Directing WTO Negotiations towards Sustainable Agriculture and Rural Development
Index of Contents
1. Introduction 1
2. WWF's objectives for the next round:
sustainable agriculture and rural development 2
3. The Linkages between trade, agriculture and
sustainable development 2
4. The upcoming WTO trade talks in agriculture:
issues and priorities 3
5. Preliminary policy recommendations for
reforming agricultural trade 4
1. Introduction
Agriculture accounts for one third of the world’s land surface. In most developing countries, agriculture represents a large share of Gross Domestic Product. It accounts for 33 per cent of least developed countries' GDP and 20 per cent in sub-Saharan Africa. It is a major source of income and foreign exchange (27.3% of developing countries' merchandise exports). Agriculture employs 50.4% of developing countries' total population and supplies the bulk of basic food.[1] Agricultural practices also have a major impact on the use of natural resources, ecosystems and biodiversity. Agricultural intensification and industrial farming have led to environmental degradation in the form of water pollution, species loss, and pesticide residues in natural habitats and in our food. At the same time some farming systems are very important for ecosystem conservation, providing a continuity and stability of conditions in which plants and animals have adapted their life cycles. Today, a number of species of high nature conservation value depend on certain extensive low input or traditional forms of agriculture to maintain their habitats. The interactions between agricultural systems and practices, economics, society and the environment are highly complex.
A WWF
DISCUSSION PAPER
November 1999
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5
A WWF International Discussion Paper
There is increasing public concern that the current direction of trade liberalisation under the Uruguay Round Agreement on Agriculture (AoA) is detrimental to the environment, food security, consumer health and safety and, in some WTO members, the very development it should be encouraging. This discussion paper highlights some of the linkages between agriculture, trade and sustainable development, which should be further analysed and addressed in the forthcoming trade talks. It ends with some preliminary policy recommendations developed with the objective of ensuring that any new WTO Agreement on agriculture supports sustainable agriculture and rural development (SARD).
2. WWF's objectives for the next round: sustainable agriculture and rural development
The existing Agreement on Agriculture (AoA) has significant implications for achieving sustainable agriculture and rural development by setting an overarching framework for agricultural trade. WWF's objective is to ensure that future WTO agreements on agriculture:
· strengthen policies toward sustainable development in the agri-food sector, rural areas and communities; and
· do not undermine environmental and nature conservation interests in developed and developing countries, but contribute to achieving sustainable development and greater food security.
To achieve these objectives will require: (1) further analysis of the linkages between trade, agriculture and sustainable development, including food security and the environment; (2) defining appropriate policies that need to be implemented both inside and outside the WTO for sustainable agriculture and rural development.
This can only be achieved through cooperative approaches and innovative alliance building. This must be done in a way that balances the interests of different actors and is based on multi-stakeholder analyses. Sound and comprehensive sustainability assessments of the Agreement on Agriculture and of proposals for further agricultural trade liberalisation are necessary. Such assessments will help identify and refine appropriate policy interventions.
3. The linkages between trade, agriculture and sustainable development
Trade has had a profound impact on the pattern of agricultural production throughout the world and has been a crucial factor in the transformation of near subsistence forms of agriculture into highly specialised and intensive production systems. Agricultural trade liberalisation has allowed higher standards of living, created a platform for economic development and improved diets in many countries. However, it has also led to an inflow of cheap food imports in a number of developing countries with negative impacts on domestic production, and on the livelihood and survival of local farming communities. For countries economically dependent on a narrow range of agricultural commodity exports, the outcome of the next agricultural trade negotiations will be particularly significant. The FAO lists 47 developing countries, 24 of them in Africa, which depend entirely on agricultural exports for their economic development. Many of these rely on exporting a single crop, such as coffee, sugar, or cotton.
In purely environmental terms, trade as one of the motors of economic development, has contributed substantially to the over exploitation of natural resources and the degradation of habitats and ecosystems. The negative environmental and social consequences of export subsidies have been widely cited as evidence of the linkages between trade, or distorted trade, and sustainable development. While it is possible to derive some environmental benefits from a liberalisation strategy, an entirely free market will fail to take account of environmental externalities such as the over-exploitation of soil, water and biodiversity, and of the role played by agriculture and farming in maintaining natural habitats and ecosystems of high conservation value. While flanking or accompanying policies such as agri-environment measures can alleviate some of these problems at the national level, many countries do not have the resources or institutional structures to implement the necessary policy measures. At the international level, multilateral environmental agreements (MEAs) such as the Convention on Biological Diversity or the proposed Biosafety Protocol will also contribute to greater environmental protection, sustainable agriculture and rural development. They must not be undermined by trade liberalisation and WTO rules.
Food security is intimately linked with agriculture and trade. Trade liberalisation can contribute to food security though narrowing the difference between production and consumption needs, reducing supply variability, fostering economic growth and making more efficient use of global resources. However, the precarious food supply situation of Net Food Importing Developing Countries (NFIDCs) and Least Developed Countries (LDCs) suggests that the volatility and instability of world food prices, the deteriorating terms of exchange, and the increasing concentration of agricultural markets in the hands of a few multinational companies have not provided an appropriate framework for achieving food security.
WWF studies in the Philippines and Mexico on the social and environmental effects of agricultural trade liberalisation show how important transitional policies are to ensure a shift from protected to more liberalised domestic markets that maintain sustainability. This is especially true given the large numbers of people employed in that sector, including in subsistence farming and the contribution that local agricultural production makes to meeting food security needs.[2]
4. The upcoming WTO trade talks in agriculture: issues and priorities
Agriculture will be a high profile issue at the WTO. However, discussions remain dominated by fights between the US and the EU, and between the CAIRNs group and the EU. Developing countries find it difficult to get many of their concerns on the agenda. The following three issues deserve specific attention:
1. Opportunities where further trade liberalisation through the elimination of trade distortions will lead to increased market access for developing countries and at the same time reduce pressure on the environment
Obvious examples of the gains for developing countries and the environment include the elimination of export subsidies used by industrialised countries, and tighter restrictions on tariff escalation. This practice forces developing countries to export unprocessed, lower-value products with prices that are currently falling on world markets, while increasing their dependency on food imports.
This is not to say that all agricultural subsidies should necessarily be removed, or that trade liberalisation will never conflict with environmental protection and sustainable development. In this respect, some form of public support is generally needed to achieve specific environmental, social and food security objectives. It is therefore vital to develop the debate over agricultural subsidies beyond the argument of eliminating or keeping subsidies, and focus the actual impact of subsidies on desired policy objectives. There should be differentiation between 'negative' subsidies that stimulate over production and lead to food dumping and environmental degradation, and 'positive' incentives that support the transition to sustainable development.
2. The social and environmental effects of domestic support measures need to be assessed and the negotiations directed to ensure positive outcomes from subsidy reform
While the issue of domestic support measures is one that mostly pertains to developed countries, it nonetheless has significant effects on developing countries' agriculture. The following questions should be used to structure discussion about domestic support measures: (1) What are the impacts of current domestic support on rural communities and the environment? (2) How can domestic support be reformed to encourage sustainable agriculture and rural development?
Domestic support needs to be redesigned to achieve environmental and social objectives given that current prices and market structures fail to reflect, or undervalue these goals and outputs. Domestic support measures should be assessed to determine whether they lead to sustainable management of natural resources, biodiversity conservation and poverty alleviation. Policy recommendations stemming from such assessments should ensure that support measures direct farmers to more sustainable agricultural practices and cannot be abused for trade protectionist purposes.
3. Maintaining policy flexibility for developing countries to achieve food security should be one of the central objectives of future agricultural talks.
The question to be addressed by the trade talks is: what measures and policy options are most appropriate to ensure food security for developing countries? In this regard, the following elements should be considered:
§ subsidisation is often not an option for developing countries given their lack of financial resources relative to developed countries. Therefore, they need other tools such as import controls to protect the livelihood of rural populations
§ LDCs and the poorer developing countries should be allowed to protect local and domestic agricultural markets of staple foods, for example by exempting them from the WTO demands of minimum market access, reductions in domestic support for agricultural products and requirements of tariffication
§ the potentially negative consequences from rising prices following export subsidies removal should be addressed. In this respect, the Marrakech Ministerial Decision for NFIDCs and LDCs should be made effectively operational.
The preliminary policy recommendations developed in section 5 have been constructed with the following issues in mind: increasing developing countries market access; ensuring that domestic support has positive and not negative social and environmental effects; and ensuring that food security and environmental protection is not threatened by trade liberalisation.
5. Preliminary policy recommendations for reforming agricultural trade
There are no simple recipes for achieving locally appropriate patterns of sustainable agriculture and rural development. It requires a mix of policy measures at the local, national and international levels that are likely to change over time. WWF will therefore take a selective approach to issues on the AoA of the WTO agenda, targeted to achieve sustainable agriculture and rural development objectives. The preliminary recommendations set out below represent a substantive starting point for developing a balanced agricultural trade negotiating agenda, which responds to the needs of both developed and developing countries. Further analysis of the linkages between trade, agriculture and environmental and social impacts is required. In addition, refinement of these preliminary recommendations will be necessary as the agricultural trade negotiations unfold and liberalisation proposals are elaborated.
Overall policy objectives
§ WWF believes that public support of rural areas is warranted in relation to their contribution to sustaining biodiversity, guaranteeing food security and providing a pleasant environment for recreation and living
§ Food security and environment must be identified as a key priority in the coming WTO round. Special and Differential Treatment for Less Developed Countries should be maintained and, where necessary, enhanced. In addition, the Marrakech Ministerial Decision for NFIDCs and LDCs should be made operational. Sustainability assessments of existing policies and proposed liberalisation measures will be a prerequisite for securing environmental benefits from the negotiations on agriculture.
Market access
§ WWF recognises the lack of progress in the Uruguay Round on market access. We believe that this should be addressed especially for less developed countries. Sudden large-scale increases in market access can, however, be damaging in some sectors, both to the importing country and to the exporting country. Safeguards and appropriate policies developed to support SARD should be built into any new WTO disciplines. Further study of this subject is essential to better define these necessary policies.
Export subsidies
§ Export subsidies should be steadily eliminated, starting from the products at the most primary level (arable crops), which are not subject to distorted input prices. Export subsidies are inefficient and are associated with excessive levels of production, often with negative environmental impacts. Further binding reductions should be negotiated to cover the total volume of exports, the overall value of export subsidies and individual subsidies as appropriate
§ Export credits should also be subject to binding reductions. These are a less direct mechanism for achieving the same ends as export subsidies and can have the same negative social and environmental impacts.
Domestic support
§ Aggregate Measures of Support (AMS) for OECD countries should be further reduced providing that adequate measures to support social and environmental objectives are in place. The full implications for all WTO members need to be better understood
§ Blue box subsidies should be phased out over a three to five year period. While blue box subsidies persist, these should be made conditional on farmers meeting basic environmental standards
§ Green box measures should be reviewed and where necessary expanded to meet sustainable development objectives as conventional production related support is reduced. Whereas Annex 2 of the AoA should be reviewed, adequate flexibility is needed for agri-environment and animal welfare measures
§ Special consideration must be given to developing countries' food security and environmental needs, and specifically the inclusion of support measures that are practical options for countries with limited financial resources.