agricultural tariff policies of caribbean countries …agricultural tariff policies of caribbean...

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3

AgriculturaltariffpoliciesofCaribbeancountriesandWTO

negotiations

Hansdeep Khaira and J.R. Deep Ford

Introduction

Astheglobaltradingarenaisincreasinglyintegrated,theinfluenceofpoliciesoftheindustrializedcountriesonthesmallereconomiesbecomesevenmoreimportant.Often,externalpoliciesadverselyimpactthenationalobjectivesofsmallercountriesbecausethesecountriesarenotableto“freely”applythosepolicies best suited to the pursuit of their objectives. This chapter focuseson a group of small countries – countries in the Caribbean region – andemphasizesmanagementoftariffpolicyasaninstrumentforpromotingthedomesticobjectivesoffoodsecurityandviable rurallivelihoodsinthefaceofincreasingglobalization.

Tariff policy management concerns the flexibility that countries haveandthedegree towhich theymodify (raiseor lower) tariffs topursue, forexample,theirfoodsecurityobjectives.Tariffpolicyisanintegralpartofagovernment’snationaleconomicpolicyframeworkandgovernmentsutilizeitasoneofseveralmeasurestopursuenationaldevelopmentobjectivesthatrangefromattainingself-relianceinfoodproductiontocreatinganenablingenvironment for nascent industries to develop and flourish. Furthermore,revenuefromtariffsisanimportantcomponentofthefiscalpoliciesinmanycountries.

With the conclusion of the Uruguay Round of trade negotiations in theWTOthevastmajorityofthecountriesintheworldcommittedthemselvesto disciplining their tariff policy. The discipline was in the form of legallybindingtariffs(settingthemaximumlimitbeyondwhichtariffscouldnotbeincreased).Inprinciple,theseboundtariffswouldthenbegraduallyreduced

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Agricultural trade policy and food security in the Caribbean

in every subsequent roundofnegotiations, including theUruguayRound,withtheobjectiveofachievinghigherdegreesofglobaltradeliberalization.

While developing countries committed themselves to the process ofopening their domestic markets through a gradual disciplining of theiragricultural tariffs, there have been several challenges in implementing thetariff reductions. The opening by developing countries of their domesticagricultural markets has led to an inflow of production and export-subsidizedcommoditiesfromOECDcountriesthathavedisplaceddomesticproductioninseveralcountries.Thereductionintariffsalsoexposesfledglingdomestic industries, including agroprocessing companies, to increased andsometimes unfair competition. The impact has often been to restrict thecountries’ diversification into and growth rate of high-income and value-addedproducts.Areductionintariffsalsoleadstoageneraldeclineinthegovernmentrevenuethatcanbecrucialfordevelopmentinmanysmallandvulnerabledevelopingcountries.

This chapter’s point of departure is an investigation into tariff structureandpolicymanagementoftariffstructuresforusebydevelopingcountriestopursuefoodsecurityobjectives.Italsoexamineshowtariffstructuresandnationalpolicyobjectivesmaybeaffectedbyfurthertariffreductions.

Section 3.1 underscores the importance of tariffs for the Caribbeancountries, including theconceptandsignificanceof tradepolicy flexibility.Section3.2 analyses the current agricultural tariffprofilesof 12Caribbeancountrieswithaviewtodemonstratingthecurrentpolicytreatmentmetedouttothesectoringeneral,andtosomecommoditiesinparticular.Section3.3appliesthemaintariffreductionformulaelaidoutinproposalstabledbysomeWTOMemberstothetariffstructureofCaribbeancountries,withaviewtoevaluatingthelikelyimpactoffurthertariffreductiononthecurrentpolicyflexibility.Thefinalsectiondrawsconclusionsontariffmanagement,policyflexibilityandfoodsecuritybasedontheanalysiscarriedout inthechapter.

3.� Importance of tariffs for agriculture in the Caribbean countries

Tariffs are critical as a policy tool for the Caribbean countries, both froma food security anddevelopmentalobjective standpoint andas a sourceofgovernmentrevenue.

When policy measures affecting agricultural trade were bought into theframeworkoftheGeneralAgreementonTariffsandTrade(GATT)in1986,thegeneralconsensusamongMemberswasthatsomeofthesepoliciesledtoinefficientallocationofagricultural resourcesanddistortedglobal trade. Itwasagreedthattariffpoliciesshouldbegraduallyrevised.Consequently,theUruguayRoundconcludedin1994withcommitmentstoreducetariffsand

Agricultural tariff policies of Caribbean countries and WTO negotiations

77

allformsoftrade-distortingsupportandtheDohaRoundwaslaunchedtocontinuethisprocess.

The length of the Uruguay Round and the subsequent missed deadlinesfor concluding aspects of the Doha Round indicate the complexity of theagricultural negotiations, especially those directed at reducing tariffs. Theimportanceof tariffs stems fromseveralviewpointsmostofwhich involvedevelopingcountries.

Inamajorityofdevelopingcountrieswhereagricultureandfoodproductionisthemainstayofrurallivelihoodsandfoodsecurity,tariffsareseenascriticaltostabilityandfurtherdevelopment.Mostofthesedevelopingcountriesdonot have adequate resources to provide domestic support and other formsofprotectiontotheirfarmers,makingitdifficultforthemtocompetewithsubsidized imports. Applying safeguards to protect their local agriculturalproducersfromabnormalspurtsinimportsisadministrativelycomplexandexpensive.Fewdevelopingcountrieshavetheresourcesandtheinstitutionalandlegalcapacitytoapplysuchmeasureswhich,inaddition,requireproofofinjuryandinvolvealengthyandcostlylegalprocess(FAO,2002).

Thus,tariffsremainanimportant(andinmostcases,theonly)instrumentfor promoting agricultural development and food security. Even with themitigating effect of a tariff, it is often difficult for the farmers in thesecountries to compete with products from developed countries that wouldhave benefited from assistance at several stages of the production andmarketingchain.Further,manyOECDcountriescontinuetoprovideexportsubsidiestotheirproductsoftenresultinginproductsbeingsoldontheworldmarketatpricesbelowthecostofproduction.Provisionofexportsubsidiesby theUnitedStates, forexample,meant that in2003wheatwasexportedat28percentbelowitscostofproduction,whilecottonwasdumpedat47percent,ricewasdumpedat26percent,andsoybeansandcornweresoldat10percentbelowthecostofproduction(IATP,2005).

TheCaribbeancountriesshareconcernswithotherdevelopingcountriesabout market access as these relate to food security and rural livelihoodsecurityoftheirsmallholdersandtomaintainingabasefordomesticsupplyofsomefoodandagriculturecommodities.WhileCaribbeancountrieshavemade good progress in overcoming poverty and undernutrition and haverelatively higher levels of per capita income than some other developingcountries, food insecurity still exists in the region, especially in countrieswhere agriculture is an important income-generating sector for the ruralpoor.ThisisespeciallytrueintwolargecountriesoftheCaribbeanForum(CARIFORUM): 47 percent of the people in Haiti and 25 percent in theDominicanRepublicareundernourished(FAO,2005).

Caribbean countries have become increasingly more dependent on foodimportswhiletheyhavefacedagradualerosionoftheirtradepreferencesinthemainexportingmarkets.Thecombinedeffecthasapotential toreduce

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foodsecurityinthesecountriesasbothexportsandimportsbecomehighlysusceptible to changes in supply and prices in the world markets. In lightof this,divertingsomeproductive resources fromexportcrops toproducefoodstuffs efficiently will not only be a profitable activity but could alsoleadtoincreasingthedegreeofself-sufficiencyandenhancedfoodsecurity.35Anappropriatelevelofimporttariffs,especiallyoncommoditiesproducedby the country and by smallholders in the country, could assist in thisprocess.Itisawell-documentedfactthatcountriesrelyonarangeofpolicyinterventionstoimproveruralareaproductivityandtariffsandtariffrevenueareanimportantpartofthepolicypackagefortheCaribbeanregion.

The importanceof tariffsasacontribution tonationalbudgets is shownin Table 3.�, which presents the approximate tariff revenue derived byCaribbeancountriesfromimportsofagriculturalcommodities.Therevenueis computed using the applied tariff rates (most-favoured nation) and theimportvalues forall agriculturalcommodities (HS01–24)excluding fish.36Thus, for example, if the tariff for a particular commodity is 10 percentand value of imports of that commodity is US$100000, the tariff revenueisUS$10000.Forsomecountriesthisrevenueisahighpercentageoftotalgovernment revenue. For example, it approaches ten percent for BarbadosandsixpercentforSaintVincentandtheGrenadines.

35 Althoughgiventhelimitedfactorendowments(chieflylandandlabour)intheCaribbeancountries,therewillbealimittotheextenttowhichtheseobjectivescanbesuccessfullypursued.

36Therevenueiscalculatedbyaveragingtariffpercentagesandvalueofimportsatthe6-digitHSlevel.Furthermore,itdoesnottakeintoaccountpreferentialtariffratesthatmaybeimposedonimportsfromsomecountries.Theresultsarethereforeonlyindicative.

TABLE3.1Approximate value of tariff revenue from agricultural imports and its share in total agricultural imports (�003)

Tariff revenue (in million US$)

Share in total imports (%)

AntiguaandBarbuda 13 18.9Barbados 73 37.9Belize 9 14Dominica 63 10.2Grenada 8 17.9Guyana 17 19.5Jamaica 83 17SaintKittsandNevis 5 15SaintLucia 14 16.6SaintVincentandtheGrenadines 6 14Suriname 11 16.9TrinidadandTobago 60 16.3

Source:WITS,2005;IMF,2006,InternationalFinancialStatisticsCD-ROM(March)


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For Barbados, more than one-third of the amount spent on imports ofagricultural products goes to the government as revenue. Table 3.1 showsthatcountries likeJamaica,DominicaandTrinidadandTobagoalsoderivelarge amounts of revenue from imposing tariffs on agricultural imports.Although it is difficult to demonstrate that tariff revenue necessarily goestotheagriculturalsector,nonetheless, inmanycountrieswhereagricultureisthemainstayofeconomy,orwhereruraldevelopmentisthetopnationalpriority, this is very likely the case. Table 3.� provides an example fromBarbados’currenttariffsonsomecommodities,linkingthemtotheobjectivesthecommoditytariffscouldpossiblyassistinachieving.

3.� Agricultural tariff profiles of Caribbean countries

An analysisof the current tariffprofileof a country isuseful for assistingpolicy-makers in framing appropriate national policies aimed at rural areadevelopment.Thefollowinganalysisexaminestheexistingtariffprofilesoftwelve countries in the CARICOM group. It takes into consideration thecurrenttradepolicytreatmentbeingaccordedtotheagriculturalsector–andmorespecifically,tocertaincommodities–andlooksatthelikelyimpactoffurthertariffreductions.37

Table 3.3presentsthesummarystatisticsoftariffsforthe12countries.Thefirst columnshows thenumberofmatched tariff lines (wherebothboundandappliedtariffsexisted)foreachcountry.

37 Three countries that are part of the CARICOM group are not included here: the Bahamas andMontserratarenotincludedbecausetheyarenotWTOMembersandthushavenolegallybindingtariffs,whiletariffdataonHaitiwasnotavailableforanalysis.

TABLE3.2Policy objectives and tariffs on commodities: the case of Barbados

Policy objective Commodity HS no. Tariff (%)

Foodsecurity

Livepoultry

Tomatoes

Pork

Poultrymeat

0105

0702

0203

0207

186

224

206

116Ruraldevelopment Jams,jellies,marmalades,etc.

Otherfoodpreparations

Sausagesandfoodprep.ofmeat

2007

2106

1601

145

178

183Governmentrevenue Alcoholicbeverages1(ethyl)

Beerfrommalt

Tobacco

2207

2203

2403

211

141

119

Source:AppliedtariffdatafromWITS1ForCaribbeancountries,hightariffsonalcoholicbeveragesarealsotoprotecttheirdomesticproduction.

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TheanalysisisbasedontariffslinescorrespondingtoagriculturalproductsatHarmonizedSystem(HS)6-digitlevel(aggregatedusingsimpleaverages).The products selected corresponded to HS numbers 01–24 (excluding 03),4201, 4202, 4203 and 5201. Since an important component of the analysisisacomparisonbetweentheboundandappliedtariffs,theonlytariff linesconsidered were those for which information on both types of tariffs wasavailable.Asapercentageoftotaltarifflinesatthe6-digitlevel,dependingondataavailabilityforacountry,thisgenerallyrepresentsarangeof76percentto 87 percent (the exception is Suriname, with its matched lines being 50percentofitstotallines).Thus,wheretheactualnumberofagriculturaltarifflines for a countryaremore than thenumberofmatched lines in the firstcolumn,theomissionisdueexclusivelytolackofinformation.

Thesecondcolumnshowsthesimpleaveragesofboundandappliedtariffsfor the matched tariff lines. The average for applied tariffs ranges from 11percentto36percent.Therangeforboundtariffsisverywide,fromalowofjust20percentforSuriname38toahighof116percentinthecaseofSaintVincent and the Grenadines. The simple average of applied tariffs for the Caribbeancountriesis19percentwhiletheboundtariffaverageisclosetofivetimesthatoftheappliedtariffaverage,at90percent.Theagricultural-weighted average bound tariffs for developing countries globally areapproximately21percentandforappliedtariffs48percent (Andersonand

38 SincecompleteinformationonalargenumberoftariffsforSurinamewasnotreadilyavailable,anyanalysisbasedontheresultsforthiscountryshouldbeconsideredwithcaution.

TABLE3.3Summary of tariff statistics – Caribbean countries

No. of matched

lines

Simple average Standard deviation

Minimum rate Maximum rate

Bound Applied Bound Applied Bound Applied Bound Applied

Antigua/Barbuda 603 106 16 16 14 100 0 220 45

Barbados 533 113 21 28 15 100 0 223 224

Belize 598 101 19 4 17 70 0 110 91

Dominica 608 113 21 22 25 100 0 150 135

Grenada 611 99 18 29 15 0 0 200 40

Guyana 613 100 21 0 21 100 0 100 100

Jamaica 611 97 17 15 17 0 0 100 75

StKittsandNevis 597 110 13 29 20 10 0 250 40

StLucia 614 115 16 26 15 100 0 250 45

StVincent/Gren. 596 116 17 27 15 100 0 250 40

Suriname 353 20 24 1 18 10 0 20 50

Trinidad/Tobago 612 91 17 27 16 0 0 156 60

Note:DataontariffswascompiledfromtheWorldIntegratedTradeSolution(WITS).CorrespondingappliedandboundtarifflineswerematchedusingtheSAS9.1software.


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Martin,2005).Thus,thoughtheaverageboundtariffsofCaribbeancountriesarealmost twice theaverageofdevelopingcountries, theapplied tariffs lieclosertothedeveloping-countryaverage.

Inthecontextofappliedtariffs,theCaribbeancountriesconsideredinthischapterareallsignatoriestotheCARICOMcommonexternaltariff(CET).TheCETwasdesignedtoharmonizetheexternaltariffforMemberStates,whilegivingpreference togoodsproducedwithin the region. Inprinciple,the maximum tariff levied on agricultural imports from extra-CARICOMsourcesundertheCETis40percent.However,rulesagreedundertheCETpermitsuspension(waiver)ofthismaximumtariffrateforcertainproducts.39Inotherwords,MemberStatesarefreetoapplyrateslowerthan40percenton agreed products. The fact that average applied tariffs in the table areshowntobefarbelow40percentforallcountriespointstotheuseofthisruleofsuspensionbyallMembersonalargenumberofproducts.

The significance and continuing need for this policy flexibility for theCaribbeancountries isbroughtoutby the fact thatwhilemostCaribbeancountries are signatories to the CET of the CARICOM and should applya common tariff policy, there are commodities on which applied tariffsimposedbydifferentcountriesarehigherthanthecommonly-agreedtariffratesintheCET.

Thestandarddeviation(SD)isusedheretogaugethedegreeofspreadordispersioninthetariffsoftheCaribbeancountries.Thestandarddeviationisastatisticthatindicateshowcloselythevariousdatapoints(tariffs,inourcontext)areclusteredaroundtheaverage(mean)inasetofdata.Inthecaseofacompletelyuniformtariffprofile,theSDiszero.AhighSDimpliesthatthereareanumberofcommoditieswhoserelativeimportancetothecountryisbeingreflectedthroughdifferenttarifflevelsintheprofile.

Theresults inTable 3.3showthattheSDinboundtariffsrangesfrom0or very low in some countries, indicating the existence of a uniform tariffprofile, to 26 and above for others, pointing to a relatively more skewedprofile.40Inthecaseofthelatter,highSDcoupledwithhighaveragetariffsindicatesalargenumberoftarifflineswithhightariffrates.TheSDisagoodindicatorforevaluatingthelikelyimpactonatariffprofileofatariff-cuttingformula,asdemonstratedinthenextsectionofthechapter.Box 3.�showstheconcentrationofboundratesat100percent.

ThelasttwocolumnsofTable 3.3 showtheminimumandmaximumratesforbothboundandappliedtariffs.Minimumappliedratesforallcountriesarezerowhileminimumboundratesvaryfrom0to100percentinsomecases.

39 ThelistofsuchitemsiscontainedinAnnexAoftheCET.40 Forexample,inGuyana,withaSDof0,alltarifflinesaresetat100percentandinBelize,almost

allboundtariff linesarecloseto100percent;whereasSaintKittsandNevisandSaintLucia, forexample,haveSDofover25,withmoreskewedprofiles.

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BOX 3.�Concentration of bound tariff rates

ThedatabelowshowthatformostcountriesintheCaribbean,thereisahighconcentrationoftariffsatthe100percentrate.Onaverage,morethan80percentofalltarifflinesareboundatover100percent.InthecaseofGuyana,alltheagriculturaltarifflinesareuniformlyboundat100percent.

Thelevelofconcentrationintariffratesisanimportantfactorinamultilateralsystemapproachtotariff-cuttingbasedontiers:ahighlevelofconcentrationindicatesinwhichtiermosttariffswouldfall,andthustowhatlevelofcutmostwouldbesubject.InthecontextoftheCaribbeancountries,atariffreductionformulathatproposeshigherlevelsofcutsinhighertariffswouldleadtohigher levelofoverallcuts(sincemosttariffsareboundatahighlevelof100percent),andwouldalsoaffectalargernumberoftarifflines(sincethereisalargeconcentrationofhightariffs).

Bound rate tariff lines Bound rate equal to % of tariff lines bound at that rate

AntiguaandBarbuda 100% 84

Barbados 100% 80

Belize 100% 84

Dominica 100% 74

Grenada 100% 88

Guyana 100% 100

Jamaica 100% 98

SaintKittsandNevis 100% 76

SaintLucia 100% 60

SaintVincentandtheGrenadines 100% 61

Suriname 20% 100

TrinidadandTobago 100% 86

Source:datafromWITS,2005

With the exception of Suriname, all countries here have maximum boundrates 100 percent and over, while an equal number have maximum appliedrates below 100 percent. Although the maximum tariff agreed to be leviedonagriculturalproductsundertheCETis40percentseveralcountriesapplyhigherratesonsomeproducts.TheyareabletodosobecausetheCETmakesaprovisionforallowingexceptionstotheratesundercertainconditions.

Since the tariffprofilesanalysedabovearebasedonaverage tariffsofallagricultural commodities, an examination of the trade policy treatment at


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the commodity level will assist in deepening this analysis. In addition tounderstanding the reasons for the type of policy treatment to a particularcommodity/commodity group, such analysis also helps national policy-makers and negotiators in assessing the likely impact of tariff reductionformulaeonindividualcommodities.

Table 3.4 presents commodities or commodity groups that attract highbound and applied tariffs in the Caribbean countries. [Note that since thetariffratesshownforeachcommoditygroupareaveragesforthe12countriesin the region, results may vary for individual countries.] The table showsthat Caribbean countries declare high bound tariffs, and levy high appliedtariffs,onvegetableoilsandtobaccoproducts.Hightariffsonthelatterareleviedmainlyasasourceofgovernmentrevenue.IntheWTOagriculturalnegotiations,whenMembersagreeonatariffreductionformulathattargetshighertariffs,itisthecommoditiesshownherewithhighboundtariffsthataremostaffected.

Thetablealsoshowscommoditieswithhigherandlowerflexibility41thanothersintheregion.Furthertariffreductionswillaffectthosecategorieswithlowerflexibility(e.g.sugar,tobaccoproductsandalcoholicbeverages)more

41 Flexibilityherereferstothedifferenceorwedgebetweentheboundandappliedtariffsinabsoluteterms.

TABLE3.4Commodity groups and trade policy treatment in the Caribbean countries

Commodities Average tariff rate (%)

Commoditieswithhigh

boundrates

Vegetableoils 110

Ediblevegetables,rootsandtubers 102

Tobaccoproducts 100

Commoditieswithhigh

appliedrates

Cigarsandcigarettes 45

Vegetableoils 40

Alcoholicbeverages 40

Citrusfruits 40

Commodities Average tariff wedge

(%)

Commoditieswithhightariff

flexibility(highestdifference

betweenappliedandbound)

Productsofanimalorigin 92

Residuesandwastefromfoodindustry 90

Meats 84

Cereals 81

Commoditieswithlowtariff

flexibility(lowestdifference

betweenappliedandbound)

Sugarandsugarconfectionary 66

Cigarsandcigarettes 66

Alcoholicbeverages 52

Source:datafromWITS

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thanthosewithhigherflexibility(e.g.animalproductsandcereals).Althoughtariff flexibility is auseful factorwhenassessing the likely impactof tariffreductiononaproduct,theboundrateofthatproductisalsoimportant:twoproductswiththesamelowflexibilitywillbeaffecteddifferentlybasedontheirboundrates.Theproductwithhigherboundratewillundergoahigherreductionunder the tiered tariff reduction system than theproductwithalowerrate;howtheflexibilityofoneortheotherisaffecteddependsontheirrespectiveappliedrates.

3.3 Application of some key tariff-cutting proposals

The purpose of this section is to look at the main tariff-cutting proposalstabledduring2005byWTOMembersintheDohaRoundandinvestigatetheimpacttheyarelikelytohaveonsomecountriesintheCaribbeanregion.42

Theformulaesuggestedintheproposalsareappliedonthetariffprofilesof12Caribbeancountries;theresultsareanalysedintermsoftheirimpactonthecurrentboundtariffsofthesecountries.43

In an important sense, the proposals submitted can be seen to representdifferent agricultural trade situations of the proposing countries. Table 3.5clusters the proposing countries (or country groups) with their net tradepositionandtariffpolicies.Countriesinmoreadvancedstagesofagriculturaldevelopment, liketheUnitedStatesandtheEU,havemoreopendomesticmarketswhenviewedfromthestandpointoflowtariffs;theyseekmarketsinothercountries.AgricultureintheG20countriesischaracterizedbyafairlyadvancedstageofdevelopment:mostofthesecountriesareself-reliant,havea positive net agricultural trade position and display competitive levels ofdomesticproduction.Theyprovideafairlevelofdomesticprotectionintheformoftariffs,especiallyonproductsandtheirimportsubstitutes.TheACPisagroupofcountrieswithalargeagriculturalsectorwithfairlylowtomodestlevelsofdevelopment,typicallyexportingtropicalcashcrops(dependentonpreferentialmarkets)andimportingfood(netimportersasaggregate).Theyaim towards increased self-sufficiency and hence need to increase the rateofagriculturalgrowthanddiversification;consequentlytariffsareboundatrelativelyhighlevels.ThecharacteristicsofmostCaribbeancountrieswouldmatchtheACPgroup.

Net exporting countries with more open markets propose higher cuts intariffstotakeadvantageofmarketaccessincurrentlyprotectedmarkets.Netimporting countries propose lower cuts in bound tariffs in order to protect

42 Thissectiondrawsheavilyonatechnicalnotepreparedonthepotentialimplicationsofsometariff-cuttingformulaepreparedbytheCommoditiesandTradeDivision(ESC)oftheFAO.

43 TheproposalsbuildonthecommonframeworksetoutintheG20proposalofJuly2005,whichhadproposedvaluesforsomekeyelementsofthetieredapproach,asenvisagedintheJuly2004WTOframeworkagreement.Theycanbeviewedathttp://www.ictsd.org/ministerial/hongkong.


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products for which they seek to be self-reliant (while products for whichthe country depends heavily on imports can be levied lower applied tariffs).Preference-dependent countries are worried about preference erosion indeveloped-country markets and would prefer lower cuts in tariffs in thosemarkets.

Analysis of tariff-cutting proposals when viewed from the perspectivediscussed above provide a useful understanding of the linkages betweendifferences inacountry’snationalgoals,stagesofagriculturaldevelopmentandtradepolicies.

3.3.� Summary of proposalsInthissectionproposalsareanalysedintermsofthethresholdlevelsoftiers(range of bound tariffs falling in different tiers) and proposed reductionformulaecoefficientsineachtier.[TheproposalsarepresentedinmoredetailinAppendix 3.�.]Thetierssetouttherangesforspecificcutsontariffs:forexample,iftherewereonlytwotiersthenalltariffsaboveasetlevelwouldhaveacertaincutandalltariffsbelowthatlevelhavealessercut.Belowisasummaryofthefourproposalsandadescriptionofthesmall,vulnerableeconomies(SVE)proposal:�) United States: Proposes the same four tiers for both developed and

developingcountries;thetariffcapandreductioncoefficientsarespecifiedfor developed, but not for developing, countries. An important feature

TABLE3.5Agricultural trade situation and tariff policy

Country/group

Stage of agricultural development Net trade position

Average tariff structure

US Highlevelsofagriculturalproductivity,wellestablishedcreditmarketsandinstitutions,highlevelsofgovernmentsupport,relativelyopendomesticmarkets,highprivatesectorparticipation,etc.

Netexporting Lowtariffs

G20 Reasonablyhighlevelsofproductivity,functioningcreditmarketsandinstitutions,moderatelevelsofgovernmentsupport,relativelyopendomesticmarkets,enhancedprivatesectorparticipation,etc.

Netexporting Mediumtohightariffs

EU Highlevelsofagriculturalproductivity,wellestablishedcreditmarketsandinstitutions,highlevelsofgovernmentsupport,relativelyopendomesticmarkets,highprivatesectorparticipation,etc.

Neutral Lowtariffs

ACP Lowlevelsofproductivity,lackofestablishedcreditmarketsandinstitutions,lowornegligiblelevelsofgovernmentsupport,relativelycloseddomesticmarkets,poorprivatesectorparticipation,dependenceonfewcommodityexportsandpreferentialmarkets,etc.

Netimporting Hightariffs

Source:Authors

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ofthisproposalistheavailabilityofarangeoflinearcutstoMembersinTiers1,2and3.Memberscanchoosereductionratesfromwithinagivenrangeaslongasthespecifiedaverageforthetierisattained,therebygivingthemflexibilitytosubjectdifferenttarifflinestodifferenttariffcuts.

�) EU:Proposesfourdifferenttiersfordevelopedanddevelopingcountries;thetiersandcutsfordevelopingcountriesarethesameasproposedbytheG20.ThecutsfordevelopedcountriesarelessthanfortheG20countries.Flexibility is provided in Tier 1. As in the United States proposal, thisproposalprovidesflexibilityintheformofarangeoftariffcuts–albeitinTier1(thelowesttier)alone.

3) G�0:Proposesfourdifferenttiersfordevelopedanddevelopingcountries;lowerreductioncoefficientsandhighercapsfordevelopingcountriesarespecified.

4) ACP: Proposes same number of tiers but different threshold levels fordevelopedanddevelopingcountries;samelinearreductioncoefficientsforbothgroupsofcountries.Notariffcapisproposed.

SVEs: Proposed market access modalities that include tariff-cutting butnot in the tiered format of the four major proposals. Proposed that theyundertakelinearcutsnottoexceed15percent,withaminimumof10percentpertariffline.ItwasalsorecommendedthatnotariffcappingbeappliedtoSVEs.TheSVEproposalsuggestsacutbeappliedtoitscountriesthatwouldbetenpercentagepointslessthantheACPproposal(15asopposedto25).

3.3.� Methodology of applicationInordertoseehowimplementationwouldaffect thetieredapproachtotariffcuts, thefollowingstepsweretaken.First, thevaluesofthecurrentboundagricultural tariffs ineachcountryweresorted inascendingorder.Second,based on the threshold levels (or tariff range) set in each proposal, tariffswereassignedtodifferenttiers,withthelowesttariffrangeinTier1andthehighest in Tier 5. Third, the tariffs were “cut” according to the proposedreductioncoefficientforthetierinwhichtheywereplaced.

In examining what the tariff reductions would be, some importantassumptionsweremade.InthecaseoftheUnitedStatesproposal,sincethereisnoindicationoftheextentoftariffcutstobemadeindevelopingcountries,it was assumed that developing countries will reduce their tariff by two-thirdsofthereductionmadebydevelopedcountriesandthattariffcapsfordevelopingcountrieswillbesetat100percent.TheUnitedStatesproposalprovidesflexibilityoftariffreductioncoefficientsineachtierbyproposingarangeforthetariffcutwithinthetier.Forexample,itproposesthatinthecaseofdevelopedcountries,tariffsinTier1canbecutwithinarangeof55to65percent. In thecaseofdevelopingcountries this rangecould thenbebetween37and43(two-thirdsof55and65respectively).Forthepurposesofthisscenario,itisassumedthatwheresuchflexibilityisavailable,thehigher


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tariffsineverytierwillbesubjectedtothelowestpossiblecut.Becausethismight not reflect countries’ actual use of flexibility, the results are merelyindicativeofdirectionandrelativemagnitude.

Noaccountistakeninanyofthefiveproposalsoftheflexibilityavailabletodevelopingcountriesthroughdesignationofsensitiveorspecialproducts,inlargepartbecausenoclearlydefinedflexibilityhasbeenagreedtodate.44

Theaveragecut inbound tariffs is takenas theaverageof the reductionsmadetoeachtariffline.Thisisnotthesameconceptasthecutintheaveragebound tariff, which is the percentage reduction in the average bound tariff(fromwhattheaveragewasbeforeandafterthecutsareappliedtoalltariffs).

3.3.3 Analysis of resultsTheresultsofthetariff-cuttingexerciseareanalysedfromtwostandpoints:1)Towhatextentarethebroadobjectivesofmultilateraltradereformsmet?2)Whatistheimpactonthedifferencebetweenacountry’sboundandappliedtariffs(referredtoasthe“overhang”)?

Meeting the objectives of multilateral trade reformsTheDohaRoundestablishedthesefourbroadobjectivesofmultilateraltradereforms:i. Ambition: Substantial reductions should be achieved in average tariff

levelsofcountries.ii. Harmonization:Steepercutsshouldbeachievedonhighertariffs,bringing

acountry’sfinaltariffsclosertogether.iii.Proportionality:Theaveragecut indevelopingcountrytariffsshouldbe

significantlylowerthanthatindevelopedcountrytariffs.iv.Flexibility: Country-specific concerns, particularly relating to sensitive

productsandspecialproducts,shouldbeaccommodated.Ambitionisassessedinthischapterintermsofthelevelofaverage cutin

theboundtariffsoftheproposingcountry.ItisassumedthatiftheaveragecutachievedexceedstheoneagreedtointheUruguayRound(24percentcutfordevelopingcountries),thentheproposedformulaisambitious;ifitfallsbelowthisvalueitmaybeunambitious.

Harmonization can be measured in terms of the extent of reductions inhigher tariffs as compared to lower tariffs. When higher tariffs are reducedmorethanlowertariffs,aformulaissaidtobeachievingharmonization.Themeasureusedhere for assessingharmonization ina formula is theStandardDeviation(SD).TheSDoftheaverageboundtariffsresultingafterthecutsiscomparedwiththeSDinthecurrentaverageboundtariffs.ThelesstheSDinthenewboundtariffs(ascomparedtothecurrentone),themoreaformulawillbeconsideredtobecomparativelymoreharmonizing.

44 TheaspectofflexibilityisfurtheraddressedinChapter5.

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TABLE3.6Summary statistics: tariffs before and after implementation of cuts

Current US proposal EU proposal G�0 proposal ACP proposalNew % reduc-

tionNew % reduc-

tionNew % reduc-

tionNew % reduc-

tionAntigua/BarbudaAverage 106 42 60 68 35 68 35 83 21Maximum 220 88 132 132 154Minimum 100 40 65 65 80BarbadosAverage 113 46 60 72 36 72 36 88 22Maximum 230 89 134 134 156Minimum 100 40 65 65 77BelizeAverage 101 41 60 66 35 66 35 80 21Maximum 110 44 72 72 83Minimum 70 28 49 49 56DominicaAverage 113 45 60 71 36 71 36 88 21Maximum 150 60 90 90 113Minimum 100 40 65 65 80GrenadaAverage 99 40 60 64 35 64 35 79 20Maximum 200 80 120 120 140Minimum 0 0 0 0 0GuyanaAverage 100 40 60 65 35 65 35 80 20Maximum 100 40 65 65 80Minimum 100 40 65 65 80JamaicaAverage 97 39 60 63 35 63 35 78 20Maximum 100 40 65 65 80Minimum 0 0 0 0 0St Kitts & NevisAverage 110 44 60 71 35 71 35 85 21Maximum 250 100 150 150 175Minimum 10 6 8 8 9St LuciaAverage 115 46 60 75 35 75 35 89 22Maximum 250 100 150 150 175Minimum 100 40 65 65 77St Vincent/Gren.Average 116 46 60 75 35 75 35 89 22Maximum 250 100 150 150 175Minimum 100 40 65 65 77SurinameAverage 20 11 46 15 25 14 29 17 15Maximum 20 12 15 15 17Minimum 10 6 8 6 9Trinidad/TobagoAverage 91 37 59 59 33 59 33 73 20Maximum 156 62 94 94 109Minimum 0 0 0 0 0


89

Proportionality isnotdealtwith in thischapterbecause itcomparescutsacrossdevelopedanddevelopingcountriesandisnotrelevanttoCaribbeancountriesalone.

Flexibility mainly concerns the recourse to sensitive or special products,andinvolvesexcludingcertainnumberoflinesdeclaredassensitiveorspecial.Itisthusnotanalysedbelowbecauseguessinghowcountrieswillusetheirflexibility is highly speculative. However, clearly whatever is agreed onconcerningsensitiveandspecialproductswillaffectalltheobjectivesbecauseitcouldbethatthehighesttariffsareremovedviasuchflexibility.

Impact on the “overhang” in a country’s bound and applied tariffsTheimpactoftariffreductionformulaeonacountry’stariffprofileisgaugedhereintermsoftariff“overhang”,whichisthedifferencebetweentheboundandappliedtariffs,alsoknownaspolicyflexibility.Flexibilitymaybeneededfor many reasons including for raising tariff levels in response to changesindomesticdemand–supplyconditionsordynamicsof international trade.Where a formula reduces this difference, there is a resulting loss in tariffflexibility.

How tariffs are cut and the resulting outcomes will be decided throughcomplexnegotiationsthatresolvemanyconflictinginterests.Forinstance,thelargerdevelopingcountriesthatarealsonetexporterswillwantanapproachthat reduces tariff peaks and tariff escalation in developed countries. Thepreference-dependentdevelopingcountrieswillwanttopreventtheerosionof the preferential tariffs in developed countries. On the other hand, thedevelopedcountrieswillwanttoacceptatariff-cuttingapproachthatopensupmarketaccessopportunitiesfortheminespeciallythelargerdevelopingcountries. Many Members instead demand a comprehensive approachin which the extent of tariff cuts is based on the extent of cuts in exportsubsidiesanddomesticsupport.

Inaddition,anyagreementontheextentofflexibilityavailabletoMembersthrough theuseof sensitiveandspecialproducts (e.g. thenumberof tarifflines thatcanbesodesignated)willalsohavean importantbearingon thefinaloutcome.GiventhattariffstructuresdiffersowidelyamongMembers,itwillbedifficulttosatisfyallthemainobjectiveswithoneformulaorsetofparameters.

Because this exercise includes just 12 countries, the aim is not to drawgeneralconclusionsontheeffectivenessofthedifferentproposals,butrathertodemonstratetheireffectsonasetofcountriesthatexhibitsimilarcharacteristicsandwhosetradepoliciesarelargelyshapedbytheregionaltradingagreementofwhich theyare apart. It aims to showcase the rangeof impactson tariffprofilesofthedifferentlevelsofcutsbeingdiscussedinthenegotiations.

Table 3.6presentswhatwouldresultfromtheapplicationofthedifferentproposals to eachof the12Caribbeancountries.TheSVEproposal isnot

90


included here because its outcome is relatively predictable. It proposes amaximumlinearcutof15percentacrossall tariff lines;becauseCaribbeancountries display similar features of uniform bound tariffs and highconcentration around the same rate (100 percent), most new bound tariffratesundertheSVEproposalwouldbearoundthe85percentlevel.

Analysis of results in terms of the main objectives in cutting tariffsBasedontheresultsshowninTable 3.6,belowwediscusstheimpactoftheproposalsonthetariffprofilesoftheCaribbeancountriesinthecontextofthetwoparametersofambitionandharmonization.i) Ambition. TheUnitedStatesproposalwouldreducetheaveragetariffsof

eachcountrythemost(onaverageby59percent)andtheACPproposalwouldreducethemtheleast(onaverageby20percent).Infact,thereisanalmostthree-folddifferencebetweentheaveragereductionswhenthetwoformulaeareappliedandthenewboundratesarecompared.(Again,theSVEproposalwouldresultintheleastambitiousreduction,a15percentcut.)

Similarly,whencomparedwith theUruguayRoundaverage reductionfor developing countries (24 percent), the United States, the EU andthe G20 would satisfy greater ambition while the ACP (and the SVE)proposalswouldbelessambitious:thehighthresholdofthelowestcutoftheUnitedStatesandtheG20guaranteethisoutcome,becausetheyareeffectivelyhigher than thehighestcutsproposedby theACPproposal.InthecontextoftheCaribbeancountriesasadevelopingcountrygroup,these results correspond with results of the informal note prepared byFAO (Sharma, 2006) which included the following eight developingcountries:Brazil,Egypt,India,Indonesia,Pakistan,Philippines,SriLankaandTurkey.

ii) Harmonization. Intermsofharmonization,ortheprincipleofreducinghighertariffsmorethanthelowertariffs,thefourproposals(UnitedStates,EU G20, ACP) would achieve this principle. For instance, in the G20proposal,anaveragetariffof100percentinthecaseofGuyanaisreducedby35percentwhileSuriname’srelativelylowaveragetariffof20percentisreducedby25percent.TheUnitedStatesproposalismoreharmonizingthan the other three proposals when differences in new tariff levels fordifferent countries are compared. Using the same example, the UnitedStatesproposalreducesGuyana’stariffby60percentandSuriname’sby46percent(adifferenceof14percentagepoints),whiletheACPproposalreducestheaveragetariffsofGuyanaby20percentandSuriname’sby15percent (adifferenceof5percentagepoints). (TheSVEproposalwouldnotpromoteharmonizationofCaribbeantariffstructures.)

Anotheraspectofharmonizationisthereductioninmaximumtariffsortariffpeaksascomparedtoloworminimumtariffs(withinacountry).This


91

factor is addressed by the four proposals, although the degree of proposed reduction differs. For example, in the case of Barbados, the United States proposal reduces the maximum tariff of 220 percent to 88 percent and reduces Suriname’s maximum tariff from 20 to 12 percent (in absolute terms, a reduction of 132 and 18 percentage points, respectively).

Finally, harmonization is also assessed by the extent of tariff dispersion, or standard deviation (SD) of tariffs from their mean, as discussed earlier. Lower tariff dispersion or SD in the new bound tariffs (as compared to the current ones) means a formula is harmonizing. Table 3.7 presents the current and new SD after application of the four proposals. The table shows that the SD in new tariffs is lower in the case of the United States proposal, implying that the United States proposal is most harmonizing.

iii) Proportionality. While proportionality is not assessed in this chapter, if can be assumed that with developing countries reducing their tariffs by no more than two-thirds of the average tariff reduction in the developed countries (as was done in the Uruguay Round), the G20 formula comes closer to meeting this objective than the EU and United States proposals do.45

Analysis of results in terms of the overhang in tariffsThe impact of a tariff reduction formula on a country can also be gauged by the extent to which the difference between its bound and applied tariffs are

45 This conclusion is based on an informal note prepared by FAO (Sharma, 2006), which applied the EU, United States and G20 proposals to a set of eight developing and three developed countries.

TABLE 3.7Standard deviation of bound tariffs, current and new (after implementation of four proposals)

Current bound

New Bound

US proposal EU proposal G20 proposal ACP proposal

Antigua and Barbuda 16 6 9 9 10Barbados 28 11 15 15 16

Belize 4 1 2 2 1Dominica 22 9 11 11 14Grenada 29 11 17 17 20Guyana 0 0 0 0 0Jamaica 15 6 10 10 12St Kitts and Nevis 29 11 16 16 18St Lucia 26 11 15 15 16St Vincent and the Gren. 27 11 15 15 16Suriname 1 0 1 1 1Trinidad and Tobago 27 10 17 17 21

Source: Authors’ calculations

9�


affected.Figure 3.�depictsthecurrentlevelofaverageoverhanginthetariffprofilesoftheCaribbeancountriesandthenewoverhangafterapplicationoftheproposals(thevaluesontheXaxisreflecttheabsolutedifferencebetweenboundandappliedtariffsforeachcountry).

The application of the United States proposal results in substantialreductionsintheoverhanglevelsoftheCaribbeancountrieswhiletheACPandSVEproposalsaffecttheoverhangtheleast.TheimpactoftheEUandG20proposalsfallsinbetweentheACPandtheUnitedStates.

Sincetheabovefigureonlyshowsthereductionintheaverageoverhanglevelsofeachcountry,itdoesnotrevealthefactthatthetariffoverhanglevelsfor some tariff lines are reduced further than others. Identifying the tarifflinesthatarereducedthemostwouldprovideusefulinsightsintothetypeofcommoditiesthataremoreaffectedbyaparticularformula.Thisexercisewasconductedtoidentifycommoditiesineverycountrythataremostseverelyaffectedbyeachofthefourproposals.Theresultsarepresentedintwoways:asagraphicalrepresentationofthetariffprofilesattheHSChapterlevelforeachcountry, includingbothcurrentandnewboundrates(Appendix 3.�);andasa tabular representationat thedetailedcommodity level (Appendix 3.3). The commodities in Appendix 3.3 are taken to be the ones whoseoverhanglevelsarereducedtozeroorlessbytheproposalsi.e.wherenew

FIGURE3.1Tariff overhang (percentage) currently and after applying

proposed tariff cuts

Note:TheabovefigureexcludesresultsforSuriname,sinceitstariffprofileshowsanegativeoverhang,i.e.appliedtariffsaremorethanboundtariffs(mostlikelyduetoadifferenceinthereportingyearsofthesetwotypesoftariffs).

0

20

40

60

80

100

120

Antig. &Barb.

Barbados Belize Dominica Grenada Guyana Jamaica St.Kitts & Nev.

St. Lucia St. Vinc.&Gren.

Trinidad &Tob.

Tari

ff o

verh

ang

(%)

Current US proposal EU & G20 proposals ACP proposal


93

boundtariffsareequalto,orlesserthan,thecurrentappliedtariffs,implyingabsolutelossofpolicyflexibility.

TheresultsoftheexerciseshowthatforeverycountrytheUnitedStatesproposal results in thehighestpercentageof tariff lines/commoditiesmostseverely affected, which mirrors the ambitious nature of the United Statestariff-cutting proposal. The number of lines most severely affected rangefrom4percent(inSaintKittsandNevis)toalmost31percent(inGuyana).Theaveragefor theCaribbeancountries isnearly20percent.Asexpected,theotherformulaeaffectrelativelyfewertarifflinesseverely.

Although the types of commodities severely affected by these proposalsdifferbycountry, therearesomecommodities thatarecommonlyaffectedacrosstheCaribbeanregion.Theseincludefruitandvegetables,meats(lambandpig), spices,vegetableoils, fruit juices, coffee, sugar (excludingrefinedsugar), alcoholic beverages, tobacco products, nuts and cut flowers. Onereasonisthatmanyofthesecommodities(e.g.fruitandvegetables)areboundat100percentandtheappliedtariffsare40percent.Asaresult,the60percentreductionsuggestedintheUnitedStatesproposallowerstheirboundtariffstothelevelsoftheircurrentappliedtariffs.Similarly,somecommodities(e.g.alcoholicbeveragesandtobaccoproducts)thathavehighboundtariffsalsohavehighappliedtariffs(asexceptionstotheCET).Suchlowoverhanglevelsinvariablyareaffectedevenbyamoremodesttariffcut.

3.4 Summary and conclusions of results of tariff-cutting formulae

The analysis of tariff profiles and proposals in this chapter shows theimportance of tariff policy and how the 12 countries in the group can beaffecteddifferentlybytheproposals.Amongtheproposals,theUnitedStatesproposal resulted in “deepest” cuts for the Caribbean countries, while theACP(andtheSVE)proposalwouldbethemost“lenient”.

The tariff policy proposals of the different groups and countries clearlyreflecttheirlevelofdevelopmentandnationalgoals.Forinstance,theUnitedStates is anet agricultural exporterwith low tariffs. It seeksmarket accessinothercountriesandtherefore itsproposaladvancesthisobjective;at thesametime,alowtariffstructureinitsowncountryensuresthatthedegreeofcutswillbemuchlowerthaninsomeothercountries(potentialmarkets)withhighertariffs.Attheotherend,theACPgroup(ofwhichtheCaribbeancountries are a part) suggests moderate tariff cuts in order to ensure tradepolicyspacethatmaybeneededinfuturetoinitiateorstrengthentheprocessofsectoralgrowth.TheEUandtheG20groupofcountriesshareacommongroundinthattheyproposelessambitioustariffreductionsascomparedtotheUnitedStates.Particularly for theG20countries, this reflects intent tomaintain appropriate levels of protection in the form of tariffs. The focus

94


oftheG20groupismoreonadrasticreductioninthetwootherpillarsoftheAgreementonAgriculture,domesticsupportandexportsubsidies,sincetheyviewtheseas theprincipal impediments forgetting theirexports intodevelopedcountries.

Tariff policy management is thus an important component of nationalpoliciesaimedatachievingtheirfoodsecurityobjectives.Tariffsenablethelocal producers of agricultural commodities to produce food with a lowerthreatofsubsidizedimportsdisplacingtheirproductsinthemarketandcreateanenablingenvironmentfordiversificationintovalueaddedcommodities.Inaddition,revenuegeneratedthroughtariffsisamuchneededsourceoffundsfornationaldevelopment.

AverycrucialaspectoftariffsinthecontextoftheCaribbeanregionisthedevelopment of a common external tariff structure that promotes regionaltrade among Caribbean countries. This is an important policy given thestructuralandeconomicdisadvantagesinherentintheireconomies.However,since they are also members of multilateral trading entities like the WTO,theyarefacedwithmanyrulesandobligationsthatinfluencetheframeworkofnationalandregionalpolicy-making.ThisissoparticularlywithrespecttotariffpolicywhichisthemainmeasureinthecontextoftheWTOthatisusedbytheCaribbeancountries.AsseenintheWTOnegotiationsundertheDohaRoundagradualreduction(disciplining)oftariffsispromotedandthiswillleadtoareductioninthepolicyflexibilitythattheCaribbeancountriescurrentlyhavetopursuetheirfoodsecurityobjectives.

CaribbeancountriesfacethetaskofnegotiatingintheWTOframeworkatariffpolicythatdoesnotunderminetheirfoodsecurity.FromtheanalysisofthemajorproposalsinthischapteritappearsthegapbetweentheUnitedStatesononehandandtheACP(andSVE)ontheotheristoowideforanagreementthatwouldmeetthepurposesofbothgroups.Thus,oneapproachisforCaribbeancountriestonegotiatetheirintereststhroughSDTmeasures.This is underway through features such as special products (SPs) and thespecialsafeguardmechanism(SSM).ThroughSPs,negotiatorscouldnegotiateforbeingabletodeclarealltheirimportant(foodsecurity,ruraldevelopment,tariffrevenue)commoditiesaffectedbytariffcuttingasspecialandsensitiveproducts.Thiswouldensureminimumreductionintariffsoncommoditiescritical to their national development goals. Further, they could use theoptiontoimplementtheSpecialSafeguardMechanismonthesecommodities(depending on what is agreed in the final round of negotiations). Thesemeasures would enable further tariff reductions as pursued by the entiremultilateraltradeframeworkwithoutnecessarilyunderminingfoodsecurityandnationaldevelopmentgoalsofsmallandvulnerableeconomies.


95

References

Anderson, K. & Martin, W.2005.Agricultural market access: the key to Doha success. TradeNotenumber23(27June).Washington,DC,WorldBank.

FAO. 2002. A Special Agricultural Safeguard (SAS): buttressing the market access reforms of developing countries, FAO Papers on selected issues relating to theWTOnegotiationsonagriculture.Rome.

FAO.2005.The state of food insecurity in the world 2005.Rome.IATP. 2005.Sailing close to the wind: navigating the WTO Hong Kong Ministerial.

November.Minneapolis,Minnesota,InstituteforAgricultureandTradePolicy.IMF. Government Finance Statistics Yearbook and data files. Washington, DC,

International Monetary Fund (also available at http://www.imf.org/external/pubs/cat/longres.cfm?sk=16701.0).

96


Appendix3.1

Theproposedreductionformulae

United States proposalAlthough the United States proposal of 10 October 2005 is much moreexplicit than the other proposals, there are still a few unknowns, notablythepercentagereductionandleveloftariffcapsfordevelopingcountries.Inthischapteritisassumedthatdevelopingcountrieswillreducetheirtariffbytwo-thirdsofthereductionmadebydevelopedcountries.Furthermoreitisassumedthattariffcapsfordevelopingcountrieswillbesetat100percent.Inthe(last)highesttiers,theUnitedStatesproposestoreducethetariffsintherangeof75percentto90percent,butinthischapterandtobeconsistentacrosscountries,eachtarifflinewillbesubjecttoa90percentreductioninthistier.TableA1providesasummarytheUnitedStatesproposalfortariffreduction,withtheassumptionsaddedherefordevelopingcountries.

APPENDIXTABLEA1United States proposal

DEVELOPED COUNTRIES DEVELOPING COUNTRIES

Threshold Cuts at Average cut of %

Threshold Cuts at Average cut of %

Lowest end Highest end Lowest end Highest end<20 55 65 60 <20 36.6� 43.33 40

20≤…<40 65 75 70 20≤…<40 43.33 50 46.6�40≤…<60 75 85 80 40≤…<60 50 56.6� 53.3

….>60 90 90 …>60 60

TariffCAP:75percent TariffCAP:100percent

Note:Assumedparametersareinitalics.

EU proposalThecutsfordevelopingcountriesarethesameasintheG20proposal,withtheexceptionofadditionalflexibilityinthefirsttierwhereanaveragetariffcutof35percentissought,butflexibilitytoimposecutsofbetween20and45percentisallowed.

Thesimulatedcutstoindividualtariffsfallinginthefirsttierisdeterminedinsuchawayastoachieveanaveragecutof35percentwiththeobjectiveofmaximizingflexibilitybysubjectingthehighertariffstolowercuts.

Thetotalnumberoflinesisfirstcategorizedintotwogroups:thelowestN*0.7linesaretobesubjecttothehighestcutsandtheremainingN*0.3linesaretobesubjecttothelowercuts.TheN*0.7linesarefurtherdividedby14


97

togivethenumberoflinestobecutby45percent,44percent......32percentrespectively.TheN*0.3linesarefurthersubdividedby12togivethenumberoflinestobecutby31percent,30percent.......20percentrespectively.

Forexample,ifacountryhas1200nonzeroboundtarifflines:ForthelowestvaluetariffsN*0.7=840.Then840/14=60.Thelowest60

linesarecutby45percent,thenextlowest60linesby44percentandsoonuntilthe781st-840thlineshavebeencutby32percent.

ForthehighervaluetariffsN*0.3=360.Then360/12=30.The841st to870thlowestlinesarecutby31percent,thenext30by30percentandsoonuntilthe1171stto1200thlineshavebeencutby20percent.

Theeffectofthisapproachistoachievetheaverage35percentreduction,but with a larger proportion of lower level lines being cut the most, thusreducingtheeffectontheaveragetarifflevel.

APPENDIXTABLEA2EU proposal


Thresholds Linear cuts %


…≤30 35(20–45) ….≤30 25(10–40)

30<….≤60 45 30<…≤80 30

60<….≤90 50 80<….≤130 35

….>90 60 …>130 40

TariffsCap:100percent TariffsCap:150percent

G �0 proposalThe G20 proposal has four thresholds for both developed and developingcountries. Both the threshold range and reduction percentages differ. Fordevelopedcountriesthesizeofthetiersissmallerthanthosefordevelopingcountries.Indevelopedcountriesthelowestthreshold(0…≤20)willbesubjectto 45percent cut whereas the lowest threshold in the case of developingcountries(0…≤30)willbesubjectto25percentcut.Fordevelopedcountriesboundtariffswillbecappedat100percentandfordevelopingcountriestariffwillbecappedat150percent.TableA3summariestheG20proposal.

ACP proposalThe ACP proposal suggests four tiers for both developed and developingcountriesandthetariffreductionwillbebasedonlinearcuts.Nopercentagesfor linear cuts are indicated for developed countries, although the textmentions that proportionality will be achieved by guaranteeing that theoveralloutcomeoftariffreductioncommitmentsbydevelopingcountriesislowerthanthatrequiredfromdevelopedcountries.Theproposalalsostatesthattheoverallaveragereductionoftariffsbydevelopingcountriesshallnot

98


exceed24percent(perhapsthechoiceoflinearcutpercentagesisintendedtoreflectthispoint).Notariffcappingisproposed.

The proposal recommends specific modalities for countries with tariffceilingsandhomogeneouslowbindings.ItstatesthattheseMemberswillbesubjecttotheoverallaveragereductiononly,willdistributetheirtarifflinesacrossthelowertiersoftheformulaonthebasisoftheirownassessmentofsensitivitiesandwillnotbeexpectedtoundertakethelevelofcutsrequiredinthehighesttiers.

Small, vulnerable economies’ proposalThe small vulnerable economies presented a proposal on market accessmodalitiesthatincludedatariffcuttingproposalbutnotinthetieredformatofthefourmajorproposals.Eventually,SVEsproposedthattheyundertakelinearcutsnotexceeding15percentwithaminimumof10percentpertariffline.Further,itwasrecommendedthatnotariffcappingbeappliedtoSVEs.The SVE proposal is to cut about ten percent points less than the ACPproposal(15asopposedto25percent).

APPENDIXTABLEA3G�0 proposal




…≤20 45 ….≤30 25

20<….≤50 55 30<…≤80 30

50<….≤75 65 80<….≤130 35

….>75 75 …>130 40

TariffsCap:100percent TariffsCap:150percent

APPENDIXTABLEA4ACP proposal


Thresholds Thresholds Linear cuts (%)

>80 >150 30

>50≤80 >100≤150 25

>20≤50 >50≤100 20

0≤20 0≤50 15


99

Appendix3.2

ResultsoftariffreductionformulaeforCaribbeancountries–graphicalrepresentation

Antigua and Barbuda

0

50

100

150

200

250

1 2 2 4 6 7 7 8 9 9 11 12 12 14 15 17 19 20 21 22 24

HS Number

Bo

un

d T

arif

f Ra

te (

%)

Current bound

New bound (US)

New bound (EU) & (G 20)

New bound (ACP)

Barbados

0

50

100

150

200

250

1 2 2 2 4 6 7 7 8 8 8 9 11 12 15 15 17 19 20 20 21 23 41HS Number

Bo

un

d T

arif

f Ra

te (

%)

Current bound

New bound (US)

New bound (EU) & (G 20)

New bound (ACP)

�00


Belize

Dominica

Grenada

Current bound

0

20

40

60

80

100

120

1 2 2 4 5 7 7 8 8 9 9 11 11 12 13 15 15 17 19 20 20 22 23HS Number

Bo

un

d T

arif

f Ra

te (

%)

New bound (US)

New bound (ACP)New bound (EU) & (G 20)

0

20

40

60

80

100

120

140

160

1 2 2 4 5 7 7 8 8 9 9 11 11 12 13 15 15 17 19 20 20 22 23 41HS Number

Bo

un

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arif

f Ra

te (

%)

Current bound New bound (US)New bound (EU) & (G 20) New bound (ACP)

0

50

100

150

200

250

1 2 2 4 5 7 7 8 8 9 9 11 11 12 13 15 15 17 19 20 20 22 23 41

HS Number

Bo

un

d T

arif

f Ra

te (

%)

Current bound New bound (US) New bound (G 20)New bound (EU) New bound (ACP)


�0�

Guyana

Jamaica

Saint Kitts and Nevis

0

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40

60

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100

120

1 2 2 2 4 6 7 7 8 8 8 9 10 11 11 12 12 14 15 15 17 19 20 20 21 22 23 41

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Bou

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Rat

e (%

)


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Bou

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Rat

e (%

)


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1 2 2 2 4 6 7 7 7 8 8 9 10 11 11 12 12 14 15 15 17 19 20 20 21 23 24 52

HS Number

Bou

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iff

Rat

e (%

)


�0�


Saint Lucia

Saint Vincent and the Grenadines

Suriname

0

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300

1 2 2 2 4 6 7 7 7 8 8 9 10 11 11 12 12 14 15 15 17 19 20 20 21 22 23 41

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Rat

e (%

)


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1 2 2 2 4 6 7 7 8 8 8 9 10 11 11 12 12 14 15 15 17 19 20 20 21 23 24 52

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Rat

e (%

)


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25

1 2 2 2 4 4 6 7 7 7 8 8 8 8 9 10 11 12 12 15 15 16 19 20 22 23 23 24

HS Number

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iff

Rat

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)



�03

Trinidad and Tobago

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)


�04


Appendix3.3

PercentageofHStarifflinesandcorresponding

commoditiesseverelyaffected(resultingbound

rate=or<thancurrentappliedrate)bythe

fourtariffcuttingproposals

US proposal

% of lines Commodities

Antigua/Barbuda 10 Fruits,honey,rawsugar,vegetableoils,spices,groundnuts,birdeggs,cutflowers

Barbados 20 Birdeggs,honey,cutflowers,vegetables,beans,nuts(alltypes),fruits(alltypes),coffee,spices

Belize 17 Alcoholicbeverages*,sausages*,lamb&goatmeat,birdeggs,cutflowers,nuts(alltypes),fruits,spices,groundnuts,vegetableoils,rawsugar

Dominica 22 Coffee*,fruitjuices*,citrusfruits*,alcoholicbeverages*,tobaccoprds*,birdseggs,vegetables,nuts,fruits,vegetableoils

Grenada 22 Soyabeanoil*,alcoholicbeverages*,rice(milled/broken)*,seedsforsowing,birdeggs,cutflowers,soyacake,vegetables,nuts,fruits,coffee,spices,vegetableoils(excl.soyabean),sugar&sugarprds.(excl.refined)

Guyana 31 Alcholicbeverages*,tobaccoprds*,meat(pig,bovine,lamb,poultry),birdeggs,vegetables,nuts,fruits,coffee,spices,vegetableoils,groundnuts,sugar&sugarprods(excl.refined)

Jamaica 29 Freshmilk*,meat(bovine,pig&poultry),birdeggs,honey,cutflowers,vegetables,nuts,fruits,coffee,spices,seedsforsowing,vegetableoils,sugar*&sugarprods(excl.refined)

StKittsandNevis 4 Cinnamon*,veg.fats*,wine(smallcontainers)*,animalfats,maplesugar

StLucia 6 Liquers*,cigarettes*,birdeggs,cutflowers,fruits,soyabeanoil,vegetable&animalfats

StVincent/Gren. 7 Birdeggs,cutflowers,nuts,fruits,soyabeanoil,animal&veg.fats

Suriname* Meat*(pig,swine,poultry,lamb),fruits*,sorghum*,vegetableandfoodprep.,citrusjuice*,rice*,sorghum

Trinidad/Tobago 25 Alcoholicbeverages*,tea*,groundnuts*,meat(pig,lamb),freshmilk,birdeggs,honey,cutflowers,vegetables,nuts,fruits,spices,wheat,seedsforsowing,vegetableoils,sugar&sugarprods(excl.refined)

*SincemostappliedtariffratesinSuriname’stariffstructureareabovebound,resultswereusedonlyforthosetarifflinesinwhichoppositewasthecase.Also,sincethisapproachwouldnotyield.


�05

EU proposal

% of lines Commodities

Antigua/Barbuda -

Barbados -

Belize 1 Alcoholicbeverages*

Dominica 3 Coffee*,fruitjuices*,citrusfruits,coconuts

Grenada 4 Soyabeanoil*,alcoholicbeverages*,rice(milled/broken)*,mixtureofjuices*,foodprep.(n.e.s.)*,seedsforsowing,soyacake.

Guyana 4 Alcholicbeverages*,tobaccoprds*

Jamaica 3 Freshmilk*,seedsforsowing

StKittsandNevis 0 Cinnamon*

StLucia

StVincent/Gren.

Suriname* Meat*(pig,swine,poultry,lamb),sorghum*,fruits,vegetableandfoodprep.

Trinidad/Tobago 3 Wheat,seedsforsowing

G�0 proposal ACP proposal

% of lines Commodities % of lines Commodities

Antigua/Barbuda

- -

Barbados - -

Belize 1 Alcoholicbeverages*

Dominica 1 Coffee*,citrusjuice*,aeratedwater*

Grenada 4 Soyabeanoil*,alcoholicbeverages*,rice(milled/broken)*,seedsforsowing,soyacake.

4 Soyabeanoil*,alcoholicbeverages*,rice(milled/broken)*,seedsforsowing,soyacake.

Guyana 4 Alcholicbeverages*,tobaccoprds*

4 Alcholicbeverages*,tobaccoprds*

Jamaica 3 Freshmilk*,seedsforsowing

3 Freshmilk*,seedsforsowing

StKitts/Nevis 0 Cinnamon* 0.2 Cinnamon*

StLucia - -

StVincent/Gren. - -

Suriname* Meat*(pig,swine,poultry,lamb),sorghum*,fruits,vegetable&foodprep.,

Meat*,sorghum*

Trinidad/Tob. 5 Tea*,wheat,seedsforsowing

5 Tea*,wheat,seedsforsowing

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4

AddressingtradepreferencesandtheirerosionintheCaribbean

Piero Conforti and J.R. Deep Ford

Introduction

Preferentialtradeagreementsarediscriminatorypolicies,entailingpartialortotal trade liberalizationforasubsetof tradingpartners.Therealityoftheworldtradingsystemischaracterizedbyawidevarietyofsuchagreements,whose discriminatory nature tends to clash with the principle of non-discrimination,which isoneof thecornerstonesof themultilateral tradingsystem.Atthesametime,preferentialtradehasbeenconceivedasaprimarytooltointegratedevelopingcountriesintotheworldtradingsystem,therebypromoting their economic growth and development. Preferential tradeconstitutes, therefore,asignificantshareof theworldmarkets,particularlyforsomeagriculturalproducts.

The multilateral trade liberalization processes, such as the GeneralAgreement on Tariffs and Trade (GATT) negotiations and the subsequentWorldTradeOrganization(WTO)rounds,havesoughttoensurecompatibilitywiththeexistingpreferentialtraderegimesthroughasetofexemptionsandwaiverstothemost-favourednation(MFN)rule.Inparticular,theso-calledEnablingClause46createdapermanentlegalbasisfortradepreferences,bothgenerallyfordevelopingcountries,undergeneralizedsystemofpreferences(GSP)regimes,andalsoformorespecificpreferentialtreatmentoftheleast-developed countries (LDCs). Individual developed countries sometimesgrantspecificpreferencesforlimitedgroupsofdevelopingcountrieswhichinclude non-LDCs, such as those that the European Union (EU) grantsto theAfrican,CaribbeanandPacificGroupofStates (ACP).These latter

46 DecisiononDifferentialandMoreFavourableTreatment,Reciprocity,andFullerParticipationofDevelopingCountries.GATTDocumentL/4903,28November1979,BISD26S/203.

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preferences, which have been the object of a waiver, are among the morecontroversialinthecurrentdebateonpreferences.

Preferences have certainly existed for a long time and taken differentforms,buttheirlong-termeffecthasbeenquestioned,especiallywithrespectto their ability to promote development and the economic integration ofthe recipient countries. Hoekman and Özden (2005) provide a review ofthe theoretical frameworks and available empirical evidence concerningdevelopingcountries,focusingonthe79MembersoftheACPgroup.

For ACP countries, and especially for the smaller and less diversifiedeconomieswithinthisgroup,preferencesareakeyelementoftheeconomy.They have provided considerable incentives to develop local industries,whichhavebecomeessentialforthelivelihoodoflocalcommunities.Insomecountries,productionpromotedbytheEuropeanpreferencesisamongthefeweconomicactivitiesundertaken.Infact,amatterofconcernistheextenttowhichpreferenceshaveprovidedincentivesthatpreventeddiversification,in those countries where existing resources could have allowed differentactivities.

During the latest WTO rounds, preferences were framed as part of thespecialanddifferentialtreatment(SDT)fordevelopingcountries.DuetothesingleundertakingpracticeintroducedwiththeUruguayRound–bywhichWTOMembers subscribe toall theelementsof theagreements–SDThasbecomethemeansthroughwhichcountriesseekrecognitionofthedifferencesintheircapacitiestoimplementtheundertakings.TheapplicationoftheSDTis relatively simple in the area of tariff reduction, as commitments can besmaller and more diluted through time for certain countries. Preferencesstill can and do openly contradict the basic non-discriminatory principlesof theWTO–even if forverygoodreasons.Moreover, their effectivenessisproportionaltothesizeoftradebarriersfacedbyothercountries,andistherefore reducedby themultilateral liberalizationprocess, aphenomenoncommonly called preference erosion. In fact, within the Doha Roundnegotiation,preferenceswerementionedmostlywithreferencetotheirlikelyerosion,andtotheneedofaddressingtheassociatednegativeconsequences.

The empirical evidence of the effect of trade preferences is not fullyconclusive. It makes clear that although the global effect might have beenmarginalintermsoftradeandwelfare,theeffectissignificantonanumberofspecificcountries,whicharenowlikelytobedeeplyaffectedbytheerosionphenomenon(Lowet al.,2006).SeveralACPcountrieshavecertainlybeenseverelyaffected.

Thischapterreviewsthelogic,structureandvalueoftradepreferencesasthey stand today, with special reference to the ACP regime (the one mostimportant to the Caribbean countries), with the aim of providing insightsintotherolethatpreferentialagreementsmayormaynotplayinthefuture.

Addressing trade preferences and their erosion in the Caribbean

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Particularly,thechapteraimsatrespondingtothefollowingquestions:Whatis the logic and functioningofpreferences inplace in theCaribbean?Cansuch a system constitute a viable perspective for the future of the region?And,ifnot,alongwhichlinesshouldthepresentpreferentialregimeevolveinordertoeffectivelysupportthesustainableeconomicdevelopmentofthesecountries?Section4.1 looksat themainfeaturesof thecurrentpreferentialsystem and its value, while Section4.2 considers its importance and thethreatoferosion.Section4.3buildsontheprevioustwotodiscusselementsandpresentconclusionsthatmayinformthestrategyofcountriesinwhichpreferences are more important today, and for which erosion may haveseriousconsequences.

4.� The logic and value of ACP preferences

In the Caribbean region, the ACP–EU preferential regime is the mostimportant. The formation of the European Communities, which startedin the late 1950s, largely coincided with de-colonization. Many trade andeconomicrelationssetupinthecolonialperiodsurvivedduringthatdifficultprocess,allowingthenewly-formedstatestomaintaintheirroleassuppliersof primary agricultural goods in the European market. At that time, thesetraderelationsconstitutedthebackboneofmanysucheconomies,andhenceofde-colonizationitself.

When the founder Members of the EU started to move towards thecreation of a single market in agriculture and other primary products, themaintenance of such consolidated economic relations became an obviousrequirement,bothfromtheEuropeanperspective,giventheneedtosecurethe supply of primary goods, and for the fragile economies of the newlyindependentcountries.ThisledtotheYaundéConventionsinthe1960s,andlatertotheLoméconventionsfromthemid-1970s.Thesystemofrelationswasinherentlyasymmetric.Inthe1960s,thiswasanextensionoftheendingcolonialstatus;inthe1970s,theasymmetrywasreinforcedby,amongotherconsiderations, the European fears about the instability of the commoditymarkets, which had been following from the oil crises and scarcity inthe world cereal market (both of which occurred a few years before thesignatureoftheLoméConvention).Itwasnotbychance,thereforethatthatConvention also included stabilization schemes for the exports of mineralandmanufacturedgoods.

Foragriculturalgoods,thelogicthatshapedthepreferentialtraderelationsbetweentheEUandtheACPwassimilartothatwhichhadbeeninspiringthe newborn Common Agricultural Policy (CAP). The idea was that, bycontrolling output and (major) input prices in agriculture and the relatedbasic processing industries, the level and stability of rural incomes would

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increase,whilepricestoconsumerswouldremainstable.Tradepreferencesfor theACPwere to someextentpartof the system; the stabilityof theirroleassupplementarysupplierswasindirectlypromotedwithintheCAPforsugar,andforbananas,whoseimportsweresecuredbypreferentialimports.For sugar, a guaranteed price level was linked to the guaranteed producerpriceoperatedinthedomesticmarket.

Despite their far more limited scope, ACP trade preferences providedfor some kind of broad and non-selective support that shielded producersfromcompetitionintheopenmarket.Bythesametoken,preferenceswerepossibly distorting the economies and slowing down the adjustment thatcompetition might have brought about. Exactly as the CAP was partlyinsulating European producers from the world market – as far as importswere not required – ACP preferences took the form of quasi-guaranteedtradeflows.Thesewouldbemarginallyaffectedbychangingworldmarketconditions, and not be affected by competition over production costs,becausethesettingofprohibitiveout-of-quotatariffsdiscouragednon-ACPcompetitorfrominterferingwiththesystem.ThiswasthecaseforimportantCaribbeanproductslikesugarandbananas.

Thus preferences generated a rent, and to the extent to which such renteffectivelyaccruedtoACPcountries,theregimeresultedinaninjectionofresources, equivalent to a financial transfer. Possible uses of such transfersincluded anything from the generation of private wealth, which couldprovidedisincentivestoinvestandinnovate,tothepromotionofinvestmentwherestructural,institutionalandnaturalconditionsalloweddoingso.Therelativeimportanceofeitherofthesetwophenomenaisanempiricalmatter,which has contributed to shaping the structure of the economies and thedegreeofdevelopmentofthecountriesintheregion.

4.�.� The value of preferences Whathasbeenandwhatistodaytheabsolutevalueofthebenefitassociatedtothepreferentialregime?Theanswertothisquestionisnotstraightforward.Ideally one should compare the actual situation in which preferences existwith a counterfactual scenario in which preferences do not exist. Thisrequiresacrediblesimulation,capableofindicatingwhattradewouldhavelooked like should the existing preference not been in place, and whatresourceallocationwouldhavelookedlikeintheinvolvedcountriesundersuchascenario–including,forinstance,theeffectsonthelabourmarket,oninvestment,oronthebalanceofpayments.

The comparison of the economies with and without preferences shouldalso be based on a credible numeraire. Economic welfare may play thisrole,butothermeasuresofwell-beingmaybetakenintoaccount,includingthose related to income level and its distribution. In any case, the choice


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oftheindicatorwouldnotbeneutralwithrespecttotheoutcome.Finally,the simulation shouldbeaccurateenough to showwhicheconomicagentsare receiving the rent associated with the existence of the preferences.Dependingontheactualorganizationoftradeacrossimportersandexporters,and depending on their relative market power, the rents generated by apreferentialregimecanbecapturedbyeithersideofthemarketandtranslateinto different pricing. Given these requirements, good candidates for thistypeofevaluationaregeneralequilibriummodels,whichnotoriouslyentailhugecostsintermsofdataandassumptionsandyieldcomplexresults.Manysuchevaluationsareinfactavailableintheliterature(HoekmanandOzden,2005);theyindicatethatbenefitsaresmallinglobalterms,whilesignificantforcertaincountries,amongwhichthesmallACPsfeatureprominently.

For the purpose of this chapter, however, it is sufficient to compute thesimple nominal value of the preferential margin, as reported in Table 4.�.Many studies have computed similar values, including Yamazaki (1996),Tangermann(2000)andFAO(2003). It isuseful torecallbriefly themanylimitationsof thismeasure: ituses actual tradepatternsas abenchmark toassess the advantage generated by the preferences; it does not tell who iscapturing thebenefit,whatever itsvalue; and itdoesnot indicatewhatare

TABLE4.1Value of preferences under the EU/ACP trade regime

Values in 000 US$

�990/9� �99�/93 �994/95 �996/97 �998/99 �000 �00� �00�

AntiguaandBarbuda 90 40 1789 175 874 128 95 115

Bahamas 538 745 3716 4759 4491 8043 5653 10934

Barbados 18487 21403 15248 23212 21313 16296 14708 14109

Belize 16767 24850 30110 33170 38318 28532 30598 22790

Dominica 5134 5520 3684 3560 2478 2116 1351 1443

DominicanRepublic 8230 16477 16291 17320 16491 11648 15416 19121

Grenada 1277 891 765 518 495 137 168 184

Guyana 50351 82104 64855 89991 99514 76195 67368 72917

Haiti 993 795 920 1007 513 185 135 159

Jamaica 54720 66003 63836 68651 72308 51934 48665 53692

SaintKittsandNevis 5899 8684 6740 7489 6687 5165 6294 7320

SaintLucia 10895 11049 9232 8253 5687 5067 2404 3549

SaintVincentandthe

Grenadines

7347 6380 3963 4348 3646 3160 2198 2360

Suriname 3633 4100 5231 8761 10152 8239 7613 8625

TrinidadandTobago 17043 22096 20622 22741 20682 18546 14547 19132

TotalCaribbean 201404 271137 247002 293955 303649 235391 217213 236450

Source:EUROSTAT

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thebroadercostsand/orbenefitsspreadthroughouttheeconomyandhowtheyaredistributed.47

The margins show the importance of Guyana and Jamaica in absolutetermsamongthetopbeneficiarycountries,followedbyBelize,TrinidadandTobagoandtheDominicanRepublic(DR).Thetotalvaluehasdeclinedoverthelastfewyears,eveninnominalterms.

A more size-independent measure is considered in Table 4.�, where thevalues are divided by the value of agricultural exports and gross domesticproduct(GDP).Thisshowsthepotentialimportanceofthetraderegimenotonlyforalltheagriculturalexportsfromtheregion,butalsofortheentireeconomies of a number of small countries, such as Saint Kitts and Nevis,andofanumberofrelativelylargerones,suchasBelize,Guyana,SurinameandJamaica.Thisisabroaderindicationofimportance,sincepartorallof

47 Inmoredetail,forad valoremtarifflines,thecomputationisthemultiplicationofthepreferencemarginby thevalueofexports for thepreference-receivingcommodity. If the tariff lineconsistsof both a specific tariff and an ad valorem tariff, the above method is used for the ad valoremcomponentwhile thepreferencemargin for the specific tariff is computedandmultipliedby thevolumeofexports.Thesummationofthetwothengivesthevalueofthetariffpreference.Whenthepreferredtariffisaseasonalad valoremorspecifictariff,itisassumedthattheexportsoccurredduringthespecifiedseasonbecausenotradewouldoccurpost-orpre-seasonasthetariffswouldbeexorbitantlyhigh.Table4.1reportsthevalue/rentoftradepreferencesfortheperiod1990to2002fortheCaribbeancountriesundertheEU/ACPtradeprotocol.

TABLE4.2Importance of preferences in selected countries

Value of preferences as a % of agricultural exports

Value of preferences as a % of GDP

AntiguaandBarbuda 7.5 0.0

Bahamas 3.9 0.2

Barbados 21.3 -

Belize 16.3 4.5

Dominica 8.3 0.6

DominicanRepublic 2.7 0.1

Grenada 0.7 0.0

Guyana 29.8 14.1

Haiti 0.6 -

Jamaica 19.9 1.1

SaintKittsandNevis 71.1 2.7

SaintLucia 8.6 0.5

SaintVincentandtheGrenadines 7.8 0.8

Suriname 12.9 1.0

TrinidadandTobago 7.3 0.3

Average 11.6 1.7

Source:FAO,2004


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thisadvantagemaynotaccruetothecountry,but,forinstance,tosomeEUimportersofproductsfromtheACP.

4.�.�. The products involvedInorder tobetterunderstand the effective advantagesofpreferential tradeschemes in individual countries, it is necessary to look at how preferencemarginsareorganizedanddistributedinfact,consideringinparticular:thepolicytoolsuponwhichtheyarebased;theproductswhichareinvolvedinsuch schemes; the transaction costs involved in the use of the preferences;andthedistributionofthetariffpreferenceamongthedifferentpointsonthecommoditychain.

In terms of policy tools, the ACP preferences are organized mostly onthe basis of duty-free access granted to individual countries, coupled withthe price guarantees that were granted to domestic production under theCAP.Forsomeproducts–notablysugarandbananas– thesystemwouldnotimplyquantitativelimitationsuntilthe1970s,whileafterthatperiodthepreferencestooktheformofanexportquotaallottedtoindividualcountriesbasedmoreorlessontheirproductionandexportcapacity.Priceguaranteeswouldcontinuetoapplywithinthatquota.

In terms of products, the concentration of preferences and the key roleplayedbysugarandbananasisimmediatelyevident.Tables 4. 3 and 4.4showhow the specific margins for these products account for a very significantshareoftheoverallnominalvalueofthepreferencesgrantedbytheEU.

ArecentstudylookedindetailattheparticularorganizationofpreferentialtradeforanumberofACPcountrieswithreferencetothespecificcaseofthe sugar industry (Garside et al., 2005). Qualitative indicators show thattheownershipofthesupplychainsismostlyontheexportside,andmostlydomesticinthiscase,implyingthatthebenefitsarisingfromtheexistenceofthepreferencesshouldhaveremainedmostlywiththeACP.Atthesametime,

TABLE4.3Direct economic importance of sugar exported to the EU for selected countries

Value of exports to EU Value of preferences

000 US$ % of GDP 000 US$ % of GDP

�997/99 �000/0� �997/99 �000/0� �997/99 �000/0� �997/99 �000/0�

Barbados 26406 22057 1.1 0.9 21686 14801 0.6 0.6

Belize 26167 25325 4.1 3.1 21000 14562 2.7 2.1

Guyana 98985 96649 13.7 13.5 79137 62317 9.3 9.3

Jamaica 76207 76412 1.0 1.0 61330 46492 0.7 0.7

SaintKittsandNevis 9180 10406 3.2 3.0 7325 6243 2.5 2.1

Trinidad 24339 27224 0.4 0.3 19404 17054 0.3 0.2

Source:FAO

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thefactthattradeisconcentratedonveryfewproducts,thatitaccountsforasmallshareofglobaltradeinsuchproducts,andthatexportsfromtheACParedestinedtoalimitednumberofforeignmarkets–mainlytheEU–clearlycontributestotheweaknessofthetradingsystemcreatedbythepreferences,particularlyintermsofthedependencyofsomeoftheACPcountriesuponthatsystem.

TheimportanceofthesetwoproductswasrecognizedbytheWTOinarecentpaper(Lowet al.,2006),whichmakesclearthattheerosionofnon-reciprocalpreferencesinagricultureisconcentratedinfewproducts.Ofthelikely losses–defined in termsofpercentageofagriculturalexports in themost-affectedWTOMembercountries–85percent arise in the sugar andfruitsandvegetablessectors(withthislattergroupdominatedbybananas).The same study also qualifies the problem in terms of the more-affectedcountries,bylookingatthoseinwhichtheestimatedlossesfrompreferenceerosionexceeds4percentoftotalagriculturalexportstotheQuadcountries(EU,UnitedStates,CanadaandJapan);sixoutoftwelvecountriesinwhichthis is thecaseareCaribbeancountries (SaintLucia,SaintVincentandtheGrenadines,Belize,Dominica,SaintKittsandNevisandGuyana).Thelistof countries – which includes Botswana, Namibia, Mauritius, Cameroon,Swaziland,andFijitogetherwiththeCaribbeancountriescitedabove–doesnotoverlapwiththepoorestormorevulnerablecountries.

4.� Preference erosion

Howhasthepolicyenvironmentbeenevolvingthroughtime?TheloweringofMFNagriculturaltariffs(startedbytheUruguayRoundoftheGATT),the (perspective) extension of EU preference beyond the ACP countries(broughtaboutbytheEverythingButArms(EBA)initiative)andtheCAPreformintheEUinkeysectors likesugarandbananas,areall factorsthatwill bring about an erosion of ACP preferences. In the background, thenegotiationsheldwithintheDohaRounduntilitscollapsein2006havealso

TABLE4.4Direct economic importance of bananas exported to the EU for selected countries

Value of exports to EU Value of preferences

000 US$ % of GDP 000 US$ % of GDP

�997/99 �000/0� �997/99 �000/0� �997/99 �000/0� �997/99 �000/0�

DominicanRep. 28135 46107 0.3 0.4 3410 6640 0.0 0.1

Jamaica 54936 29662 1.3 1.2 4406 2803 0.1 0.1

SaintLucia 54345 33977 14.3 9.1 4779 2647 1.3 0.7

SaintVincentandtheGren. 28370 22938 14.3 11.3 2466 1909 1.2 0.9

Source:FAO


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contributed to creating expectations of further erosion, and fuelled usefuldiscussionsaboutthefutureofsuchmeasures.

In the Doha Round, the discussion largely reflected the inherentcontradictionbetweenthecommitmentstomultilateralliberalizationprocessand to addressing the problem of preference erosion. In August 2004, theGeneral Council approved a statement in which it “fully recognized” theneedtotakeintoaccountlong-standingpreferencesandtoaddresspreferenceerosion.However,theprovisiondidnotindicatehowthiswasmeanttobeachieved. Reference was made to a part of the so-called Harbinson text–preparedin2003butneverapproved–whichindicatedboththepossibilityofdelayingtheapplicationofMFNtariffreduction(inthosecasesinwhichasignificantshareofaMemberState’sexportswouldbeaffectedbytheerosionofpreference),andthepossibilityofaddressingtheissuethroughtechnicalassistance to the affected Member. The first provision, given the triggerconditionshypothesized,48wouldhaveappliedverylittletothepoorerandmorevulnerableMembers.Theseconddimensionwasmoreprevalentinthesubsequentdebate,althoughwithoutdirectlinkagetopreferenceerosion.

Adirectcomparisonofthevaluesofpreferencescomputedfortheperiod1994/95–beforetheimplementationofthe1994WTOUruguayAgreement–andthelatestinformationavailableshowsthatthevaluehasdecreasedinatleast7ofthe15countriesoverthelastyears(Table 4.�),whilenocountryshows a consistent increase over the same period. Individual cases can beexplainedbyparticularevents;forinstance,inthecaseofJamaicathedeclineat the end of the 1990s can be explained by the devaluation of the dollaragainsttheeuro,whichreducedthevalueoftrade,combinedwiththedeclineofworldsugarprices.InSaintLucia,thereductioninthevolumeandunitvalueofbananascanexplainpartoftheobserveddecline.

Thereareanumberofstudiesintheliteraturethathavelookedatpreferenceerosion inspecific industries,andparticularly in thesugarmarket (StevensandKennan,2001;UNCTAD,2005;vanBerkum,RozaandvanTongeren(2005);Garsideet al., 2005).More specifically,vanBerkum,RozaandvanTongeren(2005)utilizeageneralequilibriummodeltoinvestigatetheimpactoftheEUsugarpolicyreformontheworldpricesandconductcasestudiesontheimpactofthereformontheSugarProtocolsignatories(Mauritius),theLDCs(Ethiopia)andthedevelopingcountries(Brazil).Garsideet al.(2005)collecteddetailedcountry-specificvaluechaininformationthroughsurveysandpersonalinterviews,andshowthatthereareanumberofcountriesthatarelikelytocompeteintheopenmarketdespitetheerosionofpreferences.For instance, in two Caribbean countries – Belize and Guyana – thereappears tobe room for reducingproductioncosts and increasing the scale

48 Itwasstatedthat“productsconcernedshallaccountforatleast[20]percentofthetotalmerchandiseexportsofanybeneficiaryconcernedonathree-yearaverageoutofthemostrecentfive-yearperiod”.

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ofproduction,therebyallowingthemtocompeteinthemarketbeyondthepreferenceregime.

Otherstudieshaveanalysedtheerosionofpreferencesfromtheperspectiveof the EU reform under the EBA initiative. Conforti and Rapsomanikis(2006)lookedattheerosioninthevalueofpreferencestosugar-producingcountries arising from trade and domestic policy reform of the EU sugarsector, considering trade costs as constraints in the growth of the exportsfrom the LDCs to the EU under the EBA initiative. Results indicate thattheexpectedpolicydevelopmentsarelikelytosignificantlyaffectanumberofCaribbeancountries,bothduetothereductionintheEUpriceandtheincreasedcompetitionfromLDCsundertheEBAinitiative.

Forbananas,whicharetheothermostimportantandcontentiousproductafter sugar, data show that non-ACP exporters have been expanding theirexportshareintheEUmarket.Actually,thesharesuppliedbyACPcountrieshas been declining. So, ACP exports have hardly been a hindrance to thegrowthinexportsofothercountriestotheEUmarketintheseproducts.Infactthegrowthrateofimportsfromnon-ACPsuppliershasfarexceededthegrowthrateofACPsuppliers.Thedatafurthershowsthatthegrowthratesof importsby theEUfromLatinAmericaandAsia forbothbananasandsugarhavebeenincreasingoverthepastthreeyears.TheincreasedgrowthrateinexportsofACPbananasisaccountedforlargelybytheexpansioninexportsfromtheAfricanACPexportersandtheincreasedexportsfromtheDominicanRepublic.ThesmallexportersfromtheeasternCaribbeanhaveexperienced a major decline in their banana exports since the early 1990s.OneofthekeyissuesofconcernfortheCaribbeancountriesinthissectoristhemechanismthroughwhichcountryquotasareallocated,asthisbecomesamajordeterminantofmarketaccess.

TABLE4.5Evolution of preferences as a share of GDP for selected countries (percentages)

�96�/6� �97�/7� �990/9� �000/0�

Barbados 16.8 3.0 1.2 6.0

SaintLucia 0.8 2.3 0.5

Jamaica 3.5 0.9 1.8 0.7

Belize 6.5 3.7 0.3

Grenada 0.9 0.4 0.0

Haiti 0.4 0.1 0.1 0.0

SaintKittsandNevis 7.3 3.8 1.8

Suriname 1.7 0.7 1.0

TrinidadandTobago 1.1 0.3 0.4 1.2

Source:calculationsonFAOSTATandIMFdata


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In general terms, the extent to which trade preferences have beendiminishinginimportancebecomesevidentifweprojecttheirvalueonthebasisofpastdata.Ifweconsiderthevalueofpreferencesasashareoftrade–ascomputedinTable 4.�–withreferencetotheACPcountriespreferencesin the EU, and we project the shares back on the trade data of the early1960sandearly1970s,weobservethatinthepasttheeconomicimportanceof preferences, however crudely assessed, was far higher than today. ACPpreferencesinthatperiodwereprobablygeneratingalargerrentcomparedtowhatishappeningtoday.

For example, in the early 1960s the value of preferences would accountforalmost17percentofGDPforBarbados, and for1percentofGDP inTrinidadandTobago;intheearly1970s,preferenceswouldaccountforupto7percentinSaintKittsandNevis,andfor6percentinBelize(Table 4.5).

IfweapplythesepercentagesharesofGDPcomputedinTable 4.5fortheearly1960sand1970stotoday’sGDPvalues,wecanobservethattheorderof magnitude is quite different from the estimates provided for the lateryears.

IfpreferencesforBarbadosaccountedtodayfortheshareofGDPthattheyaccountedforintheearly1970s,theirabsolutevaluewouldbearoundUS$77millionperyear,asopposedtotheapproximatelyUS$15millionestimatedfor2000/02 (Table 4.6).For Jamaica, theearly1960s shareofGDPwouldresulttodayinavalueofaboutUS$267million,ratherthanUS$51million;forBelize,applyingthe1970sGDPsharewouldresulttodayinavalueofthepreferenceswhichisabouttwiceasmuchtheactualestimatesfor2000/02.

Thechangeinrelativeimportance,however,dependsalsoontheextenttowhichGDPhasgrownthankstothegrowthofeconomicactivitiesthatareindependentfromtheexistenceofpreferences.Infact,themorediversifiedeconomies, such as Trinidad and Tobago and Barbados, show the widestdifferences.Butinsomeofthelessdiversifiedeconomies,wherethesectors

TABLE4.6Value of preferences in �000/0� (000 US$ per year)

Actual Projected as a share of GDP

in �96�/6� in �97�/7�

Barbados 15038 418641 77342SaintLucia 3673 5603Jamaica 51430 267402 73339Belize 27307 58636Grenada 163 3680Haiti 160 8765 3000SaintKittsandNevis 6260 25361Suriname 8159 13310TrinidadandTobago 17408 97689 24824

Source:calculationsonFAOSTATandIMFdata

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towhichpreferencesareimportantaremajoractivitiesintheeconomy(suchasinSaintKittsandSaintLucia),thedifferenceissignificant.

4.3 Conclusions

TradepreferencesfortheCaribbeancountrieshaveconstitutedanimportantinjectionoffungibleresourcesthroughtradeandanopportunitytomarketproducts under particular conditions, especially for those agriculturalproductscoveredbytheACPregimeintheEU.InEurope,preferenceshaveimpliedandstillimplytosomeextenttheestablishmentoffairlypredictableandorganizedtradeflows,whosemanagementhasbeenconsistentwiththeorganizationofthedomesticmarketforsomeagriculturalproducts.

From the 1980s onward, the growth of agricultural trade flows and theincreasing economic integration in agricultural commodity markets hastranslated into mounting pressure on countries to switch toward moreopentraderegimes,characterizedbyamultilateralcoordinationofpolicieswithin theWTOandprogressive trade liberalization. In theDohaRound,wherenon-discriminationwasanobjective,thisprocesshasclashedwiththediscriminatorynatureoftradepreferences.

The role of ACP preferences, as they were conceived by the EU in the1960s,seemstobelosingground,asshownbothbythefiguresandbythelikely effects of the envisaged policy changes. Against this background,andgiven the importanceofpreferences in the economyof theCaribbeancountries, an importantquestion tobeaddressed ishow todevise aviableeconomicstrategybybuildingupontheexistingtraderelations.Thespecificactionstobeundertakenneedtobedefinedatthenationallevel,onthebasisof more detailed information. However, it can be useful to highlight herea number of framework elements that may be taken into account for thedefinitionofthespecificstrategies.

Particularly,twogroupsofactionsmaybeundertaken.Ontheonehand,privateandpublic institutionsinthecountriesmayplanmedium-tolong-term investments with the aim of competing in an environment in whichpreferencesplay a smaller role. Inpractical terms this implies assessing, intermsofcostandqualitycharacteristics,thepotentialsofthekeyproductionprocesses (such as sugar and bananas in the case of agricultural products),anddecidingwhetheritispossibleandworthwhiletoimprovesuchactivitiesto thepoint that theycanbeeconomicallyviablewithoutdependinguponpreferences.

Ontheotherhand,onceinvestmentplansidentifyalternativesindependentfrom preferences, countries may consider the opportunities for financingsuchplansthroughthemeansavailablewithinthenationalandinternationalpolicy framework, including the current (maybe partially eroded) rentsgeneratedbypreferentialtrade.Inpracticalterms,thisimpliesconsideringthe


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opportunitiesgivenwithintheWTO,thegeneralizedsystemofpreferences(GSP)systemandtheEconomicPartnershipAgreements(EPAs).

Theextenttowhichpreferenceerosioncanbeaddressedthroughspecialanddifferentialtreatmentappearsquestionable,atleastifoneconsiderstheinterpretationofthisprincipleintheUruguayRoundAgreement.Preferenceerosiondoesnotdependuponthetariffsofthecountrythatsuffersfromit,butratheruponthetariffsofthecountrygrantingthepreferences.Nordoesit seemstraightforward toaddresspreferenceerosionwithin the specialorsensitiveproductdefinition,forthesamereason;theonlycasewhereitmightapplywouldbesugarintheUnitedStates(Lowet al.,2006).

One way out of this problem was indicated in the proposal of devisinga specific Aid for Trade mechanism (Stiglitz and Charlton, 2006), whichbuildssimultaneouslyontheideasof:(i)compensatingcountriesthatsuffera loss so that they achieve the collective advantage associated with tradeliberalization; (ii) increasing the equitability of the WTO process; and (iii)providingdevelopingcountrieswithadditionalopportunitiestoremovethoseobstacles that prevent them from benefiting from a more liberalized tradepolicyenvironment. In thecaseof theCaribbean,given the importanceofpreferencesintheeconomy,thistypeofsupportmaybeconceivedassupportforanoverallgrowthstrategy,andnotjustasaidaimedatsupportingtrade.Inotherwords,at least someof thecountriesmoreaffectedbypreferenceerosion may be willing to reconsider their overall economic medium- tolong-runstrategy,ratherthanjustimprovingthetradeinfrastructure.

Moreover,anycoordinatedeffort towardagricultural trade liberalizationintheWTOhassofarproducedonlyrelativelymoderatereductionsinthetariffs.ThisleavestheCaribbeancountrieswithsomepreferentialmargins,whichmayevenpersistover themediumrun,given the recent collapseofmultilateral negotiations. These could also be employed to finance plansaimedatreducingthedegreeofdependencyuponpreferences.

TheGSPschemeoffersopportunities,althoughinamoreselectivefashion,giventhegraduationmechanismthatitinvolvesbywhichbenefitsarereducedwhentheexporterreachesagivensizeinthemarket.IntheGSPframework,moreover, recent initiatives have adopted formulas that cover a wide range(virtuallyall)ofproducts,asinthecaseoftheEBA.Thisapproachreducesthedegreeofdistortioninthebeneficiarycountries,whoseproductionpatternswouldbethuslessaffectedbythepreference.

As for the Economic Partnership Agreements, it should be recalled thatfromaneconomicpointofviewACPproducersfindthemselvesinexactlythe same position as some European farmers, whose levels of market andprice guarantees have been reduced. However, the important differencebetween the EU and ACP farmers is their position in terms of politicaleconomy, since the former have a far stronger voice than the latter indemandingcompensation for the reductionof themarketguarantees.This

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hastranslatedintomuchhigherlevelsofcompensation:Europeanfarmersareprovidedacompensationaccountingforabout60percentoftheirlikelyloss;the amount or resources indicated so far for restructuring aid to the ACPcountriesintheEPAswouldhavetomorethantripleinordertoreachthesamelevelofcompensation (ChaplinandMatthews,2006).

It appears that Caribbean countries still have some time to adjust.However, they have been at the threshold of losing preferences for a longtime.Thereforeit isimportantthatallmechanismsavailableforpromotingthecompetitivenessof traditional localproductsareusedwherethisseemspossible; and in all cases resources should be used to rapidly reduce thedegree of dependency on preferences, and to increase product and marketdiversification.

Preferences have been important for achieving relatively high levels ofhuman development in most of the Caribbean countries benefiting fromthem,mainlyinsugar-andbanana-producingcountries.Thepromotionofagriculturaltradeliberalization–whichstartedwiththestructuraladjustmentprogrammespromotedbytheWorldBankandtheInternationalMonetaryFundandwascontinuedwiththeUruguayRoundandtheformationoftheWTO–hasledtoanincreasingnumberofquestionsaboutthecontinuingusefulnessofpreferencesandas tariff reductionshavebeennegotiated, thevalueofpreferenceshaseroded.

InthisnewandworseningsituationitiscrucialthatCaribbeancountrieswork together with development partners to identify and implement newstrategiesfortheircontinueddevelopment.Theseopportunitiesappeartofallintofourgeneralareas:

• strengtheningregionaltiesandmaximizingthedevelopmentofregionalmarkets: this would limit production decline and create additionalopportunities;

• mainstreaming the strong historical, political and economic ties withEuropeandthestrategiestoestablishasustainableextensionoftheLomeandCotonouagreementsthroughtheEPAs;

• pursuing greater linkages with the multilateral system as a whole andusingtheAidforTradeproposalinconnectionwithspecificinvestments;and

• using market opportunities to establish strategic alliances aimed atextendingtheresourcecapacityoftheCaribbeancountries.

Benefits from surviving preferences should be employed together withregional market opportunities to promote overall development plans thatuse available resources more effectively. (One option to consider is to tietheAidforTradeprovisiontotheAgriculturalModernizationFundbeingpursued by the Caribbean.) There are Caribbean countries that efficientlyutilizedtheextensiveresourcesavailableinthe1960sand1970stodiversify


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their economies, which allowed them to become far less dependent uponpreferences.Anyavailableresourcesshouldbeputtosimilaruse.

References

Chaplin, H. & Matthews, A. 2006.Copingwiththefalloutforpreference-receivingcountriesfromEUsugarreform. The Estey Centre Jour. of Int. Law and Trade Policy,7(1):15–31.

Conforti, P. & Rapsomanikis, G. 2006.Preferences erosion and trade costs in thesugar market: the impact of the Everything But Arms initiative and reform oftheEUpolicy.Forthcoming inJournal of International Agricultural Trade and Development.

FAO. 2003. Improving the value and effective utilization of agricultural trade preferences.Rome.

FAO.2004.Small island developing states agricultural production and trade, preferences and policy.FAOCommodityandTradeTechnicalPaperNo.7.Rome.

Garside, B., Hills, T., Marques, J.C., Seeger, C. & Thiel, V. 2005.Who gains from sugar quota?ODI-LSEDestinDV406Researchproject(availableathttp://www.odi.org.uk/iedg/projects/ EU_banana_sugar_markets/ODI_LSE_SugarProject_2005.pdf).

Hoekman, B. & Özden, Ç. 2005. Trade preferences and differential treatment of developing countries: a selective survey. World Bank Policy Research WorkingPaper3566.April.Washington,DC,WorldBank.

Low, P., Piermartini, R. & Richtering, J. 2006. Nonreciprocal preference erosion arising from MFN liberalization in agriculture: What are the risks? WTO staffworkingpaperERSD-2006-02.March.Geneva,WTO.

Stevens, C. & Kennan, J. 2001. The impact of the EU’s “Everything But Arms” proposal: a report to Oxfam.London,InstituteofDevelopmentStudies.

Stiglitz, J.E. & Charlton, A. 2006.Aid for Trade. A report for the Commonwealth Secretariat.March. (available athttp://www2.gsb.columbia.edu/faculty/jstiglitz/download/2006_Aid_For_Trade.pdf)

Tangermann, S. 2000. The Cotonou Agreement and the value of preferences in agricultural markets for the African ACP. Paper prepared for UNCTAD.Göttingen,InstituteofAgriculturalEconomics.

United Nations Conference on Trade and Development (UNCTAD).2005.Effects of the Everything But Arms Initiative on the sugar industries of the least-developed countries.UNCTAD/DITC/COM/2004/6.Geneva,UNCTAD.

Van Berkum, S., Roza, P. & van Tongeren, F. 2005. Impacts of the EU sugar policy reforms on developing countries. Report6.05.09.TheHague,AgriculturalEconomicsResearchInstitute(LEI).

Yamazaki, F. 1996. Potential erosion of trade preferences in agricultural products.Food Policy,21(4–5):409–417.

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5

Specialproducts:developingcountryflexibilityinthe

WTODoharound

J. R. Deep Ford and Hansdeep Khaira

Introduction

The World Trade Organization (WTO) Ministerial Declaration launchingtheDohaDevelopmentAgendain2001madeseveralcommitmentstofosterdevelopmentamongpoorerdevelopingcountries.Paragraph3committedto“addressingthemarginalizationofleast-developedcountriesininternationaltrade”. Paragraph 13 stated that special and differential treatment (SDT)measures “shall be an integral part of all elements in the negotiations onagriculture”andthesemeasuresshouldbe“operationallyeffectiveandenabledevelopingcountriestotakeaccountoftheirdevelopmentneeds,includingfood security and rural development”.49 The WTO thereby committed itstraderulestoachievedevelopmentresults.The2004‘Julypackage’reiteratedthe commitment “to fulfilling the development dimension of the DohaDevelopment Agenda, which places the interests of developing and least-developedcountriesattheheartoftheDohaWorkProgramme”.50

This chapter focuses on the identification and treatment of “specialproducts” based on the modality agreed by WTO Members in the ‘Julypackage’ document (paragraph 41) and extended in the 2005 Hong KongMinisterialDeclaration(paragraph7)asfollows:

“Developing country Members will have the flexibility to designate an appropriate number of products as special products, based on criteria of food security, livelihood security and rural development needs. These products will be eligible for more flexible treatment. The criteria and treatment of these products will be

49 WTO.2001,DohaMinisterialDeclaration,20November.(WT/MIN(01)/Dec/1)50 WTO.2004.DohaWorkProgramme,DecisionadoptedbytheGeneralCouncilon1August.(WT/

L/579)

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further specified during the negotiation phase and will recognize the fundamental importance of special products to developing countries.”

‘Julypackage’(2004),paragraph41 (emphasis added)

“Developing country Members will have the flexibility to self-designate an appropriate number of tariff lines as special products guided by indicators based on criteria of food security, livelihood security and rural development.

HongKongMinisterialdeclaration(2005),paragraph7 (emphasis added)

The main differences between the July 2004 package and the December2005HongKongMinisterialdeclarationdocumentisthatthelatterprovidesgreater flexibility (self designation), specificity (number of tariff lines) andmakesreferencetoindicators.

This chapter has three main goals. One, to advance the understandingof special products by demonstrating an approach and methodology foridentifying special products. Two, to identify a list of possible specialproducts in the context of a Caribbean case study using the methodologydemonstrated.Three,toextendtheconceptofspecialproductstoaregionalsetting in order to promote regional integration and agriculture sectordevelopment. The authors hope that the chapter will assist countries inthe Caribbean region in conducting the analysis necessary for identifyingspecialproducts,thusstrengtheningtheirnationalcapacitiesintradepolicyanalysis related specifically to negotiations and more generally to sectordevelopment. The analysis can also serve to identify products that can bedeveloped on a regional basis as channels for attaining common economicobjectives, including agriculture-related self-sufficiency and self-reliancegoals51. Many of the indicators cited for identifying a country’s specialproductsarealsoimportantfromtheviewpointofregionalfoodsecurityandruraldevelopment.

Therestofthechapterisstructuredasfollows.Section5.1providesreasonswhy developing countries argue for special products in the negotiations.Section 5.2 offers a conceptual approach for identifying special productsanddescribesthe indicatoranalysisusedtoevaluatethecriteriasetoutforidentifyingspecialproducts.Section5.3presentsresultsfromtheanalysisofonecountryintheCaribbeanregion,Belize52.Section5.4arguesthecasefor

51 CARICOM (a customs union with 15 Caribbean countries as Members) is in the process ofintegratingandestablishingaCaribbeanSingleMarketEconomy(CSME)basedonharmonizationoftheeconomic,monetaryandfiscalpoliciesofitsMembers.

52 Belize is one of four Caribbean region country case studies completed by the authors under anFAOprojectonspecialproducts;asummaryof theresultsarepresentedheretodemonstrateanapplicationofthemethodologyandprovideanexampleoftypicalresults.Someoftheconclusionsinthischapterdrawontheexperiencefromallfourcasestudies.AdditionalFAOspecialproductcase studies are published in a FAO Commodity and Trade Division technical note on specialproducts,availableathttp://www.fao.org/es/esc.

Special products: developing country flexibility in the WTO Doha round

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regionalspecialproducts,identifiestheseproductsandproposesoptionsfordevelopingtheminaregionalcontext.Thefinalsectiondrawsgenerallessonsfromtheanalysiswithregardtotheidentificationofspecialproducts.

5.� The case for special products

Specialproductsremainacontroversialarea,despite theclearcommitmentmadebyWTOMembersinthe‘Julypackage’toaccordinggreaterflexibilitytocountries in theirpursuitofdevelopment.Thecontroversy is especiallyevident regarding the purposes that special products are meant to achieve.This isbecausesomedevelopinganddevelopedcountries thatwouldwantgreatermarketaccessinthenegotiationsseethepurposeofspecialproductsasmainlyameansofprovidingmoreflexibilityonsomelimitednumberofproducts to achieve greater ambition through higher tariff reductions onmostproducts.

Buttheusefulnessofspecialproductsgoesbeyondjustachievingflexibilityin WTO negotiations; they foster achievement of goals and objectiveswithinacountryandwithinaregion.FollowingtheeffectsoftheUruguayRound developing countries are skeptical about gains from liberalizationandtheirowncapacitiestobenefitfromit,andeffectiveliberalizationmaynot be achieved given the national interests of WTO member countries.Mostdevelopingcountriesneedtimeto introducepoliciesandprovidetheopportunity to previously poor and marginalized rural areas to transformandproducecompetitively.

WTO Uruguay Round experienceDifferences of goals, endowments and capacities led some countries towin and others to lose as a result of Uruguay Round liberalization. Manycountries saw their export market opportunities decrease (through WTOdispute panel rulings, unilateral reform and bilateral agreements) and theirfoodimportsincrease(throughtheremovalofrestrictionsandlowerlevelsofappliedtariffs).Theiragriculturaltradesurplusesshrankandtheirimportsofcerealsandlivestockproductsroserapidly.Whileliberalizationproducedsomeaggregategainsinwelfarethesewereclearlyskewedtowardsdevelopedcountriesandtowardsthosedevelopingcountrieswiththegreatestdomesticsupplyresponsecapacity.Countriessoughtaccommodationthroughspecialproducts to mitigate some of the negative impacts of liberalization ontheir economies, especially related to import surges thatundermined somelivelihoodsystems.

Low levels of liberalization on key productsThelevelsofliberalizationarestilllimited.Criticalproductsforbothexportand domestic consumption in developing countries – rice, sugar, milk and

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maize – are subject to the greatest distortions in the international tradingenvironment.High levelsofsubsidiesandtariffprotectionareprovidedtothese and other products, especially in developed countries, and they arenot expected to decline considerably. Almost all countries have nationalgoalsthatrequirethemaintenanceofsomelevelofagriculturalproductionfor food security and rural area activity, for what is referred to as “non-tradeconcerns”.Theywillnotagreetofullliberalizationwherethatwouldunderminethesenationalgoals.Theabilitytoidentifyanddesignatespecialproductsisthusanimportantaccommodation.

Rural area development strategiesDomestic markets in developing countries are critical initial outlets forproductsproducedbypoorsmallfarmers.Theseproducersdonotoperateinanenvironmentthatenablesthemtocompeteonexportmarketsoragainstimported products given that the public investment in communication,education,ruralroadsandtechnologydevelopmentthathasgenerallybeenaffordedthecompetingproductshasnotyetbeenavailabletothem.Itisbyandlargerecognizedthatruralareapublicinvestmentwithliberalizationhasthe potential to increase returns more than without liberalization; but thiscanbebetterachievedwithaphasedruraldevelopmentstrategythatallowstimetoincreaseagriculturalsectorproductioncapacityandcompetitiveness.A special products modality provides necessary investment and policyflexibility.

National policy-makers can formulate programmes and strategies thatfocus on development of specific crop and livestock subsectors, identifiedthroughthespecialproductsapproach.Theywouldinvolvebuildingsupply-side capacities and raising competitiveness levels in identified products inordertoachievenationalfoodsecurityandruraldevelopmentobjectives.

5.� Identification of special products through conceptual approach and analytical framework

Conceptual approachThis section presents a process for designating special products with threecriteriathatrepresentafundamentallinkbetweentradenegotiationoutcomesand development goals. A critical point of departure for the analysis is tounderstandtheroleofthecountry’sgoalsandstrategiesindesignatingspecialproducts.

Thefollowingquestionsrepresentstepsinaprocess(presentedschematicallyinFigure 5.�)designedtoidentifyspecialproducts:1. Whatarethecountry’s goals and strategies,includingrelativepriorities

and weights, for achieving food security, livelihood security and ruraldevelopment?


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2. Whatdefinition and indicatorsoffoodsecurity,livelihoodsecurityandrural development best match national goals and policy commitmentsrelatedtothecriteriaforchoosingspecialproducts?

3. Whatproducts are the main contributors to the achievementof thesegoals and strategies? How are these products ranked in terms of thecriteriaindicatorsandgoals?

4. Whatnationalandinternationalpolicies exist or are needed topromoteachievementofthegoalsrelatedtothethreecriteria?Dotheyconform to or violateWTOregulationsonmarketaccess?

5. Whichoftheproducts need flexibility mostandwhy?(Atthispointthelistofprincipalproductsisreducedtothoseneedingflexibility.)

6. Whatarethepolicy/productcombinationsthatdonotconformtoWTOregulations and what policy flexibility is needed (for both the productitself and substitutes). (At this point possible treatment of specialproductsisaddressed.)

7. What are the current levels of disciplines in WTO and ambition in theDohaNegotiationsandhowcantheneededflexibilityforpossiblespecialproducts be accommodated in the modalities to be negotiated? (At thispointprobablespecialproductsandneededflexibilityareidentified.)

8. Whatadjustments canbemade in theprobable listof specialproductsinordertonegotiateamultilateralagreementthatisbeneficialtoalltheparticipatingcountries?(Atthispoint,theprobablespecialproductsandassociatedflexibilityfornegotiationareestablished.)

Theaboveapproachisactuallyaniterativeanddynamicprocess:countrieschangegoalsandpoliciesasnationalandinternationalconditionschangeand

FIGURE5.1Conceptual approach to identification of special products

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

EVALUATION

OUTCOME

Prioritization of relevant national goals

Choice of relevant indicators

Choice of principal products relevant to criteria/national goals

Evaluate likely/ perceivable treatment and impact of international negotiations on possible special products

Negotiated list of special products

Identify country goals based on national agricul-tural and trade policy documents, budgetary commitments and national stake-holder analysis

Match relevant goals with generic criteria for special products selection

Identify products linked to relevant special products indicators

Detail current national and international policy and trade policy treatment on principal products

Choice of possible special products (first cut)

Reduced list of possible special products (second cut)

Consult and negotiate multilaterally to establish probable list of special products

Stage 1 - Goal / indicator assessment Stage 2 – Trade policy treatment assessment

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arebetterunderstood.Thecriteriasetasthebasisforidentifyingthespecialproductswillunderpintheframeworkforanalysingthem.Theapplicationofthisisapproachispresentedbelow.

Analytical framework: indicators linked to development criteria Some WTO Members view the special products initiative as motivated bysimple protectionism or opposition to liberalization. The opposing viewstresses the need for policy flexibility to address the crucial non-tradeconcerns of food security, livelihood security and rural development. Itrecognizes the need to cope with unstable agricultural markets and tocounteractthenegativeeffectsoftradeliberalization,whichcanbeespeciallydamaging to poor and vulnerable developing economies. This sectionprovidesindicatorsthathelptoanalysethethreenon-tradeconcernsusedascriteriaforselecting specialproducts.Box 5.�providesworkingdefinitionsofthecriteriaapplied.

Food security indicators53

Fourdimensionsarewidelyconsideredcriticaltoacomprehensiveanalysisoffoodsecurity:

• availability(productionandsupplysideissuesrelatedtophysicalaccessandsufficientfood);

• accessibility (market demand, income, and trade issues related toeconomicaccess);

• stability(includingvulnerabilityofbothgroupsandsituations);and• use(foodsafety,nutritionandfoodchoiceissues).Some of the indicators considered most relevant for linking products to

foodsecuritydimensionsare:a) Contribution of product to nutrition. This indicator measures the

product’sshareofcaloriespercapita.Thesuggestedratiois:– calories per capita per day derived from the product / calories per capita

per day derived from all products.b) Self-sufficiency or import dependency of the product54.Theseindicators

measure the share of domestic consumption in domestic production,or theproportionofconsumptionof theproduct that is imported.Thesuggestedratiosare: – total of product consumed / total of product produced; and– total of product imported / total of product consumed.

c) Stability in access of the product.Thisindicatorreflectstheproductionand/orpricevariabilityofthemainproductsconsumed.Theproduction

53 DataformostoftheindictorsdescribedhereareavailablefromFAOSTATandtheWTO.54 Theseindicatorscanbeusedinterchangeably,sincealowshareofproductioninconsumptionwould

implyahighshareofimportsinconsumption.


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variability is focused mainly on products produced within the country.Thepricevariabilitymeasurecoversallimportantfoodproducts,whethersupplieddomesticallyorimported.Thesuggestedmeasuresare:– standard deviation/coefficient of variation of production and price of

product; – degree of price transmission (international vs domestic) of product;– variability in (export) revenue generated by product activity.

d) Product consumption expenditure. This indicator reflects the shareof expenditure incurred on the purchase of product ‘x’ in the totalexpenditureonallfoodproducts.Theratiousedcanbe:– expenditure on the individual food basket item / total expenditure on

food basket.

Livelihood security indicatorsLivelihoodsecurityisabroaderconceptthanfoodsecurityandencompassesmanyofitsdimensions.Theindicatorsusedherestressaspectsofemploymentandhouseholdincomederivedfromtheproduct.a) Level of employment in product/sector. This indicator reflects the

product’s share of employment in total employment in a specific area

BOX 5.�Working definitions of special product criteria

Food security. AccordingtoFAO,“Foodsecurityexistswhenallpeople,atalltimes,havephysicalandeconomicaccesstosufficient,safeandnutritiousfoodtomeettheirdietaryneedsandfoodpreferencesforanactiveandhealthylife.”

Livelihood security. Theadequateandsustainableaccesstoincomeandotherresourcestoenablehouseholdstomeetbasicneeds.Thisincludesadequateaccesstofood,potablewater,healthfacilities,educationalopportunities,housing,andtimeforcommunityparticipationandsocialintegration.

Rural development.Aprocessthataffectsthewell-beingofruralpopulations,includingtheprovisionofbasicneedsandservices,i.e.accesstofood,healthservices,watersupply,basicinfrastructure(roads,etc.)andthedevelopmentofhumancapitalthrougheducation.Italsoreferstoactivitiesthatreducethevulnerabilityoftheagriculturalsectortoadversenaturalandsocio-economicfactorsandotherrisksandstrengthenself-reliance.

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and/orindustry,includingvulnerablesectorsofthelabourforcelinkedtotheproject.Somemeasuresare:– share of employment of the product in total agricultural labour force or

in total rural employment;– share of labour force employed in product industry in total labour force;

and – gender/age distribution of labour force employed by the product.

b) Household income from product. This indicator reflects the productshareofincomeinhouseholdincomeandcanbemeasuredas:– income from product industry/total household income.

c) Product share of agricultural land/rural assets. This indicator reflectsthe product share of the agricultural land, holdings and assets undercultivationinthecountryorinruralareas.Thiscanbemeasuredas: – land acreage planted with product/total land under cultivation; and – farm holdings growing the products/total number of land holdings.

d) Incidence of surge/displacement by imports. This indicator is a moredefensive and dynamic indicator, measuring the extent to which somelivelihood systems may be under threat by imports coming into thecountry.Itcanbemeasuredas:– correlation between imports and domestic production of product; and– growth rate of import substitutes/growth rate of competing domestic

product.

Rural development indicators Thelinkagesbetweenruralareadevelopmentandincreasedlevelsofoveralleconomicdevelopmentarewelldocumented.Specialproductsrelatedtoruraldevelopmentcriteriaaretobeselectedbasedontheirpotentialasgrowthanddevelopmentpoles:a) Importance of product in rural agricultural economy. This indicator

measurestheshareof theproduct intotalruralagriculturalproduction,thus: – product economic activity share in total rural agricultural output.

b) Product and rural area growth. This indicator seeks to capture theimportanceofaparticularproducttogrowthtakingplaceinagivenruralarea,using:– product growth rates relative to rural area growth rates.

c) Domestic value-added potential of product. This indicator capturesthe value linkages of the product as a catalyst and contributor to ruraldevelopmentandismeasuredas:– degree to which the product can be transformed into other products/

uses.d) Tariff revenue from product import/export. This indicator recognizes

the role of some products as critical suppliers of revenue for rural


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development investment in areas such as infrastructure, utility servicesandsocialservicesandismeasuredas:– tariff revenue generated by the product.

Issues related to implementation of the indicator analysis The indicators above facilitate the identification of special products basedon thecriteriaof food security, livelihood securityand ruraldevelopment.One of the main considerations in presenting them is to have quantifiablemeasuresonwhichtobaseconsiderationofspecialproducts.Thisfacilitatescomparisonacrosscommoditiesandcountries,butmostimportantlyinthecontextoftheon-goingWTOnegotiations,itensuresobjectivity.However,theprocessmayhaveshortcomings,including:

• The indicatorsmaynotcaptureall theproducts, especially those fromsmallandremoteareas.

• Some important dimensions of the three criteria are difficult toquantify.

• Dataforsomeindicatorsmaybedifficulttoobtainfrombothnationalandinternationalsources.

• Thereisastronglevelofinterdependencyamongindicators,bothwithinthesamecriteriaandbetweendifferentcriteria.

• It may prove difficult in some circumstances to accurately identifysubstituteproductsandthedegreeofvalueadditionforthem.

Nonetheless, the indicators provide a sound basis for identifying specialproductsandareappliedinthenextsectionofthischapter.

Application of the special products identification methodology This sectiondiscusses applicationof themethodology for identification ofspecialproducts (described in thepreceding section).There are two stagestoidentifyingspecialproducts(seeFigure 5.�).Stage1involvesareviewofnationalgoalsanduseofcriteriaindicatorstoidentifyaninitialsetofproductsaspossiblespecialproducts.Stage2involvesconsiderationofthecountry’strade policy treatment related to these products. The policy dimension iscriticalsinceinmanycountriesongoingdevelopmentprogrammeshavehadgoalssimilartothosethatjustifyspecialproductsandhavesupportedcertainagricultural products. The analysis also addresses the current treatment oftheseproducts,whichisnecessaryforachievingnationalgoals.

STAGE � TheanalysisinStage1covers:

National goals. Country goals and policies that relate to food security,livelihood security and rural development objectives are identified basedon national, agricultural and trade policy documents and budgetary

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commitments. Although it can be difficult to establish clear links betweennationalpoliciesorgoalsandspecificproducts,selectedruralareasareoftencharacterizedbycertainproductsvimplyinghowimportanttheseproductsmightbetoachievinggoalsoftheparticulargeographicalarea.

Criteria indicators.Table 5.�providesasummaryofindicatorsrelatedtothethreecriteriaunderdiscussion.Theseindicatorsaredescribedinthesectionabove. Where available, additional indicators appropriate to the specificcontextofacountrycanbeincludedintheidentificationprocess.

Local level analysis.Inordertocaptureinformationatamoredisaggregatedlevel,householdsurveysandstakeholdermeetingsmaybeconducted.Thesemay,forexample,identifythemainproductsinaparticulardistrictthatarelinkedtothecriteria.Thismethodcanhelpprovidegeographicalspecificityto national-level data (which might otherwise be masked within nationalaverages).Stakeholdersurveyscanalsobeusedtoindicatewhichofthethreecriteriatheyconsidertobeapriorityforthecountry;resultscanbeusedtojustifythespecialproductschosenforthecountry.

Stage1yieldsalistofsuggestedproductsthatcouldserveasspecialproducts,basedonnationalgoalsandobjectives,indicatorsandsurveyresults.

TABLE5.1Summaryofindicatorsusedinidentification of special products

Criteria Indicator Name Measure

Foodsecurity

Productshareincalorieconsumption

Dailypercapitacalorieintakefromproduct/Dailypercapitacalorieintakefromallproducts

Productimportasashareofdomesticconsumption

Volumeofproductimported/Volumeofproductconsumption(%)

Ratioofdomesticconsumptionofproductindomesticproductionofproduct

Volumeofproductconsumed/Volumeofproductproduced(%)

Coefficientofvariationofdomesticproduction

Coefficientofvariationofdomesticproductionofproduct1

Livelihoodsecurity

Importgrowthrate Exponentialgrowthrateofproductimportvolume1

Shareinareaharvested Landareautilizedforcultivationofcrop/Totallandareaundercultivationforallcrops(%)

Coeffientofcorrelation(prodn&import)

Coeffientofcorrelationbetweenproductproductionandproductimportvolumes1

Ruraldevelopment

Shareinproduction(vol) Volumeofproductproduced/Totalvolumeofallproductsproduced(%)

Production(vol)growthrate Exponentialgrowthrateofproductproductionvolume1(%)

1Fortheperiod1985–2002


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STAGE � Stage 2 evaluates products mainly in the context of trade and trade policytreatment(levelsoftariffflexibilityandtheimpactoffurthertariffreductionon products). The list compiled from Stage 1 is compared with already-established national lists of “protected” products i.e. sensitive products asdeclared in trading agreements, products for which agreed levels of dutiescould not be waived due to the context of regional trading arrangements,etc. The national lists of “sensitive products” are assumed to generallyreflecttradepolicytreatment(associatedwithproducts)aimedatpromotingachievementof thegoals related to the threecriteria.Thus, theseproductswillhavebeenincludedintheanalysistowardsidentifyingalistofpossiblespecialproducts.55

Shortlisting of special products. Trade agreements are a process ofdeliberationwherebythefinalagreementdoesnotusuallyaccommodatealldemandsofthenegotiatingparties.Ifthenumberofspecialproductsinthelistsdevised at Stages1 and2 are tobenegotiated to a smallernumberofproducts,itisusefulforacountrytohaveprioritizeditsproductsbycreatingits own shortlist56. This process of prioritization for shortlisted productscanbedonebyassigningcertainthresholdlevelstoeachindicator;productsqualifying under those thresholds are then analysed further. A product’stradepolicyflexibility57mayalsobetakenintoaccount:analysismaybedoneofthoseproductswithlowlevelsofcurrenttariffflexibility,whichmaybeaffectedbyfurthertariffreductionsbeingdiscussedinthenegotiations.

It is important to note that the above is a general template of themethodologyfollowedforidentifyingpossiblespecialproductsforacountry.Specificaspectsofthemethodologywilldifferbetweencountries.

5.3 Case study: Belize

Thissectionpresentstheresultsofthespecialproductsidentificationprocessfor Belize. It analyses the country’s peculiar needs for special products,summarizes its process for special products identification and presents theresults. It outlines possible flexibility for choice in the special productsidentificationprocessandconsiderstreatmentofspecialproductsinrelation

55 Theindicatordataisusuallycollectedataproductlevel(asdescribedinFAOSTAT),whiletradepolicyinformation(mainlytariffs)isexpressedattheHStarifflinelevel.Thereforetheindicatordataareconvertedintoassociatedtarifflines(usingthedescriptioncontainedintheHSnomenclature),beforetheirtradepolicytreatmentisassessed.

56 Theprioritizationhere is limitedby thedimensionsof theanalysis.Products thatarenot short-listedatthisstagemaystillbeconsideredasspecialproductsifadditionalvariablesareusedorsomeoftheinformationisinterpreteddifferently.

57 Usedheretomeanmainlythedifferencebetweenboundandappliedtariffratesinabsoluteterms.

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toissuesfromtheWTODohaRoundnegotiationsandnationaldevelopmentobjectives.

5.3.� Role of special products ThespecialproductsdimensionoftheWTODohaRoundisimportantfortheagriculturalsectorinBelizeforseveralreasons,including:i) Theproductionandtradeofagriculturalproductsisthemostimportant

socio-economic activity in Belize; almost one-third of the total labourforceisemployedintheagriculturalsectorwhileover 70percentofthecountry’stotalforeignexchangeearningsaccruefromthissector.

ii) Importantly,thesectorhasthecapacitytobecomealargeregionalsupplierof basic foodstuffs like rice, beans and high-quality beef and pork. Italso has the capacity to supply the region with high-quality processedagriculturalproductssuchasfruitjuicesandpeppersauces.

iii)The policies of the government are very supportive of the sector andvalue-addedagriculturalproductsarerecognizedasoneofthepillarsofnational export anddevelopment strategy.Theaim is to achievebroad-basedeconomicgrowththroughthesector’skeyroleinpovertyreductionandruraldevelopment.

iv)Agricultureisthemainsourceofincomeforthepoorestsectionsofthesociety; cropand livestockproduction is themaineconomic activityofsmall,resource-poorproducers;inthepoorestdistrictsofthecountry(e.g.Toledo),agriculture-relatedactivitiesaretheonlysourceoflivelihoodandfoodsecurityforthepoorinmostvillages.

v) AlthoughBelizecurrentlyproducesenoughfoodandinsufficientvarietytoensurenutritiousdietsforallitscitizens,morethan35percentoftheBelizeanpopulationisestimatedtobeatriskoffoodinsecurity.58

Giventhatagricultureplaysanimportantroleinservingthefoodsecurityand livelihood security objectives of the country and has a huge growthpotential, some form of policy protection is needed for products thatcontributesignificantlytowardsthisend.Itisimportantthatspecialproductsidentified by Belize be those that will assist in achievement of its nationalobjectives.

5.3.� Special product analysis59

Theapproachadoptedforanalysismadeuseofthetwostagesdetailedearlier.AsapartofStage1,nationalpolicydocumentsincludingtheMedium-TermEconomic Strategy 2002–2005, the National Food and Agricultural Policy2002–2020 and Trade Policy Reviews were evaluated for food security,

58 AscitedintheFoodandNutritionSecurityPolicy,February2001,Belize.59 Thissectionisbasedonareportpreparedbythenationalconsultant,MrJoseCastellanos,asapart

ofthespecialproductsnationalstudyforBelize.


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livelihood security and rural development objectives. Links were made toruralareas,communitiesandproducts.Informationwasgatherednationallyand from global databases, much of it to match the nine indicators inTable 5.�. Additional indicators included: i) contribution to tariff revenue(associatedwithruraldevelopment);ii)pricedifferencebetweenimportsanddomestic products after incorporating the applied import duty (associatedwith livelihood security); and iii) level of domestic support received byproducts60 (associated with livelihood security). A stakeholder surveyfor ranking criteria and indicators, and a household survey (covering 99householdsacross23villages/townsin6districts),werealsoconducted.

AspartofStage2,informationregardingtradepolicywasassessedusingthe country’s agricultural tariff profile, list of sensitive products, bilateraltradeagreementsandTradePolicyReview.Productswithlowtariffflexibilitywhichcouldbeaffectedthroughfurthertariffcutswerealsoevaluated.

Based on indicator and survey results assessing 250 products61 on thethreespecialproductscriteria,atotalof122productsqualifiedforevaluationaspossiblespecialproducts.Inordertoassureamorerobustanalysis,andgiventhattherewasadegreeofcorrelationbetweensomeindicators,furtheranalysiswasconductedtoverifythe list.Productsthatscoredsignificantlyon two or more indicators, or scored significantly on one indicator, wereretained on the list, which narrowed it to 67 possible special products(122 tariff lines at the International Harmonized Commodity Coding andClassificationSystem(HS)level).

Table 5.�presentsasynopsisoftheresultsforthemainproductcategories,the number of corresponding HS tariff lines, the key criteria and theindicatorsunderwhicheachqualifiedaspossiblespecialproducts.

Theproductgroupsevaluatedreflectabalancedmixofthethreequalifyingcriteria.Thetablereflectsthemaincriteriaunderwhichmost productsinagrouphavequalified.Someproducts(ortarifflines)mayhavequalified(also)underadifferentcriterion.Thetableshowsthatfruits,vegetables,riceandpoultryhavethehighestnumberoftarifflinesqualifyingaspossiblespecialproducts.

Fruits,vegetables,sugarandcerealsareimportantfromthestandpointofallthreecriteria.Morethan98percentofthetotalareaharvestedinBelizeisdevotedtotheproductionoftheseproducts.Maize,riceandredkidneybeansareparticularlyimportanttothefoodsecurityandlivelihoodsoftheruralpoor.Dairyproducts,eggs,maize, riceandsugar togethercontribute43percenttothedailycalorie intakeofBelizeans.Theanticipatedincreaseinproductionofbovineandpigmeatisintendedtoboostruraldevelopment

60 Exceedingthe5percentde minimisprovisioninBelize’smajorcompetingmarkets.61 Theseproductswereproduced/consumedinsomeform(food/feed)byBelizeintheyear2003as

perinformationcontainedintheFAOSTATdatabase.

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through an increase in rural incomes. Value-added agricultural productslikecereal-basedpreparations,jams,jelliesandsoupsarealsohigh-incomeproductswithapotentialforruralareagrowth.

In termsof thenational tradepolicy treatment foragriculturalproducts,Belizehas238tarifflinesinitslistofsensitiveproducts,108ofwhichwerealsopartofthespecialproductslist;clearlythesensitiveandspecialproductsarelinkedtosimilarcriteria.MostboundagriculturalproductsinBelizehaveaceilingrateof100percent,althoughsomearesetat110or70percent.

MostofBelize’sappliedtariffsareleviedatamaximumof40percentrate,includingformostspecialproducts.Theexceptionsarerice,blackeyepeas,small red beans and black beans which have 5 to 25percent lower tariffsfor reasons related mainly to food security. Although Belize grants duty-freeaccesstomostimportsfromotherCARICOMMembers,somespecialproducts from CARICOM Members are subject to most-favoured nation(MFN) tariff rates.These includewheat flour,biscuits, alcoholicbeverages(beer, stout, ale, gin, rum, whisky, vodka) and preserved fruits and fruitpreparations(exceptfrozencitrusconcentratesandcitrussegments).

After applying the most ambitious proposed tariff cuts62 on specialproducts,almostalltheseproductswouldhavetheirboundratesequaltoor

62 Themostambitioustariff-cuttingformulaconsideredherewastheUnitedStatesproposal.

TABLE5.2Possible special product groups for Belize

Product group No. of tariff lines

Main qualifying criterion(a)

Main qualifying indicator(s)

Bovinemeat 6 RD ProductiongrowthratePigmeat 6 RD CorrelationbetweenimportsandproductionPoultrymeat 12 FS ContributiontonutritionDairyproducts 8 FS ContributiontonutritionEggs 2 FS Domesticconsumption;productionself-sufficiencyVegetables 17 LS Productionself-sufficiency;shareintotalareaharvestedFruits 19 LS Productionself-sufficiency;shareintotalareaharvestedCoffee 8 LS Contributiontoincome;shareinproductionMaize 1 FS,LS Productionself-sufficiency;shareintotalareaharvested

Rice 11 FS,LS Contributiontonutrition;productionself-sufficiency;shareintotalareaharvested

Sugar 2 FS,LS Contributiontonutrition;productionself-sufficiency;shareintotalareaharvested

Soybeans 3 RD ProductiongrowthrateCerealpreparations 3 RD Contributiontoincome;productiongrowthrateFoodpreparations 5 RD Contributiontoincome;productiongrowthrateBeverages(alcoholicandnon-alcoholic) 7 RD Contributiontotariffrevenue


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abovetheappliedrates.Ninetarifflines(mainlyfromHSchapter22)areanexceptioninthattheirnewboundrates(underanyproposal)wouldbelowerthan theircurrentappliedrates. Inconsiderationof the likely lossof tariffflexibilityforthese,theywerealsoaddedtothepossiblespecialproductslistforBelize

Therewere131possiblespecialproducts(tarifflines)forBelize.Appendix 5.�presentsthefull listofpossiblespecialproductswiththemainproductcategories,maincriteriaandtheircurrenttradepolicytreatment(intermsoftariffsandthecountry’slistofsensitiveproducts).Thepercentageofspecialproductsinthetotalnumberoftarifflinesiscalculatedat18.5percent63.Thisisbelowtheat least20 percent levelforspecialproductsspecifiedintheG33groupproposalduringtheDohaRound.

5.3.3 Options for possible special products There can be variation in the number of tariff lines designated as specialproductsdependingonthe threshold levelusedforevaluating them.If thethresholdlevelwerechangedtoincludeproductsqualifyingunderoneratherthanthreeindicators),thenumberofproducts selectedwouldjumpfrom22to148.IfthethresholdlevelfortariffrevenuewasdecreasedfromUS$100000toUS$50000,thenumberoftarifflinesselectedunderthatindicatorwouldincreasefrom19to39.

Variationintermsofpercentageoftarifflinesdesignatedasspecialproductsdependsonthelevelofaggregationatwhichthesearedeclared.Inthiscasestudy,theHSlevelofspecialproductstarifflinesisassumedtobe6digits.ThetotalnumberoflinesatthatlevelinBelize’stariffstructureismeasuredtobe705,resultingin18.5percent.However,theWTOnegotiationscouldagreeonalowerpercentageofspecialproductsandadifferentHSlevel.IftheagreementisattheHS6-digitlevel,thereisadequateroomfordesignatingspecialproductsasthemajorityofitsspecialproductstarifflinesaredeclaredat the 8-digit level and converting these to 6 digits would lead to a lowernumberandsmallerpercentage.

Inthe2004WTO“Julypackage”itwasagreedthatflexibilityintermsofspecialproducts treatmentmaybeexercisedonlywithin themarketaccessframework, in terms of ambition in tariff cuts on special products andnumberofspecialproductspermittedforeachcountry.InthecaseofBelize,even after applying the highest possible cuts on possible special products,very few tariff linesareaffected.This isbecause its current tariff structureallows for sufficient space between bound and applied tariffs. Therefore,

63 The131tarifflinescorrespondtoHSdigitlevelsasfollows:78tarifflinesat8-digitlevel,51tarifflinesat6-digitleveland2tarifflinesat4-digitlevel.Assumingall131tarifflinesatthe6-digitlevel,with705as the totalnumberof6-digit lines; thus thepercentageof specialproducts in the totalnumberoftarifflinesiscalculatedat18.5percent.

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the kind of flexibility that Belize might argue for is deeper cuts on non-specialproductsinreturnforhighernumberofproductspermittedasspecialproducts(possiblywithlowercuts).

SomecropandlivestocksectorsinBelizehavehugepotentialtoincreasetheirsupplycapacityandthuspromoteruralareagrowth.Fromadevelopmentperspective, then, there is a need for Belize to adopt a more flexible andcomprehensive approach to specialproducts.The country should strive toincreasethescopeoftreatmentofspecialproductsbeyondthemarket-accessframework to include thedomestic supportandexportcompetitionpillarsoftheAgreementonAgriculture,theSanitaryandPhytosanitaryMeasures(SPS)agreement,etc.Inorderforthemtobeproducedmorecompetitivelyproductssuchasriceandredkidneybeans,whichcanbeproducedinlargequantities, may be treated even more flexibly through such areas as de minimis support or subsidy support under Article 6.264. Enhancing tradein bovine meat (which currently suffers from trade-related quality-controlissues) may require financial and technical assistance from donors andinternationalagenciesspecializingintheareaofSPSstandards.

5.3.4 Conclusions of Belize case studyThe process used in the Belize case study identified several products(includingrice,maize,meats,fruits,vegetablesandsugar)aspossiblespecialproducts.ThatmostoftheseproductswerealsoonBelize’slistofsensitiveproducts helped confirm the validity of the analytical process and theirimportance for Belize’s development goals. The analysis used data-basedindicatorstodemonstratetheproducts’linkstothecriteriaoffoodsecurity,livelihoodsecurityandruraldevelopment.

FromtheperspectiveofWTOnegotiations,ifthechoiceisbetweengreaterambitionintariffcutsonnon-specialproductsandhighernumberofspecialproducts – as opposed to lower cuts on non-special products and lowernumberofspecialproducts–Belizemayprefertochoosetheformer,giventhatithassufficientlevelsoftariffflexibility.However,shouldtheagreementsettleonthelatter,Belizewouldhavetoprioritizeitschoiceofproducts.Itmightfocusonproductswhich,intheabsenceofaprotectivetariff,couldbedumpedinthecountry;examplesincludepoultry,dairyandeggs.

Iflossofcompletetariffflexibility(afterapplicationoftariffreductionproposals)istakenasacriterionforselectingproductsforspecialproductsconsideration,thenundertheUnitedStatesproposal9tarifflineswouldhavetheir new bound levels lower than their current applied level and 40 tarifflineswouldhavetheirnewboundlevelsequal totheircurrentappliedtariff

64 Article 6.2 of the Agreement on Agriculture under the domestic support pillar states that“investmentsubsidieswhicharegenerallyavailabletoagricultureindevelopingcountryMembersandagriculturalinputsubsidiesgenerallyavailabletolow-incomeorresource-poorproducersareexemptedfromthecalculationofaggregatemeasuresofsupport”.


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levels.The latterproducts includemostvegetables, some fruits, coffee andsomefoodpreparations.Thus,atotalof49tarifflineswouldfaceacompleteloss of tariff flexibility under the United States proposal. This analysis isuseful in terms of prioritizing selection of special products based on thecriterionoflikelyimpactoftariffreduction.

Althoughthecasestudymadeuseofbothnational-levelanddistrict-leveldatatoidentifyspecialproducts,eachcountrycandecidewhatlevelofdatadisaggregation to use. If the goal is to develop agriculture in a particularregion then the region or product may be given greater emphasis in theanalysis; forexample, redkidneybeansandmaizeproduced in theToledodistrict. If thegoal isnational then itwouldprobablybenecessary togiveequalweighttoallthedistricts.

Someproducts that areonBelize’s listof sensitiveproductsbutdidnotfeatureonthelistofpossiblespecialproductsincludeliveanimals,muttonand lamb, dried and smoked meat, soybean oil, some food preparations(pasta),fruitjuicesandtobaccoproducts.Ontheotherhand,12productsonthespecialproductslistbutnotonthesensitivelistaremilkpowder,sweetcorn,cassava,soursop,mineralwater,biscuits,packagedvegetables,soups,preparedfood,tea,swinemeat(saltedorinbrine)andsugarconfectionery.Thissuggestssomeweaknessesintheindicatorsincapturingsubstitutesandluxuryproducts.

Treatmentforsomeofthepossiblespecialproductsneedsmorethanjusttradepolicysupport.Budgetsupport,infrastructure,technology,creditandmarket development assistance could make several of the special productsimportantruralareagrowthpolesforBelize.specialproductspolicyshouldbelinkedtosupply-sidecapacity-buildingmeasuresatthenationallevelandaspartofinternationalinstitutions’developmentprogrammes,especiallyintermsofinvestmentandhumandevelopment.

5.4. The case for regional special products

The previous section presented a list of special products for Belize. In theothercasestudiesintheCaribbeanregionmostspecialproductswerealsooneachcountry’slistofsensitiveproduct.Thissuggestsacommonlogicbetweentheanalysisusedfornational-levelsensitiveproductslistsandthatusedhereforspecialproducts,whichreinforces thesoundnessandobjectivityof theresults.ThisisimportantfromthestandpointofWTOnegotiations.Whileindividualcountrieswillchoosetoidentifyspecialproductsonthebasisoftheir national policies and socio-economic goals, their choice will also beinfluenced by the policies of their trading partners and competitors. Thisaspectisparticularlysignificantforcountriesthatarepartofregionaltradeagreements(RTA),wheretheobjectivesandthearchitectureoftheregionalarrangement shape (or dictate) the choice of a Member’s national policies,

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especiallythoseconcerningtrade.TheimportanceofRTAsinthetradearenaisunderscoredbytherapidgrowthintheirnumbersincethelate1980s.AsmanynewRTAshavebeenformedsincetheWTOwasestablishedin1995asduringthepreceding37years(SOCO,2004).

Twootherreasonspointtotheneedtoconsidertheregionalcontextinthechoiceofspecialproducts.First,formanycountries,especiallysmallerandlessdevelopedeconomies,preferentialtradearrangementsaccountformostof their exports. Continuing trade liberalization puts pressure on existingpreferentialregimesanditbecomesincreasinglydifficulttomaintaincurrentlevels of preferential margins. Further, WTO Members have challengedpreferential trade in specific commodities. Brazil, Thailand and Australiachallenged the EU’s sugar regime, which was in part responsible for theEU slashing guaranteed prices paid to its internal producers and the ACPgroupofcountriesby36percentover fouryears (beginning in2006).ThechallengebysomeLatinAmericanbanana-producingcountriestotheEU’sbananatraderegimefavouringACPcountriescompelledtheEUtoproposereplacing its current banana import rules, moving from a system of tariffsandquotasonMFNsupplierstoatariff-onlysystemasof1January2006.Countrieswillhavetolookmoreandmoretoregionalarrangements,bothforexpandingtradeandassourcesofsupply.

Second,animportantfeatureofacustomsunionisacommonexternaltariffstructure:allgoodsenteringthecustomsterritoryofanymembercountryareassessedthesamerateofappliedtariff.BecauseappliedtariffsofallMembersmovetogether(unlessthereisawaiveronthecommontariffforaparticularproduct), if amembercountrycuts itsbound tariffs and thenewratesarelowerthantheappliedtariffrates, tomaintainotherMemberswillhavetobringdowntheirratestothenewlevel.WTOmultilateralnegotiationsmayaffect a country directly or through the policy framework of the RTA ofwhichthatcountryisaMember.

The CARICOM could choose to devise a regional special products listwhereby all Members would designate those agreed special products in theirindividualsubmissionstotheWTO.Thereasonsforthischoicemightinclude:

• TheCaribbeanregionismovingtowardsasinglemarketandeconomyunder the aegis of the CARICOM Single Market and Economy(CSME). This represents a harmonization of policies at the regionallevel that, for example, promotes free movement of labour. This mayhelp the agricultural sector, which in many countries in the regionfaces severe labour shortages. In addition, harmonization of customsprocedures will introduce simplicity and transparency in movementofgoods.Alargermarketwithharmonizedpolicieswillenhancepricecompetitiveness inselectedimportantagriculturalproductsbycreatingenabling conditions for greater capital investment (in areas of productresearchanddevelopment,technologyadoptionanddissemination,etc.),


�4�

loweradministrativecostsandeconomiesofscale,amongotherfactors.• A process of identifying regional special products can help policy-

makers focus on options for developing those products to promoteregional integration and contribute to the region’s common economicobjectives, including increasedself-reliance inagriculture.Manyof theindicatorsusedinthischapterforspecialproductsanalysisarerelevantinthisregardbecausetheyarelinkedtoproductsthatareimportantfromtheperspectiveofregionalfoodsecurityandruraldevelopment.

• The regionhas long recognized the importanceof regional integrationefforts through the adoption of common policies and programmes. Inthe1970saRegionalFoodPlanwasdevelopedandtheCaribbeanFoodCorporationwasestablishedtoimplementit.Thatinitialplanwasbasedlargelyonpublic sectorproductive investmentandbecamedifficult toimplementastheglobalpolicyframeworkchanged,butthefoundationsexistforcontinuedregionalcooperation.

• A number of initiatives and programmes in the Caribbean region havebeenconceptualizedrecentlythataimtofacilitateasmoothertransitionoftheCaribbeaneconomiesingeneralandtheagriculturalsectorinparticulartowardsregionalandglobalintegration.Itwouldhelpfortheprogrammestobecoherentamongthemselvesinanumberofareas,andregionalspecialproducts could act as facilitators of integration. For example, regionalspecialproductscouldhelpadvancetheJagdeoInitiative,whichvisualizesaCaribbeanregionagricultural sectorcapableofachievinghigher levelsof food security, of transforming its processes and products and ofstimulating the innovative entrepreneurial capacity of agricultural andrural communities. The Regional Special Programme for Food Securityandanyexpansionofitshouldbelinkedtoregionalspecialproducts.

• Regional special products could assist in promoting and advancingcurrent and potential levels of intraregional trade, thereby increasingrevenuetocountrieswithintheregion.Anaverageof20percentoftotalagricultural imports of CARICOM Members is sourced from withinthegroup(seeTable 5.3).Notably,theshareofintraregionalimportsishighest for processed product groups, which generate higher income,ratherthanforprimarycommodities(exceptriceandrawsugar).Thereis a potential trading opportunity for member countries to supply anincreasedproportionofregionalagriculturalimports.

5.4.� Proposing a regional special products listWe prepared a shortlist of products that could serve as possible regionalspecialproductsfortheCaribbeanregion,basedonthethreeconsiderationsdescribedhere:1) Products important for food security, livelihood security and rural

development objectives. Productsunderthiscategorywereidentifiedon

�4�


thebasisoftheresultsoftheCaribbeancasestudiesandanalysisofotherCaribbean countries. Products that are important contributors to thenourishmentoflargesectionsoftheregion’spopulation,providelivelihoodsecurityandarepotentialgrowthpolesforruralareadevelopmentdeserveconsiderationaspotentialregionalspecialproducts.Thesewereidentifiedthroughthespecialproductscasestudiesandinformationfromnationalandregionalagriculturalpolicydocuments.

TABLE5.3CARICOM agricultural intraregional imports under main HS chapters and products, and their share in total imports from world (�00�)

HS chapter

Product name Inntraregional import value (US$ million)

Intraregional imports’ share in

total imports from world (%)

2 Meatandediblemeatoffal 0 0

Bovinemeat–boneless 0

4 Dairyprod;birds’eggs;naturalhoney 8 4

Powderedmilk 4

7 Ediblevegetablesandcertainroots 4 5

Beans 3

8 Ediblefruitandnuts 4 9

Bananas 2

10 Cereals 34 21

Rice 33

11 Productsofmillingindustry;malts/starches 12 22

Wheatflour 12

15 Animal/vegfats&oils 13 21

Margarineandsoybeanoil 10

17 Sugarsandsugarconfectionery. 22 22

Rawsugarandconfectionary 18

18 Cocoaandcocoapreparations. 4 18

Chocolateproducts 3

19 Preparationsofcereal,flour,starch/milk 38 29

20 Preparationsofvegetable,fruit,nuts 23 20

Juiceoforangeandapple,preparationsofpotatoesandnuts

18

21 Foodpreparations 23 16

Othersauces,includingoftomatoes 18

22 Beverages,spiritsandvinegar. 64 34

Mineralwater,beerandrum 54

24 Tobaccoandmanufacturedtobaccoproducts 8 34

Cigarettes 7

Source:WITS,2006Note:TherowsinTable5.3areaggregatedoverseveraltarifflinesandsoitisnotclear whereCARICOMsupplies50percentandmoreofaparticularproduct.


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Productsmostconsumedand/orimportedbytheDominicanRepublicandHaitiwerealsoconsideredforanalysis.Thesetwocountriestogetheraccountformorethan70percentofthetotalpopulationoftheCaribbeanForum (CARIFORUM)65 and therefore products consumed on a largescale by these two countries are especially relevant for the overall foodsecurityoftheregion.Table 5.4showsthemainproductsthatcontributetopercapitadailycalorieconsumptionof these twocountries.There isalackofdataonmaintradingpartnersharesintheseimports.However,rice, sugar and dry beans (which are imported in large volumes) areproducedandexportedbyotherCaribbeancountries,indicatingpotentialintraregionaltradeintheseproducts.

2) Products that Caribbean countries produce or could produce competitively and supply to the region. Agricultural trade isan importantcomponentofregional foodsecurityanddevelopment; itspotential role inregionalintegration efforts cannot be overstated. For a number of individualproducts in theCaribbean region almost all trade is intraregionalwhileforseveralothersitisaconsiderablepart(morethan50percent).Table5.5shows the main product categories with more than 50 percent share inCARICOMintraregionaltrade.WiththeformationoftheCSME,whichaimsatharmonizationofregionalpoliciesandadministrativeprocedures,the existing regional trade levels are expected to increase. The regionalspecial products list also includes products that represent a share of50percentandaboveintheimportsfromwithintheregion.

65 Includes15membercountriesoftheCARICOMandDominicanRepublic.

TABLE5.4Daily calorie consumption (per capita) and imports of selected products for Haiti and Dominican Republic (average �00�–�003)

Haiti Dominican Republic

Calories/day/capita (share in total)

Imports (million US$)

Calories/day/capita (share in total)

Imports (million US$)

Rice 22 98 18 13

Wheat 15 63 7 58

Sugar 15 37 19 4

Maize 11 0.2 4 112

Soybeans 6 0 11 0.1

Beans,dry 4 15 2 12

Milk 2 31 5 25

Source:FAOSTAT,2006

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3) Products that can be produced in reasonable quantities within the region but need protective tariffs to prevent dumping from extra-regional sources. Thiscategoryconsidersproductsthatarepartofthe“ineligiblefordutyexemption” list agreed by CARICOM Members66. CARICOM hassufficientproductioncapacitytomeet60percentormoreofthecommonmarketneedsoftheproductsonthelistandtheirdirectsubstitutes;thustheproductsareextremelysensitiveproductsfortheregion.

Regional trading agreements are conducted by member countries withinthe framework of a common set of policies. These policies encompassseveraldimensionsoftradeincludingtariffs,productqualityandstandards,customsprocedures,rulesoforigin,etc.Thepolicydimensionoftheregion’scommonexternaltariffmayincludedifferenttreatmentfordifferentproductsdependingonregional/nationalobjectivesandneeds.Forexample,productsnot produced in sufficient volumes, desired quality, etc. by the regionalproducers but are important from food security and rural developmentviewpointsmaybeexemptedfromthecommontariffratestoallowforextra-regional imports. On the other hand, products that can be sourced fromwithintheregionandwhoseproductionisimportantforfoodsecurityandruraldevelopmentneedsmaybeineligibleforexemption.

Atotalof186tarifflinesatthe6-digitleveloftheHSwereidentifiedaspossibleregionalspecialproducts.Table 5.6categorizesthetariff linesintomainproductgroupsandalsoshowsthenumbersoftarifflinescorrespondingto each group evaluated. The importance of fruit and vegetables in bothprimaryandprocessedformsfortheCaribbeanregionisunderscoredbythehighnumberofassociatedtarifflinesevaluatedaspossiblespecialproducts.Meats and cereals are the other two product groups that appear in a highnumberoftarifflinesinbothprimaryandprocessedforms.

66 UndertherevisedTreatyofChaguaramas,aCARICOMmemberstatemaysuspendimportdutyonanagriculturalproduct coming fromoutside theCommonMarket,unless it ison theList of commodities ineligible for conditional duty exemption.

TABLE5.5Main product categories with more than 50 percent share in CARICOM intraregional trade

Vegetables,rootsandtubers Cerealpreparations

Fruitsandnuts Preparationsofvegetables,fruitsandnuts

Rice Foodpreparations

Oilseedsandflour/mealofoilseeds Beverages,alcoholicandnon-alcoholic

Vegetableoilsandvegetableandanimalfats Foodwastesandresidues,includingfeed

Sugarandsugarconfectionary Tobaccoproducts

Source:COMTRADE(2006).TheUnitedNationsCOMTRADEdatabaseisavailablepubliclythroughtheWorldBank’sWITSsoftware.


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Thetarifflinesareassociatedwiththethreecategoriesasfollows:1)foodsecurity, livelihoodsecurityandruraldevelopmentobjectives:109 lines;2)intraregional trade of more than US$1million by value or more than 50percentbyshareintotaltradefromallsources:49lines;and3)ineligibleforduty exemption list: 101 lines. Eleven tariff lines are common to all threecategories: roots and tubers, bananas, husked rice, semi-milled/milled rice,copra,rawsugar,biscuitsandotherbakeryproducts,orange juice (frozen)and mineral water. There were 45 tariff lines identified using the threespecialproducts criteria that are alsoonCARICOM’s“ineligible fordutyexemption”list(intotheregionalmarket),suggestingthatforthoseproductsthereispotentialforregionalself-sufficiency.

These186linesformalmost27percentofthetotal6-digitHSnomenclaturelinesfortheCaribbeancountries67,andtherecouldbeadditional linesthatindividualcountriesmaywishtoevaluateasspecialproducts.ThenegotiatingproposalsonspecialproductstabledbydifferentMembersduringtheWTODoha Round vary in their assessment of the flexibility allowed in thepercentageoflinesdesignatedasspecialproducts.TheUnitedStatesproposalsuggestsfivetariff lineswhiletheG3368proposal(whoseMembers include

67 Assumingthattotaltobe705.68 The G33 countries include Antigua and Barbuda, Barbados, Belize, Benin, Botswana, China,

Congo, Côte d’Ivoire, Cuba, Dominican Republic, Grenada, Guyana, Haiti, Honduras, India,Indonesia, Jamaica, Kenya, Korea, Mauritius, Madagascar, Mongolia, Mozambique, Nicaragua,Nigeria, Pakistan, Panama, Peru, Philippines, Saint Kitts and Nevis, Saint Lucia, Saint VincentandtheGrenadines,Senegal,SriLanka,Suriname,TrinidadandTobago,Turkey,Uganda,UnitedRepublicofTanzania,Venezuela(BolivarianRepublicof),ZambiaandZimbabwe.

TABLE5.6Possible regional special products categories and number of tariff lines

Product categories Number of tariff lines

Meatandpartsthereof(bovine,pig,lambandmutton,poultry) 25Dairyproducts(milkfreshandpowderedandyoghurt) 7Vegetablesandrootsandtubers 25Fruitsandnuts 15Spices 9Rice 4Oilseedsandflour/mealofoilseeds 8Vegetableoilsandvegetableandanimalfats 10Sausagesandothersimilarmeatproducts 7Sugarandsugarconfectionary 6Cerealpreparations 10Preparationsofvegetables,fruitsandnuts 32Foodpreparations 5Beverages(alcoholicandnon-alcoholic) 9Foodresidues,includingforfeed 6

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13CARICOMcountries),recommendsat least20 percentofthetotallines.Intheeventthattheflexibilityagreedinthenegotiationsis lowerthanthe27percentarrivedatinthisanalysis,itwouldbenecessaryfortheCaribbeanregiontoreducethenumberofspecialproductstheydeclare.

Thailand and Malaysia also introduced proposals in the context of theagriculturalnegotiations to influence theselectionof specialproducts.Theproposals differ in their threshold levels. The Malaysia proposal is that a product of which more than 75 percent of world trade is represented by developing countries’ exports should not be designated as a special product.The Thailand proposal is that product exported by developing countries that cumulatively constitutes more than 50 percent of world export of that product shall not be designated as special products. Our analysis showedthattheThailandproposal’slowerthresholdlevel(whichwouldeliminateagreaternumberofspecialproducts)wouldeliminate42ofthe186possiblespecial products tariff lines from special products consideration, or almost23percent.Theseincludeanumberofimportantproductsinthecategoriesoffruitandvegetables,spices,rice,sugar,oilseedsandflour/mealofoilseeds,vegetableoilsandvegetableandanimalfats.

5.4.� Issues and policy options for regional special productsThissectionexploressomespecialproductsoptionsfortheregionfrompolicyandstrategystandpoints,includingaspectsofagriculturaltradenegotiationsandregionaltrade.Theregionaloptionsenvisiondevelopingtheseproductsasenginesforattainingtheregion’scommoneconomicobjectives,includingself-sufficiencyinagricultureandself-reliancethroughincreasedproductionandtrade.1. The Caribbean countries may choose to negotiate for an appropriate

numberoftarifflinestobedesignatedasspecialproducts.Themethodologyusedinthischapterresultedin27percentoftarifflinesatthe6-digitlevelas possible special products for the countries in the region. In case anagreementisreachedthatallowsonlyalowernumberofspecialproducts,Caribbeancountriescouldconsiderexcludingfromthespecialproductslistregularlytradedproductsforwhichthird-countrysubstitutesarenoteasily obtained, including tropical perishable products such as a rangeof fruits (pineapples, mangoes, oranges, avocadoes, plantains, goldenapples, watermelon), vegetables (bora, eschallot, thyme) and root crops(yams,tannia,dasheen,eddo)thatareunlikelytobeimportedfromothercountries(oriftheyweretobeimportedwouldbeexpensive).Processedproductsshouldbeprioritizedwhenevaluatingspecialproducts,whetheratthecountryorregionallevel.Ourcasestudiesandanalysis,includingofintra-regionaltradingpatterns,madeclearthegreaterpotentialoftheseproducts.


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2. Given their tariff structures, these countries could argue for a highernumberofspecialproducts(possiblywithlowertariffcuts),asatrade-offfor more ambitious tariff cuts on non-special products. Since the tariffstructures of most other CARICOM Members are similar to the threecountriesstudied[seeChapter3],theregionasawholecouldargueforthis treatment. The final lists of special products proposed for the casestudycountries andothers represented less than20percentof the totalnumberofproductsintheirtariffprofiles.ThisresultmeanstheycouldbecongruentwiththeG33groupproposalof“atleast20percentoflinesasspecialproducts”.

3. Given the opportunity of designating both sensitive (all Members) andspecial (onlydeveloping- countryMembers)products andalthough thebasis of and the number of products that can be selected as sensitiveproducts is also not yet agreed, there is mention made that theseproductswillreceivemorefavourabletreatmentunderthemarketaccessframework. Thus, developing countries are given two categories ofproductsreceivingfavourabletreatment.Dependingonagreementsmadefor the type of treatment and number of permissible tariff lines undereachcategory,Caribbeancountriescouldchoosetoallocatetheirpossiblespecialproductsinbothofthesecategories.

4. Special products could also be included within the region’s othernegotiatingarenas,includingtheFreeTradeoftheAmericas(FTAA)andtheEUEconomicPartnershipAgreement (EPA).Tradingarrangementswith extra-regional partners can have a negative impact on the regionalproductionofsomecommodities.Forexample,itisarguedthatwhenthepriceofEUmilkpowderimportsundercutthelocalpriceoffreshmilkinDominicanRepublicby25percent,partlyduetotheEUexportsubsidies,around10000 farmerswere forcedoutofbusinessdespiteconsiderableinvestmentinthedairysectorbythegovernmentandtheindustry(ThirdWorldNetwork,2006).Theheavily subsidizedEuropeanexportsmadeitdifficultforlocalmilkproducerstocompete.Extendingtheconceptofspecialproducts(morefavourabletreatmentforsomeproducts)toothernegotiatingplatformswillhelpservecoherencyoftradepolicyrelatedtotheseproducts.

5. At the regional level, strategies fordevelopingregional specialproductsshouldfocusonprovidingpolicy,technicalandfinancialsupporttotheseproducts.Onewayistosegmentproductsbasedontheirproductionandtrade patterns and then target forms of support to them. The regularlytradedproductsforwhichtherearethird-countrysubstitutes(whichcanbepotentiallycompetitive)and theregularly tradedproducts forwhichthird-countrysubstitutesarenoteasilyobtained(differentiatedCaribbeanproducts) are products that CARICOM governments may need to

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support in order to get them to an acceptable level of competitivenessand productivity. In the case of new products (products not currentlytradedbutforwhichtechnologyforexpandingtradeexistsintheregion,products that are possible substitutes for current imports, value-addedand niche market products), development funds may be required tohelpachieve the transition.Technical and investmentneedsought toberesourcedfrombothprivateandpublicsectors.

6. SuspensionofCEThasbeengrantedbytheCARICOMforanindefiniteperiodonimportsofseveralproductsidentifiedinthischapterasregionalspecialproducts;theseareproductsthatareregularlynotavailablefromwithin the region.Access to lower ratesmayserveas adisincentive forintraregional trade: for example, while both Belize and Guyana havewell-developedbeef industries,bovine itemsarecurrentlyon the listofCETexemptedproducts. It is important to emphasize that thebasisofsuspensionofdutiesonsomepotentialspecialproductsmayneedtoberevisited if they are to serve the objective of enhanced regional trade.Reasons for tariff rate suspensionhaveoften involvedpoorqualityandsanitation.Thus,regionalqualitystandard-settingbodiesneedtoreviewthecurrentregulationsthatmayserveasimpedimentstoregionaltrade.Recognizing the competitive nature of the current trade environment,countries with production and export potential should devise specificplansofactiontofirstsegmentingthetargetmarketandthenmovingtosupplyspecificcomponentsofthatmarketwithinagiventimeframe.

7. Forproductswithcompetitivepotential,effortsshouldfocusonsupporttobothproductionandmarketing.Onthesupplyside,regionalcoordinationefforts could deal with the technological innovation and disseminationaspects of agricultural systems. Marketing efforts for regional specialproducts should provide better extension and market information andservices.Effortstoencourageregionalproductionofmeatsshouldfocusonproviding technical and financial assistance related toSPSstandards.A Regional Agricultural Development Fund for special products couldbeestablishedwithfundsfromdonorsandkeytradingpartners;itwouldrequireclearguidelinesforutilizationofthefunds.

8. Regionalspecialproductsmaybeusedaschannelstoattractinvestmentvitalfortheagriculturalsector’sgrowthanddevelopment.Governmentsin countries with supply potential may need to devise policies anddomesticconditionsthatattractforeignentrepreneursincertainproductsectors.Countriescantakeadvantageofseveralwindowsofopportunitycurrently being proposed by donors and international institutions,includingadjustmentassistanceunderCAPreformandtheAidforTradeendeavourmandatedinparagraph57oftheWTOHongKongMinisterialDeclaration.


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5.5. Conclusions

Analysisinthischapterwasbasedonamethodologicalapproachthatmadeuse of several indicators for evaluating the special products, which werelinkedtothethreecriteriaoutlinedintheWTOJulyPackage:foodsecurity,livelihood security and ruraldevelopment.Fromanegotiationsviewpoint,thepurposeoftheindicatorswastomakethespecialproductsidentificationprocessbothobjectiveandtransparent.Fromanational/regionalstandpoint,thepurposewastohavetheprocessreflectnationalpolicies,developmentalgoalsandobjectives.

CountriesintheCaribbeanregionwereevaluatedinatradeanddevelopmentcontext to draw lessons related to designation of special products in theWTOagriculturalnegotiations.Theprocessofspecialproductevaluationinthecasestudycountriespresentedawiderangeofresultsrelatedtonumberofspecialproductsandpercentageofspecialproducts(asashareofthetotaltarifflinesinacountry’sschedule)rangingfrom122tarifflines(or17percentofthetotal)inthecaseofBelizeto55tarifflines(or8percentofthetotal)forSuriname.

The chapter proposed options countries can explore in relation to thenumber or percentage of tariff lines that could be evaluated as specialproducts. One way is to change the number of indicators used for specialproducts qualification. Another way is to use a different digit level of theHSnomenclature.Forexample,Surinamehadahighnumberoflinesatthe8-digit HS level. If the final negotiated agreement of the Doha Round fordesignating special products is at the 6-digit level, Suriname could declareagreaternumberofspecialproductsthanwouldbethecaseifmostofthedeclaredlineswereatthe6-digitlevel.

The chapter also explored the concept of identifying and developingregionalspecialproducts,usingtheCaribbeanregionasacasestudy.TheaimwasnottointroduceanadditionalconceptintotheWTOcontext,butrathertoargueforadvancingtheconceptinallregionalnegotiatingarenasandtoassistregionalintegrationeffortsthatfosterincreasedtrade.Thisisverymuchinkeepingwith theEU/ACPdevelopmentcooperation framework,whichestablishesEconomicPartnershipAgreements.Threecategoriesofproductswere considered for the Caribbean regional special products list: productsimportant from food security, livelihood security and rural developmentobjectives; products which some countries in the region are producing orcanproducecompetitivelyandsupplytotheregion;andproductsthatcanbeproducedinreasonablequantitieswithintheregionbutneedprotectivetariffstopreventsubsidizedimportsfromextra-regionalsources.

The results showed that almost 27 percent of the total tariff lines at the6-digit HS level could be considered as potential regional special products

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basedontheaboveconsiderations.Most tariff linesshowedupaspossiblespecial products for more than one of the case study countries, especiallythose related to rice, meat, fruits and vegetables, sugar, prepared food andfood preparations and beverages. This highlights the fact that productsservingnationalobjectivescanalsobeusedtoadvanceregionalgoals.

References

Belize.2002. Belize medium-term economic strategy 2002–2005.MinistryofNationalDevelopment.

Belize. 2003. The national food and agricultural policy 2002–2020. Ministry ofAgricultureandFisheries.

CARICOM Secretariat.2005.Strengthening agriculture for sustainable growth and development. A proposal for interventions to alleviate the key binding constraints to the agriculture sector in CARICOM Countries. Georgetown, Guyana,CARICOM.

CARICOM Secretariat.2006.http://www.caricomonline.org/cet2007/;Castellanos, J. 2004.WTO impact on Belize’s agricultural sector.(Consultantreport)FAOSTAT. 2006.Database,http://www.faostat.org.Rome,FAO.Ford, J.R.D., Koroma, S., Yanoma, Y. & Khaira, H. 2005. Identifying “Special

Products”. Developing country flexibility in the Doha Round.CommodityMarketReview2005–2006.Rome,FAO.

Ford, J.R.D., Koroma, S., Yanoma, Y. & Khaira, H. 2006. Special products: a comprehensive approach to identification and treatment for development. PaperpresentedattheFAOWorkshoponWTORulesforagriculturecompatiblewithdevelopment.2–3February.Rome,FAO.

Mullen, J., StCyr, J. & Paccoud, T.1999.ECs-sponsored study on poverty in Trinidad and Tobago 1999.

St Kitts and Nevis. 2000. Agriculture and Fisheries Census 2000. Department ofAgriculture.

St Kitts and Nevis. 2004.Economical food basket for well-balanced meals.MinistryofHealth.

St Kitts and Nevis. 2005a. St Christopher and Nevis Budget Address. 2005.St Kitts and Nevis. 2005b. The Department of Agriculture Annual Review, 2005.

DepartmentofAgriculture.St Kitts and Nevis. 2005c. Agriculture Strategic Plan 2005–2009.StatisticalDivision,

DepartmentofAgriculture.Third World Network. 2006. Globalization, liberalization, protectionism: impacts

on poor rural producers in developing countries. Available at http://www.ruralpovertyportal.org/english/topics/trade/documents/global_agri.pdf.

Trinidad and Tobago. 1982. Agricultural census report. Central Statistical Office,MinistryofAgriculture.


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Trinidad and Tobago.2001. Labour Force Report No.82.CentralStatisticalOffice.Trinidad and Tobago. 2004a. The 2020 vision for agriculture in Trinidad and Tobago

.Creating a sustainable long-term capacity for national food security: 2020 & beyond.TrinidadandTobagoAgricultureSub-Committee.October.

Trinidad and Tobago. 2004b. Agricultural census preliminary report. CentralStatisticalOffice,MinistryofAgriculture.

United Nations Development Programme (UNDP). 2006. Human Development Report 2005.NewYork.

World Bank. 2006.http://wits.worldbank.org/WTO. 2002.Trade and economic performance: the role of economic size? Noteby

theSecretariat,CommitteeonTradeandDevelopment(DedicatedSession).WT/COMTD/SE/W/5.23October.Geneva.

WTO Secretariat. 2004.Framework agreement (WT/L/579).Geneva.WTO Secretariat. 2005. Doha Work Programme: Ministerial Declaration. WT/

MIN(05)/DEC.HongKong,WTO.WTO.2006.Chairman’s reference paper: special products.CommitteeonAgriculture,

SpecialSession,MarketAccess.4May.Geneva.

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Appendix5.1

ListofpossiblespecialproductsforBelize

Sr No Tariff

lineProduct group Products

Main qualifying indicator

Sensitive list

Applied rate

Bound rate

1 202.1

Beef

Carcass&half-carcass RD x 40 110

2 202.201 Brisket RD x 40 110

3 202.209 Other RD x 40 110

4 202.301 Tenderloin RD x 40 110

5 202.302 Sirloin RD x 40 110

6 202.303 Minced(ground) RD x 40 110

7 202.309 Other RD x 40 110

8 203.11

Pigmeat

Carcass&half-carcass RD x 40 110

9 203.12Hams,shoulders&cutsthereof,withbonein

RD x 40 110

10 203.19 Other RD x 40 110

11 203.21 Carcass&half-carcass RD x 40 110

12 203.22Hams,shouldersandcutsthereof,withbonein

RD x 40 110

13 203.29 Other FS x 40 110

14 207.11

Poultry

Notcutinpieces,freshorchilled

FS x 40 110

15 207.12 Notcutinpieces,frozen FS x 40 110

16 207.13 Cutsandoffal,freshorchilled FS x 40 110

17 207.141 Backsandnecks FS x 40 110

18 207.142 Wings FS x 40 110

19 207.143 Livers FS x 40 110

20 207.149Other(assumingthatitincludesseasonedpoultry)

FS x 40 110

21 207.24Notcutinpieces,freshorchilled

FS x 40 110

22 207.25 Notcutinpieces,frozen FS x 40 110

23 207.26 Cutsandoffal,freshorchilled FS x 40 110

24 207.271 Backs&necks FS x 40 110

25 207.279 Other FS x 40 110


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Sr No Tariff



Sensitive list

Applied rate

Bound rate

26 401.1

Dairy

Ofafatcontent,byweight,notexceeding1%

FS x 0 100

27 401.2

Ofafatcontent,byweight,exceeding1%butnotexceeding6%

FS x 0 100

28 401.3Ofafatcontent,byweight,exceeding6%

FS x 0 100

29 402.1 Milkpowder FS 0 100



32 4063000Processedcheese,notgratedorpowdered

RD x 0 100

33 4069000 Othercheese RD x 0 100

34 407.002Eggs

Hatchingeggs,notforbreederflock FS x 0 100

35 407.003Otherfresheggs(notforhatchingorbreederstock)

FS x 40 100

36 409 Honey LS x 40 110

37 701.9

Vegetables,rootsand

tubers

Irishpotato FS x$0.42/100lbs

100

38 702 Tomatoes FS x 40 100

39 703.101 Onions LS x 40 100

40 704.901 Cabbage LS x 40 100

41 706.101 Carrots LS x 40 100

42 707.001 Cucumber LS x 40 100

43 709.902 Okra FS x 40 100

44 709.903 Pumpkin LS x 40 100

45 709.904 Sweetpepper LS x 40 100

46 710.8 Sweetcorn FS 40 100

47 713.103 Black-eyedpeas FS x 15 100

48 713.32 Smallredbeans FS x 5 100

49 713.331 RKbeans FS x 40 100

50 713.339 Blackbeans(otherbeans) FS x 5 100

51 714.1 Cassava FS 40 100

52 714.2 Sweetpotato FS x 40 100

53 714.903 Coco-yam FS x 40 100

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Sr No Tariff



Sensitive list

Applied rate

Bound rate

54 801.11

Fruitsandnuts

Coconut,desiccated LS x 40 100

55 801.191 Inshell LS x 40 100

56 801.199 Other LS x 40 100

57 801.31 Cashewnut:Inshells LS x 40 110

58 801.32 Shelled LS x 40 110

59 803.001 Bananas,fresh FS,LS x 40 110

60 803.002 Plantains,fresh FS x 40 110

61 803.003 Bananas&plantains,dried LS x 40 110

62 804.3 Pineapple LS x 40 110

63 804.4 Avocado LS x 40 100

64 804.502 Mangoes LS x 40 110

65 805.1 Oranges LS x 40 110

66 805.302 Lime LS x 40 110

67 805.303 Grapefruit+C38 LS x 40 110

68 807.191 Cantaloupe LS x 40 110

69 807.11 Watermelon LS x 40 110

70 807.2 Papayas LS x 40 110

71 810.904 Soursop FS 40 100

72 810.909 Craboo FS 40 100

73 901.111

Coffee

Beansforblending(unroasted&notdecaffeinated)

LS 5 100

74 901.1199Other(unroasted&notdecaffeinated)

LS 40 100

75 901.121 Beansforblending(decaffeinated) LS 5 100

76 901.129 Other(decaffeinated) LS 40 100

77 901.21 Roastedcoffeenotdecaffeinated LS 40 100

78 901.22 Roasteddecaffeinated LS 40 100

79 904.11

Spices

Neithercrushednorground LS x 40 100

80 904.12 Crushedorground LS x 40 100

81 910.1 Ginger LS x 40 100

82 1005.9 Corn(Maize) FS,LS x 40 110


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Sr No Tariff



Sensitive list

Applied rate

Bound rate

83 1006.109

Rice

Other(notforsowing) FS,LS x 25 110

84 1006.201 Whiterice,inpackagesforretailsale FS,LS x 25 110

85 1006.202 Otherwhiterice FS,LS x 25 110

86 1006.301Semi-milledwhitericeinpackagesofnotmorethan10kg

FS,LS x 25 110

87 1006.302 Othersemi-milledwhiterice FS,LS x 25 110

88 1006.303Semi-milledparboiledrice,inpackagesofnotmorethan10kg

FS,LS x 25 110

89 1006.304 Othersemi-milledparboiledrice FS,LS x 25 110

90 1006.305Whollywhiterice,inpackagesofnotmorethan10kg

FS,LS x 25 110

91 1006.306 Otherwhollymilledwhiterice FS,LS x 25 110

92 1006.401 Inpackagesforretail FS,LS x 25 110

93 1006.409 Otherbrokenrice FS,LS x 25 110

94 1007.009 Sorghum FS x 40 100

95 1101.009 Wheatflour FS x 25 70

96 1201.009 Soybeans LS x 10 110

97 1202.1 Inshell LS x 40 110

98 1202.209 Other LS x 40 110

99 1212.92 Sugarcane LS x 10 100

100 1404.103 Annatto LS x 5 100

101 1601.002Meat

prepara-tions

Otherchickensausages(notcanned) RD x 20 100

102 1601.003 Salamisausages RD x 20 100

103 1601.009 Otherssausages(notcanned) RD x 20 100

104 16010020 Otherchickensausages RD x 20 100

105 1701.1 Sugar FS,LS x 40 110

106 17049000 Othersugarconfectionery RD x 20 100

107 1801.001 Cocoa LS x 5 100

108 2101910 Meatofswine:saltedorinbrine RD x 5 110

109 19041000 Cerealprepara-

tions

Preparedfoodsobtainedbytheswellingorroastingofcereals

RD x 20 100

110 19053010 Sweetbiscuits RD x 35 100

111 19059090

Cucumbersandgherkinsinpackagesnotlessthan50kg

RD x 35 100

112 200560 Asparagus RD 45 100

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Sr No Tariff



Sensitive list

Applied rate

Bound rate

113 21011200

Foodprepara-

tions

Extracts,essences,andconcentratesofteaormate

RD x 20 100

114 21039090

Soupsandbrothsandpreparationsthereofinliquidform*

RD x 20 110

115 21041020

Homogenizedcompositefoodprepforinfantuseputupforretail

RD x 20 100

116 21050010

Othericecream&otheredibleice,whetherornotwithcocoa

RD x 35 100

117 21069090 Mineralwaters RD x 20 100

118 22021010

Beverages

Otherwaters,includingmineralwaters&aeratedwaterscont.sugar

RD x 20 100

119 22021090 Beveragescontainingcocoa RD x 20 100

120 22030010 Stout RD x 40 110

121 22042100

Grapemustwithfermentationprevented/arrestedbyaddingalcohol

RD x 40 100

122 22060090

Undenaturedethylalcoholofalcoholstrengthbyvolumeof80%orhigher

RD x 40 100

123 23091000 Mixedbirdseed RD x 20 100

124 220410 Sparklingwine RD 51 100

125 220830 Whiskies RD 90 110

126 220840 Rumandtafia RD 90 110

127 220850 GinandGeneva RD 90 110

128 220820 Spiritsobtainedbydistillinggrape RD 91 110

129 220860 (1996-)Vodka RD 91 110

130 220870 (1996-)Liqueursandcordials RD 91 110

131 220890 Other RD 91 110

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