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TWN Info Service on WTO Issues (April 04/1)

Third World Network

6 April 2004

Dear Friends and Colleagues,

MEMBERS STILL LISTENING, NO BEAKTHROUGH, IN WTO AGRICULTURE WEEK 22-26 MARCH 2004

The first formally organised session on agriculture negotiations since Cancun was held at the WTO in Geneva on 22-26 March, in what was termed the “Agriculture Week.”

It ended without convergence of views among members on the three major “pillars”, i.e. market access, domestic support and export competition.   The Chairperson of the agriculture special session, Ambassador Tim Groser of New Zealand, said:  “The members are still in the hearing and listening mode.”

The week saw a change in the negotiating process, with members negotiating or discussing among themselves in “informal mode”, rather than each of them consulting with the Chairperson.  During the week, numerous meetings were held between the various groupings.

There was an informal session where all members attended on 24 March for the Chairperson and the members to take stock and to assess developments in the negotiations. This was followed by another informal and formal session on 26 March when members reported on their meetings and their views, and the Chairperson summed up the week’s activities and presented the members with a broad overview of the developments, highlighting areas of convergences and disagreements.

Below is a TWN report on the agriculture week by Goh Chien Yen.  This report summarises the statements and comments made by various members and groupings during the session on the final day, 26 March, as well as the Chairperson’s conclusions.  The EC and the US also gave separate press conferences at their respective missions in Geneva during mid-week to give their impressions of the negotiations.  Substantial parts of their presentations at their press conferences have also been included in the report.

From the report, and the positions stated, the following main conclusions could be made:

On the process, most members were satisfied that they were talking to one another, rather than presenting their positions to the Chair, which was the previous method.  Most of them agreed to aim for an agreement on a “framework” by the end of  July, after which the negotiations would continue into “modalities.”   Some developing countries however cautioned that discussions or agreement on a framework should not undermine the attainment of fair and equitable modalities, pointing out that this may happen if there are not enough details or balance in the framework. 

On market access, it was generally agreed the most difficulties are in this area.  The US and EU are maintaining their proposal for a “blended formula” of three categories of tariff reductions.  During the week, this “blended formula” came under criticism from many parties, including the G20, the G33, and the Cairns Group.   Developing countries expressed their concern that the blended approach would result in their having to take on steeper cuts than the EU and US, thus negating the S and D principle.  They developed articulated the need for another approach, which would better take account of their interests, both in gaining more effective market access to developed countries, and in enabling their farmers from excessive import competition. 

On special products (SP) and special safeguard mechanism (SSM), the G33 in particular pressed that these be accepted, and reported that the concepts had been recognised by all parties they spoke to.  However, as the Chairman commented, that the scope and mechanisms of these concepts had not been worked out or agreed to.  Thus the iissue remains whether these concepts will be given adequate treatment, if they can be operationalised, and whether the interests of small farmers and food security can be taken care of through them.

On domestic support, many members (especially the Cairns Group and the G20) asked for deep cuts to the amber box, blue box and de minimis support.  There were also calls for better criteria and disciplines for the green box subsidies.  The EU however defended the importance for them of the blue box and the US said there could be a “cap” on it but was sympathetic to the EC’s concerns.  On the green box, the EC seemed relieved that “there was not so much discussion any more about the idea to cap or reduce the green box” and it was willing to discuss how to check the criteria.  If this is true, then the developed countries would have flexibility to continue the process of shifting their subsidies from one type to another, whilst still maintaining high overall support.

On export competition, many countries (including the Cairns Group and G20) asserted that it was crucial to set a date for ending all forms of export subsidy, including export credits.  The US agreed that setting a date to eliminate export subsidies was important.  The EC however repeated its offer to developing countries to come up with a list of products of interest to them, and the EC would end subsidies on these products first.   This was however rejected by the G20 and other developing countries and also by the Cairns Group.  The EC also stressed the need for “parallelism” in which export subsidies would be reduced at a similar rate that other forms of subsidies (credits, food aid) are reduced.  

We hope the report below will be of use to you.  Any feedback will be much welcomed.

For previous issues of TWN Info Service, please check our website www.twnside.org.sg.

 

With best wishes

Martin Khor

TWN

 

“MEMBERS STILL IN A LISTENING MODE”:  REPORT ON THE AGRICULTURE WEEK OF NEGOTIATIONS IN WTO, 22-26 MARCH 2004

A TWN Report by By Goh Chien Yen, Geneva, 4 April 2004

A flurry of meetings in WTO over the week 22-26 March to resuscitate negotiations in agriculture ended on 26 March with no concrete convergence of views or commonalities between the member states. “The process is not reaching a phase of solving problems. The members are still in the hearing and listening mode,” said  New Zealand’s  Ambassador, Tim Groser, in his summing up during the Informal/Formal session on agriculture on 26 March.  Groser is the current Chairperson of the Special Session on Agriculture until the next Ministerial Meeting.

He also announced that further negotiating sessions on agriculture would be held on  20-23 April, 2-4 June, 23-25 June and 14-16 July.

The process of negotiations

A significant feature of the week was the “new” process of negotiations.  The different groupings of member countries had been meeting both bilaterally and plurilaterally over the course of the week: G33 with EC, African Group with the G10 and G20, the US and the Cairns Group, the G20 with the EC, US and Africa Group, etc.  Many members have found this approach of direct contacts among the delegates to be a more constructive way of working.  Before this direct way of negotiating, members had tended to negotiate with the Chair either of the negotiating session or the General Council, instead of with one another.  And the Chair would come up with a draft text that would turn out to be controversial and not accepted (at least in parts) by several parties.  The new method used was an admission that continuing with the old system would be fruitless.

Several members brought up the process issue during the week.  At a EC press conference held during mid-week , Amb. Mary Minch highlighted that in order to reach a successful framework the process must bring “everyone along.”   She added:  “It just doesn’t work if at the eleventh hour a paper suddenly emerges and if we think that that is going to wrap up in 24 hours. So I think process is going to be important if it is going to bring everybody on board as we move.”

[This is an interesting observation, coming from the EC, as the EC had traditionally favoured the coming up with a draft in the last hours of a Ministerial Conference, as happened at the Doha Ministerial meeting of 2001, when a draft Ministerial Statement was produced on the morning of the last day after an all-night small and exclusive  “Green Room” meeting.   The failure to succeed in doing the same in Cancun may have led the EC to change its mind about the process.]

Raising the process issue during the Session on Agriculture on 26 March,  the G33 pointed out that they “have always been concerned with the issue of inclusiveness in the negotiating process” and reminded the individual members and groups to be inclusive in their meetings. The G33 also urged the Chairperson in so far as he is holding meetings, “that such meetings be held in an open-ended format to ensure that all Groups are represented.”   The G33 is a grouping of over 40 developing countries (ccordinated by Indonesia) concerned about the problems faced by small farmers facing import surges;  they are also called the Alliance for Special Products (SP) and Special Safeguard Mechanism (SSM).

Many other members said during the formal session on agriculture that they are satisfied with the current process.

Some members also said that political developments outside Geneva had created a more conducive environment for the recommencement of talks in the WTO. In this regard, Groser observed during the formal session that there is now a much better “interaction” and understanding between the political process (i.e. ministers and capitals) and the Geneva process. Without the political process, he pointed out, work in Geneva would be a “waste of time”. But the frameworks will be negotiated in Geneva. If Geneva fails, the negotiations fail completely. “This paper will be written in Geneva or it won’t be written at all,” Groser emphasised.

Framework and Modalities

Groser spent some time in his conclusions on the issue of finalising a “framework” for negotiations as distinct from “modalities.”   The content and nature of the framework paper would, he said, serve as a staging point on the road to “full modalities”. However, he said that the two will not be separate. He added there is a “continuum” starting with the Doha mandate, passing through the “framework” and then the “full modalities” and ending with final agreement and commitments.

In this regard, he was aware that there is therefore a “working hypothesis” that the frameworks may not include numbers (such as percentage reductions or coefficients in formulas), even though some members are still not convinced that this would be wise. Some countries he pointed out have argued numbers might be needed to give a degree of certainty about how deep the cuts will be.

[However, according to a WTO spokesperson, the Chair’s assessment is that delegations can live with some uncertainty in the frameworks so long as there is no inconsistency with the level of ambition of the Doha mandate.]

[Earlier, during the meeting, some members had cautioned that the framework approach should not undermine the prospects of having appropriate modalities.  For example, Kenya said:  “While we continue building on the framework agreement, we must ensure thatthis approach does not undermine the possibility of negotiating equitable and fair modalities.”   It added that we need a framework that will increase market access on products of interest to developing countries, that recognises that the liberalisation process should not be to the detriment of developing countries, that it allows enough flexibility for the adoption of meaningful S and D, and that issues of interest to developing countries (such as SPs, SSM and preferences) should be elements in the framework and not concepts to be developed later.]

The Chair added that in any case, based on his observations and conversations with individual delegates, there is in his view a consensus to aim for a “framework” (i.e. key points of what would later be more detailed principles or “modalities” of the final agreement) before the summer break (i.e. by late July).

The Chairman said that the content for the framework will have to come from the members and that his role would only be to focus on the process for doing this.

He then advised members to reflect on the different problems, viewpoints and concerns before they meet again on 20-23rd April. Additional meetings are planned for the 2-4 June, 23-25 June and 14-16 July.

On the substance of the discussions that took place over the week, Groser offered his view  that far more work needs to be done on market access compared to the issues on domestic support and export competition, given the disagreements among the members. Although the issues of export subsidies (and other aspects of export competition) and domestic support both face difficult political decisions, enough technical and other work has been done to put those two pillars within reach, he said.

The following is a report on the positions taken by various members and groupings on the main issues of market access, domestic support, export competition. 

Market Access

This section reports on the positions on market access in general, and the next section deals with the specific issue of SP and SSM (which is part of market access).

The G20, represented by Brazil, said that market access was the more complex issue to tackle. A lot of work is needed to develop a structure that is comprehensive and balanced, that does not preclude the level of ambition of the mandate and th edevelopment needs of developing countries.  The G20 called for “an open mind to explore new alternatives for the reduction formula or improvements in the current one that would deliver the results.”  In such an undertaking, three objectives are to be borne in mind:

i)    to generate additional trade through effective market access

ii)   to take into account the specificities of rural structures of developing countries, and

iii)   to factor in different tariff structures of developed and developing countries

The G20 said a critical element from the mandate that is yet to be taken on board is to assure operational and effective S and D treatment, including by “having proportionality between their tariff reductions in relation to those undertakedn by developed countries, as well as by other instruments such as SPs and SSM.”

They also argued that “additional market access must also be provided through a significant expansion of TRQs, based on objective criteria” and the question of TRQ administration should not be disregarded.

The G33, at the formal session on 26 March, articulated their concerns with the blended tariff reduction formula during the special session. Amb Gursmardi of Indonesia, speaking for G33 highlighted that the “current blended formula may lead to developing countries having to undertake greater tariff reduction commitment than that of developed countries.”  He added we have to ensure the formula agreed to “does not undermine the concept of S and D.”   On TRQs, the G33 continues to hold the position that there should be no TRQ expansion for developing countries, particularly for SPs.

The ACP Group, represented by Trinidada and Tobago, said it would discuss with the G33 on a technical level to craft ways to move thr process forward.  He noted there are divergent views on the tariff reduction method.  “We have to ensure that the tariff reduction formula to be agreed upon does not undermine the S and D to be afforded to developing countries.”   The ACP also said that as part of  S and D, trade preferences should be recognised as legitimate instruments of development, and so too the need to have flexible rules that facilitate their preservation.

The Africa Group said in all the meetings it held (with the US, the G33, the G10, the G20, and as part of the G90, the Cairns Group and the EU), it indicated its key concerns regarding LDC exemptions and access, the net food-importing developing countries issue, longstanding preferences, SPS/TBT, SP/SSM and obstacles posed by some export competition and domestic support measures to further access of African countries with export interests.  The Africa Group also stressed the importance of finding a satisfactory solution to the cotton issue.

The Cairns group of agriculture exporting members said their gravest concern about progress to date was in market access.  They said  “all WTO members with the exception of LDCs”  must contribute to this objective. Stressing that the mandate calls for substantial improvements in market access, the Group was critical of the “blended formula”  for making tariff reduction commitments proposed in the Derbez text.   Australia, speaking on behalf of the group said:  “We remain unconvinced that the so-called blended formula as it appeared in the draft Cancun framework would deliver on this objective [of substantial improvements in market access]. We remain ready to discuss means to achieve real market access for all products...We believe this will involve changes in the basic formula for tariff cutting, a mechanism to ensure effective tariff quota expansion and improved administration of tariff quotas.”

Although for contrary reasons, the G10 made it clear during the formal session on agriculture that the blended formula is not something they have accepted as a basis for negotiating on tariff commitments. Instead “we have always preferred the Uruguay Round formula. In the blended formula, balance must be ensured in a way that the Uruguay Round element should be the principle....More importantly G10 cannot accept tariff capping and a mandatory expansion of TRQs”, said the Ambassador of Switzerland , representing the G10.

US lead agriculture negotiator Amb. Alan Johnson, speaking at a press conference on 23rd March 2004 held at the US mission in Geneva, affirmed his support for the current blended formula. This would secure the greater market access the US needed in order to reduce their subsides, he explained

More specifically, elaborating on the US understanding of how the blended formula could eventually look like, Johnson said:  “We would start with Swiss 25” for the second part of the blended formula, implying a coefficient of 25 for the Swiss formula. And for the first tier, which is the Uruguay Round approach, we would like to see that number as small as possible.”   On the whole,  “we would like to see as large as possible, minimum and maximum cut, mixed minimum and average cuts and then as part of the formula talks about getting substantial improvement in market access, if it is not through tariffs then it needs to be through TRQs”

He also recognised the concerns of developing countries “that they don’t [end up getting] a disproportionate share of the challenge in market access” when applying the blended formula. However, he was of the opinion that there are sufficient flexibilities in the current approach to take on board these concerns such as S and D treatment and the SP and SSM concepts.  He also pointed out that the coefficient for the Swiss formula part of the blended formula could be different for developing countries.

In any case, he sees greater market access in developing countries “as a very important development tool, delivering on the Doha mandate, helping development.”

[This view is contrary to that of many developing countries, whose position is that if they were to grant more market access by cutting tariffs, there would be a threat to their farmers and to food security].

At a separate EC press conference on 23 March, in Geneva, Amb. Mary Minch of the EC also recognised that “market access is proving to be a difficult issue to grapple with down here,” especially in relation to the blended formula.  She reminded that the history of the blended formula contained in the Derbez text is the result of the joint EC-US text which she feels could address the developing countries’ concerns.  “Our position is that there should be a formula, a single approach, if you like, to tariff reduction. But we have always been in favour of finding special arrangements,” she explained. These special arrangements include S and D treatment and SP and SSM for example.

Market Access - SP and SSM

An important aspect to the market access negotiations is the demand by developing countries for the establishment of instruments to enable them to protect their small farmers and food security. These instruments include “special products” (SP) and “special safeguard mechanism (SSM).  The champion of these concepts is the Group of 33 (which now has over 40 members), and it is also supported by many other countries.

During the formal session on agriculture, the Chair, Amb. Groser, said that SP and SSM  are   accepted in principle by all members. However there are differences in understanding over the scope, application and mechanisms required to operationalise these concepts in the eventual modalities.

In a statement by its coordinator, Indonesia, the G33 said from their meetings with EC, US and other groups, “there is now a firm acceptance of the concept of SP and SSM for developing countries, to be included as an integral component of S and D treatment, in any agriculture framework to be agreed on. We view this as a posoitive development, whilst recognising there is further work to be done on the elements.”   The G33 would also strengthen its cooperation with the ACP.

The G33 reiterated that in order for SP to be an effective instrument:

o It must be a stand alone provision, and not merely recognised as an additional flexibility or linked to any part of market access reduction formula.

o There must be no tariff reduction commitment for all SPs.

o There must be no new TRQ commitment on all SPs.

o Products considered as SP must have access to SSM.

o Developing countries must be able to decide themselves which products they consider as SP through a simple procedure.

In addition, Amb Gusmardi of Indonesia expressed concern about the blended formula, and said the formula agreed to should not undermine S and D.  “The G33 is of the position that the acceptance of the SP and SSM concept should not be used as an excuse to demand higher tariff reduction commitment from developing countries.”

The ACP group during the special session also recognised that “there exists the critical elements of SPs and SSM being integral components of the negotiations.” This is a fundamental issue to the ACP group, “of meaningfully incorporating S and D into the Framework, in particular the instruments of SPs, SSM and other market access elements.”  This would provide deserving developing countries with the policy space and flexibility in policy interventions needed to safeguard their development.

The G20 pointed out that the crucial element of special and differential treatment to developing countries in the mandate had not yet been taken on board,  including “by having proportionality between developing countries’ tariff reductions in relation to those undertaken by developed countries as well as by other instruments such as SPs and SSM.”

The Cairns Group said it was strongly committed to S and D in market access, which they expect would be reflected at least in different levels of obligation and implementation phasing, as well as in elaboration of SP and SSM provisions for developing countries with particular rural development and food security concerns..

Domestic Support

On domestic support, the G20 stated during the formal session on 26 March that:  “In order to achieve substantial reduction, it is essential to have deep cuts in the sum of overall trade-distorting support (Amber, Blue and de minimis). Better disciplines are suited for ensuring that changes in different formats of distorting domestic support will not be limited to changes of labels, while preserving distortive effects.”   Furthermore “enhanced monitoring mechanisms are essential to make us confident that what we accomplished is respected.”

Also at the formal session, the ACP Group gave their impressions of the week’s discussions, observing that “the discussions revealed a somewhat reluctant willingness on the part of [some], of the need to strengthen the applicable rules and commitments on trade distorting domestic support.”  Speaking on behalf of the ACP Group, Amb. Bernard Weston of Trinidad and Tobago added:  “Differences in this area essentially relate to (i) the issue of adherence to the Doha mandate; (ii) the precision of the language that would be contained the framework; (iii) the extent and nature of disciplining of the Blue Box and (iv) whether there should be review of the Green Box.”

The Cairns Group, at the formal session, stated:  “Our benchmark is that trade distorting support must be reduced substantially, including through provisions that ensure that overall levels of AMS, de minimis and Blue Box support decline significantly.  Levels of distorting support to all commodities must also be reduced. We consider that a framework text should include an effective mix of rules and reduction commitments so that the final results make a genuine difference to world markets. And finally, we want to see the Green Box disciplines strengthened, including by enhanced monitoring of adherence to its requirements.”

Speaking at the EC press conference on 24 March,  Amb. Mary Minch asserted that:  “The EC for its part is ready to do something very significant on the AMS. However we make no bones about the fact that we think that the blue box is a useful tool for reform. We have made very significant reforms in the community but we still require this famous blue box for certain types of direct payments.”

On the green box, she said:   “I don’t hear so much discussion any more about the idea to cap or reduce the green box.  I think there is a growing acceptance that the green box is an acceptable tool for all WTO members to use. There is a desire by some WTO members to check the criteria and measures to ensure that they are not trade distorting. And it is a debate we are perfectly willing to be engaged in.”

Speaking at the US press conference, Amb. Johnson said:   “There should be substantial reduction on AMS, that there should be overall cut in trade distorting domestic support. . In our case, we agree that we should put a cap on the blue box. Our position could still be for the elimination of the blue box.  But if the blue box is going to exist, which I know is important for the Europeans’ policies in their CAP reform, as transition policy from more trade distorting to less trade distorting and on the way to non-trade distorting, I think it ought to serve a useful purpose and at least the way we would use it would be to move it through that continuum from the amber box which is directly tied to current production and current price, the way we would use the blue box would be decoupled from current production but it would still be related to current price, which is an important element, because if you don’t do that there’s an encouragement for over-production. So we are trying to de-link that and then on the way to the green box which is not coupled to current production or price....In terms of the green box, we have always said that it should be non-trade distorting or minimally trade distorting policies, and we are always willing to look at the disciplines to ensure that that happens.”

He added that it is important for the US to see other countries reduce substantially their subsidies because “our farmers do not want to be exposed to other countries’ subsidies when we significantly reduce ours.”    In addition, from the US point of view there is also a clear linkage between greater market access and reduced domestic support.   “We need to be able to make the case back home that we made opportunities for our farmers when their government support is reduced,” he said.

Export Competition

The G20 said that on export competition, “some movement was flagged and we expect to see it materialised and followed through”.  The G20 felt “it is fundamental to arrive at a date certain and credible for the elimination of all forms of export subsidies - including those contained in export credits, food aid operations and STE activities - for all products. This element is central to build confidence and to make progress on the other two pillars.”

The Cairns Group made it clear during the formal session that for them, “there is no possibility of a result without a commitment to the elimination of all forms of export subsidies on all products by a credible end date.”

The Australian Ambassador, speaking on behalf of the Cairns Group said:   “We are clear about being committed to what is called “parallelism”, ie to equivalent disciplines on all forms of export subsidization, but we are equally clear that there is no room for fudging on the basic issue of elimination of these most trade distorting policy instruments. The message from our Ministers in San Jose was that a list of products for which export subsidy elimination would be of special interest to developing countries would be both diversionary and divisive. It is strongly in the interests of developing countries—and all of us—that these highly distorting policies be removed altogether. We have heard the same message here this week from a large number of delegations and groups. In our view, resolving this issue could trigger real progress towards a framework text.”

Speaking at the EC press conference, Amb Mary Minch said that the EC is ready to engage seriously on this topic. The EC has proposed that the developing countries submit a list of products of export interest for which the EC will be ready to phase out subsidies on.

However, according to Minch, “developing countries have not come forward and responded with such a list. We have explained that this idea is certainly not one to divide WTO members. On the contrary, we saw this as a way of moving into a real dialogue on this issue and this is what we are still looking for.”

She added that other countries must also be prepared to make commitments in this area of export competition.   “The different groupings we have been speaking to, accept that we have to have parallelism. In the coming weeks this is going to be one of the aspects which we will be pushing to get further clarity and do further technical work as necessary. There is general support for the idea of parallelism and now we have to convert this into clear concepts.

“From the point of view of the EC, the export refunds, while disliked by some, are rather transparent when compared to other types of export subsidies such as export credits, so called food aid and state trading enterprises. We make the point very clear here.”

Speaking at the US press conference, Amb Johnson made clear that having an end in sight for export subsidies is necessary. “We must find a way of setting an end date, not setting THE date, but there will be an end date for export subsidies.”

According to him this means that “Europe needs to be brought along in the process, that is extremely important. To listen to what challenges they have.”

He added:  “One of the issues which is extremely important to them is parallelism and that means what happens to export credits, what happens to food aid, what happens to state trading enterprises and other policies, like differential export taxes. In the case of the tools we use, we thought that it is important to step up and meet the challenge to provide them the opportunity to make their case back home. So in export credits, we said that we will eliminate the subsidy component of export credits, in the same time export subsidies are eliminated. In the area of food aid, we said that we are willing to talk about disciplines. We generally sense, after meeting with 70 countries, a common objective on food aid. We recognise that there is a food aid shortage in the world today, in order words there is more request in food aid than there is supply, so our objective in these discipline is not to have unintended consequences of lowering the amount of food aid available, but really just avoid it being used in a way that is an export subsidy. And we have a point of departure in the Harbinson text, and most countries recognise that really that it is more of a technical exercise to work through rather than a large substantive difference between us.....Obviously, we also need state trading enterprises to be reformed through this process.  But the key issue obviously is setting that date for the elimination of export subsidies.”

 


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