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May 2005 Agricultural Subsidies and the Round: A Historic Breakthrough? Samuel T. Ledermann Macalester College

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Recommended Citation Ledermann, Samuel T., "Agricultural Subsidies and the Doha Round: A Historic Breakthrough?" (2005). Geography Honors Projects. Paper 3. http://digitalcommons.macalester.edu/geography_honors/3

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CaseStudy Analysis of the WTO FrameworkAgreement and the

CottonDispute Settlement on Cottonand MaizeFarmers in the United

States,Mali and

SamuelT Ledermann GeographyHonors Thesis PrincipalAdvisor: Professor William Moseley MacalesterColleqe,2OO4 - 2005 Tableof Contents 1. Introduction 2. Methodology 3. From 19thCentury Liberalism to GATT 4. Breakinga Taboo:The AgriculturalSector 5. Settingthe Stage:The UruguayRound 5.1.URAA: Reductions 5.2.URAA: Domestic Support 5.3.URAA: Export Subsidies 6. Enteringthe DohaRound 6.1.TheFailure of Cancun 6.2.TheThreat of the Demiseof the WTO 7. Scriptinga Fairy-Tale:The GenevaFramework Agreement 7,1.Bypassingthe Ministers 7.2.'Progress'on AgriculturalLiberalization? 7.3.The'FifthWheel': Singapore and Cotton 8. Outlook 9. DeclaredVictors and otherwinners: Investigation of the Agricultural Sectorsof US,Mali and SouthAfrica 9.1.Setting the stagein the UnitedStates 9.2.TheUS CottonSector 9.3.Perverse Myth of Cotton Subsidies 9.4.US MaizeSector 9.5.TheCotton Sector of Mali 9.6.Maize Sector in Mali 9.7.Matzeand CottonSector in SouthAfrica 10. Assessing the lmpacts 10.1. lmpact#1: US Reductionof Subsidiesand its lmpactson US Farmers 1O.2. lmpact#2: Spreadof GlobalAgribusinesses 10.3. lmpact#3:Genetically-modifiedlntensificationand Dependency 10.4. lmpact#4: Sustainabilityof Maizeand Cotton Price lncrease 10.5. lmpact#5: FoodSecurity for the small-and large-scale farmer 11. Policy Considerations 12.Conclusion

Acknowledgments Appendicesl- lV Works Gited Abstract

Theinternational community witnessed a self-proclaimed'historical breakthrough'atthe World Organization (WTO) in lateSummer 2004 as a frameworkwas created to eliminateall export subsidies and reduce domestic subsidiesand tariffs respectively. While many hailed this step as a majorvictory for developingnations, others have been cautious on the'success'of this agreement. Thishonor thesis evaluates the short-and long-term effects of thisframework agreementon theagricultural sectors of theUS, South Africa and Mali. The paper firstundertakes a historical analysis of whatled to this'victory'for developing nations at the WTO.The paper then focuses on two majorcrops, cotton and maize, in order to explorethe impactof the agreementon povertyalleviation, food security and ecologicaland economic sustainability. Ultimately, the thesis proposes several policy considerationsin order to harvestthe 'potential' historical breakthrough in the long- run. 1. lntroduction

ln a July11th, 2003 editorial in the NewYork Times, the presidents of Mali andBurkina Faso, ToumaniToure and Blaise Compaore, gave a compassionate pleato the USpublic to endits unfair subsidizing of cotton.With their title "Your farm subsidiesare strangling us", they argued that $3 billionannualfarm subsidies in

2001-2002to "relativelywell-off farmers has the unintendedbut neverthelessreal effectof impoverishingsome 10 million rural poor people in Westand Central Africa"

(Toureand Compaore, 2003). They subsequently appealed to theWorld Trade

Organization(WTO), the world's consensus-based ruling body on freetrade, to

"applyfree trade rules not only to thoseproducts that are of interestto the richand powerful,but also to thoseproducts [, cotton,]wherepoor countries have a proven comparativeadvantage." (ibid.) Together with Brazil, Benin and lvory Coast, they fileda complaintto theWTO claiming that an eliminationof USexport subsidies wouldresult in increasedearnings for African cotton farmers of $250million annually

(Smithand Rice,2004).

As of earlySeptember 2OO4, the WTOhas ruled and affirmed their ruling in itslandmark case that US cotton subsidies and expoft credits, along with EU trade- distortingsugar support, have been found to "contraveneWTO rules" of freetrade

(Oxtam,2004). Furthermore, the WTOand its 147members revitalized talks on the

DohaDevelopment Agendatocusing on all agriculturalsubsidieswhich were doomedfor failure through "round-the-clock meetings produc[ed a] historic breakthrough"on August1st 2004 (WTO News, 2OO4l. The result of this"grueling session",which included major concession of theUS and EU, was a ground- breakingFramework on agricultureand manufactured goods to eliminateall export subsidiesand the limitation of othersubsidies, trade-distorting support and tariff barriers(WTO News, 2004).

Inorder to understandthe story of the'historic breakthrough', as proclaimed by WTODirector-General , I first examine the various power- playersand other actors that have shaped this particular outcome. This chronological groundingof the'historical' breakthrough will be basedin an analysisof thepower- strugglesthat went hand-in-hand with the creation of the GeneralAgreementson

Tariffsand Trade(GATT) in 1947and the subsequentbirth of theWTO in 1995.This analysis,while by no meansexhaustive, presents a succinctoverview of the more thanfifty years of liberalforcesthat have attempted to increasefree trade based on the widespreadwisdoms and lessons learned and applied during the post-Second

WorldWar era.

Secondly,I present and analyze the mostimportant and significant agriculturalnegotiations and treaties, especially the UruguayAgreement on

Agriculturethat have emerged during the post-World War llera. lt is withinthis contextthat I presentthe July 31't 2oO4'breakthrough', lhe GenevaAccord, or

AgriculturalFramework Agreement and the recentCotton Dispute Settlementthat wasachieved at the WTOin orderto assesswhether or notthey constitute historic breakthroughs.

Third,I providean in-depthanalysis of theagricultural sectors in theUnited

States,Mali and South Africa, focusing on cottonand maize within each economy.

ThisFourth, I analyzethe prospectsof the WTOFramework agreement and the

CottonDispute Settlement for the maizeand cotton sectors in the US,Mali and

SouthAfrica. This analysis answers the researchquestion on the potentialimpact on foodsecurity for thesesmall- and large-scale farmers. Fifth, this analysis of the 2. Methodology

Theprimary methodology applied in thispaper is thecase study method, whichinvestigates three countries on the impactof the WTOFramework agreement.

Thethree countries, United States, South Africa and Mali, were chosen concerning theirrespective situation on thedevelopmental ladder. While the United States is clearlysituated at itstop, South Africa has already past the first major steps and Mali is currentlyin theprocess of gaininga strongfoothold on theladder's first steps.

ln termsof researchmethods, this case study analysis is builtupon an in- depthliterature review, which includes extensive analysis of statisticalsources and empiricalstudies. These analyses of statisticaldatainclude both the usageof tertiary datasets, such as EnvironmentalWorking Group, as wellas the evaluationof secondarysets, such as the FAOSTATS homepage.

Furthermore,the case study analysis is severelylimited by financial and time constraints,as I havebeen unable to undertakenecessary field work within the three countriesmyself and am indebtedto fellowscholars having undertaken this hard and insightfulwork. Last, but not least, as becomesevident when critiquing this work, its scopeis limitedby the fast-movingdevelopments and works published and released in thisfield of internationalagricultural policies. Consequently, while certain parts will be outdatedas moreinformation, such as the modalitiesby the endof 2005at the

HongKong summit, will be released,its findings nevertheless should create an accurateaccount of currentagriculturaldevelopmental progress up to thisstage 3. From 1lh Century Liberalism to GATT Whilethe Western hemisphere has been dominated for morethan 500 years by mercantilistcapitalism and protectionism, it was as earlyas in themid 19th century thatthe leadingworld power, Great Britain, took a majorstep towards the freeing of agriculturaltrade.Facing pressure from its industrial bourgeoisie, it repealed the protectionistCorn Laws in 1846and opened up their markets in favorof cheaper importedfood and increased market-access for industrialproducts and textiles. As

Lekachman,biographer of Keynes,commentates, "the nation had finatly settled the issueof freetrade versus protection" and its successinspired in thethird-quarter otherEuropean nations to followsuit (1966). lnternational trade increased dramatically,reaching its highestlevel during what Polanyi has termed the Hundred

Years'Peace, a balance-of-powersystem that was basedupon a self-regulating marketsupported by a stableinternational gold standard. lt wasduring this period thatthe idea was founded that "trade had become linked with peace", a doctrinewell establishedin thepresent context of globalcapitalism and reminiscent of Clintonian policies(Polanyi, 1944, p.3tf).

Withthe unraveling of thegold standard and the subsequent breakdown resultingin WorldWar l, "mostleading capitalist countries reverted to mercantilist- typeprotectionism" (Peet, 2003, p.147). These sentiments were especially well- foundedin the 1930sduring the periods of theGreat Depression, in whichcountries resortedto unilateraltariffincreases given the unstableand volatile international tradeenvironment and the lackof exchangerate stability.

Havingreached the ultimate climax of protectionismin the Second World

War,countries were eager to establishmultilateral trade organizations that would reconnectformerly dislocated war-nations. In additionto the InternationalMonetary

Fund(lMF) and the WorldBank (WB), an InternationalTradeOrganization (lTO) was proposedin orderto "overseethe operationof a multilateralcode of tradeconduct"

(lngcoand Nash, 2004, p.25). However, this code of tradeconduct was contingent uponthe United Nations' (UN) approvalot multilateraltreaties, which as Peet proclaims,was "a targefly in theinternationalointment" from a USperspective

(2003,p. 148).As UScontrolof the UN was limited, the US Congress subsequently rejectedin 1948the Charter of the InternationalTrade Organization, fearing its newly gainedhegemonic status would be underminedby a communisttrade scheme. As a matterof fact,the abilityfor the UNto imposesanctions on the US in caseof non- compliancewould have involved "a sacrificeof sovereigntyunprecedented in the historyof [theUS]" (Loree qtd. in Peet,2003, p.149).

It is withinthis context that the 23 post-WorldWar ll countriesrinvolved in the negotiationsconsequently resorted back to the earlieragreed on GeneralAgreement on Tariffsand Trade (GATT) in October1947 in Geneva.While lacking the institutionalcapacity and a strongenforcement mechanism of the lTO,its main features,"limited mandate, qualified legal obligations, rudimentary dispute settlement mechanism,improvised institutional arrangement in Geneva,and unsatisfactory arrangementsfor agriculturaltrade", became the foundation of morethan forty years of tradeliberalization (lngco and Nash, 2004, p.25l.As Jagdish Bhagwati has argued,"the GATT trading system has achieved unprecedented trade expansion and worldprosperity" (Bhagwati qtd. in Mandle,2003).

1These founding nations were: Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, ,, Czechoslovakia, France, India, Lebanon, , , New Zealand,, Pakistan, Southern Rhodesia, Syria, South Africa,United Kingdom and the UnitedStates. (http://www.wto.org/english/thewto_e/minist_e/min96_e/chrono.htm) Theinitial rounds of multilateraltradetalks were a greatsuccess. While ignoringthe larger issues of subsidiesand import licensing, by 1950,the third GATT roundresulted in 8700tariff concessions, which amounted to a25 o/ocul of the 1948 tarifflevels ("Timeline," BBC News, 2OO4). These results were based upon the principlesof "liberalization,equal market access, reciprocity, non-discrimination and transparency"(Peet, 2003, p. 150).One of themost important arrangements was the

'non-discrimination'principle,which created the mosf favored nation (MFN) status thatclaimed a universalapplication of tariffreductions or increasesto allsignatory countries,so thatevery nation receives the 'same'treatmentas the 'mostfavored' nation(, 2002, p. 197tf).While these and subsequent tariff cuts, such as duringthe Round in 1963-67,resulted in significantreductions worth approximatelyaround $50 billion dollars of worldtrade, the agricultural sector largely remainedataboo ("Timeline," BBC News,2004). 4. Breakinga Taboo:The AgriculturalSector

Thereasoning behind the lackof liberalizationin the agricultural sector prior to 1980shas been attributed largely to thepolitical, social and economical context of thepost-War period. Politically, entering the era and having witnessed the deadliestwars of mankind,countries retreated to a practiceof self-sufficient agricultureas a'security'concern. Consequently, while manufactured goods covered underthe GATT were freely traded, agricultural goods were still heavily protected andinternally supported. This action was socially supported by thewidespread experienceso{ foodstamps and shortages during the interwaryears and consequentlyfood security and food sovereignty2 received a veryhigh priority among policymakers (lngco and Nash, 2OO4, p.25).

ln termsof politicaleconomic reasoning, agriculturaltrade was explicitly excluded,as demandedby the US,from consideration in the GATT,as statedin

ArticleXl:2c on importand Article XVI:3 on exportexceptions. These articles allowed for usingnontaritf border measures and agriculturalexport subsidies to exist

"providedthey were not usedto gain'more than an equitableshare of the world trade"'(ibid.,p.25).

2The term food sovereigntywas coined lirst by members of Via Campesina,an international coalitionof peasantfarm groupswho raisedof awarenessfor the adverseconsequences of economicglobalization at the World Food Summit+5 in Rome in 2002."Food sovereignty emphasizesthe rightof each nationto protectand regulatedomestic agricultural production and trade to achievesustainability, guarantee a livelihoodfor farmers,and assureits citizens are fed. Food sovereigntydoes not negatetrade, states Via Campesina;"it promotesthe formulationof trade policiesand practicesthat serve the rightsof peoplesto safe, healthy and ecologicallysustainable production." (http://www.ncrlc.com/food_sovereignty.html) On a broaderscale, protectionist policies were rising as developednations increasinglyfocused on creatinga stableexport-focused agricultural sector. As a matterof fact,the EuropeanEconomic Community (EEC) devised the nowfamous protectionistand trade-distorting Common Agricultural Policy (CAP) in 1958(ibid., p.25).lts counterpart, the USand its agricultural industry on theother hand, greatly benefitedfrom increased demand in a post-warEurope in the processof modernizationand reconstruction. Supportive of domesticproduction conditions, a majorpolicy shift occurred during the 1970sin theUS with the introduction of the

1973Farm Bill. This bill, which similar to itssuccessors was highly vested by powerfulagro-industry lobbyists, "removed production constraints on American farmersand encourage commercial exports, [...]fundamentally alter[ing] the relation of Americanagriculture to theworld economy" (McMichael, 1998, p.3). Insummary, giventhe increasing importance of internationaldevelopment,such as foodaid, and the chorologicallimited, yet powerfulreach of the GreenRevolution, the 1970swas a periodcharacterized by vastglobal demand and an increasein yieldand 'green production'(Ledermann,2003).

However,with vast increases in productionoutput, the global markets in the

1980sproved to be unableto sustainthis demand as overproductionoccurred and pricesfor agricultural goods collapsed, putting great strain on thefeasibility of protectionistagriculturaf policies (lngco and Nash, 2OO4, p.26). This increased stress on farmers'incomes occurred simultaneously with a vastincrease of thenumbers of nationshaving joined the GATTand the increasingimportance of developingnations asfood import markets. As McMichaelpoints out, while the developing nations only o/o accountedfor ten of allwheat imports, this figure increased to 57 "/"by 1980, accountingfor vast market-opportunities thatwere 'to be explored'bythe

11 industrializedFirst World (1998, p.3). Thus, by the 1980s,the agricultural world market"becarne a battlefieldin whichcountries fought with export subsidies [and othermethodsl for marketshares" (Rieger qtd. in Riegerand Leibfried, 2004, p.88).

It waswithin this context of risingagricultural production, toughening internationalcompetition and the increasinginterests of industrializedcountries to seekexport markets that the GATT trade ministers, under the leadership of the

UnitedStates, launched the Uruguay Bound, the "most ambitious and far-reaching traderound so far"("Trade," BBC News,2004). 5. Setting the Stage: The

TheUruguay Round, which was named after Punta del Este, Uruguay where theinitial meeting took place, was established in 1986and lasted until its successful conclusionin Marrakeshin 1994,which marked the establishing of theWTO as predecessorto theGATT and created an enforcementarm. While characterized by failureand upsets, such as thewalkout by delegationsof agriculturalexporting countriesin 1990in Brussels,its grandest achievement, the Uruguay Round

Agreementon Agriculture(URAA), has carried on itsinfluence as the founding documentfar intothe post-Uruguay,WTO setting. As RichardPeet states, "the

UruguayRound [...] represented not a swansong but a phoenixfor international tradeagreements" (2003, p.153).

Accompaniedwith major new trade agreements, such as theAgreement on

Textilesand Clothing, this multilateral trade round was marked by the successful integrationof agricultureinto the free-trade complex. Furthermore, the Uruguay

Roundhas been successful in "brin[ing]the UnitedStates back into the foldof GATT rulesand procedures" after it haslargely frustrated its tradingpartners with erosive useof unilateraltraderetaliation, justified as'leveling the playing field'(Tussie and

Glover,1993, p.22-23)

Whilemajor agreements regulating trade, such as the well-critiqued

Agreementon Trade-relatedAspects of lntellectualProperty Rights (TRIPS), the

Trade-relatedlnvestment Measures (TRIMS) and the General Agreement on Trade in Services(GATS), have often taken center-stage (Shiva, 2000;Wade, 2003), l intendto focusin thefollowing section on themajor achievements in reducing tariffs andsubsidies provided in the21 articlesand the annexes of theURAA.

As mentionedearlier, agricultural products were largely exempt from previous tariffnegotiations. Consequently, countries often applied tariffs and non-tariff measures(NTMs), such as "quotas,import bans and embargoes" to regulateand protecttheir vulnerable domestic agricultural sector (lngco and Nash, 2004, p.271.

5.1 URAA: Tariff Reductions

TheURAA laid the groundwork for several rules on marketaccess, export subsidiesand domestic support levels in theagricultural sector. The first step undertakenby negotiatorswas an agreementto alignagricultural trade rules with thoseapplying to tradein manufacturinggoods. In addition,they also called for increasedtransparency through a processcalled 'tariffication' (ibid., p.28). Under

Article4, MarketAccess, tariffication involved the mergingof NTMsinto tariffss, througha calculationof the differencebetween domestic and world market price.

Upholdingthe most-favored nation and non-discriminatory principle, developed countriesthen subsequently devoted themselves to a reductionin tariffequivalents by an "averageof 36 o/oand a minimumof 15 "/"over six yearsand developing countriesby an averageof 2O"h anda minimumof 1O"/" over 10 years" (ibid., p.28). Furthermore,tariff bindings were put in placemeaning that nations, having lowered theirtariffs, "agreed to holdthe tariffs at thenew lower level" (Mandle, 2003, p.12).

Howeverthis commitment to agriculturaltariff reductions contained two majorflaws. First, the cutswere not weighted for the volumeof trade,meaning that it

' NTMs (Nontariff measures)are policyor practicesthat altersthe conditionsof internationaltrade besidestariffs. Most prominently,used interchangeablywith tariff barriers, these includeimport and exportquotas.

14 heavilyfavored larger agricultural export nations. Second, and even more gravely, as lngcoand Nash accurately point out, "the reduction commitments were based on

'averagecuts' rather than cuts in the averagetariff", resulting in the strangesituation thatif a tariffol 1 "/"was cutto 0.5 7", a 50 7oreduction had taken place (2004, p.28).

Subsequently,the tariffcuts agreement was flawed in thatit alloweda nationto cut lower,lesser-important tariffs while protecting their most viable crops with minimum- tariffcuts4.

Thisissue was further aggravated with the creationof SpecialSafeguard

(SSG)Provisions in Article5, whichreserved the right to anyWTO member who undertooktariffication, to declareadditionaltariffs if import prices fluctuate heavily.

As an example,a price-basedSSG provision allows for the taritfto risein casethe costof the importedcommodity falls. Consequently, the SSGtariff would act as a compensatorymechanism "for the fixedtariff and reduces or eliminatesthe effectof fallingprices on thedomestic market" (ibid., p.30). These mechanisms werefurther supported by provisionswhich allowed for limitationsand exceptions to the earliermentioned bound tariffs.s

However,while certain loopholes clearly favored the developedworld, under

Article15 of theURAA, special and differentialtreatment (S&D) has been put in placeto allowan expansionof 'developmentspace'to developing nations' agriculturalsector. Being conscious of theparticular needs and conditions of developingcountries in theimplementation of market access commitments, negotiatorsaccepted that "least-developed countries did nothave to makeany

4As it shouldbecome obvious to the reader,an evaluationof the prospectsof an agreement on trade involvesa lawyer-likeanalysis, trying to get past vague and impreciselanguage. 5 For example,Article XX of the GATT 1994allows for importrestrictions based upon a varietyof concerns,including the "protectionof human,anima, or plantlife for health,reasons of publicmorals and protectionof nationaltreasures"(lngco and Nash,2004., p. 29).

t5 reductioncommitments on tariffs,domestic support, or exportcompetition" (ibid., p.35).Furthermore, reduction commitment in exportand domestic subsidies for developingcountries were fairly lower. However due to theirgeneral monetary constraintsin providingsubsidies in thefirst place, they were of littleimportance and effect.

5.2 URAA: Domestic Support

Whiletariff reductions have been a keycomponent, the most contentious and ambitiouspoint of argumentat thenegotiations focused on thedomestic support farmersreceived. Covered under Article 6, reductioncommitments for subsidies weresingled out as a majorgoal towards reducing trade distortion, as it was generallyperceived that domestic support of agriculturalproduction has led in the pastto overproduction,resulting in decouplingagricultural production from the dynamicsof supplyand demand of the market.This overproduction in turnhas led to excessstockpiles of commoditiesthat were 'looking'for a purchaser.In orderto createdemand, as worldmarket prices were much lower than domestic prices, exportsubsidies were consequently put in placein additionto the domestic subsidies,in orderto selltheir goods on the globatmarket.

Forthis purpose, and to increasevisibility, distorting agricultural subsidies wereclassified into boxes "using the traffictight approach, with red for prohibited subsidies,amber for subsidiesthat had to slowdown, and green for nontrade- distortingsubsidies" (ibid., p.31). While negotiators decided to dealwith the redbox, whichcovered export subsidies, separately, a newblue box, which figures as a transitional'box' between the amberand green box, was created and "considered to be less-tradedistorting than market price supports (see Appendix Itor overallchart of the boxesand Appendix lllor USexamples of boxes).

Applyingthese classifications and delvinginto the details,Article 6 callsfor a reductionin domesticsubsidies in the mosttrade-distorting amber box in excessof deminimislevelsof5o/"fordevelopedand 1Oo/otor developingcountriesof thetotal valueof agriculturalproduction. Based upon the 1986- 1988base periods, developedand developingcountries made reduction commitments of 20 %by 2O00 and 13.37o respectively by 2004 (ibid.,p. 31).

An exampleon how thesereductions were calculated is basedupon the calculationof the totalAggregate Measurement of Support,as outlinedin Article6,

Annex3 and Annex4. Analyzingthe belowexample provided for by the WTO (see below),the only product-and non-productspecific support measures that were includedare the ones in excessof the 5 "/ode minimisthreshold of developed countryx in year y. Based upon these calculations,a nationx would have had to cut its total AMS by 20 7o until2000.

17 Source:WTO. http://www.wto.org/english/tratop_e/agric_e/ag_introo3_domestic_e.htm#box

However,due to severalexemptions and loopholes mentioned earlier, such as inputsubsidies provided for low-income, resource poor farmers or measures takenin orderto strengthendomestic food security, and the fact that the 1986-1988 baseperiod on whichcuts were based was marked by historicallyhigh support levels resultedin few actualreductions of domesticsubsidies and cuts. While several governmentshave simply shifted their support levels from the amberto the lesser- distortingblue box, a practicecommonly known as "box-shifting",other countries, suchas the US,did not have to undertakeany reductions, as "reformsundertaken priorto thenegotiations were adequate to fulfillthe new rules on reducingdomestic support"(ibid., p.36).

5.3 URAA:Export Subsidies

Thethird major issue was reductionin exportsubsidies, the formerred box.

Theseexport reductions, as statedin Article9.2, "require that members reduce exportsubsidies by 21 "/"in volumeand 36 7" in valueover the six-yearperiod from

1995to 2OOO"(ibid., p.33). These figures were again spatially differentiated for developingcountries, for which the reductioncommitments were "14 "h in volume and24 7oin valueover a 1O-yearperiod from 1995 to 2004"(ibid., p.33).

Theseexemptions were not universalin application,as developingcountry membersdid nothave to reducesubsidies that are geared towards "marketing exportsof agriculturalproducts [...] and internal transport and freight charges on exportshipments [...]." (Article 9.4, WTO, AoA) Furthermore, WTO members agreed to "prohibitthe introductionof newexport subsidies for agriculturalproducts" in a similarfeat of exportsubsidies binding (Economic Research Service, 2004).

Whileexport subsides have been reduced since 1995, "high levels of export subsidiesremain and continue to distortworld markets" (lngco and Nash, 2OO4, p.36).While the Agreement's main achievement has been hailed as to eliminate"all exportsubsidies for agriculturalproducts over six year for developedcountries, ten for lessdeveloped countries, with the least-developedcountries being exempted", onlylittle progress has been achieved so far (Peet,2003, p.153). The EU is still accountingfor 90 o/oof allOECD export subsidies, which have been found most commonlyamong diary and sugar products as opposedto grains,oilseeds and cotton(Economic Research Service, 2001). [See Appendix lllJ

ln summary,as illustratedin thetable below, the reachedat theend of theUruguay Round resulted in thefollowing required reductionsand opened the roadfor the foundingof the WTOand the startof the

Dohanegotiation Round. lt is importantto note,that these final details of theAoA werelargely "decided bilaterally between the USA and the EC in thenow infamous

BlairHouse Accord in 1992"(Jawara and Kwa, 2003, p.26tf). it shouldcome as no surprisethen that the US was largely able to 'fine-tune'themodalities of the

19 agreementand established legal loopholes, such as the Greenand Blue Boxes and the earliermentioned 'box-shifting.' Nevertheless, successful completion of the

URAAand the transitionfrom the GATTto the WTOmarked an importantstepping- stonefor the developing nations into the international trade regime and the first major

WTOtrade round, Doha (Tussie and Lengyel).

Developed Developing Least ReductionCommitments Countries Countries Developed in AoA (1995-2000) (1995-2005) Countries6 Tariffs Averagecut for all agricultural 36 Yo 24 o/" products None Minimumcut per product 15o/o 10% (baseperiod 1986-88) Domesticsupport 200h 73"/" Totalagriculture support cut None (baseperiod 1986-88) ExportSubsidies 36% 24% o/" 21 14 "/" Value of subsidies None Subsidizedquantities (baseperiod 1986- 90) Source: EconomicResearch Service, "WTO:...", 2004

6The Least DevelopedCountries, LCDs, are: Angola,Bangladesh, Benin, Burkina Faso, Burundi,CentralAfrican Republic, Chad, Democratic Republic of Congo,Djibouti, The Gambia,Guinea, Guinea Bissau, Haiti, Lesotho, Madagascar, Malawi, , Mali, Mauritania,Mozambique, Myanmar, Niger, Rwanda, Senegal, Sierra Leone, Solomon lslands,Tanzania, Togo, Uganda, Zambia (Source:WTO)

20 6. Enteringthe DohaRound

Afterthe collapse of theSeattle WTO summit in 1999,the inability to reach consensuson suchdiverse issues as tradein services,operations of development andliberalization of agriculture painted a darkpicture of futuretrade negotiations.

However,while we bestremember the more than 30,000 anti-WTO protestors and thepolice force as thereason for the summit's failure, Jeffrey J. Schottargues that ultimately,"the WTO meeting fellvictim no to protestsoutsrde in the streets,but ratherto serioussubstantive disagreements rnslde the convention centef' (2000, p.5).Thus, while a vastmajority of countrieswere eager to "expandthe WTO agendabeyond the issuesmandated by the UruguayRound accords", conflicts of interestsexisted on howto proceedwith them (ibid., p.6).

Giventhe mandate in Article20 in the URAAfor continued negotiations on agriculturestarting in 2000,the potentialof thesetalks was controversial when the

WTOlaunched the broaderDoha Round and its DohaDevelopment Agenda in

November2001 in Doha,Qatar. While some regarded this newest trade round launchas a "positivedevelopment", others painted a starklydifferent picture (lngco andNash, 2OO4, p.37). As Jawaraand Kwa point out, developing countries "were 'agreement'with bulliedand coerced into acquiescing with an whichmost of them profoundlydisagreed. [...1 all that the developing countries achieved for their strenuousefforts was the label'The Doha Development Agenda'[, a Ministerial declarationon TRIPsand Public Health, and agreement that negotiations on the

'singaporeissues'would begin on thebasis of 'explicitconsensus'on the modalities of negotiationsat Cancun"(Jawara and Kwa, 2003, p.xv).

6.1 The Failure of Cancun Meetingin Cancun,this later topic proved to bethe most contentious, as the

Singaporeissues foresaw the expansionof the rightsof foreigninvestors, the establishingof a competitionpolicy, which would regulate cartels and increase competitionbetween local and foreign firms, including for governmentcontracts

(AfricaRenewal, 2004, p.24). Failing to reacha consensusamong its 147members bodyagain, the negotiations came to an abrupthalt in

Cancun,Mexico, in September2OO3 over a seriesof disagreementsconcerning the detailsof theagricultural agreements and the extent of non-agriculturalagreements, suchas the Singaporeissues. Ultimately, it wasconference chair, Mexican Foreign

MinisterLuis Ernest Derbez, who closed the meeting and the conference, resulting in a widespreadblame-game of whichcountries'delegates were at faultand signs of jubilationand frustration on bothsides. These mixed reactions ranged from "civil societyrepresentatives [that] broke out in songand dance in the conventioncentre" to USTrade Representative "clearly sulking, [throwing] a tantrum in hisfinal press conference" (Jawara and Kwa, 2003, p.xxi).

While many factorscertainly have contributedto the collapseof the trade talks,the commonmain factorthat has been attributedwith it is the fact that developingcountries were able for a firstsuccessfultime to maintaintheir high level of cohesion,such as displayedin their powerfulcreation of the G20, in face of strong effortsby the US and the EU to "divideand rule"and use "arm-twistingand bullying" in order to achievetheir preferredoutcomes (Jawara and Kwa, 2003, p.xxxvi ff.;Narlikarand Tussie,2004, p.947tt). Consequently, while previous efforts to apply developmentaid and bilateralfreetrade agreementsas sticksand carrotshave been ableto coercedeveloping nations into a lessfavorable outcome, they have failed to bearfruits as the G20,under the leadershipof Braziland India,still consists presentlyof 19membersT. As Narlikarand Tussie point out, this historical achievementseems to "suggestthat the G20is a productof almosttwo decades of learningby developingcountries" (ibid., p.948).

6.2 The Threat of the Demiseof the WTO

Havingfailed to reachan agreementin the Doha Roundand havingfallen behindthe timetable,many trade analysts put the WTO's'constitutional' head on the chopping-blockand argued that anotherfailure to resolvethe key issueof agriculture couldresult in the totalcollapse of the WTO.Given this bleakoutlook, intense 'green-room'power- backroomnegotiations developed which involved continued politicalnegotiations between the developedand developingagriculturalexporters.

White" delegates formally registered their disappointmentat a missedopportunity", behind closed doors they "werejubilant" (Jawara and Kwa,

2003, p.xxii).This spirit of havingachieved a milestonein the processof multilateral negotiationscarried on even to previoussupporters of developedcountries, such as

SouthAfrican Trade MinisterAlec Erwin.who statedthat "this is the first time we haveexperienced a situationwhere, by combiningour technicalexpertise, we can sit as equalsat the table.This is a changein the qualityof negotiationsbetween developingand developedcountries" (Elliot et al.,qtd. in Jawaraand Kwa,2003, p.xxiii).

7 Membersinclude , Bolivia, Brazil, Chile, China, Cuba, Egypt, India, , Mexico,Nigeria, Pakistan, Paraguay, , South Africa, Tanzania, Thailand, Venezuelaand Zimbabwe.(lxv)

23 7. Scripting a Fairy-Tale:The Geneva Framework Agreement

ln the nightof July31", WTOnegotiators came out of theirclosed doors negotiationsand announced that a "breakthroughagreement" had been reached that wouldkeep the previouslydoomed Doha Development Round alive (WTO News,

2004).While the evaluation of itscontent might be controversial,it is generally agreedthat this Geneva Framework Agreement marks a majorstep towards the continueddiscussion on tradeliberalization in agriculture, as it proposesnew and moreprecise commitments on the threepillars of domesticsupport, export competitionand market access. While it containshardly any quantifications and it is stilla'diamond in therough', it nevefthelesspresents itself as a key-documentwith greatinterest for furtherempirical and structural analysis.

ln thefollowing sections, I willevaluate the Frameworkagreements achievementsin two steps:First, I evaluatethe institutionalbreak that occurred at themeeting as a departurepoint from previously failed negotiations. Second, I will investigatethe Framework'smajor achievements and its perceivedwinners and losers.

7.1 Bypassing the Ministers

First,from an institutionalperspective, as Kwaand Bello point out, the meetingmarked a significantbreak from the earlier meetings in theDoha Round whichhad resulted in a nearcollapse of the WTO.Because these previous ministerialmeetingsin Cancun in 2003and Seattle 1999 had resulted ultimately in stalemate,the GeneralCouncilmeeting of the Summer2004 established itself as "de factothe supreme institution for decisionmaking" (Bello and Kwa,2AOq. As the previousministerial meeting included NGOs and popular protesters, as wellas increasingmedia attention, the leading nations came to therealization that trade negotiators,which were largely partisan politicians, were more "determined to stand upfor their country's interests" (ibid.). lt wasthis sense of increasedscrutiny and transparencythat was attributed with the failure of thesenegotiations.

Learningfrom this past backfire, the main negotiators, under the leadership of the FIPS(Five interested Parties), which included the US,EU, Australia, Brazil andIndia, pushed for a newdecision to be madewithin a smallergathering of only

40 tradeministers during their July General Council meeting. Moving swiftly and oftenwithout giving other countries the chance and needed time for review, they producedshortly after midnight on 1'rof August2OO4 the Framework agreement,

"whichDirector-General Supachai Panitchpakdi said will greatly enhance members' chancefor successfully completing the important Doha negotiations" (WTO News,

2004).

7.2'Progress'on AgriculturalLiberalization?

Thisapparent lack of transparency and system of exclusionseems to greatly coincidewith the practiceof the "GreenRoom", which "had traditionally provided a wayto expediteconsultations" through the inclusionof onlya few corecountries and thus"underpinning the claims of a'democraticdeficit"'(Tussie and Lengyel, p.7).

In addition,this processof bypassingother state actors has also includeda furtherinclusion of non-governmentalorganizations and WTO criticsin general.

Consequently,strengthening the role of state actors,the WTO has purposefully channeledand filteredany oppositionthat could occur on a nationalbasis by acceptingonly a singlevoice per nationas a traderepresentative. As wasthe case, this ultimatelyresulted in the silencingof criticalvoices within the US of the

Frameworkagreement while large agribusiness and lobbyinggroups have lauded

UnitedStates Trade Representative(USTR) Zoellick on their positiveand close discussionsthrough all processes.

Finally,this process of creatingan 'arbitrary'core group is aggravatedby the fact that few developingcountries hold the resourcesand expertisenecessary to delegatea permanentrepresentative to those meetings. As oneis unsureof whether or notthey will result in a 'constructive'Framework, they often have to takea gamble on howto allocatetheir limited time and funding.s Confronted with these constraints, many developingcountries find it difficultto find a balancebetween "crafting a consistentproposal with due attention[and] the equallyrelevant requirements of 'consensus-based' efficiencyand legitimacy"(ibid. , p.7').Theevaluation of the

Frameworkagreement is thus still up in the air, as both analystsand developing nationsare trying to ascertainits implications.

The Frameworkagreements major achievement, building onto the URAA, can be dividedinto three subsectionsin a similarfashion as the Agreementon

Agricultureduring the UruguayRound: export competition, domestic support and marketaccess. First, export competition has been hailed as the negotiators'greatest achievementsin furthering trade liberalization, as "allforms of exportsubsidies are to be eliminatedin parallels, and disciplineson all exportmeasures established, with

I As a matterof fact, more than 100 nationswere absentduring the negotiationsof the Frameworkagreement. e lt is importantto note,as ChristianHaeberli points out, that the phasing-outof the complete armoryof exportcompetition instruments is more likelyto look like a "disarmamenttreaty:

27 equivalenteffect, "by a credibleend date" (Haeberli,2004, p.4ff).The measuresto be eliminatedinclude export credits and insuranceprograms, trade distorting practices of state trading enterprises,and food leading to commercial displacement"(ibid.). While no cleartimeline does yet exist,the modalitieswill result in significantcutbacks and changesin the US, in terms of export creditsand food aid.10However, because a final date is yet to be determined,French Agriculture

MinisterHerve Gaymard is on recordas statingthat it couldbe "2O15to 2017 before

Europeanexport subsidiesare tinallyeliminated" (Africa Renewal, 2004, p.3). As a matterof fact, as ChristianHaeberli points out, "they finallyaccepted it only on the understandingthat the phase-inof these disciplineswould likelylast for up to 10 years"(ibid., p.6).

Secondly,while the export competitionissue is by no means written in stone, the domestic support pillar is by far more complex both in terms of lack of quantitativedata as well as ambiguousdefinitions. In general,the Framework agreementrequires all subsidizingmembers to "reducethe overallsum of their trade-distortivesubsidiesll. This reductionwill have to occur with a tiered approach, meaningthat highersubsidies levels would get cut morethan lower.A reductionof at least20 % has been agreedon for the first year of implementation,which shouldbe at the latest December2005, which has been set as the extended"deadline for concludingthe round" (Africa Renewal, 2004). This cut of 20 7o, as noted by

Haeberli,is the same amountas has been achieved"over the whole UruguayRound

Indeed,exporters today enjoying governmental support of anykind will not agree to phase thosepayments out unlessthey are given sufficient assurances that their competitors will not benefitfrom support measures with a similareffect." (Haeberli, 2004, p.1tt) 10Critique was very vocal in the EU,which has been heavily criticized by itsown member states,such as France;and by Canada,which holds state trading agencies 11These trade supporting subsidies have been defined as AmberBox, Blue Box and de minimissupport.

28 'breakthrough' implementationperiod" and consequently as worthyof beingtermed a

(Haeberli,2004, p.7tt).

In termsof the absoluteactual results of thesecuts, a varietyof opinions exist.While Haeberli suggests that they might pose a greatchallenge to the US,this claimis disputedas calculationswith present numbers have shown. Thus, currently the US is spendingaround 23 billion$ in subsidiesannually over the lastthree years, whichis wellunder the 49 $ billionit wouldbe allowedto useaccording to agreement calculations(Africa Renewal, 2004). This calculation results on the factthat the "sum of all trade-distortingsupport will not exceed80 % of the sumof FinalBound Total

AMSplus permitted de minimsplus the BlueBox," of whichthe BlueBox level will be the higheramount of a 'representativeperiod' so that the basefor cut will be higher thanthe actualblue box usage.Thus, on BlueBox payments,the Frameworktext providesthat such support "will not exceed5 "h of a Member'saverage total value of agriculturalproduction during an historicalperiod" (Haeberli, 2004). However, even thereexceptions exist, so that memberswith very high Blue Box levels,such as

Norway,would not have to make"a whollydisproportionate cut" (ibid.).

Manycritics of this interpretationargue that the effectof the Agricultural

FrameworkAgreement on developedcountries is notactual reduction, but simply the earliermentioned shifting around of paymentsfrom box to box,which in caseof the

US is mostlikely to occuraway from the illegalAmber box towards the Greenand

Blueboxes. Haeberli however argues that the "gatewayfrom Amber Support (AMS or de minimis)to Blue Box measuresis likelyto be a narrowone, as the solutionof product-speciliccappingl2 has been introduced.Overall, "it remainsto be seen

12Product-specific capping basically refers to the idea that certainmaximum levels across the 'shifting'of variousboxes will be identitiedfor each productso that a simple boxesno longer whetherthe additionalobligation to reducesupport on a productbasis will also apply to sensitiveproducts" (ibid.).

The third grand pillarthat has been includedin the FrameworkAgreement is marketaccess. Synchronous to the domesticsubsidies cuts, a tieredformula will be appliedhere, meaningthat tariffswill be dividedinto "differentbands dependingon their respectivebound tariff level" (ibid.). While Least DevelopedCountries would be excluded from any reduction commitments,harmonization would occur in both developingand developedcountries, resulting in highertariffs being cut more than lowerones.

However,these reductionmethodologies have yet to be defined,as well as how the bound tariffs are going to be classified.As Haeberli notes, "in order to accommodatethe US delegation,capping remains on the table but only as a subject which 'will be furtherevaluated"' (ibid.). Countries however are still able to applythe

'sensitiveproducts' rule. As stated in Paragraph31, o'membersmay designatean appropriatenumber, to be negotiated,of tarifflines to be treatedas sensitive"if they don't undermine"the overall objectiveof the tiered approach"(WTO in Appendix).

Whilethis heavilyfavors export nations with only a few products,such as the US, as opposedto lndia, which exports more than 100 differentagricultural commodities, developingnations have been grantedsome extra maneuverroom as their products are generally subject to lesser reductioncommitments. Furthermore, developing nations also would be able to designate "Special Products" (SP) based on the previouslyestablished criteria of food security, livelihoodsecurity and rural developmentalneeds. is feasible.lt is importantto notethough, that a phalanxof developednations, e.g. ,Japan, are opposedto this feature,fearing that this would cut into their high- levelsof 'GreenBox'subsidies.

30 In summary,thus, the three main pillarsunder negotiationfor further liberalizationmarks a milestonein the WTO'shistory and the developingcountries struggletowards free and fair trade. However, in everysingle pillar there exist clear drawbackstowards further liberalization of agriculturaltrade. For example,while a generalincrease in exportcompetition superficially appears to be beneficialfor the developingnations, it also reducespreviously held favorable statuses. Haeberli questionsthe benefitssub-Saharan African countries will receivefrom the agreement,as it would"considerably increase" their food bills "without being able to substantiallyimprove their market shares abroad or evenat home"due to eradication of previouslyfavorable tariff preferences in Europel31Haeberli,2OO4, p.6). In addition,the breakthroughon marketaccess is questionableas the mainmodalities and figuresstill have to be workedout. These detailedfigures will essentially determinewhether or not the more lenienttreatment of sensitiveproducts for examplewill offsetany possiblegains in termsof furtherreductions of tariff.

However,as seen in the issueon domesticsubsidies with the possibilityof box- shifting,it appearsthat every membercountry that has the resourcesavailable to supportits farmingconstituency will most likelyexplore all possibleways of continuingdo so. Consequently,while the proximatevictors of the agreementmight appearto be the developingnations in the shortterm, the ultimatewinners could againbe the largeindustrialized farming nations that havethe legal and monetary

13As a matterof fact, these preferentialaccess agreements to the marketsof the developed world are one of the reasons"third world remainedaloof form the negotiationsorganized by the GATT."(Mandle, p.14) However,economist Krueger argues that "mostanalysts believe that, althoughGSP [GeneralizedSystem of Preferences]had some valueto developing countries,it was limitedto a few countriesand a few commodities[and that] it may not have been worth even the diplomaticefforts and other coststo developingcountries." (Krueger, 1995,p.40 as quotedin Mandle,p.14)

31 resourcesto supporttheir farmers, successfully argue their case at the WTO and benefitfrom freer markets elsewhere.

7.3The'Fifth Wheel': Singapore and Cotton

Furtherissues that were discussed included, but werenot limitedto, the

Singaporeissues and cotton, which were two of the reasonsfor failureof the Cancun agreement.While the Singaporeissues, which consist of a "mixedbag, relating to investment,competition policy, ,and transparency"have been largelydropped by the EuropeanUnion and have been reducedto a simple commitmentto takethem up in laternegotiations, the cottonissue has remainedon the table (Bhagwati,2OO4). With developingnations pushing for an expedited solutionto the currentlyunstable and unfairmarket situation, cotton has been specificallyintegrated into the agreement,receiving special attention in an "ambitious and expeditiousmanner." Thus a subcommitteefor cottonlawas establishedin 18rh

November,2004.

This subcommitteefor cottonwas establishedin the face of a dispute settlementcase brought by Braziland joinedby severalother countries, including four Centraland WestAfrican nations, Mali, Burkina Faso, Benin and Chad.As 'fair arguedby Oxfam,one of the largestinternational NGOs working in favorof and 'for the developingworld context, "agricultural subsidies in the United

Statesare at the heartof a deepcrisis in the worldcotton markets" (Oxfam, 2002, p.

2). lt is challengingthat with cotton prices, adjusted for inflation,having fallen to their lowestlevel since 1930s due to overproduction,more than 10 millionproducers that depend"directly on cottonproduction" have been pushed to the brinkof starvation

14As of March22nd,2005, the Sub-Committeeon Cottondoes holds its ownsite at the WTO whichwill be continuouslyupdated with releases of progresses.For more information, feel freeto consulthttp://www.wto.org/english/tratop e/agric e/cotton subcommittee e.htm

32 and poverty(ibid., p.2). Arguing that Centraland WestAfrican nations enjoy a

'comparativeadvantage' in the productionof cotton,which is as muchas threetimes lowerthan in the US in termsof productioncost, US cottonsubsidies are unfairly inflatingthe market,as they 'kick in' when pricesare their lowest.Consequently, basedupon a study undertakenby the InternationalCotton Advisory Committee

(ICAC)which showed that the withdrawalof US cottonsubsidies "would raise cotton pricesby 11 centsper pound,or by 26 o/o",Oxfam argues that the regionlost more than300 million dollars and demanded compensatory payments (ibid., p.1ff).

However,these compensatory payments have not beengranted. As Jagdish

Bhagwatiargues, these demands were "simply unrealistic and inappropriate"as compensatingothers for the effectsof theirown policies would set a precedentwhich wouldopen up a "Pandora'sBox" (2004). Consequently, the Africanstates agreed to the US proposalof establishinga specialsubcommittee, in a quid-pro-quodeal for eliminatingtheir demandof compensation.Nevertheless, in September,2004, followingthe AgriculturalFramework Agreement, the WTO DisputeSettlement Body upheldan earlierpreliminary ruling that the "US hadpaid illegal subsides worth 3.2 billiondollars" to its cottonfarmers ("Brazil," BBC News,2OO4). While the US has appealedthe disputeruling in October2004, claiming that all of its subsidiesare legalwithin the presentsystem, Phil Bloomer from Oxfam International remarked the mostrecent ruling as "a triumphfor developing countries" (ibid.).

Consequently,even the cotton dispute, while largely pointing in favorof

Brazil,has not yet been'won' and given the US masteryof box-shiftingof subsidies, it couldcome as no surprisethat by the end of theruling, it willhave again relocated 8. Outlook

Grantedthe complexitiesof the WTOsystems and its agreements,it is difficultwithout further investigation and actual case studies to providefor an accurateand sound outlook on thewinners and losers of theagreements.

Nevertheless,I have been able to showthe degreeto whichpower-politics have shapedthe particular outcomes in agriculturalnegotiations over a historicalperiod of time.However, as therecent developments with the rise of theG20 coalition has shown,the past, quasi-hegemonic power-imbalance in favor of theheavy-hitters US andEU has slowly, even if onlymomentarily, shifted towards a'truer consensus- basedsystem'of the WTO.

However,this statement again needs to be differentiatedas seenin the recentFramework agreement, which has been pushed for by the US,and heavily favorslarge food export nations that are able to effectivelyuse the WTO's loopholes, boxshifting methods, etc.. Furthermore, the agreement supports a'return'to a more state-centricmodel of analysis,as NGOsand WTO critics have largely been sidelinedand bypassed, or at least'censured and filtered'through their own state's traderepresentatives.

Finally,the looming question needs to be posedwhether or nottrade liberalization,even if 'fairer'willbenefit developing nations as a whole.While short- termbenefits are likelyto be harvesteda moreserious interrogation needs to take place.ln the nextsection, I willinvestigate the agriculturalsectors of the US,Mali andSouth Africa in orderto determinethe presentand past structures of agricultural productionand possibilities and hurdles that would stand in theway of change. 9. Declared Victors and other winners: Investigation of the

Agricultural Sectors of US, Mali and South Africa

As becomesobvious from the previous chapter, these current developments raisevarious questions on whoare the winners and losers of theGeneva agreement andthe Cotton Dispute Settlement. Investigating the reactions in thevarious agriculturalsectors and ministerial groups on a percountry basis, I willfirst 'historical' investigatewhat the domesticreaction has been to the breakthroughin thepublic and private sphere. Secondly, I undertake an independentanalysis based on commoditiesof theimpact of the Frameworkagreement.

9.1Setting the stagein the UnitedStates

TheUnited States, acting as the most powerful actor in the present global worldorder, had an enormousstake in keepingthe Doha Round Trade talks alive.16

Spendingin theyear 2000 more than the combined grossed domestic product of 70 nations,the UnitedStates not only had a greatstake in findingexport markets but alsoin providingcontinued support for itsdomestic farmers and the strong political constituenciesthey constitute. After the collapse of Cancun,Robert Zoellick, US

TradeRepresentative "responded [...] by lettingrecriminations fly" (Bhagwati, 2004).

In a FinancialTimesletter to theeditor, Mr. Zoellick threatened bilateral trade agreementswith "can do" developing countries that "have withstood pressure to join thestrife from larger developing neighbors" (2003). Consequently, adding pressure on the G-20and other developing nations that have insisted on compensationfor

16lt is importantto note that I purposefullydid not use the term "hegemonic"in orderto portraymy sensethat in agriculturalnegotiations, the EuropeanUnion has almostthe same 'larger-than-life' amountof say, especiallybecause of its CAP programsupporting farmers throughcontroversial Blue Box measures.

37 cotton,fought measures of protectionismfor theirown agricultural sectors and the liberalizirrgSingapore issues, he threatenedthat "as WTO members ponder the future,the USwill not wait: we willmove towards free trade with can-do countries"

(ibid.).

Havinggained Fast-Track authority by PresidentBush, something that has notbeen achieved in thelast years under President Clinton, Zoellick traveled the world(and the USA) immediately after Cancun with a "trip[he]took around 32'000 milesup anddown the world to geta senseof theview of thekey colleagues"

(Zoellick,2004). These stops included, but were not limited to Kenya,South Africa,

China,Japan, Pakistan, lndia and of coursethe EuropeanUnion. lt is withinthis contextof the establishingof the earliermentioned FIPS that the currentFramework wasdrafted and later agreed upon by the General Council.

Whilehe certainlyhad to makecertain successions to the EuropeanUnion andother developed nations, such as Norwayand Switzerland, in termsof the 'box' cappingof tariffsand amountof amberbox reductions,he was largelyable to throughhis country's stance on agriculturaltradeliberalization. Given the realization thatnew markets are neededin orderto providefor the excessproductivity of the US agriculturalsector, his efforts were applauded not only by the government,but as wellby largespecial interest groups and transnational companies. As a matterof fact,in a statementreleased by the 'AgTradeCoalition', which consists of such powerfulmembers as theAmerican Farm Bureau Federation (FB), and the leading

US-agromultinationals Cargill and Monsanto, they "congratulate U.S. negotiators for a successfulconclusion to the negotiations",stressing that the agreementprovides for the "expansionof accessto highlyrestricted foreign markets", a mission Americanagriculture has long sought to achieve(AFBF, 2OO4). As BobStallman,

Presidentof theAmerican Farm Bureau Federation has remarked,

"theframework text adopted by theWTO General Council will continue the processof negotiationtoward the goalof expandingworld markets for American agriculture[and]will lead to expandedmarket access for U.S.farmers and ranchers"

(ibid.).

It is withinthis context that the Framework has been declared overall a victory as it achievedthe US Agricultural Secretary's, Ann M. Veneman, goals of "significant improvementsin market access; substantial reductions in trade-distortingdomestic support; andin a historicmove, the complete elimination of exportsubsidies"

("Statement",USDA, 2004).

Whatbecomes obvious in thestudy of themajor governmental and non- governmentalactors'reactions is the widespread optimism within the agricultural sectorin the UnitedStates that the Frameworkwill have no or onlylittle negative repercussionson theirown livelihoods. Backed with a20O2 farmbillwhich increases

UScrop and dairy subsidies to farmersby morethan 50 7o,one would expect the

'historic'Framework agreement to achievethe goalsof liberalizingdomestic subsidiesreduction in the US andthe world as a whole(FASS Track, 2OO2).

However,as Zoellickreassured in a letterto then-Democraticleader Tom Daschle of

SouthDakota, "this reduction will notweaken our abilityto supportour farmers [...]"

(OrganicConsumer Association, 2004). As a matterof fact,based upon the calculationformula devised in the earliersection, the 20 7ocut taken from the 49 billion$ of annualmaximum subsidies the US would be allowedto havewill not affectits currentprojected commitment of 23 billion$ of subsidiesper year. Havingpresented a generaloverview, in thefollowing commodity analysis, I will investigateto whatextent this interpretationof a victorymight be differentiated basedon variousscales, when investigating in detailthecotton and maize sector.

9.2 The US Cotton Sector

TheUnited States holds a keyposition in theglobal agricultural market as it accountsfor the world'slargest exporter of cotton,as "in a typicalyear more than halfof UScotton is exported"(Oxfam, 2002, p.10). From a domesticperspective, however,cotton farmers in the US arereceiving vast amounts of subsidies.

Measuredover a sevenyear period, from 1995 - 2OO2,204182cotton farmers have receivedaround 10.7 billion $. (EWG)This figure accounts for the sth highest subsidiesprogram in theUS, with corn subsidies being the greatest (34 billion $) overall,yet lowerper-capita payments. In termsof subsidiesper acre, cotton receivedaround 230 dollars per acre, compared with corn, which amounted for approximately40 dollarsper acre in 2001/2002(Agricultural Outlook, June/July 2002 qtd.in Oxfam,2OO2, p.33).

Froma historicalperspective, these subsidies, as shownhere in the caseof cottonin Graph1, havebeen largely on the increaseand their respective increases largelycorrelate with the falling world market price for cotton,due to "counter-cyclical payments[that] are made when a commodity'seffective price is belowits target price"(USDA, 2OO3). Consequently, their trade distorting effect, as reflectedin the increasein globalcotton market export share during this 7 yearperiod, can be clearlydetected in Graph2. US Cotton Subsidiesand World Cotton Prices95-02

3,500,000,000 qn

80 3,000,000,000

2,500,000,000 cr' o 5 i'z.ooo.ooo.ooo E o .ct (t c 1.500,000.000 o o cr

1,000,000,000 Graph1 Adaptedfrom 500,000,000 Oxfam, 2002.

0 1998 1999 2000 Years s tu s c [](, HItt ,& fifrg$ .sbE 6* rl, fi$ ng"la ,$H ? ()< {, $< (J{0 s &n rt# m* tffi &s &t

I r t I l * q\l I ft * fi tn * {t} s!! t fiD ra tr{, r& x!t sp g * }|q uJ $

*t& 2 tfi Graph *tt Source: Oxfam,

ID {[ Itt ltr

a

& ils sF fi Fggg !r sfififrF-:qq Efiei oooo0 crooo Efr ltg Thesesubsidies programs (see Table 1) havebeen classified into 6 categories,with each respectively falling within one of thethree subsidies boxes of theWTO. The largest of thesepayments, with a totalof over4 billiondollars, the

ProductionFlexibility Contract in the 1997Farm Bill, have been officially declared as

GreenBox subsidies, however with the newest ruling in theDispute Settlement Body theywill have to bedeclared as AmberBox. The second amber category payments are EmergencyLoss Payments (renamed counter-cyclical payments in the 2002

FarmBill), which include the Market Loss Assistance of over2 billiondollars. The thirdAmber box payments are loan deficiency payments, which accounted for 1.7 billiondollars over that same period. Frurgrams included in cotton subsidim

FraduqtionFlexibility Contrast - UplandCctfon $4,$47,669,2.CI8

fiomrnoditl, C€rtificates- Cocp Cotbn $2,s09,698,72.6

C'onarncdity Cefificates - Cstlon $4CI5,055,344

DireatCCIunter Cyclical - UplondCntton $L84,610,470

Loan Sef" Fayment - Non PFC- Cotton $1,093,?84

Loan Deficiency - Cropland Factsr - Upland Cotton $-7,769

Lsan Smficiency - Ineligible - Cotton $-62,S71"

Loan SeficiencyFayment Lirnit- Upland€ottnn $-ffiCI,477

FroductionFlexibility Refund - UplandCotton $-276,24.9

Sefieieney Final Faynrent - ELS cotton $-3,837,461

Directpayments, replacing earlier production flexibility contracts (PFC) payments,have been put in placefor cottonfarmers under the 2OO2Farm act

(USDA,2003). These direct payments have been established "based on thevalue of productionand yields during a perviousproduction period" (Oxfam, 2002.)

Consequently,as thesestandardized payments are decoupled from production and presentworld prices, they are eligible for the GreenBox. However, with a changeof thereference period to 1998-2OO1 (see Graph 1);the entitlement to subsidieshas increasedsubstantially as theseyears represented increased acreage and yields underproduction for cotton. Thus, during the period of 1995- 2002,they accounted formore than 4 billiondollars, or roughly4O % of totalcotton subsidies.

Thesecond new introduction under the 2002 Farm Act was to replacethe emergencymarket loss payments with counter-cyclical payments, which are amber boxsupport measures. The emergency market loss payments accounted between

1995- 20O2forapproximately 2 billion dollars, or 2Oo/o of totalcotton subsidies.

Estimatesfrom the USDAFarm Service Agency for 2003Crop Counter-cyclical paymentsfor cotton are 0.0393 dollars per pound of uplandcotton (see Figure 1), whichis considerablybelow the estimategiven by Oxfamin 2003of 13 centsper pound,"or one-third of themarket value of thecrop" (Oxfam, 2OO2l. lt consequently becomesobvious that with the highvolatility of the cottonmarket prices, so do the overallsubsidies payments vary considerably.

Figure1 NniFcrop Couilercycrlcal peymert {CCP) Rrte8 tor Source:USDA srhear, 38rtet, orts, Pllnatq upard comon, Gom. Gralr sofglrom" a.ld soy5€nr9

ailev Oals Pmtns Uolald olltrl Cd0 SorolEm

Se0dd Sh*d lbrdd gbhdr h gedf,td $rg*l nbld tAdra

CCP oaraneterg Tafg€t prioe J& 2.21 1.400 495.O0 o,7244 2"60 2_54 5.80 Oiied payt1lenttde 0.52 o.24 0,@4 36.00 0"0667 0_28 0.35 0./t4 '|.350 Losn |als (LF) 2"S0 1.88 355.00 0.5200 1.98 1.98 5_00 ira|teling yesr a€raoe {tdYA} ilic€l/ 2.29 1.460 386_00 0.6r80 2.42 2.39 7-34

Efi€ciive Dri:e Highe, ol LFIs !ff4 Pdce 3.40 2.8 1.480 386.@ 0,618{, 2_42 2.39 7_34 dc dired gaysrani late 0.52 o.24 0.0'24 36.8O 0.0667 0_a 9.35 0.44 = ettsclivg F i:e 3.92 2.53 1.504 422"W 0.6€47 2_74 2.V4 7.78

CCPqawng*mte TargPt priae 3.85 2.21 1..{OO 495.00 o.7244 2_60 ?.5{ 5.80 rtna etlecttv€ p{ice 3.52 2.53 1.504 4?2.ffi 0.6*17 2.m 2.V4 7,72 €q.rab CCF palmet{ tate 2f 0.@ o.00 0.000 13.00 0.496 0.m 0,m 0.00

CCP oarnenl raies F st padial payrnd|t lale 3/ 0.0315 0.0m 0.0@0 3S.40 0,o201 0.0rI0 0.0140 c.00@ S€cord pditEl pafnenl tate 4/ o.0@o 0.0m o.0@8 15.40 0,0000 0_0000 0.0@0 0.0000 Fhd paynEnl raie 5/ -o_0i'15 0.0ff0 0.0s8 21.n 0,0192 {_0r/o .o.0140 0.0000

It 500t6: 29. 2004-

Cdn. dgfre srd slb*Narnl &ricd!..| g.ri*ic! SdbustlA, sai.6bx ?0. 2004. tlrrhn ffi-ilnjM Agrtdftrd Sdblicr Sfrii*USOA" tub{ 12, 2004. I d#ffiH#mm':;ffiffigtrffi ?ffiffiffi'ffi ffJfi lffi 'tuF'iid." &'.* 5{ Fid ,B ffi @.+[b @? Prytid r& rs the frd &d Ed F ticl 16. fl.gdtn ffi M r r.ffi rd..

A thirdmeasure are the loan deficiency payments, which are triggered whenever"world prices fall below$0.52 per pound" resulting in the effectthat "the furtherworld prices fall below that level, the more [the loan deficiency payments and marketingloan grainsl increase" (Oxfam, 2002, p.15). During our observed period, theyaccounted for approximately 1.8 billion dollars, or 18o/" of totalcotton subsidies.

As theyare clearly linked to thecurrent volume of productionand global world price, theyare Amber Box subsidies. Furthermore, 90 % of thecotton produced in theUS is underprotection under the "US Crop Revenue and lnsurance Programme", which coversfarmers against potential losses of yielddue to harshweather conditions and othernatural phenomena. As theysubsequently reduce the risk of farming,they are technicallyAmber Box subsidies. However, because they are not product specific, meaningthat they are also applied towards other crops, they have been

"permissible,as longas theydo notexceed the de minimisquota" (ibid., p.16).

Finally,the last and arguably most controversial measure granted the currentlypending dispute, early victory for Braziland the developing West and

CentralAfrican cotton producing nations, and recent appeal by the US at the WTOis theStep 2 subsidies.This subsidy, which was established first in the 1990Farm Bill, totaledmore than 10.7 billion $ between1995 - 20O2and has risen to thecenter of the internationaldebate over adverse impact of US subsidieson developingnations becauseit "keepsUS export prices in linewith low-cost competitors" (EWG and

Oxfam,2OO2, p.15). More specifically, it provided 285 cotton exporters and millers from1995 to 2OO2with 1 .68 billion dollars, as aggregatedunder Commodity

Certificates(EWG). As of now,the WTO Dispute Panel has ruled against the US, agreeingwith Brazil that the Step2 program,as wellas otherexport credit guarantee programsthat distort international trading patterns through export subsidies as illegal andin violationof variousArticles of theAgreement on Agriculture.As a matterof fact,this ruling has been backed up recentlyby theAppellate Body, reducing any possibilityof overrulingin the futurein favorfor the UnitedStates. Consequently, the

UScurrently has to presenta proposal,not a timetable,by mid-Summeron howto implementthe ruling. (for more information, see WTO Ruling, www.wto.org)

9.3 Perverse Myth of Gofton Subsidies

As becomesapparent, the cottonsector is oneof the mostheavily subsidized sectorsin thewhole world, backed up by politicallobbying groups, such as the

NationalCotton Council of America,which portrays "an image of a sectordominated by farmersoperating in a harshenvironment, but displayingan entrepreneurialdrive that benefitsthe nation"(Oxfam, 2002, p.24\. As a matterof fact, revisitingthe earlier cross-comparisonof subsidiesreceived per acre, it is fair to concludethat the cotton 'in-sync' sectorand its politicalrepresentatives are very well and are able to produce someof the mostoutrageous pork-barrels in the US Congressin a sectorthat is highlynon-efficient and cost-expensive.(See Graph 3) This lackof comparative advantagebecomes especially apparent when comparedwith the net cost of producingone poundof cottonwithin the WestAfrican region. As seenin the graph,

Benin,with 30 centsper pound,averaging similar net costas Malican produceat less than half of the averageproduction cost of the UnitedStates with over 68 cents per poundbetween 1999 and 2001.

Graph3 Source:ICAC NetCost ol ProducingOne Poundof Cotton'

o.70

0.60

0_50

s O",*O t(t $l if, 0-3(,

8.X,

0-10

Ctrins Aenh {Sqr|h Eertn{ih(fr Senln E sil PddrmnPddsirn Tu'/ffryTurlsel Awrale U"S" (YdtmFlirer Zsul Zf,itl tBorsou- (Cen*) tPrtrridt {AEgeer} {iloi}'nl Vslhy) Atecora) Awre4r) 'Exc&dng lg|d r€ntrnd eeedwkre. Goetare for 2{ffiftl, exEEfnl9SgOI fuf U.S.8rd Arscrrlk source-'IGAC,Sun€y€ff|le Coefof ProdlrcrbndRaw Cotbrl,2AAl This earlierclaim of unevensubsidies distribution is backedup by the data providedfor by the EWG, which shows that from 1995 to 2002,the top 10 7" of cottonsubsidy recipients received 78 o/ool cottonsubsidies (EWG). As a matterof fact, large powerfulagriculturalfarming corporations with intimateconnections to multi-nationalagro companies have received the vast bulkof the cottonsubsidies payments.For example,Tyler Farmsin Arkansas,which controls almost 40'000 acresof land,has receiveda totalof almost25 millioncotton subsidies from 1995-

2002 (ibid.).In 2001 alone,the companyreceived almost $6 millionin cotton subsidies,a figurewhich is equivalentto the averageincome of 25'000people in

Mali(Oxfam, 2002, p.24).

The paradoxof the situationis furtheraggregated by the fact that the recipientsfor these subsidiesare not the local, ruralcotton farmer, as arguedin the mostprevalent discourse on agriculturalsubsidies.lT As a matterof fact,the strong trend towardsthe consolidationof the familyfarm into large-scaleconcentrated farmingis aggravatedby the subsidieswhich providesufficient capital to large-scale producersyet excludealmost completely the bottom80 "/" of farmers,who receive8 per cent of the payments,a total of 5470$ per recipient.Consequently, while

PresidentBush promotedthe myth that the currentsubsidies "promote tarmer independence,and preservethe farmway of life[and] helps America's farmers, and thereforeit helpsAmerica," it becomesclear that the presentagricultural policies most importantlyhelp to preservethe increasingmarginalization of smallerscale farmerson a domesticand globalscale (ibid., p.1).

17This creationof the myth of the familyfarm has beendocumented as earlyas in 1981 by lngolfVogeler in his book"The Myth of the FamilyFarm:Agribusiness Dominance of US Agriculture". Froma legalstandpoint, up to thisdate, we willhave to waitand see what the finalruling of theWTO will be. However, it becomesalready apparent that any reductioneither through the Dispute Settlement Mechanism or throughthe

Frameworkin ExportSubsidies will havea greatereffect on large-scalefarmers that havebecome dependent on sustainingtheir lack of 'comparativeadvantage'through agriculturalsubsidies. ln termsof timing,however, it becomesvery relevant through whichmodus operandi the reductionwill be achieved,as a finalruling against the US wouldmost likely accelerate any changes in USsubsidies policies given the ability of exportingmarkets to imposetariffs in retaliation.

Overall,it becomesapparent that the current unsustainable cotton subsidies policyis largelyfounded upon the ill-advised vision of a ruralAmerica on "whichwe canproject our hopesand dreams" (Danbom , 1997 , p.1 sff). As a matterof fact, hopingto escapethe coldreality of neo-liberalismand global capitalism, the returnto our'roots'and the agriculturalvillage often serves as oursource of inspiration,hope andenergy. As longas currentagricultural policies largely support the heavy-hitters of cottonproduction, however, the likelihoodis immensethat we willend up facing 'family-farm' thestark reality of neo-liberalismwithin our own backyard soon and the we triedto preservewill have been reformed into a commoditywithout aesthetics andfeel of 'naturalness.'

9.4 US MaizeSector

Thispicture of theruralfarmland held by the US population is heavily dominatednot by cotton,but by corn,which occupies the largestamount of farmed areaof anyother crop. While cotton has received higher subsidies payments per area,corn farmers have received the most amounts of subsidiesin total.Estimates of the 2003-2004season show little change in acresplanted, as theydecreased by

0.2 millionacres from 78.9 in 20O2-2003to 78.7in 2003-2004.However, in its most recentUSDA Corn Crop Production Report in November,the acresharvested broke againall records,due to betterproduction conditions as the acresharvested rose from69.3 to 71.1millions. Gonsequently, the overall production of cornhas reached recordheights, surpassing the 10billion bushels barrier, as it increasedby 12% from8'967 million bushels to 10'114 million bushels in 2003-2004 (USDA and Hilker,

2005).

Grantedthis vast amount of production,over 1.4 million farmers, corporations,partnerships and estates have become the beneficiariesof at leastone cornsubsidy payments from 1995 - 2003(EWG). However, analogous to cotton,B0 o/oof themreceived on averagejust'4700 dollars totalover 9 years,which, when brokendown, results in lessthan $50 per month. Consequently, in comparison, the bottom8O o/o of cornfarmers received only 15 % of the payments,whereas the top 1

7oreceived 18 o/o. Thus, the number, while proportionally higher than the cotton producers,is significantlylower in termsof totalpayments (EWG). (See Graph 4) Corn and CottonSubsidies Distribution

100

90

80

70

o 60 o E l= clftoeffiientl o 50 filll"-1 6 G

d 40 ts tn

10

0 20,00 30,00 40,00 50,00 60,00 70,00 PercentRecipients

Source:EWG

As canbe seen,subsidy payments in theUS greatly deviate from the gini coefficientof 0. Consequently,it becomes obvious that for any further analysis of the effectsof a reductionof US cornand cotton subsidies, the effectsare mostlikely to havea smalletfect on smallscale farmers, as theyare only benefiting marginally, mostlythrough conservation programs, from this form of governmentsupport.

In termsof exports,the US is the world'slargest exporter of maizeglobally

(Oxfam,2004). However, as ArturoWarman documented in his book"Corn &

Capitalism:How a.Botanical Bastard Grew to GlobalDominance" , it wasnot untilthe early1980s when corn surpassed the previouslymost important expofi, wheat, both in termsof valueand volume and became the "backbone" of the"international phase of U.S.agriculture" (Warman, 2003, p.191f). As a matterof fact,present numbers showthat in the 2002- 2003production year, total US cornvalue amounted lo 21.2 US$billion, which is almostfour times more than the 5.9 US$ billion of wheat production(NCGA, 2003).

The riseof cornto its supremestatus has occurred synchronous with the rise of largemultinational agribusiness and the'Green'and Biotech' Revolutions. Holding the highestvalue of production,the corn sector is largelydominated by large agribusinesses,such as Cargill,Monsanto, Dow and Archer Daniels Midland.

Monsantoalone has acquired more than 22 seedcompanies from 1995 - 1998

(MacDonaldand Denbaly, 2000).

Thesefirms have undertaken a policyof mergersover the pastyears, which havebecome even more important as withthe introductionof GM corn,an increasingvertical oligopoly exists. Consequently, as seedcompanies and research firmshave been acquired by thesemega agribusinesses, so have the pesticide and fertilizermarkets become increasingly consolidated. The top four firms'concentration ratiosaccount for 64 % of seedssold. These companies are DuPont/Pioneer,

Monsanto,Novartis and Dow. These numbers are also retlected in the factthat presentlythe US is thelargest grower of geneticallymodified (GM) crops, accounting foras muchas 68 % of theworld's GM productionareas (ISAAA, 2003). In 2003,Bt cornplantings have increased from its introductionin 1996with 4 "/"to a totalof 40 % (Whybiotech,2004).

Furthermore,within the cotton industry, Monsanto dominates this industry as it accountstor 87 7oof cottonseed sales, if includedwith Delta & PineLand

(MacDonald,Denbaly and Mark, 2000). In terms of theprocessing chain, wet corn millingpowers are concentrated by 74 "/oin 1997,grown from 63 "h in 1977,within

ADM,Cargill, Staley and CPC. Cotton seed milling, on theother hand, while the data is older,is ownedwith 62 % byAnderson Clayton (ibid.).

53 Overall,2OO1-2OO2 global corn exports figures show that the USexports o/o,1847 accountedfor morethan 60 millionbushels or 2O"/" of totalUS maize production,which is significantlymore than the 4O "/"that the US accounts for in worldproduction. lt is withinthis context that the National Corn Growers Association, oneof thelargest lobbying groups, warns that "without export markets ffor cornl, farmand ranch income would be significantlylower today" (NCGA, 2OO4). While arguingstrongly in favorof USTRZoellick's "ongoing efforts to promotefree and fair trade"that "assure US cornand corn products full accessto worldmarkets", they havebeen highly skeptical of thepost-Cancun developments (ibid.). As indicatedin a letterto USTRRobert Zoellick and Secretary of AgricultureAnn Veneman by 12of themost powerful agricultural lobbying groups, they each voiced " seriousconcerns aboutdeveloping countries'demand for limiting the implementation of new disciplineson marketaccess, domestic support, and export subsidies in anyself- declareddeveloping country" ("Letter," NCGA, 2OO3). Consequently, while voicing theirappreciation for further agricultural liberalization, they are articulating their concernwith "extensions of Specialand Differentialtreatment"ls for developing nations,while arttully hiding their own practices behind green and blue boxes (ibid.).

The USsubsidies structure for cornclosely resembles the cottonsubsidies explainedearlier. Production Flexibility and MarketLoss Assistance payments make upthe largest amounts of totalsubsidies. (See Table 2) Whilethe former has been declareda GreenBox subsidy, the latter has been placed within the Amber box as theyexhibit a "directlink between payments and market prices" (Oxfam, 2OO4, p.7).

18Their majorconcern here lies with the recent"precautionary approach" principle which is appliedin the disputeson GM crops.The US corn growersare essentiallyworried about the abuseof the "healthand safety"clause in the WTO agreements,which would allow for restrictionsof marketaccess. etc. Furthermore,loan deficiencypayments, which accountfor the third largestform of 'amber subsidies,are classifiedas box'.Consequently, over the periodfrom 1995-

2002,approximately 44 % of the subsidiesfell withinthe greenbox, while 56 % in the amberbox. (SeeGraph 5)

Totaf Corn Payments L995 - 2002

Amber Box 560/o l@Amd-';- I GreenBox GreenBox 44o/o

Graph 5 Source: EWG Table 2: Source: EWG

Froductiqn Fltxibility - Csrn $t6,Zg,6,64Lu8gE

Loan Deficiency- Corn $6,449,t*",not

FtarketGains Farrn- Corn $1,S7,0,673,41?

---rqfttrq; -aaw& Md.ri' : Seficiency - Carn s917,O79,7lfl

;.:,,+litPiy!l\t|111,,,,.181r?,ii*:jrltMi#niar:3,.Wfit;i;6tl2w"ii;nr.:t::#.)tt*,t;::#Wir\iii':::.:;itw:;.;i:: Laan Sef. Payrnsnt - Ncn FFC- f,crn $,64,0.01,529

Farrn Storage - Corn $13,933,gff

Senied Market Gain - Ccrn *-tr",?.7?'

Diversion - Corn $-3,3tr8

F{kt. Lcss Asgt. Refund - Corn $-1u,097

Loan Def. Rafund - Csrn $-279,735

Prcd" Flcx" Refund - Corn $'x.o&78,577

56 g.s The Cofron Sectorof Mali:

TheWest African nation of Malihas situated itself at the centerof the current

WTOcotton dispute and has taken great strides in the pastand present in providing for a state-centeredapproach which placed a lot of faithinto the'white gold', cotton.

As a matterof fact,the developmental discourse in Malicontinuously stressed that

"'cotonest la cl6du d6veloppement[cotton is thekey to development]"(Jeune

AfriqueEconomie qtd. in Keeleyand Scoones, 2004). Consequently, under the leadershipof PrimeMinister Alpah Oumar Konare, cotton, with its high socioeconomicstatus attached to it, hashistorically received a vastamount of politicaland research attention and domestic financial support, through which Mali hassurpassed allother sub-Saharan African nations in termsof productionoutput andis currentlythe largestcotton producer and exporter in SSA.

It is withinthis context of the promisefor developmentof cottonthat I will evaluatethe currentWTO agreement and its impacton Malilater on. Consequently,I willfirstprovide a historicalaccount of the two majorstages of Frenchcolonialism andindependence in orderto illustratethe pastactivities, efforts and hopes that have ledto whatis believedto be a "rareagricultural success stories in contemporary

Africa"(Bassett, 2001). Second, this analysis will be followedby recent developmentsof liberalization,as emphasizedby outsidepressures from the WB andlMF. Finally, I willprovide for an analysisof the presentcotton sector and its intriguingfactors that need to be takeninto account when evaluating the WTO

CottonDispute Settlement and the Frameworkagreement. Malihas long held a leadingrole in producinghigh quality cotton for the globalexport market due to favorableclimatic conditions and lessmechanical picking methods.While it doesstill trail heavily subsidized Greece in termsof export quantities,2OO3|2OO4 estimates and 200412005 forecasts show that Maliis closeto reachingthe spot of the 4thlargest cotton exporter in the world.(See Table 3)

Exports:1000 Metric 1999 20001 2001t 20021 20031 20041 2000 2oo1'n 2002 2003 2004 2005 Tons (Estimated) (Projected) (USDA:World Cotton Markets) United States 1470 1467 2395 2591 2996 2874 Uzbekistan 893 740 740 762 642 729 Australia 699 850 681 578 470 414 Greece 235 310 218 250 267 250 Mali 196 125 201 185 256 223 Table3 Source:USDA

Thus,using the 2OO3|20O4seasons as a benchmark,Mali's 256'000 metric tons(mt) account for 3.5 % of theglobal exports of 7'183'000Mt. In terms of cotton production,Mali currently is estimatedof havingapproximately 545'000 ha under production(average between 2003 - 2005).Furthermore, it holds one of the highest yieldsin SSAwith an averageof 450 kg/haof cottonproduced. Analyzed from an

Africanperspective, Mali is thelargest cotton producer, with 1.2 million bales producedin 2003/2004,which is closelyfollowed by BurkinaFaso and Egypt

(FAOSTATS).

Analyzingthe cottonmarket on a domesticscale, 2O04|2OOS figures show thatMali is likelyto holda greaterend stock than it didin thebeginning, as

teThe reasonfor the drop in 2OOO|2OO1,as explained later on, was a very'effective'farming strikein Malito gaingreater share in producerprices.

58 productionof 1.O7million 480 pound bales outstrips its exports, which total 1.025 million480 pound bales. Thus, while its beginning stock was 257'0OO 480 pound bales,its endstock is projectedto be 282'000480 pound bales. While this is indicativeof a weakeningdemand on a globalscale, it alsois importantto notethat domesticconsumption (use) is proportionallyoutperformed by exportsby a 1:51ratio

(20:10251'000 480 lb Bales).Thus overall, Mali has approximately 61'000 metric tonsof cottonleft at the endof the 2OO4|2OO5cycle, a growthof about8.5 % from thebeginning stock, which is considerablymore than the 1'000metric tons increase in the 200312004production year ("Cotton," USDA,2AA4\.

Theserecent data are part of the continuingcomplex story of thefast rise of cottonin theWest African nations under French colonial rule. Starting in 1960,cotton productionin theWest and Central African nations under the CFA franc zone did not amountto morethan 1 % of totalworld production (Tefft, 2003, p.3). Consequently, as Francewas increasingly becoming interested in establishingcotton as thebasis for its economicsurplus extraction in a postWWI environment, motivated by

Sarraut'spolicy of 'lamise en valeurdes colonies francaises', they introduced a systemusually referred to as'filiere'.As describedby Keeley,J. andScoones, 1., this vertically-styledorganization "entails a verytightly integrated and managed system coveringall aspectsof the lifeof cotton- fromprovision and choice of inputs,to guidancein cropmanagement, to supplyof credit,to purchaseand marketing of outputs,to processingand export" (2OO4, p.102).

Withthe introductionof newcotton hybrid varieties, output increased dramatically(see graph 1) in the 1970sand 1980s, and this focus on cotton productionas the 'key towards development'enjoyed a linear continuation even in a post-colonialera through the continued"work of a quasi-privatizedparastatal, the

59 CompagnieMalienne pour le Developpementdes Textiles(CMDT), that has monopolycontrol over the local market" (Moseley qtd. in Moseleyand Logan,2OO3, p.54).lt is importantto notehowever that compared to othercountries in theWest andCentralAfrican region, the creation of a statecotton companies occurred fairly late(Tetft, 2003, p.8). As a matterof fact,prior to the creationof the CMDT,Mali experienceda drastic increase in cottonyields, which grew between 1960 and 1974 at an "annualrate ol15/o, tripling average yields to 833kilograms per hectare. The areaunder cotton cultivation expanded at an annual5.5 % rateover the period reaching69'000 hectares in 1974"(ibid., p.12).

TheCMDT, as the otfspringfrom the cottonfiliere after independence in

1974,was partially owned by the Malianstate, 60 o/o,and 40 o/ow€ra held by the

CompagnieFrancaise pour le Developpementdes FibresTextiles (CFDT), of which

64 % is ownedby the Frenchgovernment, and constitutes one of the world'stop ten largestinternational cotton merchants (Keeley and Scoones, 2004, p.103).

Consequently,this highlyvertically-integrated cotton operation acts not only as a

'commercialcompany'in that it providescotton farmers with credits, seeds and technologyto producecotton which it thenresells on the internationalmarket, but it alsoholds a mandateas a "ruraldevelopment agency", as CMDThas taken the leadingrole in providingfor "social development in theMali-Sud region", which goes wellbeyond "the provision of healthcenters and literacy training, to the provisionof infrastructure,such as roads,and some commitment to environmentalmanagement"

(ibid.,p.103). lt is withinthis system of theholistic, all-encompassing parastatal, still largelycontrolled by itsformer colonial power, that the political clout of theCMDT needsto be understood.

Theincreasingly political importance of theCMDT however did not go unchecked.One of the mostimportant developments during the post-1974period underthe CMDT were the successive farmer protests and their increasing ability in mitigatinguntair and pressing for fairer production conditions, most importantly higherproduction prices paid to thefarmers. The first such widespread protest was triggeredin 1964when farmers protested to whatwas perceived to be "dishonest cottongrading and weighing practices" (Bingen et al.,qtd. in Tefft,2003, p.14).

Finallyhaving their demands met, they created so calledfarmer organizations, associationsvillageoises (AV), which were responsible in the "assemblyand weighingof seedcotton grading in villages"(Tefft, 2003, p.14').Furthermore, they overallachieved lower CMDT operating costs and higher credit recovery rates as the

AVsgained controlover localdevelopment, such as thecreation of infrastructures, e.g.schools, health centers, wells (ibid.). They literally sprouted across the cotton producingzone in Mali,starting with a singleAV in 1974to morethan 900 by 1987.

Presently,there are over 4'500 AVs in thecotton producing zone (ibid., p.14).

The secondlarge-scale political protest by cottonproducers took place in

1991, when the cotton farmers declared a cottonstrike as theCMDT was unwilling to meettheir "grievances related to specificcotton pricing and marketing practices" in theaftermath of theoverthrow of PresidentMoussa Traora (ibid., p.14). As Jim

Bingenhas argued, this "rural revolt symbolized a new era of 'democracyin the countryside',and brought forth a vitalnew political actor (the Union of Cottonand

FoodCrop Producers, Syndicat des producteurs de cotonde vivriers,SYCOV) in

61 Malianpolitics" (Bingen, democracy (have to findarticle again), p.1)This SYCOV, representinglocal cotton farmers, consequently in theend of 1991became a major newactor and has become a partyto all"relevant CMDT decision-making units"

(Bingenet al,qtd. in Tefft,p.15).

Underthis leadershipof the SYCOVin cooperationwith the CFDT,CMDT and the WorldBank/lMF, the farmersendured another major policy shift in 1994with the devaluationof the CFA francby 5Oo/o, surpassing the previouslyfixed exchange rateof 50:1.This devaluationwas largelypushed through in orderto "reducingthe heavydependence of the WestAfrica fanc zoneon imports,stimulating export productionand importsubstitution and shiftingconsumer demand towards more locallyproduced goods and services.The ultimategoalwas to stimulateself- sustaining,broad-based economic growth, which would reduce Mali's widespread povertyand food insecurity"(Dibley qtd. in Tetft, 2003, p.23).This issuewas even the more pressingas donors increasinglyplaced conditions on their financial assistance,as the cottonsector had acquireda 9 billionCFAF deficit by 1985/1986.

Thisscenario was repeatedagain in 1992,when due to the fall in worldprices and the previousovervaluation of the CFA franc,the CMDTneeded financial support fromthe "Malianand Frenchgovernments, the EuropeanUnion and WorldBank to covertheir losses"(Bocchino qtd. in Tefft, 2003, p.21-22).

Initially,after the devaluationin 1994and a parallelrise in worldcotton prices, the impacton Mali'scotton sector was felt "overnight",resulting in a nominalrise of

189 % in the CFA priceof fiber (Tefft,2003, p.23).However, even thoughthe CMDT saw a net raisein the salesprice of 463 CFA francper kilogram,under the producer pricefixing system,the farmersonly received30 CFAF per kg. lt was not untilthe

62 nextyear that the nominalbase producer price of seedcotton was raised by 65 % from85 to 140CFA franc, these higher levels "spurred large increases in the productionof seedcotton and in thequantity of coilonginned. Between 1994 and

1998,production grew annually by 21 o/o",pushing the francophone CFA countries' worldmarket share from 8.8 "/"in 1991192to 15% in 1997/98(ibid., p.23-24).

Contraryto earlierexpansions, however, this expansion largely was undertakenon the'backof nature',as theacreage of plantedcotton increased annuallyby 7.6 7" between1994 - 1998,resulting in an overallincrease of 45 % in totalarea cultivated. As CMDTdata shows, the average cotton farm planted 2.4 to seedcotton and 4.4 hectaresto cerealswith a totalarea of I hectares(CMDT qtd. in

Tefft,2003, p.241. lt hasconsequently been argued that the initial result of the devaluationhas been vast expanses in extensificationof cottonproduction, as "most farmersincreased acreage cultivated by reducingfallow periods and clearing new lands"(Tefft, 2003, p.24l.This extensification largely went hand in handwith a vast increasein theuse of animaltraction equipment, as reflectedin thefact that "manual or non-equippedfarms declined by 23 7o"from 1994 - 1998(CMDT qtd. in Tetft, p.24).This increase in the numbersof cottonproducers extended long past the 1993 devaluationinto the present, as by 1998,93 % of farmhousehold in theCMDT zone weregrowing cotton and by the 2000,amounted to over200'000, a 5O"/" increase since1993 (Teffi, 2003, p.25). Alongside four more cotton gins were constructed, raisingthe total to 17.

However,as pointedout by Moseley,this increase in productionhas greatly increasedthe pressurethat cotton has placed on the environment.As a matterof fact,the preference placed by the government and the CMDT on "expanding productionin newareas rather than seek sustainable alternatives in olderproduction

63 zones" has resultedin increasedsoilerosion, pesticide and nutrientrunoff (Moseley,

2004,p.55). Thus, farmers during the post-1993period have increasingly experienceddeclining yields in the old cottonbasin, and the blamehas solidlybeen placedby the WorldBank, the CMDTand othergovernmental officials on the poor farmers,and as representedin the internationaldiscourse of the "poverty-induced environmentaldegradationthesis" (ibid., p.55). However, as his researchhas indicated,the "relativelyrich, rather than the relativelypoor, are the proximatecause of environmentaldegradation in southernMali" (ibid., p.57). As a matterof fact,the poorermembers of ruralcommunities, seeking to gain profitsgenerated from the rise in cottonprofits, are seriouslylagging behind in theirricher counterparts, largely due to lackof capitalinvestments and agriculturalknowledge, in theirability "to practice resourceexploitation on the samescale" (ibid., p.57).

Anotherindicator of the increasingenvironmental unsustainability of cotton productionhas been the fact that previousadvantages, as indicatedby the signsof relativelylower crop loss rates of 20 to 35 % comparedto 60 % in other African nation,is slowlyeroding. As a matterof fact, growingresistance has often been namedon the main reasonsfor the decreasein seed cottonyields, as pesticide quantityused has doubled(Tefft, 2003, p.27).ln 1995,for example,"cotton bollworm resistanceto the relativelynon-toxic pyrethroids became problematic and was compoundedby additionaldamage from whiteflies" (Bingen qtd. in Moseleyand

Logan,2003). Consequently, at presentit is generallyperceived that Malianfarmers, underthe leadershipof the CMDT,have largely entered the'classic pesticide treadmill'response, as opposedto undertakinga moreorganic approach, such as formulatedunder the verysuccessful integrated pest management plans (lPMs). Becauseof thefact that CMDT has been an thelargest employer and providednumerous well-paid jobs, the CMDThas increasingly become the target of corruptionand patronage, as high-levelofficials skimmed off security funds for themselvesand their political allies personal protits. Consequently, Mali has recently beenshaken with corruption charges in 1999,as "threevice-presidents of the CMDT wereremoved for corruption", close links exist between the ruling party and senior officials,as wellas themore than 2000 officials of theCMDT have received substantiallyhigher benefits and wages than any other state employees (ibid., p.10a).This has led to drasticchanges to thecotton sub-sector as demandshave increasedfor restructuringand privatizing the CMDTand "reassigning [the role of the statelin thepublic and private sector and [...] remodeling its producer support system"(Zoundi, 2OO4). This reform has been adopted on 6rhof June2001, amendedin 2003by the governmentand is to be carriedout until2006.

Thesereform calls have essentially been further strengthened by the very strongcotton boycott in 2000/01season, when a largenumber of cottonfarmers refusedto planttheir annual cotton, "resulting in a 47 % tallin seedcotton production"and a subsequentloss of at least20 billionCFA francs in potential revenues(Tetft, 2003, p.35). The motivationfor the strikewas the factthat the farmers'AVswere severely financially strained when the CMDT decided to reneged on itsearlier agreement of 195CFAF/kg and paid farmers only 155 CFAF/kg (ibid., p.34).Furthermore, besides these price constraints, reports of the'disappearance'of

36 millionUS dollars that had been established at the CMDTdid nothelp its cause for institutionalsurvival either.

Realizingthat the cottonsector was "no longer serving as a dynamicmotor for economicdevelopment in ruralMali", these reforms call for a restructuringof the CMDT(ibid., p.39). This restructuring effort includes such measures as "refocusing

CMDTtowards public service missions; withdrawal from extension work; gradual withdrawalfrominput and equipment supply activities; continued withdrawal of

CMDTfrom transport activities; more rational use of humanresources" (Zoundi,

2004).Furthermore, these liberalization efforts of the cottonand oil seedssub-sector alsocallfor a "betterparticipation by producersin managingthe cotton sub-sector, whichincludes allowing them to buyinto CMDT capital and greater control by producersin providingservices that they need" (ibid.). Most importantly CMDT's refocustowards public services has already resulted in the reductionof its workforce by almost600 employees, as wellas extensionservices have "dropped from approx.

1000to a bare500, which means 1 agentfor 450-500farms, rather than 250 - 300 farms"(ibid., p.6).

9.6 MaizeSector in Mali

Consequently,while cotton in Malihas to someextent lost its dominant stancewithin the development discourse, maize production has received increasinglymore attention as a cropused for the internal market and neighboring countries'trade.20 Introduced in Maliin the 1970sby French-operatedresearch stationsin WestAtrica, maize has historically played a minorrole in Mali(MSU lnternationalDevelopment Working Papers, 1994, p.6f). However, as a reactionto

"chronicfood deficits during the 1970sand early 1980s, government policy has consistentlystressed self-sufficiency in cereals as a policyobjective" (ibid., p.18).

Consequently,using the synergiesthat exist with the alreadyexisting linkage and a Exportligures lor maizeare negligibleas maizeis largelyconsumed either fresh or marketedtowards the urban population.

66 integratedapproach towards technological delivery of the CMDT,maize farming was launchedas a cropalternative to reducestarvation. As the CMDTdecided to promotemore intensive maize production, applying improved maize varieties and increasedusage of fertilizer,maize production grew dramatically. As seenin the followingGraph 7, improvedmaize was adopted very rapidly over the periodfrom

1975- 1990.As establishedby MSUresearchers, this increase in theadoption of maizewas highlycorrelated2l with increased mechanization of expandedcotton production.As cottonfarmers invested their profits into mechanization equipment, theyincreasingly were able to "plowand weed frequently in a timelymanner" (ibid., p.2O').Furthermore,they also were able to applyleft-over fertilizer from the previous cottonyear to maizeproduction, as maize"is the mostfertilizer-responsive rained cereal"(ibid., p.20).

In addition,foreign donors were increasingly eager to supportmaize productionas an alternativeto cottonand rice. For example, a francophone developmentproject, Proiect Marg established an "operationalbudget for a seed multiplicationfarm, a large-scaleprogram of maizedemonstrations, a program of first-equipmentloans for non-mechanizedfarmers, and the constructionof maize storagesilos at CMDTregionaldepots" (ibid., p.21). However, two main setbacks occurred,when in 1983a maizestreak virus outbreak destroyed hundreds of hectaresof maizeand subsequently in 1986when the CMDTwas no longerable to financiallysustain its integratedapproach towards production of maize,as it hadto removeguaranteed prices for maize(ibid., p.20-22). Being exposed to thesemarket

21Their findingsare that "bivariatecorrelations between the area of improvedmaize and the numberof draftanimals and equipmentin serviceover the period1975 - 1909gives the followingresults (all significant at the 0.01level): number of draftoxen 0.98; number of plows 0.99 ; numberof weeders0.98; number of seeders0.98" (p.20)

67 pressures,farmers adapted rather quickly by reducingchemical fertilizer input, changingseed varieties and increasingly applying traditional maize-millet intercroppingmethods (ibid., p.22).

Thesefindings reaching up to 1990are greatly supported by James Tefft's workpublished in late2003. As he pointsout, "contrary to a popularperception that cashcrops have a negativeeffect on foodcrop production and household food security,cotton production has provento be a boomto coarsegain production in

Mali"(2004, p.17). As a matterof fact,he found that average annual gross cereal productionper capita between 1989/90 - 1997198was in generalalmost twice as highin CMDTproduction zones as opposedto theoverall region.22 As regression analysisby Dionein 1989has shown , "a 107o increase in percapita cotton area was associatedwith a '12oh to 13 7" increasein netcoarse grain availability per capita"

(Dioneqtd. in Teftt,2004, p.17). Consequently, the earlier documented growth in cottonproduction has brought with itself a3.5"/" annual increase in maizeproduction between1960 and 1985. Furthermore the total area that was planted in theCMDT zonerose from 6000 hectares to 51000hectares from 1960 to 1985(Tefft, 2004, p.18).With the resent higher farm-level prices, cereal production, analogous to cotton,has increased drastically in areaas extensificationhas taken place as a responseto devaluation.Figures show that the total average cereal area planted in ha grewfrom 3.4 to 4.4 between1993/94 and 1997/98,accounting for a29 "/" changeoverall (ibid., p.24). This process was further aided by increased mechanization,as seenin theearlier high correlations, leading in increased,while

2 To use an example,in the Koulikoro/Fanaregion, production per capita(kg per person) averagedat225, as opposedto the CMDT zone with 407 kg per person. stillvolatile,maize production starting dramatically in the 1980s.(See Graph 7)

Maize in Mali FAOSTAT

700000

600000

.9 500000

t Ito g 400000 n.atH"*-l = E l- -Prqqqqre!] F rooooo

6 ql

;2ooooo E

100000

*d^9@B&Bd9e^f 'f,dd ^f"^9d^pfBtrvd 949"|9d'9tr^pa pf +*+s Year19

Furthermore,the datagreatly supports Tefft's earlier claim of increased extensiveproduction after devaluation in 1994,as productionand area under productionmeasured in ha increasedfrom 256952 hectares in 1993prior to devaluationto 619896hectares in 1999,which is an increaseof morelhan 24O "/".

(SeeGraph 8)

Overall,while not an exportc;lrop per se, maizein Malihas become increasinglyimportant, especially since the "loose[ning] in the mid-1980s [by the

CMDT]toallow farmers to freelymanage the allocation [of] agricultural inputs across differentfarm plots [...] Maizethen became a maiorcash crop" (Hussein, 2004).

Consequently,as maizehas reached increasing importance, the described interdependencebetween maize and cotton production is clearlya keyfactor that needsto betaken into account when evaluating the potential impact of theWTO agreementsand the cotton trade dispute settlement. (See Graph 9).

Growth in Maize Production I FAO STAT

s 150 o

I €t o i roo E E i-Growth in ProductionI t 9so I IE t <0

Maize and Seed Cotton Production in tlali: FAO STAT

F=seed c"ttml l+Maize l

.e"^949&969ed'ddp94d"p*^gf +trS6^98e*^etr^9tr*4d""-f,"e 9.7 Maize and Cotton Sectors in South Africa

Historically,European settlers and their colonial regimes have forcefully supportedthe development of cornin orderto meetthe urban demand for export productsand for exportuse. ln manycolonies, as a matterof fact,corn cultivation wasthe only "alternative if [the settlers] were to remainin theAfrican colonies at all"

(Warman,2003, p.72).lt is withinthis context that South Africa, under the modelof

Apartheid,rose to becomethe "leading producer of cornin Africa[...] accounting for abouta thirdof totalproduction" (ibid., p.87). Consequently, during the period of the

GreenRevolution, only Zimbabwe and South Africa were essential exporters of corn in theSub-Saharan setting.

Placedwithin the currentcontext, South Africa presents an interestingcase, as it is clearlymore developed than Mali, yet still 'underdeveloped'when interpreted froma US perspective.Consequently, South Africa has often been classified as a developingnation with great amounts of potentialin Africasince the ending of

Apartheidrule in 1994.In terms of agriculturalproduction, South Africa acts in two interestingalmost as a mirrorimage to Mali'sagriculturalsector. First, on a macro- scale,while the agricultural sector as opposedto Maliand similar to theUS, only accountsfor approximately 14 "h of itsGDP and 10 % of itsexport goods, it still providesemployment and a backboneof people'slivelihoods for morethan 7 million people.As statedin the "StrategicPlan for SouthAfrican Agriculture", the approximately50'000 large-scale commercialfarmers in South Africa, which are predominantlywhite, "employ about 1 millionworkers, which is 11% of totalformal sectoremployment in thecountry''(NDA, 2001). These employees then provide livelihoodsand housing to morethan 6 millionfamily members. Furthermore, with the riseof 24O'OOOsmall-scale farmers, an additionalone million family members, and

500000temporalworkers also need to be includedinto the calculations (ibid.).

Overall,taking into account the "increasingly popular and economically significant agro-tourismand gameJarming activities [...] about 40 o/oof thecountry's total populationare therefore dependent mainly on agricultureand related industries"

(ibid.).

However,it is importantto notethat while the importance of farmingis still relevant,a mergingof tarmsand increased concentration of farmlandhas occurred similarto theUnited States. According to themost recent2002 South African

Censusof Agriculture,the numberof activecommercial tarm units decreased by

12162compared to the 1993census to 45818active commercialfarmers (Statistics

SA,2004, p.1). Furthermore, the number of employeesin {ormalagriculture also decreasedby almost14 o/o to belowa millionwith 940'815 employees, of which

WesternCape employed the largest number of paidemployees (ibid.).

Secondly,South Africa stands out from Mali, as maize,as opposedto cotton is its largestexport crop, amounting to 749'870metric tons being exported in 2O02, witha totafvalue of morethan 135 million US$ (FAOSTATS). Using 2O01-2002 data,

SouthAfrica exported 47 millionbushels of maize,which accounts tor 2"h of global maizeexports, a smallfraction when compared to the 1.8 billionbushels exported in theUS. f n termsof overallcorn production of 358million bushels in 2OO1l2OO2,this exportsum accounts for a mere13 "/"of totalproduction (USDA (2), 2A04\. Au contraireto the situationin Mali,cotton on the otherhand is notan exportcrop, as the averageexport for cottonlint production between 1994/95 to 200312004amounts to only1850 metric tons total, with no exportsoccurring and projected from 2OO1l02 titl2004/05(CottonSA.org). However, while maize production has historically dominatedthe agricultural sector, cotton production is notnegligible in certain regions.Cotton presently accounts for approximately1 o/o of totalSouth African agricultu ral production, "generating approximately US$50 million ann ually" (Kock,

2000,as quotedin Shankarand Thirtle, p. 3). Furthermore,while 1530 large commercialfarmersin the Limpopo Province, the Free State and KwaZulu-Natal produceover 90 % of the output,smallholder farming is stillsignificant in certain regions.For example, about 3000 Zulu smallholders in the MakhathiniFlats,

KwaZulu-Natal,and 500 in Tonga,Mpumalanga, produce an aggregated98 % of smallholdercotton grown in SouthAfrica (Hofs and Kirsten, 2002, as quotedin

Shankarand Thirtle, p.4).

As the government,with the institutionof the GMOAct of 1997has adopted a policyunique to the wholeSSA, which is in favorof the adaptationof genetically modifiedagriculture, both GM maizeand cotton23 have been introduced in South

Africasince then. Presently, more than 600 different biotechnology projects are believedto be in existence,with more than 50 companies2o,Monsanto having its

Africaheadquarters in SouthAfrica, involved (Ledermann, 2003). As a matterof fact, as stressedby the government,GM technology plays an integralpart as it "provides us witha wayof meetingthe growingdemand of foodwithout placing even greater pressureon ourscarce resources. lt allowsus to growbetter-quality crops with a Bt cotton is also plannedfor introductionin Mali, as a recentnews reportby GRAIN has discussed.As a matterof tact, researcherswith the Institutd'Economie Rurale in Mali are currentlyin the processof finalizinga five-yearplan with the USAID,Monsanto, Syngenta and Dow Agrosciencesto developand commercializeGM cotton. 24lt is importantto note that while many of these companiesprovide research, competition betweenthem has reportedlyincreased. As an example,while a privateinput supply company,VUNISA, was in chargeof supplyingsmallholders in MakhathiniFlats with Bt cottonby Monsanto,their monopolystatus has been underminedmost recently.As a matter of tact, while VUN|SA"buys cotton trom the farmersat pricesfixed by CottonSouth Africa,[it] now has to competewith Danish-ownedNSK, which has openeda high-capacitycotton gin" (Shankarand Thirtle,p.4).

74 higheryields while at thesame time sustaining and protecting the environment"

(Dept.of AgricultureSA, as quotedin Ledermann,2003). Presently, approximately alreadybetween 10 and15 o/o ol maizecrop planted is geneticallymanipulated in orderto protectit tromthe 'stalkborer' (Reynolds 2002, as quotedin Ledermann,

2003).Furthermore, Bf-cotton production has been introduced in 1999,showing

'strong'results in the MakhathiniFlats area of KwaZulu-Natal,as 95 7" of small-scale farmershave been estimated to be growingGM cottonby 20O112002in that specific regionwith "augmentling] their gross margin by 11o/" in thefirst season , and 77 "h in thesecond season in comparisonto farmersgrowing non-Bf cotton" (Nuffield Council on Bioethics,2003, p.23, as quotedin Ledermann,2003).

Whilethese results give hope for the application of Btcotton as a toolfor povertyreduction, Aaron de Grassihas pointed out that improved cotton technology seemsunfit to reducepoverty, as a hostof otherfactors are largelycontributing towardsit. Just to namea few,he identifiesthe unequaldistribution of power in termsof negotiatingaccess to water,"top-down planning favoring wealthier farmers, elitisttourism, authoritarian nature conservation, land inequality compounded by slow landreform, declining pensions and off-farm wages, overproduction and HIV/AlDS"

(deGrassi, 2OO3, p.38 as quotedin Ledermann,2003). From another point of view, as a recentinvestigation by Shankarand Thirtle into the situation in KwaZulu-Natal argue,the main contribution of theintroduction of Bttechnology is to enable"the smallholdersto circumvent credit and labor constraints associated with pesticide application"(Shankar and Thirtle, 2004, p.1). Consequently they show that "non-BT smallholdersin South Africa under-use pesticide and that the main contribution of the newtechnology is to enablethem to realizethe lostproductivity resulting from under- use"(ibid.).

75 Nevertheless,two recentreports of developmentprojects heavily focus on cottonas a toolto lift small-scale,black farmers out of poverty.As reportedin July

2004,a R150million investment project in Easterncape is hopedto providefor a muchneeded boost to "SouthAfrica's struggling cotton sector" (SouthAfrica.info,

"R150m...:", 2OO4). Being one of thepoorest province in SouthAfrica, it is hopedthat thisinvestment, undertaken by the EastLondon-based textile manufacturer Da

GamaTextiles,will"create some 6000 seasonaljobs and empower localblack farmers"(ibid). Overall, the project forms an integralpart of a widespreadcotton industry'sdevelopment strategy "which looks to drawemerging black farmers into cottongrowing", as almost1500 ha of cottonwill be planted,which should produce

36000bales within the nextthree years (ibid.). ln addition,the LabourJob Creation

Trust,an agglomerateof threeSouth African trade unions, has created the Moutse

CottonUmbrella in Denilton,Mpumalanga. This project is intendedto providemoney to buyfarming equipment in orderfor 130women farmers to enterthe cotton businesses(SouthAf rica.info, "Cotton. ..", 2OO4).

Interms of research,the University of Missourihas been instrumental, in a similarfashion to MichiganState University in Mali,in providingits expertise in creatinga modelingsystem to analyzethe complex economic interrelationships of foodand agriculture industry to theUniversity of Pretoria(FAPRI, p.1). With the fall of apartheid,legislation "eliminated a large number of parastatalmarketing boards on productsranging from sugar to maize"(ibid., p.4). At present,the main control is held by cooperativesand producer associations, "putting South Africa with countries like

NewZealand and Australia" in termsof theirelimination of "nearlyall direct subsides"

(ibid.,p.4). Subsequently, it is arguedthat with the increasing exposure of South

Africanagriculture to thevolatile fluctuations in worldmarket prices, their FAPRI

76 modelprovides them with the necessaryforecasting tool to providefor the strengtheningof the primary sector, but also the increasing integration of formerly marginalizedsmall- and medium-scale black farmers within the competitive global market(ibid., p.4ff). Basing their projections on macroeconomic variables of the exchangerate, population, income per capita and inflation, they have created the followingbaseline projections for maizeproduction in SouthAfrica (million tons). (see

Graph10)

19051894 1g{5 1996l9$7 r€08 19992@ r00r 20022003 2004 ?00$ m6 200720C8 200S 20t0 20112012 ?013 Ysrr.

Mostimportantly, this graph shows an increasein productionand a consequentincrease in exports,as domesticconsumption is reduced given the projectedpopulation decrease in SouthAfrica from 45.1 millionsto 42.9million

between2O04 and 2010.25This decreasein consumptionis also suppodedby

increasinginflation versus the dollar,which will cause higher prices and resultingin

moremaize being exported. Overallthough, this graph needs to be interpretedwith

care,as it does not predictthe future.26.

Overall,while cotton holds a potentialto be evaluatedfor farmersas an

alternatesource of income,the importanceof maizeas the dominantstaple food in

SouthAfrica is well-established.Classified as a "wagegood", it takesup as muchas

20 o/ool a low-incomeconsumer's income, and any changesin supplyand

subsequentlower prices could have a greateffect on theirlivelihoods and food

security(Traub and Jayne, 2004,p. 1). However,presently, the earliermentioned

significantmarket reforms and liberalizationof the agriculturalsector have not yet led

to lower prices"as maize marketingand processingcosts typicallyaccount for 50 to

70"/"ol the totalcost of maizemealpaid by south Africaconsumers" (ibid., p.1).

Consequently,while freer global marketsmight strengthen South Africa's stance as a

corn exporter,the domesticconsumer and producermight profit little.As a matterof

fact, as lbng as South Africa'smillers and processingfirms controlsuch a substantial

part of the commoditychain both in terms of percentageof profitsand production,

they hofd a de facto oligopolyon the maize consumerand producer.While food

marketreforms in neighboringcountries have generally "reduced the marketingcost

5 For more projectioninformation and detailedinterpretation of the modelplease refer to the FinalReport for the Universityof MissouriSouth AfricanEducation Program, FAPRI. 6 This pointon the validityof the graph is especiallyimportant. As stressedby FApRl, it is importantto notethat "in reality,the assumptionsunderlying the baselineare certainto be violated,and so actualmarket outcomes will deviatefrom the projectionspresented in the supply-and-usetables. Therefore, the usefulnessof the baselineprojections ls not to predict the futurebut ratherto analyzethe impactof a rangeof "what if" questionson the baseline projections"(FAPRl, p.1 0).

78 wedgebetween producer and consumer prices, there are a priorireasonswhy this outcomemight not be expectedin SouthAfrica" (ibid., p.4). Nurtured over several decadesof colonialism,the maizeindustry holds considerate political cloud and marketcontrol, as "threeof the recentlyprivatized grain cooperatives, Sentraalwes

(SWK),OTK , andNWK own72"/o of allsilos in thecountry" (ibid., p.4).

Furthermore,two food-retailers, Pick 'n Payand Shoprite Checkers hold a de facto oligopolyin theretail sector, as theycontrol 80 % of allfoodretail sales (ibid., p.a).

Furthermore,certain companies are vertically integrated, meaning that they control bothsilos, millings, processing and retailing.

Inconclusion, it becomes clear that in orderto evaluatethe impact of the

WTObreakthrough, a potential increase of the worldprice of cottonand maize and its impacton SouthAfrican farmers, one needsto adopta system'sapproach that takesinto account the whole spectrum of political,economic, social and environmentalconcerns on the local.national and internationallevel in order to undertakea usefulassessment of its potentialimpact. 10.Assessing the lmpacts

Havingstudied the contentsof the WTO Frameworkagreement and the reactionsand presentand pasttrends within the maizeand cottonindustries of the

UnitedStates, Mali and South Africa, this section is dedicatedtowards placing these contentswithin an informedcontext in orderto undertakean educatedanalysis of possibleshort- and longtermimpacts of the agreementon small-and large-scale farmerswithin these economies. This analysis, while by no meansauthoritative, will be drawinglargely upon a synthesisof varioussources ranging from the economic to the sociopolitical.Consequently, while exploring several avenues, the ultimategoal of thischapter will be to providenot definite answers but to raiseimportant questions that will need to be taken into accountwhen tacklingthe vagariesof the WTO outcomes.

lmpact #1: US Reductionof Subsidiesand its lmpacts on US

Farmers

Assessingthe impactof the currentFramework agreement, one first needsto explorethe distributionof presentsubsidies. While Mali is exemptas a LCDcountry from any reductionand South Africa presentlydoes not exceedTotal AMS measures,the greatestimpact will be foundwithin the UnitedStates. As illustrated earlierin Graph4, bothcorn and cotton subsidies distributions are marked by a very unevendistribution as exemplitiedby its highgini coefficient.lt becomesapparent that in bothcases of maizeand cotton, 2Oo/o of the largesttarms receive more than

8O"/" of the subsidies.Consequently, any subsequent subsidies reduction within the

US settingwould affect more vastly larger farms than small-scale farmers. As has beenshown earlier, 8O "/" of the corn farmersreceived less than $50 per month.

Thus,the reductionwould certainly not have that great of an effecton approximately

1 millionfarmers.

Thisfinding concerning smaller farmers however stands in starkcontrast to thatof largerfarmers, whose operations are dependentupon being able to produce domesticallyand exportcompetitively cotton and maizein the world market.Of course,this first majorimpact is largelycontingent upon the inabilityto undertake tacticsof legaltechnicalities, such as boxshifting,as well as the longertime horizons that havebeen drawn in termsof the agreements'implementation, starting around theyear 2012, and the upcomingmodalities to be negotiatedby the endof 2005and the upcomingHong Kong summit.However, granted the limitations,the overall tendencyspeaks clearly in favorof reducingsubsidies in the longrun. This trend is supportedby the recentannouncement by PresidentBush to tacklefarming as the majorsector in whichbudgetary cuts will be undertaken,through the implementation of fiscallimits on subsidies'recipients, potentially decreasing the currenttrend of increasingagricultural land values.27 Furthermore, it is alsoimportant to differentiate betweencotton and cornin termsof its currentlegal contentions. As of this writing, cottonsubsidies have undergone a vastlygreater scrutiny, as they havebeen the subjectsof internationalcontention in the WTO.Consequently, while the possibility existsthat corn subsidieswill receiveless scrutinyin the near future,cotton subsidieswill haveto be reducedmore quickly in orderto complywith the WTO ruling.Thus such programs, for examplethe Step2 exportsubsidies, will have to be eliminatedin the shorter,medium-term or compensatorylegal measures will be in order.

Grantedthe reductionof bothdomestic, as wellas exportsubsidies, cotton

andmaize prices no longerwill be ableto be sustainedat an artificiallyhigher level.

Consequently,prices for the domesticfarmer in the US will mostlikely drop across the boardand overallsupplfs, due to reducedprofit margins or evenlack thereof, wouldbe greatlyreduced. Taking the well-documentedexample of cottonand using the variouseconomical models applied, this estimated drop in US cottonproduction variesfrom1.5 % (ODl,2OO4) to 29.1% (Sumner,2003).Taking the averageof all studiescited by the FAO Commodityand Trade PolicyResearch Working Paper

(2004),the averagesupply would be reducedby 11.59 %. Expressedin prices,the

27As WilliamMoseley has pointed out, this recent domestic pressure on theagricultural sectorcould be interpretedindirectly as diminishingthe earlier gained victory of thirdworld countriesat theWTO in relationshipwith their bargaining power. a lt is importantto notehowever that certain farm activities within the USis delinkedfrom the capitalistlogic of profitmaking.As ArturoWarman points out, "there are cases in whichlarge corporationsenter into agriculture specifically intending to losemoney. This would be poor businessstrategy from any point of viewother than the intricatelabyrinth of tax breaks. RonaldReagan, before he becamepresident, boasted of notpaying taxes on incomethanks to losseson hisCalifornia ranch" (Warman, p.195). As a wordof caution,I need to pointout howeverthat I am unawareof anycase studies which would specifically demonstrate this tax- delinkingfrom capitalist logic in cottonand maize farming enterprises.

82 estimated price increases range from 2.8 "/" (Tokarick,2003) to 29.7 % (ICAC,

2OO2),with an averageof approximately16 "/"2e(FAO, 2OO4l.

While the models'figures are different,it does become prevalentthat a subsidyreduction would have an effecton Americanfarmers. Consequently, with the loweredprices, there would be a great push towardsthese farmersto improvetheir productionprocesses if they would like to sustaintheir operations.Based upon earlierdynamics of farmingoperations, they wouldeither have to increasethe quality of the cotton or corn that is producedin order to reap a greaterprice, i.e. organic cottonor corn,or the outputwould haveto be steppedup, such that the quantityand efficiency would be greater, while potentiallysacrificing the potential gains associatedwith the productionof highergrade cotton(A) or producingmaize for the organicmarket. While this interpretationmight lead to the increasingconcentration of farmingoperations within larger, more efficientunits, the pictureseems to be less common-sensical,as pointedout by Willis L. Petersonin his study "Are largefarms more efficient?".Undertaking a study of the Corn Belt revealed that "there is evidenceof diseconomies[of scale]as farm size increases"(Peterson, 1997, p.2tt\.

Consequently,with a reductionof subsidies,the US corn and cottonfarming size and populationis most likely to be reduced,accelerating the current decline, without necessarilyeffecting a reductionin actualfarming acreage.

As a result,the culturaland environmentallandscape of farmingin the US is most likely to change accordinglyas subsidieswill be reduced and total output declines. With a reduction in farming population,the public as a whole will

€ Thesedisparities between the variousstudies can be bestexplained by thedifferent key assumptionsimplicitly situated within each model. Those key assumptions are estimates on demandand supply elasticity, year upon which the simulationis basedupon, and whether or notmarket segmentation was assumed and cotton stocks were included. For more detailed analysis,refer to the earliermentioned FAO Trade Backgrounder No.1 on cotton. increasinglybecome more disconnected from the agriculturaldiscourse of the myth of the 'smallscale tarmer' as fewerfarming operations will remain.However, this effectis mitigatedby the unrelentingfact thatthe US farmersconstitute one of the mostpowerful historical lobbying groups that are willingto battleany reductionin production-effectingsubsidies. NCC (NationalCotton Council) Chairman, Woods

Eastland,warned in a reactionto the recentproposal of budgetcuts withinthe agriculturalsector, that "any reduction or weakeningof the safetynet providedby the

2OO2larm law will negativelyimpact the securityof all Americans",framing it as

"equivalentto unilateraldisarmament" within the internationalWTO context(NCC,

2005).Furthermore, the AmericanFarm Bureau (AFBF) and a diversegroup of organizations,argued that budgetcuts in agriculture"will put at riskthe promising environmentalbenefits of the bill,and the nutritionalhealth of someof the poorest populationsin our country"(AFBF, 2005). Consequently, it becomes apparent that greaterpressure exists to remedyany reductionor limitson subsidieswith other compensatorymeasures3o. Returning to the 'colored'boxes scheme, one approach for which great supportfor the farmersexists, would be to strengthenpresent conservationprograms, so calledConservation Reserve Program (CRP) and

ConservationSecurity Program (CSP), which are GreenBox subsidiesand have beenwell-established on a globalscale without much controversy in suchcountries as Switzerlandunder the notionof 'multi-functionality.'Thisconcept of strengthening the greenbox throughboxshifting away from the amberbox wouldallow for greener, moresustainable production, as farmersare receivingmoney to eithertake land out of cultivation(CRP) and to farmsustainable (CSP). Furthermore, as suchsupport is s Onesuggested measure is greatersupport for farmersand ranchers purchasing land, as wellas the removalofthe death taxes. etc. currentlycapped at a maximumamount, this wouldgreatly favor the smallerfarms andconsequently correspond with the generalpublic's perception of 77"/"support for subsidiesto smallfarms, yet only 31 "h supportfor subsidizinglarge farming businesses(P I PA/Knowledge Networks, 200 4, p.22tt).

Consequently,the big winnerin the UnitedStates of subsidiesreduction wouldultimately appear to be the public,as formerlybudgeted tax moneywill be freed up. This view seemsto be strengthenedby the PIPAsurvey, as the public becomesincreasingly more aware, through the works of suchNGOs as EWG,of the mythof agriculturalsubsidies. This debatewill especiallybecome more heated as discussionsand publicitywill increaseduring the Presidentialbudget proposal negotiations.Ultimately, however, it becomesevident that any savedbudgetary moneywill mostlikely be lost withinthe budgetarybattles and otherpork created withinit.

lmpact#2: Spreadof GlobalAgribusinesses This potentialreduction in US productionwill not only hit hardthe farmers who were put out of business,but as wellglobal agribusinesses who earntheir greatestshare of profitswithin the US farmingindustry. (see Graph 11: BiotechCrop

Countriesand Mega-Countries)In the year 2004,the US, one of 14 designated

Biotech Mega-Countries,contributed to more than 58 % of total biotechcrop production.Overall, the globalproduction value of biotechcrops amounted to more thanestimated US$ 4.7 billion,which accounted for approximately16% of the US$

30 billionglobal commercial seed market(ISAAA, 2004). These figuresare especiallyessential when witnessing the rapidgrowth of GM cornand cotton planting in the UnitedStates. In 2001,the percentageof geneticallyengineered corn amountedto 26 o/"of all corn,and 69 o/"of allupland cotton. This number increased

Bintsch Crop Countriesand Mega-Cr:untries*,2fr04

'I (blanbia ] {105 Miilks llar l ilry *i4 | hir:techm*gn-cnuntri€s growing 50.0O0hectares, or $lo{e, of biotech crop. sftrlq.e:{-:liv$ rnmqs. :1fi}4 to 2004 by the numberof US GM corn plantedincreasing lo 45 o/",and 81.1 million acres. Cotton establisheda percentage increaseas well, as its total GM cotton acreageincreased from 15.5 million in 2001,which amounted to a staggering69 % to 13.5 million,a decreasein termsof acreageto 13.9 millionin 2004,but a percentageincrease to 76 "h (PEWAG,2004 ; see Table4: MaiorUS GM Crops).ln termsof profits,as reportedin Monsanto's2004 Annual Report, 47 o/oof its seeds and genomicsgross profit comes from corn seeds and traits.Taking into account that NorthAmerica accounts 59 % of salesby geographicregion, it becomes apparentthat morethan a quarterof its profitsfrom seedsand genomicsare achievedwith in the US(Monsanto,2OO4).

Granteda possibledecrease in cornand cotton production within the US and a resultingreduction in profitswould consequently have an immenseimpact on such largecompanies as Monsanto.lt is for this reasonthat we needto take a broader viewof the issueby stepping'outside' the agriculturalsetting and examiningthe

'wholepackage' of the Doha DevelopmentRound. As WTO GeneralDirector

Supachihimself recently stated in an addressto Africanand NordicMinisters, "[...] progressin agriculturealone is not sufficient.We needthe otherareas of the negotiationsto alsomake progress. The networkof linkagesbetween different areas and issuesis well known.We can certainlynot wait for resultsin agriculturebefore makingfurther progress in NAMA[Non-Agricultural Market Access], Services, Rules and all the otherareas" (WTO News, 2005). Taking this holisticview, it becomes apparentwhy Monsanto,which holds significant leverage within the structuralbody of the WTO,is not opposedto the currentproceedings; while agricultural markets withinthe US mightdry up, severalnew springsof agriculturalpossibilities will be openedby freeingup the agriculturaltrading landscape. As notedearlier, several

Africancountries are currentlycontemplating integrating GM cropswithin their farmingoperations. The strengtheningof the Singaporeissues and TRIPS, etc., not

87 only facilitatethat process,but also are aidedby an increasein the free movementof FrfiA",$ftU.S {iM Cft{}PS

ff,fS0dtffitbl

7*J** fsfiqhl

$$,,*es[s*{61 !**'il [?lqb] l$,$** {}ne} r rs*I {?r4hl goods,services and capitalacross the globe.Consequently, the reductionin subsidieswithin a US contextcould likely result in an increasingproliferation of biotech,as wellas agro-chemicaland other agricultural services abroad. Thus, the questionraised by Kirstenand Sartoriusin their intriguingarticle "Linking agribusinessand small-scale farmers in developingcountries: is therea newrole for contractfarming?" needs to be keptin mindwhile evaluating the movementstowards

"agriculturalindustrialization" in developing countries (Kirsten and Sartorius,2002, p.1ff).

lmpact#3: Genetically-modifiedIntensification and Dependency

Oneof thenations that presents itself as an obviouschoice for expansion is

SouthAfrica. Having adopted a "promotionalapproach" towards GM cropsthrough its earliermentioned GM act,estimates were that 95 o/oof its cottonfarmers were usingMonsanto's Bt-cotton by 200112002(Ledermann, 2003). Occupying the largest shareof development'space'in Sub-Saharan Africa, South Africa has positioned itselfat the cuttingedge of the biotechnologicalrevolution through the creationof a networkof researchcenters within the privatesector and universities. Consequently, 'state it is markedby a strongprivate, public cooperation as wellas of the art' intellectualproperty rights (ibid.). Thus, the groundwork for an increasein investmentsinto the modernizationof agriculturehave been established, especially in the,from a GM perspective,lesser-developed corn market.

Giventhat the potentialfor furtherintensificationsl exists, the thesisneeds to be evaluatedwhether or not the SouthAfrican farmers will actuallybenefit from the reductionof subsidiesand the Frameworkagreement. As establishedearlier, the cotton marketpresently is not shapedfor the export market,as all cotton has been usedwithin a domesticcontext. Nevertheless it presentsitself as a very important sourceof incomefor severalthousandsof small-scalefarmers who dependon the cottonharvest for theirfood security. Consequently, a smallincrease in the prices receivedwould certainly strengthen their livelihoods, especially if implementedwith 'hungry conjunctpolicies of reducingthe seasons'throughthe buildingof storage silos,encouraging a returnto traditionalagricultural methods, such as increasingthe diversityof plantingcycles, etc. Overall, as pointedout by Todd Mossand Alicia

Bannon,the possibilitycertainly exists, as foundin two casestudies, that a 10 % of priceincrease could lead to a3O%"increase in food security(Moss and Bannon,

2oo4).

However,taking into accountthe earlierdiscussed account of South Africa's agriculturalsector being marked by a liberal,yet highlyintegrated verticaloligopoly, one could expectthat only a small trickledown effectmight be likelyto occur.32As articulatedwithin the recent"The Stateof AgriculturalCommodity Markets" report by

31The gains from the applicationof Bt-cottonhowever need to be more closelyevaluated, not 'gross-margins', onlyin economicterms, using the languageof but alsofrom the perspective of ecologicalsustainability. From anotherperspective, however, it is clearthat the potential for intensificationand expansionof productiondoes exist,as afterfalling production for severalyears, "producers responded to a sharp increasein the real producerprices of white and yellowmaize and have increasedtheir harvestarea" for the last two productionseasons (NDA,2003, p.145). ln addition,the millingindustry does still hold potential, as it currentlyis runningat around80 % of its availablecapacity. 32This is mainlytrue for the corn market.

89 the FAO,"at the internationallevel, a few verticallyintegrated companies have gainedincreasing control over agricultural trade" (FAO (2), 2004, p.31). Furthermore, asobserved with the prominence of lessthan a handfulof retailersin theSouth

Africanmarket, "supermarkets'domination of the marketgives them significant leverageover production, distribution and trade, including through direct involvement withdeveloping country suppliers' (ibid., p.31). This effect of concentrationis especiallypronounced within the maize sector and will likely affect simultaneously large-and small-scale farmers.33

Furthermore,these farmers clearly run the danger of increasingtheir dependencyby the application of GMseeds as the vertical integration of the commoditychain would be extendedvertically downwards to theseed. As Mariam

Mayet,the director of theanti-GM Centre for Biosafetyin SouthAfrica has argued,

"multi-nationalcompanies [most prominently Dow Agrosciences and Monsanto] [are] seekingnurseries in thesouth hemisphere for the production of GMseeds for export to the UnitedStates" (CapeTimes, 2005). Filing an objectionlast year with the

Departmentof Agriculture,it has successfully lobbied the government, as of early thisyear, to "turndown an applicationby multi-nationalDow Agrosciences to testits geneticallymodified (GM) maize in SouthAfrica" (ibid.). One of themain reasons for objectionby thegovernment was the unknown potential impact of pesticide-resistant

GMmaize on non-targetspecies. Furthermore, Dow explicitly stated in their applicationthat the reason for their filed trials was "to gather information to substantiateEuropean Union registrations" (ibid.). Consequently, while the dependencyin thelesser important cotton sector on GMproduction has already well s Small scalefarmers however might be enjoyinga considerabledisadvantage as they are less able than largerfarmers to createan alliancethat could constitutea challengeto the strongmaize oligopoly.

90 progressed,GM maizehas not yet fullyestablished itself within the SouthAfrican market.

Furthermore,large-scale maize farmers in SouthAfrica have become increasinglydependent on largeloans both from the governmentalLand Bank, as well as commercialbanks. As newsof the currentharvest estimates trickle in, 'belly-up'as severalfarmersare threatenedgoing they are forcedto defaulton loans due to an extremelylow and volatilemaize price. Holding more than 3.2 milliontons of maizestocks and havingexpanded production areas from previousyears, farmers are facedwith current prices which are well belowthe R900that wouldbe needin orderto "covertheir input costs "and we are not eventalking about profit"" (Njobeni,

2005).Currently, the marketprice for white maizestands at their lowestlevel ever, with R512,having dropped by morethan R50034due to an over-supplyand a lackof drought(Reuters, 2005). Ultimately, it becomesapparent that the currentstrategy of intensificationmight not be profitableor evenapplicable within the presentcontext.

From a macro-economicperspective, the opening up of the agricultural market of the developed countrieswould not greatly affect South Africa's maize market, as presently,in years when maize surplusesexist, "South Africa exports maize mainly to Zimbabwe, Japan, Zambia, Malawi, Mauritius, Kenya and

Mozambique"(NDA, 2OO3,p.1a6). Consequently, unless vast increasesin output would take place, South Africa is unlikelyto become a major player outsideof an

African context in the maize market. Thus, while subsidies reductionwould s Due to the liberalizationefforts undertaken within a post-apartheidcontext, which included the deregulationof the industryand the abolishmentof the Maize Boardin 1997,prices have been determinedunder free marketcondition through the tradingat the SAFEX. 'gamble'of Consequently,some analystsadvocate for farmersto take part withinthe global fockingin their harvestthrough the purchaseof futureson the maizemarkets. lf they would have undertakenso, they could have lockedin last fall, when the pricewas aroundR1000 and sold presentlywithout having to deal with the loss of R400 sincethen.

91 potentiallyincrease the pricedue to a dropof supplyon a globalscale, the issueof tariffreductions is of lesserimportance, as SouthAfrica engages most prominently in regionaltrading. Nevertheless,due to maize'scrucial role withinthe domestic contextand in relationshipto the issueof domesticfood self-sufficiency,the continuationof a strongsector is of utmostimportance. Consequently, a short-term priceincrease might most likely benefit South African large-scale farmers the most, as they are operatingunder a liberalizedmarket setting and holdthe necessary capacityand capital to increaseproduction.

lmpact # 4: Sustainabifityof Maize and Cotton Price Increase

Thisimportance isheightened within the Malian economy, both in the context of maizeand cotton production. Maize in Malihas been established as an important sourceof nutritionin a domesticcontext, whereas cotton's importance is much furtherreaching in termsof scaledue to itsrising importance as themain export crop.Overall, agriculture accounts for as muchas 92.3% of totalexport products in

2003.Consequently, as Mali'ssmall- and large-scale farmers are to profitin the short-termthe most from any global price gains, it is importantto questionthe potentialsustainability of such gains in thelong-term.

As hasbeen welldocumented by severalauthors, commodity prices in generaland cotton prices in particularhave been marked by a steadyhistorical decline,as wellanomnipresent high seasonalvolatility (FAO (1), 2OO4, Moseley,

2OO4).Commodity prices consequently are notonly marked by the lawsof supply anddemand, but have become integrated within the global economy and its various stockmarkets,where traders, with imperfect information, are making decisions on potentialvulnerability of productionoutput, and consequently integrate their own perceptionof riskswithin the current price3s. To illustratethis occurrence, as we can seein Graph11, 12 and Table 5, overall,the African agricultural commodity sector hasundergone a historicaldepression overthe last40 yearsif analyzedfrom a Graph12 Graph11 Source:FAO, Source: 'State...", FAO, 2004 "State...", 2004

havingsuffered the mostdue to increasingworsening of termsof trade.As estimated by theWorld Bank, "between 1970 and 1997 declining terms of tradecost non-oil- exportingcountries in Africathe equivalent of 119% of theircombined annualgross domesticproduct (GDP) in lostrevenues" (FAO, 2004, p.13).

s A recentexample is the reactionof tradersto the final WTO disputeruling in early March that declaredUS cottonsubsidies illegal. On news of this decision,cotton futures rose to 51 cents / lb for May deliveries.They are expectinga "bullish"market, signified by lower cotton plantingand risingglobalcotton demand, which has ledto its highestlevel since October 2004. However,fears alreadyexist that "priceshave climbedtoo fast [... as the textilemills might notl consumethe excesssupply of both U.S. and world cotton."Furthermore, as shown in the earlierSouth African case, droughtforecasts have also been activelyintegrated. Overall,consequently, the short marketreaction is an indicatorof the expectationsof traders (Purchasing.com,2005).

93 Iable 5 1961-63 1971-73 1981-83 1991-93 2001-o2 Cotton 146 158 128 70 40 Maize 5.5 4.4 2.5 1.7 Source:Oxfam,2002 Pricesare defleatedby the UnitedSfafes Consumer Price lndex: 1995=l) Cotton: US cents/lb Maize US$/bushel Second,as illustratedin Graph12 "Cotton exports grow but income lags", whileone common revenue to a declinein termsof tradedue to fallingexport earningsand rising food import prices is to increaseproduction, this attempt to offset thelosses become increasingly non-compatible. As a matterof fact,while countries

(includingMali)36 that depend on cottonas a singleagricultural commodity for more than20 % of theirtotal revenues have significantly increased their export volumes, theyhave not seen the corresponding increase in exportrevenues. Thus, as in the caseof cotton,while export volumes have increased in these6 countriesby more than40 % duringthe 1990s,the revenues have respectively dropped by 4 % during thesame period. Consequently, needing the foreign exchange derived from exports in orderto repayearlier debts, as wellas payfor foodimports, several developing countrieshave been hurt considerably by thehigh volatility of cottonand maize prices.As illustratedby a lMFMorldBank study, the past "sharp drop in theprices of keyexport commodities [were] the mainreason why the ratioof debtto exportshad worseneddangerously in 15 heavilyindebted poor countries" (ibid., p.21).

Thissharp drop in pricesis a linearphenomenon cutting across alltraditional agriculturalexport commodities. As illustratedin Table5, bothcotton and maize pricesmeasured in realterms have declined consistently over the past40 years

(ibid.).Consequently, when evaluating the potential increase in pricedue to an

sThese countriesare CentralAfricanRepublic, Togo, Mali, Benin, Chad, Burkina Faso. eliminationin USand EU subsidies, while a 4 "/"increase in theprice has been realisticallyestimated in theaftermath of thecurrent WTO decision, as mentioned earlier,the estimatedprice increases range from 2.8 "/" lo 29.7, withan averageof

16% (FAO(1),2OO4; see Table 6: "Estimatedimpacts of developedcountry subsidy removalonworld prices, ..."). Having observed the generaldownward trend from a historicalperspective, the damning question on thesustainability and longevity of theseprice increases needs to be asked.Thus, a potential16 percentincrease in worldcotton and maize prices through the successful implementation of the WTO

FrameworkAgreement and the CottonDispute Settlement, appears like a dropof wateron a hotstove, given the structurallong-term forces, as manifestedin the decliningterms of tradeand world agricultural commodity prices.

Thematter is furthercomplicated by forcesthat lie outsidethe traditional economicalanalysis. As illustratedearlier, cotton prices have been effected not only bythe laws of supplyand demand, but as wellby traders' perception of risks, physicalcircumstances and the decisions undertaken by majorcotton actors. As mentionedearlier, China, due to itscommanding volume of cottonprocessed each year,has a greatamount of influenceon theannual volatility of thecotton market.

Actingas botha producer(exporter) as wellas an importer,China's levelof net importsof rawcotton has been ascribed as "thesingle most important factor affectingworld cotton prices" (Cotton Incorporated). China currently accounts for

"over25 % of worldcotton production and nearly 35 % of consumption"(FAO (1),

2OO4,p.3tf). At the moment,as it is unclearwhether or notChina is currently subsidizingcotton production, analysts are unsure what impact an increasein world priceswould have on Chineseproduction. Given the paststrong response in

200212003in China,when a 2O"/" increase in the domesticcotton price led to a 26 "h

95 increasein productionarea, the world's largest cotton producer clearly amounts to oneof themain factors affecting prices in a post-US-EU-subsidiesenvironment.

Insummary, it thusbecomes prevalent that increases in cottonprices due to a reductionin subsides,while beneficial in theshort term, are not only also affected in theshort{erm by a multitudeof otherfactors, but as wellplaced in starkopposition withthe historicaltrends observed above . Consequently,assuming a continued worseningof theterms of tradefor agricultural products, while greater benefits will be reapedfrom the cotton production in theshorter term, increased global supply as a reactionto thesehigher prices, or expectationsof higherprices, will reduce any prior shortterm benefits as demandfor cotton will most likely not increase dramatically.3T

Havingthus questioned the longterm sustainability of cotton production in termsof revenue,as wellas from an ecologicalstandpoint in thediscussion of Mali(Moseley

37As a matterof fact, a large part of US cottonspending was devotedtowards a marketing campaign,as witnessedon US TV that pitchescotton as a natural,American good and consequentlytries to eliminateits archenemy,cheaper polyester. and Logan,2003), I will evaluateas a finalpoint the issueof food security.

Tatrlc l: Esfmsbd tnpaots ol dsrslopsd cotrrtry et&sHy rarnovnlsn sorNdplcsq EU anil US producf*ombvo{E ardtlm ren*ting lncrs.aseInW*stand SastmlAtdcan tW0A}expartaarnhgo

Table6 rldpstll*effias pr{cg {cQ |rg http ta||ln fi Source: tusrnb) thliad ttaoa Eunpesn FAO,2004 {lq Uf}lon t'L}

o&r{ax}s*}" sl'tl 0.675 ts- a8 1t"2 e6.a ffi6"5 Fiu 0.6ffi 20 a.$ tg.a #t.8 SD o.70 n ts.6 25.2 35{.5 FJD 0.743 & 1"5 a"s 'I935 GoirE{D( {l{}0S} 0.58S- 0.6{9 ?.9- t8.4 e"e- 14.7 10-48 s7- ?54 nAc {ffie} 0.742 ?.9.7 w4 aAc(zwlr s00q&1 a,742 21 9001/oe 0.738 7?'.*4 SOil FAS (soo4) 0.691 - 0.60 2.'.S.-5.0 t,q-r4p 16.'t- st.7 30 FApRI{soor} 11.4 4.7 70.6 gt"87 Rserrc*atd{s{t01f 8.4V4 t$.7 r6'9 1l& 76 *rnwref {aooe} o.644 t2.e 29.1 IE tt6 TokaricktAffi$) o.688 2.8 &6 na. 26 Sprsm: Ba**d sr Shrl (tr!41 tThs tlDtsurdesnnlorrnrodcl3cm$ho:8=*glgMe{rgt;Ekrgnpntcdfld{pt U= twornsblHty;t} = Oitb|wrtHe'd el{r$d$ ^Fnr ths sgtpntsd |trdkd s"s{f|l;do{\ thswtrld phe ir m rwrlp smcs s.pn nts 1ffi serdes|.mrnootof r*$p8frrndatmlstrdst{sx€ptfclic Ws}{rdHcsr{* tr{oi}ydrd|ils3$Olm&t|.Ag&rCsflld frhe ln30o0&01= l.Hp,f,gblouJ|lmdd frioch z0s{lts = U$$o.$1e/b. tfufllord of [$sporitr$y tThevshrtof T2ptrsmtr€pflbdh FAOh s*i6rsdbymrry tob* er fl.rHordrbthsvsry lrfl iloddprt0edrhryfb dnRdrlbfl y*s- se ds.rstbrfir basreyerbel*. sWtnrn*xprelrd*tsW0A lrynpn bnole$ldtty *tdodkr r st,r}, fp vdrpin lln t$elrs*ilrnnbdhy urhU r*don sfCy ery*tim hrl{C* ta&kl*p rtrtlotd nrpnrtorr*Us 1nnembdby fp }*mse hilorldfrloe.

lmpact#5: FoodSecurity for the small-and large-scalefarmer

Estimatingthe ultimateimpact of the WTOFramework agreement on small- andlarge-scale farmers, we needto establisha concreteunderstanding of the conceptof foodsecurity. Expanding across four scales, the international, national, householdand individual, the Framework for food security and the diversity of its conceptualizationis enormous. While presently, according to Maxwell,over "two hundreddifferent definitions of theterm" do exist,its source lies in the 1970s,when it wasapplied as an indicatorof a "nation'saggregate food production" (Norton, 2004, p.99).Generally, this concept has evolved to ourpresent understanding, which stresses"the ability of poorhouseholds to gain accessto food in the necessary amounts"(ibid., p.99). Consequently, while a discourseof the definitionsof food securitymight be an interestingavenue for furtherexploration, I will use the well- knownfood securitydefinition presented by the FAO Committeeon WorldFood

Security,which states that food securitymeans that "allpeople at all timeshave both physicaland economicaccess to the basicfood they need"(USAID 1992).

To brieflyelaborate on thisdefinition, the importantkey elementis tood access. Whilefood self-sufficiencyhighlights the importanceof accessto locally producedfood without having to dependupon externaldonors and commercial 'expands'this imports,food access accessboth in termsof its geographicalscale and throughthe introductionof capitalistmodes of production,with the introductionof 'securing'this cash-crops,and a focuson tradeas a meansfor access.To citethe

USDAdefinition of this conceptof food access,it stressesthat "individuals have adequateincomes or otherresources to purchaseor barterto obtainlevels of appropriatefoods need to maintainconsumption of an adequatedieVnutrition level"

(ibid.).

It standsconsequently in stark contrastto policiesproposing nationwide food self-sufficiency.These policieshave generallybeen characterizedas a costly,if not impossible,approach, that inducesthe dangersof an autarkicapproach with a historicalquest "to extractingrural producecheaply to feed cities,creating perverse incentives,harming food output and employmentand worseningundernutrition"

(Norton,2OO4, p.101). Thus, as advocatedby Norton,the'fundamental lesson' learnedfrom past mistakesis that "to achieveimproved levels of nutritionin rural households,cropping patterns should be allowedto follow comparativeadvantage, and farmersshould not be given artificialincentives to grow basicfoods. The surest

98 This comparativeadvantage has continuallybeen linkedduring both the

'white colonialand post-colonialerain the Maliancontext with the gold', cotton.

Grantedthat over 200'000 farmers, and over93 % of farm householdsin the CMDT zone,depend on cottonas theirsource of income,it becomesapparent that any increasein producerprice with other food pricesstaying stable could result in a significantstrengthening of food securityin termsof increasingtheir abilities to purchasefood crops. Long-termtrends have shownthat, while the internal autarchicalstrategy has largelybeen abandoned,least-developed countries have movedfrom holdinga net surplusof agriculturalproducts up throughthe 1980sto an expandingnet deficitof close to $5 billionby 20O2.(see Graph 13: "Agriculturaltrade balanceof leastdeveloped countries, 1961-2002") Furthermore, future projections by the FAO predictthat by the year 2030, "the net food trade deficitof developing countriesis expectedto swellto more than US$50billion in constant1997-99 US$"

(ibid.).Thus, while an increasingnet deficitexist, from a macroscale, food security and insecurityappears to be closelyrelated to three indicatorsof internationaltrade:

100 the shareof foodimpods in totalmerchandise exports, the shareof foodaid in food importsand the share of totalfood imports in caloriesavailable for consumption (ibid. p.19).Consequently, as seenin Graph14 below, the food insecure countries, while devotinga largepart of theirexport earnings towards imports of foodcrops, "cover a smallershare of theirapparent consumption from food imports" (ibid.).

Consequently,it becomes apparent that in orderto increasetheir food

Graph14 Source:FAO, "State...".2OO4

securitfs, presentlyfood insecurecountries "might import even more food to cover shortfallsin domesticproduction and ensurefood securityif they were not constrainedby limitedexport earnings" (ibid.). Thus, recalling the currenttrends proposedby the globaland nationalactors away from food self-sufficiencyin the 70s and 80s towardsagricultural production with the goalof achievingfood security,this presentdata seemsto suggestthat this trend is well underwayand no future return to formerpolicies in an increasinglyopen, networked and globalizedeconomy is foreseeable.

Finally,this endeavoris also supportedby furtherdata sets that suggestthat pastfood spikes,while still currently being detrimental to nationaleconomies that are s lt is howeverimportant to pointout that the break in food securitycategorization appear to be drawn ratherrandom. Furthermore, the graph does not addressthe questionof the reason for this phenomenondirectly.

101 heavilydependent upon a smallnumber of economicexport and import goods, have vastlybeen reduced and resulted in a, at leastperceived, increasing sustainability of thispolicy approach. (see Graph 15: "Distribution ofthe incidenceof importprice spikes...")Calculations by Diazet al.show that the coefficient of variabilitylor maize

($lmt;and cotton (cents/kg) has decreased from 0.21 in 1960-1999to 0.16in the

1990sfor maizeand from 0.19 to 0.14for cotton respectively (Diaz et al.,2OO2,p. Graph15 Source:FAO, "Statg...",2004

Interestingly,not only South Africa has moved towards a greaterliberalization of theirmarkets, with the major exception of sugar,but so hasMali, with the major exceptionof cotton.Receiving considerable international support (PRMC;

Programmede Restructurationdu Marche Cerealier), as wellas underpressure by theWorld Bank under its SAP (StructuralAdjustment Program), the government deregulatedtheir cereal markets starting in 1981.Investigating the response of cerealtradersto thismarket reform effort in the cereafsector, Demb6f6 and Staatz foundthat while these market reforms failed at resolving"all the problems of cereals marketingand food security in Mali",as it did ignorestructural problems on the productionand transportation side of farming,they nevertheless were "effective in increasingcompetition, lowering costs, and improving physical access to coarse grainsby consumers"(Dembele and Staatz, 2000, p.159ff). Consequently, their studyseems to supportthe liberalassumption that the saleof stateenterprises, permittingprivate sector involvements will increase competition and efficiency, resultingultimately in greaterproducer and lower consumer prices, as wellas more

'equal'fooddistribution. A case in pointare the marketing margins, which decreased dueto theincreasing competition, and fell by almost2O "/" tor "millet and sorghum betweenBamako and its two major supplying areas" (ibid., p.153). Furthermore,

"mostevidence suggests that the reductionin marketingmargins was passed back to farmersin theform of higherprices" (ibid., p.153). However, it is importantto note thatthe larger traders, due to thelower margins available in thegrain trade, decided to investelsewhere, and smaller traders "responded most dramatically" investing heavilyinto trucks and storage capacities (ibid.). Consequently, through market reforms,these smaller traders, which used to operatein theshadow economy under the monopolyof the OPAM(Office Malien des ProduitsAgricoles) and faced repression,moved into the formal economy and could increase their profits as well as reducetheir margins, as theyno longerwere "forced to operateclandestinely"

(ibid.,p.148ff).

Fillingthe gap, these traders 'exploited'this newly gained freedom of access to allregional markets across the country (including neighboring countries) as they

"movedcereals to areaswhere prices were most attractive" (ibid. p.156). Measuring theaverage correlation of retailmillet prices across the urban market areas in Mali,

Dembeleand Staatz found an increase"from 0.70 in themid-1980s to 0.97during the 1990s"(ibid., p.156). Overall, trade flows have increased dramatically, partially

103 due to the devaluationof the CFA as well as the removalofimporl and export restrictionsboth in Maliand neighboringcountries. In summary,on a regionallevel, the marketreforms have lead to greaterphysical availability of grains in marketsthat previouslywere markedby fooddeficits. However, when taking the international economyinto account, a clear"risk" exists that due to the increasingcompetition with wealthierneighboring countries, such as Cote D'lvoireand Senegal,"some Malian consumersmay be pricedout of the market"(ibid., p.1560. Furthermore, any market instability,be it local,national, regional or global,will havean effectnow on the marketprices as they are no longerprotected from outside 'ripples'.

Takinginto account this decrease in pricestability due to internationalization of trade,food securitydoes not seem to have improvedaccordingly. As the reforms, whilesuccessful in reducingthe costsof graindistribution, marketing costs as well as retailprices, poor people still lack the purchasingpower necessary to purchase grainsin periodsof low supply,exchange fluctuations and the resultinghigh price volatility.Consequently, improving access for the poorestlies outsidethe current marketreforms undertaking under the PRMCand would"require a muchbroader effortto reducepoverty and developedtargeted social safety nets in Mali"(ibid., p.161).

Evaluatingthe effectof past policymeasures undertaken in post-Apadheid

SouthAfrica, Nick Vick finds that deregulation of the grainmarket, which included the abolitionof pricefixing mechanisms, resulted similar to the Maliancase in increased opportunitiesfor tradersand "smalland medium-scalebusinesses in processingand distributingmaize and maizeproducts" (Vick, 2004, p.162). As pricesare increasinglycoupled to the worldmarket level, farmers in generalhave responded by eitherreducing their input costs and/or increasing their agricultural asset

104 diversificationas wellas increasingconcentration of operations. Thus, Nay observed an overall"increase in thenumber of smallercommercial farms and an overall increasein theaverage farm Size" (ibid., p.157). Overall, the real price for food has decreasedin the ruralareas in SouthAfrica as the conceptof comparative advantagehas been more strongly applied within the liberalized setting.

Consequently,for example, with the retreat of the"'single-channelfixed price' marketingregime [that was] characterized by pan-territorialand pan-seasonal pricing",prices took into account such factors as transportation costs, as wellas the regionaldynamics of supplyand demand. In summary, farmers in SouthAfrica have respondedto thisabolition by diversifyingtheir livelihood strategies through increasedparttime farming, adhering to contractfarming or pricehedging, supported bythe creation of theSAFEX and other agricultural futures market, resulting in

"greatercertainty and lower transaction costs" (ibid., p.162).

However,smaller farmers seems to havebeen the mostnegatively atfected as firstgovernmental spending on agriculturalresearch3s was cut back, leaving severalsmallfarmers without any support services in the country.Secondly, due to thedecline in employmentwithin the large-scale farming sector, attributed to the introductionof a minimumwage, and the reluctant pace of landredistribution, which

3eOf coursepublic spending, while reduced,was to a certaindegree offset by privatesector research,especially in South Africa.However, it becomesevident that adheringto the principlesof economiesof scale and profit-maximization,these companiesand research enterpriseslargely tend to reachthe large-scaleproducers. Furthermore, an interestingissue arises,such as the FiscalYear 1995Appropriations Act and its "BumpersAmendment, i.e. "theUS directiveagainst providing assistance to localagriculturalcommodities'producers whose exportsmay competewith US agriculturalproduction" (USAID, 2002, p.32). Consequently,even thoughin high demand,the handsare tied for the world'slargest aid organization,USAID, to undertakeany strengtheningof agriculturalcotton research within the Maliancontext.

105 accountfor lessthan 2 o/oso fat,Vick argues that the ruralfarmers' food securit/o hasnot improved.Furthermore, with the absenceof effectivegovernmental structuresto reachthese rural poors with the social service programs, a taskusually undertakenby theirformer large-scale farming employers, rural farmers engaging in export-orientedagriculture have increasingly become polarized in twoclasses, in whicha "privilegedminority of householdssucceed in developingmultiple livelihood strategiesbased on skillsand predictable income, while a poorermajority of householdsincreasingly find their established strategies undermined and often move on in searchof betterlocations from which they will attempt to developa new strategy"(Vick, p.175ff). In conclusion, Vick paints a'dark picture'for the rural, traditionalsector, as agriculturalstrategies are increasingly undermined by lackof governmentalsupport and safety nets, women are experiencing increased vulnerabilitiesand a generaltrendtowards pushing for "rights to residence[that]take precedenceover rights to cultivationand grazing" (ibid., p.176ff). Thus, a greatneed existsto geta betterunderstanding of rural-urban migration on a regionalscale, supportedwith a foodsecurity monitoring system, in orderto providefor the more than12 million people, 25 "/oof thewhole population, that are involved directly or indirectlyin thecommercial or traditionalrural agricultural sector (ibid., p.173ff). Vick ultimatelyfinds that the "multipliers from agricultural growth" theo4/1 is stillwell alive andshould receive its deservedattention in orderto strengthenfood security and

€ Vick rejectssubsistence agriculture as a viablestrategy, adhering to the conclusionof a recentresearch report, ECl, which "concludedthat the singlemost importantdeterminant of foodsecurity in SouthAfrica is cashin hand[...] Unlessagricultural production moves out ol subsistencelevels to some scaleof commercialization,little impact on food insecurityand povertyis possible"(ibid., p.168). ar Agriculturalgrowth theory suggests that for every dollarof increasedearnings within 'multiplication'of agriculture,additional spending will be createdthrough a thatdollar's purchasingpower. Thus, multipliersto non-tradablesform agriculturalincome growth ranges from below2.0 (i.e.Niger) to above2.75 (i.e. Burkina Faso) (Mellor, 1999, p.9).

106 purchasingpower of therural populations, thus regurgitating the earlier thesis by

Nortonthat "adequate real price incentives in agricultureare important not only for economicgrowth but also for alleviating rural poverty" (Norton, 2004, p.103).

To a greatextent, this focus on seeingvulnerability and food insecurity as an incomeproblem, as opposedto a supply-sideissue, is sharedby Moseleyand

Logan.In their work on "ThePolitics of Discourse,Famine Early Warning Systems andHunger in Africa",they argue that there is a considerablebias in theinternational communitytowards interpreting food in-/security as a supply-sideproblem that, while acknowledgingthe importance of thehousehold level, is stilllargely focused on a macro-levelapproach that ignores important developed nations' political economical analysis(Moseley and Logan, forthcoming 2005, p.4). Demonstrating how this supply-sideapproach is closelyentrenched within the interests of Africa'slargest donors,they argue against the application of earlywarning systems as indicatorsof vulnerabilityand conclude that "the inexactness of foodsecurity monitoring, means thatthe national or internationalsafety net will always be riddledwith holes" (ibid., p.18).

Consequently,in orderto evaluatethe ultimateeffects we needto connect thepolitical economy of agriculturaltrademarkets with the structural, supply-side problems,as elaboratedin the previoussection. Thus, any improvements in food security,while higher prices garnered through reduced subsidies are an important factor,will have come in overthe long term "only about through reducing the real costsof foodproduction and distribution, coupled with broad-based income growth"

(Dione,2000,, p.137). Both private and public investments will be neededin orderto ensurean improvementin bothphysical infrastructure, aswell as technical support to thefarming communities. The role of theprivate trader, as wellas thelarge-scale

107 11. PolicyConsiderations

Havingstudied in-depth the potentialoutcomes of the WTO Framework

Agreementand the CottonDispute Settlement at large,and the farmingsector within the UnitedStates, South Africa and Maliin particular,it becomesevident that no clear-cutpanacea exists. Dedicating this final section towards the propositionof policyconsiderations, I will advocatefor threewide-ranging avenues that all lead 'developmental towardsthe ultimategoal of increasing space'withinan increasingly

'modernized',liberalized and industrializedglobal agricultural setting. This expansion or creationof developmentalspace within agriculture occurs at five levels:the global, national,regional, local and the individual.While it will be impossibleto coverall five levelswith due justice,all proposedavenues will ultimatelybe aimingat strengtheningor creatingthe flexibilityand choiceof the marginalizedfarmers in the medium-to long-runwithout negatively limiting developmental space for equally marginalizednon-agricultural groups.

Havingwitnessed the decreasingpolitical clout of the US agriculturalsector, as seen in the recentproposed budget cuts by PresidentBush, the firstsuccessful legalagricultural challenge fought at the WTO by developingnations, and the partial, yet in termsof modalities,incomplete victory achieved with the phasingout of subsidiesin the July31't FrameworkAgreement, it becomesclear that the bargainingpower of developingnations on the globallevel has increased. Consequently,a potential increase of developmentalspacea2 appears to liein the horizonwith the continued coherence of theG20.

However,in orderto sustainthis 'success story'in the long-term, these nationsshould invest heavily into the strengthening of their legal understanding and capabilitiesto keepa checkon theimplementation of the rulings as wellas during thenegotiations in theHong Kong summit and upcoming negotiations. This academicpublic investment into strengthening the legal abilit/3 of bothMali's and

SouthAfrica's negotiators will be keyin monitoringthis process of freer,less- distortedagricultural trade. Furthermore, the role of scholarsand NGOs in articulatinginjustices'has increasingly heightened in theage of globalizationand the internetrevolution. Consequently, a dual-pronged approach should be taken, throughthe creation of linkagesbetween the bureaucracy, academia and farmers, whichfocuses on pointingout and challenging current violations, prohibiting past violationsfrom reoccurring and shaping future negotiations that strengthen and defendany gained developmental space. Ultimately, while acknowledging the major democraticand institutional shortcomings witnessed in thepast in theWTO, I stronglybelieve that each developing nation's possibility will be the greatest through includingand establishing itself with a commitmenttowards shaping the international traderules from within. Of course,this long{erm strategy does not have to occur a2The increaseof developmentspace, accordingto Wade (2004),would includea shift away 'water'or from furthertrade homogenizationtowards granting states reasonable actingroom to chooseeffective levels of nationalprotection during times of volatilityand infancy. 4 lt is importantto notethat the WTO is alreadyoffering several legal workshops, financed usuallyby Northerncountries, such as the Netherlands.While a majorconflict of interest existswith the UnitedStates certainly not wishingto be strengtheningdeveloping nations 'education', abilityto challengetheir own subsidiesthrough legal an interestingspace does exist as Europeannations have been battlingagainst the US on the Africancontinent to ban GM crops.lt is withinthis context of a'GM-war'thatseveral European anti-GM lOs, NGOs and governmentshave providedlegal adviceand support,which increasestheir bargaining poweroutside the realmof GM crops.

110 unilaterally,as the perseveranceof the G20 alliancehas shown,overcoming many real-politikobstacles. Overall, including the importanceof the TRIPS,TRIMS and the

GATSin diminishingand limitingdevelopment space, the overarchinggoal should 'market not be simplyto gain access',but to appropriatefor themselvesthe tools 'development 'kicking necessaryto create space'and reversingthe awayof the developmentladder', as describedby RobertWade (2003).

Whileone potentialstrategy of developmentspace, as articulatedby Wade, is the well-discussedstrategy of importsubstitution in the manufacturingsector, its equivalentwithin the agriculturalsector is traditionalagriculture, free from contract farming,with reduceddependency on non-organicfertilizer, pesticides and herbicides,as well as patentedseeds and a capablestate that can protecttheir marketin cases of high volatility.All of these factorsare representedto the extreme in the struggleagainst biotech companies, such as Monsanto,through their highly verticalproduction process, as well as their powerfullobbying and legal capacity withinand outsidethe WTO settinga.Taking into account the potentialimpact of the

WTO Frameworkin extendingthe reachof biotechnologyand strengtheninglocal farmers'dependencyon non-organicinputs, it becomesimperative that the national governmentsimplement policies that filter this power-imbalance.Granted that the benefitsand the disadvantagesof biotechnologicalfarmingare stilllargely unknown and facts are abundantpointing in both directions,it appearsto be most reasonable 'precautionary for the legislatureto adopt policiesof a approach'45towards

n As a matterof fact, severalof past WTO high-rankingofficers have held management postswithin Monsanto. 4sWhile several definitions exist, the mostprominent one is the onefound in the Rio Declarationon Environmentand Development,as set out in the declaration's15th and 16th principles.This precautionaryapproach requires that "whenthere are threatsof seriousor

111 biotechnology,in order to regaina legaldegree of autonomywithin the industrialized agriculturalcontext. Furthermore, while not excluding the potentialbenefits of biotechnologyper se,governments should be varyof sacrificingtheir farmers and its landsfor field testing experiments, as seenin thecase of SouthAfrica, that are aimednot towards helping improving food security of thesefarmers, but rather strengtheningtheir own role in theinternational market context. Given the immense amountof fundingthat is investedon bothpro- and contra-biotech actors'sides, both

Maliand South Africa would be welladvised to includeconditionalities into any potentialcontracts or licenseshanded out. Possible conditionalities could include, butnot be limitedto, the sharing of informationwith public universities to promotethe biotechnologicaldevelopment of indigenouscrops or theinclusion of financialcredits to smaller-scalefarmers. Consequently, the goal would be to counteract,what

Moseleyhas observed as the trend that "international capital sought out the local wealthythrough agricultural extension programs in orderto proliferateand intensify cashcropping and its associatedtechnologies" (Moseley, 2005, p.18).

Of course,while potentially economically beneficial in theshort- to medium- run,in Moseley'sfinal analysis, it becomesevident that soil degradation appears to be moreclosely linked to thetechnological methods of agriculturalproduction, as opposedto anyindex of poverty(ibid.). Thus, challenging the dominant discourse of povertyinduced environmental degradation, the overall ecological sustainability of modernizedmaize and cotton production might be threatenedin the longrun with increasingapplication of pesticideand inorganic fertilizer, and threatens to overshadowany shortterm economic gains achieved through more stable and

irreversibledamage, lack of full scientificcertainty shall not be used as a reasonfor postponingcost-effective measures to preventenvironmentaldegradation" (UNEP, 1992).

112 higherworld prices. Consequently, the government needs to payclose attention to boththe economic, as wellas theecological sustainability of modernized agriculture 'straight-jacket'of in orderto avoidslipping into a increasinglymarginalized yields, soilsand farmers.

Furthermore,governmental policies should be establishedthat go beyondthe pushfor liberalization of the cotton sector, as demandedby the World Bank, by creatingpolicies that counteract the establishment of monopolies and oligopolies in thetrading sector. This factor appears to be especiallyprevalent in thecase of both

SouthAfrica and Mali, whereas in SouthAfrica the issue appears to expandwell beyondthe trader into the retail sector. Of course,this national policy does not have to be undertakenthrough limiting of thefree trade, but rather through promoting greatercompetition among these actors, supporting the democraticcapacity of the citizensin voicingtheir own opinion and strengthening and cooperating with the farmers'unions as importantactors in shapingfairer markets. Overall, extending

AmartyaSen's thesis on faminesand democracy, both Malian and South African governments,as theirdomestic influence in theagricultural markets are reduced, shouldencourage the strengthening of accountability in order to notweaken the food securityof marginalized,rural population.

Finally,as seenin thecase of SouthAfrica and Mali, there is a greatneed for continuedgovernmental involvement acting as safetynets, as wellas extension agentsthat reach and supportthe small-scalefarmers. This governmental support howeverneeds to be as dynamicand flexible as possible,in orderto avoid counteractingmarket incentives and not to prolong,as wasthe case in Mali,the historicallack of supportfor intercropping, crop rotations, improved fallows and diversificationseen as integralin strengtheningfood security. One of the most

113 promisingavenues of policyinvolvement for the government certainly would be in the

provisionof creditsfor small-scalefarmersoo that are lessattractive for

agribusinesses,as well as thesupport for the creation of locallyowned storage

capacitysystems, anti-monopoly fegislation4T, the creation of commodityexchange

marketsand better diffusion of pricinginformation in orderto providefor (temporary)

sheltersfrom price volatility. Of course,this governmental support is largelyfinanced

by multi-and bi-lateral donors that have previously viewed cotton as the keyexport

croptowards development. However, with an increasingfocus on ecological

sustainability,these governments might be ableto garnera newinflux of supportby developingorganic cotton, as an example,that will counteract many of thenegative

effectsassociated with cotton production through increasing both its ecological,

reducedsoildegradation, and economic, highest quality resulting in higherprices, sustainabilit/8.One recent avenue of suchproduction efforts has been undefiaken

in Maliand Kyrgyzstan with the support of severalhigh-ranking Swiss governmental andnon-governmental aid agencies,such as Helvetas.Results form the 2OO2 and

2003harvest have shown that not only yields, as comparedto conventionalcotton,

6 One of the most beneficialavenues to improvefood security,I would argue,is the possibilityof supportinga group of farmersfinancially in orderfor them being able to buy into storageand processingtacitities, for example,during the processof liberalizationin orderto offsetthe negativeeffects observed in the case of SouthAfrica. This is especiallypertinent withinthe contextof Mali,where currentlyliberalization etforts in the cottonsector are underway.Furthermore, in the case of South Africa,financial support for land redistribution shouldbe made more readilyavailable, as the currentprocess has been a disappointment. 47As noted by Nortonon the topic of anti-monopolylegislation, he pointsout that "legal remediesfor casesof abuseof the powerof monopoliesand oligopolies[...], can be made available,and shouldbe. Nevertheless,proving abuse is likelyto be a cumbersome, uncertainprocess, and the difficultiesof doing so shouldnot be underestimated,especially in circumstanceswhere judiciaries are relativelyweak" (Norton, p.95). € As statedby Meier,the reasonsfor organicproduction vary from "occupationalhealth and 'treadmill'of opportunityto escape creditsfor inputs"for the producersto "Opportunityto turn 'faceless'community into a cleadyprofiled product" for the cottonand apparelindustry. Furthermore,a facilitatedaccess to the Swiss cottonimport market has been established, and severalinternational actors have stressedtheir interestor alreadypurchased organic cotton,including lkea, Nike, H&M and Patagonia(Meier, 2OO4).

114 12. Conclusion

In conclusion,it consequently becomes clear that the issue of assessingthe impactof theWTO Framework Agreement on farmersin boththe developed and developingworld is vastlycomplex and clear limitations in anystudy will exist.

Nevertheless,I hope to haveclearly shown that the WTO Framework Agreement currentlycan not be deemeda historicbreakthrough for two main reasons. First, the termbreakthrough is certainlyinappropriate, as it willtake up to 10years to implementthe agreement if negotiation progress does not stall. Second, analyzing its historicity,the agreement, while holding the potential to constitutea historic achievementcompared to the URAA,nevertheless will ultimately depend upon the workingout of themodalities at theHong Kong Summit in December2005. lt is withinthis context that the earlier proposed policy consideration of strengthening the legalcapabilities becomes especially urgent and important to closelegal loopholes, suchas the documentedboxshifting activities, as wellas increasedevelopment spacein thelong-run.

Concerningthe impacton small-and large-scale farmers, it appearsthat the greatestbeneficiary in boththe UnitedStates and Mali would be the smaller scale farmers.ln SouthAfrica, on theother hand, due to thehigh marketing margins and theirincreasing marginalization within a liberalizedsetting, the larger-scalefarmers wouldbe the ones that will reap the benefits of an increasedprice most readily.

Beingable to respondto higherprices with increasing supply, they would most likely be ableto increasetheir own capital, consequently outcompeting smaller-scale farmerseven further. Takinga step back,however, it becomesevident that in the longterm,the priceincrease might prove to be unsustainableunless large-scale structural economicchanges would take placeon a globallevel. However, as has become evidentin the earlieranalysis of the WTO FrameworkAgreement and the Dispute

Settlementvictory, these structural changes are not to be foundwithin a settingof an increasinglyneo-liberal agricultural market. Thus, strategies of diversificationat all scalesmight prove to be the mostsuccessful avenue, through a reinvestmentof potentialshort-term increased agricultural profits into other sectorsand agricultural commodities,as well as througha returntowards more traditional agricultural approaches,e.g. inter-cropping,no-till and organicfarming.

Ultimately,however, for futurestudies and the interestedreader, three main story-linesshould be keptin mindand on the academicand policyradar screen:

First,how longwill the gainedbargaining power of the G20 be sustained?Listening to peoplehaving closer access to negotiations,severe deflections and internal disputeshave weakened the alliance'sconsistency and couldundermine a great achievement.Second, the modalitieswill be extremelyimportant and as soonas agreedupon, a wealthof reportswill likelybe releasedby the NGO armada,lead by

Oxfam,assessing the impacts.A specialeye shouldbe kept on the UnitedStates farminglobbies, as theirpress releases tend to be very indicativeof theirtrue stance.

Concerningthe DSM, Oxfam has alreadystarted as of March2005 a new campaign targetingrice subsidies in the US. Consequently,further rulings in favorof developingnations may be very likely.Finally, in termsof agriculturaldevelopment, two key eventsto be closelywatched is the continuedpush for biotechnologyin

Africa,such as the introductionof GM coftonin Mali,and the potentialforan increasein contractfarming as agriculturalspecialization might occur. Both cases, I

117 stronglybelieve, will turn out to be detrimentalto thesuccess of strategieson strengtheningfood security as an increasingof concentrationon the vertical commoditychain will occur. Thus, it willonly be through a complexaction and cooperationat severalscales that developing and leasfdeveloped countries will be ableto 'climbup the development ladder'and increase their own development space,counteracting the kick by thedeveloped nations.

Acknowledgments

I am verygrateful for all the supportand insightful reviewers of thiswork. First of, I wouldlike to thankProfessor Moseley,as my principal advisor, who has pushed mewhen needed and greatly increased my possibilityfor eyeingthe long-term perspective.Second, I am verythankful for the supportand review by Professor DavidBlaney and Professor David Lanegran. Third, I wouldlike to thankthe discussantsat the2005 Annual meeting of theAssociation of AmericanGeographers in Denver,CO, where I presenteda versionof thispaper. Last but not least,I thank allmy fellow students and friends, especially Heidi Erickson, who has assisted me andgiven me insightfulfeedback on both my presentations and the paper in general. Appendix I Source: WTO

q * (uxi t( r o 19' !!15 tt s x"()-- t ur & qfi {D 9ol ur ah =,n m f! X{, $ {lJ CJ gE$gg,.c .c

o x e'F*€ () ! F Vt "ll * REE 6^ ltj X =g.e58F s o c !d a u $f Es$F @ E qt 3 € {t) !tr (uE gEgEAEa- e {t a v (u g.(! a o- () ,go fi {}cL {u o) a

* 61 E o o s$g+ t 3 0 tt : E.e MEY$RgE o- !u ([ CL ('l g! EE HET .E g .g (!t g, 8t E€ E o! 6 ctQ E (t} .aE F c t5< EBg g E= A ro G:oBE Appendix ll Source: WTO

HXAMPLHSOF USSUB$INIE$

AITBER BOX BLUEEOX G*EEil BPX

'An6er Box with Do not distort trade. or F'JIDornesuc Snpport if support Conditions" al nro6tcause nrinimal M€a$ureslhat dstori limit regulresfarmers to tlav€ ts bs prsdjLltion afid tr.sde producliiln distorltolr. {e.9.Direcl gwernment-tunded snd Paym€fils a$ opposed to must nol invofueprke ma*et supporl) suPport"

frtinfnis supportof 5 '101& lsr (hvehpedl for ofl sperding 0n blue box increassspsrdirE or lntsodlloeor amend APPENDIXIII Source:ERS/USDA, 2001 Exportsubsidy expenditure by country,199$98

$ billion I I 7 b 5

T 3 2 1 0 1995 19S6 1397 1998 lWl nestofwortd l--l u.s. VZ eu I Norway I swirzenana

Sosce: Economb Research Service, USDA Commoditycategory 1995 1996 1997 1998 1999

Wheat 169.3 403.4 197.9 562.9 53'1.1 Coarsegrains 420.O 494.4 306.4 864.5 772.0 Rice 55.3 97.7 36.3 28.7 27.5 Oilseeds 83.3 49.9 10.1 2.7 1.0 Fibers 0.4 0.0 0.0 0.0 0.0 Fruitsand vegetables 166.3 126.4 95.1 89.8 79.2 Sugar 512.9 692.7 890.7 913.2 510.0 Milkproducts 2,547.1 2,695.3 1,938.7 1,992.9 2,255.1 Wine 75.7 85.9 47.2 35.5 27.4 Beef 2,010.1 1,947.1 950.2 732.5 808.0 Pork 135.5 94.4 95.4 403.7 288.5 Poultry 189.2 104.7 107.8 128.8 102.2 Other meats 11.9 11.3 10.1 2.2 2.6 Livestock 26.6 14.7 0.1 o.2 1.2 Tobacco 25.8 5.9 0.8 0.9 0.0 Processedproducts 779.4 852.4 709.5 747.5 841.0 't59.0 Other agriculturalproducts 114.7 209.5 161.6 257.4 Total 7,323.6 7,885.6 5,555.3 6,667.7 6,504.1

1/ Not all countrieshave notifiedas yet for this year.

Source:Economic Research Service (ERS) calculations from WorldTrade Organization(VWO) export subsidy notifications. http:/lwww. ers. usda. gov/dbAlto/ AppendixlV

WTOJuly FrameworkAgreement

Doha Work Programme

DecisionAdopted by the GeneralCouncilon 1 August2OO4

1. The GeneralCouncil reaffirms the MinisterialDeclarations and Decisionsadopted at Dohaand the fullcommitment of all Membersto giveeffect to them. The Council emphasizesMembers'resolve to completethe DohaWork Programme fully and to conclude successfullythe negotiationslaunched at Doha. Takinginto account the Ministerial Statementadopted at Cancfn on 14 September2003, and the statementsby the Council Chairmanand the Director-Generalat the Councilmeeting of 15-16December 2003, the Counciltakesnote of the reportby the Chairmanof the TradeNegotiations Committee (TNC) and agreesto take actionas follows:

a. Agriculture: the GeneralCouncil adopts the frameworkset out in AnnexA to this document.

b. Cotton: the GeneralCouncil reaffirms the importanceof the SectoralInitiative on Cottonand takes note of the parametersset out in AnnexA withinwhich the trade- relatedaspects of this issue will be pursuedin the agriculturenegotiations. The General Councilalso attachesimportance to the developmentaspects of the Cotton Initiativeand wishesto stressthe complementaritybetween the trade and developmentaspects. The Counciltakes note of the recentWorkshop on Cottonin Cotonouon 23-24March 2004 organizedby the WTO Secretariat,and other bilateraland multilateralefforts to make progresson the developmentassistance aspects and instructsthe Secretariatto continueto workwith the developmentcommunity and to providethe Councilwith periodicreports on relevantdevelopments. Membersshould work on relatedissues of developmentmultilaterally with the internationalfinancialinstitutions, continue their bilateral programmes, and all developed countriesare urgedto participate.In this regard,the GeneralCouncil instructs the DirectorGeneralto consult with the relevantinternationalorganizations, including the BrettonWoods lnstitutions,the Food and AgricultureOrganization and the International Trade Centreto directeffectively existing programmes and any additionalresources towardsdevelopment of the economieswhere cotton has vital importance.

c. Non-agricultural Market Access: the GeneralCouncil adopts the frameworkset out in AnnexB to thisdocument.

d. Development: Principles: developmentconcerns form an integralpart of the DohaMinisterial Declaration.The GeneralCouncil rededicates and recommitsMembers to fulfillingthe developmentdimension of the DohaDevelopment Agenda, which places the needsand interestsof developingand least-developedcountries at the heartof the Doha Work Programme.The Councilreiterates the importantrole that enhancedmarket access, balancedrules, and well targeted,sustainably financed technical assistance and capacity buildingprogrammes can playin the economicdevelopment of thesecountries. Special and DifferentialTreatment:the GeneralCouncil reaffirms that provisionsfor specialand differential(S&D) treatment are an integralpart of the WTO Agreements. The Councilrecalls Ministers'decision in Doha to reviewall S&D treatmentprovisions with a view to strengtheningthem and makingthem more precise,effective and operational.The Councilrecognizes the progressthat has been made so far. The Councilinstructs the Committeeon Trade and Developmentin SpecialSession to expeditiouslycomplete the reviewof all the outstandingAgreement-specific proposals and reportto the GeneralCouncil, with clear recommendationsfor a decision,by July 2005. The Councilfurther instructs the Committee,within the parametersof the Doha mandate,to addressall otheroutstanding work, including on the cross-cuttingissues, the monitoringmechanism and the incorporationof S&D treatmentinto the architectureof WTO rules,as referredto in TN/CTD|7 and report,as appropriate,to the General Council. The Councilalso instructsall WTO bodiesto which proposalsin Categoryll have been referredto expeditiouslycomplete the considerationof these proposalsand reportto the GeneralCouncil, with clear recommendations for a decision,as soonas possibleand no laterthan July 2005. In doingso thesebodies will ensure that, as far as possible,their meetingsdo not overlapso as to enablefull and effectiveparticipation of developing countriesin thesediscussions. Technical Assistance: the GeneralCouncil recognizes the progressthat has been made sincethe Doha MinisterialConference in expandingTrade-Related Technical Assistance(TRTA) to developingcountries and low-incomecountries in transition. In furtheringthis effortthe Councilaffirms that such countries,and in particularleast- developedcountries, should be providedwith enhancedTRTA and capacitybuilding, to increasetheir effectiveparticipation in the negotiations,to facilitatetheir implementation ol WTO rules,and to enablethem to adjustand diversifytheir economies. In this context the Councilwelcomesand furtherencourages the improvedcoordination with other agencies,including under the lntegratedFramework for TRTA for the LDCs (lF) and the Joint IntegratedTechnical Assistance Programme (JITAP). lmplementation:concerning implementation-related issues, the GeneralCouncil reaffirmsthe mandatesMinisters gave in paragraph12 of the Doha Ministerial Declarationand the Doha Decisionon lmplementation-Relatedlssues and Concerns, and renewsMembers'determination to find appropriatesolutions to outstandingissues. The Councilinstructs the Trade NegotiationsCommittee, negotiating bodies and other WTO bodiesconcerned to redoubletheir effortsto find appropriatesolutions as a priority. Withoutprejudice to the positionsof Members,the Councilrequeststhe Director-General to continuewith his consultativeprocess on all outstandingimplementation issues under paragraph12(b) of the DohaMinisterial Declaration, including on issuesrelated to the extensionof the protectionof geographicalindications provided for in Article23 of the TRIPS Agreementto productsother than wines and spirits,if need be by appointing Chairpersonsof concernedWTO bodiesas his Friendsand/or by holdingdedicated consultations.The Director-Generalshall reportto the TNC and the GeneralCouncil no later than May 2005. The Councilshall reviewprogress and take any appropriateaction no laterthan July 2005. Other Development lssues: in the ongoingmarket access negotiations, recognising the fundamentalprinciples of the WTO and relevantprovisions of GATT 1994,special attentionshall be givento the specifictrade and developmentrelated needs and concernsof developingcountries, including capacity constraints. These particular concernsof developingcountries, including relating to food security,rural development, livelihood,preferences, commodities and nel tood imports,as well as prior unilateral liberalisation,should be taken into consideration,as appropriate,in the courseof the

124 Agricultureand NAMA negotiations.The trade-relatedissues identified for the fuller integrationof small,vulnerable economies into the multilateraltrading system, should also be addressed,without creating a sub-categoryof Members,as part of a work programme,as mandatedin paragraph35 of the Doha MinisterialDeclaration. Least-DevelopedGountries: the GeneralCouncil reaffirms the commitmentsmade at Doha concerningleast-developed countries and renewsits determinationto fulfilthese commitments.Members will continueto takedue accountof the concernsof least- developedcountries in the negotiations.The Councilconfirms that nothingin this Decisionshall detractin any way from the specialprovisions agreed by Membersin respectof these countries.

e. Services: the GeneralCouncil takes note of the reportto the TNC by the Special Sessionof the Councilfor Trade in Servicesaeand reaffirmsMembers' commitment to progressin this areaof the negotiationsin linewith the Dohamandate. The Council adoptsthe recommendationsagreed by the SpecialSession, set out in AnnexC to this document,on the basisof whichfurther progress in the servicesnegotiations will be pursued. Revisedoffers should be tabled by May 2005.

f. Other negotiatingbodies: Rules,Trade & Environmentand TRIPS: the GeneralCounciltakes note of the reportsto the TNC by the NegotiatingGroup on Rulesand by the SpecialSessions of the Committeeon Tradeand Environmentand the TRIPSCouncil.e The Council reaffirmsMembers'commitment to progressin all of these areasof the negotiationsin line with the Doha mandates. Dispute Settlement: the GeneralCouncil takes note of the reportto the TNC by the SpecialSession of the DisputeSettlement Bodfl and reaffirmsMembers'commitment to progressin this area of the negotiationsin line with the Doha mandate. The Council adoptsthe TNC's recommendationthat work in the SpecialSession should continue on the basisset out by the Chairmanof that body in his reportto the TNC.

g. Trade Facilitation: taking noteof the work done on trade facilitationby the Council for Trade in Goods underthe mandatein paragraph27 of the Doha Ministerial Declarationand the work carriedout underthe auspicesof the GeneralCouncil both priorto the FifthMinisterial Conference and after its conclusion,the GeneralCouncil decidesby explicitconsensus to commencenegotiations on the basisof the modalities set out in Annex D to this document. Relationship between Trade and Investment, Interaction between Trade and Competition Policy and Transparency in : the Council agreesthat these issues,mentioned in the Doha MinisterialDeclaration in paragraphs 20-22,23-25 and 26 respectively,will not form part of the Work Programmeset out in that Declarationand thereforeno work towardsnegotiations on any of these issueswill take placewithin the WTO duringthe DohaRound.

h. Other elements of the Work Programme: the GeneralCouncil reaffirms the high priorityMinisters at Doha gave to those elementsof the Work Programmewhich do not

4eThis reportis containedin documentTN/S/16. s The reportsto the TNC referencedin this paragraphare containedin the following documents:Negotiating Group on Rules- TN/RU9; SpecialSession of the Committeeon Tradeand Environment- TN/TE/9; Special Session of the CouncilforTRIPS - TN/IP/10. 5tThis reportis containedin documentTN/DS/10.

125 involvenegotiations. Noting that a numberof these issuesare of particularinterest to developing-countryMembers, the Councilemphasizes its commitmentto fulfilthe mandatesgiven by Ministersin alltheseareas. To this end,the GeneralCouncil and other relevantbodies shall reportin line with their Doha mandatesto the Sixth Sessionof the MinisterialConference. The moratoriacovered by paragraph11.1 of the Doha MinisterialDecision on lmplementation-relatedlssues and Concernsand paragraph34 of the DohaMinisterial Declaration are extendedup to the SixthMinisterial Conference.

2. The GeneralCouncil agrees that this Decisionand its Annexesshall not be used in any disputesettlement proceeding under the DSU and shallnot be usedfor interpretingthe existingWTO Agreements.

3. The GeneralCouncil calls on all Membersto redoubletheir efforts towards the conclusionof a balancedoveralloutcome of the Doha DevelopmentAgenda in fulfilmentof the commitmentsMinisters took at Doha. The Councilagrees to continuethe negotiations launchedat Doha beyondthe timeframeset out in paragraph45 of the , leadingto the SixthSession of the MinisterialConference. Recalling its decisionof 21 October2003 to acceptthe generousoffer of the Governmentof ,China to host the Sixth Session,the Councillurther agrees that this Sessionwill be held in December2005.

Annex A

Frameworkfor EstablishingModalities in Agriculture

1. The startingpoint for the currentphase of the agriculturenegotiations has been the mandateset out in Paragraph13 of the DohaMinisterial Declaration. This in turnbuilt on the long-termobjective of the Agreementon Agricultureto establisha fair and market-oriented tradingsystem through a programmeof fundamentalreform. The elementsbelow offer the additionalprecision required at this stageof the negotiationsand thus the basisfor the negotiationsof full modalitiesin the next phase.The levelof ambitionset by the Doha mandatewill continueto be the basisfor the negotiationson agriculture.

2. The finalbalance will be foundonly at the conclusionof thesesubsequent negotiationsand withinthe SingleUndertaking. To achievethis balance,the modalitiesto be developedwill need to incorporateoperationally effective and meaningfulprovisions for specialand differentialtreatment for developingcountry Members. Agriculture is of critical importanceto the economicdevelopment of developingcountry Members and they must be able to pursueagricultural policies that are supportiveof their developmentgoals, poverty reductionstrategies, food securityand livelihoodconcerns. Non-trade concerns, as referred to in Paragraph13 of the Doha Declaration,will be taken into account.

3. The reformsin allthree pillarsform an interconnectedwhole and must be approachedin a balancedand equitablemanner.

4. The GeneralCouncil recognizes the importanceof cottonfor a certainnumber of countriesand its vital importancefor developingcountries, especially LDCs. lt will be addressedambitiously, expeditiously, and specifically,within the agriculturenegotiations. The provisionsof this frameworkprovide a basisfor this approach,as does the sectoral initiativeon cotton. The SpecialSession of the Committeeon Agricultureshall ensure appropriateprioritization of the cottonissue independentlyfrom other sectoralinitiatives. A subcommitteeon cottonwill meet periodicallyand reportto the SpecialSession of the Committeeon Agricultureto reviewprogress. Work shall encompass alltrade-distorting policiesaffecting the sectorin all three pillarsof marketaccess, domestic support, and export competition,as specifiedin the Doha text and this Frameworktext.

5. Coherencebetween trade and developmentaspects of the cotton issuewill be pursuedas set out in paragraph1.b of the text to whichthis Frameworkis annexed.

DOMESTICSUPPORT

6. The Doha MinisterialDeclaration calls for "substantialreductions in trade-distorting domesticsupport". With a view to achievingthese substantialreductions, the negotiationsin this pillarwill ensure the following:

. Specialand differentialtreatment remains an integralcomponent of domestic support.Modalities to be developedwill includelonger implementation periods and lowerreduction coefficients for all types of trade-distortingdomestic support and continuedaccess to the provisionsunder Article 6.2.

. There will be a strongelement of harmonisationin the reductionsmade by developed Members.Specifically, higher levels of permittedtrade-distorting domestic support will be subjectto deepercuts.

. Each such Memberwill make a substantialreduction in the overalllevel of its trade- distortingsupport from bound levels.

. As well as this overallcommitment,Final Bound Total AMS and permittedde minimis levelswill be subjectto substantialreductions and, in the caseof the BlueBox, will be cappedas specifiedin paragraph15 in orderto ensureresults that are coherent with the long-termreform objective. Any clarificationor developmentof rulesand conditionsto governtrade distortingsupport will take this into account.

Overall Reduction: A Tiered Formula

7. The overallbase levelof all trade-distortingdomestic support, as measuredby the FinalBound TotalAMS pfus permittedde minimislevel and the level agreedin paragraph8 belowfor Blue Box payments,will be reducedaccording to a tieredformula. Under this formula,Members having higher levels of trade-distortingdomestic support will make greater overallreductions in order to achievea harmonizingresult. As the first instalmentof the overallcut, in the first year and throughoutthe implementationperiod, the sum of all trade- distortingsupport will not exceed80 per cent of the sum of Final BoundTotal AMS plus permittedde minimisplus the Blue Box at the leveldetermined in paragraph15.

8. The followingparameters will guidethe furthernegotiation of this tieredformula:

. This commitmentwill applyas a minimumoverallcommitment. lt will not be applied as a ceilingon reductionsof overalltrade-distorting domestic support, should the separateand complementaryformulae to be developedfor TotalAMS, de minimis and Blue Box paymentsimply, when taken together,a deepercut in overalltrade- distortingdomestic support for an individualMember. . The basefor measuringthe BlueBox component will be the higherof existingBlue Box paymentsduring a recentrepresentative period to be agreedand the cap establishedin paragraph15 below.

Final Bound Total AMS: A Tiered Formula

9. To achievereductions with a harmonizingeffect:

. FinalBound TotalAMS will be reducedsubstantially, using a tieredapproach.

. Membershaving higher Total AMS will makegreater reductions.

. To preventcircumvention of the objectiveof the Agreementthrough transfers of unchangeddomestic support between different support categories, product-specific AMSs will be cappedat their respectiveaverage levels according to a methodology to be agreed.

r Substantialreductions in FinalBound Total AMS willresult in reductionsof some product-specific support.

10. Membersmay make greaterthan formulareductions in orderto achievethe required levelof cut in overalltrade-distortingdomestic support.

De Minimis

11. Reductionsin de minimiswill be negotiatedtaking into accountthe principleof speciafand differentialtreatment.Developing countries that allocatealmost all de minimis supportfor subsistenceand resource-poorfarmers will be exempt.

12. Membersmay make greaterthan formulareductions in orderto achievethe required levelof cut in overalltrade-distorting domestic support.

Blue Box

13. Membersrecognize the role of the Blue Box in promotingagricultural reforms. In this light,Article 6.5 will be reviewedso that Membersmay have recourseto the following measures:

. Directpayments under production-limiting programmes if: - suchpayments are basedon fixedand unchangingareas and yields;or - such paymentsare made on 85% or less of a fixed and unchangingbase levelofproduction;or - livestockpayments are made on a fixed and unchangingnumber of head.

. Directpayments that do not requireproduction if : - such paymentsare basedon fixed and unchangingbases and yields;or - livestockpayments made on a fixed and unchangingnumber of head;and - such paymentsare made on 85% or less of a fixed and unchangingbase levelof production. 14. The abovecriteria, along with additionalcriteria will be negotiated.Any suchcriteria willensure that BlueBox paymentsare lesstrade-distorting than AMS measures,it being understoodthat:

. Any new criteriawould need to take accountof the balanceof WTO rightsand obligations.

. Any new criteriato be agreedwill not have the perverseeffect of undoingongoing reforms.

15. Blue Box supportwill not exceed5"/" of a Member'saverage total value of agricultural productionduring an historicalperiod. The historicalperiod will be establishedin the negotiations.This ceiling will apply to any actualor potentialBlue Box userfrom the beginningof the implementationperiod. In caseswhere a Memberhas placedan exceptionallylarge percentageof its trade-distortingsupport in the Blue Box, some flexibility will be providedon a basisto be agreedto ensurethat such a Memberis not called upon to make a whollydisproportionate cut.

Green Box

16. Green Box criteriawill be reviewedand clarifiedwith a view to ensuringthat Green Box measureshave no, or at most minimal,trade-distorting effects or effectson production. Such a reviewand clarificationwill needto ensurethat the basicconcepts, principles and effectivenessof the Green Box remainand take due accountof non-tradeconcerns. The improvedobligations for monitoringand surveillanceof all new disciplinesforeshadowed in paragraph48 belowwill be particularlyimportant with respectto the Green Box. EXPORTCOMPETITION

17. The DohaMinisterial Declaration calls for "reductionof, witha viewto phasingout, all forms of exportsubsidies". As an outcomeof the negotiations,Members agree to establish detailedmodalities ensuring the parallelelimination of all formsof exportsubsidies and disciplineson all exportmeasures with equivalenteffect by a credibleend date.

End Point

18. Thefollowing will be eliminated by the end date to be agreed:

Exportsubsidies as scheduled.

Exportcredits, export credit guarantees or insuranceprogrammes with repayment periodsbeyond 180 days.

Termsand conditions relating to exportcredits, export credit guarantees or insurance programmeswith repayment periods of 180days and below which are not in accordancewith disciplines to be agreed.These disciplines will cover, inter alia, paymentof interest,minimum interest rates, minimum premium requirements, and otherelements which can constitute subsidies or otherwisedistort trade. . Trade distortingpractices with respectto exportingSTEs includingeliminating export subsidiesprovided to or by them, governmentfinancing, and the underwritingof losses.The issueof the future use of monopolypowers will be subjectto further negotiation.

. Provisionof food aid that is not in conformitywith operationallyeffective disciplines to be agreed.The objectiveof suchdisciplines will be to preventcommercial displacement.The role of internationalorganizations as regardsthe provisionof food aid by Members,including related humanitarian and developmentalissues, will be addressedin the negotiations.The questionof providingfood aid exclusivelyin fully grantform will alsobe addressedin the negotiations.

19. Effectivetransparency provisions for paragraph18 will be established.Such provisions,in accordancewith standardWTO practice,will be consistentwith commercial confidentiality considerations.

Implementation

ZO. Commitmentsand disciplinesin paragraph18 will be implementedaccording to a scheduleand modalitiesto be agreed.Commitments will be implementedby annual instalments.Their phasingwill take into accountthe need for some coherencewith internal reformsteps of Members.

21. The negotiationof the elementsin paragraph18 and theirimplementation will ensure equivalentand parallelcommitments by Members.

Special and Differential Treatment

22. Developingcountry Members witl benefitfrom longerimplementation periods for the phasingout of all forms of exportsubsidies.

23. Developingcountries will continueto benefitfrom specialand differentialtreatment underthe provisionsof Article9.4 of the Agreementon Agriculturefor a reasonableperiod, to be negotiated,afier the phasingout of all forms of exportsubsidies and implementationof all disciplinesidentified above are completed.

24. Memberswill ensurethat the disciplineson exportcredits, export credit guarantees or insuranceprograms to be agreedwill make appropriateprovision for differentialtreatment in favourof least-developedand net food-importingdeveloping countries as providedfor in paragraph4 of the Decisionon MeasuresConcerning the PossibleNegative Effects of the ReformProgramme on Least-Developedand Net Food-lmportingDeveloping Countries. lmprovedobligations for monitoringand surveillanceof all new disciplinesas toreshadowed in paragraph48 will be criticallyimportant in this regard. Provisionsto be agreedin this respectmust not underminethe commitmentsundertaken by Membersunder the obligations in paragraph18 above.

25. STEs in developingcountry Members which enjoy specialprivileges to preserve domesticconsumer price stability and to ensurefood securitywill receivespecial considerationfor maintainingmonopoly status. Special Circumstances

26. In exceptionalcircumstances, which cannot be adequatelycovered by food aid, commercialexport credits or preferentialinternational financing facilities, ad hoc temporary financingarrangements relating to exportsto developingcountries may be agreedby Members. Such agreementsmust not have the effectof underminingcommitments undertakenby Membersin paragraph18 above,and will be basedon criteriaand consultationprocedures to be established.

MARKETACCESS

27. The Doha MinisterialDeclaration calls for "substantialimprovements in market access".Members also agreedthat specialand differentialtreatment for developingMembers wouldbe an integralpart of all elementsin the negotiations.

The Single Approach: a Tiered Formula

28. To ensurethat a singleapproach for developedand developingcountry Members meetsall the objectivesof the Doha mandate,tariff reductions will be made througha tiered formulathat takes into accounttheir differenttariff structures.

29. To ensurethat such a formulawill lead to substantialtrade expansion,the following principleswill guide its furthernegotiation:

. Tariff reductionswill be made from boundrates. Substantial overalltariff reductions will be achievedas a final resultfrom negotiations.

. EachMember (other than LDCs)will makea contribution.Operationally effective specialand differentialprovisions for developingcountry Members will be an integral part of all elements.

. Progressivityin tariffreductions will be achievedthrough deeper cuts in highertariffs with flexibilitiesfor sensitiveproducts. Substantial improvements in marketaccess will be achievedfor all products.

30. The numberof bands,the thresholdsfor definingthe bandsand the type ol tariff reductionin each band remainunder negotiation.The role of a tariffcap in a tieredformula with distincttreatment for sensitiveproducts will be furtherevaluated.

Sensitive Products

Selection

31. Withoutundermining the overallobjective of the tieredapproach, Members may designatean appropriatenumber, to be negotiated,of tariff linesto be treatedas sensitive, takingaccount of existingcommitments for these products.

Treatment 'substantial 32. The principleof improvement'willapply to eachproduct. 'substantial 33. improvement'willbe achievedthrough combinations of tariffquota commitmentsand tariffreductions applying to each product. However,balance in this negotiationwill be found only if the final negotiatedresult also reflectsthe sensitivityof the productconcerned.

34. Some MFN-basedtariff quota expansionwill be requiredfor all such products.A basefor suchan expansionwill be established,taking account of coherentand equitable criteriato be developedin the negotiations.In order not to underminethe objectiveof the tiered approach,for all such products,MFN basedtariff quota expansionwill be provided underspecific rules to be negotiatedtaking into account deviations from the tariffformula.

Other Elements

35. Otherelements that will givethe flexibilityrequired to reacha finalbalanced result includereduction or eliminationof in-quotatariff rates,and operationallyeffective improvementsin tariffquota administrationfor existingtariff quotas so as to enableMembers, and particularlydeveloping country Members, to fully benefitfrom the marketaccess opportunitiesunder tariff rate quotas.

36. Tariff escalationwill be addressedthrough a formulato be agreed.

37. The issueof tariffsimplification remains under negotiation.

38. The questionof the specialagricultural safeguard (SSG) remainsunder negotiation.

Special and differential treatment

39. Havingregard to their ruraldevelopment,food securityand/or livelihood security needs,special and differentialtreatment for developingcountries witl be an integralpart of all elementsof the negotiation,including the tariff reductionformula, the numberand treatment of sensitiveproducts, expansion of tariffrate quotas,and implementationperiod. 40. Proportionalitywill be achievedby requiringlesser tarifl reductioncommitments or tariffquota expansioncommitments from developingcountry Members.

4'1. Developingcountry Members will have the flexibilityto designatean appropriate numberof productsas SpecialProducts, based on criteriaof food security,livelihood security and ruraldevelopmentneeds. These products will be eligiblefor more flexibletreatment. The criteriaand treatmentof these productswill be furtherspecified during the negotiation phaseand will recognizethe fundamentalimportance of SpecialProducts to developing countries.

42. A SpecialSafeguard Mechanism (SSM) will be establishedfor use by developing countryMembers.

43. Fullimplementation of the long-standingcommitment to achievethe fullest liberalisationof trade in tropicalagricultural products and for productsof particularimportance to the diversificationof productionfrom the growingof illicitnarcotic crops is overdueand will be addressedeffectively in the marketaccess negotiations. 44. The importanceof long-standingpreferences is fullyrecognised. The issueof preferenceerosion will be addressed.For the furtherconsideration in this regard,paragraph 16 and other relevantprovisions of TN/AGM/1/Rev.1will be used as a reference.

LEAST.DEVELOPED COUNTRIES

45. Least-DevelopedCountries, which will have full accessto all specialand differential treatmentprovisions above, are not requiredto undertakereduction commitments. DevelopedMembers, and developingcountry Members in a positionto do so, shouldprovide duty-freeand quota-freemarket access for productsoriginating from least-developed countries.

46. Work on cotton underall the pillarswill reflectthe vital importanceof this sectorto certainLDC Membersand we willwork to achieveambitious results expeditiously.

RECENTLYACCEDED MEMBERS

47. The particularconcerns of recentlyacceded Members will be effectivelyaddressed throughspecific flexibility provisions.

MONITORINGAND SURVEILLANCE

48. Article 18 of the Agreementon Agriculturewill be amendedwith a view to enhancing monitoringso as to effectivelyensure full transparency,including through timely and completenotifications with respectto the commitmentsin marketaccess, domestic support and exportcompetition. The particularconcerns of developingcountries in this regardwill be addressed.

OTHERISSUES

49. lssuesof interestbut not agreed: sectoralinitiatives, differential export taxes, Gls.

50. Disciplineson exportprohibitions and restrictions in Article12.1 of the Agreementon Agriculturewill be strengthened. AnnexB

Frameworkfor EstablishingModalities in Market Access for Non-Agricultural Products

1. This Frameworkcontains the initialelements for futurework on modalitiesby the NegotiatingGroup on MarketAccess. Additionalnegotiations are requiredto reach agreementon the specificsof some of these elements. These relateto the formula,the issuesconcerning the treatmentof unboundtariffs in indenttwo of paragraph5, the flexibilitiesfor developing-countryparticipants, the issueof participationin the sectorialtariff componentand the preferences.ln orderto finalizethe modalities,the NegotiatingGroup is instructedto addressthese issuesexpeditiously in a mannerconsistent with the mandateof paragraph16 of the Doha MinisterialDeclaration and the overallbalance therein. 2. We reaffirmthat negotiationson marketaccess for non-agriculturalproducts shall aim to reduceor as appropriateeliminate tariffs, including the reductionor eliminationof tariff peaks,high taritfs,and tariffescalation, as well as non-tariffbarriers, in particularon products of export interestto developingcountries. We also reaffirmthe importanceof specialand differentialtreatment and less than full reciprocityin reductioncommitments as integralparts of the modalities.

3. We acknowledgethe substantialwork undertakenby the NegotiatingGroup on MarketAccess and the progresstowards achieving an agreementon negotiatingmodalities. We take note of the constructivedialogue on the Chair'sDraft Elementsof Modalities (TN/MAA/V/35/Rev.1)and confirmour intentionto use this documentas a referencefor the futurework of the NegotiatingGroup. We instructthe NegotiatingGroup to continueits work, as mandatedby paragraph16 of the DohaMinisterial Declaration with its corresponding relerencesto the relevantprovisions of ArticleXXV|ll bis of GATT 1994 and to the provisions citedin paragraph50 of the DohaMinisterial Declaration, on the basisset out below.

4. We recognizethat a formulaapproach is key to reducingtariffs, and reducingor eliminatingtariff peaks, high tariffs,and tariffescalation. We agree that the Negotiating Groupshould continue its workon a non-linearformula applied on a line-by-linebasis which shalltake fully into accountthe specialneeds and interestsof developingand least- developedcountry participants, including through less than full reciprocityin reduction commitments.

5. We furtheragree on the followingelements regarding the formula: - productcoverage shall be comprehensivewithout a prioriexclusions; - tariffreductions or eliminationshall commence from the bound ratesafter full implementationof currentconcessions; however, for unboundtariff lines,the basisfor commencingthe tariff reductionsshall be [two]times the MFN appliedrate in the base year; - the base year for MFN appliedtariff rates shall be 2001 (applicablerates on 14 November); - creditshall be givenfor autonomousliberalization by developingcountries providedthat the tarifflines were boundon an MFN basisin the WTO since the conclusionof the UruguayRound; - all non-ad valoremduties shall be converted to ad valoremequivalents on the basisof a methodologyto be determinedand bound in ad valoremterms; - negotiationsshall commence on the basisof the HS96or HS2002 nomenclature,with the resultsof the negotiationsto be finalizedin HS2002 nomenclature: - the referenceperiod for importdata shall be 1999-2001.

6. We furthermoreagree that, as an exception,participants with a bindingcoverage of non-agriculturaltariff lines of lessthan [35] % would be exemptfrom makingtariff reductions throughthe formula. Instead,we expectthem to bind[100] 7o of non-agriculturaltarifflines at an averagelevel that does not exceedthe overallaverage of boundtariffs for all developing countriesafter full implementationof currentconcessions.

7. We recognizethat a sectorialtariff component, aiming at eliminationor harmonization is anotherkey elementto achievingthe objectivesof paragraph16 of the Doha Ministerial Declarationwith regardto the reductionor eliminationof tariffs,in particularon productsof exportinterest to developingcountries. We recognizethat participationby all participantswill be importantto that effect. We thereforeinstruct the NegotiatingGroup to pursueits discussionson such a component,with a view to definingproduct coverage, participation, and adequateprovisions of flexibilityfor developing-countryparticipants.

8. We agreethat developing-countryparticipants shall have longerimplementation periodsfor tariffreductions. In addition,they shallbe giventhe followingflexibility:

a) applyingless than formulacuts to up to [10] % of the tarifflines providedthat the cuts are no less than half the formulacuts and that these tarifflines do not exceed [10]% of the totalvalueof a Member'simports;or

b) keeping,as an exception,tariff lines unbound, or not applyingformula cuts for up to [5] % of tariff lines providedthey do not exceed[5] % of the total value of a Member'simports.

We furthermoreagree that this flexibilitycould not be used to excludeentire HS Chapters.

9. We agreethat least-developedcountry participants shall not be requiredto applythe formulanor participatein the sectorialapproach, however, as part of their contributionto this roundof negotiations,they are expectedto substantiallyincrease their levelof binding commitments.

10. Furthermore,in recognitionof the need to enhancethe integrationof least-developed countriesinto the multilateraltrading system and supportthe diversificationof their production and exportbase, we call upon developed-countryparticipants and other participantswho so decide,to grant on an autonomousbasis duty-free and quota-freemarket access for non- agriculturalproducts originating from least-developedcountries by the year [...].

11. We recognizethat newlyacceded Members shall have recourseto specialprovisions tor tariltreductions in orderto take into accounttheir extensivemarket access commitments undertakenas part of their accession and that staged tariff reductionsare still being implementedin many cases. We instructthe NegotiatingGroup to furtherelaborate on such provisions.

12. We agreethat pendingagreement on core modalitiesfor tariffs,the possibilitiesof supplementarymodalities such as zero-for-zerosector elimination, sectorial harmonization, and request& offer, shouldbe kept open.

13. In addition,we ask developed-countryparticipants and other participantswho so decideto considerthe eliminationof low duties.

14. We recognizethat NTBs are an integraland equallyimportant part of these negotiationsand instructparticipants to intensifytheir work on NTBs. ln particular,we encourageall participantsto make notificationson NTBs by 31 October2004 and to proceed with identification,examination, categorization, and ultimatelynegotiations on NTBs. We take notethat the modalitiesfor addressingNTBs in these negotiationscould include requesUoffer,horizontal, or verticalapproaches; and shouldfully take into accountthe principleof specialand differentialtreatment for developingand least-developedcountry participants.

15. We recognizethat appropriate studies and capacitybuilding measures shall be an integralpart of the modalitiesto be agreed. We also recognizethe work that has already been undertakenin these areas and ask participantsto continueto identifysuch issuesto improveparticipation in the negotiations.

16. We recognizethe challengesthat may be faced by non-reciprocalpreference beneficiaryMembers and those Membersthat are at presenthighly dependent on tariff revenueas a resultof these negotiationson non-agriculturalproducts. We instructthe NegotiatingGroup to take into consideration,in the courseof its work, the particularneeds that may arise for the Membersconcerned.

17. We furthermoreencourage the NegotiatingGroup to workclosely with the Committee on Tradeand Environmentin SpecialSession with a viewto addressingthe issueof non- agriculturalenvironmental goods coveredin paragraph31 (iii)of the Doha Ministerial Declaration.

Annex C

Recommendationsof the SpecialSession of the Council for Trade in Services

(a) Memberswho have not yet submittedtheir initialoffers must do so as soon as possible.

(b) A date for the submissionof a roundof revisedoffers should be establishedas soon as feasible.

(c) With a view to providingeffective market access to all Membersand in orderto ensurea substantiveoutcome, Members shall strive to ensurea high qualityof offers,particularly in sectorsand modesof supplyof exportinterest to developing countries,with specialattention to be givento least-developedcountries.

Membersshall aim to achieveprogressively higher levels of liberalizationwith no a prioriexclusion of any servicesector or modeof supplyand shall give special attentionto sectorsand modesof supplyof exportinterest to developingcountries. Membersnote the interestof developingcountries, as well as other Members,in Mode4.

Membersmust intensifytheir effortsto concludethe negotiationson rule-making underGATS ArticlesVl:4, X, Xlll and XV in accordancewith their respective mandatesand deadlines.

Targetedtechnical assistance should be providedwith a view to enablingdeveloping countriesto participateeffectively in the negotiations.

For the purposeof the Sixth Ministerialmeeting, the SpecialSession of the Council for Trade in Servicesshall reviewprogress in these negotiationsand providea full reportto the Trade NegotiationsCommittee, including possible recommendations. Annex D

Modalities for Negotiations on Trade Facilitation 1. Negotiationsshall aim to clarifyand improverelevant aspects of ArticlesV, Vlll and X of the GATT 1994 with a view to furtherexpediting the movement,release and clearanceof goods,including goods in transit.? Negotiationsshall also aim at enhancingtechnical assistanceand supportfor capacitybuilding in this area. The negotiationsshall further aim at provisionsfor effectivecooperation between customs or any other appropriateauthorities on trade facilitationand customscompliance issues.

2. The resultsof the negotiationsshall take fully into accountthe principleof specialand differentialtreatment for developingand least-developedcountries. Membersrecognize that this principleshould extend beyond the grantingof traditionaltransitionperiods for implementingcommitments. In particular,the extentand the timingof enteringinto commitmentsshall be relatedto the implementationcapacities of developingand least- developedMembers. lt is furtheragreed that those Memberswould not be obligedto undertakeinvestments in infrastructureprojects beyond their means.

3. Least-developedcountry Members will only be requiredto undertakecommitments to the extentconsistent with their individual development, financial and tradeneeds or their administrativeand institutionalcapabilities.

4. As an integralpart of the negotiations,Mernbers shall seek to identifytheir trade facilitationneeds and priorities,particularly those of developingand least-developed countries,and shall also addressthe concernsof developingand least-developedcountries relatedto cost implicationsof proposedmeasures.

5. lt is recognizedthat the provisionof technicalassistance and supportfor capacity buildingis vitalfor developingand least-developedcountries to enablethem to fully participatein and benefittrom the negotiations.Members, in particulardeveloped countries, thereforecommit themselves to adequatelyensure such supportand assistanceduring the negotiations.s

6. Supportand assistanceshould also be providedto help developingand least- developedcountries implement the commitmentsresulting from the negotiations,in accordancewith their natureand scope. In this context,it is recognizedthat negotiations could lead to certaincommitments whose implementationwould requiresupport for infrastructuredevelopment on the part of some Members. In these limitedcases, developed- countryMembers will make every effortto ensuresupport and assistancedirectly related to the natureand scopeof the commitmentsin orderto allow implementation.lt is understood, however,that in cases where requiredsupport and assistancefor such infrastructureis not forthcoming,and where a developingor least-developedMember continues to lack the necessarycapacity, implementation will not be required. Whileevery effortwill be madeto ensurethe necessarysupport and assistance,it is understoodthat the commitmentsby developedcountries to providesuch supportare not open-ended.

7. Membersagree to reviewthe effectivenessof the supportand assistanceprovided and its abilityto supportthe implementationof the resultsof the negotiations.

e lt is understoodthat this is withoutprejudice to the possibleformat of the linal resultof the negotiationsand wouldallow considerationof variousforms of outcomes. s In connectionwith this paragraph,Members note that paragraph38 of the Doha Ministerial Declarationaddresses relevanttechnical assistance and capacity building concerns of Members.

137 8. In orderto make technicalassistance and capacitybuilding more effectiveand operationaland to ensurebetter coherence, Members shall inviterelevant international organizations,including the lMF,OECD, UNCTAD, WCO and the WorldBank to undertakea collaborativeeffort in this regard.

9. Due accountshall be taken of the relevantwork of the WCO and other relevant internationalorganizations in this area.

10. Paragraphs45-51 of the DohaMinisterial Declaration shall apply to these negotiations.At its first meetingafter the July sessionof the GeneralCouncil, the Trade NegotiationsCommittee shall establish a NegotiatingGroup on TradeFacilitation and appoint its Chair. The firstmeeting of the NegotiatingGroup shall agree on a work planand schedule of meetings. Works Cited

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