Online Proceedings Working Paper No.

2010/30

SECOND BIENNIAL GLOBAL CONFERENCE JULY 8 - 10, 2010 THE UNIVERSITY OF BARCELONA AND ITS IELPO PROGRAMME

FOOD SECURITY AND AGRICULTURAL TRADE LIBERALIZATION

MARTHA BELETE HAILU ADDIS ABABA UNIVERSITY SCHOOL OF LAW ETHIOPIA

July 2, 2010
Published by the Society of International Economic Law with the support of the University of MissouriKansas City (UMKC) School of Law

This paper can be downloaded free of charge from: http://www.ssrn.com/link/SIEL-2010Barcelona-Conference.html

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

Abstract Many Sub-Saharan African countries are highly dependent on the agricultural sector for the livelihood of the population. Agriculture is source of livelihood for 64 percent of the population in the region; the sector contributes about one-fifth of total gross domestic product, and about 12 per cent of the total export earnings for the region.1 These countries are gifted with abundant land, labor and natural resources indicating existence of comparative advantage in the agriculture sector. With the existence of comparative advantage, 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 food shortage for the period 1998-2002 are found in Sub-Saharan Africa.2 Food security of a country is affected by different factors; one of which is international trade policy. Trade policy reform resulting from the WTO negotiations involves a combination of the three pillars of the Agreement on Agriculture: tariff, domestic support measures and export subsidies. Each of these pillars have one way or another an implication on food security. Lowering of tariff in agricultural products would lead to an increase in import and declining of price of imported goods thereby enhancing food security. However, for a continent like Africa, where more than 64% of the population depends on the sector, the negative consequences could out weigh. The rules on domestic support and export subsidy also have an impact on food security in that their removal will increase the price of food in the world market there by increasing the import bills of food importing countries and decreasing the amount of food supply to food deficit countries in the form of food aid. The removal of support, however, is beneficial in the long run as it would enhance competitiveness of agricultural products from African countries. In light of the fact that trad e policy plays a great role in the food security of countries, the issue deserving consideration

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, 291-292
2

FAO, FAO STAT online data, available at < www.faostat.fao.org >

is the effect of the WTO agricultural trade liberalization on food security and the available mechanisms for addressing the issue. The article examines the food security implications of the WTO agreement on Agriculture. It asserts that the Agreement on Agriculture favors agricultural producers of the developed countries at the cost of producers in developing countries, including Africa. The article will also 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, the next section will define food security and look into the state of food (in)security in SubSaharan African countries as well as the causes for food insecurity. The third chapter touches upon the three pillars of the AoA and their implementation and will also discuss their relationship with food security. The fourth section will highlight the state of affairs in the current negotiation and indicate the reforms necessary to be undertaken under the current round of negotiation which aims towards enhancing food security in the region. The paper will finalize by making some concluding remarks.

Table of Content Abstract Acronyms I. Introduction II. Defining Food Security III. State of Food Security in Africa and Causes of Insecurity IV. The Agreement on Agriculture and Food Security: The Relationship IV (i) Market Access IV(ii) Domestic Support and Export Subsidy V. Food Security Issues in the Doha Round VI. Concluding Remark 2 5 6 6 7 9 9 12 18 21

Acronyms AOA FAO GATT GDP LDC NFIDC SSM UNCTAD WTO Agreement on Agriculture Food and Agriculture organization General Agreement on Tariff and Trade Gross Domestic Product Least Developed Countries Net Food Importing Developing Countries Special Safeguard Measures United Nations Conference on Trade and Development World Trade Organization

I.

Introduction

Agriculture is the backbone of the majority of African Countries economy. The sector employs 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, one tends to assume existence of comparative advantage in the sector and food self sufficiency of 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 important factor which gears a countrys trade policy is its international commitment through membership to the WTO. This paper aims at assessing the food security situation of African countries and the relationship between food security and the WTO agreement on agriculture as well as the impact 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 Doha round is agricultural trade. The paper will also look into the implication of the progress so far made under the current round on the food security concerns of African countries. II. Defining Food Security

Food security is an amorphous concept and different definitions have been given to it in different times. The 1974 World Food Summit defined food security as the availability at all times 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 concern during that time was the volume and stability of food supply, the definition adopted reflects this concern. Soon the concern shifted to ensuring access of food to all people, including vulnerable ones and attention was given to balancing between the demand and supply side4 resulting in
3 4

FAO, (2003), Trade Reforms and Food Security: Conceptualizing the Linkage, Rome, p 26 Ibid

adoption of a new definition. In view of this shift, the FAO adopted a new definition in 1983 as such food security was defined as ensuring that all people at all times have both physical and economic access to the basic food that they need.5 By the mid-1990s food security was recognized as a significant concern, spanning a spectrum from the individual to the 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 cultural preference have also been considered. Consequently, the 1996 World Food Summit adopted a new definition of food security6, which was later in 2001 modified to include the social aspect 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 food that 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 the food. 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 the agriculture sector. However, a glimpse at the performance of the sector in many African countries shows otherwise. In over twenty years the continent reversed from being a key exporter of agricultural commodities to a net importer, and the sector has been plagued with production problems. Moreover, the food security situation in many African countries has deteriorated over the years. In 2003, acute food security had affected 38 million people in the continent, who were facing outright risk of famine, with 24,000 dying from hunger daily. 8 The 2008 world food crisis also affected the continent highly. A 2009 UNCTAD report
5 6

Ibid 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 to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life, 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, p 8 8 Jenny Clover, (2003), Food Security in Sub Saharan Africa, African Security Review vol 12 (1), p6

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 continents population.9 Many factors contribute to the dwindling food security situation in the continent. One of the major factors for the poor performance of the agriculture sector in the continent thereby contributing for its food insecurity, is the underdevelopment of the sector. In many African countries agriculture is still dependent on rain; there is low level of investment and poor technology is employed. The land tenure system in many African countries as well as malaria and HIV/AIDS epidemic have been pointed as contributing factors to the low performance of the sector. Moreover, in many of these African countries the agriculture sector receives limited 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 changes following implementation of structural adjustment programs. UNCTAD reports point out that 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 commodities and food staples.11 While these African countries abandoned the support they give to the sector, their developed trade partners, on the other hand, continued the support. This situation of African countries was further exacerbated by the liberalization of market access barriers 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 protection reflected in paragraph three of the preamble has not so far been achieved. The long standing agricultural subsidies and domestic support in developed countries have posed critical obstacles to agriculture development in African countries. Quantitative analysis and case study evidence by FAO and UNCTAD indicates that agricultural subsidies in developed countries have been associated with rapidly increasing food imports in developing countries, alongside the decline in agricultural production.12 Liberalization of agriculture sector
9

UNCTAD, (2009), Food Security in Africa: Learning Lessons from the Food Crisis, [TD/B/EX(47)/3], p2 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 12 11 Ibid. See also UNCTAD, (1998), Trade and Development Report. 12 Id., p14
10

following the structural adjustment programs made these countries susceptible to pressure from the importation of subsidized food exports of the developed countries. The policy change has limited the countries opportunity to protect their agricultural sector and undermined domestic production. Many African countries which were traditionally food exporters 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 and benefited from special arrangements which derogate from the rules within the GATT. Food security has been put forward as a reason for the exceptional treatment of agriculture.14 Protecting the sector was perceived as a means of ensuring consumers reasonable prices and protecting producers against fluctuations in the price of agricultural products15 so as to guarantee food supply. The concerns of states resulted in the protection of the sector with high tariffs and introduction of support to farmers. The Uruguay round pronounced the end of this distortion by introducing some disciplines to the sector. A separate agreement on agriculture was adopted and this agreement contains rules on three major areas; market access, domestic support and export subsidy, also known as pillars of the agreement. Each of these pillars has a link with food security. IV (i) Market Access Agricultural market access refers to the terms and conditions under which agricultural products could be imported into WTO member countries.16 Countries may prevent or limit import in to their domestic market through the use of tariffs or non tariff barriers. The
13

Id., p14-15. One example here is the case of Ghana. Ghanas 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 heavily subsidized 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, Ghanas parliament raised the poultry tariff from 20 to 40 percent, still much below the bound rate of 99 percent. However, the IMF objected to this move and the new approved tariff was not implemented. For more, see, Anuradhan Mittal, (June 2009), The 2008 Food Price Crisis: Rethinking Food Security Policies, G 24 Discussion Paper Series No 56, [UNCTAD/GDS/MDP/G24/2009/3], p12 14 Melaku Geboye Desta, (2001), Food Security and International Trade Law: An Appraisal of the World Trade Organization Approach, Journal of World Trade, Vol 35, no 3, p449 15 Fabian Delcros, (2002), The Legal Status of Agriculture in the World Trade Organization : State of Play at the Start of Negotiations, Journal of World Trade, Vol 36, no 2, p 219 16 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

GATT 47 favours tariffs as a means of protecting domestic market by prohibiting the contracting parties from using non tariff measures under article XI. However, as agriculture was treated uniquely, the provision contains an exception under sub 2 which allows countries 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, after tariffying 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 and reducing the tariff amount. Accordingly, paragraph 5 of the Modalities agreement requires developed countries to reduce their duties by a simple average of 36% over a six year period from 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 are exempted from undertaking any reduction commitment.19 A look into the current market structure of countries reveals that not much has changed in market access of agricultural products. The extensive escape hatches and caveats that are manipulated to maintain or even increase actual protection curtailed substantial change in market access.20 In the absence of appropriate supervision of the tariff conversion process and to prevent backsliding, members often resort to dirty tariffication or ceiling binding by grossly 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 the support given to the sector which makes competition from developing countries which do not and cannot provide support, impossible. Low tariffs as a result of the liberalization process are expected to enhance the food security of a country by making food available at cheaper price. However, there is also a danger that low prices will suppress domestic price and production thereby leading for dependence on food 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, agriculture
17 18

Article 4/2 of the AOA Melaku Geboye Desta, (2002), The Law of International Trade in Agricultural Products: From GATT 1947 to the WTO Agreement on Agriculture, Kluwer International, p 73 19 Article 15/2 of the AOA 20 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 683 21 Ibid

10

generates over one third of the gross domestic support and substantial percentage of export depend on agriculture.22 The other concern related to market access is the prohibition of export restriction. Countries respond 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 the 2008 food crisis many countries, including many African countries have resorted to export restriction of cereals and other food products.23 Article XI/2 of the GATT exempts temporary use of export prohibition to relieve critical shortage of food stuff from the general rule applicable under the first sub paragraph. It should be stressed that resort to export restrictions is a temporary measure and it can be used only when there is critical shortage of foodstuff domestically. A related obligation on states using export restriction is to give due consideration to the implication of the measure on importing countrys food security and to notify in advance of the measure to the committee in agriculture. 24 The conditions for export restriction are criticized for being vague and imprecise.25 According to this view, the two crucial terms critical shortage and temporary in the provision are not defined anywhere. The advance notification requirement is rarely adhered to. The right to impose export tax has been exercised unfettered. It could be excessively high, and unlike import 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 the other 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 Reform and the WTO: where are we heading?, 23 The countries that introduced export restriction on food grain are India, Pakistan, Sri Lanka, Nepal, and Bangladesh 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. World Bank 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, see http://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 AOA 25 Professor M. Rafiqul Islam and Md. Rizwanul Islam, supra note 20 , p684 26 Ibid

11

The Agreement on Agriculture defines export subsidy as subsidies contingent upon export performance27, however, it doesnt define what subsidy means. Here, the Vienna Convention could give us a clue as it states under article 31/1 that the interpretation of agreements should be made in accordance with their context.28 Context in this situation covers not only the 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 the government or any public body contingent upon export performance and conferring a benefit on the recipient. Subsidies were covered under the GATT agreement. However, the obligation on the contracting parties was only to notify one another on amount of their subsidies and to consult each other on their content.31 Article XVI/4 was adopted latter in 1955 with additional obligation in the contracting parties to cease to grant export subsidies for any product other than primary products.32 However, a country granting subsidy for its agriculture has to make sure that the support should not result in that country having more than an equitable share of world export trade in that product.33 The ambiguousness of the requirement of not having more than equitable share of world export has resulted in this provision 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 28

Article 1/e of the AOA Article 31/ of the Vienna Convention on the Law of Treaties states that A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. Vienna Convention on the Law of Treaties (Vienna 23 May, 1969) also available at <http://www.admiraltylawguide.com > 29 Melaku Geboye Desta, (2002), supra note 18, p 214 30 Article 1 of the SCM Agreement defines a subsidy as a financial contribution made by a government or any public body conferring a benefit on the recipient 31 See article XVI/1 of the GATT 32 Fabian Delcros, supra note 15, p 223 33 Article XVI/3 GATT

12

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.35 The obligation on export subsidies brings with it two major concerns. To the extent that developed countries reduce export subsidies, developing countries products will become more 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 importing countries as their import bill may increase as a result of increase in food price following reduction of support. On the other hand, several food exporting countries are concerned on the 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 food aid is tied to other commercial sales.38 Differentiating between food aid and commercial transaction 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 first requires member countries to ensure that provision of food aid is not tied with commercial exports of agricultural products. Furthermore, the agreement also adopted the threshold level of concessionality set by the Food Aid Convention for a transaction to qualify as food aid 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 agriculture decision requires members to make an annual notification on the quantity of food aid provided to least developed and net food importing countries, the proportion of such aid made 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 over a six year implementation period for developed countries while the obligation of the developing countries will be 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 their reduction commitment; while countries which were not providing export subsidy during the base period will cannot introduce it in the future. As a result, only 25 countries (WTO members) scheduled their export subsidy reduction commitment, and the list does not include developing countries. See Melaku supra note 16, p 19 35 Carmen Gonzales, Institutionalizing Inequality: The WTO Agreement on Agriculture, Food Security and Developing Countries, 27 Colum J.Envt L , p 464 36 Id., p 475 37 Melaku Geboye Desta, (2001), supra note 14, p 451 38 Joseph McMahon, (2006), The WTO Agreement on Agriculture : a Commentary, Oxford University Press, p 179 39 Melaku, Supra note 14, p 451 40 Joseph McMahon, Supra note 38 p 179-180

13

The other pillar of the AOA is domestic support. Domestic support refers to the monetary contribution given by the government or other public body to agriculture producers irrespective of export of the products. Governments provide support to their agricultural producers in different ways ranging from direct budgetary transfers to highly disguised forms of market price support.41 Though the support given benefits the recipient farmers, it may entail distortion to the patterns of international trade.42 The provision of support lowers the price of locally produced goods below the level of imports and there is a danger that it may drive out import competition. In view of this, the AOA introduced disciplines on domestic support measures; which are portrayed in boxes with different colors: Amber, Blue and Green.43 Support 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 distorting measures during the 1986-88 base period44 cannot introduce it. And those countries, which have reported using it for the 1986-88 base period are required to undertake reduction commitment of the Aggregate Measure of Support.45 According to article 6.3 of the AOA, a member 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 final bound commitment level specified in its schedule. The reduction commitment of the member countries slightly differs with the difference in their development status. Accordingly, developed countries undertook 20% reduction commitment while the developing countries commitment is 13.3%. Hence, while the 35 countries have entered a commitment to reduce the level of farm support, the remaining, mainly poor developing and least developed countries, cannot make use of any measure falling under the amber box, with few exceptional measures.
41 42

Melaku Supra note 16, p 22 Melaku, supra note 18, p 313 43 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 24 45 The Aggregate Measure of Support (AMS) refers to the annual level of support, expressed in monetary terms, provided for an agricultural product or non product specific support provided in favor of agricultural producers in general. Article 1(a) of the AOA.

14

The first exception is the de minimis level of support. This exception is available for both developing and developed countries which do not fall under article 6.3 AOA. Here, the members are exempted from reduction commitment of product specific or non product specific 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 and differential treatment, is measures falling under article 6.2, also known as Development Box measures. These measures include generally available agricultural investment subsidies, agricultural input subsidies generally available to low income or resource poor producers and support to encourage diversification from growing illicit narcotic crops. Domestic support measures given by developing countries which meets one of these three conditions will not be included in the calculation of the members current total AMS.48 The Blue Box contains production limiting programs which are exempt from reduction commitment provided the payment is based on fixed area and yield, or made on 85% or less of the base level of production while for livestock if the payments are made on a fixed number of head.49 It covers payments directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land.50 The blue box measures are available for every member 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 box measures. 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 from reduction commitment. These measures are provided in a detailed but non exhaustive list
46 47

Joseph McMahon, supra note 38, p 70 Article 6.4 of AOA 48 Article 6.2 AOA 49 Article 6.5 AOA 50 WTO, Agriculture Negotiation Background, p56 also available at <www.wto.org> 51 Ibid

15

under Annex 2 of the AOA. Green box measures tend to be programmes that are not directed at particular products, and include direct income supports for farmers that are not related to (are decoupled from) current production levels or prices.52 Hence, they are allowed without limits, provided they comply with relevant criteria set under annex 2. The criteria set are i. the support in question must be provided through a publicly funded government program not involving transfer from consumers and the support in question shall 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 the green box. The first category, general services, includes measures providing services or benefits to agriculture or the rural community that do not involve direct payments to producers or processors. Measures such as pest and disease control, extension and training services, research and infrastructural services also fall under the first category. Paragraphs 5 to 13 allow for various direct payments to producers to be exempt from the reduction commitment. 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 can also provide assistance for structural adjustment, environmental and regional development purposes. As mentioned above, one of the concerns related to disciplining of export subsidies and domestic support is the potential increase in the price of food which will in turn increase the import 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 to address the concern. For instance, paragraphs 3 of Annex 2 categorizes measures taken by governments for purposes of achieving food security under the green box and hence exempt it from reduction commitment. Such measures include expenditures in relation to the accumulation and holding of stocks of products which form an integral part of a food

52

Id., p 53-54

16

security program identified in the national legislation53 and expenditures in relation to the provision 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 and net 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 negative effects 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 on Food Aid under the Food Aid Convention 1986 and to initiate negotiations in the appropriate forum to establish a level of food aid commitments sufficient to meet the legitimate needs of developing countries during the reform program; b. adopt guidelines to ensure that an increasing proportion of basic foodstuffs is provided to least-developed and net food-importing developing countries in fully grant form; c. give full consideration in the context of their aid programs to requests for the provision of technical and financial assistance to least-developed and net food-importing developing countries to improve their agricultural productivity and 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 and LDCs have had nothing but a lot of good will messages and fine rhetoric; but no concrete action.56 Some are of the view that the dissatisfaction mainly arises due to ambiguity in the
53

For such measures to be exempt from reduction commitment, conditions stipulated under paragraph 3 have to be fulfilled. These conditions are: there has to be correspondence with the volume and accumulation of the stock on the one hand and the predetermined targets related solely to food security, there has to be financial transparency in the process of stock accumulation and disposal, and lastly food purchases by the government has to be made at current market prices and sales from food security stocks shall be made at no less than the current domestic market price for the product and quality in question. The basic aim of setting these conditions is avoiding the practice of trade and production distorting subsidies disguised as genuine food security measures. See Melaku, supra note 18, p 415 54 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, food purchases 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 on Least Developed and Net Food Importing Developing Countries 56 Joseph McMahon, supra note 38, p 181

17

language which made it difficult to parties to agree whether the commitments have been met.57 The WTO did review food aid levels and did initiate negotiation under the Food Aid Convention, resulting in the 1999 FAC. But the result of the convention was unsatisfactory as the minimum level of commitment by donors declined.58 Currently, one of the issues on the negotiating table of the WTO members is the strengthening of the decision.

V.

Food Security Issues in the Doha Round

The long term objective of establishing a fair and market oriented agricultural trading system is sure very hard to achieve within the implementation period provided in the AOA. Considering this, the agreement sets for an inbuilt agenda for initiation of a new round of negotiation a year before the end of the implementation period envisaged under it. In launching the new round of agricultural trade negotiation, article 20 of the AOA requires member countries to also consider non trade concerns which include food security. In accordance with the mandate given under this provision, the Doha Round was launched in 2001. As prioritizing concerns of developing countries without denying possibility of negotiating on the issues of interest to developed countries is envisaged within this round, it is said that the round has a development component. As far as agriculture is concerned, the round is directed towards the three pillars: market access, domestic support and export subsidies. In this regard, the Doha Ministerial Declaration, in relevant part states:59 we commit ourselves to comprehensive negotiations aimed at: substantial improvements in market access; reduction of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. We agree that special and differential treatment for developing countries shall be an integral part of all elements of negotiations ...so as to be operationally effective and to enable developing countries to effectively take account of their development needs, including food security and rural development. We ... confirm that non-trade concerns will be taken into account in the negotiations as provided for in the Agreement on Agriculture.

57

Linda M Young, (2002), Options for World Trade Organization Involvement in Food Aid, The Estey Centre Journal of International Law and Trade Policy, Vol 3 no 1, p16 58 Ibid 59 Paragraph 13 of the Doha Ministerial Declaration, adopted on 14th of November 2001, WT/MIN(01)/DEC/1

18

Accordingly, the major concern in relation to agricultural market access is the improvement of access by members through the reduction of tariffs. In this regard, in the July package the members 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 this formula is the principle of progressivity which requires deeper cuts in higher bound tariffs.60 The number of bands for structuring tariff cuts and the threshold for the cut was left for further negotiation. Accordingly, the Hong Kong Ministerial resulted in the adoption of four bands for structuring the tariff cuts61 while in the December 2008 Draft Modalities it was proposed that developed countries should cut their tariffs by 50-70% while the cut by developing 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 flexibility to developing countries to self designate an appropriate level of tariff lines as Special Products 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 their tariff line to as special products while for developing countries the amount is 1/3 more. 63 This way, the developing countries will be able to deviate from their reduction commitment on more products compared to developed countries. The flexibility for developing members to designate and make a smaller tariff reduction commitment on special products is essentially 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.64 The other exception relates to Special Safeguard Measures (SSM). Paragraph 42 of the July package provides that a special safeguard mechanism will be established for use by developing 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 we evaluate the role of this provision for African countries from a food security perspective, it is
60

Paragraph 29 of Doha Work Program, Decision adopted by the General Council on 1 August 2004, (July Package), WT/L/579 61 Paragraph 7 of Hong Kong Ministerial Declaration, adopted on 22 December 2005, WT/MIN(05)/DEC 62 Paragraph 61 and 63 of the Revised Draft Modalities for Agriculture, 6 December 2008, TN/AG/W/4/Rev.4 63 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 for Net Food Importing Developing Countries, South African Institute of International Affairs: Development Through Trade Program, Occasional Paper No 54, p 14

19

very limited. The concern at the time of using SSM is limiting market access which will reduce the amount of imports. This will, at the end of the day, have an effect of raisin the price of imported food. On the other hand, what is the immediate concern by net food importing countries, like in the case of many African countries, is to have food in the domestic market at a lower and affordable price. As indicted under section IV/I above, one of the concerns related to agricultural market access is the prohibition of export restrictions. One of the shortfalls in the existing rules governing export restriction is the imprecision and vagueness in which the conditions are drafted; which led to the unfettered use of export restrictions by members. The Draft Modalities for Agriculture tried to address this shortcoming by providing time limit for the use of export restrictions. As envisaged under paragraph 178 of the Revised Draft Modalities, members which adopted export restriction measures on food stuff have to bring it to an end within the first year of the implementation period. The member instituting the export prohibition is also required to give notice of reason for introducing or maintaining the measures as well as to consult, upon request, with another member with a substantial interest as importer.65 A time framework for instituting new export restriction measures is also provided in the Draft Modalities. Consequently, paragraph 179 stipulates that any new export restriction should not normally be longer than 12 months. Instituting the restriction for 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 are given the right to say something on the measure. The second area of negotiation on agriculture under the current round is on export subsidies and 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 in trade distorting domestic support. As a follow up to this, the members on the July package have 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 for calculating Total AMS as well as permitted de minimis level of support, so as to allow deeper cuts of higher levels of permitted trade distorting domestic support.67 Further to this, the
65 66

Paragraph 173 and 174 of the Revised Draft Modalities for Agriculture Paragraph 18 of the July Package 67 Paragraph 6 and 7 of the Doha Work Program, Decision Adopted by the General Council on 1 August 2004 (July Package), WT/L/579

20

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 elaborating how classification under the three bands will be made, the Declaration further provides that members 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 and third highest levels of support will fall in the middle band and will undertake commitment accordingly, while the remaining members will all be in the bottom band. The proposal made under the Revised Draft Modalities is for developed countries to reduce their trade distorting domestic support with 45 to 70% in six steps over a period of five years; while the requirement for developing countries if 2/3 of that of developed countries, i.e., 30 to 46%.69 On 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 reduction of 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 be an increase on the price of food in the world market, which could to the detriment of food importing 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 price of cereals in net food-importing developing countries.71 This will affect the economic accessibility of food72 in the short run. But the creation of a fair and market oriented agricultural trading system will be to the benefit of every one, including the poor African countries, in the long run. The dismantling of the unfair trading system which turned African farmers from net agricultural exporters to being net importers will in some years time enable these farmers to be reinstated to their previous position. This will then boost the food security situation in these countries. As far as the short term effect is concerned, it can be addressed by making the Marrakesh Decision more effective and practicable, and by extending meaningful special and differential
68 69

Paragraph 4 of the Hong Kong Ministerial Declaration, Paragraph 13, 15 and 16 of the Revised Draft Modalities on Agriculture 70 Paragraph 6 of the Hong Kong Ministerial Declaration 71 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 16 72 Ibid

21

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

The majority of the population in the sub Saharan region are rural dwellers relying on agriculture for their livelihood. Agriculture contributed the lions share of the regions income and employs majority of the work force. Despite this, the sub Saharan Africa region is known for its low level performance of the agriculture sector and high incidence of food insecurity. Major portions of the world food aid shipments are directed to the region annually. Different factors contribute to the low level of performance of the agriculture sector 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 WTOs Agreement on Agriculture fundamentally covers three areas: market access, domestic support and export subsidy; each of which has a link with food security. The rules on the three pillars were aimed at creating a fair and market oriented agricultural trading system. However, due to various reasons, this objective is not yet achieved. Recognizing the difficulty in achieving this objective within the time frame envisaged in the AOA, the agreement provides for an in-built agenda for further negotiations. As a result, the AOA is currently under renegotiation. The renegotiation of the AOA is also focused on the three pillars. The progress so far made under the Doha round indicate positive sign towards achieving a fair and market based agricultural trading system. This will be very important for the majority of African agricultural producers whose products have been denied of fair and competitive marketing environment for so long. The elimination of export subsidies and substantial reduction of trade distorting domestic support measures by the developed countries will push the prices of 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 run implication 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 the population. Nonetheless, this concern should not hold the implementation of the current proposals as the short term negative effects can be ameliorated by resorting to alternative 22

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

23