Agriculture

In this session, the focus was on the issue of food security in the context of the WTO. This issue drew attention to the appropriateness of typologies of country groups currently used by the WTO. The WTO recognises three categories of countries: developed, developing (LDC), and least developed (LLDC). In addition, it distinguishes a fourth category, which is not mutually exclusive to the first three, namely the net food importing developing (NFIDC) countries. The question is whether these categories tell you anything about food security. The speaker presented a paper which employs various measures of cluster analysis to identify groups of countries categorised according to different measures of food security. The following five measures of food security were used: food production per capita, the ratio of total exports to food imports, calories per capita, protein per capita, and the share of the non-agricultural population share. The results of the analysis can be summarised as follows:

• The category of LLDCs consists of largely food insecure countries. There are also a number of food insecure countries that are not LLDCs however.
   

• A third of the countries listed in the category of NFIDCs does not fall under any of the food insecure groups.
   

• The category of developing countries is very heterogeneous and therefore not very useful when looking at issues of food security.
   

• Finally, all countries of the developed countries category can be labelled as food secure.

The speaker concluded that the LLDC category appears to be a good starting point to define special rights and obligations in the WTO, plus the countries identified as food insecure in the analysis.

The discussant stressed the importance of vulnerability of the agricultural sector in developing countries. The agricultural sector is far more important in developing countries than in the developed world, in terms of its shares in employment, production and exports. Because there are wide differences among developing countries, a targeted approach is needed. This could be done by clustering developing countries using a vulnerability index. In the discussion it was also re-emphasised that the NFIDC category by no means coincides with food insecure countries, as one might expect from trade theory. The analysis carried out in the paper was seen as a laudable effort to arrive at country groupings that have similar negotiating interests in the context of the WTO.

The discussant also looked at the Agreement on Agriculture and the reasons why so far the benefits for developing countries have been limited. In addition, he listed several critical issues facing the food insecure countries in the ongoing negotiations, including, among others, appropriate special and differential treatment, market access for developing countries, and creating a level playing field for domestic subsidies. Another important issue that was mentioned was how non-trade concerns of developing countries can be dealt with, especially the issue of food security. The creation of a "Development Box" or Food Security Box" in the Agreement of Agriculture could maybe a solution to these problems. This box would provide special and differential treatment to developing countries in order to enable them to better address their food security concerns and to preserve and improve rural livelihoods

Another point raised in the discussion was the issue of to whom the rents of trade preferences (e.g. in the EU-ACP contact) accrue. Most participant agreed that the farmers in developing countries are not the likely recipients, but there is uncertainty about who then receives these rents: importers, traders, or retail chains?

Textiles

The Agreement of Textiles and Clothing (ATC), concluded in the Uruguay Round, lays down the framework and procedures to phase out the Multi-Fibre Arrangement (MFA) by the year of 2005. So far, however, liberalisation has been limited, and has not included particularly sensitive clothing items, which are of most importance to developing countries. Liberalisation has been such that it may well prove difficult if not impossible to complete at the end of the year 2004.

The speaker presented a paper which looks at what happens after full implementation of the ATC, both in the case with and without China in the WTO, using a general equilibrium model with 9 sectors and 24 countries/regions. The analysis clearly shows that when China becomes a WTO member, many exporting countries of textile and clothing products will be hard-hit. Export figures for Mexico, Turkey and Central European economies, which benefit from regional preferences, will decrease. The results for clothing exports from South Asian countries are relatively positive, provided that their competitive advantages will be efficiently tapped. Time, on the other hand, is a factor that will drive locational demands for T&C production facilities, with fashion changing rapidly and just-in-time manufacturing becoming standard.

The paper also includes a survey among textile and clothing companies in Hong Kong, which looks at what countries must do to keep their exports up and to attract investment in the textile and clothing sector. The most important factors influencing investment and sourcing decisions seem to be the availability of quotas and the politics and stability in the host country, followed by the quality of transportation and telecom infrastructure, and the costs and quality of labour. A final important factor is policies affecting trade and investment. Poor countries like Bangladesh, who now benefit from the quota system, may therefore suffer double from the elimination of quotas. Countries like China will be able to attract more investment, first because of their competitiveness, and secondly, because the factors that are important for investment decisions described above are more favourable. This is reflected in the example of what has happened in Sweden, when it removed its import quotas from 1991 to 1995. In that period the share of imports from East Asia has increased, while those of South Asia and the rest of Asia has stayed constant or increased only marginally.

The discussant started by briefly sketching the history of textile quotas in international trade: successful investment in the textile industry in a particular country leading to increased developing countries exports would subsequently invoke quotas from importing countries; investment would then shift to another country, a development that, when successful, would result in new quotas to protect domestic interests in developed countries, etc. In the end, the Agreement on Textiles and Clothing was born to end this practice, and to move the Agreement into the rules of the GATT. The main problem facing parties now lies not so much in the agreement, but in its implementation. Fairly harmless products were built into the accord simply to safeguard continued quotas. However, there is presently good, albeit slow progress within the agreed rules, but for developed country producers there is no longer a way back. After 2004 trouble clearly looms for these producers, but there is no escape from the expected increased LDC supply on the domestic markets of the industrialised countries.

Despite the quotas, the growth in textile trade has been spectacular, as fast as the total increase in world trade. Evidently, the system of quotas has not been blocking trade expansion. As for the future structure of export supply, China’s domination of the export market is likely to continue, but it must be seen in the context of developments in the rest of Asia. Other Asian countries, for example, Korea and Taiwan, are diversifying and moving away from clothing production. Here, as in other export activities, supportive complementary policies are key to capturing the ultimate benefits of increased trade opportunities.