Summary of FTAA Working Group Discussions Affecting Agriculture and Food Security

Steve Suppan, Ph.D.
Director of Research, Institute for Agriculture and Trade Policy

November 1997

The following summary reviews recent topics of discussion and possible negotiating positions in Working Groups towards the proposed Free Trade Area of the Americas (FTAA). The summary is intended to prompt thinking and political organizing about how the discussions of various Working Groups may affect food security and family farming policies and programs. This review concerns the Working Groups on Sanitary and Phytosanitary Measures (SPSM); Subsidies, Anti-Dumping and Countervailing Duties; and to a lesser extent (for lack of access to documents), Market Access. Sanitary and Phytosanitary Measures concern animal, plant and food health and safety norms and inspection practices in traded goods. "Antidumping" concerns measures to prevent the "dumping" of products at below the cost of production to increase market share. Countervailing duties are levied to retaliate for an increase in tariff or non-tariff barriers to trade. Sometimes SPSM and charges of "dumping products are topics of mutual accusation in agricultural trade disputes. (For a sample case of such a dispute, see our "Guerra Comercial de Verduras y Cumplimiento de las Normas Sanitarias y Fitosanitarias.")

Discussions in other Working Groups will also affect family farming and food security, but these three have been selected for discussion due their centrality to our concerns. (See also the accompanying summary of intellectual property protection in the FTTA for their pertinence to agricultural biotechnology and its impact on family farming.)

NGOs do not yet have the formalized access for making recommendations to negotiators enjoyed by the for-profit sector, organized as the Business Forum of the Americas, so at present NGOs will have to publicize their concerns outside of official FTAA fora. However, it is hoped that in the near future, governments will see the wisdom of formalizing access to FTAA negotiations for representatives of civil society, at which time NGOs will have to synthesize their thinking in concrete policies and prepare to negotiate.

Working Group on Subsidies, Anti-Dumping and Countervailing Duties

At the September 30 - October 2 meeting of the Working Group, the United States alone refused to discuss reforms to trade remedy laws, including its unilaterally determined and imposed Section 301 sanctions. Section 301 law authorizes the U.S. government to investigate U.S. industry charges of unfair trading by U.S. trading partners, and to levy trade sanctions as "remedies" against countries that resist policing their exporters in conformity with U.S. determinations of unfair trading. Section 301 sanctions are most often used to punish countries whose exporters are judged to have "dumped" their goods at below the cost of production in order to gain market share.

The U.S. also alone opposed making "fairness" in the use of trade remedy laws a goal of FTAA negotiations. The U.S. insisted that Working Group discussions be limited to how best to implement existing trade remedy laws to ensure due process and transparency. Any other discussions of trade remedies the U.S. proposes to reserve for the World Trade Organization. While many Hemispheric countries would like to discipline U.S.trade remedy laws, such as Section 301, the U.S. paper discusses those concerns as it Latin American countries were not familiar enough with WTO rules to determine their exporters were "dumping." For example, the paper states "FTAA (and other) countries have had only limited experience in implementing the detailed and complex methodological and substantive provisions of the WTO agreements." Such a statement might suggest that the U.S. would favor a "gradual" approach to FTAA negotiations, to allow Latin American countries to develop the technical capacity to implement their WTO obligations. However, the United States has been the strongest proponent of seeking, as quickly as possible, to "go beyond" WTO disciplines in other Working Groups, such as that of Intellectual Property Rights.

The U.S. proposal for Working Group discussions stated that "to reach the objective of the elimination of all export subsidies in the Hemisphere, countries would have to agree to build upon and go beyond existing WTO obligations. But to make any such Hemispheric agreement meaningful, there must be some mechanism for substantive, if not identical disciplines on export subsidies originating from outside the Hemisphere." The prime target of the proposed disciplines on extra-Hemispheric export subsidies is the European Union, a chief trading partner of the Mercosur nations. Given the interest of Mercosur in reaching an agreement on economic integration with the European Union, the U.S. proposal effectively vitiates the objective of elimination of all export subsidies.

Other topics that the U.S. paper would like the Working Group to discuss include "other practices with effects similar to export subsidies, e.g. potentially but perhaps not exclusively: certain activities of state trading enterprises; export rebates; differential export taxes; certain price pooling practices." The WTO already has a Working Party on State Trading Enterprises in which the U.S. has vigorously participated to target such enterprises as the Canadian Wheat Board. Canada will certainly oppose a discussion to discipline its Wheat Board by FTAA rules and sanctions. Indeed, Canada has suggested that it may seek disciplines on private traders such as Cargill, Continental and Louis Dreyfus, all past recipients of munificent U.S. export subsidies, and as such de facto state traders.

Given the perhaps irresolvable disagreements within the Working Group, the U.S. paper states that "it has proved to be awkward and inefficient to attempt to address three topics [i.e. subsidies, "antidumping" measures, and countervailing duties] adequately within a single working group." The U.S. proposes either breaking up the Working Group into new groups. One group or groups would be concerned with reviewing the issues of prospective FTAA members within the context of the WTO Agreements on Agriculture and on Subsidies and Countervailing Duties. Issues concerning "agricultural export practices with effects similar to export subsidies" would be discussed "under the aegis of a Marketing Access Negotiating Group."

Under such a proposal, negotiated concessions on "other practices with effects similar to export subsidies" might be granted in return for market access concessions. Brazil has stated that it wishes to delay market access talks until the final stage of the FTAA process, in part because at present its industrial base would be vulnerable to exports from U.S.-headquartered companies and because it wishes to see other FTAA issues negotiated to its satisfaction. U.S. diplomats have thus far rebuffed Brazilian concerns, contending, as one did, that after implementing macro-economic reforms in 1990, "they [Brazilian officials] can deal with somewhat more confidence in what is a big boys' game."

Working Group on Sanitary and Phytosanitary (SPS) Measures

Controversy has reigned in this Working Group to the point where, after six meetings, it is the only Working Group not to have submitted a report approved by vice trade ministers, though it will finally submit such a report for an October 28-30 vice ministerial. Even the accuracy of the status report prepared by Mexico on SPS discussions in July was challenged by the United States, Canada and Brazil. The three countries objected to the proposed creation of an SPS committee created by prospective FTAA members in advance of signing and ratifying an FTAA agreement. The United States and Canada contended that the draft minutes and reports were available in English only after the conclusion of the meetings and did not reflect what they thought had been agreed to.

The U.S. and Canada opposed the establishment of a regional mechanism for setting SPSM, suggesting that such a mechanism could lead to a "regional ghetto" whose standards would be below those of the WTO SPSM Agreement. Because most prospective FTAA members were not represented in the WTO SPS negotiations, the U.S. and Canada suggested that these countries needed to be "educated" to demonstrate that following WTO SPSM rules would be feasible even for smaller countries.

In the heavily bracketed (brackets marking passages of disagreement) report from the July 8-9 meeting of the Working Group, a sample exchange of proposed deletions may suggest the extent of disagreement: "It is proposed that where no international standards exist, regional standards should be developed which could eventually be adopted as hemispheric standards. It is also recommended that the Ministers promote the necessary actions to structure national notification and information services in the member countries, so as to comply with the obligations acquired under the WTO. [Delete the sentence: "It is proposed that where no international standards exist..." UNITED STATES PROPOSAL] [Delete as of: "It is also... BRAZILIAN PROPOSAL] These proposed deletions were then followed by further modifications from Chile, also in brackets. Sometimes the objections to the draft report were more encompassing, as in part of Canada's objection to the "General Comments" section of the report: "We do not agree with the majority of statements in this section of the report..."

Given this extent of disagreement, the approval of a consensus status report at a August 27-29 Working Group meeting signified a considerable degree of at least rhetorical concessions. Among the proposals that were dropped from the report was the U.S. proposal to discuss environment issues in the Working Group, after Chile, supported by Mercosur and other countries, stated that the WTO SPS agreement explicitly excluded environmental issues from its discussions. Also dropped from the report was a proposal to create a formal mechanism for discussing regional SPSM problems in advance of the signing of an FTAA Agreement. Nonetheless, the Working Group was unable to agree on a set of approaches towards negotiating an Agreement on SPS measures and food safety.

In view of the extent of disagreement not expressed in the August 27-29 consensus report, the U.S. submission to the Working Group proposed "to consider the linkage with the disciplines from the other Working Groups to determine whether the issue area requires a single Negotiating Group, coordination with other Negotiating Groups or inclusion in a broader Negotiating Group." Although the U.S. opposed the formation of a SPS Negotiating Group, "to foster a continued dialogue on these issues, the United States recommends that SPS experts participate in meeting of the FTAA Market Access Negotiating Group, when matters of technical importance in this area [are] addressed by the FTAA Market Access Negotiating Group."

A consensus report from the Andean and Central American countries, Chile and Mexico proposed the creation of a single SPS Negotiating Group, "in accordance with the WTO SPSM Agreement," and in opposition to the U.S. proposal to discuss SPS issues in the context of market access. The reported further proposed that "maintaining the identity of the [SPS Negotiating] group, coordination will be established with the "Small Economies Group" and eventually, if the need should arise, with other groups, such as Standards and Technical Barriers to Trade, Market Access, and Custom Procedures and Rules of Origin." Towards resolving differences in SPS rules and implementation, the report recommends that "the FTAA process should take into account these differences and advance towards the harmonization of either international or hemispheric-wide standards as the case may be. In the case of the former, a full joint participation in specialized organizations, OEI, CIPF, CODEX) should be achieved; as to the latter, the work and coordination of regional agencies should be encouraged." In order that the interests of smaller (and agricultural export dependent economies) be represented. "the group considers that all the countries of the hemisphere should participate in the [SPS]n negotiations, regardless of their qualification."

Working Group on Market Access

The above summary outlined United States proposals that would put topics of disagreement in subsidy, and SPS issues in the context of the Market Access Negotiating Group. This indicates that the United States sees market access as a key negotiating area for forging agreement and obtaining concessions regarding other Working Group topics. Brazil's reluctance to discuss market access issues until discussions and negotiations in other Working Groups are well advanced has perhaps limited controversy in the official reporting on the Market Access Working Group. Unfortunately, it has not been possible to obtain Market Access reports more recent than the one submitted to the February 25-27 vice ministerial in Recife, Brazil. (According to the official FTAA Web Site http://alca-ftaa.iadb.org the latest Market Access meeting was held October 9-10 in San Salvador. No other information about the meeting is available on the Web Site.) The progress reported by the Working Group on fulfilling its mandate consisted of:

1) agreeing on a work plan to compose a Hemispheric Data Base of tariff and non-tariff barriers to trade, trade flow information for 1995, converted into the UNCTAD-TRAINS format and made available to countries on a CD;
2) holding a seminar on using and updating the Data Base; and
3) submission of disaggregated information on imports, together with tariffs applied to them.

The report looked to the Vice Ministers of Trade for guidance prior to further discussing approaches to negotiating market access issues in the context of negotiating approaches in other Working Groups and in the FTAA process as a whole. In addition to completing the next phase of the Hemispheric Data Base and making it available to the private sector, the Working Group stated that it would "explore the possibilities of workshops with the active participation of the private sector, based on specific and detailed proposals by countries." According to an oral report at the "Agriculture, the FTAA and the WTO" seminar hosted by the International Policy Council on Agriculture, Food and Trade at the Belo Horizonte Trade Ministerial, the market access workshops of the Business Forum of the Americas attracted, by a wide margin, the greatest participation of business representatives.

Conclusion

As can be appreciated from the above summary, there is a great deal of disagreement about what the FTAA should be. While these disagreements presently reflect largely the interests of businesses and the diplomatic corps, the issues discussed bear, directly or indirectly on the ability of family farms to prosper and on the ability of consumers to afford to grow or buy healthy food all year round. For example, whether family farmers can meet the international SPP standards for food trade, when those standards have been determined without the participation of Latin American nations, is a matter of importance to large and small exporters. Equally, if not more important, however, are issues excluded from FTAA discussion, such as discussion of trade practices which weaken household or community food security. It is important to understand what is being discussed in FTAA Working Groups, in order to be able to offer alternatives to the public, if not to the Working Groups themselves. It is perhaps even more important to publicize the issues that do not receive enough discussion to become matters of disagreement, such as the impact of trade on food security.