AGRICULTURAL TRADE IN THE URUGUAY ROUND: INTO FINAL BATTLE



els, consistent with existing legislation and GATT rules. This does
not imply that old legislation cannot be changed and current pro-
grams replaced, unilaterally or in coordination with other countries.
How countries will roll back or eliminate existing trade or output dis-
tortions in 1990 and after was left vague.

Overall, the midterm review package provided evidence of prog-
ress in the Uruguay Round, but it is far from clear that the good in-
tentions it expressed will be realized in a final 1990 package.

U.S. Proposes “Tariffication”

Immediately following the April accord, relatively little was done
for several months, as countries allowed themselves relief over the
fact that a midterm agreement had been reached at all. In the July
10 meeting of the Negotiating Group on Agriculture, however, the
United States put forward a major part of what is emerging as its
final package of proposals (GATT Secretariat). This is the so-called
“tariffication” concept, hailed by
The Economist as “the most prom-
ising way yet suggested to break out of GATT’s agricultural thicket.”

In brief, tariffication means converting all nontariff import barriers
to tariffs, which can then be “bound” and negotiated downward
over time. Bound (or fixed) tariffs are the preferred method of im-
port protection under GATT law.

The U.S. proposal suggested the difference between domestic and
world prices be used as the basic measure of tariff equivalence. For
example, a quota increases domestic prices by reducing the amount
of supply available to consumers at the world price. The difference
between the world price and the higher domestic price is equivalent
to a tariff of that amount. If the domestic price for the product in
question during the reference period is 100, and the world price is
50, the tariff equivalent would be 100 percent = [(100 — 50)/] × 100.

Tariffication Faces Resistance

The tariffication proposal sounds reasonable in the abstract, but is
sure to encounter resistance from those sectors most reliant on
quotas and other nontariff protection for their livelihood. In the
United States, this includes those protected by dairy, sugar, tobacco
and peanut import quotas. There are also a variety of technical
problems in calculating tariff equivalents, including the choice of ref-
erence prices and base period.
The Economist also presages, “as tar-
iffication proceeds, some countries may be tempted to impose new
import restrictions in the form of product standards, such as sanitary
and phytosanitary restrictions.”

27



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