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Nepal’s WTO Membership and the Agriculture Sector

Navin DahalSouth Asia Watch on Trade Economics and Environment

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Content of the Presentation

Introduction to WTO Nepalese Agriculture Sector Agreement on Agriculture Nepal’s Commitments and Concerns Other Agreements that impact the

Agriculture Sector

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WTO

Successor of GATT, Operational from 1 January 1995

Permanent inter-governmental body governing and regulating international trade in goods, services and IPR

It’s an organisation for liberalising trade – help trade flow as freely as possible

It’s a place for settling trade disputes

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WTO

WTO is based on four pillars Promoting rules based multilateral trading system Non-discrimination (Most-Favoured Nations and National

Treatment) Transparency Special treatment for less developed countries

It has 149 members Decisions are made through consensus It provides for an effective dispute settlement

system

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WTO

At the heart of the system are WTO Agreements, negotiated and signed by members

These Agreements are contracts that bind governments to keep their trade policies within agreed limits

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Major WTO Agreements

GATT 1994 Trade Related Aspects of Intellectual Property

Rights (TRIPS) Agreement on Agriculture (AOA) General Agreement on Trade in Services (GATS) Agreement on Sanitary and Phytosanitary (SPS)

Measures Technical Barriers to Trade (TBT) Agreement on Textile and Clothing (ATC)

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WTO Agreements

The WTO Agreements cover goods, services and intellectual property

They spell out principles of liberalisation and permitted exceptions

They include individual countries commitment to lower custom tariffs and other trade barriers and open key services sectors : 22,500 pages listing individual countries commitments

They set procedures for settling disputes

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Nepalese Agriculture Sector

38 % of GDP 70 % employment 83 % of total households Average farmland 1.09 hectares 40 % small farmers operating less than 0.5

hectares of land

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AoA

Objective – To establish a fair and market-oriented agriculture trading system

Members are required to make commitments in three areasMarket AccessDomestic SupportExport Subsidies

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Market Access

Binding of tariff Reduction of tariff Developed countries 36 % 6 years Developing countries 24 % 10 years

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Agriculture in WTO (contd..)

Modest success in reforming agricultureMarket Access Bound tariff-62 per cent Tariff peaks and escalation Non-predictability of tariff structure Use of specific duties Tariff Rate Quota Special Safeguard Measures (SSG) State Trading Enterprises

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Tariff Structures Bound Tariffs

USA EU-15 INDIA

Mean 12% 29% 117%

Maximum 350% 277% 300%

Minimum 0% 0% 10%

# Tariff lines 1,829 2,091 692

T = 0% 388 399 0

0% < T >30% 1,247 1,060 24

30%<T>100% 139 480 422

T >100% 28 152 246

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Products with High Tariffs

USA EU-15 INDIADairy Meat of Bovine

& PorkNuts

Grapes Pork Wheat

Peanuts Dairy Vegetable oil

Sugar Banana Beverages

Tobacco Processed Cereal Grains

Sugar

Prepared vegetables….

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Domestic Support

Aggregate Measurement of Support (AMS) Support that encourage overproduction Amber box, blue box and green box support 1986-88 base level Developed countries reduce 20 percent over 6

years Developing countries reduce 13 percent over 10

years De minimis – 10 and 5 percent of AGDP

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Export Subsidies

Prohibited unless specified in Member’s commitments

Where listed members agreed to cut both amount and quantities

Developed countries agreed to cut by 36 % over 6 years

Developing countries by 21 % over 10 years

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Agriculture in WTO (contd..)

Domestic Support Existence of huge domestic support Concentrated in three members – EU, US and Japan Concentrated in grains, sugar and field cops Existence of blue box subsidies Export Subsidies Rights conferred only to 25 members EU uses 90 per cent followed by Switzerland and

the US Concentrated in wheat and flour, coarse grains

sugar, milk products and meat

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Export Subsidies

No SA country has right to use ES (EU -20, US – 13)

Share of Total ES notified to the WTO (1995-2001) EU 25 – 90%, Sw’land –5%, USA 1.4%

Share of Total ES notified to the WTO (1995-2001) Dairy 35%, Beef 18%, Sugar 11%, Grains 14%.

To be eliminated as scheduled by the end date to be agreed

SDT 1 – Longer implementation period SDT 2 – Continued access to the provision under Article

9.4 of the AoA for a reasonable period to be negotiated

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Export Credits

Share of EC (1998) – USA 49%, Australia 20%, EU 15 16%, Canada 14%

Share of EC – Cereals 28%, Livestock products 16%, Vegetable products 16%, Processed Products 10%

Export credits, export credit guarantees or insurance programs with repayment periods beyond 180 days will be eliminated by the end date to be agreed

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Agriculture in WTO (contd..)

Nepal’s Commitment in Agriculture Final bound tariff-42 per cent No TRQ and SSG Elimination of ODCs Applied rate is 13.5 per cent: flexibility

of upward revision AMS- nil No Export subsidies

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Nepal’s Interest

Opening of domestic Market Bound Tariff Trade with India Making agriculture produce available and

affordable to the poor Market Access in Developed and Developing

Markets Existing distortions Nepal net food importer

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Agriculture in WTO (contd..)

Ongoing Negotiation Doha Declaration July Package

Parallelism Recognition of development and social issues Domestic support Export subsidies Market access Special and differential treatment

Work on Technical Issues not drafting of Text

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Nepal’s Concern

Guiding Principles Policy flexibility Enlarged markets Protection of small farmers Import Bill

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Import

19 % of total Crude palm oil – 24.3 % Rice – 2.6 %

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Direction of Imports

India -35.4 % Singapore – 15 % Malaysia – 11 % Indonesia – 10 %

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Export

26 % of total 30 % - Vegetable fats and oils 17.5 % wheat 8 % lentils

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Direction of Exports

India – 84 % Tibet – 7 % EU – 3 %

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Nepal’s Concern (contd..)

Concern on specific issues Market Access Domestic support Export subsidies Green box Food aid Preference erosion Special safeguard measures Special and sensitive products Duty free and quota free market access

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HK Decisions

Elimination of export subsidy by 2013 Four bands for reducing tariff Three bands for reducing domestic

support Self designation of Special products SSM – price and volume trigger

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Other Agreements

SPS TBT TRIPS

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Thank you for your kind attention