Economic Paper

2310-1385 (online)
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This series examines current economic issues from a Commonwealth perspective. The titles in the series are technical papers of topical interest to specialists concerned with trade, micro and macroeconomics, development economics and related subjects.

Agriculture in the Doha Round

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Neil Andrews, David Bailey, Ivan Roberts
01 Jan 2004
9781848598591 (PDF)

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In 2003, the WTO Ministerial Meeting at Cancun failed to achieve any significant progress on the liberalisation of agricultural markets in developed or developing countries. If the present round of negotiations is to be successful, it must continue the momentum for reform achieved through the Uruguay Round. Agricultural liberalisation has the potential to deliver significantly improved welfare in both developed and developing countries. This report prepared for the Commonwealth Secretariat by the Australian Bureau of Agriculture and Resource Economics, looks at the benefits of liberalisation and examines the closely interrelated use of the three pillars of domestic support, export subsidies and restrictions on market access in distorting world agricultural trade. It outlines the negotiating positions of the key players, and suggests possible areas for compromise and concessions in an attempt to drive forward reform crucial to a successful outcome.

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  • Introduction

    In 2003 the WTO Ministerial Meeting held at Cancun failed to achieve any significant progress in reaching an agreement on the liberalisation of agricultural markets in developed or developing countries. The disparity in positions on agriculture between countries and the apparent lack of political will of major developed countries to make any concessions on agriculture contributed to this outcome.

  • Benefits of Liberalisation

    The economic benefits from trade arise from ‘comparative advantage' which enables countries to specialise in supplying goods and services that they provide at the lowest relative cost and to exchange amounts of those goods for those that others produce at lowest relative cost (Johnson, 1991; Tyers and Anderson, 1992). However, these benefits are significantly reduced by the impact of border measures, domestic subsidies and price support. These measures allow resources to flow into inefficient industries, diverting them away from their most productive uses.

  • Three Pillars of Agricultural Support

    In the present WTO Agreement on Agriculture, concluded in 1994 under the Uruguay Round, separate provisions were agreed for three categories of support – market access, domestic support and export subsidies. For convenience these categories are termed the three ‘pillars' of support. The idea was that all measures that reduce economic benefits through restricting and distorting markets would be subject to agreed reductions and limitations, as all measures would fall within one of these categories.

  • Domestic Support in the WTO Agreement on Agriculture

    The total level of support provided by the European Union was as high in 1999–2000 as it was in the 1986–88 base period. While total support has remained relatively constant, the Aggregate Measurement of Support has been reduced since the base period. This reduction has been achieved by changing the forms of support.

  • Export Subsidies in the United States and the European Union

    Export subsidies are a highly market-distorting form of support. They are used to maintain internal prices to producers at above world market levels and to transfer domestic surplus supplies onto the world market. While they are designed to support internal market prices in the countries applying them, they also affect world markets by increasing export supplies and depressing world market prices.

  • Incidence and Benefits of Support

    One rationale for providing assistance to agriculture is to support financially struggling farmers. However, such support promotes inefficient production practices and patterns (BAE, 1985; Johnson, 1991; Gardner, 1996) and a disproportionate amount of the support usually flows to farmers with higher incomes. Officials from both the European Union and the United States have indicated that providing assistance to lower income farmers is a high priority for their respective agricultural policies (Commission of the European Communities, 1991; Bureau of National Affairs, 2000).

  • Negotiating Positions of Key Players

    During 2002, separate reform proposals were put forward by key WTO members, notably the United States, the European Union and members of the Cairns Group. The gap in the level of ambition contained in these proposals is large and negotiations to bridge the gap and reach a final agreement are proving difficult. As part of the process, Stuart Harbinson, who was then chair of the WTO agriculture negotiations, produced a series of draft proposals in early 2003.

  • Possible Compromises

    The objective of the multilateral trade system embodied in the WTO is to obtain economic benefits for its members. The architects of the system agreed that the only route to achieving the required benefits was through ‘progress towards open markets and liberalised trade' (WTO, 1998b: 4). The more open markets become, the greater are the opportunities for competitive producers to generate wealth and the greater the variety of competitively priced products available to consumers.

  • Addendum: Negotiations in Agriculture and the WTO Framework Agreement Adopted by the WTO General Council on 31 July 2004 and Appendices
  • Glossary and References
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