Areas of Commitments under the Agreement on Agriculture

- market access, i.e., the disciplines on import restraints and import limitations;

- domestic support, i.e., support by government to domestic producers;

- export subsidies, i.e., support by government to exporters.

The agreement does allow governments to support their rural economies, but preferably through policies that cause less distortion to trade. It also allows some flexibility in the way commitments are implemented. Developing countries do not have to cut their subsidies or lower their tariffs as much as developed countries, and they are given extra time to complete their obligations. Special provisions deal with the interests of countries that rely on imports for their food supplies, and the least developed economies. “Peace” provisions within the agreement aim to reduce the likelihood of disputes or challenges on agricultural subsidies over a period of nine years.

Market Access

Tariffication.

The new rule for market access in agricultural products is “tariffs only”. Before the Uruguay Round, some agricultural imports, especially for many temperate zone agricultural products, were restricted by quotas and other non-tariff measures. These have been replaced by tariffs that provide more-or-less equivalent levels of protection — if the previous policy meant domestic prices were 75% higher than world prices, then the new tariff could be around 75%. (Converting the quotas and other types of measures to tariffs in this way was called “tariffication”.) The tariffs on virtually all agricultural products traded internationally are bound in the WTO.

Tariffication formula - tariffication referred to the conversion to an ordinary tariff rate of the full extent of protection given to a product through both tariff and NTBs. The Modalities document prescribed the use of the price gap method to measure tariff equivalents, as follows:

T = (Pd - Pw)/ Pw * 100

Where T = ad valorem tariff equivalent

Pd = domestic price (e.g. wholesale price)

Pw = world reference price (import or export parity price)

Base year - the average of three years, ex.1986, 1987 and 1988.

Tariff Reduction.

A Member has to reduce its tariff total every year in equal steps over a prescribed span of time.

Developed Members will, from 1995 to 2000, reduce their tariffs on agricultural products by 36% on average, with a minimum cut of 15% in each tariff line. For developing Members, the cuts are 24 and 10% respectively from 1995 to 2004. Least-developed Members were required to bind all agricultural tariffs, but not to undertake tariff reductions.

In practice, major importers of agricultural products have bound the tariffs at very high levels, assuming very high tariff equivalents for non-tariff measures, thus making the entry of imports almost impossible.

Typical High Tariffs

Canada: butter 360%,

cheese 289%,

eggs 236.3%

EU: beef 213%,

wheat 167.7%,

sheep meat 144%

Japan: wheat products 388.1%,

wheat 352.7%,

barley products 361%

US: sugar 244.4%,

peanuts 173.8%,