TWN Info Service on WTO and Trade Issues (Mar05/9)

23 March 2005

Remaining issues in agriculture framework get first look; talks break off without agreement on AVEs

The agriculture negotiations that took place 14-18 March covered many issues, including domestic subsidies (See TWN Info Mar05/8 for report on G20 and G33 statements on blue box and de minimis support respectively).

The discussions also covered several issues that received "first reading". These issues included implementation of export competition elements, tariff escalation, tariff simplification and special agricultural safeguard; least developed countries, recently acceded members; monitoring and surveillance; and "issues of interest but not agreed" . During the week, members also discussed the method for calculating ad valorem equivalents (AVEs) of non-ad-valorem duties. However they did not reach agreement on this. The meeting was suspended on Thursday afternoon.

Below is a report by Kanaga Raja. It was published in the South-North Development Minitror (SUNS) of 21 March 2005. Permission to reproduce will have to be obtained from

With best wishes
Martin Khor


No agreement on AVEs issue, and remaining issues in agriculture framework get first look

By Kanaga Raja, Geneva, 20 March 2005 

Published in SUNS Bulletin (21 March 2005).

The Special Session of the Committee on Agriculture of the WTO held informal meetings on 16-17 March where remaining substantive issues in the July framework relating to agriculture (Annex A) that had not yet been discussed, got an initial examination to determine how to proceed further with these issues.

The issues that received a "first reading" to gauge reactions and to determine how to pursue them further included implementation of export competition elements

(paragraphs 20 and 21 of Annex A of the July framework); tariff escalation, tariff simplification and special agricultural safeguard (paragraphs 36-38); least developed countries (paragraphs 45-46); recently acceded members (paragraph 47); monitoring and surveillance (paragraph 48); and "issues of interest but not agreed" (paragraph 49).

The Chair of the Special Session Ambassador Tim Groser of New Zealand remarked at the informal meetings that it had taken nine months to complete the "first readings".

Earlier in the week, informal meetings were held to examine in greater detail subjects that already had a "first reading" including blue box criteria (paragraph 14); the formulae for reductions in trade-distorting domestic support (various paragraphs of the domestic support pillar of the framework); and total value of agriculture production (various paragraphs of the domestic support pillar of the framework), as well as ad valorem equivalents.

A formal meeting of the Special Session was held on Thursday where members asked for some of their statements made in the informal meetings to be put on the record. After a brief session, the Chair suspended the meeting in order for consultations to continue on the method for calculating ad valorem equivalents (AVEs) of non-ad-valorem duties.

In the late afternoon of Thursday, the consultations on AVEs had broken off without agreement or any indication from Groser as to when it would resume. The negotiations on the method for converting non ad valorem tariffs (for example, those expressed as value per unit such as $100 per ton) into ad valorem equivalents

(expressed as percent of the value of the import) have preoccupied and cast a shadow over the week-long consultations.

As of Friday afternoon, the formal meeting remained suspended.

On discussions on other issues at the informal meetings on 16-17 March, differences in views appeared to emerge among members on almost all the remaining issues in the framework relating to agriculture, particularly on "issues of interest but not agreed" (sectoral initiatives, geographical indications and differential export taxes).

On export competition and implementation of elements, the main difference was over how the elimination of export subsidies (including parallel implementation of subsidized credit) would be staged. The G-20 (Egypt speaking) and Cairns Group members (Australia and New Zealand) favour some form of "front loading" (deeper cuts in earlier years, or at least a large "down payment" cut in the first year).

China said that front loading would be more important if the period for eventual elimination is longer, and called for separate reduction schedules for key products in order to avoid subsidies being shifted between products. Norway opposed down payments and called for equal annual reductions. The African, Caribbean and Pacific group (Mauritius speaking) called for the interests of net-food-importing developing countries to be taken into account.

According to trade officials, Groser indicated that there appeared to be "procedural agreement" on a number of points including the need to sort out the rules first. He suggested that negotiations on the phasing out might have to wait until after the "first approximation" of the Hong Kong Ministerial decision is produced in July.

On tariff escalation, while most speakers agreed that this is an obstacle preventing developing countries from moving into value-added industries and attracting investment, most also agreed that it will have to be tackled after the main tariff reduction formula is agreed on. Some countries such as the EU said that in practice tariff escalation might be too complex to develop a specific formula. Others, such as the US, Australia and Costa Rica, said that an ambitious main tariff reduction formula could help reduce the severity of tariff escalation.

With respect to tariff simplification, according to trade officials, the debate continues as to whether straight specific duties (e. g. dollars per ton) are simple, predictable and transparent. The G-10 (Switzerland speaking) and the EU argue that they are, because they avoid customs valuation problems. However, the G-20 (Thailand speaking) and Cairns Group members say that they are not because it is more difficult to determine whether they are high or low. The G-10 and the EU said that they are willing to discuss simplifying more complex non-ad-valorem duties.

On special safeguards for developed countries, positions appeared to remain the same. The G-10 (Switzerland speaking) and the EU continued to argue that the safeguards are needed as a safety valve while they improve market access. On the other hand, the G-20 (Argentina speaking), Cairns Group members and the US argued that the safeguards should be scrapped because they add to the layers of possible protectionist measures.

Canada argued that the special safeguard should be kept as a negotiating tool - if tariff reductions and quota widening are ambitious, the special safeguard might be justified. But if the results are not overly ambitious, then the safeguard should go, Canada said.

Australia asked why some of the biggest defenders of non-ad-valorem duties in agriculture are major exporters of industrial products who favour eliminating specific duties in non-agricultural market access (NAMA) negotiations.

With respect to the least developed countries, trade officials said that there was broad agreement that LDCs need special treatment, including duty-free, quota-free access to richer countries' markets. But there seemed to be broad agreement that this would have to be examined more closely later.

On the recently acceded members, trade officials said that there was sympathy for the arguments of the 6 recently acceded members (Croatia speaking for the six recently acceded members), China and Chinese Taipei, that new members currently undergoing reforms as part of their membership agreements might need a special deal to take account of the reforms they have undertaken and to perhaps delay further reforms until the present transition periods are over. China pointed out that its average tariffs have been cut by 70%, from an average of 50% to just over 15%, whereas richer countries reduced their tariffs by a much smaller average in the Uruguay Round agreement.

According to trade officials, the Chair said that he appreciated the fact that the new members accepted that their concerns would have to be addressed later, when the main formulae have been agreed. He said that members had noted their concerns and as chair, he would make sure that these concerns would not be left until the last minute.

On monitoring and surveillance, the G-20 (China speaking) and Japan listed a number of concerns and ideas for improving notification and transparency. The G-20 proposed, for example, that a new sub-committee be created for the purpose. The ACP countries said that additional notification would be a problem for them and they would need technical assistance.

Groser said that it is a fundamental principle that any obligations agreed in the negotiations cannot be implemented and enforced without appropriate disclosure of information. However, this is another subject that will have to be discussed later, he added.

With respect to "issues of interest but not agreed" (sectoral initiatives, differential export taxes and geographical indications), in general, the G-20 (Brazil speaking) said that this should not be discussed at this stage because there are more urgent tasks in the negotiations that have been agreed. Tackling these issues now would wrongly give them the same level of priority as the three pillars, the G-20 said.

Argentina argued that since these subjects are not agreed, they should not be negotiated. Some other G-20 members (such as Chile) preferred "not yet" rather than "never". The EU, Switzerland and Bulgaria countered that Argentina was wrong - "not yet agreed" does not mean, "not to be negotiated", they said.

On sectoral initiatives (generally involving members cutting their duties to zero for products in a sector or sub-sector), Colombia, supported by Costa Rica, called for a sectoral initiative on flowers, describing how this would benefit developing countries, which have become major suppliers internationally. Colombia wants zero duties on these products.

The US proposed deeper cuts in domestic support under sectoral initiatives and said that it is interested in pork, oilseeds, beef, barley, fruit and vegetables, some processed products, distilled spirits, whey and poultry. Canada and New Zealand said that they were interested but preferred to focus on the tariff-cutting formula first.

However, India, Kenya and Argentina opposed the sectoral initiatives - India on the grounds that this would undermine various aspects of special treatment for developing countries, and Kenya because countries are not equal in their ability to compete with each other.

On geographical indications, Australia, supported by the US, Costa Rica, Chile, South Africa, New Zealand, Bolivia, Pakistan and Argentina, said that this has no place in the agriculture negotiations. It should be discussed in the TRIPS Council, they said.

The EU said that other countries should recognize that the EU is willing to give substantial improvements in all three pillars and has a right to expect something in return. The EU said that the subject can be discussed under agriculture because it involves market access for its products. Bulgaria said that it would be seeking market access commitments for products that have its geographical indications and would block the "modalities" if this were not accepted.

Switzerland agreed with Australia and others that geographical indications should be discussed in the TRIPS Council. But that means discussing and not blocking, Switzerland said, and proposed linking export subsidies and domestic support reductions directly with geographical indications protection.

Raising concerns over some members refusing to negotiate in the TRIPS Council, Switzerland said that it had to make the following proposal in the agriculture talks:

(1) the end date for phasing out export subsidies ("all forms of export competition") would have to be the same as the date for extending the protection now given to wines and spirits (Article 23 of the TRIPS Agreement) to all geographical indications; (2) domestic support limits on specific products would not apply to products that do not enjoy the higher level of geographical protection of TRIPS Article 23; and (3) possible lower reductions in domestic support for products with geographical indications.

On differential export taxes (higher export taxes on raw materials and lower duties on processed products), Chile (a G-20 member) said that this will have to be discussed later because differential export taxes lead to unfair competition. It added that taxes should be bound and gradually reduced. The US and Japan said that export taxes in general might be acceptable (for example, for developing countries to raise revenue) but differential taxes are harmful. The US wants them eliminated. Argentina, Indonesia and China, among G-20 members, with Malaysia and Cuba, defended differential export taxes as legitimate measures.

The G-10 (Switzerland speaking) submitted an unofficial paper on "Taking non-trade concerns into account in the market access pillar". This argues that some market access barriers are needed in order to preserve agriculture in difficult conditions. There was no debate over the paper, except a comment from New Zealand, which described it as a backward step since the aim is to increase market access. +