Chapter 3
Main Agreements I

INTRODUCTION

The WTO consists of several agreements to which members are a party. This section describes the Agreement on Textiles and Clothing (ATC), the SPS Agreement, and other agricultural issues including the plurilateral agreements on beef and dairy products. It also explains concerns of the less developed country (LDC) members of the WTO as well as environmental issues.

LESS DEVELOPED COUNTRY CONCERNS

The WTO brings together more than 130 diverse members in a mission towards free trade. Of those members, only about thirty are developed nations. While developed nations may be outnumbered by the approximately 100 developing and transition members of the WTO, their presence in world trade is far greater. The EU and the United States alone - two of the world's largest traders - produce 35 percent of the world's exports.⁽¹⁾ The least developed of the developing countries together produce only one-half of one percent of the world's trade.⁽²⁾ These numbers reflect the differences in social, political, and economic realities between developing and developed nations as well as gaps in resources among the two. The figures also explain the fear at the WTO's inception that, as articulated by Fernando Jaramillo, former chair of the Group of 77 and Colombian ambassador, "The industrialized countries, which make up only 20 percent of the membership of GATT, will appropriate 70 percent of the additional income to be generated by the implementation of the Uruguay Round."⁽³⁾

The developing world, often referred to as the global South, consists of nations engaged on varying levels in the process of industrialization. To differing degrees they are nations that must deal with such internal economic issues such as an over-emphasis in exports on primary, agricultural, and textile goods, and the overall stimulation of industrialization and export of manufactured goods. Insufficient resources are often an obstacle for nations to deal with other, related issues: building institutional capacity, developing infrastructure, improving policy making and macroeconomic management, boosting training and attaining political stability. From dependency theory and nationalism, to military governments, to import substitution and other economic protectionist policies, developing nations have undergone huge upheavals in attempting to deal with these issues. Yet the tactics of the previous decades have largely failed to thoroughly and permanently affect positive change and to address the gap between the North and the South. The 1990's have seen political leaders and economists of the South turn to economic liberalization schemes. The general willingness to conform to the standards of the North, to adopt free trade reforms and to join in the WTO is evidence of the desire to deal with these issues as well as recognition that failure to participate will lead to marginalization and isolation.

At the core of the concerns developing countries have with free trade in general, and with the WTO specifically, lies the issue of fairness, both in trade and in the way in which the business of the WTO is conducted. Due to their smaller, less stable, and less diverse economies, developing nations have special needs that must be taken into account in the negotiation of trade agreements and in the process of participation in the WTO. Currently, two bodies of the WTO focus on developing countries' interests in trade. They are its Committee on Trade and Development and its Secretariat. These bodies also provide technical assistance to nations in need. In addition, the WTO includes special provisions with regard to developing countries. Some of these provisions are as follows: requiring WTO members to take developing countries into account when adopting legislation, working to increase their access to markets, allowing extra time for the fulfillment of commitments in most agreements, and helping those countries to meet those commitments.

Despite the existence of these bodies and of the special provisions, countries continue to fear potential negative economic impacts that tariff peaks, tariff escalation, and erosion of preferences might have. Tariff peaks are exceptionally high tariffs placed on certain products, tariffs meant to protect an importing country's industry. Such tariffs on a country's exports - especially vital exports like textiles and clothing - can negatively affect that country's trade. Tariff escalation occurs when a country places low duties on materials imported for use by a domestic industry, and high duties on imports equivalent to that industry's finished (manufactured) product. This could negatively affect a developing country's effort to stimulate the export of manufactured goods and force them to continue to rely heavily on primary goods. The erosion of special preferences for least-developed countries was illustrated by the banana case.

Sierra Leone's experience in 1995, in attending its first Committee on Trade and Environment (CTE) meeting, demonstrates how lack of resources affects a nation's ability to participate fully in the WTO. In September of that year, the government of Sierra Leone sent a delegation to the CTE meeting. A non-profit organization was hired to join the delegation and to provide much needed technical assistance. The WTO Secretariat initially rejected the composition of Sierra Leone's delegation, due to the presence of the non-profit organization. Not only did Sierra Leone lack the human resources to participate in the CTE meeting alone, it lacked the economic, political and diplomatic influence to resist the Secretariat's objections.⁽⁴⁾ While the situation eventually worked out, this illustrates the disadvantage of less developed countries. Furthermore, as the country's delegation later realized, its lack of resources affected the extent to which the nation was prepared with adequate knowledge of the WTO to participate fully in the organization. The experience of many countries of feeling left out of WTO meetings and decisions has caused some to call for greater transparency in the WTO, particularly in its dispute resolution process.⁽⁵⁾

Implications for the Future

With regards to developing nations' concerns over the negative effects of trade under the WTO, this organization as well as other international institutions such as the World Bank and the Trade and Development Center, project that any losses are not likely to be overwhelming. For instance, the World Bank and the United Nations Conference on Trade and Development (UNCTAD) project that the erosion of trade preferences overall for Africa would reduce African exports by less than one percent.⁽⁶⁾ It remains to be seen over the long term, however, if such reductions will be compounded by increases in food prices, causing overall damage.

Renato Ruggiero, director-general of the WTO, has identified three key areas for improvement on behalf of the developed world. While he refers to these specifically in the context of least-developed nations, they apply to all developing nations. They are: opening new market access opportunities for developing countries, designing an integrated approach to building trade capacity (which truly reflects their needs), and using new technology to open windows of opportunity between the North and the South. While the WTO has made progress in dealing with developing countries and continues to do so, its members will have to continue to pay close attention to these issues in the future. As Mr. Ruggiero commented, "…without the full integration of the [developing nations] we can never have a truly 'global' trading system."⁽⁷⁾

THE WTO AND ENVIRONMENTAL CONCERNS

The inception of the WTO occurred congruently with a growing global green movement. As a result, what was intended to be strictly a trade institution has come under scrutinization by environmentalists from all over the world. The environmental issue cannot be considered a new one, as it has long roots and has been included in GATT discussions in the past. However, environmental concerns reached a crescendo in the 1990s, forcing policy makers and corporations worldwide to take notice or face the backlash of public opinion. The WTO has not been exempt from examination from the green perspective. The crux of the difficulties faced by the WTO in its attempts to assuage environmental concern is the fact that it is inherently a trade institution, and not an environmental one. The challenge for the WTO will be to reconcile trade policy agendas with environmental policy agendas without deconstructing either into an unrecognizable form. Over the past three years, the WTO has produced considerable discussion and posturing on this issue, but many environmental groups remain unconvinced and continue to criticize the WTO for its lack of environmental awareness. In response to global environmental concern, the Uruguay Round of GATT negotiations put forward a working group on trade and environment which evolved into the CTE. The Committee has a very general area of responsibility that calls for the study of the interaction between trade and the environment, and makes recommendations on any changes that may be needed in the trade agreements. One can see already that the Committee has a limited role, and it is meant to be so. The framers of the Committee maintain two principles by which the Committee must conduct its work. The first principle deals with the issue of the WTO as a trading institution, therefore its area of expertise is trade. The WTO is not an environmental regulatory institution and is not interested in becoming one. Therefore the CTE only studies questions in which environmental policies have a significant impact on trade. The second principle by which the Committee operates is that when an issue does arise, the solution must uphold the principles of the WTO.⁽⁸⁾ From these two operating principles, it is evident that the WTO is not interested in taking on environmental policy choices. The belief is that environmental legislation should be left to domestic governments and should not be dictated to states by the WTO. This sentiment is demonstrated in comments made by Renato Ruggiero when he said, "Environmental problems need environmental solutions, not trade solutions, even though the two may be mutually supportive."⁽⁹⁾

The work of the WTO Committee on Trade and Environment culminated in a report on trade and the environment to the Ministerial Meeting in Singapore in December of 1996. The report's conclusions supported the principles of the WTO and listed the benefits of free trade to sustainable development and environmental protection. This theoretical conclusion was reached by recognizing the economics behind free trade. The idea is that free trade encourages the best allocation of resources and thereby will contribute to the conservation of the world's natural resources, which is key to both sustainable development and environmental protection. The report and the committee's work have been relatively overarching and have not been aggressive or active enough in the eyes of environmentalists, but this fits with the WTO's position that it wishes to remain out of the environmental policy arena.

In keeping with this point of view, the WTO would have questions on the environment delegated to those institutions equipped with the experience and capability to deal with them. This point is emphasized by the fact that there are roughly 200 international agreements currently in force concerning the environment, called multilateral environmental agreements (MEAs). Some of these agreements include provisions that can affect trade. The most notable of these agreements are the Montreal Protocol⁽¹⁰⁾ and the Basel Convention⁽¹¹⁾. The CTE maintains that these agreements can coexist with the WTO and that the principles of non-discrimination and transparency do not conflict with trade measures needed to protect the environment. To date, no trade action taken under a multilateral environmental agreement has been challenged in the WTO or the GATT.⁽¹²⁾ It is the Committee's opinion that if such a dispute were to arise, it would best be handled within the framework of the MEA concerned. A gray area remains for the Committee concerning the hypothetical situation where a signatory to an MEA imposes trade restrictions on a non-signatory, thus bringing to loggerheads the issue of trade policy and environmental policy. Given the WTO's stance, such a dispute would be settled based on the effects on trade and not the effects on the environment.

The Venezuela case against the United States concerning gasoline exports demonstrated the emphasis the WTO puts on trade issues as opposed to environmental issues. Despite the fact that the Venezuelan gasoline did not meet the environmental standards set forth by the United States, the WTO ruled in favor of Venezuela. The ruling was a relatively simple one since the United States violated the national treatment principle and imposed stricter requirements on imported gasoline than on domestically refined gasoline. The ruling highlights the WTO's adherence to its basic principles of free trade. The case also demonstrates that environmental regulations cannot be imposed arbitrarily on imports or they will be seen as unjustified non-tariff barriers.

Another case which is often cited in discussions of trade and environment in the WTO is the dolphin-tuna case, which was actually brought before the GATT but bears mentioning since it has established a precedent that may be revisited in the WTO. The settlement, which was never adopted due to the consensus requirement, determined that a product could only be judged by the qualities in and of itself and not by the process by which it was made. The argument was that to impose standards on the process by which a product was made in another country would constitute extraterritoriality, and could lead to a flood of restrictive environmental process regulations that would favor domestic industries and work against the principle of free trade.⁽¹³⁾ Once again we can see the emphasis of the correct trade policy over the correct environmental policy.

Out of the dolphin-tuna case came a reinvigoration of interest in the eco-labeling issue. Eco-labeling is the labeling of environmentally friendly products. It has been supported by the WTO as a very important environmental policy tool, as consumers can bring their power to bear on those businesses that do not have environmentally safe products. The WTO maintains that eco-labeling must be in the spirit of WTO principles and be non-discriminatory. The dolphin-tuna case specifically highlights the eco-labeling issue since the CTE has approved eco-labeling for the product, but has not decided if the labeling of the process of production is consistent with the WTO agreement on Technical Barriers to Trade.⁽¹⁴⁾

The commitment of the WTO to trade issues exclusively has been demonstrated by both word and deed. The position of the WTO remains the same: to deal with trade issues and defer environmental questions to institutions better suited to deal with them. Detractors, including many of the world's environmentalists, claim this is a shirking of responsibility and that the WTO is missing a grand opportunity to make real headway on global environmental issues. The accusations come from all sides of the green movement. Many environmental organizations claim that the WTO only hears the voice of the corporate world. The environmental organizations of the South claim that the WTO only concerns itself with Northern environmental issues. Although the specific complaints may vary, the central theme heard when soliciting remarks from environmentalists across the globe is that the WTO has failed to address environmental issues. Of course, this is not surprising considering it was not designed as an environmental institution. However, the agreement establishing the WTO does mention the environment and sustainable development in its preamble. Regardless, there remains a firewall between environmental and trade experts, as can be seen in the arguments that arise between the two. Therefore, the WTO will have to step carefully to avoid the image of being environmentally apathetic. The questions on trade and environment will only become more complex and blurred in the very near future. The institution needs to be prepared to deal with this.

TEXTILES AND CLOTHING AGREEMENTS

One of the most significant changes that came out of the Uruguay Round was the Agreement on Textiles and Clothing (ATC). This trade sector had not been under normal GATT discipline for almost forty years. Although multi-fiber agreements were established under the auspices of GATT, they violated core ideologies: multilateralism, non-discrimination (MFN treatment) and liberalism. (For more on the history of this trade sector, see Annex IV.)

The U.S. textile and apparel industries are the most heavily protected of all U.S. industries. "The textile and apparel industries receive higher levels of protection than any other U.S. manufacturing sector. The estimated tariff rate equivalent of all U.S. protection of textiles (tariffs and quotas combined) is 23.4 percent, and 48 percent for apparel." ⁽¹⁵⁾ Traditional economists generally find protectionism to be inefficient. It decreases the aggregate wealth of the world. This takes several forms in the case of textiles.

First, quotas restrict the volume of goods developing countries may export. With limited domestic markets, export restraints prevent these countries from achieving economies of scale. Export restriction also limits access to foreign exchange, forcing these countries to borrow in order to finance imports of foreign technology and capital goods. This exposes them to currency risks and potential international banking crises.

Restrictions on textiles and apparel are particularly damaging. Some traditional development models hold that countries start with simple light industry like textiles. They use the capital and skills generated in this sector to develop more advanced industries like iron, steel, ship building, and autos. By limiting the textile exports of LDCs, they never gain enough capital or expertise to move into the next stage of development.

Finally, restrictions prevent developing countries from exploiting their comparative advantage in low wages, as textiles and apparel requires large numbers of unskilled and semi-skilled laborers. This inefficient labor allocation also affects developed countries, which suffer misallocation of labor and capital because of protectionism. This, in turn, results in the outcome seen today in the United States, where better educated workers are employed in low-skill positions. This labor and associated capital would be better employed in more productive sectors.

U.S. consumers are also harmed by protectionism, facing significantly higher prices on textiles and apparel. "Elimination of all U.S. import barriers would provide a $24 billion windfall to U.S. consumers (Hufbauer and Elliot 1994, 88-89)..."⁽¹⁶⁾ Other estimates have been lower, "…Trela and Whalley 1988, 1990 suggest global gains from the elimination of quotas and tariffs of more than $17 billion (of which $ 11 billion will accrue to developing countries) and gains to the United States from the removal of quotas of $3 billion."⁽¹⁷⁾

However, there is substantial evidence that the market for export licenses is not perfect, with a few firms and individuals controlling most of the licenses. The Hong Kong Trade journal, Textile Asia, alleges that: "Quota price fluctuations do not in fact reflect normal supply and demand but the course of manipulation by the quota holders." ⁽¹⁸⁾ If this is the case, then some firms in LDCs are earning "quota rents," profits significantly higher than a free market would allow. It is possible that this rent aids in capital formation by concentrating profits in a few firms, attracting investment, especially FDI. Quotas may aid LDCs in another way. By limiting the amount that firms can export, the only way firms can increase profits is to focus on higher quality products with greater profit margins. This process leads to a great focus on quality control, which is a key step in progress toward success in more sophisticated industries.

Quotas may not harm the United States as much as some seem to believe. The United States buyers' market for textiles and clothing is not perfectly competitive, but characterized by a high degree of concentration. These buyers use their market power to demand lower prices. Studies found that, "...the U.S. share of the total potential rent is very substantial, ranging from 48 percent for skirts in 1986 to 94 percent for playsuits in 1988."⁽¹⁹⁾ This means that U.S. corporations already capture a substantial share of the amount that the U.S. consumer would receive from the lifting of tariffs and quotas. Although the lifting of these quotas would represent a net aggregate gain for the United States, a substantial redistribution for retail corporations to consumers would also take place.

A similar redistribution of income would take place between U.S. consumers and textile workers. Krishna, Erzan, and Tan's numbers suggest that every U.S. consumer would save about $12 a year. However, a number of U.S. textile workers would lose their jobs or face lower wages. Though many workers would transfer to other industries, some would experience a long-term reduction in standard of living. This is especially true of regions such as Maine, where other traditional industries are also struggling. In summary, most economists would agree that tariffs and quotas reduce aggregate efficiency, however there are other factors that make an exact estimate impossible. Despite these uncertainties, the ATC was aimed at bringing this sector of trade back under normal GATT discipline.

The ATC has a number of elements. The first is a ten-year transition period over which quotas will be eliminated, though countries retain a lot of flexibility on the exact products on which they will lift quotas. (See Annex V) For products where quotas are not eliminated, the quota growth rates must be higher than they were in the MFA-V Agreement. (See Annex VI) Least developed countries and small firms are given a slight advantage. The Agreement also establishes a new institution, the Textiles Monitoring Body (TBM). This body monitors countries' progress and makes sure they are conforming to ATC requirements.

The ATC also has a number of safeguards, some transitional, others permanent. The transitional safeguards are intended to blunt export surges. Countries may apply selective (that is, non-MFN) restrictions on countries that "cause or threaten serious damage to domestic industry." Countries' ability to do this is limited by three restrictions. First, the restrictions may not reduce the volume of exports below the level they were at in the pervious twelve-month period. Second, they may remain in place for only three years and are non-renewable. Third, no "handloom, cottage industries, traditional handicrafts or textiles of historical significance or pure silk" ⁽²⁰⁾ may be restricted.

The permanent safeguards include the use of Article XIX: non-discriminatory (MFN based) limits can be imposed to prevent "market disruption." The ATC limits the use of this Article to the textile categories that were liberalized under the Agreement. The other permanent safeguard is the continued existence of anti-dumping procedures.

Developing countries see many potential problems with the ATC. First, the liberalization schedule is substantially back-loaded, with 49 percent of textiles under quotas until 2004. The flexibility that nations enjoy in choosing what to liberalize means that politically sensitive categories of goods will be protected until 2004. "Since the most sensitive items will be the last to be liberalized, one can expect tremendous political pressure for an extension of the quotas, and or for the imposition of import safeguards, as the transition period draws to and end."⁽²¹⁾ Also, underutilized categories were retained and new categories of products were added to the ATC. Countries can avoid any new liberalization by "removing" quotas on goods that were never restricted and still satisfy their ATC commitments.

Developing countries also dislike the formula for quota growth levels. The example in Annex VI had a base growth rate of 6 percent, translating into a minimum quota increase of 134 percent during the ten-year transition.⁽²²⁾ However, many growth rates were much lower under MFA-V. A base growth rate of a more common 1 percent leads to only 16 percent growth over the ten-year transition. Modest increases in demand in developed countries would increase the "effective" restrictiveness of the quotas. As a group, LDCs could lose market share in developed countries as trade is "liberalized."

Developing countries are also concerned that the developed countries will over-use the safeguards. Even if these safeguards are not over-utilized, developing countries will still face relatively high tariffs on specific goods. The ATC does nothing to lower these tariffs. After the transition period, the United States will still have, "More then 50 items ...left with tariffs above 15 percent, particularly on wool and wool-blend fabrics." ⁽²³⁾

One final issue is of concern to both developed and developing countries. The ATC does not currently include China and Taiwan. These countries account for 25 percent of the world's textile exports. How these countries can be integrated into the ATC without disrupting markets and harming developing countries is not clear. This point is especially significant in light of the current excess production capacity in East Asia.

Although the developed nations of the world committed themselves to removing all quotas on textiles and apparel by 2004, it is not clear that this will really happen. The first two rounds of quota elimination (1994 & 1997) did not cause any serious pain to developed nations. Will they be willing to make the harder liberalization in 2004? No one can know, but history suggests it will depend on the strength of their economies at the time and the degree of progress that LDCs have made in liberalizing their economies.

THE SPS AGREEMENT AND AGRICULTURAL ISSUES

History of the SPS Agreement

Before the conclusion of the SPS Agreement, the general principles of the GATT 1947 and the 1979 Agreement on Technical Barriers to Trade (TBT Agreement) had covered the sanitary and phytosanitary (food safety and animal and plant health) concerns of agricultural trade. First, the MFN and national treatment clauses of the GATT required non-discriminatory treatment of imported commodities from various foreign suppliers and from domestic products. These two clauses applied to any legislation and regulations affecting the sale of agricultural commodities, including pesticide residue and food additive limits, and restrictions for animal or plant health purposes.⁽²⁴⁾ Article XX: b of GATT 1947, however, provided the exceptional treatment of agricultural goods, if it is "necessary to protect human, animal, or plant life or health."⁽²⁵⁾ Some considered this clause as a major loophole by which national governments could exempt their food safety measures from GATT provisions.⁽²⁶⁾

Secondly, the TBT Agreement concluded at the Tokyo Round negotiations (1974-79) allowed national governments to introduce sanitary and phytosanitary measures restricting agricultural imports on the grounds that they would pursue "legitimate" objectives, potentially including environmental protection, animal welfare, religious considerations, and national security.⁽²⁷⁾ The lack of comprehensive and detailed regulations specifically covering the food safety and agricultural trade, and the existing framework which potentially encouraged governments to devise trade-restrictive measures, created impetus for the SPS Agreement during the Uruguay Round negotiations.⁽²⁸⁾

The SPS Agreement

The SPS Agreement was signed as a part of the Final Act of the Uruguay Round. The Agreement took effect with the establishment of the WTO. The objective of the SPS Agreement is twofold. First, it aims to reduce the arbitrary nature of sovereign governments using SPS measures as trade restricting devices. Second, it seeks to promote the harmonization of national SPS measures to the international standards while protecting member governments' rights to regulate their own food safety, animal and plant health issues.

The new features contained in the SPS Agreement reflect the above objectives. Unlike the TBT Agreement, the SPS Agreement is particularly designed for the safety of agricultural commodities. In addition, the SPS Agreement establishes the burden of scientific justification in cases where national SPS measures are deemed protectionist by other members.⁽²⁹⁾ In order to reduce arbitrary conduct of trade regulations, the SPS Agreement contains the concept of transparency, which requires governments to provide information regarding their sanitary and phytosanitary measures and any changes to these measures (Article VII of the SPS Agreement).⁽³⁰⁾ The Agreement also promotes the concept of harmonization (Article III). Although the SPS Agreement does not impose any international sanitary and phytosanitary standards, it encourages governments to "harmonize" their SPS measures with the existing international standards developed by organizations such as the Codex Alimentarius Commission and the International Office of Epizootics. The SPS Agreement elaborates the procedural framework in which governments deal with their sanitary and phytosanitary issues. The dispute settlement system (Article XI), the risk assessment procedures (Article V), and the establishment of the SPS Committee (Article XII) are aimed at creating a more transparent and efficient food safety and agricultural trade regime. Finally, the SPS Agreement provides some preferential arrangements for developing countries.⁽³¹⁾

Impact of the SPS Agreement

The United States, as the largest agricultural exporter, has benefited from the SPS Agreement since it helps American agricultural interests by reducing arbitrary and unscientific trade barriers in foreign markets. For example, the U.S. Department of Agriculture (USDA) regards the conclusion of the SPS Agreement as a major victory against unfair trade restrictions.⁽³²⁾ In fact, a U.S. farm lobby insisted that Australia and New Zealand open their markets of fruit and poultry respectively, by relaxing their sanitary and phytosanitary measures that are not scientifically justified.⁽³³⁾ A more conspicuous example of the U.S. position in sanitary and phytosanitary issues is the EU ban on U.S. beef ingested growth hormones from 1989. This was expected to be "a test case for the Uruguay Round SPS Agreement."⁽³⁴⁾ In September 1997, the WTO dispute panel ruled in favor of the United States, insisting that the EU import ban would violate the SPS Agreement since it did not provide scientific ground. Despite subsequent EU appeals against this decision, the WTO Appellate Body again supported the U.S. position in January 1998.⁽³⁵⁾ The Appellate Body, however, took a more conciliatory position towards the EU, adding that the EU could establish a higher standard to protect consumers even if its proof is not unanimously shared among the scientific community.⁽³⁶⁾ This recent decision encouraged the EU to propose that the revised SPS Agreement include consumer preference as the justification of SPS measures.⁽³⁷⁾ Consequently, EU interests appear incompatible with the existing provision of the SPS Agreement which U.S. export sectors have supported.

The impact of the SPS Agreement on U.S. agricultural imports is less adverse than it would be in other countries. In fact, there has been no major increase in U.S. agricultural imports attributable to the conclusion of the SPS Agreement.⁽³⁸⁾ Since the United States has subscribed to the Codex Alimentarius Commission's food safety standards,⁽³⁹⁾ it is not likely that other WTO members would request that U.S. national standards to conform to the international standards. Moreover, the United States has actively participated in all committees of the Codex Alimentarius, which is under the auspices of the World Health Organization.⁽⁴⁰⁾ It is not surprising, however, that environmentalists and consumer activists in countries with "high" standards are generally fearful of any international attempts which might result in lowering of their standards.⁽⁴¹⁾ In fact, U.S.-based NGOs have recently filed their comments on the SPS Agreement. They recommended that international standards mentioned in the Agreement constitute "floors, not ceiling(s)," that the WTO allow public participation in SPS deliberations, and that the role of Codex Alimentarius and other standards be re-examined.⁽⁴²⁾ Although these groups do not necessarily oppose the SPS Agreement, it is essential for the U.S. government to accommodate some activist voices in order to strengthen its position on trade liberalization. It can do so by communicating that the U.S. safety standards, which are scientifically justified, provide sufficient protection for consumers. According to the USDA, the U.S. regulatory system currently assures consumer safety through pre-market assessment and approval, production monitoring, statistical sampling and inspection of imported products. It also maintains that all trade agreements which the U.S. signs guarantees the sovereign right to set its own level of protection for human, animal, and plant health.⁽⁴³⁾

The conclusion of the SPS Agreement also had an impact on the existing agricultural trade regime. On September 30, 1997, the WTO announced that it would suspend the International Bovine Meat Agreement and the International Dairy Agreement at the end of 1997.⁽⁴⁴⁾ According to the parties to the two plurilateral agreements,⁽⁴⁵⁾ the formation of the WTO Committee on Agriculture and the SPS Agreement questioned the raison d'etre of the meat and dairy agreements which had taken effect in January 1980, with the intention of expanding world trade in the two sectors. The International Meat Council and the International Dairy Council were responsible for circulation of trade market information of the two sectors and the evaluation and implementation of the respective agreements. Now WTO members can rely on national and inter-governmental organizations for such services. Resource constraints of governments and the WTO Secretariat were another factor in the termination.⁽⁴⁶⁾ In short, the more comprehensive and inclusive approach of the WTO and the SPS Agreement superseded the two plurilateral agreements.

Agricultural Issues and Future WTO Negotiations

WTO members agreed to start negotiations on the next phase of agricultural trade liberalization at the end of 1999. While priority issues vary among members, there is little doubt that the next round will address issues from the "built-in agenda" such as import access, domestic support, and export subsidies. The SPS measures are likely to be another focus of attention. The USDA has identified several issues that U.S. negotiators will pursue in the next round. The issues include enhanced import access through the further reduction of tariffs and the elimination of tariff quotas, the reduction in production and export subsidies, price and income supports, and the elimination of disguised subsidies and non-tariff measures.⁽⁴⁷⁾ While other major agricultural exporters, such as the EU and the Cairns Group, generally agreed on the need to further reduce their support to agricultural sectors, the EU expressed reservation that its Common Agricultural Policy must maintain environmental protection.⁽⁴⁸⁾ (See Annex VII)

As to the status of the SPS Agreement, the USDA desires the tightening of the agreement to counter disguised protectionist intent in the SPS measures. On the other hand, the EU has proposed the inclusion of consumer preference as the reason for trade restriction of agricultural products. If the participants in the next round were to discuss the revision of the SPS Agreement, the treatment of genetically engineered farm products would be a major focus of debate. The EU remains apprehensive about lifting restrictions on these products, whereas the United States accuses such intent as being political rather than scientific.⁽⁴⁹⁾ Acknowledging that the momentum in the EU proposal might reverse the original direction of the SPS Agreement, U.S. negotiators should be cautious in opening the debate on the status of the SPS Agreement.

¹ Chaytor, Beatrice and Michael Hindley. "A Case Study of Sierra Leone's Participation in the World Trade Organization (WTO)." Abridged version. United Kingdom, Cameron and May: 1997, http://www.eleves.ens.fr:8080/home/boyd/hindley.html

² Ruggiero, Renato. Speech at "High-Level meeting on the Integrated Initiatives for Least-Developed Countries Trade Development." 27 Oct 1997. http://www.wto.org

³ "Developing Countries." WTO website. http://www.wto.org

⁴ See Chaytor 1997.

⁵ Bergsten, C. Fred. "Competitive Liberalization and Global Free Trade: A Vision for the Early 21^st Century." APEC Working Paper 96-15. Institute for International Economics: 1996, http://www.iie.com:80/9615.htm

⁶ Trade and Development Centre. "Africa and the International Trading System." http://www.itd.org

⁷ Ruggiero, Renato. Speech at "High-Level meeting on the Integrated Initiatives for Least-Developed Countries Trade Development." 27 Oct 1997. www.wto.org

⁸"Beyond Agreements: The Environment - a New High Profile," The WTO webpage at http://www.wto.org

⁹Ruggiero, Renato. Director General of the World Trade Organization. Keynote address at the GATT 50th Anniversary Forum. March 4, 1998.

¹⁰The Montreal Protocol is an MEA for the protection of the ozone layer.

¹¹The Basel Convention MEA concerns the trade or transportation of hazardous waste across international borders.

¹²"International Agreements," Ibid.

¹³"The Tuna-Dolphin Dispute," Ibid.

¹⁴"Beyond the Agreements," Ibid. p. 4.

¹⁵ The Uruguay Round: An Assessment, Schott, Jerry J. Institute for International Economics. 1994. pp. 58

¹⁶ Schott. pp. 58

¹⁷ Deardorff and Stern ed., Analytical and Negotiating issues in the Global Trading System, The University of Michigan Press. 1994. pp. 97

¹⁸ Deardorff and Stern pp. 98

¹⁹ Deardorff and Stern pp. 117.

²⁰ Schott. pp. 57.

²¹ Schott. pp. 56

²² Schott. pp. 56 Again, these numbers come from a Schott example.

²³ Schott. pp. 58

²⁴ GATT 1947, Article III.

²⁵ GATT 1947, Article XX: b.

²⁶ WTO, "Goods: Rules on NTMs," <http://www.wto.org/eol/e/wto3_23.htm#note50

²⁷ Ibid.

²⁸ See Appendix D, for the background information on the agricultural negotiations during the Uruguay Round.

²⁹ The SPS Agreement provides the definition of national sanitary and phytosanitary measures which fall into the agreement. See Annex A of the SPS Agreement.

³⁰ WTO, Agreement on the Application of Sanitary and Phytosanitary Measures.

³¹ Article 9 calls for technical assistance to developing countries to help them prepare their national SPS standards. Article 10 allows developing countries to delay their fulfillment of the requirements to a certain extent.

³² USDA, "Fast Track and Agriculture: What's at Stake for Beef?" November 6, 1997, <http://www.fas.usda.gov/itp/fast_track/5beef.html

³³ "Statement of Dean R. Kleckner, President, the American Farm Bureau Federation before the House Agriculture Committee Subcommittee on Livestock, Dairy and Poultry Subject," Federal News Service. February 26, 1998.

³⁴ S. A. Harris, "The Uruguay Round Outcome: A Dilemma for EU Food and Agriculture Policy," Food Policies and the Food Chain: Structures and Inter-Relationships. September 19-21, 1994, Reading: The University of Reading, UK.

³⁵ "Growth Hormones in US and Canadian Beef," WTO News. January 21, 1998, Institute for Agriculture and Trade Policy (IATP).

³⁶ "Ambiguous Decision on Hormones," Ibid., February 9, 1998. IATP.

³⁷ "US and Europe Hint SPS may Reopen," Ibid., March 3, 1998. IATP.

³⁸ Spangler, Ibid.

³⁹ From comments by Barbara Spangler at the American Farms Bureau Federation (AFBF), March 5, 1998.

⁴⁰ USDA, "Fast Track and Agriculture: Trade Agreements and Food Safety," <http://fas.usda.gov/itp/fast_track/tradeagr.html.

⁴¹ Swinbank and Carolyn Tanner, Farm Policy and Trade Conflict: The Uruguay Round and CAP Reform, An Arbor: The University of Michigan Press, c1996, p. 135.

⁴² "1998 SPS Review Starts," WTO News. February 9, 1998.

⁴³ USDA, "Fast Track and Agriculture: Trade,".

⁴⁴ Bovine meat includes: beef, veal, and live cattle. "Beef and Dairy Agreement Suspended," Europe Agri. October 10, 1997.

⁴⁵ These agreements were called "plurilateral" because not all WTO members were signatories. The participants in the meat agreement were: Argentina, Australia, Brazil, Bulgaria, Canada, Chad, Colombia, the European Communities (15), Japan, New Zealand, Norway, Paraguay, Romania, South Africa, Switzerland, the United States, and Uruguay. The Parties to the dairy agreement were: Argentina, Bulgaria, Chad, the EC (15), Japan, New Zealand, Norway, Romania, Switzerland, and Uruguay. See WTO, "Signatories Terminate WTO Plurilateral Agreements on Meat and Dairy Products," <http://www.wto.org/press/press78.htm

⁴⁶ "WTO Meat and Dairy Accords Slated for Year-end Termination," Agence France Presse. September 30, 1997.

⁴⁷ "Agriculture: US, EU, and Cairns Define Issues," WTO News. January 21, 1998, and USDA, "Fast Track and Agriculture: What's at Stake in Future WTO Negotiations?", http://www.fas.usda.gov/itp/fast_track/5wto.html.

⁴⁸ "Agriculture,".

⁴⁹ Ibid.  

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Last Updated on 4/1/98