State trading of farm produce angers WTO

JAKARTA (JP): The trade of farm produce by state agencies has been criticized by some members of the World Trade Organization (WTO) for creating trade distortions, a WTO executive said here yesterday.

"Now, more focus is being put on state trading because ... in the view of some countries, state trading creates distortions," WTO Deputy Director General Anwarul Hoda said.

Hoda is here to attend a three-day, Asia-Pacific, senior officials meeting which ends today. The meeting is to prepare the way for an inaugural WTO ministerial meeting in Singapore in December.

Some countries have expressed great concern over the problems of state trading and have even proposed that it be "looked into in greater detail in the next round (of agricultural negotiations in 1999) or even before that," Hoda said.

He did not refer to any countries which maintained problematic state trading practices. However, there is state trading of agricultural commodities in Indonesia through the National Logistics Agency.

As part of the government's import substitution drive, the import and distribution of some agricultural products, including sugar and wheat, are still monopolized by the agency.

The WTO agreement on agriculture, to be implemented mostly between 1995 and 2000 for developed countries and between 1995 and 2004 for developing countries, does not mention state trading. The agreement has three main components: reductions in farm export subsidies, increases in import market access and cuts in domestic producer subsidies.

To comply with the agreement, signatory countries are required to reduce their farm export subsidies to one fifth lower than they were in the late 1980s. Budgetary expenditure on export subsidies is to be lowered by 36 percent for developed countries and by 24 percent for developing countries.

In terms of market access, member countries are required to convert their non-tariff import barriers into tariffs, which are then to be reduced by 36 percent for developed countries and by 24 percent for developing countries.

Japan and South Korea have managed to get concessions on the agreement. They are allowed to delay their tariff reductions on rice. Developing countries are also exempted from reducing their tariffs on products which are staples in traditional diets.

The chairman of the meeting, Soemadi D.M. Brotodiningrat, said yesterday that Japan remained reluctant to discuss market access for farm commodities.

"In Japan, agriculture is a sensitive issue. Although the number of farmers is small, they are very influential," Soemadi said. "Even for preparatory meetings for the next round of talks on agriculture, Japan is reluctant to endorse it because its farmers are very emotional."

In terms of subsidies, member countries are required to reduce their aggregate levels of domestic support for farmers to four fifths of their levels in the late 1980s for developed countries and to 87 percent for developing countries.

Hoda revealed yesterday that during the meeting, India had raised concerns over the domestic subsidies issue, arguing that India, with its large population, could not depend on the international market alone to feed its people. So it should be given flexibility in meeting its food requirement.

"I personally feel that the agreement on agriculture already contains flexibility for developing countries to do enough for its agriculture," Hoda said.

Meanwhile, Minister of Agriculture Sjarifudin Baharsjah said in Semarang, Central Java, yesterday that Indonesia's policies on agriculture have been adjusted to conform with WTO principles.

Sjarifudin said that Indonesia is committed to liberalizing trade for 1,341 agricultural items through reducing tariffs and trade ceilings in accordance with the Final Act and Modalities for the Establishment of Specific Binding Commitments under the state's reform program.

"We have been committed to reducing import tariffs on each agricultural item by at least 10 percent. It means that the average of our tariff reductions on farm products is higher than the set 24 percent," Sjarifudin said.

He also said that Indonesia would continue implementing all of its commitments to the WTO, including those on market access. Indonesia, he said, is committed to opening its market for rice -- the main staple diet for most Indonesians -- and diary products to 70,000 tons and 414,700 tons a year respectively. (har/rid)