Ministry of Food, Agriculture & Livestock
WTO Unit
Answers to the 6 Questions raised by the Pakistan's Ambassador in the WTO
Q. I. taking in to account our Net Food Importing Developing Countries (NFIDCs) status, what should be our stance on the debate on Food Aid:
Whereas, food Aid has market effects similar to export subsidies, it was not part of URAA, in the context of disciplines sought in three pillars of AoA. Since, DDA more specifically in July Package & now HKMC Declaration the issue has been focused closely. Current debate on food aid in WTO centers on disciplining food aid, as a parallel measure with elimination of export subsidies. Food Aid in kind, in grant/ cash, and limiting food aid to genuine humanitarian needs are subjects of discussion
The commercial food import expenditures of [LDCs &] NFIDCs, in real terms, have been increasing over time at the annual rate of over 6 percent during recent decades, as depicted in figure below. In 2001,for instance, the commercial food import expenditure of [LDCs &] NFIDCs was US$4.8 billion and US$10.1 billion respectively. This trend, of increasing food imports, is expected to continue.
Commercial food import bills 
Share of food imports in total apparent food consumption
Food import bill as a share of GDP
Compared to total GDP, food import bills are high for both LDCs and NFIDCs and during the high commodity price period in the late 1990s countries were, on average, spending as much as 5 to 6 percent of their GDP on food imports. Many countries have to buy food in international markets, and spend a significant proportion of their resources to do so. Many of these food insecure countries do not have means to foot the food import bill, as it constitute significant proportions of the total import expenditures.
Along with increasing dependence and a growing proportion of income resources spent on food imports, food aid to the food insecure countries has been falling in relative terms. The ratio of food aid to food imports reached its peak in the 1980s at 28 percent for LDCs, and 20 percent for NFIDCs, but has fallen to about a half of that by 2001.
Further, international agricultural commodity prices being volatile, often with large unpredictable upward swings, [international] wheat prices for example, may suddenly increase 50-100 percent within months. An NFIDCs like
Donors & Recipients of Food Aid:
The key donors (2004) of food aid are
Notwithstanding the importance of food aid for an NFIDCs like Pakistan, as discussed above, in terms of satisfying the nutritional needs of the population (these meet up to 35 percent of the caloric requirements of the population of some of the food insecure countries, and in disasters, Food Aid has been used by developed countries to dispose of surpluses, provide budget support to the recipient governments, and underpin foreign policy. When given in kind it may be detrimental to local producers, for it may lead to commercial & production displacements on one hand, and create over- dependence on imports in recipient countries on the other. For example, the easy availability of food grains under grants and soft loans in the past (1950s and 1960s) led us to accord low priority to agriculture development. It resulted in continued reliance on imported food grain and edible oil, which has been a major head of expenditure and reason of trade deficit.
| Year | Imports | Exports | Deficit (-)/ Surplus (+) | Status (impt /exp) |
| 1997 1998 1999 2000 2001 2002 2003 | 1448.4 1490.0 1706.0 1172.7 970.0 957.0 1129.4 | 671.6 978.1 1057.4 776.9 847.6 861.9 836.7 | -776.8 -511.9 -648.6 -395.8 -122.4 -95.1 -292.7 | Net Importing Net importing Net importing Net importing Net Importing Net Importing Net Importing |
| Total | 8873.5 | 6030.2 | -2843.3 | Importing |
Now, when GOP has embarked upon an ambitious agricultural policy of export-led agriculture, aligning with CAIRNS Group in WTO, food aid needs to be discouraged as a policy. To address the issue of likely increase in imports and food insecurity concern, GOP in coalition with other NFIDCs ask WTO Members, as pledged in Marrakech Agreement, for readily accessible financing to assist facing import bills, whether because of more volatile world commodity prices, or because of decline in food aid 7 food a concessional prices in the world market. At domestic front country needs more investment to be made in agriculture.
In global context, followings measures inter alia have been proposed in this regard:
§ Strengthen the domestic supply capacity of vulnerable LDCs and NFIDCs to limit their growing reliance on food imports, and diversify their export base;
§ Develop institutions, which may help in stabilizing food import prices, through appropriate risk management instruments.
Conclusion:
In this backdrop,
This position, would be in keeping with our overall stance on market access, and at the same time shall also help address likely impact, of increasing food imports, on
Q. ii .An analysis needs to be done on the existing domestic support in the
Commodity specific analysis on suggested lines is given below:
| Commodity-Specific Domestic Support in US and EU | ||
| (1999-2001) | | Billion |
| Commodity | EU | US |
| | | |
| | | |
| Common Wheat | 2.59 | 0.91 |
| Durum Wheat | -0.19 | 0.00 |
| Rice | 0.35 | 0.53 |
| Other Coarse Grains | 2.26 | 0.21 |
| (Barley, oats, rye, sorghum) | | |
| Maize/Corn | 0.89 | 2.66 |
| Sugar | 5.13 | 1.18 |
| Olive Oil | 1.84 | 0.00 |
| Bananas | 0.21 | 0.00 |
| Dairy | | 4.87 |
| Skimmed Milk Powder | 1.22 | 0.00 |
| Butter | 3.96 | 0.00 |
| Beef | 11.65 | 0.00 |
| Tobacco | 0.88 | 0.72 |
| Apple | 1.95 | 0.14 |
| Tomatoes | 2.24 | 0.00 |
| Cotton | 0.00 | 1.70 |
| Others | 7.69 | 3.92 |
| | | |
| Total crop-specific support | 42.66 | 16.83 |
| SOURCE: | | |
| 1) EU Notification to the WTO on Domestic Support , released on | ||
| Document code G/AG/N/EEC/38. | | |
| 2) USDA,ERS,WTO Database, at [http://www.ers.usda.gov/briefing/farmpolicy/usnotify.htm], | ||
| 3) Recent | | |
Pakistan needs to target cuts on cotton, that has 80-90 domestic support content in overall subsidies to cotton in US for example; high value agricultural products of export interest to Pakistan, like dairy, milk, beef and horticultural products (apple) and cash/food crops of export interest like rice, sugar & wheat. Reduction of subsidies in these products in US & EU may not necessarily lead to market access for
Q. iii. Since there is an understanding on front loading of commitments with regard to phasing out of exports, which are the products of interest to
In general the position on this issue is the same, as in case of domestic support (at ii above), for export subsidies are generally targeted on the same products.
Q. iv. Identification of products that could be designated as Special Products by
The debate on “Special Products” (SPs) is central to the current WTO negotiations on agricultural market access. It has roots in Non Trade concerns (NTCs) and the Special and Differential Treatment (SDT) provisions of AOA, the Doha Ministerial Declaration, the July Framework and the Hong Kong Ministerial Declaration, as is evident from the extracts of these documents reproduced below:
The Doha declaration (Para. 13) committed the WTO members to “negotiations aimed at substantial improvements in market access” while keeping in mind that the “special and differential treatment for developing countries shall be an integral part of all elements of the negotiations and shall be embodied in the schedules of concessions and in the rules and commitments to be negotiated”. The declaration further notes “that non-trade concerns will be taken into account in the negotiations”.
These broad principles were given shape in the July Frame work. Article 41 of the July Framework states “Developing country members will have the flexibility to designate an appropriate number of products as Special Products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment. The criteria and treatment of these products will be further specified during the negotiation phase and will recognize the fundamental importance of Special Products to developing countries”.
The
These provisions will help developing countries; especially NFIDCs sustain and develop rural production of these critical products and rural incomes. For chosen SPs, developing countries would apply lower tariff reduction schedules over a longer implementation period, and be exempt from minimum access quota provisions.
If development is successful, higher supplies and lower prices may also eventually also benefit urban populations as import costs are reduced. The choice of special products will be important to the future development of agricultural sectors, and to food security goals in these countries.
DISCIPLINES ON SPECIAL PRODUCTS
Disciplines on SPs will involve decision on three issues:
1. The criterion of selection of products/tariff lines
2. The number of tariff lines a country may designate as SP
3. The extent of deviation from the general tariff cutting formula
These issues have been discussed below.
1. The criterion of selection
An important question is how to determine the special products. As stated in the July framework and the Hong Kong Ministerial Declaration the Special Products are to be based on the criteria of food security, livelihood security and rural development needs. Several indicators are presented which illustrate the implications of a number of possible selection criteria associated with their rationale. On the basis of three key indicators i.e. food security, rural development and livelihood security, sub sets of indicators have been defined, these include:
1. Share of production of a product in total agricultural production (rural development).
2. Share of consumption of a product in total apparent food consumption (food security)
3. Share of domestic consumption by domestic production of a product (food security)
4. Share of employment of the product in the total agricultural labor force or in total agriculture employment (livelihood security)
The first two indicators show the relative importance of individual products in total national agricultural production and consumption. They indicate the degree to which the product is important to the agricultural base, and to the consumption profile of the country. Indicator 3, the self-sufficiency ratio, indicates the extent to which domestic production exceeds or falls short of domestic consumption; as this ratio exceeds unity, the less will the product be affected by market access provisions. Indicator 4 shows the share of the agricultural labor force engaged in growing certain products.
These indicators may guide towards the contribution of products in terms of production, consumption and employment according to the above criteria. However, there are two caveats in the use of these indicators.
First, although not traded, a locally produced crop or product could be displaced by an imported substitute product not being produced in that country e.g. powder milk displacing raw milk or processed milk. There may be a need for a tariff on the imported substitute, rather than the special product.
Second, the indicators are at best national aggregates, thus may not fully reflect the regional importance of products within a country.
At this stage it is unclear if the choice of criteria is to be a national one or a multilateral one. While the developing countries may seek the right to make the choice of criterion at national level, it is unlikely that the industrialized countries will agree to such a proposal.
In any event, the criterion must be based on all of the four indicators. Minimum thresholds may be developed for each indicator and the products selected thereafter. The thresholds should be flexible enough to reflect a country’s peculiar needs and should leave adequate policy space.
The table below lays out
Table 1: Ranking of Special Products by Score
| Product | Product Score | HS Code | Bound Rates | Applied Rates |
| Wheat | 21 | 1001 | 150 | 10 |
| Rice (Milled Equivalent) | 21 | 1006 | 100 | 10 |
| Citrus fruit | 16 | 0805 | 100 | 25 |
| Apple | 15 | 0808 | 100 | 25 |
| Edible oil | 14 | 1507-1515 | 100 | Rs. 9050 per MT to Rs. 18000 per MT |
| Tomato | 14 | 0702 | 100 | 10 |
| Milk (Excluding Butter) | 14 | 0401 | 100 | 25 |
| Cotton (Raw) | 13 | 5201 | 5 | 5 |
| Sugar | 13 | 1701 | 150 | 10 |
| Onion | 13 | 0703 | 100 | 10 |
| Tea | 12 | 0902 | 150 | 10 |
| Potato | 11 | 0701 | 100 | 10 |
| Beef | 9 | 0201-0202 | 100 | 5 |
| Mutton | 9 | 0204 | 100 | 5 |
| Poultry | 8 | 0207 | 100 | 20 |
| | | | | |
Looking at the national agricultural production from the standpoint of food security, livelihood and rural development, it appears that the five most significant crops for
2. Number of Tariff lines that may be designated as SPs
We know, from the Hong Kong Ministerial Declaration, that the developing country members will have the option of designating an ‘appropriate number’ of products as SPs. No consensus on that number exists at this stage and countries hold divergent views on the subject. Some industrialized countries argue that the number should be small and uniform for all developing countries. While this may be adequate for some smaller developing countries with narrow production base, it may be inadequate for bigger countries and a broad production base.
Academic arguments also vary significantly. While some writers suggest that a large number of SPs and the resultant protection will reduce over-all national welfare. The consumers would suffer from increased prices and a not-so-proportionate gain in production (Diaz-Bonilla 2003). Other writers argue differently. They claim that a small number of SPs will not bring about the desired effects of securing farmers’ livelihoods and the rural poverty will continue to increase.
Some writers have suggested that all domestically produced agricultural products below a certain bound tariff threshold should be eligible to be designated as SP. A country may then designate a stipulated number of products as SP. This proposal is fraught with difficulties for a country like
Conclusion: In realistic terms, Pakistan may not suggest more than 5 tariff lines at 4digit HS code, limiting it to cotton (rural development & income), wheat, milk, beef, sugar (food security).
Table 1: Basic Data on Food Security, Livelihoods and Rural Development
| Commodity | Food Security | Livelihoods | Rural Development | |||||||||||||
| | Share in Food Expenditure % | Share in Caloric Intake % | Production Minus Consumption % | Import as % of Consumption % | Regional Importance % | Share in crop income of poor % | Share of Total Crop Production % | Area under crop % | Regional Importance | Share of agriculture Value added % | Share of World Exports % | Potential for Value Addition | ||||
| Cotton | | | -167,340 | 10.6 | | 30.7 | 12.6 | 14.1 | | 7.7 | | H | ||||
| Wheat | 25 | 32 | 609,017 | 0.8 | | 33.7 | 2.7 | 36.4 | | 13.3 | 0 | M | ||||
| Rice | 6 | 5 | 1,523,229 | 0.6 | H | 10.8 | 7.3 | 9.6 | H | 5.0 | 9 | M | ||||
| Potato | 3 | 1 | 313,678 | 1.0 | | 2.0* | 1.2 | 0.5 | | 0.8 | | H | ||||
| Sugar | 8 | 17 | 1,723,129 | 20.8 | | 7.9 | 33.2 | 4.5 | | 3.6 | 0 | L | ||||
| Edible oil | 10 | 15 | 1,752,573 | 92.4 | | | 0.3 | 2.6 | | 0.4 | 0 | M | ||||
| Tomato | 1 | 0 | -3,705 | 1.4 | | | 0.2 | 0.1 | H | 0.4 | 0 | H | ||||
| Onion | 2 | 0 | 172,684 | 0.0 | | | 1.0 | 0.5 | H | 0.5 | 3 | L | ||||
| Citrus fruit | 0 | 0 | 183,683 | 0.1 | | 2.9** | 1.3 | 0.9 | H | 2.1 | 0 | H | ||||
| Apple | 0 | 0 | 8,287 | 6.5 | | | 0.3 | 0.2 | H | 0.5 | 0 | H | ||||
| Tea | 4 | 0 | -104,662 | 102.1 | | | | | H | 0.0 | 0 | L | ||||
| Beef | 3 | 1 | 1,755 | 0.0 | | | | | | 2.2 | 0 | L | ||||
| Mutton | 1 | 1 | 1,385 | 0.0 | | | | | | 2.0 | 0 | L | ||||
| Poultry | 1 | 0 | -269 | 0.1 | | | | | | 1.4 | 0 | L | ||||
| Milk | 15 | 9 | 3,940,334 | 0.2 | | | | | | 23.8 | 0 | H | ||||
| Total 15 items | 78 | 82 | | | | | | | | 56.0 | | | ||||
*includes all vegetables
** includes all fruits
H = High; M = Medium; L = Low
Table 2: Grading of Products by Food Security, Livelihoods and Rural Development
| Commodity | Food Security | Livelihoods | Rural Development | |||||||||||||
| | Share in Food Expenditure % | Share in Calorie Intake % | Production Minus Consumption % | Import as % of Consumption % | Share in crop income of poor | Share of Total Crop Production % | Area under crop % | Share of agriculture Value added | Share of World Exports | Production for Value addition | Aggregate score | Aggregated Score Adjusted for Regional Importance | ||||
| Cotton | | | 1 | 1 | 3 | 2 | 2 | 1 | 1 | 3 | 13 | 13 | ||||
| Wheat | 3 | 3 | 2 | 1 | 3 | 1 | 3 | 2 | 3 | 2 | 21 | 21 | ||||
| Rice | 1 | 1 | 2 | 1 | 2 | 1 | | 1 | | 2 | 15 | 21 | ||||
| Potato | 1 | 1 | 2 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 11 | 11 | ||||
| Sugar | 1 | 2 | 1 | 1 | 1 | 3 | 1 | 1 | 1 | 1 | 13 | 13 | ||||
| Edible oil | 2 | 2 | 1 | 3 | | | 1 | 1 | 1 | 2 | 14 | 14 | ||||
| Tomato | 1 | 1 | 1 | 1 | | 1 | 1 | 1 | 1 | 3 | 11 | 14 | ||||
| Onion | 1 | 1 | 2 | 1 | | 1 | 1 | 1 | 1 | 1 | 10 | 13 | ||||
| Citrus fruit | 1 | 1 | 2 | 11 | 1 | 1 | 1 | 1 | 1 | 3 | 13 | 16 | ||||
| Apple | 1 | 1 | 2 | 1 | | 1 | 1 | 1 | 1 | 3 | 12 | 15 | ||||
| Tea | 1 | 1 | 1 | 3 | | | 2 | 1 | 1 | 1 | 9 | 12 | ||||
| Beef | 1 | 1 | 2 | 1 | | | 3 | 3 | | 2 | 9 | 9 | ||||
| Mutton | 1 | | 2 | 1 | | | | | | 2 | 9 | 9 | ||||
| Poultry | 1 | 1 | 1 | 1 | | | | | | 2 | 8 | 8 | ||||
| Milk | 1 | 2 | 3 | 1 | | | | | | 3 | 14 | 14 | ||||
High = 3; Medium = 2; Low = 1
Conclusion: In realistic terms, Pakistan may not suggest more than 5 tariff lines at 4digit HS code, limiting it to cotton (rural development & income), wheat, milk, beef, sugar (food security).
Q. v. Identification of products, which could be designated as sensitive. Also what are the products, where we should oppose their inclusion in the list of sensitive products for developed countries. Already there is proposal from some countries that no tropical product be categorized as sensitive products.
According to July Framework Members may designate an appropriate number, to be negotiated, of tariff lines to be treated as sensitive taking in to account existing commitments in such products.
As against SPs both developed & developing countries will have to sensitive products, which like TRQ is an exception carved by July Framework, and should not be encouraged as according to one estimate even 25 of tariff lines designated as sensitive products may erode 75% of the benefits accruing from tariff reduction.
As such
Some of the sensitive products of developed countries are already protected through TRQs We should resist creation of new TRQs, and as such strive for in-quota and out of quota reduction of tariffs in already protected products.
Q. vi. The AVEs calculations are available on the AVE Forum of the WTO website. Do we have any comments on the rates calculated?
There are different formulae proposed for AVEs calculation, and as such there results may vary. By far there seems to be some agreement on what has been done at WTO level. Yet, there is need to further investigate the accuracy of methods, that needs some time.
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