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The Hong Kong Declaration and Agriculture: Implications for Bangladesh

Uttam Kumar Deb
Senior Research Fellow
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Narayan Chandra Das
Research Associate
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Abstract/ Executive Summary:

This paper reviews the developments in WTO negotiation on agriculture in the light of the Hong Kong Ministerial Declaration. It has critically analyzed the decisions and negotiating proposals adopted through the Declaration. The paper has also analyzed the possible impacts of the adopted decisions and proposals for Bangladesh’s agriculture sector and its economy. Potential impacts are measured in terms of reduction in tariff, domestic support and export subsidy. More importantly, the paper has quantified potential impacts of agricultural trade liberalization under Doha Round negotiations on prices and welfare gains, production, consumption and trade of agricultural commodities in Bangladesh. Based on the research findings, the paper has suggested some negotiating strategies for Bangladesh to be pursued in the ongoing WTO negotiations on agriculture.

Keywords: Trade liberalization, Carried out, Hong Kong Ministerial Declaration, Doha Round Negotiations, Agriculture

Location: In Bangladesh

Start Date: 00-00-2004

End Date: 00-00-2008

Program Area: Comparative study

Commodity: Management, Livelihood, Market analysis

Objectives:

To know the likely impacts of trade liberalization to be carried out globally as a follow-up of Hong Kong Ministerial Declaration through successful completion of Doha Round Negotiations.

Methodology:

The Hong Kong Ministerial Declaration of the WTO, adopted on 18 December 2005 (WTO, 2005), has clearly mentioned all decisions and proposals related to agriculture. Annex A of the Declaration includes the Report by the Chairman of the Special Session of the Committee on Agriculture to the trade negotiations committee (TNC). Annex F of the Declaration, which deals with Special and Differential Treatments for least developed countries (LDCs), has also relevance for the agriculture sector of Bangladesh. In Hong Kong, member countries reaffirmed their commitments to the mandate on agriculture as set out in paragraph 13 of the Doha Ministerial Declaration1 and to the framework adopted by the general council on 1 August 2004. ² They had taken some concrete decisions and took note of the progress on various contentious issues like domestic support, market access and export subsidy. Members also agreed to establish modalities by April 2006 and to submit draft schedules by the end of July 2006. On the important issue of domestic support, WTO member countries agreed that there will be three bands for reductions in Final Bound Total AMS and in the overall cut in trade-distorting domestic support, with higher linear cuts in higher bands. In both cases: (1) member with the permitted highest level of domestic support will be in the top bands; (2) member with a second and third-highest level of the permitted level of domestic support will be in the second band; and (3) all other countries including the developing countries will be the third band (bottom band). However, developed country members in the bottom band with a relatively higher level of Final Bound Total AMS will take an additional effort in AMS reduction. Member countries agreed to eliminate all forms of export subsidy by 2013 and this will be achieved in a progressive and parallel manner. Modalities for reduction of export subsidy (to be decided by April 2006) would be decided in a manner so that a substantial part is realized by the end of the first half of the implementation period. Members agreed to reduce the bound tariff rate on agriculture to successfully conclude the Doha agenda. It has been agreed that there will be four bands for structuring tariff cuts based on ad valorem equivalence. However, the relevant thresholds for tariff cuts were not established. Therefore, members have to agree on the thresholds level and tariff cuts to be applicable for developed and developing countries. In the case of cotton, concrete decision was made in the Hong Kong Ministerial Conference. Member countries agreed that developed countries shall eliminate all forms of export subsidies for cotton in 2006. Developed countries will also provide duty-free and quota-free market access for cotton exported by least-developed countries (LDCs) from the commencement of the implementation period. Although a time-bound decision was not made as regards reduction of trade-distorting domestic subsidies for cotton production, it was decided that domestic subsidies will be reduced more ambitiously than under whatever general formula is agreed and that it should be implemented over a shorter period of time than generally applicable. On the complex issue of food aid, the Hong Kong Declaration aims for bringing discipline in food aid but reconfirmed the commitment of the WTO members to maintain an adequate level and to take into account the interest of the food recipient countries. There will be a “safe box” for bona fide food aid so that WTO shall not stand in the way of the provision of genuine food aid but commercial displacement is to be eliminated. Member countries also agreed to work on regulations to stop misuse of food aid provisions, and at the same time, to ensure supply of emergency food aid. In the Hong Kong Ministerial conference member countries recognized the need for special and differential treatment for LDCs as regards duty-free and quota-free market access. The declaration states that “We agree that developed-country members shall, and developing-country members declaring themselves in a position to do so should provide duty-free and quota-free market access on a lasting basis, for all products originating from all LDCs by 2008 or no later than the start of the implementation period in a manner that ensures stability, security and predictability.”

Source of Information: The Hong Kong Declaration and Bangladesh Agriculture, CPD Occasional Paper Series 60, ISSN 1818-1570 (Print), ISSN 1818-1597 (Online)

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Our quantitative estimates clearly indicate that Bangladesh would have substantially been benefited from duty-free and quota-free market access for its agricultural products. Agricultural export items from Bangladesh are limited in number and there is lack of diversity in the export basket. So, there is scope for blocking effective market access for agricultural commodities with high export potentials—particularly in the US market, even after providing duty-free and quota-free market access for 97 percent of products from LDCs. Trade negotiators of Bangladesh must keep this reality in mind and highlight this in the upcoming negotiation. Bangladesh must negotiate for assured market access for products with high export potentials. Our simulation results have indicated: (i) an increase in international prices of all agricultural products except two products (livestock and sorghum), (ii) increase in Bangladesh’s agricultural export revenue, (iii) decrease in import cost for agricultural products—as a result of multilateral trade liberalization likely to be carried out under Doha Round Negotiations at the WTO as a follow up of the Hong Kong Declaration. An increase in export value of agricultural commodities from Bangladesh and a decrease in import costs for agricultural products are likely to result a surplus in the agricultural trade of Bangladesh ranges between US$80.62 million and US$119.64 million. It may be noted that Bangladesh had an average annual deficit trade balance in its agricultural trade amounting to US$66.05 million during 1999-2001. The study also revealed that though total value of agricultural exports is likely to be increased, but there is the possibility of a decrease in export of some agricultural products. The positive trade balance in livestock, sheep meat, poultry, butter, cheese, rice, tomatoes, bananas, other tropical fruits, raw sugar, tea, tobacco leaves and tropical oilseeds are expected. Exports of these commodities from Bangladesh are likely to be increased substantially. On the other hand, trade deficit for milk concentrate, barley, maize, sorghum, tobacco processed and hides and skins will increase further as a result of the increased import. Bangladesh must plan accordingly and take appropriate policies to materialize the likely gains in trade by increasing its trade capacity. To exploit the export opportunities, Bangladesh will need to enhance its supply-side capacity and pursue a broad-based diversified agricultural production and export strategy. More importantly, Bangladesh must take part in WTO negotiations on agriculture. Earlier research (Deb, 2005a) indicated that Bangladesh agriculture is responsive to prices and trade policies and the cropping pattern in Bangladesh has changed as a result of the liberalization of agricultural trade. However, Rules of Origin (RoO) and Non-tariff Barriers (NTBs) act as barriers to agricultural exports from Bangladesh (Deb, 2006). Considering the Hong Kong decisions, Bangladesh may demand for: (i) harmonized RoO applicable in all developed countries; (ii) simpler RoO; and (iii) a system which requires less documentation and certification system. Under the Aid for Trade package, LDCs may also negotiate for allocation of funds for technical assistance for the improvement of their facilities and capacities for compliance with a certification system and related requirements. In brief, the interests of Bangladesh as regards the ongoing negotiation on agriculture are threefold. Firstly, Bangladesh as an LDC would benefit if LDCs get duty-free and quotafree access to the developed country markets for their agricultural products. Therefore, Bangladesh must ensure that agricultural products with export potentials in USA and other markets, as identified in this study, are included among the 97 percent of products with duty-free and quota-free market access. Secondly, it will be in Bangladesh’s advantage if the ongoing negotiations do result in substantial de-subsidization in developed countries. One would need to keep in mind here that in a way continuing high tariff rate will provide a relatively higher preferential margin to LDCs such as Bangladesh, particularly in the situation when Bangladesh as an LDC would be eligible for duty-free and quota-free market access. So, Bangladesh’s interest will lie more in an outcome that ensures market-based domestic prices for farm products in the developed countries. Thirdly, Bangladesh will need to take a more proactive interest in other ongoing negotiations which will have important implications in terms of trade capacity building in agriculture. This relates to the positive agenda, S&D provisions, transfer of technology, enabling clause, and assistance under integrated framework initiative.

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