RIYADH, 23 January 2006 — In agriculture, Saudi Arabia has negotiated an advantageous deal for itself that will cushion the impact on domestic producers to a large extent.
First, the Kingdom obtained developing country status in agriculture (it had originally asked it for all products), thereby getting a 10-year transition period to phase in tariff and subsidy cuts.
Secondly, in the case of import tariffs, the post-WTO bound rates are higher than existing rates in a large number of agricultural products, even more so than in industrial goods. Out of 306 agricultural products, bound rates are higher than or equal to the existing GCC rates in 253 lines, and lower in only 53 lines.
Thus, import tariffs will remain unchanged for now for the 253 products (some of them will have phased tariff cuts after 10 years), while only 53 product lines will see an actual cut in import tariffs from the date of accession.
These include: Processed cheese, some types of sugar confectionary, biscuits, small tea bags, lemonade, orange drink, macaroni, vermicelli, milk-based baby food, roasted cereals, chewing gum, ice cream, mineral water, etc. We are likely to see increased imports over time for these products. On the other hands, products that will continue to enjoy the same degree of protection for now include for example, pumpkins, fresh figs, apricots, avocados, cherries, parsley, peaches, various kinds of flour, husked brown rice, millet, white corn, peas, beans, spinach, natural resins, myrrh, fresh birds egg for hatching, eggs in shells, prepared foodstuff with more than 20 percent meat, maple sugar and syrup, milk powder for industrial purposes, date molasses, long life milk in packages exceeding 1 liter, olives, edible pastas w/o eggs, etc.
The Kingdom’s obligations regarding domestic agricultural subsidy cuts are also quite generous. Saudi Arabia has agreed to cut domestic subsidies by a total of only 13 percent (the amount allowed all developing countries) from an agreed upon annual base level over the 10-year period. Called the aggregate measure of support (AMS), the WTO-negotiated formula will result in phased cuts in domestic subsidies from the current base level of SR3.7 billion per annum to SR3.2 billion per annum by the year 2015. We see two main reasons why Saudi Arabia was able to negotiate such a sweet deal in agriculture.
First, WTO accepts food security as a key reason why developing countries may want to protect native agriculture. Second, agriculture itself remains “unfinished business” in the overall WTO negotiations. Further changes will come as the Doha Development Round negotiations on agriculture unfold. Agriculture remains one of the most contentious issues in the WTO as many countries continue to protect their own farmers through high export and production subsidies and tariff walls.
(Khan H. Zahid is chief economist and vice president at Riyad Bank. He is based in Riyadh.)
