TWN Info Service on WTO Issues (June04/1)
Third World Network
8 June 2004
Dear friends and colleagues,
REPORT ON WTO AGRICULTURE NEGOTIATIONS HELD ON 2-4 JUNE 2004
A series of meetings for agriculture negotiations was held at the WTO on 2-4 June 2004. It started with a formal one-hour meeting on 2 June, during which papers were presented by the Group of 20, the Group of 33 and the Group of 10.
Various groupings and Members held meetings among themselves on 2 and 3 June.
On 4 June, the WTO members came together again in formal and informal mode, and heard a report of the developments and an assessment of the situation by the chairman of the negotiations.
Below is a TWN report by Goh Chien Yen and Martin Khor on the meeting and on the current situation.
With best wishes
REPORT ON WTO AGRICULTURE NEGOTIATIONS HELD ON 2-4 JUNE 2004
A TWN Report by Goh Chien Yen and Martin Khor
Negotiations on agriculture took place at the WTO on 2-4 June 2004. On 2 June, there was a formal meeting for about an hour, at which the G20, the G10 and the G33 presented their papers.
After that, various countries and groupings held meetings with one another.
On 4 June, the WTO members gathered again for a formal and informal meeting, at which the agriculture negotiations chair, New Zealand Amabassador Tim Grosser, gave his conclusions on what had happened and where he sees the current state of negotiations.
2. Assessment by agriculture negotiations chair
After three days of negotiations, Tim Grosser, Chair of the Committee of Agriculture in Special Session, provided members with his informal account of the current situation during the Committee’s formal meeting on 4 June afternoon.
The chair made his assessment of the agriculture negotiating process on the following basis:
(i) challenges ahead, (ii) the broader political context and climate, (iii) the maturity of the negotiations and (iv) the substance of the negotiations which are on the cotton issue and on the three pillars of export competition, domestic support and market access.
According to the Chair, the main challenge for the members is to produce a framework which is balanced. With regards to the political climate, he noted that there are expectations that the Geneva process will produce a framework by July—and that the world would be astonished if such a framework is not produced. However, the expectation for a framework does not necessarily guarantee that one will appear by itself, the Chair pointed out. He reminded Members they will have a maximum period of 2 months to produce it.
On assessing the maturity of the negotiations, he mentioned that he has been given more political opening to take initiative in the process. He has taken up decisive leadership this time.
He felt that there was an emerging convergence and there could be sufficient agreement for him to draft a preamble and that he would get it about 80% right. He highlighted that he used the phrase “emerging convergence” and not “emerging consensus” as the consultative process he had this week did not include all members. Furthermore, he did not want to use the word consensus because some members are nervous about their positions given the movements they are making.
He elaborated that the current process has 4 prongs: (i) the Chairman’s own consultations, (ii) group to group meetings, although there were fewer such meetings this time, (iii) the work within each group, and (iv) open-ended informal process.
Speaking on the substantive issue of cotton, he said that this was a grey area because of the challenge of whether and how to bring this issue into the larger agriculture negotiations. The Chair informed that he has been having consultations with Mr Harbinson, the Chef de Cabinet of the Director General, and a small selected group because the ideas are not ready to be put to the rest of the membership.
He said that the group was trying to find a way to include in the framework, recognition to the political achievement of the African countries in making this proposal and giving them political comfort that it would not be buried and submerged in the broader agriculture framework.
The African country members are not seeking concrete, detailed commitments in the framework, but would require signals that their trade objectives are being addressed, he said.
He described the consultations on cotton as excellent and undertaken in a constructive atmosphere, but not ready to be broadened to other members. He also mentioned that not only African country members were involved in the consultations.
Grosser then gave his assessment on the agriculture negotiations on the three pillars. On the issue of export competition, Grosser said that the EC letter by Trade Commissioner Pascal Lamy and European Farm Commissioner Franz Fischler provided a political opening and that there is a major step forward. However, the EC position comes with conditions. One, there must be effective language on parallelism which means giving similar treatment on other types of export subsidies, namely state trading enterprises, food aid and export credits. Two, there must be movement on the other two pillars of domestic support and market access. And finally, results in other negotiating areas such as non-agriculture market access.
On the issue of domestic support, he detected an emerging convergence. He said that he could probably start consultations and if he were to put a paper together, he could get about 80% of it right. One point of convergence, is that those members with higher distortions are to make greater efforts on harmonization. This will be achieve by cuts and also might be some kind of product specific commitments, he elaborated. He also shared that even those members who are having more offensive interest or do not use trade-distorting domestic support do not want to complicate the reform efforts of those members who have to undertake those reforms.
He also asserted that the time has come to bury the phrase “box-shifting.”
On market access, Groser noted that there was some progress, but not nearly enough. The problem with market access is that every member has border measures, unlike export subsidies and domestic support which are used by very few members. Furthermore, tariff profiles differ significantly among members. Hence, he concluded that there is a technical difficulty rather than this pillar being more politically difficult.
He also said that the discussion on sensitive products for developing countries in the area of market access aroused some concerns among developed country members. He therefore could not see convergence in this area. With so much divergence, he pointed out that it would be unhealthy for him as chairperson to move ahead. Hence, he would not even think of producing a paper on market access, he said.
According to a trade delegate, the Chair said that he would commence technical consultations when he returns from Sao Paulo after the UNCTAD XI ministerial conference.
3. Positions are still divergent
Overall, the chair’s assessment seemed to demonstrate optimism, especially when he spoke of a major step forward by the EU on export competition, and of an “emerging convergence” in domestic support.
However, some trade diplomats from developing countries provided a less optimistic view of the negotiations and the state of affairs.
On export competition, the EC has said it is ready to place all its subsidies “on the table.” Although this is widely reported in the media and taken to mean elimination of the subsidies, the EC itself has been careful not to use the word “elimination” but the phrase “put on the table.” But as Grosser himself had said, the EC position comes with several conditions: (i) full parallelism within export competition, or action by others (to the EC’s satisfaction) on state trading enterprises, food aid and export credits; (ii) movement in domestic support and market access to the EC’s satisfaction; (iii) results which are wanted by the EC in other areas such as NAMA.
The EC’s conditions seem difficult for others to fulfil. In demanding “full parallelism” within export competition itself, the EC seems to have hardened its position vis-à-vis other developed countries. For example, whilst the US is willing to deal with the subsidy component of its export credits, the EC is asking the US to eliminate its budgets and programmes on export credits. On state marketing boards and state trading enterprises, the EC apparently wants Australia, Canada, New Zealand and other developed countries to wind them down or close them. This is being resisted by the countries concerned.
On domestic support, Grosser said there is “emerging convergence” of views. However, the EC seems adamant that there should not be capping or reduction of the Green Box subsidies. But some developing countries want to see disciplines on the Green Box too.
Speaking to journalists, after the formal meeting on 4 June, Brazilian Ambassador Luiz Seixas Correa said that there should be overall cuts in domestic support, in the amber, blue and green boxes. There should also be clarity and transparency in the blue box, he said. This is “to avoid the misuse of the boxes. There must be mechanisms to ensure that blue is blue and green is green. Just moving is not a solution. The move has to be meaningful so that the subsidies are indeed non-trade distorting. We need clarity on this”, he explained.
The EC also wants the US to reduce its counter-cyclical payments (under Blue Box subsidies). The US may find that difficult to do.
Thus the EC has made an offer (in the form of a letter, but not officially on record at the WTO) on its export subsidies but has heightened its demands on others, which are difficult for them to agree to.
On market access, as admitted by Grosser and several other parties, the positions of members are still wide apart. The issues of contention include the tariff reduction formula, and the scope for the use of the special products category by developing countries.
4. Presentation of papers by G20, G33 and G10
On 2 June, at the formal meeting, the G20 (Brazil, India, China, South Africa., etc), G33 (also known as the Alliance for special products and special safeguard mechanism) and the G10 (mainly developed countries with a defensive interest to protect their agriculture, including Switzerland, Norway, Japan, etc) presented papers.
The G20 paper, presented by Brazil, focused on its approach to market access. The G-20 has 19 members: Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa, Thailand, Tanzania, Venezuela, Zimbabwe.
The G20 says its paper balances between different positions, due to different interests within the group itself and also because the group wanted to accommodate concerns of other members. Brazil said the balance is between the “offensive interests” of members wanting to export, and the sensitivities of members on the import side, while meeting the Doha mandate of substantial improvements in market access.
The paper does not provide any tariff-reduction formula but sets out some “elements”, for example that the tariff reductions should ensure steeper cuts on higher tariffs, with some guarantee of flexibility for some sensitive products. It also proposes that tariffs be capped, with possible exceptions for a “very limited number of products on conditions to be agreed.” It proposes tariff quota expansion for developed countries.
As S and D for developing countries, it proposes milder cuts and longer timetables for developing countries. It also says developing countries shall have flexibility to use a “special products” category but says this shall be designated “under conditions, as necessary, to be agreed in the negotiations”, and thus does not allow members to self-select the products (which is a demand of the G33). It also says a special safeguard mechanism shall be established for developing countries, without giving any details.
It exempts LDCs from tariff reduction commitments, and their products are given duty and quota free access to developed countries. There are also proposals to deal with the erosion of preference and the concerns of newly acceded members.
The G33 paper, presented by Indonesia, focused mainly on the rights of developing countries to make use of the “special products” (SP) category and to use a special safeguard mechanism (SSM).
Among the countries that have identified themselves as G-33 members are Barbados, Botswana, Congo, Côte d’Ivoire, Cuba, Dominican Republic, Haiti, Honduras, Indonesia, Jamaica, Kenya, Korea, Republic of, Mauritius, Mongolia, Mozambique, Nicaragua, Nigeria, Pakistan, Panama, Peru, Philippines, Senegal, Sri Lanka, Tanzania, Trinidad and Tobago, Turkey, Uganda, Venezuela, Zambia, Zimbabwe
The G33 stressed the Doha mandate for S&D for developing countries as an integral part of all elements of the negotiations and that it should be embodied in the schedule of concessions and commitments and in the rules and disciplines to be negotiated, to enable developing countries to effectively take account of their development needs, including food security and rural development.
An important element in the market access pillar that can affect the effectiveness of S&D is the tariff reduction formula, which must preserve the intended objectives and not erode it. The formula to be eventually agreed should not undermine the S&D concept.
The paper also says the inclusion of SP and SSM or any other additional S&D in the market access pillar should not be used as a justification to demand higher tariff reduction commitment from developing countries, the G33 paper said.
For a tariff reduction formula to be acceptable, the G33 says that it should fulfill the Doha Mandate’s level of ambition, including: (i) ensure the integrity of S&D treatment for developing countries; (ii) ensure that the tariff reductions undertaken by developing countries are only a designated proportion of tariff reductions undertaken by developed countries; (iii) ensure fairness, bearing in mind the different tariff structures of Members; (iii) fully reflect the differences between developed and developing countries’ commitment; and (iv) neither entails new commitment on Tariff Rate Quota (TRQ), nor expansion of the current TRQ for developing countries.
The G33 paper says the tariff reduction formula is currently central to the discussion, but the issues of SP and SSM are of equal importance. For the G33 the issue of SP and SSM is crucial in addressing food and livelihood security as well as rural development. From this perspective, the G33 paper calls for a ‘stand-alone category’ for SP.
In their view, there must be no tariff reduction commitment for all SP, and developing countries must be able to decide for themselves which products they consider as SP.
Also, the SSM shall be established for use by developing countries, and the products considered as SP must also have access to SSM.
The G10 paper, presented by Switzerland, says that if tariff reductions are by the Swiss formula for some products and by the Uruguay Round approach for others (as in the EU-US proposed “blended formula”), then the Uruguay Round approach should predominate. It is opposed to tariff capping and compulsory expansion of tariff quotas.
The G-10’s 10 members are Bulgaria, Chinese Taipei, Rep of Korea, Iceland, Israel, Japan, Liechtenstein, Mauritius, Norway and Switzerland.
The G10 paper also deals with domestic support and export competition, and accepts the possibility of negotiating an end date for export subsidies provided concerns on market access, domestic support and non-trade concerns are fully taken into account and reductions in all areas of export competition (subsidies, subsidized credit, food aid, and state trading companies) are handled in parallel.
The G10 said it appreciated the G-20’s effort, but also described some of the G20 paper’s provisions as more difficult to accept than the “Derbez” draft, for example the wording on preference erosion is “watered down”. The G10 prefers to take the March 2003 draft modalities paper as the basis on this issue). Among its other objections: the G-20’s proposed caps for tariffs, mandatory tariff quota expansion, and inadequate provisions for non-trade concerns.
5. Next Steps
The UNCTAD XI meeting in Sao Paulo starting 14 June will be an occasion for some groups and some key players to meet (at the sidelines of the conference) on agriculture. The G20 will hold a Ministerial meeting on 12 June. The group of 5 major players (US, EU, Australia, India and Brazil) will also meet at Ministerial level on 13 June.
The next formal agriculture negotiations sessions will be held at the WTO on 23-25 June and 14-16 July.