Agriculture reforms without EC input on modalities?

As the end-March deadline for setting the governing framework for the WTO agriculture talks draws nearer, member states remain far apart in their negotiating positions, unable to bridge differences over myriad aspects surrounding trade in this crucially sensitive sector.

by Chakravarthi Raghavan

GENEVA: The chair of the Special Sessions of the WTO Committee on Agriculture which run the negotiations on agriculture trade, Stuart Harbinson, will circulate a first draft of a modalities paper before the next special session meeting (informal and formal) scheduled for 24-28 February.

The modalities paper, which is to set out the guidelines for the negotiations, is envisaged by trade officials and some of the protagonists to involve reduction commitments in terms of the so-called “three pillars” of market access, domestic support and export competition, and some ancillary matters (geographical indications, food safety, labelling, importing and exporting state enterprises, export credits, food aid, administration of tariff quotas).

Once the modalities paper is agreed, this more or less sets the course for the rest of the negotiations and decides the final outcome, at best giving the members a little leeway in haggling and bargaining over details.

In terms of the deadlines set by the Doha Ministerial Declaration, WTO members are to agree on the modalities by the end of March, and table their draft schedules of commitments (based on the modalities) by the next WTO Ministerial Conference in Cancun, Mexico in September.

EC deadlock

However, with the European Commission stymied (because of major disagreements among its members and possible veto by France and a few others), there is little expectation that the end-March deadline can be met, and there is now talk of the modalities having to be negotiated at Cancun.

The Commission negotiates on behalf of the European Union (which is referred to officially in the WTO as the European Communities, EC) at the WTO.

The Commission’s efforts to get EU members to agree to reform of the Common Agricultural Policy (CAP) as such have been blocked, and CAP budget outlays have been ‘frozen’ until end-2006. Separately, the Commission’s attempts to put forward proposals at the WTO on modalities, and envisaging shifting of farm support to the so-called “decoupled” “green box” payments, have been blocked by France and other members which benefit from the CAP. Even the consent of the UK and Germany to the Commission’s view has been obtained only after the Commission’s reform proposals had put back the support/subsidies to the big farms, which were originally slotted to be ended.

The Commission’s 16 December proposals on modalities were to be considered in the week of 27 January at the level of EU ministers, but the proposals are such a minimalist approach that they cannot provide an impetus for progress at the WTO easily.

Harbinson had put forward an overview paper in December (see TWE #297), and he had called for comments and for efforts at “bridge-building.” There were comments on his overview paper at the special sessions of the Agriculture Committee in the week of 20 January, but in his summing up at the informal sessions, Harbinson confessed “not much bridge-building” had taken place, either because members were not quite ready to move or because they needed “some external stimulus.”

As per his original programme, based on the comments and proposals (written and oral) in the Committee so far, he is due to formulate a first draft of the modalities paper for the February meeting. Based on those discussions, he is to prepare a second draft to be circulated in March for consideration at the special sessions (25-26 and 28-31 March) and for establishing the modalities for members to submit by the Cancun Ministerial Conference draft schedules of further commitments under the Agriculture Agreement.

With the EC not having put forward any proposals of its own, however, it is now generally agreed on all sides that not only will the 31 March deadline for settling the modalities not be met, but the other parts of the Doha negotiating agenda (besides agriculture) could also be jeopardized.

Even as it is, clear deadlines (of end-2002) set to address three issues of particular importance to developing countries (TRIPS and public health, implementation decisions and special and differential treatment questions) have been missed, and there is much argument as to whether even what was agreed at Doha will be put through - as in the case of implementing Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health (which is not even part of the Doha single undertaking). (See TWE #297.)

The doubts on agriculture modalities being agreed by 31 March were confirmed at a press conference on 22 January by India’s Agriculture Minister, Ajit Singh, who was in Geneva to meet the agriculture negotiators of various protagonists.

During his four-day stay here, Singh had met WTO head, Supachai Panitchpakdi, and the latter’s chef de cabinet, Harbinson, who is continuing to chair the Special Sessions of the Committee on Agriculture. At his press conference, he declared that there was no way that India, with 650 million farmers to whom agriculture was a livelihood and not a case of agribusiness, could undertake any tariff cuts unless the rich nations cut their export subsidies and domestic support, including the loopholes in the Agriculture Agreement which had enabled them merely to shift their levels of support, and even increase them, by calling them “green box” support (decoupled from production and thus presumed to be non-trade-distorting).

No forward movement

At the informal session in the week of 20 January on Harbinson’s overview paper, there were comments on market access, export competition and domestic support. But there was mere repetition of known positions and no forward movement at all, trade diplomats said.

Apart from these three heads in the overview paper, there was also discussion about the least developed countries and “other matters”, namely geographical indications, food safety, labelling, capacity building, importing and exporting state trading enterprises, export credit, food aid, and the administration of tariff quotas.

Several countries in their comments made clear their views about the interlinkages among the three pillars (market access, domestic support and export subsidies). China and India were among those who said they would only be able to reduce tariffs if developed countries cut their domestic support and export subsidies.

In insisting on a linked approach (no tariff cuts until cuts in domestic spending and export subsidies by the rich nations), Ajit Singh explained at his press conference that developing countries could not use budgetary resources (like the rich nations) to provide domestic support to their farmers, nor provide export subsidies to compete with the treasuries of the rich countries.

The only protection that the Indian government could provide to its farmers, with an average holding of 1-1/2 hectares and 80% of farms below two hectares, was through tariffs. India could not reduce these (in the absence of drastic cuts in domestic support and export subsidies of the rich nations) without creating social disorder, he added.

The EC and other European countries, for their part, said at the meetings that the three pillars are linked to agreement on non-trade concerns, a term under which a wide range of questions have been brought up. These include food safety and labelling, with the EC elaborating on how the precautionary principle for food safety could be formulated as an interpretation of the Appellate Body rulings.

The Cairns Group members, however, oppose this.

India and others have also raised the problems created by restrictions on their exports through the so-called sanitary and phytosanitary measures - and the EC and other views about the precautionary principle in food labelling could easily add to these.

Another ‘non-trade’ issue is the one relating to geographical indications (GI) of origin. Bulgaria has raised the issue, supported by India, the Europeans and several others, for an extended coverage of GI protection, but this is stoutly opposed by Australia, the US and several of the Cairns Group members. Bulgaria made clear that if there was no progress on negotiations on the GI issue - either at the agriculture talks or at the TRIPS discussions - it would not be able to agree to any accords in other areas of the negotiations, particularly in agriculture.

In respect of the proposal for a new special safeguard mechanism for developing countries (which are presently denied use of the special safeguard since they had not converted all their support measures into tariffs), Malaysia and Thailand (both Cairns Group members) said they could drop their opposition to such a proposal, if the formulation strictly limited its use to a small number of highly sensitive staple products under tight conditions.

It is not very clear what the “highly sensitive” staple products are, and whether they will be the same for all countries, or whether each country would be able to set out a “small number” of these and under what conditions. Presumably all these may need to be part of the negotiations.


At the end of the latest informal sessions, it is not very clear what Harbinson would do in terms of his stated timetable of putting forward a first draft modalities paper well in time for the next special session at the end of February.

Some trade diplomats think that the Harbinson first draft might just put in the options posed in his overview paper - which though was seen at that time as leaning in the direction of the US’ stances.

And these diplomats also think that unless there is considerable ‘lowering’ of ambitions by the US, entities like the EC or big countries with large rural populations will not be able to agree and the single-undertaking negotiations will be jeopardized.

The Harbinson overview paper has envisaged the possibility of “some unfinished business” being considered after the 31 March deadline. However, at the discussions in the week of 20 January, the EC and some others said they could  only consider and  agree on a complete package of modalities, since they would have to assess the whole package.

It is possible that the European Commission, which will want to use the WTO negotiations to get the upper hand over its members, might privately encourage Harbinson to put forward a modalities draft, to formally force the EU’s hand and enable Brussels to persuade the members to agree to its own view.

However, it is also apparent that even the Commission’s approach (including for CAP reforms) would involve at best shifting the farm support and payments to the so-called decoupled support, meaning the domestic-support payments to farmers would not be tied to production.

Though some trade negotiators and the WTO agreement may present this as acceptable, it is clear that, given that money is fungible, support and payments in any way to farmers will enable the inefficient and costly farming in the industrial world to stay in production. And as an OECD study has brought out, much of the support (under whatever head) goes to the big agribusinesses and farms, and not to small farmers, as is made out.

According to the latest news reports, EU member states finally adopted a new EU proposal for the agriculture negotiations on 27 January. The proposal was subsequently submitted to the WTO.

From Third World Economics No. 298 (1-15 February 2003)