TWN Info Service on WTO and Trade Issues (Jul05/6)

12 July 2005

WTO Agriculture Talks:  'First approximation' unlikely by end July

Negotiations on agriculture took place on 4-6 July at the WTO.  They ended earlier than expected, indicating a lack of progress.

The Chairperson, Tim Groser, concluded that it would be unlikely that he could draft "first approximations" of modalities by the end of July, which had been a target.

The three-day agriculture consultations covered the formula for tariff reduction, Special Products and the Special Safeguard Mechanism, and State Trading Enterprises and Food Aid.

The agriculture week of negotiations had originally been scheduled to end on 8 July, with Groser indicating he was reserving 6 July evening to 8 July to prepare a paper (not yet the first approximation).

However on Wednesday evening, Groser declared the week of agriculture negotiations to be over.

Below is a report by Kanaga Raja on the agriculture negotiations.  It was published in the SUNS (South-North Development Monitor) on 8 July 2005.

With best wishes
Martin Khor


WTO Agriculture Talks: 'First approximation' unlikely by end July

By Kanaga Raja*, Geneva 7 July 2005
Published in SUNS on 8 July 2005

Negotiations on agriculture ended Wednesday with the Chairperson Tim Groser concluding that the chances are unlikely at this stage that he will be able to produce a 'first approximation' of the full modalities on agriculture by the end of July.

At the three-day technical consultations on 4-6 July, members held discussions on the formula for tariff reduction, Special Products and the Special Safeguard Mechanism, and State Trading Enterprises and Food Aid.

The agriculture week of negotiations had originally been scheduled to end on 8 July, with Groser indicating before the negotiations began on 4 July that he was reserving the whole of the period from 6 July evening to 8 July to prepare a paper (not yet the first approximation).

However on Wednesday evening, Groser declared the week of agriculture negotiations to be over.

Groser informed members at the end of the meeting that he still needs a lot more political guidance if he is to produce a paper at the end of July in the form that he had envisaged when he first used the phrase "first approximation" at the end of last year.

While he did not discount the possibility of a 'first approximation' by end July, he said that at this stage the chances are unlikely, although he added that he will "absolutely" continue to make progress by the end of the month.

According to trade officials, this was taken to mean that Groser is keeping open the question of what type of paper he might produce at the end of July.

Groser said that while he had received some political guidance during the week, he still needed a lot more. He added that if progress is to be made, it would have to be something along the lines of his status report circulated on 27 June, and some politicians would have to get involved. However, delegates have to brief their ministers carefully as they prepare for the mini-ministerial meeting in China (12-13 July), he said.

He cautioned against trying to deal with all issues at the same time. Trying to do "everything today", means "nothing gets done", he said.

According to trade officials, while Groser did not spell out what the problems were, his references to an issue that "took an enormous amount of time" (the four-month delay in clearing up the issue of ad valorem equivalents), and the assessment in his status report, seem to indicate that the problems lie in market access and members' failure to converge on the structure of the tariff reduction formula.

Groser warned that the more things are left until after July, the more problems lie in store.

Groser said that he did not plan to revise his assessment of the status of his talks, which he circulated as a status report on 27 June.

Groser concluded by reminding negotiators that the key document is the 1 August 2004 framework, which contains the "acquis" - what has been acquired or achieved - of the negotiations.

During the informal consultations on the tariff reduction formula and other market access issues, differences appeared to remain over the formula for tariff reduction. According to trade officials, some countries said that they wanted to see movement away from entrenched positions.

Continuing to favour a Uruguay Round approach (average percentage cuts with minimum cuts in each tier) were the G-10 (Switzerland speaking, with others supporting), the EU, Turkey, Kenya and Jamaica.

Some described the Swiss formula (or some other form of "progressivity" - i. e. steeper cuts on higher tariffs) within each tier as "unacceptable" (the G-10, India, and the ACP represented by Mauritius).

New Zealand and Argentina said that the advocates of the Uruguay Round approach had not moved whereas the other side had. They, along with Canada, Brazil and others said that it is clear that both approaches are untenable and that an alternative has to be found.

According to trade officials, Brazil raised some concerns over countries' entrenched positions, rendering negotiators "totally incapable of moving on this".

A "first approximation" will not be possible if there is no convergence on the structure of the tariff reduction formula and the entire Doha negotiations will be in jeopardy, Brazil said.

New Zealand, Argentina, Canada, the US, Pakistan, Peru and Thailand called for progressive cuts in each tier.

Australia suggested a formula with progressive cuts in each tier, and three tiers with thresholds at about 20% and 80%. The cuts would be set at the thresholds and those between the thresholds (i. e. within each tier) would be calculated by "drawing a line between" the threshold cuts.

Australia said this would avoid the problem of the same cut on 21% and 79% tariffs, and would have the additional advantage of making the thresholds less controversial, since crossing the threshold would not involve a big change.

The EU said that Australia is proposing thresholds that are closer to its own view.

A number of countries opposed the mechanical approach to setting thresholds proposed by Canada at the last meeting (all countries' tariff lines or products would be listed in order of each, and thresholds would be set so that each tier has the same number of products).

Some Latin American countries called for full liberalization of tropical products and crops produced as alternatives to narcotics.

With respect to related market access issues, Brazil welcomed a proposal from the G-10 on "sensitive products" (which are available to all countries) because it provides an idea on how to move forward that can be discussed. The G-10 proposes a trade-off between tariff reduction and tariff quota expansion on sensitive products - if the cuts are smaller, the quota would be expanded more.

During the discussions on Special Products (SP) and the Special Safeguard Mechanism (SSM), several countries welcomed a G-33 announcement on "special products" (available only to developing countries), which the group described as a concession.

The G-33 (Indonesia and a number of other developing countries seeking broad exemptions for access to poorer countries' markets) said that its members are working on indicators for the three criteria for choosing special products agreed in the August 2004 framework: food security, livelihood security and rural development.

Developing countries would then use those indicators in order to choose which of their products are going to be "special products". The G-33 members said that they need some time before they can produce the indicators.

The G-33 reminded members that "the Ministers of the G-33 meeting in Jakarta on 11-12 June, conveyed a message to the WTO membership and made an important contribution to necessary progress towards Hong Kong." That is, Ministers have instructed their negotiators "to intensify the technical work on special products and come up with a set of operational indicators based on food security, livelihood security and rural development needs, which would assist developing countries to designate their own special products".

The G-33 said that it "is thus working hard on the operationalization of the three criteria of food security, livelihood security and rural development needs as agreed in the July framework and the Doha mandate."

Among non-members of the group, Brazil, Argentina, Chile, Colombia, Malaysia, the US and New Zealand welcomed the proposal as a move away from what they had previously seen as a proposed blank cheque for developing countries to pick their special products.

Several members such as Chile, Costa Rica and Thailand also articulated concerns that special products may hamper South-South trade. Malaysia and Thailand said that special products will affect their export of agricultural products.

Chile remarked that the indicators should be used to pick non-commercial products. A number of G-33 members responded by arguing that they need to protect "special products" for commercial reasons as well as for development and political reasons.

In its statement, the G-33 said that "the group expects that members will recognise that negotiations towards full modalities on Special Products cannot be approached from a limited purely commercial perspective."

The US clarified its position that special products should at least see some tariff reductions. "For these products, we really don't have high ambitions," the US said. If a case can be made about the vulnerability of the producers, then smaller cuts, or tariff quotas or some other means could be used to provide no more than a minimal amount of market access, the US added.

There were divergences in opinions over the special safeguard mechanism, partly over whether members should try to work on this before or after the end of July, and partly whether the mechanism should be triggered by surges in the volumes of imports or by price falls or by both.

Some developed country members such as the US and the EU were opposed to SSM being triggered by both changes in price and volume. They argued that since the SSM is to deal only with import surges, a volume trigger would be sufficient.

The G-33 reiterated its "objective in establishing an effective mechanism to address import surges and price depressions."

"In this context, and as a unique special and differential treatment provision, the design of the SSM must reflect the particular circumstances of developing countries, as well as their institutional capacities. Arbitrary restrictions that may undermine the effectiveness of the mechanism need to be avoided," the G-33 said.

Newly acceded members such as Moldova and Georgia supported the G-33 SSM proposal. They said that they did not receive such treatment during their accession process to the WTO, and that such a measure would be helpful.

On state trading enterprises, which was discussed Wednesday, members appeared to accept Groser's proposal that he should focus now on "financial privileges" (subsidies, government financing and underwriting of losses) leaving the more contentious questions of monopoly power and other issues such as price discrimination until after July.

Differences remained on food aid questions such as whether the aid should only be in cash or whether aid in kind should be allowed. Some countries argued that there should be no changes on food aid at all. According to trade officials, Groser intervened at one stage to emphasize that no one is proposing to curb emergency food aid.

A group of low-income transition economies introduced a new paper (TN/AG/GEN/10, from Armenia, Georgia, Kyrgyz Republic, and Moldova) calling for the same treatment as least-developed countries and others at a similar level of vulnerability, particularly since their tariffs are already low.

According to trade officials, members also welcomed Groser's "status report" circulated on 27 June. Several described it as a contribution to the transparency of the negotiations. Venezuela called for similar reports in other negotiations in the WTO.

Several countries had slightly different assessments of some of the details and suggested that it should be "recalibrated".

Groser said that recalibration was precisely the purpose of circulating the text about one month before he is due to produce his "first approximation" of the "full modalities" that members want to agree in Hong Kong in December.

In his status report, Groser outlined his view of the situation in a wide range of subjects, what he considers to be needed by the end of July, and what could be negotiated afterwards.

He identified market access as the least advanced of the three pillars (the other two are domestic support and export subsidies). In his report, he stressed the need for a sequence in the negotiations, which means that some questions (such as the structure of the tariff reduction formula) have to be settled before others (see SUNS #5831).

No further meetings on the agriculture negotiations have been scheduled for this month, trade officials said.

Trade observers note however that a number of developments make it difficult for the outlines of a draft modalities agreement, even with political directions, to emerge before end of July, and an agreement on modalities to be achieved by the Hong Kong Ministerial (December 2004).

After the emphatic French and Dutch 'NO' to the EU constitution, the future of the EU and the ratification process have created great acrimony and bitterness - with no way forward easily evident. Though the rejection of the constitution does not abrogate the Rome and Nice treaties of the EU, there is great political uncertainty, since the French and Dutch 'NO' are not only against their governments, but the Brussels EU decision-making, with no accountability to the public.

On top of it, the EU budget process is also in disarray - with considerable bitterness and public brawling between the Prime Minister Tony Blair and French President Jacques Chirac, with several other EU members supporting Chirac. Most EU members seem to think that no compromise or agreement on the budget is likely with Blair heading the EU till end December, when the EU presidency changes.

The EU Trade Commissioner Peter Mendelson and the EU Agriculture Commissioner Mariann Fischer-Boel are sharply disagreeing in public about 'trade-offs'. Mendelson (as the US etc) is propagating the view that for the EC to cut its agriculture support and market access etc, there must be large market openings by major developing countries (Brazil, China, India etc) under non-agricultural market access (NAMA), and services including financial services. The EC Agriculture Commissioner on the other hand has said that the only trade-off in agriculture had to be within the three pillars of reform - domestic support, export subsidy and market access. Even if all these can be reconciled, it is difficult to see any of this happening during the UK presidency, and before the Hong Kong Ministerial.

(* With inputs from Goh Chien Yen.)