II. Agreement on Agriculture

PURPOSE

The purpose of this module is to describe the post-UR market access situation for agricultural exports from the developing countries and to discuss issues that merit further attention in the next round of negotiations.

CONTENTS

4.1 Introduction

4.2 Market access rules of the Uruguay Round

4.3 Post-Uruguay Round market access situation in developed country markets

4.4 Some considerations in the context of the next round of negotiations

KEY POINTS

• Market access rules are set out in the Agreement on Agriculture and include some special treatment provisions for developing countries.
• The post-Uruguay Round tariff structure in developed country markets have a number of features which continue to limit developing country agricultural exports.
• A range of issues which should be examined by developing countries in the context of the next round of negotiations are highlighted.

4.1 INTRODUCTION

Focus on improving export market access

The GATT provisions on the treatment of imports were also meant for agriculture from the beginning. Thus, in principle, agricultural trade was to be regulated with ordinary tariffs only, preferably bound in country Schedules. However, there was one exception in GATT Article XI:2 (c) that permitted quantitative restrictions in agriculture if these were necessary to enforce certain forms of domestic market management. In practice, the situation turned out to be different as non-tariff barriers became widespread and endemic. This was in part due to the exception granted by this Article but also because of various derogations (e.g. "grandfather clauses" that legalized bilateral deals in the accession process), country-specific waivers from general rules and the lack of clarity in the GATT rules to check "grey area" measures such as voluntary export restraints that mushroomed over time. Even where quantitative restrictions were not applied, ordinary duties could be raised to any level to regulate imports as most tariff lines were not bound. The Uruguay Round (UR) addressed these distortions by outrightly banning some of these practices and developing clear rules for others.

The purpose of this module is to describe the post-UR market access situation for agricultural products and to discuss issues that merit further attention. Since developed country markets account for the bulk of exports from the developing countries, the focus is on access terms in these markets. Two remarks on the scope of the paper. First, this module is on access terms or access opportunities created by the UR and not on export opportunities as a whole, which has other components also, e.g. expansion of the export market itself and the capability of an exporter to respond to increased demand. Second, the focus is on access terms on MFN basis (Most Favoured Nation) and not on preferential terms. Although the latter plays an important role in the trade of many developing countries, the focus of trade negotiations under GATT/WTO is to improve access terms on a MFN basis.

The module covers the following three aspects:

• market access rules of the Uruguay Round;
• post-Uruguay Round market access situation in developed country markets; and
• some considerations in the context of the next round of trade negotiations.

4.2 MARKET ACCESS RULES OF THE URUGUAY ROUND

Rules require tariffication, binding and reduction

There is an important difference to note at the outset between rules and commitments. The former refers to the rules or provisions that are agreed by negotiating parties in general and are contained in the UR Legal Text. The latter refers to market access commitments which are specific to individual countries and are contained in country Schedules, and which are also legal documents.

Box 1 summarizes major market access rules agreed to in the UR. There are some special treatment provisions for the developing countries, but on the whole the basic principles apply to all. Thus, non-tariff barriers (NTBs) to agricultural trade were outrightly prohibited, requiring that all such trade take place under a tariff-only regime. Second, virtually all ordinary tariffs were bound, i.e. maximum possible rates that can be applied at any time were fixed, compared to 17 percent of the tariff lines bound before the UR in the case of the developing countries and 57 percent in the case of both transition economies and developed countries. Third, these bound rates have to be reduced at agreed rates over the implementation period. And fourth, current market access had to be maintained and minimum access opportunities were required where these did not exist before. Taken together, this was a remarkable achievement of the UR, especially given the widespread distortions prior to the UR.

Other companion modules have covered some of these provisions in detail, e.g. minimum market access and tariff quotas and Special Safeguard Provisions, and so are not addressed here. The rest of the paper, therefore, focuses on tariff issues - the key component of market access.

Box 1. General provisions on market access

4.3 POST-URUGUAY ROUND MARKET ACCESS SITUATION IN DEVELOPED COUNTRY MARKETS

Key to access opportunities in Schedule commitments

Having in place the new set of rules on market access is a remarkable achievement of the Agreement on Agriculture (AoA) and a significant contribution to the predictability and security of trade. However, what is important for actual trade to take place at a given point in time is the level of tariffs and other access conditions which are country-specific and are contained in Schedules. The rest of the paper therefore summarizes the main features of the post-UR import regimes of the developed countries that warrant particular attention by the developing countries in the context of the preparation for the next round.

Bound tariffs remain high on sensitive products

High tariffs on temperate-zone food products and low rates on tropical products. This is a typical pattern of the post-UR tariff profile of many developed countries (Table 1)¹. The reason is simple - imports of temperate-zone products compete with domestic production while others do not. This difference is also reflected in reduction rates from the base to final levels - while tariffs on tropical products as a whole were cut by an average of 43 percent, the reduction rate on other product groups were lower, e.g. 26 percent on dairy products². The AoA rule required a 36 percent overall simple average reduction for agricultural products - the developed countries surpassed this target by one percentage point.

Table 1: Bound tariff rates of the EU, Japan and US for selected agricultural products (%)

Source: OECD (1997a) for first eight commodities; Hathaway and Ingco (1995) for sugar, wheat, coarse grains, rice, dairy and products.

There is a catch here worth noting - tariffs on many tropical products were already very low (e.g. 5-10 percent) and so it was feasible to reduce these even more sharply (e.g. by 50 percent) without disrupting domestic markets. Some commentators have expressed doubts whether these relatively sharp reductions on tropical products added anything substantial in terms of access terms. In many cases, these levels have fallen to what is called "nuisance tariffs" of 1-2 percent. On the other hand, the base period tariffs on temperate-zone products were very high - in many cases over 100 percent and so a further reduction of 20-25 percent from that level still leaves considerable border protection.

There were a number of reasons why bound tariffs on these products turned out to be very high:

• The choice of 1986-88 as the base period was an important factor. At that time, world market prices were very low and as a result the computed tariff equivalents, or the gaps between domestic and world prices, were very high. These high tariff equivalents were used to set base period tariffs. A 15-20 percent or even 36 percent reduction from these high base levels would still result in high bound rates by the year 2000.
• There is some evidence that several countries set their base tariffs for some products at much higher rates than justified by computed tariff equivalents, particularly on temperate-zone products such as cereals, dairy, meat and sugar³.
• The simple average formula used in the UR allowed countries to make smaller (the 15 percent minimum required) cuts on some commodities (e.g. the so-called "sensitive" products) combined with larger cuts on others (e.g. tropical products) in order to arrive at the simple average of 36 percent⁴.

Tariff peaks still important

Many tariff peaks. As a result of the above factors, tariff peaks are widespread. Products with the highest rates include milk, meat, sugar, butter and cheese and cereals. For all agricultural and fisheries products taken together (SITC numbers 1-24), the number of tariff lines for which duties exceed 20 percent are about 26 percent of all tariff lines for both the EU and Japan but only 11 percent for the United States (Annex Table 1). Tariff peaks in agriculture are most widespread in three product groups: i) major food staples; ii) fruit and vegetables; and iii) the food industry (processed food products).

Reduction in bound tariffs not reflected in applied tariffs

Actual border protection may have increased. In principle, tariffication was to result in bound tariffs no more protective than the non-trade barriers that existed in the base period. And since all tariffs are to be reduced, market access terms should be better. However, a number of factors such as the three points made earlier may prevent this from happening.

A recent OECD study on border protection that uses production-weighted averages of applied MFN tariffs showed that actual border protection to agriculture was higher in 1996 compared to 1993 in eight of the 10 OECD countries (EU as one) covered by the study, the two exceptions being Australia and New Zealand⁵ . It was also found that tariff protection is substantially higher on food and beverages group compared to agriculture as a whole. Since bound rates cannot be below the applied rates, the border protection based on bound rates would have been even higher.

Non ad valorem tariffs lead to lack of transparency

Complex tariff structure. The post-UR tariff profiles in agriculture have become more complex, especially in the case of the developed countries, because of an increase in the number of tariff lines to accommodate different tariffs applicable to the same product, such as seasonal, in-quota and above-quota tariffs, and the more frequent use of non-ad valorem tariffs⁶ . The proportion of agricultural tariff lines that are expressed in non-ad valorem terms ranges from about 22 percent for Canada and Japan and 42 percent for the EU and the United States to around 90 percent for Switzerland. In many cases, tariffs vary according to one or more technical reasons such as sugar content or alcohol content, making them even less transparent.

Non-ad valorem tariffs are obviously less transparent than ad valorem tariffs with regard to their restrictiveness, and they are less easy to compare from one country to another. Non-ad valorem tariffs also weigh more heavily against lower-priced imports. For example, the degree of restrictiveness of a specific tariff varies inversely with unit price of imported product, while it remains constant in the case of an ad valorem tariff.

TRQs have had limited effect in improving access

Tariff Rate Quotas (TRQs). The TRQs were designed to create some minimum access opportunities through low tariffs for those products that went through the tariffication process, which was feared to result in out-of-quota or MFN tariffs prohibitively high for trade to take place. Bananas and sugar are typical examples of products where MFN tariffs are high in some major markets and most trade takes place at the in-quota rates, but there are also other examples.

Thirty-six WTO Members have tariff quota commitments in their Schedules with a total of 1 370 individual quotas on agriculture. How large are the quotas? The total volume of the TRQ in 1995 as a percentage of the world trade in that product typically ranged between 3 to 7 percent. For some commodities, e.g. dairy, meat products and sugar, this level exceeded 10 percent.

These include both new quotas as well as existing, i.e. current quotas. But how much additional access opportunities did the UR open with quotas? The answer is very little - in most cases additional tariff quota volumes amount to less than 2 percent of the total world trade, with the exception of dairy products at 17 percent and rice at 6 percent. For example, most of the post-UR quotas on bananas and sugar were what existed prior to the UR.

What has been the experience so far? One relevant indicator here is utilization rate - the amount of trade that actually took place relative to the TRQ level. These rates have been just over 60 percent for both 1995 and 1996 for all agricultural products for which TRQs were opened. For 1997, this was 50 percent, but this is most probably due to incomplete notifications received at the WTO for that year.

A number of conceptual and implementation issues have been noted in the area of TRQs. These include⁷ :

• The amount of the quota available on a MFN basis was lower than expected as many countries allocated current access quotas to traditional suppliers, and also counted preferential access quota under minimum access commitments⁸.
• Committing minimum access quotas at higher-level product aggregation resulted in lower quotas in many cases⁹.
• In several cases in-quota tariffs were on the higher side, which curbed imports, as no rule was established for setting in-quota tariffs.
• Several methods chosen by importing countries to administer and allocate TRQs were not transparent and simple, probably negatively affecting the utilization rates.

Safeguards to date used less than expected

Additional protection - special safeguards measures (SSGs). The protective effects of these high tariffs are exacerbated further by the use of SSG provisions. About 80 percent of the tariffied items of the OECD countries are subject to SSGs¹⁰ . The SSGs allow an importer to increase tariffs above the bound levels in response to a surge in imports or a decline in import prices. The right to apply SSGs are reserved in all product categories, but are more common in the following groups: 22 percent of all tariff lines with SSGs on meat; 18 percent on cereals; 13 percent on fruit and vegetables; and 12 percent each on oilseeds and oil products and dairy. In practice, SSGs have not been used as much as expected. During 1995-98 period, price-based SSG actions were taken by five Members (EU, Japan, Rep. of Korea, Poland and the US) affecting a total of 72 tariff items and volume-based SSG actions were taken by five Members (EU, Japan, Poland, Slovak Republic and the US) affecting a total of 128 tariff items.

EU continues to enjoy special arrangements

Some exceptions to "tariff-only" regime continue. Although no longer permitted, some cases of more complex import arrangements continue to exist. Two notable examples are the "entry price" system applied by the EU on fruit and vegetables. The import regime is complex as it is based on minimum import prices and seasonal tariffs¹¹ . The developing countries are increasingly becoming competitive in these products and so the regime is seen by many as a source of disguised protection. In some cases, e.g. cucumber and tomatoes, market access terms are said to have worsened following the adoption of the entry price system. Similarly, the cereal import regime of the EU continues to have features similar to the previous variable levy regime. Under this system, import duties on cereals are calculated on the basis of reference import prices and domestic support levels, subject to a maximum rate agreed to in the UR. Several developing countries are important exporters of grains and rice.

Escalation still important in tropical products

Tariff escalation. This refers to a situation where tariffs rise along processing chains. This practice can afford significant protection to processed products, depending on the share of value-added in final output. The issue of tariff escalation is very important given that growth in agricultural trade is shifting more to processed products. As in the case of basic agricultural products, the tariff bindings on processed food products remained high post-UR. Generally, tariff reduction rates on processed products are lower than on basic products. Studies have shown that although tariff escalation was reduced post-UR, it still prevails in some important product chains, notably coffee, cocoa, oilseeds, vegetables, fruit and nuts and hides and skins¹² . This will continue to impede exports of processed products from the developing countries.

Tariff dispersion. Distortions of agricultural trade are caused not only by a high level of protection but also by high disparity of protection across commodities within the same country (Box 2). As mentioned earlier, the reduction formula adopted during the UR allowed countries to reduce high tariffs (usually for sensitive food products) somewhat modestly compared to low tariffs. This has exacerbated the problem of tariff dispersion. Examination of post-UR tariffs in the EU, the United States and Japan has shown that tariff dispersion has increased post-UR¹³.

Box 2: Example of a trade distorting effect of tariff dispersion

Countries with preferential access lose out

Erosion of preferential tariff margins. Preferential tariff margins are defined as the difference between the MFN and (lower) preferential rates. And so, when MFN rates fall, the margin is bound to decline. Although preferential tariff rates are set outside the GATT/WTO negotiating forum, the reduction in the margin is one of the consequences of the UR and hence is worth noting here. Several estimates are available of the potential value of the preference and its erosion over time due to the UR¹⁴ . On the whole, these are not considered to be substantial when seen in relation to the total value of agricultural trade. However, the impact would be significant for several developing countries that depend heavily on the export of products with substantial margins, e.g. bananas and sugar for several countries, but also several other products.

Access can be nullified by SPS/TBT barriers

Sanitary and Phytosanitary Measures/Technical Barriers to Trade (SPS/TBT). These Agreements are mentioned in the AoA in the overall context of the improvement in market access terms. These Agreements aim to promote trade in a non-discriminatory way by setting detailed rules on where trade restrictions may be justified. In particular, trade in such products as processed cereals, meat, dairy, fruit and vegetables should benefit from these rules as food standards typically attract greater degree of attention in these products compared to basic products. As tariffs are lowered in the subsequent negotiating rounds, the SPS/TBT measures will be increasingly important for trade. For the developing countries, meeting the higher standards of the developed countries is a major challenge as the gap in standards is high. Moreover, concerns over food safety and quality are on the rise in richer countries, possibly further widening the gap. A great deal of effort and investment would be required to meet the higher standards. There are many other issues in this area, which are covered in depth by companion modules on SPS/TBT.

4.4 SOME CONSIDERATIONS IN THE CONTEXT OF THE NEXT ROUND OF NEGOTIATIONS

Increased exports: three critical links. The focus of this module has been on the post-UR market access terms - mainly on tariffs. However, it would be appropriate at this stage to keep in perspective the three critical links that are necessary for increased exports. These are: i) expanding market opportunities; ii) improving access terms; and iii) strengthening domestic supply capacity. A number of considerations are worth noting in each of these areas, some of which would require a good deal of research and analysis by individual exporting countries.

Access is influenced by overall support levels in export markets

On the question of expanding export opportunities, disciplining of domestic support measures and export subsidies are important¹⁵ :

• The issue is how the very high levels of domestic support in the richer countries can be reduced through the multilateral negotiating process? Support to agriculture in the OECD countries as a whole, as measured by the total Producer Support Estimate (PSE), amounted to 35 percent of the value of agricultural production in 1996¹⁶ . The AoA disciplined only a part of this support - those measures considered to be most "trade-distorting", as covered by the Aggregate Measurement of Support (AMS). In reality, there is hardly any support measure that does not affect the level of production and thus distorts trade - the question is one of the degree of distortion¹⁷ . Although it is unlikely that the current rules would be changed much in the next round, the issue of the high level of support is of concern to developing countries. They may even consider using the matter as a leverage for negotiating greater market access.
• How to ensure that export subsidies are banned or reduced to a minimum?

Identify how best to improve market access

On the question of improving access terms, the review of the post-UR tariff structure and import regimes in Section 4.3 brought to light a number of problems that need to be addressed. In brief, the developing countries need to take into account the following points as they prepare for the next round:

• identification of current import regimes that are restrictive for their agricultural exports;
• banning border measures that are not "tariff-only" regimes and prohibiting complex tariffs in favour of a "tariff only" regime;
• analysing which tariff reduction method provides the best market access terms for them, i.e. lower tariffs without peaks (on this see below);
• negotiating to sharply expand market access by raising tariff quotas¹⁸ ; and
• improving the rules and practices governing the administration of tariff quotas so that these are transparent and simple to access.

Ability to take advantage of market access stressed

As regards strengthening domestic supply capacity, the relevant questions to ask are:

• What are the main export commodities for which the country has a comparative advantage?
• What is the "incentive structure" faced by producers of these commodities as a result of policies? Is it neutral, positive or negative (i.e. taxed?). If the latter, what is the reason - sectoral (e.g. direct taxation) or macroeconomic (e.g. overvalued exchange rates)?¹⁹
• What are the structural constraints faced by the sector? What is required to relieve these in order to make the sector more competitive?

Reducing high overall tariffs and tariff peaks in major import markets. It is in the obvious interest of the developing countries to explore alternative methods of achieving this goal in the next round. An example of how the choice of a right method may do the work is shown here by applying three possible tariff reduction formulae to a subset of post-UR bound agricultural tariffs of the EU. The formulae are: i) linear reduction; ii) linear reduction with harmonization; and iii) the "Swiss formula"²⁰ . To compare their effectiveness, all formulae were set in a way that would result in nearly equal percentage cut (36 percent) in the simple average tariffs by end of the implementation period.

While there was a clear reduction in the number of tariff peaks with all the three methods, the reduction was most pronounced in the case of the Swiss formula (Figure 1 and Table 2), which also reduced the tariff dispersion (as measured by the coefficient of variation) the most. By contrast, any reduction method that allows for minimum cuts, as was done in the UR (the "UR formula"), would not cut the tariff peaks much. For the developing countries, therefore, the adoption of a method such as the Swiss formula would mean a much improved market access, particularly for products whose exports face tariff peaks.

Table 2: Tariff dispersion under different tariff reduction methods

Note: Computations are based on a sub-set of tariff peaks for 80 product items in the EU taken from UNCTAD (1997), pages 22-23.

Collective approach to negotiations. As a majority of the developing countries are "small" suppliers in world markets, they lack the clout of a "principle supplier" in negotiating better access terms. Rather than wait for others to do the negotiations and accept the terms, it would pay to form alliances with others having common interests and negotiate collectively. Since access terms are often negotiated on a commodity or sub-sector basis, such partners would be other countries having similar interests. Such grouping is also useful at the preparatory stage - to pool financial and technical resources for conducting in-depth analysis on market access issues.

Countries that are not as yet WTO Members. Not being a WTO Member means that it cannot participate in the negotiations. But when it becomes a member, it would have the same access terms as others, e.g. the MFN tariff. However, there is one area where current rules are not as clear. This is whether and to what extent it would receive access to TRQs where these are not allocated globally on a MFN basis but to specific suppliers. Recent experience has shown a tendency by countries to limit their TRQs to WTO Members only, a practice that may progressively reduce the shares of non-WTO Members. When a new Member accedes, it is fair that it also has access to these quotas.

REFERENCES

Bautista, R. & Valdes, A. 1993. The Bias against Agriculture: Trade and Macroeconomic Policies in Developing Countries. San Francisco, ICS Press.

Hathaway, D. & Ingco, M. 1995. Agricultural Liberalisation and the Uruguay Round, in Martin W. and Winters A. eds. The Uruguay Round and the Developing Economies. World Bank Discussion Papers Number 307. Washington, World Bank.

Lindland, J. 1997. The Impact of the Uruguay Round on Tariff Escalation in Agricultural Products. ESCP No. 3. Rome, FAO.

OECD. 1999a. Preliminary Report on Market Access Aspects of Uruguay Round Implementation, Document COM/AGR/APM/TD/WP (99) 50, June 1999. Paris.

OECD. 1999b. A Matrix Approach to Evaluating Policy: Preliminary Findings from PEM Pilot Studies of Crop Policy in the EU, the US, Canada and Mexico, Document COM/AGR/APM/TD/WP (99) 4/Rev1, June 1999. Paris.

OECD. 1997a. Market Access for the Least Developed Countries: Where are the Obstacles? Paris.

OECD. 1997b. The Uruguay Round Agreement on Agriculture and Processed Agricultural Products. Paris.

Sharma, R. 1997. The Impact of the Marrakesh Agreement on Trade of Agricultural Products in ACP Countries. Paper prepared for the ACP Secretariat. Rome, FAO.

Swinbank, A. & Ritson C. 1994. The Impact of the GATT Agreement on EU Fruit and Vegetable Policy, Food Policy, 20(4).

Tangermann S. 1995. Implementation of the Uruguay Round Agreement by Major Developed Countries, UNCTAD/ITD/16. Geneva, UNCTAD.

UNCTAD. 1999. Examining Trade in the Agricultural Sector, with a View to Expanding the Agricultural Exports of the Developing Countries, and to Assisting them in Better Understanding the Issue at Stake in the Upcoming Agricultural Negotiations, TD/B/COM. 1/EM.8/2, February 1999. Geneva.

UNCTAD. 1997. The Post-Uruguay Round Tariff Environment for Developing Country Exports, TD/B/COM. 1/14. Geneva.

UNCTAD. 1995. Identification of New Trading Opportunities Arising from the Implementation of the UR Agreements in Selected Sectors and Markets. Geneva.

UNCTAD. 1994. The Outcome of the Uruguay Round: an Initial Assessment. Geneva.

WTO. 1999. Guide to the Uruguay Round Agreements, Kluwer Law International and WTO Secretariat.

Yamazaki, F. 1996. Potential erosion of trade preferences in agricultural products. Food Policy, Issue 21 (4/5).

Annex Table 1: Tariff peaks by agricultural product groups (EC, Japan and the US)¹

¹ Tariff peaks are defined as tariff rates that are 20 percent or more. All are MFN tariffs.
² The numbers within the parenthesis in the product are SITC numbers.
Source: UNCTAD (1997), Tables 1-3.

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¹ By contrast, many developing countries made ceiling bindings, typically setting "one" bound rate for all agricultural products.

² See WTO (1999), Table III.2.

³Hathaway and Ingco (1995) provide these details. This practice has now come to be known as "dirty tariffication".

⁴For instance, in a three commodity case, a country could meet its 36 percent average reduction requirement by reducing tariffs on two products with initial tariffs of 100 percent by only 15 percent while reducing by 78 percent on the third item with initial tariff of 15 percent.

⁵OECD (1999a).

⁶UNCTAD (1999). Non-ad valorem tariffs include specific tariffs, which are a fixed monetary amount per physical unit of the imported product (e.g. $20 per kg), compound rates (a combination of ad valorem and specific tariffs) and mixed rates (ad valorem rate or specific rate, whichever is higher).

⁷TRQs are discussed

⁸Examples are sugar imports in the EU and the US and beef imports in the US (Tangermann, 1995).

⁹For instance, the EU, in its minimum access commitments, has aggregated all vegetables into one category and all fruit into another. As a result of this aggregation, the quantities of imports of the EU from each of the two categories during 1986-88 was more than 5 percent of its base year internal consumption and as such the minimum access commitment was not applicable. The situation could have been different if a product by product approach had been followed.

¹⁰UNCTAD (1995).

¹¹For a detailed analysis of the EU's entry price system for fruit and vegetables, see for example, Swinbank and Ritson (1995).

¹²See, for example, Linland (1997) and OECD (1997b).

¹³Tangermann (1995); Hathaway and Ingco (1995).

¹⁴Yamazaki (1996).

¹⁵Both these topics are covered in detail separately in companion Modules (Module II.11 on "Domestic Support Measures'' and Module II.3 on "Export subsidies'').

¹⁶The Producer Support Estimate was introduced to replace the Producer Subsidy Equivalent, by the OECD in 1999. There are some definitional differences between the two concepts.

¹⁷This has been shown in a series of Policy Evaluation Matrix (PEM)-studies conducted under the auspices of OECD. These show that even those measures identified as non-distorting in the AoA generate distortions (see OECD (1999b). This is also clearly stated in Article VI of GATT 1994 - that domestic subsidies can reduce imports and harm other exporters.

¹⁸Issues on TRQs are discussed in detail in another Module (Module II-6 on Safeguard Measures).

¹⁹As summarized in Bautista and Valdes (1993), a major analysis in the 1980s showed that trade and macroeconomic policies of several developing countries biased the structure of incentives against agriculture and agricultural exports relative to the other sectors. The UR itself has very little in terms of disciplining domestic taxation of agriculture and exports. This is something that has to be done on a unilateral basis.

²⁰See the companion Module II-2 on "Preparing for Negotiating Further Reductions of the Bound Tariffs" for details on these formulae.