Developing Countries in the World Trade in Agricultural
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Developing Countries in the World Trade in Agriculture: Bangladesh Perspective.
1. Introduction.
Agriculture directly or indirectly, is the main source of livelihood of most of the people all over the world. It provides a considerable portion of the national GDP of all developing countries and for the poor countries it provides the main portion of GDP. However, the World Trade Organisation (WTO) is the key organisation for controlling the world trading system and of which agriculture is one of the key concerns. The WTO Agreement on Agriculture (AoA) is the sole instrument controlling the world trade in agriculture and agricultural products.
The object of the agreement is to “establish a fair and market-oriented agricultural trading system” and it contains rule regarding three broadly categorised groups, a) market access, b) domestic support, and c) export competition. Has it so far managed to establish a fair and market-oriented agricultural trading system? This is the main concern for the developing countries and especially for the least developing countries (LDC). The text does not properly reflect the will and aspirations of the developing countries, rather it contains some rules which are inconsistent with the interest of the developing countries. It seems that the agreement is more intent to defend the interest of the developed countries.
However, as a signatory party of WTO Agreement on Agriculture, Bangladesh have a lot of concerns on the agreement in order to gain its own interest. Bangladesh is crucially facing the high price rate of food in world market. It cannot effort to feed 150 millions of people by importing from the world market at a higher price, where the rice price is now double than one year before. In order to provide food to our people we have to increase production of food and at the same time Bangladesh as well as other developing countries need to have equal opportunities to export their agricultural products in the world market. But we have lack of technology, research methodology and indeed easy access to fertiliser which are must to increase food production. This paper shall discuses the problems and prospects of the agreement and the interests of Bangladesh in world trade in agriculture shall also be critically analysed.
Referring to the multilateral trading system, Martin Wolf of the Financial Times noted:
The multilateral trading system at the beginning of the twenty-first century is the most remarkable achievement in institutionalised global economic cooperation that there has ever been. [1]
Through out this article, we will discuss whether the multilateral trading system makes a level playing field for the developing countries in the world trading system or not.
This paper consists of six separate chapters. Following the introductory first chapter, the second chapter is a brief of the General Agreement on Tariffs and Trade, 1947. The third chapter is the most important part of the paper as it scrutinises the WTO ‘Agreement on Agriculture’ from different point of views and its positive sides as well as its lacks along with the governing principles of the WTO. However, the fourth chapter deals with the interests of the developing countries in the world trade in agriculture and it also contains a separate part on Africa. The fifth chapter analyses agriculture of Bangladesh from different point of views. It tries to find out the reasons why Bangladesh is lacking behind in comparison with other countries in agricultural sectors. It also speaks of the on going WTO negotiations and how we can defend our interest in future negotiations. Finally the concluding chapter ends with some recommendations how Bangladesh can compete with the world trade in agriculture in future.
2. ‘The General Agreement on Tariffs and Trade (GATT 1947)’
International trade needs some guiding mechanisms to benefit the people allover the world. In order to control the world trade in 1947 the ‘General Agreement on Tariffs and Trade’ (GATT) was established. The Governments of 24 countries mutually entered into reciprocal and mutually advantageous arrangement directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce which was the main instrument to control the international trade and tariff. Recognising that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods.[2]
However, among all of the principles embodied in the said instrument some majors were, General Most-Favoured-Nation Treatment, National Treatment on Internal Taxation and Regulation, Freedom of Transit, Anti-dumping and Countervailing Duties, Valuation for Customs Purposes, Fees and Formalities connected with Importation and Exportation, Marks of Origin, Publication and Administration of Trade Regulations, General Elimination of Quantitative Restrictions, Restrictions to Safeguard, Exceptions to the Rule of Non-discrimination, Subsidies, Governmental Assistance to Economic Development, etc. These principles were the rules to regulate the international trade.
In addition, the GATT, 1947 had lack of a strong mechanism in case of any violation of the rules embodied here. There was no dispute settlement authority which would take steps to give remedy where any contracting member suffers substantial injury by the acts of other members. Moreover, the GATT, 1947 did not has rules about the agricultural trading system which is now one of the most important concern of world trade.
3. Sources of the WTO Laws.
The GATT, 1947 was established for the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international commerce. But in course of time it proved as insufficient to control the world trade, which became very wide and spread by couple of decades. World’s ruling economies and also the developing countries felt it necessary to establish a new mechanism to control the world trade. In order to establish a new organisation to manage the world trade, negotiation was going on for several years. Finally in 1995 the World Trade Organisation (WTO) was established as a result of 10 years long Uruguay Round of multilateral trade negotiations. Here we will discuss about the sources of the laws of the WTO.
3.1. Basic Principles of WTO.
The law of the WTO is specialised and focuses on the world trade only. It contains various issues like tariffs, import quotas, customs formalities, intellectual property right, national security measures etc. However, there are distinct six groups of basic rules and principles of the WTO.
These basic rules and principles of the WTO law make up the multilateral trading system. This chapter contains a brief review of these basic rules and principles constituting the multilateral trading system.
3.1.1. The principles of non-discrimination:
There are two principles regarding non-discrimination in WTO law: the most favoured-nation (MFN) treatment obligation and the national treatment obligation.
The MFN treatment obligation provides that a WTO member is not allowed to discriminate between its trading partners, for example, by giving more favourable treatment with respect to market access for the products imported from some countries than the products imported from other countries.[3] This rule is so important that without it the multilateral trading system would not exist.
The national treatment obligation requires a WTO member to treat the foreign products, services and service suppliers in a same manner as it does for the like domestic products, services etc. it means a WTO member is not allowed to discriminate against foreign products, services and service suppliers. The foreign products once crossed the border and entered the market it will not be subject to different taxation or regulation than like domestic products. However, for trade in goods the national treatment obligation has general application to all trade.[4] By contrast, for trade in service, the national treatment obligation does not have such general application. It applies only to the extent a WTO member has explicitly committed itself to grant ‘national treatment’ in respect of specific service sector.[5]
However, in US-Section 337, the Panel noted that:
The purpose of Article III… is to ensure that internal measures ‘not be applied to imported or domestic products so as to afford protection to the domestic production’ (Article: III; 1).[6]
3.1.2. The rules on market access
WTO law contains four groups of rules regarding market access:
Ø rules on custom duties;
Ø rules on other duties and financial charges;
Ø rules on quantitative restrictions;
Ø Rules on other ‘non-tariff barriers’.
The imposition of custom duties is not prohibited in WTO law. However, WTO law calls upon members to negotiate mutually beneficial reduction of custom duties. [7] These negotiations results in the tariff concessions or bindings set out in the Member’s Schedule of Concessions. The products for which tariff concession or binding exists, the customs duties may no longer exceed the maximum level of duty agreed to.[8]
While customs duties are, in principle, not prohibited, quantitative restrictions on trade in goods are, as a general rule, forbidden.[9] Unless one of many exceptions applies, WTO members can not ban the importation or exportation of goods or subject to quotas.
Among ‘other non-tariff barriers’, the lack of transparency of national trade regulations definitely stands out as a major barrier to international trade. Transparency and the fair application of fair trade regulations are therefore part of the basic rules on market access.[10]
3.1.3. The rules on unfair trade:
WTO law does not directly provides general rules on unfair trade rather it does have a number of relatively detailed and highly technical rules relating to unfair trade. These rule deals with dumping and subsidised trade.
Dumping means to export a product onto the market of another country at a price less than the normal value of the product. It is condemned but not prohibited in WTO law. However, when the dumping causes substantial injury to the domestic industry of a Member then WTO law allows that member to impose anti-dumping duties on the dumped products in order to offset the dumping[11]. Subsidies i.e. financial contribution by a government or by public body that confers a benefit, are subject to an intricate set of rules.[12] Some subsidies, such as export subsidies, are, as rule prohibited. Other subsidies are not prohibited but when they cause adverse effects to the interests to the interests of other Members, the subsiding Members should withdraw the subsidy or take appropriate steps to remove the adverse effects. If the subsiding Member fails to do so, counter measures commensurate with the degree and nature of the adverse effect may be authorised.[13]
3.1.4. Trade liberalisation versus other societal values and interest:
The rule regarding ‘Trade liberalisation versus other societal values and interest’ allow a WTO member to take account of economic and non-economic values and interest. Economic interests include the protection of domestic industry from serious injury inflected by as unexpected and sharp surge in import. Non-economic interests include the protection of the environment, public health, public morals, national treasures and national security.
3.1.5. Special and deferential treatment for developing country members:
WTO law recognising the need for positive efforts designed to ensure that developing country Members and especially the least-developed countries among them are integrated into the multilateral trading system. [14] WTO law includes many provisions granting a degree of special and differential treatment to the developing country Members. In many areas they provide for fewer obligations differing rules for developing countries as well as for technical assistance.
3.1.6. Institutional and Procedural rules:
The multilateral trading system includes and depends on, institutional and procedural rules relating to decision-making and dispute settlement. The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the WTO agreements are being infringed. Judgments by specially-appointed independent experts are based on interpretations of the agreements and individual countries’ commitments. The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage-by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds.
3.2. Agreements on Agriculture:
3.2.1. Overview of the Agreement on Agriculture:
In 1995, the year that the WTO was established, the first effective rules governing international trade in agriculture and food were introduced. Following the Uruguay Round negotiations, all agricultural products were brought under multilateral trade rules by the WTO’s Agreement on Agriculture. The main object of the agreement, "is to establish a fair and market-oriented agricultural trading system”.
Agriculture was brought under the purview of GATT, 1994 with a view to minimise distortions in global trade in agricultural and food products. Negotiations on agricultural trade had earlier been excluded from GATT, 1947 on the ground of food security and socio-political stability, which made agriculture different from other sectors of the economy. By the time the Uruguay Round of negotiations began, many countries had started voicing the need to liberalise agriculture, particularly for opening this highly protected sector in the developed countries to more efficient producers from developing countries. For implementation of the rules agreed during the Uruguay Round of multilateral trade negotiations, the GATT Secretariat has been transformed into the World Trade Organisation on January 1, 1995.
The commitments under the Agreement on Agriculture (AoA) may be broadly categorised into thee groups, a) market access, b) domestic support, and c) export competition:
a) Market access envisages tariffication of all non-tariff barriers (that is removal of quantitative restrictions and export and import licensing).
b) Domestic support measures or subsidies are disciplined through reduction in the total Aggregate Measurement of Support (AMS).
c) Export competition contains rules to control the export subsidies in order to give the developing countries an opportunity to compete with the developed countries in exporting agricultural products. Further, they also result in distorting the world prices of agricultural commodities and thereby adversely affecting the interest of the developing countries.