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IPC Position Paper No. 9

State Trading and The WTO: Reforming the Rules for Agriculture

An overview

With agricultural trade reform talks preparing to resume by the end of 1999 under the auspices of the World Trade Organization, it is time for the activities of state trading enterprises (STEs) to come under the purview of the multilateral trade rules system. This is because the same reasons for liberalizing borders and reforming policies also apply to reform of STEs: Measures that favor one type of commerce over another invite abuse, encourage waste and stifle innovation, with the costs falling most heavily on farmers and consumers.

The aim of the present paper by the International Policy Council on Agriculture, Food and Trade (IPC) therefore is to provide negotiators in the WTO with policy recommendations for how to liberalize this aspect of agricultural trade in the context of the 1999 trade round. The paper describes the various types of STEs—from public export monopolies to market promotion agencies and cooperatives—and suggests individual remedies for their trade-distorting effects. Where monopolies exist, the IPC contends that effective competition must be put into place, and where other distortions arise because of STEs, appropriate disciplines should be imposed.

The IPC argues that if progress is made on state trading in agriculture based on the framework outlined in the paper, then the 1999 WTO round will have taken a significant step forward in removing a major obstacle to the free flow of agricultural and food products.

FULL TEXT (.pdf format)

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