Trade Liberal is at Ion

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July 2, 2010

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Barcelona-Conference.html

Online Proceedings Working Paper No. 2010/30

SECOND BIENNIAL GLOBAL CONFERENCE

JULY 8 - 10, 2010

THE UNIVERSITY OF B ARCELONA

AND ITS IELPO PROGRAMME

FOOD SECURITY AND AGRICULTURAL TRADELIBERALIZATION

MARTHA BELETE HAILU ADDIS ABABA UNIVERSITY SCHOOL OF LAW

ETHIOPIA



SIEL Second Biennial Global Conference July 2010

Conference Paper

Food Security and Agricultural Trade Liberalization

By: Martha Belete Hailu Addis Ababa University School of Law, Ethiopia

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AbstractMany Sub-Saharan African countries are highly dependent on the agricultural sector for thelivelihood of the population. Agriculture is source of livelihood for 64 percent of thepopulation in the region; the sector contributes about one-fifth of total gross domesticproduct, and about 12 per cent of the total export earnings for the region.1 These countriesare gifted with abundant land, labor and natural resources indicating existence of comparative advantage in the agriculture sector. With the existence of comparativeadvantage, one can reasonably expect the continent to be able to feed its citizens. However,food security is of particular concern to many Sub-Saharan African countries and a daily

problem for large parts of the population. Many of the countries which faced recurrent foodshortage for the period 1998-2002 are found in Sub-Saharan Africa. 2Food security of a country is affected by different factors; one of which is international tradepolicy. Trade policy reform resulting from the WTO negotiations involves a combination of the three pillars of the Agreement on Agriculture: tariff, domestic support measures andexport subsidies. Each of these pillars have one way or another an implication on foodsecurity. Lowering of tariff in agricultural products would lead to an increase in import anddeclining of price of imported goods thereby enhancing food security. However, for acontinent like Africa, where more than 64% of the population depends on the sector, thenegative consequences could out weigh. The rules on domestic support and export subsidyalso have an impact on food security in that their removal will increase the price of food inthe world market there by increasing the import bills of food importing countries anddecreasing the amount of food supply to food deficit countries in the form of food aid. Theremoval of support, however, is beneficial in the long run as it would enhancecompetitiveness of agricultural products from African countries. In light of the fact that trade policy plays a great role in the food security of countries, the issue deserving consideration1 Samuel K. Gayi, (2007), Does the WTO Agreement on Agriculture Endanger Food Security in Sub-Saharan Africa? In Basudeb Guha-Khasnobis, Shabd S. Acharya, and Benjamin Davis, (eds), Food Security: Indicators,

Measurement and the Impact of Trade Openness , Oxford University Press, 291-2922 FAO, FAO STAT online data, available at < www.faostat.fao.org >2

http://www.faostat.fao.org/





is the effect of the WTO agricultural trade liberalization on food security and the availablemechanisms for addressing the issue.The article examines the food security implications of the WTO agreement on Agriculture. Itasserts that the Agreement on Agriculture favors agricultural producers of the developedcountries at the cost of producers in developing countries, including Africa. The article willalso address the extent to which the realization of the objectives of the Agreement on Agriculture will promote food security in food insecure African countries. Accordingly, thenext section will define food security and look into the state of food (in)security in Sub-Saharan African countries as well as the causes for food insecurity. The third chapter touchesupon the three pillars of the AoA and their implementation and will also discuss theirrelationship with food security. The fourth section will highlight the state of affairs in thecurrent negotiation and indicate the reforms necessary to be undertaken under the currentround of negotiation which aims towards enhancing food security in the region. The paper will finalize by making some concluding remarks.

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Table of Content

Abstract 2 Acronyms 5I. Introduction 6II. Defining Food Security 6III. State of Food Security in Africa and Causes of Insecurity 7IV. The Agreement on Agriculture and Food Security: The Relationship 9

IV (i) Market Access 9IV(ii) Domestic Support and Export Subsidy 12 V. Food Security Issues in the Doha Round 18 VI. Concluding Remark 21

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Acronyms AOA Agreement on AgricultureFAO Food and Agriculture organizationGATT General Agreement on Tariff and TradeGDP Gross Domestic ProductLDC Least Developed Countries

NFIDC Net Food Importing Developing CountriesSSM Special Safeguard MeasuresUNCTAD United Nations Conference on Trade and Development WTO World Trade Organization

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I. Introduction

Agriculture is the backbone of the majority of African Countries’ economy. The sectoremploys more than 60% of the population and is also significant source of export earnings.Considering the importance of the sector to the economy as well as the population, onetends to assume existence of comparative advantage in the sector and food self sufficiencyof the population. Quite to the contrary, food security is of particular concern to many African countries and a daily problem for large parts of the population. Many factors, one of which is trade policy, play a role in fostering food security in one country; and one importantfactor which gears a country’s trade policy is its international commitment throughmembership to the WTO.This paper aims at assessing the food security situation of African countries and therelationship between food security and the WTO agreement on agriculture as well as theimpact of the latter on the former. The rules on agricultural trade as they exist under the AOA favor producers in the developed countries to the detriment of the interest of producers in African countries. One of the agenda for negotiation under the current Doharound is agricultural trade. The paper will also look into the implication of the progress sofar made under the current round on the food security concerns of African countries.II. Defining Food SecurityFood security is an amorphous concept and different definitions have been given to it indifferent times. The 1974 World Food Summit defined food security as ‘the availability at alltimes of adequate world food supplies of basic foodstuffs to sustain a steady expansion of food consumption and to offset fluctuation on production prices.’3 As the global concernduring that time was the volume and stability of food supply, the definition adopted reflectsthis concern.Soon the concern shifted to ensuring access of food to all people, including vulnerable onesand attention was given to balancing between the demand and supply side4 resulting in3 FAO, (2003), Trade Reforms and Food Security: Conceptualizing the Linkage , Rome, p 264 Ibid

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adoption of a new definition. In view of this shift, the FAO adopted a new definition in1983 as such food security was defined as “ensuring that all people at all times have bothphysical and economic access to the basic food that they need.” 5 By the mid-1990s foodsecurity was recognized as a significant concern, spanning a spectrum from the individual tothe global level. Together with this, the concern was also changed to making sufficient food with necessary nutritional value available for all. The issue of food safety as well as culturalpreference have also been considered. Consequently, the 1996 World Food Summit adopteda new definition of food security6, which was later in 2001 modified to include the socialaspect of food security. Accordingly, it was defined as “Food security exists when all people,at all times, have physical, social and economic access to sufficient, safe and nutritious foodthat meets their dietary needs and food preferences for an active and healthy life.” 7 Four

essential elements can be pointed out from this definition: adequacy of the food supply,stability of the supply across the year, affordability of the food and quality and safety of thefood. This definition is adopted as a working definition for the purpose of this article.III. State of Food Security in Africa and the Causes for Insecurity Agriculture lies at the backbone of African economy. It contributes for about one fifth of the total GDP and about 12 % of total export earning for the continent. Being endowed

with abundant land and labor, the continent presumably has a comparative advantage in theagriculture sector. However, a glimpse at the performance of the sector in many Africancountries shows otherwise. In over twenty years the continent reversed from being a keyexporter of agricultural commodities to a net importer, and the sector has been plagued withproduction problems. Moreover, the food security situation in many African countries hasdeteriorated over the years. In 2003, acute food security had affected 38 million people in thecontinent, who were facing outright risk of famine, with 24,000 dying from hunger daily.8The 2008 world food crisis also affected the continent highly. A 2009 UNCTAD report5

Ibid6

The definition adopted in 1996 defined food security as “Food security, at the individual, household, national,regional and global levels [is achieved] when all people, at all times, have physical and economic access tosufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthylife”, FAO, (1996), World Food Summit Plan of Action, Paragraph 1, also available at<http://www.fao.org/wfs/index_en.htm> [accessed on February 10, 2010]7 FAO, (2009), The State of Food Insecurity in the World in 2009: Economic Crisis-Impacts and Lessens Learned, Rome, p88 Jenny Clover, (2003), Food Security in Sub Saharan Africa, African Security Review vol 12 (1), p6

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http://www.fao.org/wfs/index_en.htm

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indicated that of the 36 countries worldwide facing a food security crisis in 2009, 21 are African, and it is estimated that there are over 300 million Africans facing chronic hunger –nearly a third of the continent’s population.9 Many factors contribute to the dwindling food security situation in the continent. One of themajor factors for the poor performance of the agriculture sector in the continent therebycontributing for its food insecurity, is the underdevelopment of the sector. In many Africancountries agriculture is still dependent on rain; there is low level of investment and poortechnology is employed. The land tenure system in many African countries as well as malariaand HIV/AIDS epidemic have been pointed as contributing factors to the low performanceof the sector. Moreover, in many of these African countries the agriculture sector receiveslimited support in terms of the government budget and domestic investment, even though it

is often among the largest contributors to gross domestic product (GDP) and employment.10

Lack of government support for the sector is mainly related to domestic policy changesfollowing implementation of structural adjustment programs. UNCTAD reports point outthat the structural adjustment programs have encouraged fiscal austerity and abandoned or weakened the role of key institutional support measures, including marketing boards,subsidies for agricultural inputs and stabilization funds for both agricultural commoditiesand food staples.11 While these African countries abandoned the support they give to thesector, their developed trade partners, on the other hand, continued the support. Thissituation of African countries was further exacerbated by the liberalization of market accessbarriers following the establishment of the WTO. Though the WTO agreement on Agriculture tried to discipline the world agricultural trade, its long term objective of providing for substantial progressive reduction on agricultural support and protectionreflected in paragraph three of the preamble has not so far been achieved. The long standingagricultural subsidies and domestic support in developed countries have posed criticalobstacles to agriculture development in African countries. ‘Quantitative analysis and case

study evidence by FAO and UNCTAD indicates that agricultural subsidies in developedcountries have been associated with rapidly increasing food imports in developing countries,alongside the decline in agricultural production.’12 Liberalization of agriculture sector9 UNCTAD, (2009), Food Security in Africa: Learning Lessons from the Food Crisis, [ TD/B/EX(47)/3 ], p210 UNCTAD (2008), Addressing The Global Food Crisis: Key Trade, Investment and Commodity Policies in Ensuring Sustainable Food Security and Alleviating Poverty , [UNCTAD/OSG/2008/1], New York and Geneva, p 1211 Ibid. See also UNCTAD, (1998), Trade and Development Report .12 Id., p14

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following the structural adjustment programs made these countries susceptible to pressurefrom the importation of subsidized food exports of the developed countries. The policychange has limited the countries’ opportunity to protect their agricultural sector andundermined domestic production. Many African countries which were traditionally foodexporters have become net food importers over the past 20 years13 IV. The Agreement on Agriculture and Food security: the Relationship Agriculture has always been shielded from the rules applicable for industrial products andbenefited from special arrangements which derogate from the rules within the GATT. Foodsecurity has been put forward as a reason for the exceptional treatment of agriculture .14Protecting the sector was perceived as a means of ensuring consumers reasonable prices andprotecting producers against fluctuations in the price of agricultural products15 so as toguarantee food supply. The concerns of states resulted in the protection of the sector withhigh tariffs and introduction of support to farmers. The Uruguay round pronounced the endof this distortion by introducing some disciplines to the sector. A separate agreement onagriculture was adopted and this agreement contains rules on three major areas; marketaccess, domestic support and export subsidy, also known as pillars of the agreement. Eachof these pillars has a link with food security.

IV (i) Market Access

Agricultural market access refers to the terms and conditions under which agriculturalproducts could be imported into WTO member countries.16 Countries may prevent or limitimport in to their domestic market through the use of tariffs or non tariff barriers. The13 Id., p14-15. One example here is the case of Ghana. Ghana’s poultry sector was at its prime in the late 1980s,but declined steeply in the 1990s due to the withdrawal of government support and the reduction of tariffs.Poultry imports rose by 144 percent between 1993 and 2003, and a significant share of this was heavilysubsidized by Europe. Between 1992 and 2002, EU frozen chicken export to West Africa rose eight fold,mainly due to import liberalization, practically wiping out the half million chicken farmers in Ghana. In 2003,Ghana’s parliament raised the poultry tariff from 20 to 40 percent, still much below the bound rate of 99percent. However, the IMF objected to this move and the new approved tariff was not implemented. Formore, see, Anuradhan Mittal, (June 2009), The 2008 Food Price Crisis: Rethinking Food Security Policies,

G 24Discussion Paper Series No 56, [UNCTAD/GDS/MDP/G24/2009/3], p1214 Melaku Geboye Desta, (2001), Food Security and International Trade Law: An Appraisal of the World TradeOrganization Approach, Journal of World Trade, Vol 35, no 3, p44915 Fabian Delcros, (2002), The Legal Status of Agriculture in the World Trade Organization : State of Play atthe Start of Negotiations, Journal of World Trade , Vol 36, no 2, p 21916 Melaku Geboye Desta, (2006), Legal Issues in International Agricultural Trade: The Evolution of the WTO Agreement on Agriculture from its Uruguay Round Origins to its Post Hong Kong Directions, FAO Legal Papers no 55 , p 8

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GATT 47 favours tariffs as a means of protecting domestic market by prohibiting thecontracting parties from using non tariff measures under article XI. However, as agriculture was treated uniquely, the provision contains an exception under sub 2 which allowscountries to use quantitative restrictions on agricultural products.The Agreement on Agriculture requires members convert their non tariff barriers in to tariff and not to maintain or resort to measures other than customs duty. 17 Members, aftertariffying their non tariff barriers, are required to reduce them. Hence, the obligation of members under the market access pillar of the AoA is tariffication of non tariff barriers andreducing the tariff amount. Accordingly, paragraph 5 of the Modalities agreement requiresdeveloped countries to reduce their duties by a simple average of 36% over a six year periodfrom 1995 base year while the requirement on the developing countries was 10% over a 10

year period for similar base year.18

On the other hand, least developed countries areexempted from undertaking any reduction commitment.19 A look into the current market structure of countries reveals that not much has changed inmarket access of agricultural products. The extensive escape hatches and caveats that aremanipulated to maintain or even increase actual protection curtailed substantial change inmarket access.20 ‘In the absence of appropriate supervision of the tariff conversion processand to prevent backsliding, members often resort to ‘dirty tariffication’ or ‘ceiling binding’ bygrossly overestimating the tariff value of their equivalent previous non tariff barriers.’21 Even when the tariffication process resulted in low tariff, market access is still impeded due to thesupport given to the sector which makes competition from developing countries which donot and cannot provide support, impossible.Low tariffs as a result of the liberalization process are expected to enhance the food securityof a country by making food available at cheaper price. However, there is also a danger thatlow prices will suppress domestic price and production thereby leading for dependence onfood import and a decrease in self sufficiency. The problem will be more serious for

developing countries where two thirds of the population lives in rural areas, agriculture17

Article 4/2 of the AOA18 Melaku Geboye Desta, (2002), The Law of International Trade in Agricultural Products: From GATT 1947to the WTO Agreement on Agriculture, Kluwer International, p 7319 Article 15/2 of the AOA20 Professor M. Rafiqul Islam and Md. Rizwanul Islam, (October 2009), The Global Food Crisis and Lacklustre Agricultural Liberalization: Demystifying their Nexus Underpinning Reform, Journal of World Investment and Trade, Vol 10 No 5, p 68321 Ibid

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generates over one third of the gross domestic support and substantial percentage of exportdepend on agriculture.22The other concern related to market access is the prohibition of export restriction. Countriesrespond to high domestic food demand by imposing complete or partial ban on export of food products. This is to increase domestic supply and hence stabilize the price. During the2008 food crisis many countries, including many African countries have resorted to exportrestriction of cereals and other food products.23 Article XI/2 of the GATT exemptstemporary use of export prohibition to relieve critical shortage of food stuff from thegeneral rule applicable under the first sub paragraph. It should be stressed that resort toexport restrictions is a temporary measure and it can be used only when there is ‘criticalshortage’ of foodstuff domestically. A related obligation on states using export restriction is

to give due consideration to the implication of the measure on importing country’s foodsecurity and to notify in advance of the measure to the committee in agriculture. 24 Theconditions for export restriction are criticized for being vague and imprecise.25 According tothis view, “the two crucial terms ‘critical shortage’ and ‘temporary’ in the provision are notdefined anywhere. The advance notification requirement is rarely adhered to. The right toimpose export tax has been exercised unfettered. It could be excessively high, and unlikeimport tariffs, is not subject to binding.”26 This lack of notification and unfettered use of export restriction will endanger food security of countries relying on food imports. On theother hand, it gives policy space for food exporting countries that are faced with shortage of food supply.

IV (ii) Export Subsidy and Domestic Support

22 Diaz-Bonilla, E., Diao, X., and Robinson, S., (2003), Thinking Inside the Boxes: Protection and Investment in the Development and Food Security Boxes , paper presented at the International Conference; Agricultural Policy Reformand the WTO: where are we heading?,23 The countries that introduced export restriction on food grain are India, Pakistan, Sri Lanka, Nepal, andBangladesh from South Asia; Ethiopia, Liberia, Madagascar, Malawi, Niger, Nigeria, Sierra Leon, Sudan,Tanzania, and Zimbabwe from Africa; Eypt, Syria, Iraq and Yemen from Middle Ease and North Africa, Argentina and Bolivia from Latin America; China and Indonesia from East Asia and Pacific, and Belarus,Croatia, Kazakhstan, Russia, Serbia, Ukraine and Uzbekistan from Eastern Europe and Central Asia. WorldBank Chart on country Policies and Programs to address rising food prices, available at < www.worldbank.org>accessed on January 31, 2010. Ukraine has already lifted the export restriction. For more information, seehttp://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21743967~pagePK:34370~piPK:34424~theSitePK:4607,00.html 24 Article 12/1 (a) and (b) of the AOA25 Professor M. Rafiqul Islam and Md. Rizwanul Islam, supra note 20 , p68426 Ibid

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http://www.worldbank.org/

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The Agreement on Agriculture defines export subsidy as subsidies contingent upon exportperformance27, however, it doesn’t define what subsidy means. Here, the Vienna Conventioncould give us a clue as it states under article 31/1 that the interpretation of agreementsshould be made in accordance with their context.28 ‘Context’ in this situation covers not onlythe text of the AOA rather extends to other relevant multilateral agreements forming part of the WTO agreement,29 like the agreement on Subsidies and Countervailing Measures.30 Accordingly, export subsidy can be defined as financial contribution made by thegovernment or any public body contingent upon export performance and conferring abenefit on the recipient.Subsidies were covered under the GATT agreement. However, the obligation on thecontracting parties was only to notify one another on amount of their subsidies and toconsult each other on their content.31 Article XVI/4 was adopted latter in 1955 withadditional obligation in the contracting parties to cease to grant export subsidies for anyproduct other than primary products.32 However, a country granting subsidy for itsagriculture has to make sure that the support should not result in that country having morethan an equitable share of world export trade in that product.33 The ambiguousness of therequirement of not having ‘more than equitable share of world export’ has resulted in thisprovision being not so much effective is disciplining agriculture. The AOA also permits the

use of export subsidies which are absolutely prohibited by the Subsidies Agreement. The

27 Article 1/e of the AOA28

Article 31/ of the Vienna Convention on the Law of Treaties states that ‘A treaty shall be interpreted in goodfaith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in thelight of its object and purpose.’ Vienna Convention on the Law of Treaties (Vienna 23 May, 1969) alsoavailable at <http://www.admiraltylawguide.com >29 Melaku Geboye Desta, (2002), supra note 18, p 21430 Article 1 of the SCM Agreement defines a subsidy as a financial contribution made by a government or anypublic body conferring a benefit on the recipient31 See article XVI/1 of the GATT32 Fabian Delcros, supra note 15, p 22333 Article XVI/3 GATT

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agreement rather requires countries to reduce expenditure for export subsidies as well as volume of subsidized exports;34 and it allows permissible levels of market distortion.35The obligation on export subsidies brings with it two major concerns. ‘To the extent thatdeveloped countries reduce export subsidies, developing countries products will becomemore competitive on both domestic and world markets, thereby boosting the production of both cash and subsistence crops.’36 However, it will also create concern for food importingcountries as their import bill may increase as a result of increase in food price followingreduction of support. On the other hand, several food exporting countries are concerned onthe use of non commercial transactions, like food aid as a means of side stepping their(reduction) commitment.37 Normally, untied food aid provided in fully grant form should not constitute a concern for

food exporters. However, a problem may arise in a situation wherein the provision of foodaid is tied to other commercial sales.38 Differentiating between food aid and commercialtransaction could be difficult when the latter involves subsidized food. Article 10.4 of the AOA attempts to respond to this concern of food exporting countries. The provision firstrequires member countries to ensure that provision of food aid is not tied with commercialexports of agricultural products. Furthermore, the agreement also adopted the thresholdlevel of concessionality set by the Food Aid Convention for a transaction to qualify as foodaid and then to exclude such transactions from the ambit of the rules on export subsidies.39

To further assuage the concerns of food exporting countries, a committee on agriculturedecision requires members to make an annual notification on the quantity of food aidprovided to least developed and net food importing countries, the proportion of such aidmade in fully grant form or appropriate concessional terms.40 34 The reduction commitment on budgetary outlay is 36% and 21% on volume for 1986-1990 base period overa six year implementation period for developed countries while the obligation of the developing countries willbe one third of the developed ones. (see article 9.2 of the AOA). Least developed countries, on the other hand,are exempted from reduction commitment. The obligation under article 9 AOA suggests that countries who were providing export subsidy during the base period will continue to do so, provided they meet theirreduction commitment; while countries which were not providing export subsidy during the base period willcannot introduce it in the future. As a result, only 25 countries (WTO members) scheduled their export subsidyreduction commitment, and the list does not include developing countries. See Melaku supra note 16, p 1935Carmen Gonzales, Institutionalizing Inequality: The WTO Agreement on Agriculture, Food Security andDeveloping Countries, 27 Colum J.Envt L , p 46436 Id., p 47537 Melaku Geboye Desta, (2001), supra note 14, p 45138 Joseph McMahon, (2006), The WTO Agreement on Agriculture : a Commentary , Oxford University Press, p 17939 Melaku, Supra note 14, p 45140 Joseph McMahon, Supra note 38 p 179-180

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The other pillar of the AOA is domestic support. Domestic support refers to the monetarycontribution given by the government or other public body to agriculture producersirrespective of export of the products. Governments provide support to their agriculturalproducers in different ways – ranging from direct budgetary transfers to highly disguisedforms of market price support.41 Though the support given benefits the recipient farmers, itmay entail distortion to the patterns of international trade.42 The provision of support lowersthe price of locally produced goods below the level of imports and there is a danger that itmay drive out import competition. In view of this, the AOA introduced disciplines ondomestic support measures; which are portrayed in boxes with different colors: Amber, Blueand Green.43Support measures which have significant trade distorting impact fall within the amber box.

Countries, other than the ones that have reported to have used such trade distortingmeasures during the 1986-88 base period44 cannot introduce it. And those countries, whichhave reported using it for the 1986-88 base period are required to undertake reductioncommitment of the Aggregate Measure of Support.45 According to article 6.3 of the AOA, amember is considered to have complied with its domestic support reduction commitment if the support in favor of agricultural producer for that year does not exceed the annual or finalbound commitment level specified in its schedule. The reduction commitment of themember countries slightly differs with the difference in their development status. Accordingly, developed countries undertook 20% reduction commitment while thedeveloping countries’ commitment is 13.3%. Hence, while the 35 countries have entered acommitment to reduce the level of farm support, the remaining, mainly poor developing andleast developed countries, cannot make use of any measure falling under the amber box, withfew exceptional measures.41 Melaku Supra note 16, p 2242 Melaku, supra note 18, p 31343 In a similar manner to export subsidies, the GATT did not impose a meaningful discipline on the use of domestic support. Article XVI/1, which applies for subsidies in general, requires countries to notify the use of support to member countries and to consult with a country that is affected by the support.44 Only 35 countries have reported to have used trade and production distorting measure during this period.These are: Argentina, Australia, Brazil, Bulgaria, Canada, Chinese Taipei, Colombia, Costa Rica, Croatia,Cyprus, Czech Republic, EC, Hungary, Iceland, Israel, Japan, Jordan, Korea, Lithuania, Mexico, Moldova,Morocco, New Zealand, Norway, Papua New Guinea, Poland, Slovak Republic, Slovenia, South Africa,Switzerland, Liechtenstein, Thailand, Tunisia, United States, and Venezuela. See Melaku, supra note 16, p 2445 The Aggregate Measure of Support (AMS) refers to the annual level of support, expressed in monetaryterms, provided for an agricultural product or non product specific support provided in favor of agriculturalproducers in general. Article 1(a) of the AOA.

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The first exception is the de minimis level of support. This exception is available for bothdeveloping and developed countries which do not fall under article 6.3 AOA. Here, themembers are exempted from reduction commitment of product specific or non productspecific domestic support that falls below a certain percentage of the total value of production of a basic agricultural product during the relevant year.46 The level of

de minimis

support for developed countries is 5% while for developing countries it is 10%.47 The second exception, which applies only for developing countries as a special anddifferential treatment, is measures falling under article 6.2, also known as Development Boxmeasures. These measures include generally available agricultural investment subsidies,agricultural input subsidies generally available to low income or resource poor producers andsupport to encourage diversification from growing illicit narcotic crops. Domestic support

measures given by developing countries which meets one of these three conditions will notbe included in the calculation of the members current total AMS.48 The Blue Box contains production limiting programs which are exempt from reductioncommitment provided the payment is based on fixed area and yield, or made on 85% or lessof the base level of production while for livestock if the payments are made on a fixednumber of head.49 It covers payments directly linked to acreage or animal numbers, butunder schemes which also limit production by imposing production quotas or requiringfarmers to set aside part of their land.50 The blue box measures are available for everymember of the WTO, irrespective of development status. However, only a handful of countries have notified the WTO that they are currently using or have used blue boxmeasures. These countries are the EU, Iceland, Norway, Japan, the Slovak Republic,Slovenia, and the US (now no longer using the box),51 all of which are OECD members.Many debate on the relevance of the blue box and there are proposals to scrap it from the AOA.Certain support measures provided through government programs that are believed to have

no or minimal trade distorting effect fall under the green box, and hence are exempted fromreduction commitment. These measures are provided in a detailed but non exhaustive list46 Joseph McMahon, supra note 38, p 7047 Article 6.4 of AOA48 Article 6.2 AOA49 Article 6.5 AOA50 WTO, Agriculture Negotiation Background, p56 also available at < www.wto.org>51 Ibid

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under Annex 2 of the AOA. Green box measures tend to be programmes that are notdirected at particular products, and include direct income supports for farmers that are notrelated to (are “decoupled” from) current production levels or prices.52 Hence, they areallowed without limits, provided they comply with relevant criteria set under annex 2. Thecriteria set are i. the support in question must be provided through a publicly fundedgovernment program not involving transfer from consumers and the support in questionshall not have the effect of providing price support to producers.Paragraphs 2 to 13 of Annex 2 provide list of specific types of policies which fall under thegreen box. The first category, general services, includes measures providing services orbenefits to agriculture or the rural community that do not involve direct payments toproducers or processors. Measures such as pest and disease control, extension and training

services, research and infrastructural services also fall under the first category. Paragraphs 5to 13 allow for various direct payments to producers to be exempt from the reductioncommitment. Members are also allowed to provide income insurance and disaster relief services on condition that farmers are not made to profit from it. Moreover, members canalso provide assistance for structural adjustment, environmental and regional developmentpurposes. As mentioned above, one of the concerns related to disciplining of export subsidies anddomestic support is the potential increase in the price of food which will in turn increase theimport bills of food importing countries and threaten food supply for emergency food aid.In this regard, the agreement on agriculture as well as another ministerial decision tried toaddress the concern. For instance, paragraphs 3 of Annex 2 categorizes measures taken bygovernments for purposes of achieving food security under the green box and hence exemptit from reduction commitment. Such measures include expenditures in relation to theaccumulation and holding of stocks of products which form an integral part of a food

52 Id., p 53-5416



security program identified in the national legislation53 and expenditures in relation to theprovision of domestic food aid to section of the population in need. 54 The reform under the AOA was predicted to seriously affect least developed countries andnet food importing developing countries; hence the two groups were treated in a peculiar way with in the WTO regime. A Ministerial Decision was adopted to ameliorate the negativeeffects of the liberalization and improve food security in these countries. 55 Paragraph 3 of the decision committed the WTO to:a. review the level of food aid established periodically by the Committee onFood Aid under the Food Aid Convention 1986 and to initiate negotiations inthe appropriate forum to establish a level of food aid commitments sufficient tomeet the legitimate needs of developing countries during the reform program;

b.

adopt guidelines to ensure that an increasing proportion of basicfoodstuffs is provided to least-developed and net food-importing developingcountries in fully grant form;c. give full consideration in the context of their aid programs to requests forthe provision of technical and financial assistance to least-developed and netfood-importing developing countries to improve their agricultural productivityand infrastructure.The decision, however, does not provide for any firm obligation on member countries and

many countries have reported their dissatisfaction on its implementation. For instance,Egypt noted that ‘in the five years since the Marrakesh decision was taken, NFIDCs andLDCs have had nothing but a lot of good will messages and fine rhetoric; but no concreteaction.’56 Some are of the view that the dissatisfaction mainly arises due to ambiguity in the53 For such measures to be exempt from reduction commitment, conditions stipulated under paragraph 3 haveto be fulfilled. These conditions are: there has to be correspondence with the volume and accumulation of thestock on the one hand and the predetermined targets related solely to food security, there has to be financialtransparency in the process of stock accumulation and disposal, and lastly food purchases by the governmenthas to be made at current market prices and sales from food security stocks shall be made at no less than thecurrent domestic market price for the product and quality in question. The basic aim of setting these conditionsis ‘avoiding the practice of trade and production distorting subsidies disguised as genuine food securitymeasures.’ See Melaku, supra note 18, p 41554 Paragraph 4 of Annex 2. The paragraph also provides for conditions such as the aid must take a form of direct provision of means to allow eligible recipients to buy food either at market or subsidized prices, foodpurchases by the government must be made at current market prices and the financing and administration of the aid must be transparent.55 WTO, (1994), Decision on Measures Concerning the Possible Negative Effects of the Reform Program onLeast Developed and Net Food Importing Developing Countries56 Joseph McMahon, supra note 38, p 181

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Accordingly, the major concern in relation to agricultural market access is the improvementof access by members through the reduction of tariffs. In this regard, in the July package themembers have agreed to adopt a Tiered Formula which takes into account the different tariff structures of the developed and developing countries. One of the guiding principles in thisformula is the principle of progressivity which requires deeper cuts in higher bound tariffs.60The number of bands for structuring tariff cuts and the threshold for the cut was left forfurther negotiation. Accordingly, the Hong Kong Ministerial resulted in the adoption of fourbands for structuring the tariff cuts61 while in the December 2008 Draft Modalities it wasproposed that developed countries should cut their tariffs by 50-70% while the cut bydeveloping countries will be 2/3 of that of the developed countries (33.3%-46.6%).62 Some exceptions are given for the rules on market access. One of such exceptions relate to

Special Products. Paragraph 7 of the Hong Kong Ministerial Declaration gives the flexibilityto developing countries to self designate an appropriate level of tariff lines as ‘SpecialProducts’ on grounds of food security, livelihood security and rural development. The Draft Agricultural Modalities gives developed countries the right to designate up to 4% of theirtariff line to as special products while for developing countries the amount is 1/3 more.63This way, the developing countries will be able to deviate from their reduction commitmenton more products compared to developed countries. The flexibility for developing membersto designate and make a smaller tariff reduction commitment on special products isessentially meant to enable these countries to ensure that the livelihoods and food security of domestic agricultural producers are not threatened as a result of foreign competition.64The other exception relates to Special Safeguard Measures (SSM). Paragraph 42 of the Julypackage provides that a special safeguard mechanism will be established for use bydeveloping country members as a special and differential treatment. This way, the countries will be able to protect their producers against price fall or an import surge. When weevaluate the role of this provision for African countries from a food security perspective, it is60

Paragraph 29 of Doha Work Program, Decision adopted by the General Council on 1 August 2004, (JulyPackage), WT/L/57961 Paragraph 7 of Hong Kong Ministerial Declaration, adopted on 22 December 2005, WT/MIN(05)/DEC62 Paragraph 61 and 63 of the Revised Draft Modalities for Agriculture, 6 December 2008,TN/AG/W/4/Rev.463 Id., Paragraph 71 and 72 (Revised Draft Modalities on Agriculture)64 Fantu Farris Mulleta, (February, 2010), The Quest for Affordable Food: Prospects in the Doha Round forNet Food Importing Developing Countries, South African Institute of International Affairs: DevelopmentThrough Trade Program, Occasional Paper No 54, p 14

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very limited. The concern at the time of using SSM is limiting market access which willreduce the amount of imports. This will, at the end of the day, have an effect of raisin theprice of imported food. On the other hand, what is the immediate concern by net foodimporting countries, like in the case of many African countries, is to have food in thedomestic market at a lower and affordable price. As indicted under section IV/I above, one of the concerns related to agricultural marketaccess is the prohibition of export restrictions. One of the shortfalls in the existing rulesgoverning export restriction is the imprecision and vagueness in which the conditions aredrafted; which led to the unfettered use of export restrictions by members. The DraftModalities for Agriculture tried to address this shortcoming by providing time limit for theuse of export restrictions. As envisaged under paragraph 178 of the Revised Draft

Modalities, members which adopted export restriction measures on food stuff have to bringit to an end within the first year of the implementation period. The member instituting theexport prohibition is also required to give notice of reason for introducing or maintainingthe measures as well as to consult, upon request, with another member with a substantialinterest as importer.65 A time framework for instituting new export restriction measures isalso provided in the Draft Modalities. Consequently, paragraph 179 stipulates that any newexport restriction should not normally be longer than 12 months. Instituting the restrictionfor more than 18 months, again, requires the agreement of the affected importing members.This way those food importing countries which are mainly affected by the restriction aregiven the right to say something on the measure.The second area of negotiation on agriculture under the current round is on export subsidiesand domestic support measures. The Doha Ministerial Declaration calls for the reduction, with the view to phasing out of, all forms of export subsidies and substantial reduction intrade distorting domestic support. As a follow up to this, the members on the July packagehave agreed to eliminate the use of export subsidies by a date to be agreed.66 As far as

domestic support measures are concerned, they agreed to use the Tiered Formula forcalculating Total AMS as well as permittedde minimis

level of support, so as to allow deepercuts of higher levels of permitted trade distorting domestic support.67 Further to this, the65 Paragraph 173 and 174 of the Revised Draft Modalities for Agriculture66 Paragraph 18 of the July Package67 Paragraph 6 and 7 of the Doha Work Program, Decision Adopted by the General Council on 1 August 2004(July Package), WT/L/579

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Hong Kong Ministerial Declaration provides that there will be three bands for reduction of Total AMS and overall cut of trade distorting domestic support measures.68 In elaboratinghow classification under the three bands will be made, the Declaration further provides thatmembers with the highest level of domestic support measures will be in the top band and will be subject to highest reduction commitment. The two members with the second andthird highest levels of support will fall in the middle band and will undertake commitmentaccordingly, while the remaining members will all be in the bottom band. The proposal madeunder the Revised Draft Modalities is for developed countries to reduce their trade distortingdomestic support with 45 to 70% in six steps over a period of five years; while therequirement for developing countries if 2/3 of that of developed countries, i.e., 30 to 46%.69On export subsidies, the Hong Kong Declaration provides for its parallel elimination by the

end of 2013.70

The adoption and implementation of the current proposal on the elimination and reductionof support measures will enable the achievement of the long term objective of the AOA;establishment of a fair and market oriented agricultural trading system. On the other hand,the immediate impact of the elimination and substantial reduction of the support would bean increase on the price of food in the world market, which could to the detriment of foodimporting African counties. A World Bank study projects that, setting other factors aside,the liberalization of agricultural trade in OECD countries will cause an 18% rise in the priceof cereals in net food-importing developing countries.71 This will affect the economicaccessibility of food72 in the short run. But the creation of a fair and market orientedagricultural trading system will be to the benefit of every one, including the poor Africancountries, in the long run. The dismantling of the unfair trading system which turned Africanfarmers from net agricultural exporters to being net importers will in some years time enablethese farmers to be reinstated to their previous position. This will then boost the foodsecurity situation in these countries.

As far as the short term effect is concerned, it can be addressed by making the MarrakeshDecision more effective and practicable, and by extending meaningful special and differential68 Paragraph 4 of the Hong Kong Ministerial Declaration,69 Paragraph 13, 15 and 16 of the Revised Draft Modalities on Agriculture70 Paragraph 6 of the Hong Kong Ministerial Declaration71 McCalla A & J Nash (eds), (2007), Reforming Agricultural Trade for Developing Countries , 2. Washington,DC: World Bank, p. 209. As cited by Fantu Farris Mulleta supra note 64, p 1672 Ibid

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treatment for net food importing countries which will enable these countries to invest moreon agriculture. VI. Concluding Remarks

The majority of the population in the sub Saharan region are rural dwellers relying onagriculture for their livelihood. Agriculture contributed the lion’s share of the region’sincome and employs majority of the work force. Despite this, the sub Saharan Africa regionis known for its low level performance of the agriculture sector and high incidence of foodinsecurity. Major portions of the world food aid shipments are directed to the regionannually. Different factors contribute to the low level of performance of the agriculturesector and the worsening condition of food security in the region; one of which is change in

trade policy necessitated as a result of membership to the WTO.The WTO’s Agreement on Agriculture fundamentally covers three areas: market access,domestic support and export subsidy; each of which has a link with food security. The ruleson the three pillars were aimed at creating a fair and market oriented agricultural tradingsystem. However, due to various reasons, this objective is not yet achieved. Recognizing thedifficulty in achieving this objective within the time frame envisaged in the AOA, theagreement provides for an in-built agenda for further negotiations. As a result, the AOA iscurrently under renegotiation.The renegotiation of the AOA is also focused on the three pillars. The progress so far madeunder the Doha round indicate positive sign towards achieving a fair and market basedagricultural trading system. This will be very important for the majority of Africanagricultural producers whose products have been denied of fair and competitive marketingenvironment for so long. The elimination of export subsidies and substantial reduction of trade distorting domestic support measures by the developed countries will push the pricesof agricultural produce up and encourages more production by previously disadvantaged

African producers. This will boost production in the region and help in attaining food self sufficiency. This however, is something to be achieved in the long run. The short runimplication of the rules, on the other hand, may create problem for many net food importing African countries, as food may become economically unavailable to the majority of thepopulation. Nonetheless, this concern should not hold the implementation of the currentproposals as the short term negative effects can be ameliorated by resorting to alternative22



measures like strengthening the Marrakesh Decision and through the extension of meaningful special and differential treatment provisions for these countries.

Trade Liberal is at Ion

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