Table of contents

Introduction

1. Discussion on Rural Development at the 1st NTC Conference
2. Rural Development Issues in Negotiating Proposals by WTO members
3. Possible Issues for Discussion at the 2nd NTC Conference

Introduction

Rural development is understood primarily in the economic sense of the process of assuring a progressive improvement in the economic security of people in rural areas. As a predominant land user and a major contributor to maintaining the viability of rural areas, farming plays a key role in rural development, in both developing and developed countries, although the contribution varies to a great extent across the countries.

In some countries where the great majority of the poor live and work in rural areas, rural development is inextricably linked with poverty alleviation.

In the first phase of WTO negotiations on agriculture, many member countries expressed their interest in and made suggestions on how to address concerns relating to rural development and poverty alleviation. As such, this is one of the most important issues in the negotiations.

1 Discussion on Rural Development at the 1st NTC Conference

Rural development was one of the main items discussed at the 1st NTC Conference held in July 2000, in Ullensvang, Norway. The discussion paper prepared by the European Commission stressed the following points:

1. Farming is the fabric of rural society and, in many countries of the world, it is the main economic activity. Any sudden and profound changes that impact on the farm sector could have severe consequences in terms of social and political stability in economically developing countries.
2. Agriculture also plays an important part in rural development, especially due to land use, in countries where the sector is of less economic significance.
3. The main potential contributions of farming to rural development are in terms of supporting employment, ancillary businesses, and environmental services. In peripheral regions, farming may be necessary to support the economic and social infrastructure.
4. The goal of rural development cannot be achieved by market forces alone. Rural development policies should exploit the contribution of farming, both in terms of improving on-farm activities and supporting ancillary services, to secure sustainable development for rural areas.
5. In the context of agricultural reform, WTO rules should contain sufficient flexibility to allow countries to promote rural development, especially to preserve social and political stability.

The chair of the session on rural development at the Ullensvang conference summarized that participants stressed that farming is an essential part of rural society from not only an economic but also social and other diverse viewpoints in many countries and in many regions in developed and developing countries as well as in countries in transition. Countries should have the right to pursue rural development policies in which agriculture plays a key role. The need for necessary flexibility was stressed given the diverse nature of agriculture.

2 Rural Development Issues in Negotiating Proposals by WTO members

Most of the negotiating proposals submitted during the First Phase of the WTO agriculture negotiations refer to rural development in a way or another, reflecting the high degree of interest in this issue of member countries in the negotiations. A number of proposals emphasized the close interrelation between sustainable rural development and poverty alleviation.

Background:

Most proposals identify rural development as a legitimate non-trade concern or as one of the multifunctional roles of agriculture. The proposals by the EC (G/AG/NG/W/90), Mauritius (W/96), Korea (W/98), Switzerland (W/94) explicitly insists that rural development is one of the multifunctional roles of agriculture and the EC (W/90) and Mauritius (W/96) also emphasize the need to recognize that rural development is a common concern in both developing and developed countries.

A number of proposals including those of Japan (W/91), Switzerland (W/94), Korea (W/98), Norway (W/101), and Turkey (W/106) highlight that rural development cannot be achieved by market forces alone or one-size-fits-all approach. Korea (W/98) insists that more specific provisions allowing for adequate level of government intervention would be required to secure the supply of public goods including rural development, provided by agriculture. While some proposals such as the US (W/15) and the EC (W/90) imply that rural development can be addressed sufficiently by Green Box measures alone and stress the need for targeted and transparent measures, other proposals including those of Mauritius (W/96) and Norway (W/101) emphasize that instruments to address such concerns will differ from country to country in view of their specific and diverse nature of agricultural situations and that, hence there is indeed no single measure that would be suitable for all countries. Mauritius (W/96) in particular points out that whilst it is recognized that transparent measures should be taken to address non-trade concerns, financial resource constraints are such that the "no more minimally trade-distorting" approach is inadequate in the case of most SIDS and smaller producers. Many proposals including those of the US (W/15), the EC (W/90), India (W/102), Morocco (W/105), Kenya (W/136), Senegal (W/137), and Namibia (W/143) suggest that greater flexibility should be allowed for developing countries to address the non-trade concerns including rural development.

Market Access:

Mauritius (W/96) argues that trade arrangements that procure SIDS with the means to pursue their agricultural policy objectives including rural development should be safeguarded. Small Island Developing Countries (W/97) emphasize the need to protect small farmers in developing countries against import surges particularly when this affects the production of key staples and negatively impacts on rural development and poverty alleviation. The proposal insists that use of the special safeguard provision should be allowed to meet this need. The proposal from eleven developing countries (W/13) suggests that a "development box" should be established for developing countries. The proposal illustrates 1) a positive list approach to enable these countries to identify which agricultural products or sectors they would like disciplined under AoA provisions, 2) re-evaluation and adjustment of their tariff levels, 3) drastic reduction of tariff peaks and escalations, especially for products of interest to developing countries 4) prohibition of developed countries' use of the Special Safeguard Clause, and instead opening the clause to all developing countries. The proposal also suggests that the development box should provide developing countries with flexibility of import controls, tariffs barriers and domestic support for certain items. The proposal by Kenya (W/136) also insists that a development box should be established, and emphasizes the need to allow policy flexibility in applying urgent safeguard measures and domestic support measures that are closely linked to policy measures to meet developmental concerns of developing countries.

Domestic Support:

The US (W/15) proposes that criteria-based support measures be exempt from reduction in order to promote sustainable, vibrant agricultural and rural communities in a manner that is at most, minimally trade-distorting. It insists that in addition to current provisions, these criteria-based exempt measures could address new policy directions, such as rural development, and that programs that invest in rural infrastructures, promote economic development, and provide technical assistance and information to empower local communities can be highly beneficial in enhancing rural development. It emphasizes that, in all cases, exempt measures must be targeted, transparent, and designed to minimize impacts on other WTO Members, particularly developing countries. The EC (W/90) echoes the need to revisit the Green Box criteria to incorporate the concern of rural development into the Green Box while ensuring minimal trade distortion. The EC also proposes the revision of de minimis clause for developing countries and strengthening of the technical assistance by developed countries.

The Cairns Group (W/35) recognizes the importance of S&D measures in the area of domestic support, and requests the enhancement of green box provisions for developing countries, differentiated AMS formula and commitments for developing countries, including preserving de minimis provisions and exceptions for investment and input subsidies, and domestic support to encourage diversification from growing illicit narcotic crops, and enhanced technical assistance and the promotion of international cooperation to assist agricultural and rural development in developing countries. Mauritius (W/96) insists that any measures aimed at poverty alleviation be exempt from reduction commitments. Korea (W/98) insists that supports for agricultural and rural development in developing countries should be exempt from the reduction commitments, for example, support to improve competitiveness and expand domestic production capacity of developing countries, and support in the form of investment aid for infrastructure development and structural adjustment which takes into account the disadvantaged agricultural conditions of many developing countries. The proposal by India (W/102) observes that most of the Green Box provisions are not widely used by developing countries, as they have been adapted to the conditions prevalent in the developed countries. It insists that Green Box should have provisions for the general development of agriculture, including for its diversification, in developing countries, which in turn would help them to take care of their rural employment and food security concerns. Moreover, India insists that input subsidies, for example, given by developing countries for crops wherein productivity levels are below the world average, should be covered by Green Box provisions. It suggests that, under the heading of "Food Security Box", all measures taken by the developing countries for poverty alleviation, rural development, rural employment and diversification of agriculture should be exempted from any form of reduction commitments.

Egypt (W/107) requests a further effort on the part of developed countries to enhance their capital and technical investment in the agriculture sector of developing country Members, with a view to supporting rural development and incomes. Switzerland (W/94) insists that an appropriate definition must also be found for the blue box and green box so that non-trade concerns including rural development can be better taken into consideration. Senegal (W/137) insists that developing countries should be allowed the full possibility of giving internal support to the agricultural sector with a view to ensuring food security, preserving jobs in rural areas and reducing poverty. Jordan (W/140) insists that all measures taken by developing countries for poverty alleviation, rural development, rural employment, desert reclamation and diversification of agriculture should be exempted from any reduction commitments, and that direct or indirect measures that are an integral part of the development programs of developing countries, including investment and input subsidies must remain exempt from reduction commitments during the next phase of the reform program. The proposal by African Group (W/142) insists that The Agreement on Agriculture should be reviewed so as to allow developing countries with zero AMS to provide such support if required under their development programs. It also requests that the expansion of the scope of S&D treatment in the area of domestic support should allow developing countries to employ policy measures which target the viability of small-scale and subsistence farmers, rural poverty alleviation, food security, as well as product diversification.

3 Possible Issues for Discussion at the 2nd NTC Conference

Bearing in mind the background referred to above, participants may wish to focus their discussions on the following points, with a view to contributing to the process of technical discussions which are to be held during the Special Sessions on Agriculture scheduled until March 2002.

• Is the current Green Box sufficient in addressing rural development concern? If not, what measures are necessary? Can the Amber and Blue Boxes also contribute to the objectives of rural development?
• What are the merits and demerits of each measure to address rural development and poverty alleviation?
• Which measures are used in and are most important to each country in terms of rural development and poverty alleviation?
• Are the current AoA provisions adequate in terms of pursuing rural development and poverty alleviation?
• Has your country experienced difficulties in adopting necessary measures to address concerns relating to rural development and poverty alleviation due to the current AoA provisions?
• Are there any additional measures should be included in the AoA to allow members to address the concerns of rural development and poverty alleviation more effectively?
• Is it useful to make a distinction between measures targeted to boost production and measures targeted to promote rural development?
• What should be the specific contents of the additional flexibility to be granted to developing countries to address rural development and poverty alleviation?

Korea, 3 May 2001