Shifting sands: Searching for a compromise in the WTO negotiations on agriculture

The WTO negotiations on agriculture remain deadlocked after four years of discussion, and efforts to find a solution at Cancún failed. Analysis shows that the recent draft Cancún text offers more flexibility than earlier proposals and, such flexibility most likely implies a lower level of ambition overall. However, developing countries are less able to take advantage of this flexibility and their bound tariffs will be reduced to levels at or below applied rates. The reduction in levels of intervention and the expiry of the Peace Clause make it more likely that there will be greater resort in the future to safeguards and countervailing measures.

Analysis of the various proposals using the UNCTAD/FAO Agricultural Trade Policy Simulation Model (ATPSM) shows that most of the benefits from liberalization accrue to developed countries, which currently have the highest levels of intervention. The group of developing countries, which include both exporters and importers of agricultural products, gain from liberalization, but those gains are small and unevenly distributed. In fact, net-food importing developing countries tend to lose because of higher world prices. Within developing countries, producers tend to gain from higher world prices at the expense of consumers. Since negotiating positions suggest that governments attach a higher weight to producer than consumer benefits, a possible solution to the impasse lies in switching support in developed countries from border measures to less-trade-distorting measures such as direct income support. Providing compensation to current beneficiaries of European Union support in ACP countries for the erosion of preferences may also assist in the search for a compromise.