on non-tariff measures. More
generally, the United States notes, WTO agreements are predicated on reducing trade
restrictions in agriculture and on ensuring that all measures are transparent and do not
create unnecessary or arbitrary barriers to trade.

CRS-23
The Cairns Group15
The negotiating proposal of the Cairns Group focuses on the issues of export
subsidies, market access, and domestic support. Its overarching objective is to
ensure that the WTO agriculture negotiations achieve fundamental reform which will
put trade in agricultural goods on the same basis as trade in other goods. To
accomplish this objective, the Cairns Group makes several recommendations for
further, far reaching, and specific commitments in three reform areas.
Export Subsidies. According to the Cairns Group, it is essential that the
negotiations ensure the early, total elimination and prohibition of all forms of
distortive and inequitable export subsidy. In addition, there must be rules to prevent
circumvention of export subsidy commitments and agricultural export credits must
also be brought under effective international discipline with a view to ending
government subsidization of such credits.
Market Access. The Cairns Group communication declares that access
opportunities for agricultural products should be on the same conditions as those
applying to other goods and be commercially viable. Specifically, tariffs must be the
only form of protection, tariff escalation must be removed, and tariff peaks curtailed;
the removal of nontariff barriers must be completed without exception; and trade
volumes under TRQs must be increased substantially.
Domestic Support. Negotiations must result in major reductions in domestic
support for all agricultural products. All trade-distorting domestic subsidies,
according to the Cairns Group statement, must be eliminated with only nondistorting
forms of support permitted.
Australia
Australia has become a major exponent of the Cairns Group position on
agricultural negotiations. Its proposals are consistent with the Cairns Group
statement but provide specifics with respect to the issues of export subsidies, market
access, and domestic support.
Export Subsidies. Australia calls for the immediate elimination and prohibition
of all forms of export subsidies. In addition, Australia calls for bringing agricultural
export credits under effective international discipline and for approaches to prevent
circumvention of export subsidy commitments.
Market Access. Australia restates the Cairns Group position that WTO
Members agree to a major expansion of market access opportunities for all basic and
15Argentina, Australia, Brazil, Canada, Chile, Columbia, Fiji, Indonesia, Malaysia, New
Zealand, the Philippines, Paraguay, Thailand, and Uruguay. Formed just prior to the
Uruguay Round negotiations to lend support to agricultural trade liberalization, the Group has
maintained its cohesiveness and trade liberalization objective. Hungary has left the Cairns
group in anticipation of its becoming a member of the EU. Paraguay has recently joined.

CRS-24
processed agricultural products resulting in commercially viable access on the same
conditions as those applying to other goods.
Differences in treatment of agricultural products include border protection levels
that are well above those applying to other products; the continuation of some
nontariff barriers; and the provision of special safeguards for agricultural products for
the duration of the reform process (1995-2001) as determined under Article 20.
The negotiations on tariffs, according to Australia, will need to consider all
aspects of market access notably tariffs, tariff peaks, tariff escalation, tariff rate quota
volumes, in-quota tariffs, and the rules applying to market access commitments.
Further, access opportunities must be expanded through substantial increases in trade
volumes under the TRQs. Finally, as part of the agriculture negotiations, WTO
members should ensure that the administration of tariff quotas does not diminish the
size and value of market access opportunities. Australia notes that tariff quotas are
being used to provide a level of protection greater than the impact of the tariff quota
itself and that overall, tariff quota fill rates are less than two-thirds. Abetting this
situation is the fact that there are no specific rules on tariff quota administration in the
Agreement on Agriculture or in other WTO Agreements.
As part of the market access negotiations, Australia proposes that the agriculture
negotiations develop disciplines on export restrictions and taxes. Such disciplines
would be an integral part of delivering further substantial liberalization of trade in
agriculture, including the elimination of tariff escalation. Elimination of export
restrictions could contribute to assuring least-developed and net food importing WTO
Members about their ability to access food in world markets.
Australia argues that tariff escalation in export markets hinders the capacity of
exporting countries to develop processing industries. In particular, it prevents
developing countries from adding value to their exports. As a response to tariff
escalation in export markets, some developing countries have taken recourse to
restricting or taxing their raw material exports. To avoid such perverse effects,
further substantial agricultural liberalization, including the elimination of tariff
escalation, will be an important contribution to developing more effective disciplines
on export restrictions and taxes.
Domestic Support. Australia calls for major reductions in domestic support for
all agricultural products, resulting in the elimination of all trade-distorting domestic
subsidies with only non-trade-distorting forms of support permitted thereafter. This
proposal would entail the elimination of both amber box and blue box categories of
support which, Australia emphasizes, encourage overproduction and are the root
cause of problems that emerge on world markets. WTO Members would still be
permitted to provide non-trade-distorting support (green box) to their agricultural
producers to pursue objectives including improvements in infrastructure, research and
training, income support, disaster relief, investment and the environment.
Canada
Objectives. Canada’s negotiating objective is to achieve significant further
trade reforms in the core areas of market access, domestic support and export

CRS-25
competition. The Canadian statement notes that these issues are interrelated and that
progress in one area can lead to progress in other areas. For example, since many
market access barriers were a response to the pervasive use of export subsidies,
progress towards eliminating export subsidies will have implications for lowering tariff
barriers. Similarly, progress in reducing trade-distorting domestic support, which can
stimulate production, and lead to import replacement or increased export competition,
can influence both the market access and export subsidy negotiations.
Export Subsidies. Canada will seek:
! agreement to eliminate all export subsidies in agriculture as quickly as possible;
and
! rules to ensure that government-funded export credit and export credit
guarantee programs, export market promotion and development activities,
certain types of food aid, or other forms of export assistance do not become
substitutes for export subsidies.
Domestic Support. Canada seeks:
! the maximum possible reduction or elimination or production and trade-
distorting support, including support under so-called “production-limiting” or
“blue-box” programs.
! an overall limit on the amount of domestic support of all types (green, blue,
and amber).
! a review of the criteria of the green category to ensure that green support does
not distort production and trade, and a permanent international recognition
that such support should not be countervailable;
! The elimination of those elements of the “peace clause” that restrict Canada’s
rights to pursue dispute settlement in cases where trade-distorting domestic
support and export subsidies cause nullification and impairment or disrupt sales
in third country or import markets.
Market Access. Canada is seeking real and substantial market access
improvements for all agricultural and food products through a variety of negotiating
techniques. (Perhaps with reference to its own TRQs for certain products, Canada
notes that where tariff rate quotas remain, effective liberalization will depend largely
on the size of minimum access commitments, the level of in-quota tariffs, and how
TRQs are administered.)
Canada’s approaches to market access improvement will include:
! Zero-for-zero. Canada will seek the elimination of tariffs on oilseeds and
oilseed products, barley, and malt, and other sectors where agreed.
! Ordinary tariffs. Canada will seek maximum negotiable reduction in tariffs
through approaches that reduce both the disparity between final bound rates

CRS-26
for similar competing products and the tariff escalation between primary and
processed forms of the same product.
! TRQs. Canada will seek:
binding rules to require that any tariff over a specified level be accompanied
by a minimum access commitment equal to at least 5% of current
consumption of the product concerned. TRQs must be on a product basis
(e.g., pork not meat) so that the disparity in effective market access across
WTO Members and across products is reduced;
binding rules regarding the administration of TRQs, including possible
elimination of country-specific allocations, to ensure that administrative
practices do not frustrate the agreed access; and
binding rules to require elimination of tariffs within TRQs where over-
quota tariffs are maintained at levels which limit access to the size of the
within-quota volume.
Export Restrictions and Taxes. Canada will seek agreement on rules to
effectively discipline export taxes and export restrictions on agricultural products.
Canada will seek, specifically, a ban on the inclusion of food and feedstuffs in national
security trade embargoes.
Sanitary and Phytosanitary Measures. Canada does not seek to open the SPS
Agreement. Rather, Canada proposes to seek to reaffirm Members’ commitment to
the SPS Agreement, particularly its focus on decisions based on science and risk
assessment and greater use of international standards.
Biotechnology. Canada will seek to establish a working party on biotechnology
in the WTO to determine the adequacy of existing rules and to report to the steering
body for the negotiations on whether negotiations are required within the WTO in this
area.
State Trading Enterprises. Canada will seek to ensure that the existing
disciplines on the activities of import monopolies for agricultural products are
appropriately enforced to ensure that such entities do not nullify market access
commitments.
Canada remains willing to discuss any practical trade concerns identified by
trading partners about single-desk exporters of agricultural product, but Canada will
seek to ensure that any new disciplines proposed to deal with perceived market power
of STEs apply equally to all entities, public or private, with similar market power.
The European Union
The Commission of the EU has communicated its concerns for forthcoming
negotiations to WTO Members. The EU Commission looks forward to the
negotiations, including the agricultural negotiations mandated by Article 20 of the
Uruguay Round Agriculture Agreement. Article 20, according to the Commission,
conditions the objective of substantial, progressive reductions in support and

CRS-27
protection, by other concerns, notably the experience and effects of implementing
reduction commitments, special and differential treatment of developing countries, the
objective to establish a fair and market-oriented agricultural trading system, and non-
trade concerns.
Four main areas of negotiations are identified: Whether any of the specific
instruments provided in the Agriculture Agreement need to be adapted; progress on
the key trade issues of access, assistance to exports, and commitments to reduce
support; non-trade concerns, notably the multifunctional role of agriculture, food
safety and quality, policies to protect the environment, and animal welfare; and special
and differential treatment for developing countries.
Instruments in the Agriculture Agreement. The EU is not of the view that
a major review of the specific instruments provided in the Agriculture Agreement is
necessary or desirable. In particular:
! The Commission does not rule out some updating of the blue and green boxes,
but in concept they remain essential elements in the policy of reducing support
and providing assistance to WTO members to move away from price supports
towards more transparent and non-distorting policies.
! The need, recognized in the peace clause, to provide legal security for the
outcome of the negotiations will exist at the end of the forthcoming
negotiations, as it did in the Uruguay Round; and
! Provision for continuing the special safeguard clause should be of general
interest to all Members.
Key Trade Issues. The EU’s approach to key trade issues will be founded on
the full Agenda 2000 package decided by EU heads of state and government.
! Improvement in access. The EU will seek to obtain improvements in
opportunities for its exporters, through, among other approaches, greater
clarity in the rules of management of TRQs, including imports through single
desk buyers, and the removal of other unjustified non-tariff barriers. The EU
statement continues that at the same time, as noted in Article 20, the process
reducing trade barriers in agriculture is to be seen as an ongoing process
resulting in fundamental reform, and not something which can be completed
in the next agricultural negotiations.
! Reductions in support for exports. The EU is willing to continue to negotiate
this process provided that all such support is treated on a common footing.
The commitment to introduce disciplines on agricultural export credits (part
of the Uruguay Round Agreement) must be respected. Less transparent forms
of export support, e.g., the operations of single-desk exporters and food aid
on concessional credit terms, also need to be addressed.
! Reductions in support. The EU is prepared to negotiate this in terms of the
continuation, in appropriate forms, of the blue and green boxes.

CRS-28
Non-Trade Concerns. Key non-trade concerns include:
! The multifunctional role of agriculture. In the EU view, progress on trade
issues should not damage the ability of those employed in agriculture to supply
public goods, in particular as regards the environment, and the sustained
vitality of rural areas. Direct aid measures with no or minimal trade impact
have an important role to play in this context.
! Food safety and quality. The EU notes that WTO case law has confirmed that
nondiscriminatory science-based measures to achieve the level of safety
determined by Members are in conformity with the SPS Agreement.. This
suggests that it might be useful to confirm this in way that assures consumers
that the WTO will not be used to force onto the market products about whose
safety there are legitimate concerns. Further, in any review of the Agreement
on Trade-Related Intellectual Property (TRIPS), the improved protection for
products whose reputation for quality is linked to their geographical origin will
be a major concern.
! Animal welfare. Citing increasing public concern about the conditions in
which animals are kept and reared, the EU states that it is important to address
this issue on a multilateral basis. Thus, consensus should be sought on the
accommodation within WTO rules of any trade measures taken pursuant to any
multilateral agreement which might be reached regarding welfare standards.
Special and Differential Treatment for Developing Countries. According
to the EU statement, because of the importance of food and agriculture in the
economies of developing nations, the issue of special and differential treatment will
be of considerable importance in the agriculture negotiations.
Japan
Japan’s objectives are to establish rules and disciplines that are genuinely fair and
equitable for both food importing and exporting countries and which allow a
coexistence of various types of agriculture among Member countries. To meet these
objectives, due consideration should be given to the importance of the
multifunctionality of agriculture; to the importance of food security and the basis that
domestic agricultural production provides for food security; and to redressing the
imbalance in rights and obligations under WTO rules between exporting and
importing countries. In pursuing its objectives, Japan wants two main points to be
addressed:
! strengthening the existing rules and disciplines on export
prohibitions/restriction measures, export tax, export subsidies and export
STEs; and
! reviewing the existing rules and disciplines of the Agreement on Agriculture
while maintaining its basic framework.

CRS-29
Japan also calls for an independent group for agricultural negotiations within which
issues would be negotiated. In addition, an appropriate forum should be established
to address new issues, including GMOs, from a broad perspective.
Multifunctionality of Agriculture. As regards this issue, Japan notes that
agriculture not only produces agricultural products, but also contributes to the
preservation of land and environment, to the creation of a good landscape and to the
maintenance of the local community, through production activities in harmony with
the natural environment. Thus negotiations should examine policy interventions, and
determine the extent to which such interventions can be allowed, that fulfill the
multifunctional roles (including food security) of agriculture.
Food Security. With respect to this issue, Japan notes that it is indispensable
to provide domestic agricultural production with the primary role of ensuring food
supply by increasing production. It is also necessary to fully examine how policy
intervention would be placed within the international framework and as to what extent
it is allowed, based on the experience of implementing past agricultural agreements.
Strengthening Export Rules. Multilateral rules and disciplines on the
agricultural export side should be strengthened. These include rules and disciplines
on export prohibitions, restrictions, export taxes and export subsidies and export
STEs.
Domestic Support. The framework of the Agreement on Agriculture should
be maintained. The requirements and scope of green policies should be reviewed in
light of implementation experience. The blue box, should be maintained and
positively evaluated. WTO Members should be assured of flexibility in implementing
amber box policies.
Market Access. Japan notes that tariffs are the only legitimate border measures
under the WTO. Negotiations should thus deal not only with tariffs but also nontariff
measures. Importing countries, says Japan, have legitimate rights to take appropriate
border measures for food security in their own country. Tariff rates, both within and
out of quota rates, should be examined in consideration of the necessity of maintaining
a certain level of domestic agricultural production and the multifunctionality of
agriculture.
Measures for Developing Countries. According to Japan, WTO Members
should help developing countries fulfil their obligations under the Agreement on
Agriculture and actively participate in the WTO system as a whole. In addition, not
only should WTO Members ensure that food aid would be available on a short-term
basis for developing countries, but also should provide assistance aimed at enhancing
sustainable food production in the long term.
New Challenges. New issues such as food safety, genetically modified
organisms, recycling and organic agricultural products should be addressed in the
negotiations. An independent forum should be established for this purpose.

CRS-30
Developing Countries
Developing countries will bring a diverse array of interests into the multilateral
agricultural trade negotiations. Those countries that are exporters of food and
agricultural products will likely ally themselves with positions taken by the Cairns
Group. Twelve of the fifteen members of this group are developing countries. They
include Argentina, Brazil, Chile, Colombia, Fiji, Indonesia, Malaysia, the Philippines,
Paraguay, Thailand, and Uruguay. Other developing countries will be concerned
about market access for their agricultural products. For many this will mean
negotiations to reduce tariffs and other market access barriers to their products. For
others this will translate into efforts to maintain their preferential access to developed
country markets. The net food importing countries will be concerned with the impact
of further agricultural trade liberalization on the cost and availability of food imports.
The low income developing countries also have an interest in technical assistance
to help them adapt to the new rules and disciplines already established in the Uruguay
Round Agreement on Agriculture, the SPS Agreement, the Understanding on Dispute
Settlement, and the TBT Agreement. The WTO, the World Bank, and many
developed country WTO members have programs of technical assistance to help
developing countries adapt to a more liberal global trading environment. The
availability and scope of such assistance are likely to be important determinants of
developing countries' ability to benefit from improvements in market access that may
flow from the Uruguay Round Agreement as well as from any future trade
negotiations.
Conclusion: Agriculture in the Seattle Ministerial
Disagreements over agricultural issues between the United States joined by
members of the Cairns Group and the European Union joined by Japan contributed
to the failure of the Seattle Ministerial conference to agree on an agenda for a new
round of multilateral trade negotiations. How to deal with agricultural export
subsidies was a major point of contention. The United States and the Cairns Group
wanted negotiations to result in substantial reductions in export subsidies and at some
future date their elimination. The EU, on the other hand, insisted that the aim of the
agricultural negotiations should be the progressive reduction in export subsidies with
recognition that the next round of negotiations in agriculture would only continue but
not complete the reform not only of export subsidies but also of domestic support.
Another point of contention between the United States and the EU and Japan
was the extent to which non-trade concerns should be taken up in the agenda. The
EU and Japan proposed that a number of non-trade concerns be taken into account.
These included environmental protection, food security, the economic viability and
vitality of rural areas, food safety, animal welfare, and the multifunctionality of
agriculture. The United States and the Cairns Group countries resisted particularly
inclusion of animal welfare and the multifunctionality of agriculture among non-trade
concerns to be enumerated in an agenda for agricultural negotiations.

CRS-31
The compromise proposed,
Agriculture in the Draft Ministerial Declaration
but not ultimately accepted, is
reflected in the agriculture
23. The negotiations shall continue the process
section of the draft ministerial
of fundamental reform of trade in agriculture,
declaration (see accompanying
through substantial progressive reductions in
text box.) The United States
agricultural support and protection sustained
agreed with the EU that the
over an agreed period of time, resulting in
agricultural negotiations should
correcting and preventing restrictions and
aim for substantial progressive
distortions in world agricultural markets, and
reduction in export subsidies,
the progressive establishment of a fair and
but the EU left unclear whether
market oriented agricultural trading system in
it could agree to move in “the
conformity with WTO rules and disciplines.
direction of progressive
This shall be done based on Article 20 and the
elimination of all forms of
preamble to the Agreement on Agriculture.
export subsidization.” On the
issue of domestic support, the
24. Special and differential treatment for
United States agreed with an
developing countries, as provided for in relevant
EU demand to change
WTO provisions, shall constitute an integral and
substantial reductions in
effective part of the results of the negotiations.
domestic support to substantial
Special and differential treatment shall be
progressive reduction. The
embodied in the Schedules of concessions and
draft text makes no specific
commitments and, as appropriate, in the rules
mention of state trading
and disciplines to be negotiated, so as to be
enterprises (STEs) which the
more operationally effective and so as to enable
United States had sought to
developing countries, while undertaking
include. Nevertheless, U.S.
commitments and providing concessions in the
trade policy officials say that
areas covered in paragraph 25 below, to take
STEs could be dealt with under
account of their development needs, including
the “rules and disciplines” part
food security and agricultural and rural
of the draft text. With respect
development. Particular attention shall be paid
to non trade concerns, neither
to the situation of least-developed, net food-
a n i m a l w e l f a r e n o r
importing, and small island developing
multifunctionality of agriculture
countries.
are specifically mentioned.
Furthermore, the text notes that
25. To achieve the objectives in paragraphs 23
non-trade concerns should be
and 24 above, the negotiations shall cover:
addressed through targeted,
(i) Market Access. Comprehensive market
transparent, and non-trade
access negotiations leading to the broadest
distorting measures.
possible liberalization, particularly with regard
to products of export interest to developing
Although the agricultural
country Members; (cont’d.)
negotiations as part of the
WTO’s built-in agenda have
begun, the timetable for
completing them is far from
settled. The negotiations are
likely to proceed slowly. And difficult issues which contributed to the failure of the

CRS-32
Seattle ministerial will have to
Agriculture in the Draft Ministerial Declaration
be tackled once again in these
(cont’d.)
sectoral negotiations.
(ii) Export Competition. Substantial reduction
in all forms of export subsidies, and equivalent
action in respect of the subsidy component of
other forms of export assistance, in the direction
of progressive elimination of export subsidies;
(iii) Domestic Support. Substantial reductions
to domestic support;
(iv) Rules and Disciplines. Improvements in the
rules and disciplines consistent with the
objective of fundamental reform.
Proposals for negotiations on all the above
elements shall be submitted by July 1, 2000.
26. At the same time, as foreseen in Article 20,
the negotiations shall take into account:
Non-trade concerns. These include, in
particular, the need to protect the environment,
food security, the economic viability and
development of rural areas, and food safety,
without prejudice to the Agreement on the
Application of Sanitary and Phytosanitary
Measures,. Non-trade concerns shall be
addressed through targeted, transparent, and
non-trade-distorting measures.
Other objectives and concerns mentioned
in the Preamble to the Agreement on
Agriculture, including making commitments in
a equitable way among all Members.
27. Agreements on modalities shall be reached
before 1 July 2001. Participants shall submit
their comprehensive offer lists no later than 31
January 2002. The negotiations on
commitments and legal texts shall be concluded
before 15 December 2002.
Source: Inside U.S. Trade, December 13, 1999.