WORLD TRADE
ORGANIZATIONWT/CTE/W/188
25 April 2001
(01-2062)
Committee on Trade and Environment Original:  English/
Spanish
LEGITIMATE NON-TRADE CONCERNS
Item 6 of the work programme
Submission by Argentina
I. PREFACE
1. This paper was previously submitted to the Committee on Agriculture, entitled "Legitimate
Non-Trade Concerns" (G/AG/NG/W/88).  Argentina also wishes to submit it for consideration to the
CTE under Item 6.  According to the Decision on Trade and Environment adopted at Marrakesh
on 15 April 1994, the CTE has “to identify the relationship between trade measures and
environmental measures, in order to promote sustainable development”.  Under Item 6 of the CTE’swork programme, the Committee is requested “to address the environmental benefits of removing
trade restrictions and distortions”.  This paper depicts three of the most acute environmental and
social consequences of the existing trade restrictions and distortions affecting trade in agriculture:
rural poverty, unemployment and environmental degradation.
II. INTRODUCTION
2. The Agreement on Agriculture calls for the continuation of the reform process by substantial
progressive reductions in support and protection.  These negotiations are aimed at determining what
further commitments are necessary to achieve the objective of establishing a fair and market-oriented
agricultural trading system.  In doing so we need to take into account non-trade concerns and special
and differential treatment to developing countries.
3. Therefore, while considering non-trade concerns, governments should not undermine the
objective of these negotiations (i.e. delivering th e fundamental reform for tr ade in agriculture) and
should also be mindful of the consequences for developing countries.
4. Argentina, as much as every other WTO Member, has important non -trade concerns to take
care of at home.  Some of these are particularly related to the consequences of existing trade
restrictions and distortions.
5. Argentina's non-trade concerns are aimed at prom oting human welfare.  Some of the world's
most acute problems could only be relieved by correcting and preventing restrictions and distortions
to trade in agriculture.
6. Rural poverty, unemployment and environmental protection are three of our main non-trade
concerns.  We believe these are legitimate non-trade concerns because they could be pursued by all
WTO Members consistently with the objective of establishing "a fair and market-oriented agriculturaltrading system".
7. As we explain further on, these three legitimate non-trade concerns are all intrinsically related
to current trade-distortive policies implemented by some of our richest trading partners.WT/CTE/W/188
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III. RURAL POVERTY
8. It has been widely acknowledged that rural poverty is largely responsible for environmental
degradation in developing countries.  Rural poverty is also at the root of migration to overcrowded
cities, rising unemployment rates and social unrest in developing countries.
9. Since the beginning of the Asian crisis OECD countries have increased support to agriculture
by 9,95 per cent.1  From every $100 an OECD producer earns, $40 are granted by consumers and
taxpayers.  In 1999, OECD countries spent a record of over $361 billion to support their agriculture
and this is estimated to cost developing countries US$20 billion per year.2
10. How does this affect global human welfare?
11. From 1997 onwards, the crisis caused a fall in demand for the main commodities on whose
export many developing countries depend.  Lower demand normally leads to lower prices, and if this
is then followed by a reduction in supply, a new equilibrium price is reached.
12. Unfortunately, as from 1997, some of our richest trading partners, instead of cutting
production, increased the use of subsidies.  This generated even larger surpluses, which had then to be
dumped onto the international market at subsidized prices.
13. Moreover, precisely in 1997 and 1998, some countries found it timely to use accumulated
export subsidies, i.e. those unutilized in 1995 and 1996 due to international high prices.  This isparticularly the case of sugar, a commodity on which many developing countries depend.  In 1997 and
also in 1998, the EU overshot its annual limits in terms of both budgetary outlays and volumes.
14. The OECD has estimated some of the effect s that would flow from eliminating certain
subsidies.
3  For example, if the EU did not subsidize its wheat exports, the price per tonne today
would be 4 per cent higher.  If the EU did not subsidize its maize exports, the price per tonne wouldbe 9 per cent higher.  In turn, if the United States had not increased the use of domestic subsidies,
soya today would be worth between 6 and 7 per cent more.  Obviously the downward pressure on
these commodities also has consequences for the prices of substitute products, such as palm oil or
cereal substitutes for wheat and maize.
IV. UNEMPLOYMENT
15. Tariff escalation is another good example of an environmentally and socially disastrous trade
policy in terms of the adverse impacts on developing countries.
16. Many tariffs are imposed at a higher level on processed and semi-processed products than on
unprocessed products and raw materials.  The more value is added to a commodity, the more tariffs
escalate.  This provides extra protection for processing industries in the importing country and is
particularly perverse for developing countries since it virtually "taxes" efforts to diversify production
and to move into higher stages of processing.
4
17. Developing countries are heavily dependent on agriculture and most have vast rural
populations that are increasingly expelled from the countryside because they cannot compete against
the tariffs and subsidies provided by the richest countries.
                                                     
1 OECD, Agricultural Policies in OECD Countries, Monitoring and Evaluation, 2000.
2 OECD, Agricultural Policies in Emerging and Transition Economies, 2000.
3 OECD, Agricultural Outlook 2000-2005.
4 WTO, Tariff Escalation, WT/CTE/W/25, document prepared by the Secretariat.WT/CTE/W/188
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18. To put it in a nutshell, rural poverty is send ing more and more migrants to cities.  Our
industries cannot generate enough new jobs to decently integrate these people into already over-
swelled cities and our governments do not have the means to alleviate the social consequences.  These
constraints are compounded by limits imposed to our domestic policy options by the TRIMS and
TRIPS Agreements adopted in the Uruguay Round.  The result is more social unrest and less politicalstability.
19. Moreover, tariff escalation also has a negative effect on the environment.  Since developing
countries are regularly pressured to expand their foreign exchange revenue (due to debt and
development constraints), tariff escalation is in directly encouraging the expansion of commodity
production beyond sustainable limits.  This promotes a vicious circle;  an increase in supply of
commodities leads to lower international prices and this, due to the foreign currency constraints and
the impossibility to shift to higher value-added produc ts, results in more (not less) pressure on natural
resources.
20. The only remedy at hand for developing countries is applying export restrictions and export
taxes to their commodities.  This is  meant to "offset" the negative effect of tariff escalation on their
processing industries by providing them with cheap inputs.  This remedy is - to say the least - not a
first best solution since it taxes domestic commodity production and further depresses raw materialprices, hence preventing the introduction of environmentally friendly production practices.
V. ENVIRONMENTAL DEGRADATION
21. Argentina, like many other developing countries, is very interested in protecting its natural
resources.  These are the assets on which our agriculture is based.  We are good at producing
agricultural products and therefore we have to take special care of land and water protection.  To doso we need to implement sound environmental policies.
22. Unfortunately, protecting the environment very rarely pays in the short term.  This is
particularly true in developing countries, in which, due to capital shortages, setting aside short-term
gains for the sake of the medium and long term is regarded as an extravagance.
23. Much has been said about the environmental consequences of price support and other
production-distortive subsidies to the subsidizing countries, but less attention has been paid to the
negative effects of price-distorting subsidies on distant developing countries.
24. If a government massively subsidizes its commodity production and/or exportation it is very
likely also distorting international prices.  When governmental policies distort international prices,
corresponding distortions are felt elsewhere.  Distant decisions about investments, production
methods, international trade and consumption patterns are also distorted as a result.  This encourages
new investments in the subsidized sector and consequently prevents those investments from goingelsewhere, for instance to developing countries where production may be less intensive and where
poverty, particularly rural poverty, is the main cause of rural and urban environmental degradation.
Everything is then affected:  resource allocation, international trade and environmental protection.
25. A handful of pretexts is offered to keep price-distorting subsidies in place - no matter if this
results in mountains of surpluses that require additional export subsidies and developing country'sagricultural producers have to cope with the consequences with little or no support from the
government.
26. Summing up, protecting the environment is a compromise between reaping short-term
benefits and investing for the future.  Our producers do not have the "benefit" of massive subsidising
policies and are just too obsessed with surviving in the short-term to be able to put aside adequateresources to ensure long-term sustainable exploitation.  Opting for the long term becomes anWT/CTE/W/188
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extravagance when our rich trading partners can displace our products from domestic and
international markets with their subsidies.  The result is that our possibilities of introducing
sustainable exploitation practices are seriously hindered.
VI. CONCLUSION
27. Non-trade concerns should be pursed consistently with the objective of these negotiations, not
at the expense of other  trading partners.  Argentina, just like every other Member, is committed to
achieve substantial and progressive reductions in support and protection in the agricultural sector.
This is the framework in which we all should explore the consistent ways and means of taking into
account legitimate "non- trade concerns" while being mindful of consequences for developing
countries.
28. Argentina, as a member of the Cairns Group, has presented concrete proposals on Export
Competition, Domestic Support and Market Access.  We will be raising our specific non-tradeconcerns while dealing with each of them.
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