A Field Not so Level

WTO Coming to Pakistan 

DR. ABID QAIYUM SULERI / The News International Pakistan 25may03

The Agreement on Agriculture is creating inequalities between the countries that can give substantial support and protection to their agricultural sector -- the developed one -- and those that do not or cannot -- the under developed ones

Agriculture plays an important role in Pakistan's economy, accounting for 26.4 per cent of its GDP and almost half of the country's labour force. Agriculture has grown at an average rate of 3.5 per cent per annum since 1991-92 with wild fluctuations ---- rising by 11.7 per cent at one time and falling by 5.3 per cent at another during the last decade. The fluctuation in agricultural growth is not only leading to uncertainty but is also a major factor towards an increasing food import bill. According to Food and Agriculture Organisation (FAO) projections, food demand in Pakistan would rise substantially by the year 2010, with the share of imports in domestic consumption likely to go up further. Total cropped area in Pakistan (total area cultivated plus area sown more than once) declined slightly over the last decade, whereas uncultivable wasteland increased in that period.

These trends command for an increased investment in sustainable agricultural research and development, without which our food imports cannot reduce. To do the needful, we need to adopt pro-poor as well as pro-farmer agricultural policies. However, the phenomenon of liberalisation of national policies and policy-making mechanisms has presented the decision makers with a dilemma. National policies that used to be under the jurisdiction of State and people are increasingly coming under the influence of international agencies and processes such as WTO, IMF, the World Bank, and OECD in the name of liberalisation. Pakistan, being a developing country enjoys various flexibilities and concessions when it comes to implementing various WTO agreements including that of Agreement on Agriculture (AoA). Though it is widely believed that these concessions and flexibilities are inadequate and insufficient, we are not able to avail whatever is offered to us due to our commitments with International Financial Institutions such as ADB, and IMF.

Out of various WTO agreements, AoA is of particular importance for Pakistan with respect to its economic and food security. In theory, AoA talks of increasing trade in agricultural products through progressive liberalisation. The agreement stipulates that members must undertake specific binding commitments in the areas of:

• market access (increased market access through the reduction of the import duties or tariffs);
• domestic support (reduced domestic support through reduction in trade distorting production subsidies); and
• export subsidies.

In the area of market access, Pakistan offered 'ceiling bindings' on agricultural imports during the Uruguay Round (UR). Hence the country was not required to reduce the tariffs during the UR implementation period (till 2005). However, the structure of border protection has undergone significant change over time towards greater liberalisation, involving both the dismantling of various non-tariff barriers (NTBs) and the reduction of ordinary tariffs. The NTBs included outright import bans, special dispensation and licensing, quotas, negative lists and parastatal monopolies. Import surcharges were removed in 1992-93. Licensing fees and the iqra surcharges were abolished effective from 1994-95. Import quotas have been progressively eliminated since 1987. The number of items on the negative and restrictive list has also fallen considerably. All of this is accompanied by a reduction in the maximum applied rate of ordinary tariffs. In sum, the overall picture that emerges is that the import regime has been fairly liberalised in recent years with applied tariffs mostly much below the WTO-bound rates. This has led to an influx of subsidised imported foodstuff in Pakistan.

As far as domestic support is concerned, Pakistan had 'market price support programs' for 11 crops during 1986-88 (Base Period for AoA). Being a developing country, Pakistan was allowed to give special and differential treatment (SDT) subsidies that ran into 2,085 million rupees in 1986-88 on fertilizer, credit, and tubewell electricity. These subsidies were for the farmers with landholding of less than five hectares. However, Pakistan stopped availing the benefit of SDT provisions and eliminated these subsidies in 1997-98. In sum, Pakistan is still capable of giving domestic support under AoA and the policy changes and/or reduction in support outlays after 1995 could not have been due to the AoA.

Prior to the establishment of WTO, Pakistan provided occasional direct export subsidies. Exports of rice and cotton were subsidised when the export was a monopoly of the public sector, but the subsidy was abolished when the private sector was permitted to trade in these products. Thus there was no export subsidy on agricultural products in the base period for AoA and accordingly Pakistan cannot resort to them in the future. However, it is entitled to provide subsidies to reduce the costs of marketing exports and internal transport as well as freight charges on export shipment.

Apparently it seems that AoA is not affecting the agricultural sector in Pakistan. However, one needs to analyse this situation in broader multilateral trading system, where the players and economies are highly unequal. While we are unable to give domestic support or subsidies to our farmers either due to the lack of resources or under the bindings of various loans that we are getting from various international financial institutes for 'structural adjustment' and/or 'structural reforms' programs, many developed countries have devised their 'legal' ways out to soften their reduction commitments under AoA.

Many studies reveal that level of protectionism in agricultural trade has gone higher in the developed world despite the fact that their reduction commitments are (apparently) high. According to the Organisation for Economic Cooperation and Development (OECD), developed countries spent $ 360 billion on agriculture in 1999 (about seven times more they gave poor countries in international development assistance). Likewise, US subsidies to cotton growers totaled $3.9 billion in 2002, three times the US foreign aid to Africa. This depresses world cotton prices, cutting the income of poor farmers in West Africa, Central and South Asia, and poor countries around the world. Removal of US subsidies on this one crop alone would increase revenues from cotton by about $250 million in West and Central Africa.

Thus in practice, the AoA is creating inequalities between countries that can give substantial support and protection to their agricultural sector -- the developed countries -- and those that do not or cannot -- under developed ones. This is a vicious circle where developed countries are protecting their farms with huge subsidies and grants and later on the produce is dumped in the developing countries. When it comes to import from developing world, the developed countries have a hundred and one excuses such as sanitary and phyto-sanitary measures and environmental issues etc.

IMF, the World Bank, and ADB etc, are widening these inequalities. Over the decades, loan conditions of the IMF/World Bank have forced developing countries to lower their trade barriers, cut subsidies for their domestic food producers, and eliminate government programs aimed at enhancing rural agriculture. It was the loan conditionality of the ADB's Agricultural Structural Reform Loan that forced Pakistan to take a U turn from its 'Development Box' stance just 2 months after the Doha Ministerial Conference. So far, the deeds of IFIs were considered independent from those of the WTO. However, on 13th May WTO Director General Supachai Panitchpakdi, IMF Managing Director Horst Kuhler and World Bank President James Wolfensohn met during WTO General Council meeting on coherence. The theme of the meeting was to bring coherence in the plans and strategies of world economic agencies. In other words what was being done by Bretton Woods institutes from back channels would be openly done now in the name of coherence.

Pakistan in this situation needs to remain over cautious. So far our negotiators in WTO Geneva have done a wonderful job. However, at the home front there is room for further improvement. The civil servants are being sent abroad (mostly Switzerland and USA) for WTO training courses. However, most of them are posted in other departments when they start to know about their subject. Why not form a WTO cadre in our civil service structure so that the civil servants may concentrate on WTO issues? There is also a need to involve academia and private sector (including various chambers of commerce) in WTO capacity building efforts. Moreover, arranging seminars and workshops in five star hotels is not the only way of building capacity. Various developing agencies and various ministries should also sponsor empirical research on the challenges and opportunities that WTO presents. Enough of the rhetoric now, this is the time to act.

source: http://www.jang.com.pk/thenews/may2003-weekly/nos-25-05-2003/spr.htm 27may03

Many thanks for sending this file to AgbioIndia