Mr Ramesh Sharma FAO

Development of Agricultural Trade of the (Post) Transition Economies under the WTO Membership: 

Development of Agricultural Trade of the (Post) Transition Economies under the WTO Membership Seminar on WTO Membership for Agriculture in (Post) Transition Economies 6-7 December 2004, Parnu, Estonia Ramesh Sharma Commodities and Trade Division FAO, Rome Ramesh.Sharma@fao.org

The presentation: 

The presentation Issues on quantifying country experience with trade flow – in relation to the WTO Membership Tariff and non-tariff barriers in relation to trade flow Looking forward – what can we expect for a significant change in trade flow from the Doha Round negotiations?

WTO (mainly AoA, and also SPS) and changes in trade flows: what was expected?: 

WTO (mainly AoA, and also SPS) and changes in trade flows: what was expected? Most model-based studies (during 1994-96) had shown production to shrink in subsidizing countries (e.g. EU, US) And increased production in and exports from non-subsidizing countries Model results were based on effective reductions in protection and subsidies

Ex ante (model-based prediction) versus ex-post experience (actual changes) – very difficult to reconcile: 

Ex ante (model-based prediction) versus ex-post experience (actual changes) – very difficult to reconcile It is extremely difficult to relate observed changes in trade flows to WTO Membership or WTO Agreement on Agriculture (AoA)-led liberalization The AoA brought agriculture within GATT/WTO rules but most analysts (including OECD study) hold that the impact on trade has been minimal In large part, because subsidies and protection have barely fallen effectively

For example, for (post) transition economies, the relationship between WTO and trade flow is even weaker: 

For example, for (post) transition economies, the relationship between WTO and trade flow is even weaker Disruptions/adjustments continued through 1997 for many Further disruption in 1998 and 1999 due to the 1998 Russian financial crisis So, only from about 2000 it makes sense to speak of a pattern or trend Only 5-6 countries were WTO Members in 1995; for 20 others, from 1999 only (GRAPH)

WTO Membership of transition/post transition economies (total = 30): 

WTO Membership of transition/post transition economies (total = 30)

Overall developing country experience on trade flow in recent years (1)(largely based on FAO’s 23 country case studies): 

Overall developing country experience on trade flow in recent years (1) (largely based on FAO’s 23 country case studies) Total agricultural exports mostly on trend, i.e. no significant increase after 1995 (handout for transition countries) Some exceptions for Cairns Group countries – perhaps WTO/1995 was a factor Very few cases of increased exports of diversified, value-added products By contrast, food imports rose sharply (likely related to their own liberalization)

Overall developing country experience on trade flow in recent years (2)(largely based on FAO’s 23 country case studies): 

Overall developing country experience on trade flow in recent years (2) (largely based on FAO’s 23 country case studies) Also, increased cases of “import surges”, often with negative effects Higher bound tariffs helped considerably in moderating import surges Overall, ratio of food imports to agricultural exports not positive for them

Overall developing country experience on trade flow in recent years (3)(largely based on FAO’s 23 country case studies): 

Overall developing country experience on trade flow in recent years (3) (largely based on FAO’s 23 country case studies) Increased incidences of SPS-related trade barriers – these seem to be rising A great deal of additional trade can be related to preferential market access arrangements Increased trade among regional trade agreement members So, overall, no notable, significant impact so far

Expected impact on trade flows ...Looking forward ........ : 

Expected impact on trade flows ... Looking forward ........ How much reform is needed, e.g. in the Doha Round, for effective changes that will open up additional opportunities for non-subsidizing countries (mostly developing and many post-transition countries)? In market access In domestic support

Issue # 1: Market accessBound and applied tariffs on basic foods (import-weighted, 80% of world import): 

Issue # 1: Market access Bound and applied tariffs on basic foods (import-weighted, 80% of world import)

Required cuts in bound tariffs EVEN to reduce tariffs to current applied rates ARE LARGE (import-weighted, based on 80% of world import): 

Required cuts in bound tariffs EVEN to reduce tariffs to current applied rates ARE LARGE (import-weighted, based on 80% of world import)

Will actual reduction for basic foods will be significant, as required, given exceptions likely to sensitive and special products? (in the “tiered” approach): 

Will actual reduction for basic foods will be significant, as required, given exceptions likely to sensitive and special products? (in the “tiered” approach)

Issue # 2: Domestic support - OECD support to farmers has not fallen much since 1986-88 (PSE or Producer Support Estimate, actual and trend): 

Issue # 2: Domestic support - OECD support to farmers has not fallen much since 1986-88 (PSE or Producer Support Estimate, actual and trend)

To what extent are some of the current Green Box and Blue Box measures decoupled, as assumed?  (Estimated trade distortiveness of domestic support measures, relative to MPS = 1): 

To what extent are some of the current Green Box and Blue Box measures decoupled, as assumed? (Estimated trade distortiveness of domestic support measures, relative to MPS = 1)

(OECD PSE) ... and not much shift has taken place to decoupled support measures (“Highly coupled” – MPS, inputs and output based payments; “Less coupled” – rest of the payments): 

(OECD PSE) ... and not much shift has taken place to decoupled support measures (“Highly coupled” – MPS, inputs and output based payments; “Less coupled” – rest of the payments)

The nature of the non-tariff/SPS barriers experienced in recent years: 

The nature of the non-tariff/SPS barriers experienced in recent years No “neat” numbers (like tariffs and subsidies) to compare/analyse Country experiences vary greatly Some information available to appreciate the nature of the problem facing many developing countries

Mean significance scores for factors influencing countries’ abilities to export food and agri. products to the EU: 

Mean significance scores for factors influencing countries’ abilities to export food and agri. products to the EU

Reasons for the rejection of imports of food and agri. products by the US, in % (1996-97): 

Reasons for the rejection of imports of food and agri. products by the US, in % (1996-97)

Percent of developing countries whose exports to the EU were prevented for SPS reasons (1996-99): 

Percent of developing countries whose exports to the EU were prevented for SPS reasons (1996-99)

Concluding remarks (1)WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities: 

Concluding remarks (1) WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities Uncertainty if Doha Round will lead to significant changes in market access and domestic subsidies Rules alone not adequate – could be misused (bended) easily – e.g. complex tariffs, non-tariff barriers, box-shifting (subsidies) WTO Disputes have been effective (several so far) but are expensive to bring

Concluding remarks (2)WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities: 

Concluding remarks (2) WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities SPS/TBT Agreements are promising because of harmonization of standards and equivalency – but progress very slow But income gaps across poor and rich countries is too wide – and so meeting SPS standards is formidable for many, poor developing countries Moreover, new trade opportunities will be distributed highly unevenly (with supply-side and SPS capability, e.g. Cairns)

Concluding remarks (3)WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities: 

Concluding remarks (3) WTO-led liberalization process will be slow, and many poorer countries may not be able to take advantage of new trading opportunities Many lower-income countries may even lose, e.g. from reduced preferences For them – and for key Doha Round goals - the WTO process will contribute only if trade liberalization also strengthens supply-side constraints The development challenge is to bring them to the level where they can take advantage of trading opportunities

Slide24: 

Thank you very much