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Submissions outstanding from the Third Special Session Note on non-trade concerns (G/AG/NG/W/36/Rev.1) Presentation of chapeau paper The note, which we have submitted on NTCs, is sponsored by a total of 27 countries, and it reads as follows: Article 20 of the Agreement on Agriculture provides that the continuation of the reform process should take into account non-trade concerns, special and differential treatment to developing countries and the possible negative effects of the implementation of the reform programme on least-developed and net food-importing developing countries. In this context, a Conference on Non-Trade Concerns in Agriculture attended by 40 countries and economies was held in Ullensvang, Norway, on 1-4 July 2000. The European Commission and the governments of Japan, Mauritius, Norway, the Republic of Korea and Switzerland organised the conference, which was attended by another 34 developing countries including least-developed countries and small island developing states, economies in transition, and developed countries. The broad objective of the conference was to provide a forum for discussion among developing and developed countries on non-trade concerns (NTCs). Subjects treated covered the specific and multifunctional characteristics of agriculture, agriculture's contribution to rural development, food security, environment and cultural diversity, and the need for flexibility in national policy design to address non-trade concerns, both from developed and developing country perspectives. Each of the organisers contributed to the discussion with papers covering a vast array of issues and concerns common to developing and developed countries alike. The papers highlighted the wide diversity and specificity of agricultural systems worldwide. The six papers are attached. It was recognised that every country has the right, in accordance with mutually agreed rules, to address non-trade concerns, such as strengthening the socio-economic viability and development of rural areas, food security and environmental protection, and promoting the co-existence of various types of agriculture. In this context, special and differential treatment to developing and least-developed countries must also be ensured. It was also recognised that market forces alone could not address these non-trade concerns. We believe that this is a useful contribution to the work within the framework of paragraph (c) of Article 20 by the Special Session of the Committee on Agriculture, and we look forward to a fruitful discussion in this Committee. This note has been sponsored by the following countries: Barbados, Burundi, Cyprus, Czech Republic, Dominica, Estonia, the European Communities, Fiji, Iceland, Israel, Japan, Korea, Latvia, Liechtenstein, Madagascar, Malta, Mauritania, Mauritius, Mongolia, Norway, Poland, Romania, Saint Lucia, Slovak Republic, Slovenia, Switzerland and Trinidad and Tobago. Before concluding I would like to invite others to join us in our future cooperation on non-trade concerns. I now end by inviting the six organisers of the conference to briefly present their papers. Presentation of attachment 6 regarding the need for flexibility in national policy design to address non-trade concerns The sixth and last paper examines the flexibility in national policy design that would be required to sustain domestic production necessary to address non-trade concerns. While the АФУХСљКЯВЪЙйЭјзЪСЯ agricultural negotiation mandate laid down in Article 20 of the Agreement on Agriculture recognises the “long-term objective of substantial progressive reductions in support and protection”, it also lays down that further negotiations shall take into account, inter alia, experience gained from implementing the existing agreement, non-trade concerns and special and differential treatment. In order to achieve the objective to establish a fair and market-oriented agricultural trading system referred to in Article 20, there is a need to acknowledge, inter alia, the future coexistence of various forms of agriculture based on each country's production conditions and potentials and historical and cultural background. Also, it must be ensured that the АФУХСљКЯВЪЙйЭјзЪСЯ policy reform is consistent with other multilateral commitments, such as for instance the right to food. Agriculture is facing a considerable diversity of production conditions worldwide. At the demand side, for a number of reasons related to for instance cultural, economic, or historical backgrounds, countries are demanding different goods or services from their agriculture, thus giving different weight and priority to different NTCs. Supply side variations, across and within countries and regions, are often due to physical and natural conditions, social and cultural backgrounds and institutional and economic conditions. The agricultural policy environment is continuously changing, and the possibility of changes in for instance societal priorities, production costs or economic situation, call for a long-term perspective in multilateral trade policy reform and national policy design. It is important to ensure that the developing countries’ requests for better market access are properly addressed. Furthermore, the flexibility in national policy design and long-term room for manoeuvre for developing countries and economies in transition should not be reduced unduly even though many countries may not, for different reasons, be able to take advantage of this flexibility at present. The need for flexibility must be subject to mutually agreed rules and should not be a carte blanche in national policy design. For instance, it seems difficult to justify export competition measures as part of a long-term strategy to ensure NTCs. However, given the considerable differences in production conditions between АФУХСљКЯВЪЙйЭјзЪСЯ Members, low-potential countries with unfavourable and disadvantaged production conditions are unlikely to be able to sustain production required to address NTCs by applying Green Box measures only, without having any impact on trade. Also, specific proposals relating to the special situation of developing countries should be carefully considered in the continuation of the reform process. To conclude, all Members, both developing and developed, must be given sufficient flexibility and room for manoeuvre in national agricultural policy design to ensure a viable domestic agricultural sector with domestic production required to properly address NTCs. In doing so, the specific situation of each country, including national priorities and differences in production conditions, must be duly taken into account. Concluding remarks I would like to thank all participants in this very stimulating debate over the last two days. To us, even though the importance of NTCs has been recognized before, as evidenced in the preamble and Article 20, this debate represents a watershed. From now on it will be very difficult to deny that NTCs are an integral part of our negotiations, which have to be adequately addressed in the continuation of the reform process. Our debate has amply demonstrated that NTCs are of crucial importance to a large number of АФУХСљКЯВЪЙйЭјзЪСЯ members. Twenty-seven countries, counting the EU as one, co-sponsored the NTC-note. In addition a large number of countries have made interventions in this debate, stressing the need to safeguard NTCs. And, I am happy to say these countries represent a wide variety of interests and country situations, ranging from large trading partners from the industrialized world to small island developing states as well as economies in transition. While there seems to be a broad agreement on the need to address NTCs, opinions are varying regarding the concrete instruments that are needed in this respect. We would therefore like to draw the attention, once again, to the situation of low-potential countries with disadvantaged and unfavourable production conditions. In case of these countries, domestic agricultural production necessary to address NTCs such as for instance food security and rural development, are unlikely to be sustained by applying Green Box measures only, without having any impact on trade. This leads me to another comment made by some delegations that while NTC policy objectives should be recognised, pursuing such objectives should by no means cause trade concerns in other countries. In other words, a low-potential country should only be allowed to pursue legitimate policy objectives if it has no spillover effects on the high-potential exporting countries. However, we have to realise that international spillover effects go in both directions. In order to maximize welfare both NTCs and trade concerns should be adequately addressed. I think we have to be honest and acknowledge that there may in certain cases be a conflict between NTCs and TCs, and that this is one of the themes in these negotiations. And these negotiations will only succeed if we find a balance between the various conflicting interests, in a way that low-potential countries with disadvantaged and unfavourable production conditions feel they have reasonable flexibility to pursue non-trade concerns and, of course, in a way that high-potential countries feel that they have a deal that is taking reasonably account of their interests. The co-sponsors of our note are not trying to divide and rule as one delegation tried to indicate yesterday. What we are doing is to demonstrate the commonality of interests among a wide range of member countries. It goes without saying that developing countries have special needs that we have to find solutions to in the negotiations. In parallel with special and differential treatment of developing countries, our task is to address the legitimate concerns of all member countries. A one-size-fits-all approach would not suffice as widely demonstrated by the many interventions in this debate underlining the importance different countries attach to various NTCs. The general rules of the agricultural trading system should thus be refined in ways that meet the long-term needs of developing countries and enable all countries to properly address their concerns, including those relating to NTCs. B. Presentation and consideration of negotiating proposals for continuing the reform process under Article 20 of the Agreement on Agriculture Cairns Group: Market Access (G/AG/NG/W/54) Regarding the Cairns proposal on market access, I must confess that we have serious difficulties with some of these ideas. In our view, the proposal goes far beyond Article 20. It fails to recognize that agricultural production conditions are varying considerably among АФУХСљКЯВЪЙйЭјзЪСЯ Members. The different levels of support and protection reflect the heterogeneity and diversity of country situations. As far as we can see, the proposal ignores important constraints such as the difficult production conditions that many low-potential countries are facing and the narrow product range that many countries, inter alia for climatic reasons, are relying on when non-trade concerns, such as domestic food security, are addressed. Safeguarding such concerns requires an appropriate combination of policy measures in order to compensate for disadvantaged and unfavourable production conditions. ASEAN: Special and differential treatment for developing countries in world agricultural trade (G/AG/NG/W/55) Norway would like to thank the ASEAN group for their proposal on special and differential treatment (S&D) to developing countries. S&D is an integral part of the Agreement and is particularly important for least-developed countries. We therefore need to ensure that S&D is properly addressed in the agricultural negotiations in the areas of market access, domestic support, export competition and technical assistance. We recognize that developing countries have special needs and that we need to find solutions, which properly address these needs and afford developing countries the opportunity to adopt reforms in a differential manner and on a more gradual basis. The modalities on how best to address the concerns of developing countries will be a key area in our further negotiations. The need to treat developing countries differently relates to their individual development, financial and trade needs as specified in the enabling clause. It may thus relate to a number of aspects, which are interrelated. For instance, in terms of policy objectives, developing countries are facing several challenges in their development process that are specific for their stage of development (in particular poverty alleviation as well as acute food insecurity and large shares of their populations engaged in agricultural production). Also, many developing countries are facing special problems due to limited budgetary or administrative capacity. Some problems may also relate to the individual history of support and protection of each country, on which existing commitment levels are based. Having said this, we see S&D as a complement to, not a substitute for, the more general rules of the multilateral trading system. Given that the development situation and the agricultural policy environment are continuously changing, S&D measures may not be sufficient to meet the future needs of developing countries. Therefore, in the continuation of the reform process it should be ensured that the general rules of the agricultural trading system are refined in ways that meet the long-term needs of developing countries and enable all countries to properly address their concerns, including those relating to non-trade objectives. We agree with ASEAN that developing countries are facing special challenges and require S&D. However, the ASEAN proposal does not seem to recognise that other countries than developing countries also have legitimate policy objectives, which they are pursuing in their agricultural policies. The note on non-trade concerns (/36) presented yesterday and cosponsored by 27 developing and developed countries underlined that every АФУХСљКЯВЪЙйЭјзЪСЯ Member has the right, in accordance with mutually agreed rules, to address NTCs, such as strengthening the socio-economic viability and development of rural areas, food security and environmental protection, and to promote the coexistence of various types of agriculture. Legitimate concerns of all member countries have to be addressed in the negotiations in parallel with the special and differential treatment of developing countries. Albania, Bulgaria, Croatia, the Czech Republic, Georgia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Mongolia, Slovak Republic and Slovenia: Domestic support – additional flexibility for transition economies (G/AG/NG/W/56) I would like to make some very preliminary comments on the proposal on domestic support by transition economies. Norway welcomes the paper by the economies in transition. We recognize their special problems, and that we need to take the specificity of country situations into account. A one-size-fits-all approach will not suffice, and we have to take this into account in the negotiations. C: Work within the framework of paragraphs (a), (b), (c) and (d) of Article 20 of the Agreement on Agriculture: Presentation and consideration of technical papers, as well as submissions, contributed by participants, taking into account, as appropriate, secretariat background papers Norway would like to thank the Secretariat for the various background papers prepared for this Fourth Special Session. In view of the stimulating discussion we already had on NTCs, I have revised my intervention and will just make a few points regarding the background paper on non-trade concerns (G/AG/NG/S/17). A number of lessons can be drawn: NTCs represent vital concerns for both developing and developed countries. NTCs encompass a number of essential issues ranging from food security, the viability of rural areas and the preservation of a country’s cultural heritage to several environmental concerns such as bio-diversity, landscaping and the preservation of a good plant, animal and public health. For a number of reasons related to for instance their cultural, economic, or historical backgrounds, countries are demanding different goods or services from their agriculture, thus giving different weight and priority to different NTCs of a multifunctional agriculture. There seems to be a common recognition among a considerable number of АФУХСљКЯВЪЙйЭјзЪСЯ Members that market forces alone cannot address non-trade concerns. It is clear to us that the NTCs cannot be disassociated from the agricultural production activity itself. The safeguarding of these concerns depends on an ongoing agricultural production. With this point of departure, a critical question in our negotiations turns out to be the following: What kind of policy instruments are needed to sustain sufficient domestic production to safeguard NTCs, also in countries with unfavourable and disadvantaged production conditions? This will be an important part of our future negotiations. This leads me to some comments on the background paper on the operation of the Green Box (G/AG/NG/S/18). It seems to us that some clarifications may be needed with respect to the Green Box and its relationship to other measures as well as to policy objectives related to NTCs. First, from different Members' contributions one may sometimes get the impression that Green Box measures are more legitimate than other measures. This is of course not the case. Any measure that conforms with the Agreement on Agriculture and a Member’s Schedule is fully АФУХСљКЯВЪЙйЭјзЪСЯ legitimate and compatible. Second, while Annex 2 occasionally refers to policy objectives such as food security, environmental programs and regional assistance, the Agreement nowhere claims that such support is sufficient to meet such policy objectives. On the contrary, many countries have repeatedly stated that Green Box measures may not be sufficient to address NTCs. For instance, the Green Box may not be sufficiently adapted to the specific situation of developing countries. Furthermore, as a result of differences in production conditions between and within countries and in order to be able to sustain domestic production required to properly address NTCs, countries with a comparative disadvantage need to be allowed to have recourse to a policy measure combination that includes, to a large extent, use of production-related policy measures. As I said earlier, domestic production will be required to safeguard NTCs such as for instance food security and the viability of rural areas. I think we all agree that in the long run, domestic agricultural production will only take place if it is profitable, i.e. if production revenues are covering production costs. In the case of Norway as presented in AIE/68, in a world market only scenario, production revenues would cover only 30-41 per cent of production costs. To conclude on this issue, agricultural production conditions are varying considerably among АФУХСљКЯВЪЙйЭјзЪСЯ Members. Due consideration must be given to the heterogeneity and diversity of country situations in order to ensure sufficient flexibility and room for manoeuvre to safeguard NTCs of all АФУХСљКЯВЪЙйЭјзЪСЯ Members. Finally, let me add a couple of comments to the background paper on inflation and exchange rate movements (G/AG/NG/S/19). As the background paper spells out, one of the obvious consequences of inflation is that it has the effect of eroding the nominal value of AMS commitments where they are specified in domestic currency. Obviously, this problem is proportionate to the level of inflation. However, such erosion is substantial also in cases of low inflation. For instance, between 1988 (October) and 2000 (October), average inflation in Norway amounted to 2,6 per cent annually. This inflation rate has deflated our AMS commitment level by around 27 per cent since 1988. This erosion comes in addition to the 20 per cent reduction in nominal values that was agreed during the UR. In real value our year 2000 AMS commitment has decreased by more than 40 per cent compared to the AMS of the base years 86-88. For countries with higher inflation rates, the reductions have been even bigger. The background paper evidences that market price support subject to a de minimis commitment faces the same problems. The erosion of domestic support commitments due to inflation reduces the predictability of the multilateral trading system and increases the burden on countries that in many cases are already facing constraints in their nominal domestic support commitments. 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