chapter  2
86 Pages

Liberalization of the agricultural sector

Introduction Agricultural trade has long been subject to protracted protections and widespread distortions throughout the world. Such protections, often attributed to the sen­ sitive character of agriculture for its implications for national food security and other such expediencies, were extensively practiced by both developed and developing countries, although the former evidently excelled in the race. Many developed countries, especially those belonging to the European Union, not only acquired a short­ lived competitive advantage in agriculture through massive domestic subsidies and export supports, but also often contributed to global market instability by trading such subsidized agricultural products at un­ competitively low prices. Developing countries, for their part, also adopted various protectionist measures but those evidently resulted in lowering of domestic output, higher food prices, negative taxation of agriculture, and pro­ longed dependence on food aid.1 Worse still, while successive rounds of the General Agreement on Tariff and Trade (GATT) negotiations brought down tariffs and non­ tariff barriers for manufactures, in which developed countries had greater comparative advantage and thus greater export interests, agricultural trade, in which developing coun­ tries had natural comparative advantage and thus exports interests, faced move­ ment in the opposite direction. Eventually, however, agricultural trade was brought to the negotiation table by the GATT Ministerial Conference held in Punta del Este (Uruguay) in 1986. The successful conclusion of the Uruguay Round negotiations ultimately paved the way for the integration of the sector into the strengthened GATT discipline in 1994 under what is known as the Uruguay Round Agreement on Agriculture (URAA). Despite full implementa­ tion of the agreement under the auspices of the World Trade Organization (WTO) which replaced the GATT, international trade in agriculture still remains largely distorted, and unquestionably far less liberalized than trade in the manu­ facturing sector. Moreover, any further liberalization of the sector largely depends on the success of ongoing or future negotiations under the WTO. The chapter has been organized as follows. The following section sheds light on the processes that led to the eventual integration of the agricultural sector into

the GATT discipline. The third section explains the major features of the URAA and the fourth section provides a critical evaluation of the implementation of the agreement. The fifth section provides an analysis of the consequences of the URAA implementation. The sixth section explores post­ URAA issues and WTO negotiations in the context of developing countries. The seventh section con­ cludes the chapter.