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News Release

New Agricultural Liberalization Needed in Next Global Trade Talks

April 15, 1998

Contact:    Tim Josling    (650) 723-3438

Washington, DC—The World Trade Organization (WTO) agreed in the Uruguay Round to begin another set of negotiations on agricultural trade by the end of 1999. Agricultural Trade Policy: Completing the Reform, a new study from the Institute for International Economics by Timothy Josling, makes the case that new agricultural trade liberalization is extremely important both in its own right and as a key ingredient in the development of a more open trade system in the future.

The major task is to lower the high level of protection for agricultural products embodied in the bound tariffs of the Uruguay Round. These should be brought into line with tariffs on manufactured goods and perhaps eventually eliminated altogether. Expansion of the "tariff rate quotas" negotiated in the Uruguay Round would be a significant step to reduce the distortions of the above-quota tariffs, which often range well above 100 percent.

Export subsidies should be reduced further, if not eliminated altogether. In addition, export restrictions and taxes should be subjected to more effective WTO limitations.

Tighter trade rules of this type are in fact needed to help governments reform their domestic farm and food policies. This is particularly true in Asia, where there has been a history of increasing protection of agriculture as economies develop; where the financial crisis focuses attention on the need to pursue structural reforms; and where the devalued currencies of the region provide an opportunity to roll back trade barriers. It is also true in Latin America, where the reforms of the past decade need to be consolidated, and in the developed countries where recent changes in farm policy promise more open borders for farm products.

Revised trade rules are needed as well as to address new issues including discriminatory market access agreements, the activities of state trading enterprises, differing food standards, and the like. Without agreed rules, agricultural trade conflicts will provide a constant source of tension among countries. Moreover, unless future negotiations offer benefits in the field of agriculture, it is unlikely that developing countries will find it in their interest to participate in another round of trade talks largely aimed at inducing them to offer greater access to their manufacturing and service markets.

Finally, the recent report of the WTO panel on the EU's beef hormone ban, as modified by the Appellate Body, reinforced the need for a scientific basis for strict sanitary standards but left confused the issue of how convincing such scientific evidence must be. Similar issues have arisen in the case of genetically-modified organisms (GMOs) in the food chain.

One new development in agricultural trade since the start of the Uruguay Round has been the incorporation of agriculture in the free trade provisions of regional trade arrangements. This has given the regionals a significance for agricultural trade liberalization that, with the notable but perverse exception of the European Union, they lacked before. Along with encouraging shifts in domestic policies, these regional trade agreements can play a supporting role in moving the world toward freer trade in agricultural products.

Though there will be a tendency on the part of some countries to drag out the negotiations on agricultural trade, there is a sound case for an accelerated timetable. The European Union is beginning negotiations for its first wave of members from Central Europe, who will then be subject to the Common Agricultural Policy. The countries of the Americas are about to start talks toward a regional free trade zone, including agriculture, with the goal of substantial progress by 2000. The APEC process needs to follow up its bold start with real cuts in protection, including in agricultural markets. The Transatlantic Marketplace initiative could contribute to, and benefit from, an agricultural component. The WTO can capitalize on these initiatives to open global agricultural and food markets. Josling's book attempts to chart the course for the next steps toward a reformed agricultural trade system.