Journal of International Economic Law 6(2), 535542 Oxford University Press 2003; all rights reserved

nook ncvicws
The Law of International Trade in Agricultural Products. From GATT
1947 to the WTO Agreement on Agriculture. By McLakc Gcnovc Dcs1a,
Kluwer Law International, 2002. ISBN 9041198652, 488 pp.
Every once in a while a new book is written which opens up to full scrutiny an important
area of law that had previously lain hidden. This is such a book. But it is also something
much more. The book sets a standard by which all other writing on the Agreement on
Agriculture, including the writings of WTO panels and the Appellate Body, must be judged.
It introduces the beautiful craft of expert legal analysis to the world of international agricul-
tural trade regulation, an area that up to now has been the quasi-exclusive domain of
economists and trade negotiators.
As Marco Bronkers in his introduction writes: Now that Dr Destas book has come to
light, we [lawyers, as well as people in general] no longer have any excuse for being vague
or non-committal about agricultural trade, the rules that currently apply, and the need for
their reform. The book charts this highly complex territory in a rigorous and lucid way.
Implicit in Dr Destas book is the question why agriculture has always been consid-
ered different and why there is a need to have special rules for agricultural production
and trade. The book opens with the observation that apparently even David Ricardo,
the grandfather of the benets of increased trade between countries, agreed that agricul-
ture was in fact different. True or not, it is irrefutable that regulators of international
trade have always considered that agricultural products should be treated differently.
They still do. There is an ongoing concern that markets are not the best means of
regulating food supply. So, rather than integrate the rules on trade in agricultural
products into the GATT, something that this book shows would have been perfectly
possible, even desirable, the Uruguay Round negotiators chose to create a separate
agreement dealing specically with agriculture.
Agriculture is different. It is different for three basic reasons. It is different because cli-
mate, topography and rulers have made it so. Climate and topography determine productiv-
ity or lack of it. Good soil with stable climates has allowed civilizations to develop. The
absence of these natural advantages has placed natural limits on development. But even
where conditions are normally good, bad weather or the diversion of agricultural labour to
other ends, can disrupt production and supply. In this situation people, in particular people
in cities, go hungry. And hungry people cause trouble. Thus civilizations try to regulate
food production, supply and trade so as to give themselves the primary basis for political
and social stability.
Rulers, on the other hand, have more prosaic reasons for intervening in agriculture. The
rst reason for this intervention is the need to protect the rulers power base. Two promin-
ent examples of political failures to manage food production and distribution are in the
lead up to the French and the Russian revolutions. In both cases the spark that lit the re
was hunger. In both cases the rulers lost their lives.
The second traditional reason for the maintenance by rulers of a stable supply of food is
the conduct of war. An army ghts on its stomach. In military circles this truism is usually
an introduction to a discussion on ordinance and the need to maintain lines of supply
during an advance or a retreat. In more general terms it is reference to the idea that food
must be available to feed an army and to feed the industrial workers who supply the raw
materials of traditional war.
536 Journal of International Economic Law (JIEL) 6(2)
To date, and for a very, very long time now, there has been common consent between
all states, whether warring or peaceful, nomadic or stable, considered civilized or barbarian,
that agriculture production is too important to leave to the vagaries of the weather, the
vagaries of farmers and the vagaries of markets. Food is just too important.
Is this still true today? Can it be now said that these old established fundamental reasons
for intervention in agricultural production and food supply subsist in the early 21st century?
Has the nature of civilization changed? Are rulers now more secure because of new means
of social organization such as democracy? Is war so radically changed that food supply to
a moving mass army is no longer relevant? Or will we conclude that food remains important
and trade in foodstuffs needs to be regulated? Will we even go a step further and determine
that not only should agricultural production and trade be regulated but so too should the
means of agricultural production such as water, soil and the environment?
Some of the great achievements of the 20th century have been the provision of
household water and the cleaning up of the urban industrialized environment. Western
society is unlikely to risk these achievements. So rather than a reduction in regulation
of agricultural production and trade it looks like there might be an increase in the
scope of that regulation to include not only the agricultural products themselves but
also the means of their production.
This does not mean that the hope expressed by Dr Desta in the last paragraph of this
book that [a] successful conclusion of the [agricultural trade] reform process initiated by
the Agreement on Agriculture means nothing else than the deletion of the Agreement itself
from the list of legal instruments under the WTO is not achievable. It does mean, however,
that agriculture will remain different. Separate rules on trade and implicitly on production,
however they are packaged in the GATT or in a revised Agreement on Agriculture or in a
new Agreement on Water and the Environment or in a mixture of some or all of these, will
apply to agricultural production and trade. Our modern world is not that different from
those of our predecessors. The big question facing us all is to determine how should this
political or societal pressure for continued intervention in agricultural production be
expressed in law.
This leads us to a second issue implicit in, and underlying this book. This is the question
of equity in the regulation of trade in agricultural products.
David Ricardo argued in 1817 that there is a net mutual gain from trade between coun-
tries: different countries have, for a variety of reasons, a comparative advantage over others
in the production of different products. There will be a net societal gain if there are no
trade barriers preventing those countries with comparative advantage from beneting from
specialization and economies of scale. This is the theory underlying the General Agreement
on Tariffs and Trade. In addition, as Keynes argued, not only does the opening up of
markets contribute to an overall increase in welfare, but it also prevents the sort of isola-
tionism and discrimination that contributed to the two 20th century world wars.
If this theory applies in general to trade in all products, how come trade in agricultural
products, as opposed to production and domestic supply, needs to be treated differently?
In particular, how can the great promoters of the GATT system, the United States and the
European Community, justify closing their markets to countries which have comparative
advantage in the production of agricultural goods, while at the same time trumpeting the
benets of free trade for all other products (except, of course, textiles)? How can they
undermine agricultural production and trade by massively subsidising exports? The simple
answer is that these countries along with Japan, Switzerland, South Korea, Norway and, to
a lesser degree, Canada, considered it necessary to isolate certain, if not all, agricultural
markets so as to be able to promote domestic production and supply of some or all agricul-
tural products.
Is this fair? It depends on whom you ask. A protected farmer will certainly answer yes.
An excluded farmer will answer no. To get a more complete answer it is necessary to step
Books Reviews 537
back from farming alone and look at trade in general. This brings us back to the question
of whether agricultural production and trade is different from all other trade. If agricultural
production is considered different, then the question is how can the Ricardian benets of
trade be delivered in the agricultural sector while respecting some or all of the differences
between agricultural and other goods.
There is a problem of equity and it is to be found primarily in export subsidies and
secondarily in market access. Failure to address these problems will undermine the integrity
of the WTO system. These problems are currently being addressed but not in the abstract.
They will be answered in the context of the ongoing negotiations on reform in agricultural
trade which are taking place within the wider context of the Doha Development Agenda
negotiations on the liberalization of trade in general. In these negotiations real politic will
dominate.
The removal of export subsidies should help everyone, particularly in the short term. But
it is not clear that the benets will stay over the medium term. Secondly, any openings or
reforms of protected markets will not necessarily help the worlds poorer countries. The
competitive agriculture producers are not the poor states of Africa but South and North
American, Asian and Antipodean.
One of the great achievements of this book is that a full understanding of the background
to, and the basis of, the current agricultural trade negotiations is now possible. All can
participate equally in the debate. This has not been the situation in the past. Many good
intentioned peoples (either disgruntled governments or non-government organizations)
entered the equity debate without substantive knowledge of the applicable rules. Some of
the resulting proposals were therefore not appropriate and did not further the promoters
causes. Hopefully this will now be a thing of the past.
The Law of International Trade in Agricultural Products opens with an introductory exam-
ination of the economic rationale for free trade in general and looks at the paradoxes of
agricultural trade. The substantive examination of the Agreement on Agriculture is then
divided into three parts following the three pillars of the Agreement on Agriculture itself:
market access (or more properly legitimate market protection or isolation), subsidization
of domestic production and export subsidies.
The rst pillar of the Agreement on Agriculture concerns market access and this is dealt
with in the rst part of the book. Prior to the conclusion of the Uruguay Round and the
adoption of the Agreement on Agriculture, market access for agricultural products was
regulated by the GATT. Of key importance was GATT Article XI as most Contracting
Parties did not much bind themselves to any commitments in relation to agricultural goods.
Article XI is still applicable subject to the provisions of the Agreement on Agriculture. Thus
an examination of it is both necessary and useful.
GATT Article XI prohibits quantitative import restrictions except in certain situations.
The main exceptions are in relation to agricultural products and in particular in relation
to export restrictions for food security reasons and import restrictions necessary for the
enforcement of government measures restricting quantities on the domestic market or
removing temporary surpluses or in relation to animal products. The text of these excep-
tions and their application are expertly examined. What is clear from this examination is
that the exceptions were very narrowly applied. Each time the exception was cited as a
justication for the import restriction it was rejected by the panel examining the matter.
Yet, despite this good jurisprudence, very few agricultural cases were taken under Article
XI or the GATT in general. Why is not clear. One reason may be institutional. Many
countries with comparative advantage in agricultural production were not GATT Con-
tracting Parties. But that does not explain why Brazil or Australia, for example, were not
more aggressive. A partial explanation is that many countries had their own programmes
in place and did not want to promote jurisprudence that could come back to haunt them.
But even that does not seem to be a sufcient explanation. Nor is the simple answer that
538 Journal of International Economic Law (JIEL) 6(2)
under the GATT system losing parties could block the adoption of panel reports. In prac-
tice even where a panel report was blocked in the GATT Council some remedy was usually
provided for the complaining party. So there was a benet to bringing cases.
It could be that cases were not brought under the GATT for the very reasons that
markets were protected and production supported in the rst place: namely that agriculture
is different and governments recognized this not only for the domestic but also for the
international sphere. Governments did not take international action because they agreed
on the need to manage domestic production and supply. In fact it was only when the
problem of agriculture spread from domestic market protection and production support to
unfettered use of export subsidies resulting in the destabilization of world markets that
international disciplines were agreed upon.
The book then looks at market access under the Agreement on Agriculture. Here the
basic deal was that all WTO Members should convert their border protection measures,
which were then made up of a variety of measures including moving levies, voluntary
restraint mechanisms, quantity restrictions on imports, into xed tariffs. This was a process
known as tarifcation.
It was known by the Uruguay Round negotiators that many of the tariffs, which would
result from tarifcation, would be high and often too high to allow any imports at a price
that could be sold on the import market. The example of a 1000% tariff on imports of rice
into Japan is often cited. Thus, in addition to tarifcation, it was agreed that WTO Mem-
bers would allow some trade to ow under these high tariffs by means of tariff rate quotas.
A TRQ is a limited volume that can enter a market at a tariff lower than the bound tariff.
Tariff rate quotas are problematic. The problem is not so much how licences to the
quota should be allocated among traders. A number of papers have been submitted within
the context of the Doha Round on how this should be best done. The more difcult issue
is the application of GATT Article XIII to TRQs. As Dr Desta rightly points out, many of
the TRQs agreed within the context of the Uruguay Round were mere consolidations of
existing market access opportunities. It was agreed that these should continue. It was also
agreed that where the then current trade did not amount to 5% of domestic consumption
in the base period (19861989), then minimum access TRQs should be opened over the
implementation period. Members were instructed to ensure that there was no discrimina-
tion in these minimum access opportunities opened.
There is no reason why GATT Article XIII should not apply to all TRQs. How come
then that there was a negotiating agreement that current (or pre-existing) TRQs could be
allocated to specic countries on the basis of historic circumstance, while the new TRQs
(the minimum access TRQs) could only be allocated among supplying countries on the
basis of non discrimination or GATT Article XIII?
A close examination of Article XIII read in conjunction with the Appellate Body reports
on the EC Poultry case and the EC Bananas case would seem to imply that all TRQs
must be administered in compliance with Article XIII. Article XIII provides that if a TRQ
is to be allocated among supplying countries, it must be done either on the basis of agree-
ment with all the concerned suppliers or on the basis of past trade during a representative
period. The objective, however, must be to ensure that the share in the TRQs reects as
closely as possible the trade that would occur in the absence of the trade restriction. The
allocation of TRQs among supplying countries so as to effect compensation is not permiss-
ible. The fact is that many of the current TRQs are allocated for that reason.
In addition, it can be asked whether the allocation of a TRQ among supplying countries
on the basis of past trade performance or political agreement must be subject to periodic
review. The xing of market shares over a long period, which occurs frequently, will only
vary rarely, if ever, reect the trade that would occur in the absence of the restriction. Surely
the objective of GATT Article XIII can only be achieved if there is periodic reassessment of
Books Reviews 539
the past performance allocations to reect changing trade patterns and changes in compar-
ative advantage?
The heart of this book and clearly the main concern of its author is the second section
on export subsidies reecting the third pillar of the Agreement on Agriculture. Dr Desta is
right to concentrate on this issue. It is clearly the most damaging and the most inequitable
aspect of international agricultural trade. It also continues to be the most controversial. It
is in relation to export subsidies that Dr Desta has applied the best of his skills and he has
come up with analysis that clearly questions most legal analysis to date. His argumentation
is impressive and convincing.
The book rst examines the history of the regulation of subsidies but with an emphasis
on export subsidies. This historical review looks at the position under the GATT and
under the 1979 Subsidies Code, agreed during the Tokyo Round. The subsequent chapter
examines subsidies under the WTO and in particular under the Agreement on Subsidies
and Countervailing Measures. As Dr Desta points out, this is essential to our understanding
of subsidies under the Agreement on Agriculture. Agricultural subsidies are exceptions to
the general rules and as exceptions are to be construed narrowly. Where there is no provi-
sion in the Agreement on Agriculture, then the general subsidy rules apply.
The true clarity of Dr Destas analysis comes out in his understanding what exactly the
subsidy provisions of the Agreement on Agriculture are and what they are not. This allows
for an excellent examination of where the gaps are and what the consequences are. In other
words when the provisions of either the Agreement on Agriculture or the SCM Agreement
apply. It seems clear that certain panel and Appellate Body reports would have been differ-
ent if they had had the benet of this work before them.
Part III of the book considers domestic subsidies. It begins with an examination of the
law of domestic subsidies in general and looks at a number of cases that were decided on
the basis of non-violation nullication and impairment under GATT Article XXIII. GATT
Contracting Parties were permitted to subsidise domestic agricultural as well as other pro-
duction. The only constraint was the need to ensure that other Contracting Parties were
not thereby injured. The innovation of the Agreement on Agriculture is that it begins to
dene and regulate domestic subsidies and limits the overall use of certain of them. This
is a rather complex area of law and the book successfully sets out the various rules and how
they relate to each other.
One issue is not, however, clear. If one is regulating domestic support in general and not
merely domestic subsidies, how can a discussion of the role of market protection be
excluded? How should the benet a farmer gets from being able to produce and sell behind
a high tariff wall be assessed in the light of the provisions on domestic (or even export)
subsidies? Is the distinction between domestic support and domestic subsidies really the
difference between legitimate support by means of tariffs and questionable support by
means of subsidies? For example the cost to the EC exchequer of the sugar regime is
minimal in relation to the overall benet to sugar farmers and processors because of the
high tariff and the permanent special safeguards. The limitations on the sugar subsidies in
the Agreement on Agriculture within the AMS limitations are just one part of the picture.
This issue is one of the few gaps in an otherwise excellent analysis of domestic subsidies.
The nal section of the book looks at the prospects for further reform of agricultural
trade in the current Doha negotiations. In this nal section the author reveals his prejudices.
The bulk of this nal chapter is an examination of the ECs Doha negotiating position. He
implies that unless the EC moves its position, there will be no opening up of markets or
further liberalization of trade. The question must be asked whether or not Dr Desta would
have only considered the EC position had the new US Farm Act been adopted prior to the
completion of his manuscript? The US is not an innocent champion of liberalization. It
merely champions selective liberalization in those areas where, with government support,
it has comparative advantage. It tends to package this in a principled free trade agenda.
540 Journal of International Economic Law (JIEL) 6(2)
And yet the author has pointed out in this book that the weak GATT provisions on subsid-
ies were taken from US drafts and were designed to protect US agricultural interests. When
tighter subsidy provisions were introduced in the mid-1950s the US sought and got a waiver
for its farm programmes. Finally, the Blair House accords, in addition to giving France
what it wanted, were very US friendly but packaged as a victory for the US over the EC.
A closer look at US policy is essential for an understanding of what can and cannot be
achieved in Doha.
This is a ne book and, except possibly for the last chapter, will stand the test of time.
One mild criticism can, however, be levelled at the author and that is his reliance for much
of the historical policy and political analysis on secondary sources. This is a mild criticism
as the authors approach is understandable. As a lawyer Dr Desta has not stinted on his
examination of original legal sources and doing original research in areas outside his expert-
ise would have been next to impossible. However, it can be frustrating to read that ve
Latin American states walked out of the Montreal Uruguay Round mid-term review and
not to be told which, or that a number of Cairns group countries were surprised at the US
Uruguay Round zero proposal but again not to nd out which. The footnotes merely cite
the secondary source.
The other criticisms of this book can be laid rmly at the door of the publisher, Kluwer
Law International. The rst and most basic criticism is in relation to the title. It does a
signicant disservice to the content. This book is about the market access, domestic and
export subsidies for agricultural products within the WTO system. It does not cover all
WTO law relating to trade in agricultural products. Intentionally missing is the Agreement
on the Application of Sanitary and Phytosanitary Measures which has a profound impact
on trade in agricultural products. The author specically and understandably excludes this.
The SPS Agreement is distinct and was purposely separated from the Agreement on Agri-
culture by the Uruguay Round negotiators. Nor is there an examination of Geographic
Indications within the TRIPs framework or such important topics such as the rules relating
to Genetically Modied Organism, Traceability, Labelling, etc.
Other criticisms are more technical. There are a number of typos. The footnotes are
sometimes mis-numbered and do not appear on the same page as the text to which they are
referring. And nally some editing would have allowed better cross-references to arguments
already made.
To conclude I need to cite once more Marco Bronkers. Melaku Deboye Desta is to be
admired, he says, because in writing this book he has achieved a goal to which all lawyers
should aspire: he has contributed to the betterment of society. I heartily endorse this
unusual praise. We can all now participate in the debate on the future of the international
regulation of the agricultural production, market access and exports.
Bernard OConnor*
Trade and Environment in the EC and the WTO A legal analysis. By
Jocnc: Wicns, Europa Law Publishing, Groningen, 2002, ISBN 9076871
086, 502pp.
Whether environmental concerns are at all incorporated into the application of the World
Trade Organisation agreements remains a core interest to many of the activists protesting
against the WTO. Academic work however on both sides of the Atlantic has, according to
this reviewer, quite convincingly argued that there exists no blind priority by which the
* OConnor and Company, Rue de Spa 30, B-1000 Brussels, Belgium.
Email: be.oconnor@oconnor.be