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Fact Sheets

Agriculture and the WTO

Australia - Agricultural and Food Exporter

Agriculture is an important part of the Australian economy. Australia is a competitive net agricultural exporter, with around two thirds of total production being exported. Over the last ten years, exports of agricultural goods, including processed food and beverages, have grown and in 2006 Australia accounted for 2.3% of all global agricultural exports. In 2006-07, agricultural products, including processed food and beverages, accounted for 16.1% of Australian merchandise exports

Globally, agricultural trade is the most distorted sector of trade in goods. It is characterised by very high tariffs and high levels of government support to primary producers. Farmers in heavily protected markets can overproduce and dump their surplus subsidised products on world markets, to the detriment of more efficient producers such as Australia.

Average tariffs for agricultural goods are more than 3 times higher than for non-agricultural goods ‑ some agricultural tariffs are as high as 800 per cent.

In no other area does domestic support distort international markets to the extent that it does in agriculture, with over US$268 billion in 2006 provided in support and protection for agriculture by rich developed countries worldwide.

Export subsidies, the most trade-distorting form of subsidies, are tolerated in the agricultural sector ‑ in contrast to other sectors, such as manufacturing, where they have long since been prohibited.

Australia has reduced its own tariff levels on agricultural and food products since the early 1970s through a series of across-the-board measures and as the result of inquiries into particular industries and commodities. General tariffs have been phased down to 5 percent and assistance to import-competing industries has been substantial reduced.

Australia's major exports of agriculture by destination – 2006-07 (a) (excluding forestry and fishing)

FY2007

Partner Country

A$'000

Rank

% Share

- All countries

27,005,431

 

100.0%

Japan

4,332,753

1

16.0%

China

3,074,933

2

11.4%

United States

2,910,757

3

10.8%

Republic of Korea

1,703,621

4

6.3%

United Kingdom

1,220,122

5

4.5%

New Zealand

1,224,424

6

4.5%

Indonesia

1,184,025

7

4.4%

Singapore

603,681

8

2.2%

Taiwan

618,518

9

2.3%

Malaysia

670,313

10

2.5%

Saudi Arabia

512,335

11

1.9%

Thailand

440,048

12

1.6%

Canada

427,348

13

1.6%

Hong Kong (SAR of China)

376,008

14

1.4%

India

373,382

15

1.4%

Value of Australia's top agricultural exports – 2006-07 (excluding forestry and fishing)

FY2007

A$'000

Rank

% Share

27,005,431

100.0%

011 Bovine meat f.c.f.

4,894,769

1

18.1%

112 Alcoholic beverages

2,988,985

2

11.1%

268 Wool

2,711,837

3

10.0%

041 Wheat

2,672,538

4

9.9%

012 Meat (excl. bovine) f.c.f.

2,068,561

5

7.7%

022 Milk and cream

1,312,591

6

4.9%

061 Sugars, molasses and honey (a)

1,322,598

7

4.9%

001 Live animals

951,447

8

3.5%

024 Cheese and curd

824,626

9

3.1%

263 Cotton

824,589

10

3.1%

081 Animal feed

786,964

11

2.9%

211 Raw hides & skins (except furskins)

722,150

12

2.7%

043 Barley

576,343

13

2.1%

054 Vegetables

572,636

14

2.1%

057 Fruit and nuts, fresh or dried

570,052

15

2.1%

(a) Deficient raw sugar from January to July 2007 due to confidentiality issues

Source: DFAT, STARS database and ABS Special data service

World Trade Organization (WTO) and Agriculture

The WTO, which was established in 1995, is the successor organisation to the General Agreement on Tariffs and Trade (GATT). For most of the post-war period, agricultural products were largely excluded from the multilateral trade liberalisation which took place during GATT negotiations. In the early 1980s, it was widely acknowledged that agriculture had become the most heavily protected and distorted sector in the world economy, with consequent substantial negative effects on international trade and particularly on those developing countries that are heavily reliant on agriculture for their economic development. Reform of the global rules covering agricultural trade began with the Uruguay Round of GATT negotiations that concluded in 1996. The Uruguay Round Agreement on Agriculture provided for increased market access through tariff cuts (over six years for developed countries and ten years for developing countries), for the conversion of non-tariff measures to more transparent tariff protection, and for a progressive reduction in export subsidies and trade-distorting domestic support measures.

Agriculture in the Doha Round

As the most heavily protected sector in world trade, agricultural reform stands to deliver the greatest development benefits. Rules and disciplines in the WTO for agriculture are less developed than for industrial products. WTO members agreed to start the current “round” of WTO negotiations in November 2001, in Doha, Qatar. The Doha mandate on agriculture calls for ambitious reform. Members agreed to achieve “substantial improvements in market access; reductions of, with view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.”

The Cairns Group coalition of 19 agricultural fair traders, chaired by Australia, played an instrumental role in framing the Doha mandate and subsequent WTO negotiations seeking agricultural reform.

Deep differences in the extent of reform led to a breakdown of talks at the Cancún Ministerial Conference on 10-14 September 2003 before any of the issues on agriculture could be resolved.

Substantive negotiations resumed in March 2004, and on 31 July 2004 the General Council of the WTO agreed to adopt a "Framework Package". This "Framework Package" put the Round back on track and provided a way forward on negotiating modalities for agriculture.

The July 2004 Framework Agreement included a ground-breaking commitment to eliminate agricultural export subsidies. It also outlined a broad structure for reductions in trade distorting domestic support.

However, the July 2004 Framework provided less guidance on how to address the critical issue of market access. Two important market access principles were agreed: that higher tariffs be subject to deeper cuts; and an agreed number of sensitive tariffs could be subject to lesser tariff cuts so long as the tariff rate quotas associated with those quotas were expanded.

Following agreement of the "Framework Package" in July 2004, negotiations continued, intensifying in the lead up to the December 2005 WTO Ministerial Meeting in Hong Kong. At that meeting, Members agreed to eliminate export subsidies by end-2013.

The negotiations were suspended at the end of July 2006 after a failed attempt by ministers from six key players - Australia, the United States, the European Union, Brazil, India and Japan - to break the deadlock.

In January 2007, negotiations resumed, following a call by Trade Ministers from 25 key countries, including Australia, at a meeting in the margins of the World Economic Forum in Davos, Switzerland, to recommence the negotiations across all areas. Another attempt to broker convergence among four members (Brazil, India, the EC and the US) also ended in June 2007 without agreement.

Negotiations recommenced in earnest in September 2007, based on a draft modalities text released by the Chair of the negotiations, Crawford Falconer, on 1 August 2007.

Negotiations on domestic support and export competition are reasonably advanced. On the latter, technical progress has been made on proposed new disciplines on (i) export financing support; and (ii) food aid for trade purposes so as to prevent commercial displacement of either locally-produced or imported food. On domestic support, a number of proposals currently on the table suggest that the basic building blocks are in place to realise substantial reductions in trade distorting support. Disciplines on the "blue box" category of domestic support still need to be resolved.

Negotiations on market access continue to lag significantly behind the other areas of the agriculture negotiation. There is still no agreement on the formula that will be used to cut tariffs or to expand tariff quotas for “sensitive products”. A number of issues in developing-country market access remain outstanding. The politically-sensitive market-access negotiations pose the largest obstacle to progress.

Other issues - quarantine and food safety

The World Trade Organization's (WTO) Agreements of most relevance to the application of quarantine, food safety, animal and plant health regulations are the Sanitary and Phytosanitary Agreement (SPS Agreement) and the Agreement on Technical Barriers to Trade (TBT Agreement).

The SPS Agreement allows all WTO members (including Australia) to set their own level of quarantine and food safety protection. It also requires quarantine and food safety measures to be based on science and not industry protection. This ensures that Members cannot use unfair quarantine or food safety restrictions to block trade.

The TBT Agreement gives countries the right to adopt standards or regulations they consider appropriate to protect life or health, and also for the protection of the environment or to meet other consumer interests. For example, food labelling regimes are considered technical regulations and fall within the scope of the TBT Agreement.

The Codex Alimentarius Commission, the World Organisation for Animal Health (OIE) and the International Plant Protection Convention (IPPC) are the three international standard setting bodies that hold special status under the WTO SPS and TBT Agreements. Because of their special status, Codex, the OIE and the IPPC are often referred to as “the three sisters” in the WTO context. For the purposes of the SPS and TBT Agreements, ‘the three sisters’ standards are recognised as relevant international standards protecting human, plant and animal health from additives, contaminants, toxins or disease in food.

Given the importance of international trade rules for Australia’s food and agriculture trade, Australia takes an active role in the WTO and related standard setting bodies in order to continually improve the conditions faced by Australian exporters in overseas markets.

Contact us

We want to ensure that issues of concern to you are reflected in Australia's negotiating position in the agriculture negotiations, and welcome your views via email at: agriculture.negotiations@dfat.gov.au