South Asia Watch on Trade, Economics & Environment (SAWTEE)

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Nepal’s position on agricultural negotiations
Published: The Kathmandu Post, 10 December 2004
By: Ratnakar Adhikari

The pre-occupation of our trade negotiators on market access issue for agricultural products is understandable given the fact that improved market access means possibility of improved exports. This is more so in the case of LDCs like Nepal, which are in the process of diversifying their export profile in order to avoid dependence on a narrow range of exportable commodities. The trade negotiators of these countries spend their scarce political capital negotiating better market access. As per an on-going study on market access for select Nepali agricultural exports being conducted by South Asia Watch on Trade, Economics & Environment (SAWTEE), while negotiating for better market access, four important aspects have to be particularly looked at – all of which have international dimension. First, given the fact that the July Decision of the General Council (popularly known as July Package) of the WTO has injected life into the Doha Development Round (DDR), and that agriculture still remains the most contentious issue – which will make or break the Round – it is important for Nepal to cautiously plan its negotiating strategy. July package has visibly demonstrated that the political will for reforming this sector is still lacking because of the strong protectionist lobby in the developed countries. There is a serious lack of counterbalancing constituency in the political arena of the developed countries, which could, in unison, oppose an indefensible protectionism in the agricultural sector. It is clear that this is due to classic political economy problem – consumers and taxpayers in the developed countries who are being penalised because of the protectionist policy of their own countries do not find much incentive in getting united and opposing such move.There are, however, two other actors in developed countries who are in support of relatively freer trade in agriculture. They are: a) academic community, primarily the economists, who are trained to analyse the wastage of resources trade protection creates; and b) non-governmental organisations (NGOs), which are convinced that trade protection in the developed countries has created livelihood problems for millions of poor and marginalised farmers in the developing world. In this respect, at the national level, in developing countries and LDCs including Nepal, there is a need for the four groups to come together: a) government itself; b) farmers and agricultural exporters; c) academic community; and d) NGOs. They should be able to build and develop lasting partnership with the lobby in the developed countries, which is in favor of freer trade in agriculture.

Within the WTO, Nepal should join hands with other countries, which are in favour of improving market access opportunities for their agricultural products to the developed countries. It is indeed disappointing to note that no deadline has been fixed for the reduction of agricultural protection. Therefore, Nepal, taking cognisance of July Package, should, along with other like-minded members, press for the following:

a) Creating a more transparent and simpler trade regime in all countries by converting specific tariffs to ad valorem tariffs, eliminating minimum price regulations, cutting peak tariffs and changing the structure of tariff rate quotas (TRQs) so they increase over time.

b) Phasing out of export subsidies and subsidies that encourage overproduction.

Second, given the high incidence of non-tariff barriers (NTBs) in the developed as well as developing countries (but more so in the case of developed countries), it is necessary for an LDC like Nepal to raise its voice against such market access barriers. Unfortunately, the Doha Declaration is silent as far as agriculture related NTBs are concerned. July Package also does not go far enough in terms of proposing a solution to remedy the NTB related problems. While supporting the internationally agreed health and safety standards and respecting the rights of consumers, Nepal should join hands with other like minded countries to oppose those standards which are neither based on internationally agreed criteria nor based on sound science and are only being used for protectionist purposes.

Third, as an LDC, Nepal enjoys certain preferential market access opportunities in several developed as well as developing countries. However, most of these opportunities are unilateral in nature, which can be reversed at will. Therefore, there is hardly any element of predictability in such offers. Nepal needs to prepare its domestic strategy in line with this global reality. However, to the extent such preferences have been useful for Nepal, it should also work hard to ensure that the margins of preference it enjoys from the preferential arrangements, for whatever they are worth, are not eroded as agricultural liberalisation proceeds. To this end, Nepal will do well to join the LDC group to continue pressing for the binding of these commitments at the WTO, so that there is a predictability of market access.

Fourth, Nepal being one of the poorest countries in the world lacks both capacity and resources to implement some of the WTO commitments, which would help it exploit the market access opportunities offered under the WTO regime or preferential access offered outside the WTO. For example, Nepal needs to put in place legal and institutional infrastructure not only to be able to upgrade the quality of its products for the benefits of the Nepali consumers, but also for its export interests. As per the commitments made at the WTO, Nepal needs to implement both Sanitary and Phytosanitary (SPS) and Technical Barriers to Trade (TBT) agreements by 31 December 2006.

Realising the constraints Nepal faces to implement some of the resource-demanding agreements of the WTO, Nepali negotiators did press hard to include a provision on technical assistance in the Working Party Report at the time of WTO accession. The accession package contains the following language: "…In expressing appreciation for the significant efforts already undertaken by Nepal to achieve compliance with WTO rules and principles, they [Working Party members] noted that further work was needed in order to implement some important WTO Agreements. WTO Members pledged to work constructively with Nepal in accomplishing this objective, and offered to provide technical assistance to facilitate Nepal’s accession. WTO Members looked forward to Nepal’s early accession on appropriate terms including transitional arrangements to enact and implement the legislative modifications required… (emphasis added)"Moreover, the language on technical assistance is included in most of the commitments made by Nepal. In addition, Article 11 of the TBT Agreement and Article 9 of the SPS Agreement, which deal with the provision for technical assistance to implement the commitments made at the WTO, have also been referred to in the Working Party Report.

Based on the above languages, Nepal needs to mobilise support from various bilateral and multilateral donors to implement these resource-demanding commitments. The sooner we do it the better it is. Otherwise, WTO members’ interest on this issue may decline. Moreover, when other members too accede to the WTO, the pressure on WTO members and multilateral institutions to divert the resources to meet the demands of other countries may also increase.

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