There
may be a proposal from the major developed countries for continuing with
the so called "peace clause", i.e., the provision in Article
13 of the Agreement on Agriculture (AOA), which prohibits action against
subsidy under the normal procedure of the Agreement on Subsidies. This
immunity provision expires at the end of 2003. And then the major developed
countries will be exposed to the risk of the other countries raising disputes
on their subsidies. Hence the major developed countries will be very keen
to continue with the peace clause. There is no reason for the developing
countries to agree to it. They have suffered from the subsidies of the
major developed countries too long, and now that an opportunity has come
to abolish the special immunity enjoyed by these subsidies, they would
naturally like to seize the opportunity and not lose it.
When the "peace clause" expires and it is not renewed, all countries,
including the developing countries will have their subsidies exposed to
actions according to the Agreement on Subsidies. But there are two aspects
of the practical situation which reduce the possible adverse impact on
the developing countries. Only a very small number of the developing countries
are using domestic subsidy and export subsidy. Those that have not included
any subsidy in their schedule under AOA will not get affected by the discontinuance
of the "peace clause", as they are in any case exposed to such
risk even now. Since they have not included any subsidy in the schedule
under AOA, they do not have any protection of the "peace clause".
The next question is what effects in practice will be on the other developing
countries, i.e., those that have included some subsidies in the schedule
under the AOA. Here we come to the second point.
Action against these developing countries can be taken by another country
A under the Agreement on Subsidy under two conditions, viz., if that country
A establishes that: (i) the exports from that particular developing country
is causing injury to its domestic agriculture, or (ii) the subsidy in
the particular developing country is causing serious prejudice to the
exports from that affected country A. It will be very difficult in practice,
particularly for a developed country, to substantiate either of these
pleas.
Exports from the subsidising developing country to a developed country,
particularly to a major developed country, are likely to be much less
compared to those from other developed countries. Hence it may be difficult
to attribute injury, even if it exists, to the import from a developing
country. Similarly, it may not be easy to establish that the developing
country is causing serious prejudice to the major developed country through
its subsidy, as this argument will appear quite hollow in view of the
massive subsidization in the major developed countries themselves.
Hence, even though technically the developing countries too will be denied
the benefit of the "peace clause" if it expires, the balance
of advantage for the developing countries lies very much in favour of
not having an extension of the "peace clause".
However, if the developing countries consider extending "the peace
clause" because of some reasons, it should be done only in return
for a clear decision that the Special Safeguard provisions can be used
by the developing countries even for those cases where there has been
no tariffication. As is well known, the Special Safeguard provision in
the Agreement on Agriculture gives special benefits to the developed countries
for protecting their agriculture and it cannot be used by the developing
countries (except a very few) because of the preconditions associated
with this provision. Any further continuance of the "peace clause"
should be accompanied by an unambiguous and clear provision for enabling
the developing countries to use the Special Safeguard for all agricultural
products. The current trigger criteria may be provisionally applicable,
as it will take time to work out simpler criteria for the developing countries.
Side by side, there should be an agreement to work out simpler criteria
for the trigger of the Special Safeguard for the developing countries
in terms of fall in prices or rise in imports over the previous year.
The developing countries have to ensure that they do not make a one-sided
concession (by agreeing to extend the "peace clause"), as it
was done in the Singapore Ministerial Meeting in 1996 by agreeing to zero
duty on information technology goods and in Geneva Ministerial Meeting
in 1998 by agreeing to status quo on duties on electronic commerce which
meant in practice zero duty on electronic commerce. In both these cases,
the main demanders and the beneficiaries were the major developed countries.
They got these significant concessions from the developing countries without
giving to them any thing in return.
If they have to agree to extending the "peace clause" for some
reasons, they should at least get the use of Special Safeguard in return.
It will bring at least some possible relief to the farmers of the developing
countries in facing the massive subsidized exports from the major developed
countries.
First published in TWN Info Service on WTO Issues (Oct03/7), 28 October
2003.
Third World Network.
http://www.twnside.org.sg