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TWN Info Service on WTO and Trade Issues (Oct05/23)

27 Oct 2005


G20 submits six proposals on agriculture


The Group of 20 developing countries has presented six new proposals for the WTO agriculture negotiations. The papers were distributed at two
informal meetings on agriculture held at the WTO on 21 October.

The G20 proposals were on the establishment of product-specific caps in the Aggregate Measure of Support (AMS); selection and treatment of sensitive products; export prohibitions and restrictions; exporting state trading enterprises of developing countries; tropical products; and improving monitoring and surveillance mechanisms.

Below is a report giving a summary of the six proposals

With best wishes
Martin Khor
TWN

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G20 submits six proposals on agriculture

By Martin Khor, Geneva, 21 October 2005

The Group of 20 developing countries has presented six new proposals for the WTO agriculture negotiations. The papers were distributed at two informal meetings on agriculture held at the WTO on 21 October.

The G20 proposals were on the establishment of product-specific caps in the Aggregate Measure of Support (AMS); selection and treatment of sensitive products; export prohibitions and restrictions; exporting state trading enterprises of developing countries; tropical products; and improving monitoring and surveillance mechanisms.

The G20 proposal on "Improving monitoring and surveillance mechanisms" says that there are well known shortcomings in the Agreement on Agriculture (AoA) in promoting agriculture reform.

Not only were the disciplines and commitments established by the Agreement modest to begin with, but the system put in place to monitor their implementation was also too flexible and inefficient. This situation has allowed for abusive infringement of the already insufficient commitments to agricultural reform embodied in the Agreement on Agriculture.

Any outcome from the Doha Round in agriculture should necessarily address these deficiencies and also be in keeping with the new disciplines to be negotiated in the Round.

"We should not only obtain major improvements in the substantive commitments to be arrived at but also aim for, in line with the mandate, a completely revised set of disciplines regarding monitoring and surveillance by the end of the Round, which would ensure that the new obligations are properly complied with," said the G20.

It added that enhanced monitoring and surveillance mechanisms is an important part of a new Agreement of Agriculture. It referred to paragraphs 48, 16, 21, 24 and 26 of the July 2004 Framework agreement.

The G20 proposed the following general considerations that should guide the whole exercise:

* The improvement in monitoring and surveillance refers to all aspects of the reform process and is not limited to any pillar.

* The concerns of developing countries must be addressed and they refer to; ( a) the implementation of the S and D provisions and the degree to which they are operationally effective and meaningful; ( b) the degree to which they are operationally effective and being able to pursue agricultural policies that are supportive of their development goals, poverty reduction strategies, food security and livelihood concerns; ( c) the capacity of developing countries to monitor the developments in the agricultural policies of developed countries; ( d) the ability of developing countries to comply with the enhanced requirements in terms of monitoring and surveillance; ( e) the capacity of developing countries to utilize the enhanced surveillance mechanisms;

* Monitoring and surveillance should not only focus on individual commitments but also on the inter-relationship of these commitments and their consistency with the overall objective;

* The final structure and outline of the monitoring and surveillance provisions will depend on the nature of the substantive provisions of the new AoA in two different ways: they must be designed in accordance with the new rules in a way that will permit transparency and accountability in the implementation of the new set of obligations and they must complement the substantive obligations so that they can boost the reform process.

The G20 added that the central objectives of this exercise must be greater transparency in the implementation of the new obligations through improvements in the monitoring mechanisms, as well as ensuring full compliance with the new provisions through better surveillance mechanisms. If monitoring is effective and guarantees transparency, surveillance can be exercised assuring compliance with the new provisions.

The G20 paper presented these two objectives in a table which suggests mechanisms to improve monitoring and surveillance. It also proposed the following:

* Establishment of a Sub-committee of the Committee on Agriculture to conduct on a regular basis activities in the area of monitoring and surveillance and specifically to: ( a) have overview of the process of notifications; ( b) organize, on the basis of such notifications and of a report prepared by the Secretariat, the review of the trade-related aspects of agriculture, in the light of the commitments achieved at the end of the negotiations, in particular in developed countries;

* A high-level annual debate on the reform of agricultural policy and on the operation and effectiveness of S and D provisions and the development concerns of developing countries;

* Preparation of an annual report by the Secretariat on the global developments in agriculture, with a special reference to developments in trade and development concerns of developing countries;

* Definition of special procedures as regards implementation of the commitments on cotton;

* Preparation of a special report together with other international organizations to review the relationship between trade and development aspects of agriculture, in particular the area of cotton.

In its proposal on the establishment of product-specific caps in AMS (the amber box domestic support), the G20 said the July 2004 Framework mandated that such caps be established. It was necessary to agree on general disciplines for the establishment, methodology for multilateral review, clarification of disciplines to prevent circumvention (product-specific support for a given basic agricultural product being disguised as non product specific support) and special and differential treatment (S and D).

The base period shall be, for developed members, the Uruguay Round Implementation Period (1995-2000). Developing members may use their own implementation period of the Uruguay Round (1995-2004) or the implementation period of developed members (1995-2000).

The G20 stated that product-specific caps shall constitute maximum entitlements levels for each product. Product-specific caps shall be established at the average applied levels of product-specific AMS for each product during the base period. They shall apply from the first day of the DDA (Doha Development Agenda) implementation period.

Disciplines should also be developed to prevent circumvention of product-specific caps, said the G20.

As S&D treatment, developing countries may grant product-specific AMS for each product up to the maximum level in either of the following alternative product-specific caps: the average applied levels during the implementation period; two times the Member's product-specific de minimis level; or 20% of the total bound AMS in any year.

All these criteria shall not prejudge the result of any other specific commitments for developing countries regarding AMS, such as in cotton.

In its proposal on Sensitive Products, the G20 said there should be "a very limited number of tariff lines" at a digit level to be negotiated, not more than one percent of dutiable tariff lines of each member's schedule.

There should be a credible relationship between the trade value of a tariff line and its selection and treatment as a sensitive product, with S&D for developing countries. Also, Members shall provide before the Hong Kong Ministerial Conference their lists of products to be designated as sensitive.

On treatment of sensitive products, the G20 said the higher the number of sensitive products, the higher the compensation in their treatment. The greater the deviation from the tariff determined by the tariff reduction formula, the greater the TRQ (tariff rate quota) expansion in the same tariff line.

The deviation from the Tiered Tariff Reduction Formula is measured in absolute percentage points, as the difference between the tariff to be bound for that sensitive product ("sensitive level of the tariff"), subject to tariff capping, and the tariff which the Tariff Reduction Formula delivers. The maximum deviation from the Tariff Reduction Formula (TRF) shall be 30% of the cut determined therein.

Sensitive products will also be subject to tariff capping. There will be no TRQ creation.

On TRQ Expansion, the G20 said that for each tariff line designated as sensitive, TRQs will be expanded as a way to compensate for the deviation from the tariff reduction formula.

On establishing the base level for the TRQ expansion, the G20 proposed defining the minimum access level, on the basis of annual domestic consumption, as follows: at least 6% of the annual domestic consumption resulting from the simple average in the base period expressed in the available physical unit. The base period for the calculation of the annual domestic consumption shall be the most recent three-year period for which data is available.

As S&D treatment, developing countries shall undertake less than two thirds of the developed countries' commitments in all the elements above.

To ensure proportionality, for developing country Members, the number of tariff lines designated as 'sensitive' will be 50% higher than the absolute number of tariff lines designated by the developed country having the highest number of such tariff lines.

Due to the fact that the situation in developing countries is completely different from the situation in developed countries, especially in terms of the importance of subsistence farming as a source of domestic consumption of agricultural products, different criteria shall be established for the expansion of TRQs in developing countries.

These criteria would include, inter alia, the elements of proportionality; and the importance of self consumption of subsistence production.

The levels of minimum access shall be less than two thirds of the annual domestic consumption. Further, the self-consumption of subsistence production shall be subtracted from the annual domestic consumption level in the base period.

For sensitive products included in a TRQ which did not result from the Uruguay Round (i. e. subsequent negotiations under Article XXVIII of GATT 1994 and in the recent accessions ), the base shall be the minimum access level of annual commercial domestic consumption or the current access, whichever is lower.

Developing country Members, that designate those tariff lines without TRQ commitments as sensitive, shall have the following options: lower than applicable tariff reduction in the band in which the tariff line falls over the implementation period agreed for developing countries; a maximum deviation of 45% from the tariff reduction formula over a shorter implementation period; applicable tariff reduction in the band in which the tariff line falls over a longer implementation period; other options, to be defined, including TRQ creation.

The G20 also proposed that LDCs shall be exempted from expanding their TRQs.

In its proposal on Export prohibitions and restrictions, the G20 said little attention was paid to this in the Uruguay Round. As a result, export prohibitions and restrictions of Art. XI of GATT 1994 instituted by some Members was overlooked and to date some Members continue to apply them.

Paragraph 1 of Article 12 of the Agreement on Agriculture is limited in this regard, as reference is made only to restrictions described in paragraph 2 ( a) of Article XI of GATT 1994, that is, those temporarily applied to prevent or relieve critical shortages of foodstuffs. The Agreement on Agriculture says nothing about restrictions or prohibitions of Art. XI: 1 of GATT 1994 existing prior to the Uruguay Round.

"In this connection, we need to recall paragraph 1 of Article XI of GATT 1994 on the general elimination of quantitative restrictions to exports. This should form the basis of our approach to the development of modalities, guided by paragraph 50 of the July Framework, that disciplines on export prohibitions and restrictions will be strengthened."

The G20 proposed that the new disciplines shall ensure that, in the specific case of foodstuffs or animal feed, existing or newly established export prohibitions or restrictions of Art. XI of GATT 1994 are instituted exclusively to prevent or relieve critical shortages experienced by exporting Members, and they should be applied on a temporary and non-discriminatory basis.

Ensuring that the food security needs of Members are not compromised, it will be necessary to further discuss what criteria and/or parameters would need to form part of the strengthened disciplines.

The G20 proposed that the following elements be addressed when strengthening the existing disciplines in the scope of paragraph 1 of Article 12 of the Agreement on Agriculture, by adding:

i. Existing prohibitions or restrictions in Members' territories shall be notified to the Committee on Agriculture within 90 days of the coming into force of these provisions.

ii. As provided in paragraph 7 of Article 18 of the Agreement on Agriculture, any Member may bring to the attention of the Committee on Agriculture such measures which it considers ought to have been notified by another Member.

iii. As of the commencement of the implementation of the new Agreement, a term of one year shall be established for the elimination of those export prohibitions or restrictions in foodstuffs and feeds.

iv. The above notwithstanding, any Member instituting export prohibitions or restrictions and the affected importing Member may agree to set a term exceeding one year as long as the term agreed on is not in excess of 18 months. Notice shall be given to the Committee on Agriculture of the agreement reached in this respect. A Member instituting those measures shall give notice of the causes that justify its keeping it.

v. A biannual surveillance mechanism shall be established in the Committee on Agriculture for the observance of obligations described in subparagraphs (iii) and (iv).

The G20 also submitted a proposal on Maintaining the Special Status of Exporting STEs (state trading enterprises) in Developing Countries. It noted that para 25 of the Framework Agreement indicates that STEs in developing country Members which enjoy special privileges to preserve domestic consumer price stability and to ensure food security will receive special consideration for maintaining monopoly status.

Said the G20 paper: "Exporting STEs in many developing countries play important roles. Agriculture for developing countries is not only a trade issue, but also related to their food security and rural development. To achieve these important objectives, exporting STEs, which have existed in many developing countries for a long time, have proved to be an effective and indispensable instrument."

The G20 said that OECD studies show that in most cases, trade-distorting impact originates from the level of domestic prices and the choice of policy instruments set by governments, not the STE per se. Also, recent WTO panel rulings indicate that the monopoly status of exporting STEs itself is not necessarily a cause of trade distortion.

The turnover of STEs in developing countries is generally small compared to the world market, and thus they are unlikely to influence world prices or the terms of agricultural trade. They are, in general, too small to affect the level of world prices.

The G20 said that the disciplines of Article 17 of GATT are sufficient for the operations of exporting STEs. Existing WTO rules such as the GATT, the AoA, the SCM Agreement and the ADA (Anti-Dumping Agreement) already provide adequate disciplines to prevent exporting STEs from distorting international trade.

"Therefore, all developing country Members should have the right to maintain the monopoly status of exporting STEs. However, the G-20 is open to discuss possible disciplines on the trade distorting practices of exporting STEs, bearing in mind that such disciplines should not undermine the ability of developing country Members to pursue their social policy goals.

"The discussion should focus on the implementation of existing rules of the WTO, or the rules that might be further developed, on the operation of exporting STEs instead of their monopoly status."

The G20 submitted another paper on "Some Guidelines for Tropical products and products of particular importance to the diversification of production from the growing of illicit narcotic crops." It cited relevant paragraphs from the preamble of the Agreement on Agriculture, the Doha Declaration and the July Framework (para 43).

It proposed the following:

* Paragraph 43 is an integral part of the Special and Differential Treatment.

* Developed Members shall provide to Developing Members duty-free and quota-free access on primary tropical products and eliminate tariff escalation on processed tropical products.

* This treatment shall include the elimination of non-tariff barriers affecting tropical products.

* Developed Members will assure the access to the products of interest of developing countries by not including such products in their sensitive product lists.

* Designation of products of particular importance to the diversification of production from the growing of illicit narcotic crops should be based on diversification production programs. Treatment mentioned in paragraphs 2 to 4 will apply.

 


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