Jul 15, 1988

FREEZE ON SUPPORT AND SUBSIDISATION ADVOCATED.

GENEVA, JULY 13 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The Cairns Group of agricultural exporting countries have called for "immediate freeze" on support and subsidisation distorting agricultural trade, and standstill on any restrictive or distorting measures not expressly sanctioned by GATT.

They have also proposed some limited rollback measures in agricultural support.

In tabling this proposal Wednesday at the meeting of the Uruguay round Negotiating Group on Agriculture, the Cairns Group said this freeze, standstill and rollback should be part of an agreement at the proposed mid-term review of the Uruguay round to be held at Montreal in the week of December 5.

The proposals also called for a commitment to reduce aggregate monetary levels of output-based support by ten percent in each of 1989 and 1990, to be formulated as specific commitments and as a down-payment consistent with long-term multilateral agricultural reform.

The freeze and reductions of support over the next two years, the Cairns Group proposal said, should be part of the agreement at Montreal on the key long-term objectives and elements that should form the basis of the framework approach to trade in agriculture, and the nature of transitional arrangements and rules required for a reformed long-term framework for conduct of agricultural trade.

The proposals for freeze on further support and limited initial rollback, the Cairns Group said, would not apply to third world countries.

This exemption, it said, would be in line with its original proposal for application of the principle of special and differential treatment to third world countries, provided for in various GATT instrument, as well as in the Punta del Este declaration.

In the original proposals for special and differential treatment, the Cairns Group had said that this should essentially be in the form of a longer time-frame for the third world to comply with improved rules and disciplines, and permission to undertake infrastructural domestic support in agriculture, so long as it did not contribute to trade distortions.

In putting forward to exemption from contributing to the first steps for long-term reform, the Cairns Group underscored the view that "developing countries as a whole cannot be held responsible for the significant distortions in the world markets".

The Cairns Groupís proposal, hammered out in prolonged consultations among the group over the last fortnight, was tabled at the meeting of the group at GATT wednesday by the Australian delegate.

The groupís paper said that a successful outcome of the agricultural negotiations by 1990 is critical to the future of multilateral trading system and the direction of long-term agricultural policies.

Such an outcome would end the needless pressure on budgets through competitive subsidisation and promote sound long-term agricultural development in third world countries.

The mid-term review provided "a unique opportunity" to give political direction and impetus to the negotiations.

This could be done by agreeing on a framework approach, linking short and long-term elements, which would reduce support for agriculture and begin liberalisation of international trade in agriculture.

Ministers meeting at Montreal for the mid-term review, the Cairns Group added, should reach agreement on:

--The key long-term objectives and elements that would form the basis to achieve those objectives, including the maximum time-frame for implementation,

--The nature of the transitional arrangements and rules required to achieve a reformed long-term framework for the conduct of agricultural trade,

--A commitment to introduce an immediate freeze on support and subsidisation which distort trade and not to introduce any trade restrictive or distorting measures not explicitly provided for in the GATT, and

--A commitment to reduce aggregate monetary levels of output-bases support by ten percent in each of 1989 and 1990 to be formulated in terms of specific commitments, as a down-payment consistent with long-term multilateral agricultural reform.

As part of the mid-term review agreement, the Ministers should agree at Montreal to commence in 1989 negotiation on the long-term rules and disciplines for full liberalisation to govern agricultural trade after a period of transition.

Such rules and disciplines would continue and consolidate the progress achieved through initial measures and transitional arrangements.

The Ministers should also establish guidelines to enable the desired long-term GATT regime to be achieved.

Towards this end, they should agree:

--To a progressive reduction in agricultural support, focussing on removal of trade distorting subsidies and access barriers,

--A maximum time frame in which all countries would be expected to bring their agricultural regimes into conformity with the long-term regime.

In order to bring all policy instruments that distort agricultural trade under effective GATT rules and disciplines:

--New or amended rules should be negotiated to govern the most trade distorting policies,

--Disciplines should be negotiated on use of policy measures not subject to new or amended rules, such as through use of benchmark ceilings on aggregate support levels, and

--Bringing into conformity with long-term regime all waivers (as that of the U.S.), protocols of accession (as that of Switzerland) or other derogation and measures not based on GATT rules and disciplines.

With the application of the long-term regime, the Cairns Group believes trade in agriculture would be fully integrated into the generally applicable provisions and mechanisms for consultation, surveillance and dispute settlement within the GATT system.

There would however be exemptions from such a regime in respect of measures with humanitarian objectives, including consumption subsidies, for infrastructure development or for promotion of structural adjustment.

Such exemptions should however be under prescribed and tightly circumscribed conditions.

Towards this end, at Montreal the Ministers should agree to define the extent to which, and the conditions under which, certain measures would be exempt from the reform process.

Such exemption would include measures decoupled from production and marketing.

As a part of the framework and as transition to the long-term arrangements, the Ministers should agree at Montreal:

--To negotiate target annual reductions in aggregate support across sector sand at specific commodity levels, and

--Negotiate a set of minimum annual adjustments to specific policy parameters.

Ministers should also agree that:

--Commitments to change policies would have to be the primary vehicle for reform,

--Reduction in support would be achieved through implementation of commitments to change policies, and

--Such commitments should be set out in schedules to be negotiated and applied in the transition period.

Outlining the standstill and rollback measures to be agreed upon at Montreal, the Cairns Group said the package to be agreed should focus on:

--Undertakings to reduce export subsidies,

-Increases in import,

--Disciplines on stock disposal, and

--Reduction in administered prices.

There should also be agreement at Montreal on the general framework for negotiations on sanitary and phytosanitary measures (often used as a protective device).

The negotiations should result in harmonisation of sanitary and phytosanitary measures.

There should be agreement on multilateral standards in this are, and where his is not feasible, there should be acceptance of the principle of equivalency and application of measures.