Changes In The Draft Needed To Ensure Fair Trade

Updated: Jul 26 2004, 05:49am hrs
The framework draft for negotiation is slated for discussion in the WTO general council meeting slated to begin in Geneva from July 27. The co-authors of the draft, Notaro Oshima and Supachai Panitchpakdi, have said that there is scope for improvement on the draft before it is finally adopted for further negotiations.

True, the draft needs to incorporate certain changes if it has to reflect the Doha development agenda in letter and in spirit.

It is important that the draft for negotiations in multilateral trade should give a clear message that all subsidies in agriculture should be eliminated within a fixed timeframe for ensuring fair trade. Unfortunately the Oshima-Supachai draft, though quite rhetoric in expressing the concerns of the developing countries for phasing out of domestic support given in developed countries to agriculture, have sought to enlarge the provision of farm subsidies under the Blue Box.

The proposed enlargement of the Blue Box will help the developed countries manage to shift their huge subsidies from Amber and Green boxes under various pretexts and thus legitimise their present level of support to agriculture. The draft said that with a view to avoid or prevent circumvention of agreement and box or product shifting of support, product-specific AMS should be capped at their respective average levels during a historical basis to be agreed. But the term historical basis is not clarified as to whether it is pre or post Uruguay Round or pre or post Doha!

The draft turned the demand of some African and least developing countries (LDCs) for a separate negotiation on cotton and incorporated it in the general negotiation on agriculture. Cotton subsidy issue is politically very embarrassing for US. Here due to the proposed enlargement of the Blue Box, the US will get a free hand in subsidising not only the cotton growers but also other farmers under various options to be made available. US can justify its counter-cyclical payments to farmers and payments under other heads as mandated in the Farm Bill of 2002.

The African countries will, therefore, have a tough time in negotiating their demands on cotton subsidy. The developing countries and the LDCs too will have the same problem in settling the issue of trade-distorting subsidies. The US Farm Bill, 2002 mandates a support of $ 10 billion a year under counter-cyclical payments to farmers. Several trade experts have pointed out that under this provision US can increase the support even up to $12 to $20 billion a year.

There are also certain estimates to show that the developed countries are rendering trade-distorting support to their farm sector under Green Box. The Oshima-Supachai draft has acknowledged it by say Green Box criteria will be reviewed with a view to ensuring that Green Box measures have no, or at most minimal, trade-distorting effects or effects on production. But the draft fell short of outlining the measures to discipline the subsidies under Green Box or for phasing out of such subsidies within a definite timeframe.

The LDCs and the developing countries should demand for elimination of Blue Box and phasing out of subsidies under Green Box within a definite timeframe.

The Oshima-Supachai draft is clear in giving protecting the sensitive products of developed countries, but in case of the sensitive products of the developing world the discussions have been deferred to post-Framework stage. This is outrightly a step-motherly treatment to the Third World. The draft also does not spell out in adequate details about the developing countries demand for flexibility to deal with their special products, and special safeguard mechanism (SSM) for protecting against any surge in imports.

The special protection on sensitive products given to the developed countries can be used as a mechanism to deny market access to the products from the developing world. Some trade experts say that as many as 25 per cent of the EUs tariff lines can be brought under sensitive products and thereby protected. Similarly in Japan 30 per cent of tariff lines can be brought under sensitive products

The draft has called for transparency in procurement for trade by state trading enterprises and plugging the loopholes in the operation, but it is silent on trade distortion caused by the transnational agribusiness companies that control the prices paid to farmers. The draft should have suggested total elimination of export credit. The Third World should, therefore, remain united in demanding the suitable changes in the Oshima-Supachai draft for facilitating fair trade and as well as safeguarding their interests.