AGRICULTURE AND THE WTO:

ECONOMIC ISSUES AND POLICY OPTIONS FOR PAKISTAN

1: Introduction
2: Highlights of the argicultural agreement

1.  INTRODUCTION

One of the major initiatives towards the establishment of a liberal world trading system was the signing of the Uruguay Round (UR) of the General Agreement on Tariffs and Trade (GATT). The UR global trade accord is seen by most observers as the most comprehensive and ambitious of all round of talks among GATT-member countries since it includes new areas such as agriculture, services, textiles and clothing, intellectual property rights and investment measures. The Agreement on agriculture is seen to be among the contentious subjects of the UR accord by the farming community in both developed and developing countries as it fears that dislocation would occur from cheaper agricultural exports.

Decisions on agricultural trade reached under GATT have far-reaching implications considering the importance of this sector to most economies. For most developing countries like Pakistan where agriculture remains to be the dominant sector comprising majority of the population and labor force and accounting for a huge proportion of their export earnings, the implementation of the agreement would have profound implications for a majority of population in the economy. As the agreement requires that the economic policies in member countries would need to be modified to conform to the provisions of the Final Act, political economy considerations need to be understood for effecting timely and appropriate policy changes.

With the implementation of the GATT-UR agreement, there will clearly be winners and losers. In the short-run, it is expected that some groups will be affected as a result of adjustments from policies that will need to be aligned with the accord. Countries dependent on agricultural imports, for instance, will suffer from increased prices of commodities due to the phasing out of subsidies in the exporting countries. Also, a number of less competitive firms will close down given the thrust for greater comparative advantage. The cropping pattern and the mix of activities in the livestock sub-sector would also undergo a change from the new signals. However, in the long run, the increased competitiveness among GATT-member countries is expected to increase production efficiency, generate more employment and increase farm incomes. Agricultural exporting developing countries like Pakistan are expected to gain from the increased access to foreign markets under the GATT.

[ top ]

The GATT-UR accord will definitely impinge on the performance of the agriculture sector of Pakistan. A study on the implications of the accord, therefore, is required to identify the opportunities, problems and programs/actions to maximize the gains and minimize the costs from the implementation of the agreement. With this main purpose, the paper is organized as follows. Highlights of the agreement on agriculture are presented in Section 2. Section 3 provides an overview of Pakistan's economy with special reference to the role of the agriculture sector. Section 4 describes major elements of agricultural and trade policy in Pakistan. Section 5 provides a detailed description of the experience from the UR agreement on agriculture. Section 6 identifies policies in three area of production policy, consumption policy and domestic market stability. Section 7 deals with an evaluation of policy issues, options, trade-offs and strategies for the forthcoming WTO Round in agriculture, and Section 8 concludes the discussion.

[ top ]

2. HIGHLIGHTS OF THE AGRICULTURAL AGREEMENT

Multilateral discipline to ensure comprehensive liberalization of agricultural trade was among the more important issues that the Uruguay Round negotiations took up for consideration. This marked a departure from the past rounds of negotiations in that for the first time GATT had decided to extend its authority over trade in temperate products, in the main, cereals. Tropical products, which include tea, coffee, spices, some oil seeds and vegetable oils (palm, coconut, etc.), have been governed by the GATT discipline, while temperate products had remained outside the purview of GATT.

            The major issue that the Uruguay Round negotiations addressed to in the context of liberalization of agricultural trade was the nature of domestic support mechanisms that countries had put in place of protecting their agriculture. It was argued that these support mechanisms distorted agricultural trade and had promoted inefficient producers while discriminating against the more efficient ones. This brought into focus agricultural practices followed by countries and the negotiations eventually took up for consideration all aspects of policy regime in the sector.

            A comprehensive framework underlining multilateral discipline in the agricultural sector was finalized at the conclusion of the negotiations at the end of 1993. The discipline has two broad dimensions. While the Agreement on Agriculture details the provisions upon which the future policy regime in the sector is to be based, the complementary Agreement on the application of Sanitary and Phytosanitary Measures seeks to introduce strong health and safety codes that would govern trade in agricultural commodities.

            The two Agreements seek binding commitments from member countries in several broad areas. These include: (i) discipline in subsidies regime, (ii) enhanced market access through increased tariffication of NTBs and establishment of minimum access opportunities for imports, where imports of primary agricultural commodities were below 3  percent of domestic consumption as between 1986 and 1988, (iii) discipline on public stockholding of grains for food security, and (iv) adoption of health and safety regulations in accordance with the established international standards.

[ top ]

            The Agreement on Agriculture while pushing for liberalization of agricultural policies also recognizes the possibilities of adverse implications on developing and the least-developed countries. The latter, in particular, have been granted exemptions from fulfilling several commitments under the Agreement. In addition, the Uruguay Round Agreement has made provisions to establish instruments to decrease the possible negative effects of trade liberalization on the least-developed and the net-food importing developing countries.

            In the following discussion we would deal with the above mentioned aspects of the Agreement. Table 2.1 presents a summary and a comparative view of commitments made by both developed and developing countries.

Table 2.1:   Main Features of the GATT-Uruguay Round Agreement on Agriculture

[ top ]