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TWN Info Service on WTO Issues (July 04/13)

23 July 2004

Third World Network

Developing countries criticize draft agriculture framework

On 21 July night, there was an informal meeting at the WTO for members to give their views on the agriculture text in the draft July package.

Several developing country groupings presented statements critiquing the text.  A major criticism was against the existence of double standards in the draft text, whereby the issues of concern to the developed countries were taken care of by concepts and specific or detailed provisions in the text, whilst the long-standing issues of interest or concern to developing countries were inadequately treated or postponed for decision to a post-framework stage.

Another criticism was that the draft enabled the major developed countries to escape from the Doha’s level of ambition in reducing their domestic support and tariffs, whilst the special and differential treatment needs of developing countries were not met. 

Below is a report of the views presented by the G20, the Africa Group, Indonesia (which coordinates the G33) and India.

With best wishes

Martin Khor

TWN

 

 

 

 

Developing countries criticize draft agriculture framework

TWN Report by Martin Khor, Geneva 22 July 2004

 

The agriculture text in the draft July package was severely criticized by several leading developing country groupings at a open-ended meeting on Wednesday night chaired by the agriculture negotiations chairperson Tim Groser.

Representatives of the Group of 20, the Africa Group and the Group of 33, said they found the agriculture text, which is in Annex  A of the draft July decision, to be imbalanced against the developing countries, and asked for several revisions.

A major criticism was against the existence of double standards in the draft text, whereby the issues of concern to the developed countries were taken care of by concepts and specific or detailed provisions in the text, whilst the long-standing issues of interest or concern to developing countries were inadequately treated or postponed for decision to a post-framework stage.

Another criticism was that the draft enabled the major developed countries to escape from the Doha’s level of ambition in reducing their domestic support and tariffs, whilst the special and differential treatment needs of developing countries were not met. 

The meeting, which started at 8pm and went on to 2am, was called to listen to the views of delegations on the agriculture text.

The G20 spoke first, with its coordinator, Brazilian Ambassador Luiz Felipe Seixas Correa, presenting a G20 paper with a detailed evaluation of the text.   He said the G20 had concluded that the text needs important changes to allow for a framework in line with the mandate.

The G20 found a clear imbalance between major points that are guaranteed at the outset for developed countries, while other points of fundamental importance for developing countries are left out for the subsequent phase of negotiations without a corresponding level of comfort for us.

Though the G20 remains committed to a successful outcome, it considered success to be measured by one yardstick, the level of ambition of the Doha mandate, he said.

On general comments, Ambassador Seixas Corres said a successful text should not give comfort to some and not to others, but unfortunately the present text counters this rule  by taking care of some developed members’ needs whilst adjourning the concerns of developing countries to the post-framework phase.

The scope of the document should be faithful to and not go beyond the Doha text as is now the case in the draft with geographical indicators, differential export taxes and monopoly powers of state trading enterprises.   Also, all three pillars should progress at the same pace, also in line with the principle of proportionality between developed and developing countries.

Seixas Correa said the G20 is thus concerned at a greater level of specificity on issues where there is no consensus, such as the blue box and sensitive products, while issues on which developing countries are demandeurs are treated with a high degree of generality.  The text has specificity for the concerns of the majors, and generality for developing countries’ issues.  He reminded that SDT is an integral pat of all elements, and that the logic of S&D is that it should address the concerns of developing countries and not those of developed countries.

On domestic support, the Brazil ambassador said a new blue box has been envisaged which if applied would undermine the effectiveness of an overall cut in trade distorting domestic support.   The mandate requires substantial reductions in such support (the sum of amber, blue and de minimis). 

He said the text should not allow for ambiguity there.  We should, he said, avoid a situation where entitlements of members to trade distorting domestic support are increased rather than reduced in the development of disciplines, especially for the blue box.

He added that product specific disciplines and reductions should apply to all forms of trade distorting domestic support, subject to SDT provisions; and product specific capping should not be based on historical basis criteria for developing countries.

On the blue box, Seixas Correa said if ever a new blue box is accepted, it should be a package deal, and any erosion of the current criteria cannot be accepted without full simultaneous elaboration of the new criteria.  The blue box in the text can may serve as a loophole for further disciplines on domestic support by the major subsidizers and the formulation must be changed by all means.

Any change in Article 6.5 of the AoA, if ever accepted, must necessarily be coupled with the criteria and conditions to ensure that these measures will be effectively less trade distorting and de-linked from production.  Among such criteria are product specific caps and reductions, price gaps differentials, disciplines on accumulation of support and contribution to overall reductions in trade distorting support.

In the current formulation in para 8 second tiret, the contribution of blue box to overall reduction could lead to a situation where increases in the blue box could be presented as reductions in the overall trade distorting support.  This requires redrafting, said Seixas Correa.

On de minimis, he said the G20 stressed that it is totally inappropriate to require developing countries to reduce their de minimis, given the differences in domestic support levels between developed and developing members.

On the green box, the current language is a dilution of previous language, said the Brazilian ambassador.  It disregards the flexibility shown by developing countries on green box, in moving from their original more ambitious positions.  We are now faced with the situation where there is a possibility of introducing language on non trade concerns into WTO disciplines.

On export competition, he said the G20 subscribed to the principle of equivalence between elimination of export subsidies and disciplines on other forms of export support. Nevertheless, substantial concern exists with regard to export credits,  The present language risks legalizing already-prohibited practices.  Further, carve outs to export subsidies are created.  Any special circumstances should be dealt with outside the WTO agriculture context and polishing of the text is needed to dispel ambiguities.

On market access, the G20 felt strongly that “sensitive products” for developed countries should cover a very limited range of products, under conditions to be agreed.  The G20 noted with concern that the developed countries’ “sensitive products” are dealt with in detail at the framework stage, while the “special products” of developing members (and all other S&D provisions) are deferred to a later stage of negotiations.  Seixas Correa said this gives the impression of primacy of one over the other, thereby relegating S&D to a residual position, rather than as an integral part of all elements.

He added that the selection and treatment accorded to “sensitive products” would unduly change the tiered approach into another version of the blended approach as it would exclude these products from the tariff reduction formula and the principle of progressivity whereby higher tariffs are subject to higher cuts.

In the draft, TRQ commitments would become the rule rather than be an exception, rendering the tariff reduction formula secondary for developed countries.  This is inequitable in relation to developing countries that as a rule do not count on and atre notr willing to count on TRQs, said the G20.

Further, the proportionality principle should be applied to the sensitive and special products of developing countries so that the number of such products are proportionally higher than for developed countries.

The draft text freezes current restrictions used mainly by developed countries such as TRQs and the article 5 safeguard without establishing a clear indication in favour of substantial improvement of market access.

The G20 added that proportionality in favour of developing countries should be applied in all elements in this pillar, including tariff reductions, TRQ commitments, tariff capping and number of sensitive products.  It is problematic to commit proportionality within the bands of the tiered formula when the bands are as yet totally undefined.

The G20 also said the tiered approach for tariff reductions for sensitive products should be correlated with tariff reductions described in the normal bands of the tariff reduction formula.  He elaborated that sensitive products cannot be subject to only an across the board minimum cut, and tariff cuts on them must correlate with the ones used in each band of the general reduction formula.

On LDCs, the G20 said that duty and quota free access for LDC products in developed member markets has never been contested, so the text is a clear dilution of the previous understanding on this issue.  The text also falls far short of recognizing the contribution made by members in their accession and does not provide genuine commitment to address their concerns.

On cotton, the only way the sectoral initiative can be effectively addressed within agriculture is if it is accorded priority attention, but the text falls short of delivering any tangible outcomes in this regard.  Also, disciplines on export prohibitions and restrictions in article 12.1 of the AoA must be strengthened.

Nigerian Ambassador, Matthew Nwagwu, speaking on behalf of the Africa Group, said the draft text contains imbalance as it postpones the developing countries’ issues while addressing extensively with more specificity the interests of developed countries, and this imbalance must be rectified.

He added the African Group is concerned about the text’s lack of focus on some issues of interest to developing countries, and lack of clarity in some of the Africa Group’s issues, as well as dilution of issues such as SDT and treatment of LDCs (where there had been consensus).

On domestic support, the Group wanted elimination of the 5% de minimis for developed countries whilst developing countries should be exempted from reduction of de minims support.  

The Group noted that the text legitimizes the use of new forms in the blue box as a permanent feature, which could undermine the aims of the reform process.

It called for the review of trade distorting elements of the Green Box measures of developed countries and for development of tighter disciplines through notification, surveillance and monitoring.  The current text on green box suggests the status quo will be maintained and could also pave the way to incorporating new non trade concerns I WTO disciplines.

On export competition, Ambassador Nwagwu said there should be effective SDT provisions for LDCs and NFIDCs, and exemption for developing countries from additional disciplines on state trading enterprises due to their developmental role.

Food aid for emergency, humanitarian and development aims should comply with notification, surveillance and monitoring rules.

On market access, the African countries were concerned that issues of importance to them were not addressed and deferred.  Tariff escalation should be addressed by applying a factor (__) to the tariff reduction of the processed product in case its tariff is higher than the product in primary form.  In addressing tariff peaks and escalation, the interest of preference beneficiary countries should be safeguarded.

The Group also criticized that developed countries’ sensitive products are dealt with in greater detail while the developing countries’ special products and other SDT provisions are not given the same treatment.  There is also a need to delink the issue of special products from the treatment of sensitive products (on para 41).

On para 42 on special products, the Group wanted the sentence to read:  “Members will have the flexibility to designate special products.  There will be no requirement to expand TRQs and tariff reduction on special products.”

Also, sensitive products of developed countries should be limited in range, and there should be more simplified and transparent tariff quota regimes.

On cotton, the Africa Group also presented a proposal for language on the cotton issue, which called for cotton to be given specific treatment within agriculture negotiations, so it is addressed ambitiously and expeditiously. 

The proposal includes seven specific provisions, including that:  all forms of export subsidies and measures with equivalent effect shall be eliminated by the date of implementation of the results of the Doha Round;  members commit to more than average reductions in domestic supports on cotton, with a view to complete elimination of all forms of trade distorting support on cotton by a specified year; product specific AMS on cotton shall be capped at their 2000-2001 levels and eliminated according to a timetable;  and members shall improve market access regimes for cotton imports from developing countries.

Other provisions are that an agreement on cotton be implemented on an early harvest basis, starting in 2005 and a credible date for total elimination of trade distorting support on cotton be determined at the latest by the next WTO Ministerial, irrespective of the progress on the rest of the agriculture negotiations.   Technical and financial assistance should also be given to cotton producers.   And a working group should be established to follow up on the proposed measures.   

Indonesia’s Ambassador, Gusmardi Bustami, said it was claimed that this was a development round, but the framework on agriculture as currently drafted provides little recognition or balance for developing countries’ development needs.  Treatment of development issues, or issues of real concern to developing countries, as called for by the Doha mandate, have been relegated and sidelined.

At the same time, he said, developed members’ sensitivities and concerns had been given much prominence and recognition.  This, he added, was very worrying for his delegation.

Ambassador Gusmardi said a fair agriculture framework for developing countries must be ensured, where the framework must not undermine developing countries’ key concerns, particularly on SDT.

Indonesia, which coordinates the G33 (or the SP/SSM alliance), believed that the two concepts of sensitive products and special products are different in nature, purpose and how it was provided for in the mandate.  The framework must ensure that “special products”  is de-linked from “sensitive products”.  Special products for developing countries must be of primary significance in the market access pillar as mandated by Doha.  In turn the concept of special products for developed countries must be secondary and should not undermine the market access pillar.

Ambassador Gusmardi said Indonesia is particularly concerned about the unbalanced treatment given to sensitive products and special products in the draft text.

Besides the obvious differentiation in the level of specificity, the method of selection between sensitive and special products was also very imbalanced, he said.  The draft framework allows sensitive products to be self selected by developed countries. On the other hand the special products selection is to be negotiated under conditions to be determined. 

Gusmardi pointed out that those developed countries that will have access to sensitive products have been calling for criteria for the selection of special products.  He suggested that if there should be conditions and criteria for selecting special products, there should also be conditions and clear criteria imposed on the selection of sensitive products. 

India’s Ambassador, K.M. Chandrasekhar said he would be very happy if the exercise results in a framework agreement next week, but he was still not confident that all differences of opinion in various issues will be resolved in such a short time.  To move forward in agriculture requires awareness of agriculture problems in countries like India.

He said India had over 650 million people dependent on agriculture, they live on the edge of poverty and their annual per capita income is USD175 or less than 50 cents a day.  The average farm size is abysmally small, just 1.5 hectares.  There is a preponderance of small and marginal farmers, cultivation is mainly rainfed with one crop per year and productivity levels are lower than in developed countries.  Their incomes are highly volatile and extremely vulnerable to price changes.  This situation prevails not only in India but also Africa, Indonesia, Philippines, China and many parts of Latin America.

Amb. Chandrasekhar said we have been disappointed with some for the discussions in the negotiating group and elsewhere, as we sense a lack of sensitivity to a major problem we face acutely in many parts of the world.  What we confront is a real life situation, with real persons on the verge of starvation, desperate for some form of support and understanding of their life condition.

Instead of confronting this great human problem and finding solutions, we seem to be living in a make believe world driven by mercantilist compulsions, said Chandrasekhar.  This is not a problem of three pillars but of poverty and starvation.  The ultimate goal, i.e. poverty eradication through fair and equitable trade, should not be lost sight of.

He added is it very difficult to explain to our people that our highly vulnerable rural economy has to pay for whatever reduction of subsidy takes place in richer countries, especially when these subsidies go to the likes of Fortune 500 companies like Caterpillar, Eli Lily, Mead Corporation, John Hancock Mutual Life Insurance and to some of the richest men in the world like David Rockefeller, Ken Lay, the Duke of Westminster and Sir Adrian Swire.

Chandrasekhar said he had never been able to understand the link that is sought to be established between subsidy reduction and market access into extremely poor countries like India.  Article XXXVI.8 of GATT clearly states that the developed countries do not expect reciprocity for commitments made by them to the trade of less developed countries.  

This provision provides for no reciprocity, not less than full reciprocity.  Yet developing countries have gone as far as they can and are agreeable to do proportionately what the developed countries would do.  In domestic support, said Chandrasekhar, we are willing to proportionately bring down our subsidies, but the fact is we cannot afford to use the amber or blue box just because we have no resources.

Likewise, on export subsidies, we would have brought down our export subsidies, proportionate to the reduction effected by developed countries, but again the fact is we do not have export subsidies, he said.   It is therefore difficult to understand why we are asked to do proportionately more, rather than less, than developed countries in the only pillar that we can use, namely market access, in order than others can do more in pillars that we do not utilize, he added.

Chandrasekhar stressed the point that so far as developing countries are concerned, the principle of proportionality can effectively apply only to one pillar, market access, because that is the only pillar we use.

In the present text, even this principle of proportionality is not clearly defined.  It seems to apply only to tariff reduction and not other aspects of market access and that too is limited to each band of the tiered approach.  When we do not know how many bands there will be, whether developed and developing countries will have the same number of bands and whether the band profile will remain the same, how can we talk of proportionality within a band?, asked the Indian Ambassador.

In the post-Cancun negotiations, India brought out the limitations of the blended approach in market access.  In the present text, said Chandrasekhar, we see the resurrection of the blended approach in disguise.   We also see a difference in specificity with sensitive products for developed countries being treated in a particular way without sufficient clarity about corresponding provisions for developing countries, he said, adding that the G20 coordinator had indicated the G20 preference for limitations on sensitive products and clear linkage to the tiered formula.

Chandrasekhar said the same kind of specificity was also seen in para 13 relating to the blue box.  The principle of cumulation of support does not appear in the text, and the green box language does not meet our aspirations.  He added that we are amazed to find that the Derbez text language regarding no reduction in de minimis for developing countries is not in the text.  We do not use the amber and blue boxes, are we to be denied use of the existing de minimis provision too?, he asked.

 


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