TWN Info Service on WTO Issues (Nov03/11)

25 November 2003

Third World Network

Dear friends and colleagues,


The WTO General Council chairman convened an “informal consultation” (Green Room meeting) of about 30 members on agriculture on 20 and 21 November.  This started the “second round” of consultations on four issues being undertaken, aimed at reaching some conclusions for the 15 December General Council meeting mandated by the Cancun Ministerial conference.

There was no convergence of views during the meeting, as delegations reiterated their positions.  “There is no basis for any new text,” concluded the General Council chairman.

A highlight was the presentation by India of data illustrating how the “blended approach” proposed by the EU and US for reducing agriculture tariffs would disadvantage the developing coountries as they would be subjected to far steeper reductions than the major developed countries.  Many developing countries expressed they found the results of this study “disturbing” and joined India in calling for simulations to be undertaken by the WTO Secretariat.

Below is a report of the agriculture meeting of 20-21 November, by Goh Chien Yen of the Third World Network.

Previous issues of TWN Info Service on WTO Issues can be found at our website

With best wishes

Martin Khor

Third World Network





TWN Report by Goh Chien Yen, Geneva, 22 November 2003

There was no convergence of views on agriculture during two days of informal consultations involving about 30 members on 20 and 21 November at the WTO.  The delegations that spoke reiterated their known positions.

The Chairman of the General Council, Uruguayan Ambassador  Carlos Perez del Castillo, told journalists after the meeting on 21 November:  “There was no negotiating mood.  There is the persistence of difficulty on the big issues.  The positive thing is that discussions went on.  But there is no basis for any new text at this stage.”

Perez del Castillo will resume consultations on agriculture in two weeks’ time.

The meeting this week was within the second round of discussions on agriculture, which according to Perez del Castillo, have entered a more substantive and detailed phase.

Many delegations, even some from the developed countries, were not sufficiently informed of the nature and content of the consultations and felt overwhelmed by the level of specificity involved in the discussion as it delved into the three key issues of domestic support, market access and export competition, according to a trade delegate.

A major highlight of the meeting was the serious concern raised by several developing countries over the “blended approach” to tariff reduction under market access. This approach had initially been proposed by the US and EU, to cover all countries.   Members would have to reduce tariffs under three categories:  first, tariff lines to be cut (presumably leniently) by an average overall percentage;  second, tariff lines to be reduced more drastically under a “Swiss formula” (where the higher the tariffs, the higher are the percentage cuts);  and thirdly, some tariffs to be reduced to zero or near zero.

India introduced the findings of its study, using estimates based on tariff profiles of developed and developing countries, showing that under the blended approach, developing countries would have to undertake significant deeper tariff reductions than developed countries.

Many developing countries supported the call by India for the WTO Secretariat to undertake studies and simulations to determine the effects of the proposed blended formula approach on different countries, so that discussions on market access could be based on data and not be conducted “in the dark”, as one delegation put it.   Some developed countries however were not happy with the suggestion of carrying out the simulation studies.

Another highlight was the EC’s request that the peace clause in the agriculture agreement (which expires at the end of 2003) be extended.  Several developing countries said they did not want this to be part of the negotiations.

Some developing countries, including Argentina, also pointed out that they had agreed to discuss a “framework” for modalities instead of modalities directly due to the need to have something agreed to in Cancun.  Now that the situation had changed, there should be more attention paid to modalities directly and not merely the framework, they implied.

Perez del Castillo started the meeting with the issue of domestic support, and identified what he thought were some areas of convergence based on his prior consultations with the different delegations. According to the General Council Chair, the missing numbers in the section on domestic support of the agriculture part of the Derbez text (i.e. the draft Ministerial text issued in Cancun on 13 September) as indicated by the square brackets is an acceptable starting point for the members.

On the issue of ‘blue box’ subsidies, Perez del Castillo proposed a two-stage approach.  First, the current proposal on this issue found in the Derbez text remains, where such support shall not exceed 5% of the total value of agriculture production (para 1.3(ii)).  The second phase would involve negotiations on reductions.

On ‘green box’ domestic subsidies, the Chairman found the treatment in the Derbez text to be reasonable.   In his view, the paragraphs on special and differential treatment in the Derbez framework were also reasonable.

The Brazilian Ambassador, Luiz Felipe de Seixas Correa, speaking on behalf of the Group of 20 developing countries, addressed the overall issue of the framework for modalities that was being discussed.  He said that the framework is a mid-point between the Doha mandate and the eventual modalities to be agreed upon. It is therefore important for the framework to be a hundred percent faithful to the Doha Ministerial Declaration.

Consequently, the wording of the framework should be neutral and should not preclude or prejudge the actual modalities. When dealing with all the substantive issues, the relevant paragraphs should begin with the Doha Ministerial Declaration.

Brazil stated that while the Derbez text could be a basis for the discussions, much work in many areas of the text needs to be done. For instance, on special and differential treatment, it is inadequate.  Furthermore, even if different values for the co-efficient are used in the proposed formula for tariff reduction for developing and developed countries, the former will still end up cutting their tariffs dramatically. This is serious because tariffs are an important instrument for developing countries, especially as many of them do not have resources to resort to domestic support measures.

On the specific issue of domestic support, Brazil raised concerns over the “new” assumption that there are domestic support measures that are “more” or “less” trade distortive. As far as Brazil is concerned, the domestic support measures are either trade distortive or they are not.

He referred to paragraph 1.5 of the Derbez framework which says “green box criteria shall be reviewed with a view to ensuring that Green Box measures have no, or at most minimal, trade distorting effects or effects on production.” This kind of qualification allows the sneaking in of new types of support and has the danger of expanding domestic support.  Brazil felt that it was necessary to have disciplines on the Green Box subsidies.

Brazil said that the recognition that box shifting is a problem is a good starting point, and there should be no shifting of subsidies from amber to blue to green boxes. There is also a need to strengthen the language on AMS reduction as found in paragraph 1.1 of the framework.

Brazil also made a proposal regarding market access, that the Secretariat should undertake studies and run model simulations to determine the possible effects and implications of the “blended approach” of tariff reductions that had been proposed by the developed countries.

This simulation had been done by the Secretariat in the negotiations for non-agricultural market access (NAMA) and a similar exercise in the agriculture consultations would assist delegates in addressing their concerns.

Speaking on behalf of the “multifunctional group” of countries, South Korea said that while the Derbez text is not ideal, it has no objections to it being the basis, and added that there is no need to be overly ambitious.

Argentina, speaking on the role and usage of the Derbez text in the present negotiations, said that members had agreed to use the framework approach (rather than to negotiate modalities) for the specific purpose of ensuring the success of the Ministerial Meeting in Cancun, bearing in mind the deadline of concluding the Doha Work Program by the end of 2004.

However, the situation has changed.  Since no formal decision was taken in Cancun regarding the adoption of the agriculture framework, the usage of the framework should not be unbending and rigid. The framework is not the law. From the Argentinean point of view, many changes need to be made to the Derbez text.

Mexico felt that “box shifting” may help advance the objective of subjecting the domestic support measures to disciplines. The capping of ‘green box’ subsidies could begin once the box shifting had finished. It also wanted the elimination of AMS, with dates for doing so to be negotiated.

Australia expressed concern at the attempt to change the criteria for ‘blue box’ subsidies.  It was against this being done unless good reasons could be given.

The US put forward several points.  First, the Derbez text is the document on which the negotiations are to be based. Second, no pillar has primacy over the other pillars.  Third, the US favours the approach taken by the Derbez text on domestic support.  Fourth, on the ‘blue box’ subsidies the US is willing to maintain this at the level of 5% of production value.  However, if a two stage process is envisaged for reducing ‘blue box’ subsidies, this must be extended to all pillars including market access.

The meeting discussed market access on 20 November afternoon.  The G20 countries and other developing countries forcefully expressed their dissatisfaction and concerns with the Derbez text on the blended formula to be used for making tariff reductions.

The Indian Ambassador, K. M. Chandrasekhar,  said that India’s own study of the effects of the blended approach, based on tariff profiles of developing and developed member countries, showed that this blended approach would weigh heavily against the developing countries.

The study found that the developed countries would make an approximate cut of about 30% under the blended formula, whereas developing countries would be making a more significant cut of 30% to 70%, depending on their respective tariff profiles.

The Indian Ambassador explained that this is because the blended formula is linked to each country’s tariff structure. Given the different tariff profiles of different countries, the application of  the same or a similar formula would have different impacts on different countries.  The study had strongly indicated that developing countries in general would have to undertake significantly deeper cuts.

According to the Brazilian Ambassador, this is a major problem, as the blended formula appeared to be biased against developing countries. He said that India, Brazil and other developing countries have analysed this issue deeply and that they want their analysis tested and improved upon by the Secretariat.

Based on the analyses done so far, the Brazilian Ambassador said:  “We cannot go into negotiations knowing that we would lose even before we began. It would be a walk-over.”

Several other developing countries (including Indonesia, Kenya, Philippines, Nigeria, Nicaragua, Jamaica, and Mexico) also expressed concern that the blended approach would induce deeper tariff reduction commitments for developing countries and supported the proposal that the Secretariat should undertake simulation studies.  Many of them described as “disquieting” the finding that developing countries would have to make steeper tariff cuts under the blended approach.

Kenya said that simulation studies were important as small countries did not have the expertise to do their own analysis and without the data and estimates, “we would be signing on to a blank check, which we don’t want to do.”

Switzerland said that although the Secretariat had done simulations in the NAMA negotiations, it was difficult to do likewise for agriculture as there were too many unknown factors to consider in agriculture.

The EC said it could not comment as it had no time to study the figures supplied by the India study and was supportive and open of the proposal to have the Secretariat undertake the task of performing the simulation using the blended formula contained in the Derbez text.

When the meeting resumed 21 November, the US said it wanted a single formula and approach to apply to all the member countries with regards to tariff reductions under market access. However, it said it was perhaps willing to consider having different co-efficients for developing countries, according to one senior trade diplomat.

In the discussion on export competition, the EC said that it could not respond to paragraph 3.6 of the Derbez text on having “an end date for phasing out of all forms of export subsidies...” until the EU member states finish their own internal consultation on the post-Cancun talks.

Trade diplomats interpreted this to mean that the EC is not prepared (at least not yet) to offer a date for the elimination of export subsidies.

Many members including those in the G20 and the Cairns Group said they wanted a clear end date set for the elimination of export subsidies. They said that unless that is sorted out, it is not possible to discuss the other issues pertaining to export competition.

Another area of fundamental disagreement that emerged was over the “peace clause” (article 13 of the agriculture agreement involving due restraint on actions regarding domestic support measures and export subsidies).  The EC proposed the extension of the peace clause. It was the first time the EC had formally done so, according to a trade diplomat.  Many countries including the G20 made it clear that the peace clause is not part of the negotiations and should therefore have no place in it.

Following the meeting, the Chairman of the General Council told journalists that he did not see any convergence between the stated positions of the member countries, after going through paragraph by paragraph of the Derbez text with about 30 member countries in the meeting.

“There is a persistence of difficulties on the big issues.  However, it is positive that these issues are being addressed,” he explained. “The negotiating mood is not there”, he added.

Nonetheless, he claimed to have a clearer view of the different positions which the members are coming from. On the possibility of producing a new text on agriculture for the December 15 meeting, he concluded that at this stage he simply had no basis for producing such a paper. He said that he would continue consulting on the other three issues of cotton, NAMA and the Singapore Issues in the following week, and agriculture consultations would resume after that.