TWN Info Service on WTO and Trade Issues (Jan05/1)
12 January 2005
Third World Network
G33 Developing Countries Warn Against Tariff Reduction Method That Can Disrupt Developing Countries’ Rural Economies
At the agriculture negotiations in the WTO in mid-December 2004, the G33 developing countries presented a paper on market access in which it called for a tariff reduction method that does not result in developing countries paying a high price. It warned that developing countries with already low tariffs have little capacity to undertake further significant cuts without disrupting their rural economies.”
The G33 also presented papers on special products, and on a special safeguard mechanism (SSM). (TWN Info dated 14 December reported on the G33 paper on SSM).
Papers were also presented by the G20 developing countries at the December agriculture session. The session discussed the issues of market access (in particular on the approach to be adopted for making tariff reduction commitments); sensitive products; special products for developing countries because of food security; and SSM.
Below is a TWN report on the session, by Goh Chien Yen.
With best wishes
G33 Developing Countries Warn Against Tariff Reduction Method That Can Disrupt Developing Countries’ Rural Economies
Report on the WTO Agriculture negotiations in mid-December 2004
At the session on agriculture negotiations during the week starting 13 December 2004, significant papers were presented by two groupings of developing countries, i.e. the G33 and the G20.
In a paper on market access, the G33, a grouping of over 40 developing countries (which had formed an alliance on special products and a special safeguard mechanism to further their food security and rural livelihood interests) called for an approach to tariff reduction that does not result in developing countries paying a high price, with disruption to their rural economies.
The G33 pointed out that “developing countries with already low tariffs have little capacity to undertake further significant cuts without disrupting their rural economies.”
The WTO members met during the week of 13h Dec 2004 for their last special session on agriculture to discuss, amongst others, the issues of sensitive products, special products for developing countries because of food security and market access, in particular on the approach to be adopted for making tariff reduction commitments.
The G33 paper. presented by Kenya at the meeting, also highlighted the fact that “tariffs are the only instruments available to these countries for protecting their farmers.” It emphasized that “it is important that the method of tariff reduction and the numbers negotiated are such that these developing Members are not called upon to pay an inordinately high, and iniquitous price in these negotiations.
“This is of great significance as the agriculture sectors of all such countries are underdeveloped and consist in large part of low income or resource poor farmers. Agricultural development in these countries is not primarily related to international markets.
“Lack or infirmities of institutions and lack of adequate and comparable infrastructure have a much greater bearing on development of their agriculture sectors, which are not expected to change substantially in the short or even in the medium term. We need to take into account such situations in determining the thresholds for different bands,” the G33 urged.
The meeting also saw differences in approach on the formula to be used for tariff reduction. Some members wanted an approach that would lead to steep tariff reductions. New Zealand and Australia argued that the tiered approach to be adopted for making tariff reduction commitments should have a harmonizing effect on members’ agriculture tariff profiles and result in greater market access for all products. They added that a Swiss formula would apply where there are few bands, and other formulas could be used when there are more bands. This is because the more bands there are, the tiered approach would as a whole increasingly resemble a Swiss formula. Other countries such as Thailand and Costa Rica argued strongly for a non-linear, Swiss formula to be applied in each of the band of the tiered approach to making tariff reduction.
This was vigorously objected to by the G10 (a grouping of mainly developed countries with defensive interests) and EU. The EU pointed out that this could lead to anomalies since a Swiss formula applied to a tariff at the lower end of a tier could result in gentler cuts than one applied to a tariff at the top of the tier below. They argued that a Swiss formula should therefore not be used in the tiered approach for tariff reduction. Average linear reductions Uruguay Round-style) in each band of the tiered formula was proposed instead.
According to the G20, “Firstly, the formula must ensure deeper cuts to higher bound tariffs, putting effect to the principle of progressivity, with comprehensive coverage without a priori exclusions. This will be accomplished through the tiered formula. Secondly, to ensure a fair and equitable outcome, proportionality between the tariff reductions of developed and developing countries, with developing countries undertaking lesser tariff reduction commitments. This remains central to the requirement of special and differential treatment as an integral aspect of this pillar. The different tariff structures of Members must also be taken into account, for this proportionality to be realized. And thirdly, flexibility to take account of the sensitive nature of some products, without undermining the overall objective of the tiered formula, and ensuring improved market access in these tariff lines.”
The G20 added that in the “the final discussion on the magnitude of tariff reductions, which everyone agrees is a political issue,” progress in the other pillars must be taken account of in the consideration of sufficient balance.
The G20 pointed out that the following would require further attention :
(i) the number of bands;
(ii) the thresholds for defining the bands;
(iii) the tariff reduction in each band; and
(iv) the role of a tariff cap.
The G10 and EC also wanted the issue of geographical indications to be discussed as an integral part of the negotiations on market access. The EU and Bulgaria insisted that geographical indications should be part of the market access discussions. Some members of the Cairns Group insisted that the framework said this was “not agreed”.
On Sensitive Products
The meeting discussed the category of products known as “special products”, which had been introduced in the July 2004 Package, on the insistence of some developed countries, which wanted these products to be given special treatment (i.e. lower market access obligations). Many developing countries, such as those in the G20, are concerned that the use of “special products” category should not result in the developed countries escaping from opening their markets in key agriculture products.
The G10 countries, made of members such as Switzerland, Japan, Chinese Taipei, South Korea and Liechtenstein, argued that the consideration of sensitive products should not be treated as an exception to the tariff reduction formula. As far as they were concerned, sensitive products are part of the negotiations on all components of the market access pillar.
In this respect, greater market access for sensitive products can only be achieved through tariff quota expansion and not via reduced tariffs, the G10 asserted.
The US recognized the notion of sensitive products but pointed out that the number of such products should be limited and must still deliver on the objective of greater market access.
The G20 argued that the number of sensitive products can only be determined “only be done after the tariff reduction formula has been developed.” They added that “this puts limits on the number of tariff lines that can be designated as ‘sensitive’, in particular in the upper bands of the tiered formula.”
The G20 countries pointed out that according to “the Framework..the selection and treatment of Sensitive Products should not undermine the overall objective of the tiered approach.” Nonetheless, the G20 recognised that “sensitive products, under parameters to be negotiated, will be permitted treatment more flexible than that arising from the tiered tariff reduction formula.”
In the selection process for sensitive tariff lines, the G20 highlighted that “existing commitments or these products also need to be taken into account as set out in the framework.” Thus, the G20 argued that “products already enjoying multiple layers of protection are not taken as ‘sensitive’.”
Regarding the treatment of sensitive products, the G20 said that “the July framework is quite clear that:
i) Market access in each product will be substantially improved;
ii) The combination of tariff reductions and tariff quota commitments applying to each sensitive product, which will result in the “substantial improvement”, will need to be negotiated; and
iii)Where MFN-based tariff quota expansion is required for all such products, and in order not to undermine the objective of the tiered approach, the tariff quota expansion would be negotiated taking into account deviations from the tariff reduction formula. In other words, the greater the deviation from the formula, the greater the TRQ expansion required.”
On Special Products
The session also discussed the issue of special products for developing country members to deal with issues of food security and rural livelihoods.
The G33 countries, the main proponents of special products, reiterated the flexibilities contained in the July package that allows developing countries to designate products for more flexible treatment. An appropriate number of these special products (SP) will be designated on criteria of food security, livelihood security, and rural development.
G-33 recognized that selection and treatment of special products would need to be further specified and said that this work “must.abide by the guidelines and parameters provided in paragraph 41 (of Annex A to the July Package).”
In this regard, the G33 pointed out that paragraph 41 clearly provided that:
· “Developing countries shall have the flexibilities to decide themselves the products they consider as SP.
· Selection of SP is to be made on the basis of an appropriate number of products, and not tariff lines.
· Criteria for selection must be base on food security, livelihood security, and rural development.
· Treatment of SP must be more flexible compare to the treatment of other products including sensitive products. In this regard the G-33 maintains its position that SP must not have tariff reduction or new commitments on TRQ, and must not be excluded from the coverage of the SSM (Special Safeguard Measure.”
The G33 added: “As a stand alone provision under S&D, SP is detached in the framework from the tariff reduction formula and other market access provision such as TRQ and sensitive products. SP is an additional S&D for developing countries, outside the traditional S&D to be given to developing countries on the tariff reduction formula, the number and treatment of sensitive products, expansion of TRQ, and implementation period, as provided for in paragraph 39 of the August framework.”
The G33 reminded members that “Paragraph 13 of the Doha Declaration requires S&D be made operationally effective to enable developing countries take account of their development needs including food security, livelihood security, and rural development. It follows that irrespective of the outcome of negotiations in other market access issues and other pillars, work under paragraph 41 must therefore ensure that SP can be operationally effective for developing countries.”
The G-20 recognised “SP and SSM (Special Safeguard Measure) as integral elements of S&D treatment.” It added: “Work on these issues must ensure for an adequate outcome which takes into account the needs of all developing countries. In this regard, the G20 said that they would “continue to work closely with the G33 and stand ready to work with other interested Members.”
However, the US indicated it was against the flexibility asked for by the G33 in treatment of special products. The US wanted this category of products to be “extremely limited” and defined on the basis of a “very strict criteria.”
The EU was more explicitly supportive, recognizing the need for special products for developing countries and said that it should be taken care of, but without offering much technical details on how to do so.