Keeping Eyes On The Ball In The World Trade Cup

Ivan Roberts, Troy Podbury And Richard Perry

Australian Bureau Of Agricultural Resource Economics

The Doha WTO meeting late last year initiated a broad round of negotiations that should increase the chances of more negotiations than previously and issues of importance to them are likely to be given .

Setting the scene

In November 2001, trade ministers from WTO member countries met in Doha in Qatar, and agreed to launch a new multilateral trade round. This could set the stage for advances in WTO negotiations for agricultural reforms that have been proceeding in isolation for two years and have yet to make much progress.

The wider round could breathe new life into the agricultural negotiations for two main reasons:

• It covers a broad range of products and issues, providing opportunities for tradeoffs. Potential negotiated gains in other sectors could encourage some countries to accept trade liberalising agricultural reforms.

• It was agreed that all the negotiations be treated as 'a single undertaking', which means all areas of negotiations must be agreed to for any of the negotiated outcomes to be binding. This can place pressure on negotiators in areas like agriculture, where agreement is difficult, to find common grounds in the interest of reaching an overall agreement.

Even though the agreement to launch a wider round is positive for the negotiations on agriculture, it is far from clear that the demand for agricultural trade policy reforms is currently strong enough to result in more than minor reforms from the negotiations. Indeed, some key participants appear more concerned to maintain the status quo or even to secure additional options to support their farmers or protect them from import competition.

There has been a concerted effort by some countries, including the European Union and Japan, to inject a raft of 'new' issues into the negotiations that could be used as a basis for blocking imports or for providing exempt subsidies. These issues include environmental concerns, animal welfare, viability of rural communities, food security, and geographic indications. Already, the European Union can claim some success by having a provision inserted into the Doha declaration under which the relationship between existing WTO rules and specific trade obligations set out in multilateral environmental agreements should be included.

These 'new' issues have a potential to divert the negotiations away from their traditional main 'three pillar' focus on reducing barriers to imports, reducing market distorting domestic support and reducing export subsidies, while at the same time providing opportunities to extend protection.

Developing countries will almost certainly play a much larger role in the present WTO agricultural negotiations than in the previous round. They constitute most of a rapidly increasing number of member countries, with some of the new entrants, such as China, being very large economies. Consequently, the dynamics of negotiations that were previously dominated by the United States, the European Union and Japan are rapidly changing.

The main issues that are likely to influence the current WTO negotiations are addressed here. These include the positions being taken by major participants, the interface between the traditional 'three pillars' approach to trade liberalisation and reform and the 'new' issues mentioned above, and the issues of importance to developing countries.

Positions being taken in negotiations so far

There is a general appreciation by the members of the WTO that more open markets that are less distorted by national subsidies are important for sustaining and enhancing national and global economic growth and higher living standards. However, there is a strong propensity for many participants to regard agriculture as a special case that warrants exceptions from general trade rules.

The negotiations on agriculture so far have been characterised by strong positions being taken by major participants, many of them being incompatible with more open, less distorting policies.

Positions taken by some of the main countries and groups may be summarised as follows.

United States

The United States is anxious to open markets for its exports, of which one element is to address what it perceives to be 'unfair' competition from others' statutory export marketing bodies. At the same time, it has been markedly increasing subsidies to its own producers and wishes to maintain and even extend the scope for exempting some major forms of domestic subsidies from cuts or limitations. The United States is advocating elimination of export subsidies but is itself a major user of export subsidy-like measures that are not constrained by present WTO rules. These include concessional export credits and use of some international food aid in market distorting ways. The United States opposes substantive reforms of these latter measures.

European Union

The European Union is pursuing a defensive strategy to maintain the exemptions that are in the present WTO Agreement on Agriculture that now form a cornerstone for support arrangements for some of its own major industries. The European Union is averse to eliminating export subsidies, of which it is the world's largest user. It also seeks to incorporate a number of concerns, including environmental considerations, animal welfare and health, and food safety, more fully into WTO trade rules. These issues have been categorised by some under the term 'multifunctionality of agriculture' under which they emphasise the positive side effects of agricultural activity but discount the negative side effects, to justify continued agricultural support and protection.

Japan

Japan is also pursuing a defensive strategy with an emphasis on food security, which it chooses to identify with targeting specified self sufficiency rates. It has become a strong advocate of the concept of multi-functionality.

Developing countries

Developing countries are taking relatively disparate positions depending on their particular circumstances, but there is a strong common thread that they should be accorded special treatment because of their development needs and difficulties that they face with adjustment.

Generally, they want the developed countries to open their markets more for products from developing countries. In addition, they want exemptions from cuts to domestic subsidies and export subsidies, or less stringent rules governing the use of such subsidies than apply for developed countries. Some are calling for a special 'development box' and, at the extreme, are proposing that they should be permitted to have unlimited use of all the import restricting measures and trade distorting subsidies that they wish to be removed by developed countries.

Cairns Group

The Cairns Group of agricultural exporting countries is advocating far more open markets, tighter rules limiting domestic support and elimination of export subsidies.

Clearly, there are wide differences among the parties, with the only group that is pushing strongly and unequivocally for both more open markets and lower subsidies being the Cairns Group. Nevertheless there are areas of common ground that provide prospects for reforms.

What is required for success in negotiations?

The success of WTO negotiations hinges on how much they enable both exporting and importing countries to obtain benefits from trade and from producing the goods and services in which they have a comparative advantage. These benefits arise simply from making markets as large and accessible as possible, and from enabling producers to maximise their profits by responding to market signals rather than to subsidies and other trade distorting government interventions.

Generally, these subsidies and other interventions are designed to ensure that producers are as unaffected by market forces as possible. Not only are such measures costly for the economies of the nations that apply them, but they also force greater adjustment pressures on producers elsewhere. For the world as a whole, they result in overproduction in areas where governments provide protection and support and underproduction in areas where undistorted production costs are lower - this reduces world incomes.

In the WTO Agreement on Agriculture that emerged from the Uruguay Round of multilateral trade negotiations, a comprehensive approach was adopted to address this problem, involving separate measures to expand market access, reduce market distorting domestic support and reduce export subsidies and like measures.

Implementation of the agreement has shown it to be a mixed bag. Export subsidies have been markedly reduced and limited gains have been made with market access. The domestic support rules were the weakest and the result has been a wholesale reorientation of assistance into forms of domestic support that were exempted from any reductions or limitations. It is no coincidence that the United States and the European Union have been the main countries to reorient their support in this way - they were the two members who agreed on these exemptions in the Blair House Accord, the provisions of which were later written into the WTO Agreement on Agriculture ( Orden, Paarlberg and Roe 1999 ).

What then is required to secure appreciable gains from agricultural reforms this time around? The answer is clear. Market access reforms must expand actual trade markedly more, and not merely result in notional 'reductions' in trade barriers. Furthermore, the avenues for shuffling domestic support between forms of assistance to avoid agreed cuts must be curtailed.

Market access

• Bound (agreed maximum) tariffs must be reduced sufficiently to ensure that actual applied tariffs are reduced markedly.

• Where present access is limited by tariff quotas and reductions in bound tariffs will not appreciably expand imports, the import limiting factors must be addressed. Where the limitation is from within-quota tariffs, they must be reduced; where it is restrictive administrative arrangements, they must be reformed; where it is quota volume limitations, the volumes must be increased.

• Special safeguards that enable countries to temporarily increase tariffs must be restricted so that, if they apply at all, they should only apply when domestic industries are actually threatened by very abnormal levels of imports.

The approach to special safeguards should be to tighten their application in members currently with access to them, rather than to extend them to more members. In most cases, the present general safeguard arrangements and antidumping and countervailing remedies should be sufficient to address major increases in cheap imports.

Export measures

• Substantial reductions in or phasing out of export subsidies should occur.

As a first step, currently agreed levels of permitted subsidised exports must be reduced to below actual current subsidised exports - otherwise the potential exists for a reversion to higher levels of this very market distorting form of support. This alone will necessitate large cuts to present bound levels.

• More effective reform of export measures will also require export subsidy-like measures including government subsidised concessional export credits and the misuse of food aid for surplus disposal to be markedly reduced.

Domestic support

• There is an urgent need to overhaul the rules for the highly permissive exemptions for various forms of domestic subsidies - in particular, so-called decoupled support and production limiting arrangements. Both the United States and the European Union have reoriented support for key agricultural industries into these categories, involving billions of dollars of subsidies, thereby exempting them from reductions, limits or cuts.

Changes foreshadowed for the 2002 US farm bill in area and yield bases for wheat, feed grains, rice and cotton compromise the decoupled status of this support that is required to be determined from fixed bases. The proposed changes enable farmers to update their bases, giving them a signal that they can obtain increased future benefits by planting and producing more and then exerting political pressure to further update payment bases. This means that production becomes linked to anticipated support, breaking a fundamental tenet of decoupling that support and production should be independent.

EU support under production limiting arrangements for cereals and oilseeds remains market distorting ( Nelson and Andrews 2001 ), although less so than the pre-1992 price support that it replaced ( Roberts et al. 1999 ). Payments for cattle and sheep that are exempt under production limiting arrangements remain highly market distorting.

• Definitional weaknesses in the current way of determining the Aggregate Measurement of Support (AMS) need to be addressed. They have enabled members to 'achieve' large cuts in domestic support by retaining their support levels but claiming that they no longer apply administered support prices. In 1998, Japan did this for rice, reducing its AMS for agriculture from 3171 billion yen to 766 billion yen ( WTO 2000b, 2001a ). Such a change is possible because the AMS is determined from administered support prices and not actual supported prices.

Nontrade concerns - how do they fit in?

For many years, a range of issues related to agriculture that are considered to be important and that may be influenced by trade have been of concern to people in many countries. These issues are sometimes termed 'nontrade' concerns. They include concern about the environment, animal welfare, viability of rural societies and food security. Environmental payments that are deemed to be minimally market distorting are incorporated as exemptions in the present WTO Agreement on Agriculture. However, the various other non-trade concerns are not considered, apart from in Article 20 where it is indicated that non-trade concerns should be taken into account in the continuing reform process. Some countries are calling for these issues to be given more prominence in current WTO negotiations.

An increased focus in WTO negotiations on these concerns could reduce the prominence of core trade issues - market access, domestic support and export measures. A prime objective of members that wish to elevate non-trade concerns in WTO negotiations is to ensure that the multifunctional nature of agriculture is maintained. The proponents of this concept argue that the multifunctional nature of agriculture can only be guaranteed through the continued use of production and trade distorting support because these non-trade values are jointly provided with agricultural output. As such, they are attempting to slow or reverse agricultural liberalisation, and this concept represents a significant risk to the reform agenda.

Advocates of multi-functionality emphasise the positive side effects of agriculture and ignore the negative side effects. They point out such things as agriculture's role in reducing environmental damage through water runoff, its contribution to regional employment, valued landscapes and even its role in providing a habitat for wildlife. Some also include food security within the concept. Based on these claimed benefits, the proponents argue that it is justifiable to subsidise agriculture.

However, by ignoring the negative impacts of agriculture and failing to consider less costly alternative means of achieving the stated multifunctional objectives, it is clear that the proponents of this concept are attempting to harness legitimate public concerns to try to justify protection for farmers. Such protection is at a cost to domestic economies, to producers in other countries and to the global economy.

An example of non-trade concerns being used to justify industry support is proposed exemption of payments to compensate EU producers for the costs of meeting animal welfare standards from WTO limits or reductions ( WTO 2000a ). It may be claimed that such payments are required because of widespread public support for high animal welfare standards. It would appear, however, that if their public really demanded that particular standards of animal welfare should be adhered to by farmers, they would be prepared to pay higher prices for commodities that met their desired standards. Consumer demand would encourage identification of products that met particular requirements, through labeling or other forms of commercially based advertising.

Demand for the product produced in ways preferred by consumers would efficiently determine the desired degree of production adjustments to meet the actual degree of community concern as expressed through its willingness to pay. Although provision of subsidies as incentives to use particular production methods may improve animal welfare to meet government imposed standards, this approach would be less efficient than a market based system at matching those standards with community concerns.

If the proponents of multifunctionality succeed in raising nontrade concerns to the same plane of importance as market access and subsidy issues on the WTO agricultural reform agenda, it could seriously undermine the gains from more open markets and less distorted trade.

Other WTO issues that may affect agricultural trade

The Doha meeting launched a round of negotiations across a broad range of issues. Some issues that are specified for action, but that are outside the agricultural negotiations, have the potential to affect agricultural trade. It is therefore important to analyse issues that indirectly affect agricultural trade in addition to those that are directly covered in the agricultural negotiations. Two of the issues for which negotiations or consultation were agreed include the overlap between multilateral environment agreements and WTO rules and 'geographic indications'.

The main countries insisting on incorporation of these other issues are those that already have substantial barriers against agricultural imports and that provide a great deal of support to their farmers. It is possible that they may use these issues in ways that have little effect on trade. However, there is a risk that some may use their particular interpretations of these other issues to further buttress their fortresses of agricultural protection. Important consequential considerations for trade protection include the following key areas.

Environmental agreements

To date, the inconsistencies between multilateral environmental agreements and WTO trade rules have not been substantial, and such a situation may continue. However, it is also possible that extreme positions might be taken by some countries in interpreting agreements in ways that could prejudice trade. Negotiators need to be aware of this risk, and manage the process in such a way as to minimise such potential negative outcomes.

An example of a Multilateral Environmental Agreement that might be used to give importing countries political discretion to block imports without scientific justification, and which has a potential to influence trade is the Cartagena Biosafety Protocol. Scientific justification has an established place in the WTO Sanitary and Phytosanitary Agreement. That agreement allows members to restrict imports to protect human health and animal and plant health and safety, but it obliges them to demonstrate that such restrictions are based on science.

The Cartagena Protocol requires exporters to seek consent from importers before the first shipment of living modified organisms that are meant to be introduced into the environment ( Environmental Issues 2001 ). Under such conditions some countries might take the position that they can withhold consent even in the absence of scientific proof that the products are harmful ( Oxley 2001 ).

The potential use of links between modified organisms and any risks that they might pose for the environment raise issues of the degree of risk that is acceptable to communities and the need to establish the actual degree of those risks when making rational choices. Under what has come to be called the 'precautionary principle', that was adopted in the Rio Declaration from the 1992 United Nations Conference on Environment and Development, particular measures might be adopted to prevent environmental degradation even where there was a lack of full scientific certainty. While this principle had been considered in relation to environmental risks, the EU Commission extended it to deal more generally with risk to include the environment, human, animal and plant health, in 2000 ( Moschini 2001 ).

Moschini observed that 'the precautionary principle should be interpreted as a tool for risk management, the policy stage of choosing the optimal risk exposure. Its basic tenet is that, when some uncertainty exists about the outcomes of an action, this uncertainty must be factored into the choice problem'.

Even though this principle is capable of being applied in this apparently unexceptionable way, some countries may be capable of applying it in an extreme form in order to restrict trade in products, if the imported products cannot be unequivocally proven to be free of harmful characteristics. A requirement to prove products safe beyond any doubt would be of great concern as it is impossible to prove scientifically that virtually any product, including most that are regular components of current diets, do not have any harmful characteristics to anyone.

Countries whose governments wish to block imports to protect their own industries would even have an incentive not to pursue scientific proof of the safety status of potential imports if the precautionary principle were adopted in this extreme way. In the European Union, which advocates application of this principle, problems to date from food contamination and threats to public health have arisen much more from domestic contaminants than from those generated outside.

While the extreme application of the precautionary principle would be of major concern for trade in agricultural products, the 'principle' really only represents an approach to risk management.

Environmentally based controls on processes used in production

Another area where the overlap between environmental agreements and WTO agreements could be at risk of being misused to restrict trade is environmentally based controls on production processes. Environmental groups are keen to incorporate into a multilateral environment agreement, other than in the WTO, rules that would allow the United States to reimpose restrictions on imports of shrimp, based on how they are caught ( Crousse 1999 ).

Previously, the US imposed restrictions on imports of shrimp (prawns) from countries that did not adopt a certain type of turtle excluding device in nets. That restriction was successfully challenged in the WTO as the United States did not allow imports from countries using other devices that were as effective. Even fisheries that do not have turtle populations were required either to use the devices or to undergo a lengthy certification process to establish that they were a turtle free zone.

It was found that the restriction was not just attempting to achieve an environmental outcome, but it was 'process protection', placing trade barriers on imports because the products are produced in particular ways. Environmental groups have cited this ruling in particular as evidence that the WTO places business interests above environmental interests.

The United States has since altered the approach, allowing for variations in methods to be used, but trade bans have still resulted. A subsequent WTO panel was initiated by Malaysia because the United States was still imposing trade bans unilaterally even though it had not concluded an international agreement for the protection of turtles that included Malaysia. The panel found that using trade bans is inferior to establishing an environmental agreement. However, given that the United States was negotiating environmental agreements on this issue in good faith, the bans were, for the time, acceptable. Malaysia did not challenge whether the new US approach resulted in unfair or arbitrary discrimination against supplying countries, and this latest panel therefore made no judgment on the legitimacy of process protection ( WTO 2001c ).

This case highlights the possibility that restrictions on trade through process based environmental protection might become legitimised through the review of WTO rules in the light of consistency with multilateral environmental agreements. The risk is that unjustified or arbitrary trade discrimination may be allowed, even if it is not a very effective means of achieving the desired environmental outcomes.

Geographic indications

At Doha, it was agreed that the WTO should undertake talks on the possibility of extending protection for 'geographic indications' beyond wine. Geographic indications are terms that associate particular products or processes with particular regions, such as cheddar cheese, champagne, and Kentucky bourbon. The concept is considered by some to be a form of intellectual property that should restrict production of products with that name, to the specified regions. The European Union was the main instigator, but a number of developing countries have also indicated support for such arrangements.

Geographic indications are based on the concept that production within a particular region, or use of a process associated with a region, is linked to a perception of quality. Currently, there are several bilateral arrangements requiring signatories to protect prescribed lists of the geographic indications of other countries' wine. Through those arrangements, names such as Port, Champagne and Rhine have been reserved for use only by producers located in the relevant regions of Europe. Australian regions including the Barossa and Hunter valleys are similarly reserved.

While such arrangements may seem attractive to countries that produce a product generally considered to be superior, such as Thai silk, Egyptian cotton or Cuban cigars, there is a substantial downside to the extension of such arrangements. The wine agreements require signatories to establish systems to ensure the protection of all geographic indications of other signatories.

If such a system were extended beyond wine, the administrative burden of compliance would be substantial. In addition, the use of names based on particular regions has become so entrenched in differentiating categories of some products that reserving those names to the original place of manufacture alone would require the development of new names for similar, or even indistinguishable, products produced elsewhere. A result would be substantial disruption, confusion and cost to consumers as well as producers throughout much of the world. Cheese provides a good example, where most types, including cheddar, edam, mozzarella, brie and camembert are named after European places, whereas the names are actually being used to indicate a style of product that may be produced in many different locations.

It should be evident from the above that these other issues could be of serious concern to people, whether they live in importing or exporting countries. Governments in countries with protective policies could specify unreasonable or unsubstantiated characteristics to lock out imports. It is also possible to establish such costly administrative arrangements for entry of particular products that the benefits from trade can be eroded or even eliminated.

Two concepts that are embedded in WTO rules should be very important in limiting abuse. One is equivalence and the other is national treatment. The idea behind equivalence is an acknowledgment that the same objectives for food safety, the environment etc can be attained by different measures in different countries or areas because the situations, environment and degrees of risk differ between countries and areas.

National treatment is a fundamental element of the WTO/GATT system - it requires that goods or services that are imported should be accorded no less favorable treatment than like products of national origin (paragraph 4, Article III of the General Agreement on Tariffs and Trade, WTO 1995 ). These principles along with the focus on scientific justification, as is applied for barriers under the present agreement covering quarantine restrictions, should provide sound guidelines for many of the non-trade measures.

The fundamental objectives in WTO reforms are to make markets more open and less distorted in order to obtain the benefits from more liberal trade. This must remain the central focus in WTO agreements. If, however, precepts in other international agreements such as environmental agreements are at variance with those currently within the WTO and these are given credence in WTO agreements, the damage that they could do to trade and the associated economic gains could be substantial.

So, while these other issues have been given a place in WTO deliberations under the Doha declaration, it is important that they should not be used as means of restricting rather than advancing trade. It is also important that wrangling over the many abstract questions arising from a raft of largely undefinable issues that are only indirectly related to trade, should not be used as a stalling tactic to prevent or delay agreement on agricultural reforms. They should not divert members from the main game in the negotiations, namely reducing barriers to trade and trade distorting subsidies.

Developing country issues

Developing countries have become increasingly important players in WTO negotiations in recent years, and there is widespread recognition within the WTO membership that issues of particular interest to these countries need to be reflected in WTO agreements, including those on agriculture. The heightened awareness of these interests reflects not only the rapidly expanding developing country membership but also increasing awareness of developing country issues by governments of developed countries and advocacy of those issues by non-government organisations (NGOs).

Agriculture accounts for a far greater proportion of the economy and of employment in developing countries than in developed countries - there are, however, some exceptions, such as oil rich arid countries. Because of this greater orientation toward agriculture, these countries as a group stand to gain significantly from agricultural trade liberalising reforms. Nevertheless, the effects will differ between individual countries within this disparate group because of differences between the situation of agriculture in their economies and in the agricultural products that they produce.

However, these countries can observe that the large northern hemisphere developed countries - the United States, the European Union and Japan - have been reluctant to make more than cosmetic reforms to their agricultural policies. Despite the Uruguay Round, support in these countries in recent years has differed little from peak levels in the mid-1980s ( OECD 2001 and previous ). Other developed countries like Australia and New Zealand, that depend heavily on agricultural trade, need to ally themselves with developing country interests if they are to exert sufficient pressure to advance trade liberalising reform for agriculture through the WTO. This alliance of Australia and New Zealand, and also Canada with developing country interests is most obvious with the Cairns group of agricultural exporting countries.

Although it is in Australia's and like minded countries' interests to seek common grounds with developing countries to exert pressure on developed countries to open their markets and reduce their subsidies, such an approach cannot be at the cost of accepting protectionist policies by developing countries themselves, if the goal is to maximise global welfare from trade.

It is now widely accepted within the WTO that particular characteristics of developing countries justify 'special and differential' treatment for them in agricultural agreements. Some of those characteristics include greater potential difficulties in industry adjustment because of a lack of strong social security systems and difficulties in fostering regional food security because of inadequate infrastructure and transport facilities. To date, special and differential treatment has been mainly through lesser agreed cuts for various forms of support and wider exemptions for agricultural subsidies by developing countries than applies for developed countries.

However, there are some developing countries that see the WTO reform process largely in terms of forcing developed countries to open their markets and at the same time allowing developing countries the 'right' to protect their own farmers and not reform their own policies. Such an approach would generally be detrimental to their own economies as well as contrary to objectives being pursued through the WTO.

In recent years, much of the considerable growth in trade by developing countries has been with other developing countries. If many developing countries were to pursue protective policies for their own agricultural sectors, one consequence would be reduced market opportunities and lower incomes for other developing countries. Also, in a negotiating context, one group of countries seeking legitimisation of protectionist policies for themselves, would play into the hands of developed countries that wanted to maintain their own protection.

Trade reforms through the WTO to open markets and make them less distorted are important for developing as well as developed countries. However, in many developing countries a large part of the gains from trade reform will only be realised if there are also substantial domestic reforms. Such reforms require that key factors that have impeded economic growth in those countries be addressed. Some such factors include ill defined or insecure property rights and legal institutions that do not enable low cost transfers of goods and services, or promote production, trade and investment. Other limiting factors include low levels of literacy and numeracy and underdeveloped logistical networks.

Addressing these limitations will not only increase benefits from trade liberalisation, but should assist with income growth and sustainable economic development whether or not trade liberalisation is successful. Importantly, these factors can be pursued by developing countries independently of progress in the WTO.

Consequently, developed countries can have a substantial positive impact on the long term sustainable economic growth of developing nations through assistance with the necessary reforms as well as by opening their own markets. They can contribute by targeted development assistance to improve infrastructure, health and education. In addition, technical assistance such as specialised training, or outposting of experienced technical staff can help developing countries establish or improve the legal and social institutions that affect trade and economic activity.

Developed countries have been providing some such assistance. However, a substantial part of the assistance provided by large developed countries has been through providing selective assistance to chosen developing countries via preferential trading arrangements. Such arrangements are inherently discriminatory in favor of the chosen group, diverting export opportunities away from countries that do not receive the preferences, many of which are also developing countries. They are demonstrably inefficient, effectively extending high domestic support in the preference giving countries to the preference recipients. They foster continued dependence of the recipients on assistance, and discourage innovation and a broadening of the economic bases in recipient countries ( Topp 2001 ).

The value of these preferences to recipients relies heavily on the gaps between high internal supported prices in the preference providing countries and world market prices. Such gaps may be further eroded if the developed countries reform their own support arrangements, and recipients who rely heavily on them will face significant adjustment costs.

Conclusions

The launching of a new round of trade negotiations at Doha provides an added impetus for the present agricultural negotiations in the WTO and enhances the prospects for successfully concluding a new improved agreement on agriculture.

Nevertheless, the inclusion of some negotiating issues, particularly the overlap between WTO rules and multilateral environmental agreements, could present significant risks to reforming the agricultural trading system.

This, along with other issues prescribed at Doha including animal welfare and expanding the range of products covered by geographic indications, could result in negotiating resources being bogged down in issues that are peripheral to the objective of making markets more open and less distorted by subsidies.

Some of these issues extend well beyond trade considerations and would be best dealt with in other forums in the WTO or other international bodies. Indeed, there are some members that could well use them to sabotage effective agricultural trade reform and as a justification for protectionism.

There has recently been a hardening of protectionist positions in the United States and Japan, and although many countries subscribe in general terms to the desirability of more open, less distorted markets, they are reluctant to embrace liberalisation for agriculture. This presents a particular challenge, not only for efficient agricultural exporting countries like Australia but also for developing countries.

As a group, developing countries would benefit from agricultural trade liberalisation, and they are likely to be more influential in the present negotiations than formerly. The special needs of developing countries must be addressed if the current negotiations are to succeed.

Necessary internal reforms and assistance from developed countries with education and improved infrastructure, along with trade liberalisation, would help with this.

However, some developing countries view their special conditions as justifying high protection of their own agriculture, which would be to their own economic cost as well as prejudicing a successful outcome for agriculture from the WTO round.

The new trade round presents an opportunity for realising increasing benefits from more liberal agricultural trade and less distorted markets.

However, vigilance will be required to ensure that what is agreed actually opens markets further and makes them less distorted. There are currently many threats to such an outcome and many issues being injected into the agricultural trade policy debate that can divert us from the main game.

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