The Preferential Trade Conundrum and the Multilateral Market Access Negotiations in Agriculture

Abstract

Regional trade agreements have increasingly become important as a medium for effecting trade liberalization. The trend is not expected to recede. There is not to suggest that multilateral trading system under the WTO has to be relegated. Regional trade agreements may be a good avenue to pursue market access reforms, but they do have an obvious limitation in making a foray into rule-making. They rely rather heavily on multilateral trade rules and on the expectation that these fundamental trade rules are implemented so as to build upon them within the preferential setting. This is evident when one looks at the treatment of subsidies, regulatory measures, safeguards and other trade remedy instruments within these regional trade agreements. This article examines the situation of exports and imports in ten major agricultural trading countries or territories to assess the share of preferential trade in the overall trade profile. While the situation varies across the group, a significant share of trade continues to originate in or destined for countries under (MFN) Most-favoured Nation terms. In a number of regional trade agreements, including those involving the ten major countries, various sensitive agricultural sectors like dairy, meats, sugar, cereals have either been exempted from tariff elimination or preferential tariff treatment has been offered through a minor reduction in high MFN tariffs or tariff rate quotas. Tariff reforms for a number of such sensitive agriculture sectors have proven to be difficult partly because of the linkage between tariff policies and governmental internal policies and subsidies granted to such sensitive sectors. This linkage hinders commitments on tariff liberalization for the relevant sensitive sectors, especially in a preferential setting where domestic subsidy reforms might not be feasible. In order to exploit the synergy between regional trade agreements and the multilateral trading system and negotiations, it has been suggested in this article to consider reforms of sensitive agricultural sectors within the multilateral negotiations where both tariff liberalization and subsidy reforms may be pursued together.