Evaluating the Gains of the July Framework Agreement

T K Bhaumik analyses what the Developed and Developing Countries have gained  with respect to the July negotiations on agriculture.

25 November 2004
The July Framework Agreement on the guidelines of the Doha negotiations is undoubtedly a forward movement in the WTO deliberations. But doubts persist  on the success of the Doha Round. The primary concern is with respect to negotiations on agriculture, which is the key to success on other issues, especially services and industrial tariff. The main cause of concern is whether or not  the US and EU will abide by the basic principles as laid out in the July agreement. In fact, total acceptance of the agreement by the developing countries also seems doubtful given the fact that these countries have varied interests and expectations.

Let's  look at it from the point of view of the developed countries. They have agreed to substantially reduce domestic support and eliminate export subsidy. Similarly, on the issue of market access, a formula favouring reduction  in tariff will be negotiated, but the understanding calls for "significant" reduction. In return, they have managed to secure a number of concessions  that will permit them to protect the interests of their farmers. Clearly, for the developed countries it is a case of  "give and take".

During negotiations, they may first consolidate what they have secured, namely agreement on issues related to products that are considered sensitive in terms of income and employment generation; continuation of existing  special safeguard measures applicable for countries having tariff-rate quotas (as per Article 5 of the Agreement); continuation of  support measures provided to farmers  to restrict production due to developmental reasons (or Blue Box measures as they are called). When it comes to reducing domestic support and export subsidy, their commitments are still subject to negotiation in terms of how much reduction and by when. The agreed figure for reduction of domestic support is 20% in the first year and "also throughout the implementation period". This commitment however is quite vague and leaves ample scope for interpretation.

If one goes into the technicalities of the agreement, it is quite evident  that the developed countries have been successful in keeping things in their favour. If  negotiations are concluded as per the framework, the developed  countries would have enough reason to be happy with what they have achieved.  Doubts remain, however, about their negotiating stance on the crucial issue of market access, where besides the US and the EU, other OECD countries will also have their say. Most of the OECD countries may offer resistance to significant  tariff reduction, especially on items which are their primary concerns. Even  the EU may have difficulties on this score. They may want to seek protection  for key items under the cover of  "sensitive category" products.

The developing countries on the other hand have little to be happy about their "gains".  In fact, these gains cannot yet be defined in any concrete  terms. The developed countries have agreed to reduce domestic support substantially, but the extent of "substantial reduction" is still a subject of negotiation, and that too according to a formula which is not yet agreed upon. Again, going by the experience so far, it can be said that the formula will be generated by the developed countries. In the mean time, in matters relating to calculation  of total bound AMS, developing countries have been treated at par with the  developed countries. Similarly, the developed and the developing countries have been subjected to a "single approach" with regard to reduction of tariffs, which was not the case earlier. Everything that the developing countries are expecting to get through this framework is subject to negotiation. Only the outcome of the negotiation will conclusively establish how substantial these gains are.

TK Bhaumik is Senior Advisor, Policy, Confederation of Indian Industry