General Council – Preparations for the 1999 Ministerial Conference

(99-0902)
Original:English
Issues Under Paragraph 9a(ii) of the Geneva Ministerial
Declaration – Mandated Negotiations
Communication from India

The following statement by India at the informal intersessional meeting on 23-24 November 1998 is being circulated at the request of that delegation.

• The objective of the Agreement on Agriculture (AOA) was to bring about discipline in one of the most distorted sectors of trade by, inter alia, regulating the unrestricted use of production and export subsidies, as well as by reducing import barriers, including non-tariff barriers. Thus, the AOA sought to limit the extent of support granted by individual countries and attempted to ensure that countries adopt a more liberal policy as far as agricultural trade was concerned. At the same time, the AOA recognized certain non-trade concerns, such as food security and the need to protect the environment.
• As Members are aware, Article 20 of the Agreement on Agriculture stipulates that negotiations for continuing the reform process in the agricultural sector are to be initiated one year before the end of the implementation period, which in effect means by the end of 1999. While a number of Members have highlighted the need to ensure that theses negotiations result in substantial reductions in support and protection, they have apparently overlooked what has been provided in the latter part of Article 20 of the Agreement, that these negotiations should be based on the experience of implementation, and in particular should take into account the non-trade concerns, and the implementation of special and differential provisions for developing country Members so as to ensure that a fair and market oriented trading system is established.
• We would accordingly in our intervention today focus on two broad aspects of the impending negotiations in the agricultural sector. At the outset, we would briefly dwell on the process for these negotiations and thereafter we would focus on some issues of concern to us which have arisen in the context of the implementation of the AOA.
• As stated by us earlier, Article 20 of the Agreement on Agriculture provides the basic guidelines for the new round of negotiations. We feel that the provisions of this article adequately reflect both the emphasis and the context in which these negotiations should be entered upon. Obviously, the most important aspect is that these negotiations should address the concerns and shortcomings which Members, particularly developing country Members, may have faced, in the implementation of the Agreement since its adoption. In this respect these negotiations would obviously be different from the UR negotiations, since implementational problems would need to be addressed up-front. In a way this process has already been initiated in the Committee on Agriculture, which initiated the process of “Analysis and Information Exchange” more than a year back. This process has enabled Members to raise issues of interest to them, inter alia, including issues related to the administration of tariff quotas, export subsidies, issues of interest to developing countries, non-trade concerns including food security etc. In fact it is noteworthy that nearly 45 papers have been submitted in the AIE process to date. This, no doubt, shows the importance that Members attach to this process and to the agricultural sector as a whole. It is our view that these papers form an important input for the future work and in fact the issues which have been raised during this AIE process, though obviously not exhaustive, at least provide a basis on which to build upon.
• The structure of the negotiations would obviously need to be specified. While we are yet to finalize our views in this regard, on a preliminary basis we would like to state that in our view this process should be carried out under the aegis of the Committee on Agriculture. This would save Members the administrative and procedural problems associated with creating new negotiating bodies, as has been suggested by some Members. We would at this stage also like to state that we do not view the negotiations being carried out within a very rigid time frame of completion. For us, while the conclusions of the negotiations are important, what is of even greater importance is that these negotiations adequately address the implementational concerns of Members. Consequently, we feel that the quality of the final product is of greater importance than simply ensuring that the negotiations are completed by a fixed date.
• As a background to the concerns that we have on implementation, allow me to remind Members that a large number of developing countries have predominantly agrarian economies, where a very large percentage of the population is dependent on agriculture for their livelihood. While the main concern of such countries, over the years, has been to ensure food sufficiency for their populations, they have at the same time also sought to find stable markets for their products. However, the underlying fabric of all these concerns has been to ensure the continued provision of livelihood to these large rural populations and to improve their income levels. During the UR, these concerns were translated into provisions in two broad areas. The first of these provisions related to domestic support which allowed developing countries to provide assistance, whether direct or indirect, and to encourage agricultural production as an integral part of the overall objective of rural development. The second area related to market access, where it was felt that it would be important to improve both the opportunities and terms of access for agricultural products of interest to these Members. Some of these concerns were also translated into specific provisions for developing countries and special and differential provisions were accordingly provided for in five areas of the AOA. These included market access, food security with specific reference to net food importing countries, domestic support, export subsidy, and notification requirements and technical assistance.
• While these areas, and perhaps additional areas, would need to be adequately addressed during the new round of negotiations, let me specifically highlight some of the concerns that we have in this regard. For instance, in the context of the improved market access which the Agreement had sought to provide to developing countries, India would like to draw attention to the preamble of the Agreement which specifically mandates developed countries to provide greater opportunity and access to the agricultural products of interest to developing countries. It is our view that the obligations under this special and differential treatment in the area of market access have not been fulfilled. Such treatment was considered to be particularly important in order to improve the general participation of developing countries in world agricultural trade and to reverse the growing tendency of many developing countries to become net importers. The situation relating to improved market access through lowered tariffs in developed countries is also equally unsatisfactory. In fact there have been studies which have shown that the post UR base tariffs of a number of sensitive commodities in many industrialized countries are higher than the actual tariff equivalents of all border measures which existed in 1986-88.
• Similarly, trade distorting subsidies in some developed countries have had a disproportionately negative effect on trade in the many agricultural products on which developing country exporters are dependent. In fact, export subsidies is one area where we definitely feel that the playing field is not even, since developed countries who had notified their basic level of support can, and have, continued to provide large scale trade distorting export subsidies. On the other hand, some developing countries that were provided this facility as part of the special and differential treatment have been unable to do so because of the constraints on their resources. It is therefore imperative that the use of export subsidies be minimised and a suitable time frame determined for effective reductions in export subsidies so that the trade distorting effect of these subsidies is gradually eliminated. It would also be important to address these issues during the negotiations.
• It is therefore really not clear whether the UR has actually helped improve market access for developing countries and whether products from developing countries are being able to compete in the global market on an even keel. It is also not clear as to what steps, if any, the developed countries have taken in this regard. We therefore strongly support the suggestion made by Egypt that the Secretariat should carry out an in-depth and detailed evaluation of the effects of the UR on the trade of developing countries as a prerequisite to the initiation of the negotiations. We feel that such an evaluatory study, which would obviously need to be carried out in consultation with other relevant international organisations, would provide developing countries with a clearer picture of the effects of the UR on agriculture and would consequently help them to prepare for the future negotiations.
• Let me now dwell upon certain non-trade concerns that we have. While the preamble to the AOA recognizes the importance of NTCs, this emphasis does not appear to have been fully reflected in the provisions of the Agreement and consequently in its implementation. The major thrust of the Agreement appears to be based on the hypothesis that liberalisation is the panacea for all ills in the agricultural sector. While this may be tenable from a conventional economic viewpoint, such reasoning does not take into account the problems faced by a number of developing countries which, because of certain underlying constraints, have to necessarily take into account non-trade concerns such as food security, while formulating their domestic policies. This is particularly true of developing countries where a significant percentage of the population is not only dependent on the agricultural sector for its livelihood, but is also surviving just around the poverty line. In such countries a purely market oriented approach may not be able to deliver the goods. Instead, for such countries, it may be necessary to adopt what we would like to term a “market plus” approach, in which non-trade concerns such as maintenance of the livelihood of the agrarian peasantry, i.e. rural employment, and the production of sufficient food to meet domestic needs are taken into consideration. We therefore feel that it is important to closely examine these aspect of the AOA, vis-à-vis their implementation, so as to ensure that the continued reform in the agriculture sector takes them into consideration.
• Ensuring food security, that is the access of the population to sufficient food to meet its nutritional requirements, is a basic objective of governmental policies in agrarian developing countries. Hence, food security issues cover not only issues related to the availability and stability of food supplies but also to issues of access to this supply i.e. related to the resources that may be needed to procure the required quantity of food. It is therefore clear that issues related to food security are sensitive issues and hence countries where a large percentage of the population is dependent on this sector, would like to have a certain degree of autonomy and flexibility in determining their domestic agricultural policies. These policies would naturally be geared towards improving productivity, enhancing income levels, reducing vulnerability to market fluctuations, ensuring stability of prices etc. Inter alia, this would be achieved through reliability of production and supplies, so that seasonal variations in access to food are minimal. It is for this reason that national production policies have been central to domestic agricultural policies of many developing countries. It is therefore clear that in this sense food security is a legitimate national concern and has been so recognised by the FAO. In fact, during the World Food Summit of 1996 “the importance for food security of sustainable agriculture, fisheries, forestry and rural development in low and high potential areas” was explicitly recognized. This recognition of the importance of food security even for low potential areas clearly underlines a developmental perspective which goes beyond mere trade concerns, and is therefore germane to the outlook and interest of developing countries.
• Countries which argue and support rapid liberalisation of the agricultural sector contend that global food sufficiency would in a way ensure food security since countries could then produce what they are most competent and efficient in, while importing the rest of their food requirements. Such an argument presupposes that all countries would at all times have sufficient foreign exchange to procure their food requirements internationally. This assumption is obviously not true since not all developing countries would always be in a position to import foodgrains, even if these were available at competitive prices, due to their limited foreign exchange reserves. Moreover, these countries often face cross-sectoral pressures on their available funds, which further limits their capacity to procure internationally. This problem is further compounded where the additional demand results in unforeseen variations in international prices.
• Indian agriculture presents certain peculiar features which sets it apart from the agricultural regime of the advanced countries, whose market-distortive practices were mainly intended to be targeted by the AOA. As opposed to the situation in the advanced countries, where agriculture is a commercial activity, the Indian context fosters a barely subsistence-level of agricultural production. 80 % of land holdings belong to small and marginal farmers possessing less than 10 hectares of land and only 30 % of the total production forms a marketable surplus, the majority 70 % being consumed by the producer himself. The producer being to a large extent also the consumer, the bias of the AOA towards restricting producer subsidies cannot therefore, strictly speaking, be applied to situations like the one which exists in India, where just over l % of the agricultural production finds its way into the international market.
• Similarly, there are a number of other internal constraints which, if not appropriately addressed, would severely limit the capacity of countries like India to increase domestic production. Firstly, holdings are small. This limits any attempts to introduce mechanized farming and constrains the adoption of new technologies unless accompanied by large-scale extension programmes. Consequently, productivity is low and total production varies substantially, since a large percentage of the agricultural sector continues to be at the mercy of the vagaries of nature. At the same time, there is increasing pressure on land from non-agricultural users, both because of the rising level of urbanization as also because of the geographic spread of industries. If this limitation on the availability of agricultural land is viewed in the context of the growth in population, which most developing countries invariably face, it would be clear that developing countries have an adverse land-man ratio, and therefore the only way in which agricultural growth can be sustained and the objective of food security attained would be through governmental support.
• While we are not advocating a 100 % self sufficiency in production, we feel that low-income developing countries should be able to produce at least a certain minimum percentage of their annual food requirement. We feel this is an objective which needs to be pursued, particularly in light of the constraints that developing countries have faced in the past in procuring their foodgrain requirements from international markets. Such an increase in production levels can only be brought about through the enhanced use of inputs, particularly in terms of irrigation, electricity, fertilizers, pesticides, technical know-how, high yielding varieties, infrastructural development, market support etc. Recognising the large percentage of small farmers in the agricultural sector of most developing countries, it is clear that a major part of any financial burden of increased inputs would have to be met through governmental subsidies. We feel that it would need to be recognised, in the WTO, that the small farmer would not be able to meet his principal responsibility without adequate support from government. Public intervention would therefore be necessary in order to achieve these goals.
• It also needs to be said that agricultural self reliance forms a vital underpinning for the growth of the GDP of agrarian developing economies, since good agricultural production provides purchasing power to a large majority of the population, which in turn spurs industrial growth. Self-sufficiency in food production has therefore a specific developmental perspective as opposed to a purely commercial perspective. Hence, it is our view that developing countries need to be provided the requisite flexibility within the AOA to pursue their legitimate non-trade concerns. More specifically, developing countries need to be allowed to provide domestic support in the agricultural sector to meet the challenges of food security and to be able to preserve the viability of rural employment, as different from the trade-distortive support and subsidies presently permitted by the Agreement. It is therefore important that during the negotiations a differentiation is made between such domestic support measures which are presently being used to carve out a niche in international trade and those measures which would allow developing countries to alleviate rural poverty.
• Given that the current producer subsidy equivalent in the OECD countries is as high as $151 billion for 1997, that is 34 % of the value of agricultural production, it is ironic that developing countries such as India whose paltry subsidies which have practically no implications for international trade are not only required to adhere to a stringent subsidy regime, but are also subject to lengthy and detailed questioning in the Committee when their notifications are reviewed.
• As already stated by us, the only way that these concerns can be met is by providing a certain degree of flexibility to developing countries by appropriately modifying the provisions of the Agreement on Agriculture, particularly as far as domestic support and green box measures are concerned. For instance, it would be important to recognize that in time to come the 10 % de minimis level presently provided under the AMS may not be sufficient for developing countries to give the kind of support needed to alleviate poverty and sustain rural employment. Moreover, as has been discussed in the AIE process, specific guidelines would need to formulated on how to compensate for excessive rates of inflation and depreciation of currency – problems which developing countries face while calculating their AMS. Similarly, some aspects of the green box measures may also need to be reviewed in order to provide a certain degree of flexibility to developing countries. For instance, the restrictions on public holdings for food security purposes and domestic aid do not appear to be entirely realistic since at times it would be impractical to insist on hard and fast criterion for eligibility for distributing subsidized foodgrains, particularly in view of the geographical spread of the vulnerable sections of society. Moreover, certain other green box measures such as those related to de-coupled income support to producers for limiting production are geared more to meet the needs of developed rather than developing countries.
• We have highlighted some of the concerns that we have in the agricultural sector not with an intention to create a negotiating base, but to highlight the fact that developing countries, particularly net food importing developing countries, face certain serious constraints and problems and therefore need to be provided additional flexibility in order to enable them to pursue their legitimate trade and non-trade concerns. We sincerely hope that the negotiations in Agriculture would provide such an opportunity
Services
• Article XIX of the General Agreement on Trade in Services (GATS) clearly provides that WTO Members shall enter into successive rounds of negotiations, beginning no later than 1 January 2000, with a view to achieving progressively higher level of liberalization in the area of Services. But, before we consider the mandate in full, allow me to recall our experience of GATS so far.
• The first point to note in this regard is that the experience of GATS we have had so far is limited to three years. The Singapore Ministerial Conference noted that fulfilment of the objectives agreed at Marrakesh for negotiations on the improvement of market access in services had proved to be difficult. However, since then, negotiations in the Basic Telecommunications and in Financial Services have been successfully concluded. In Professional Services, we are close to completing the work in the accountancy sector. However, we regret to note that in the one area of tremendous importance to developing countries in general and India in particular, i.e. Movement of Natural Persons, the results have been most unsatisfactory. If the mandated negotiations to commence in the year 2000 are to have any meaning at all for developing countries, this area of Movement of Natural Persons must figure prominently. But more on that later. Like the delegation of Australia, we too believe that the negotiations on safeguards, government procurement and subsidies may be folded into the next round of negotiations.
• In the three years that have gone by, it is also important to ask the question whether the participation of developing countries has increased in the Services area as foreseen by Article IV. Article IV had provided that the goal of increasing participation of developing countries would be accomplished through strengthening of their domestic services capacity, through improved access to distribution channels and information networks, through the liberalization of market access in sectors and modes of supply of export interest to developing countries. My delegation would have to note regretfully that action in these three areas has been far from meaningful leading to inadequate participation of developing countries in this crucial area.
• As is well known, the GATS is based on a positive list of commitments undertaken by individual Members in the form of Schedules. Therefore, Members undertake market access commitments in sectors of their choice as provided for under Article XVI of GATS. This fundamental feature, therefore, will no doubt govern also the mandated negotiations due to commence in January 2000. To properly evaluate the value of specific commitments, considerable work on classification and statistics must be undertaken. This information must also be made available mode-wise.
• The mandate of the negotiations due to commence in January 2000 may be found under Part IV of GATS entitled “progressive liberalization” in Article XIX. The notion of “progressive liberalization” involving a gradual approach is therefore fundamental to the new round of negotiations. This process of liberalization, besides being progressive, shall take place with a view to promoting the interests of all participants on a mutually advantageous basis and to securing an overall balance of rights and obligations. My delegation would therefore emphasize that the new mandated negotiations, if they are to be successful, must be mutually advantageous to all WTO Members and must preserve the balance of rights and obligations. The GATS framework was agreed upon after careful consideration and keeping in mind the interests of all participating countries in order to preserve the overall balance of rights and obligations. We would therefore not favour any change in the present architecture of GATS involving the four modes of supply.
• Article XIX also provides that the process of liberalization to be launched in the mandated negotiations must take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors. It further provides that there shall be appropriate flexibility for individual developing country Members for opening fewer sectors, liberalizing fewer types of transactions, progressively extending market access in line with their development situation and when making access to their markets available to foreign service suppliers, attaching to such access conditions aimed at achieving the objectives referred to earlier by us in Article IV aimed at increasing participation of developing countries.
• It is against this background that India approaches the mandated negotiations in Services due to commence in January 2000. It calls upon the developed WTO Members to approach these negotiations conscious of their responsibilities and obligations towards the developing countries enshrined in the GATS.
• An important aspect relating to the mandated negotiations is the choice of sectors. This is important because the choice will determine to a great extent whether or not developing countries will benefit from these Services negotiations. It will also determine to what extent the objective of Article IV are realized.
• In this context, my delegation would, as it always has, emphasize the primordial importance of mode 4, i.e. Movement of Natural Persons. Detailed reasoning as to why this is important for us has been presented by India at various meetings. Suffice it to say that the commitments by developed countries in this area in the mandated negotiations will determine the overall balance of rights and obligations of countries like India.
• The major problem in this area that India faces vis-à-vis commitments by developed countries is the insistence by the latter on what is known as an economic needs test (ENT). The ENT is a huge trade barrier to the movement of natural persons as service suppliers. ENT detracts from the predictability of trade and nullifies the commitments otherwise undertaken in the form of market access. So, one of the things that India would look forward to in these negotiations is the total elimination of ENT from the horizontal commitments of developed member States. In the alternative, the ENT must, at a minimum, be based on transparent and objective criteria.
• Yet another barrier to trade through Movement of Natural Persons is the administration of the visa regime. Thus, efforts must be made to streamline visa regimes when related to trade-related Movement of Natural Persons. In this context, the notion of GATS visas based on automatic-entry or multiple-entry of long duration must be explored by developed country Members.
• Sectors of interest to developing countries such as India would broadly include, but not be limited to, Computer and Related Services; Professional Services, Health Related and Social Services; Tourism and Travel Related Services; Transport Services; Other Business Services; Audio-visual Services; Construction and Related Engineering Services and Audio Visual Services.
• In conclusion, subject to the conditions mentioned in Article XIX and the objectives mentioned in Article IV, India approaches the mandated negotiations due to commence in January 2000 with the hope that the outcome will promote the interests of all WTO Members, particularly the developing country Members, and will secure an overall balance of rights and obligations.