TWN Info Service on WTO and Trade Issues (Nov05/17)

25 Nov 2005

WTO's Agriculture Chair issues his draft report

Below please find an article on the report issued by the Chair of the WTO's agriculture negotiations. The report is submitted to the Chair of the Trade Negotiations Committee as an input to the overall draft text for the Hongkong Ministerial conference.

This report was published in the SUNS, 23 Nov,

With best wishes
Martin Khor


WTO's Agriculture Chair issues his draft report for TNC

By Kanaga Raja, Geneva 22 Nov 2005

The Chair of the Special Session of the Committee on Agriculture, Ambassador Crawford Falconer of New Zealand, issued Tuesday his draft report on the agriculture negotiations, which he will be submitting to the Chair of the Trade Negotiations Committee Mr Pascal Lamy.

An informal meeting on agriculture was held mid-day Tuesday where the Chair introduced the draft report, after which it was circulated to members. Another informal meeting has been scheduled for later in the evening for members to make their observations, if any.

Falconer has earlier said that he will then make any necessary changes and pass the text on to Lamy. Members will then decide at the TNC level what to do with the agriculture text.

Falconer said that the report has been prepared "on my own responsibility," and that he has done so in response to the direction of Members as expressed at the informal Special Session of the Committee on Agriculture on 11 November 2005.

"Members made it crystal clear that they sought from me at this point an objective factual summary of where the negotiations have reached at this time. It was clear from that meeting that Members did not expect or desire anything that purported to be more than that," he said in his draft report.

"In particular, it was clear that, following the decision at the Heads of Delegation meeting that full modalities will not be achieved at Hong Kong, Members did not want anything that suggested implicit or explicit agreement where it did not exist."

"As for this paper," he said, "it is precisely what it is described to be. No more, no less. It is the Chairman's report and, as such, it is not in any sense an agreed text of Members. It does not therefore in any way prejudge or prejudice the positions of Members on any matter within or outside of it. And, it certainly does not bind Members in any way."

"I have tried to capture as clearly as I can such conditional progress and convergence as has developed in the post-July 2004 period. In doing so, I have not tried to brush under the carpet divergences that remain, and the paper tries to be just as clear on those points," he said.

"The future life of this paper, if any, is a matter entirely in the hands of TNC Members to decide. This, as I see it, is the proper safeguard of the integrity of what has come to be described as a 'bottom-up' process," he said.

The three pillars of the agriculture negotiations (domestic support, export competition and market access) are outlined in the paper, as well as a section on other elements, the least developed countries and recently acceded members.

On domestic support, the paper says that there has been very considerable potential convergence, albeit on a manifestly conditional basis. Under this section, the areas of the overall cut, de minimis, the Blue Box, AMS, and the Green Box are covered.

On the overall cut, the paper says that there is a working hypothesis of three bands for overall cuts by developed countries. There is a strongly convergent working hypothesis that the thresholds for the three bands be US$ billion 0-10; 10-60; and 60. On this basis, the European Communities would be in the top band, the US and Japan in the second band, and all other developed countries at least in the third band.

For developing countries, there is a view that either developing countries are assigned to the relevant integrated band (the bottom) or that there is a separate band for them.

Based on post-July 2005 proposals, there has been an undeniably significant convergence on the range of cuts. Of course, this has been conditional. But subject to that feature, a great deal of progress has been made since the bare bones of the July 2004 Framework.

The following matrix, the paper says, provides a snapshot: First band (threshold US$ billion 0-10, cuts are 31%-70%); Second band (threshold US$ billion 10-60, cuts are 53%-75%); Third band (threshold US$ billion 60, cuts are 70%-80%).

On de minimis, the paper says that on product-specific de minimis and non-product specific de minimis, there is a zone of engagement for cuts between 50% and 80% for developed countries.

As regards developing countries, there are still divergences to be bridged. In addition to the exemption specifically provided for in the Framework, there is a view that, for all developing countries, there should be no cut in de minimis at all. Alternatively, at least for those with no AMS, there should be no cut and, in any case, any cut for those with an AMS should be less than two-thirds of the cut for developed countries.

On the Blue Box, there is an important and significant convergence on moving beyond (i. e. further constraining) Blue Box programme payments envisaged in the July 2004 Framework. However, the technique for achieving this remains to be determined. One proposal is to shrink the current 5% ceiling to 2.5%. Another proposal rejects this in favour of additional criteria disciplining the so-called 'new' Blue Box only. Others favour a combination of both, including additional disciplines on the 'old' Blue Box.

With regard to AMS, the paper says that:

* There is a working hypothesis of three bands for developed countries.

* There is close (but not full) convergence on the thresholds for those bands. There appears to be convergence that the top tier should be US$25 billion and above. There is some remaining divergence over the ceiling for the bottom band: between US$12 billion and $15 billion.

* There is working hypothesis agreement that the European Communities should be in the top tier, and the US in the second tier. The basis for Japan's placement as between these two tiers has been narrowed but remains to be finally resolved.

* There has been an undeniably significant convergence on the range of cuts. Of course, this has been conditional. But, that understood, a great deal of progress has been made since the bare bones of the July 2004 Framework.

The following matrix provides a snapshot: First band (threshold US$ billion 0-12/15, cuts are 37-60%); Second band (threshold US$ billion 12/15-25, cuts are 60-70%); Third band (threshold US$ billion 25, cuts are 70-83%).

* For developed countries in the bottom band, with a relatively high level of AMS relative to total value of agriculture production, there is emerging consensus that their band-related reduction should be complemented with an additional effort.

* What is needed now is a further step to bridge the remaining gap in positions - particularly as regards the United States and the European Communities, it being understood that this is not a matter to be resolved in isolation from the other elements in this pillar and beyond.

* On the base period for product-specific caps, certain proposals (such as for 1995-2000 and 1999-2001) are on the table. This needs to be resolved appropriately, including the manner in which special and differential treatment should be applied.

On the Green Box, the paper says that the review and clarification commitment has not resulted in any discernible convergence on operational outcomes. There is, on the one side, a firm rejection of anything that is seen as departing from the existing disciplines while there is, on the other, an enduring sense that more could be done to review the Green Box without undermining ongoing reform. Beyond that there is, however, some tangible openness to finding appropriate ways to ensure that the Green Box is more 'development friendly' i. e. better tailored to meet the realities of developing country agriculture but in a way that respects the fundamental requirement of at most minimal trade distortion.

In the section on export competition, the paper says that while concrete proposals have been made on the issue of an end date for elimination of all forms of export subsidies, there is at this stage no convergence. There are suggestions for the principle of front-loading or accelerated elimination for specific products, including particularly cotton.

On export credits, the paper says that convergence has been achieved on a number of elements of disciplines with respect to export credits, export credit guarantee or insurance programmes with repayment periods of 180 days and below. However, a number of critical issues remain.

On exporting state trading enterprises, there has been material convergence on rules to address trade-distorting practices identified in the July 2004 Framework text, although there are still major differences regarding the scope of practices to be covered by the new disciplines. Fundamentally opposing positions remain, however, on the issue of the future use of monopoly powers. There have been concrete drafting proposals on such matters as definition of entities and practices to be addressed as well as transparency. But there has been no genuine convergence in such areas.

On food aid, the paper says that there have been detailed and intensive discussions, some of which have been text-based but not to a point where a consolidated draft text could be developed. This has been precluded by Members clinging to fundamentally disparate conceptual premises.

With respect to market access, on the tiered approach, the paper says:

* We have progressed on ad valorem equivalents. This has successfully created a basis for allocating items into bands for the tiered formula.

* We have a working hypothesis for four bands for structuring tariff cuts.

* There has been very considerable convergence on adopting a linear-based approach for cuts within those bands. Members have, of course, by no means formally abandoned positions that are even more divergent. "We need now to narrow the extent of divergence that remains. This will include whether or not to include any 'pivot' in any band."

* Members have made strong efforts to promote convergence on the size of actual cuts to be undertaken within those bands. But, even though genuine efforts have been made to move from formal positions (which of course remain), major gaps are yet to be bridged. Somewhat greater convergence has been achieved as regards the thresholds for the bands. Substantial movement is clearly essential to progress.

* Some Members continue to reject completely the concept of a tariff cap. Others have proposed a cap between 75-100%.

* Members have been prepared to make concrete - albeit conditional proposals on the number of sensitive products. But in a situation where proposals extend from as little as 1% to as much as 15% of tariff lines, further bridging this difference is essential to progress.

* The fundamental divergence over the basic approach to treatment of sensitive products needs to be resolved. Beyond that, there needs to be convergence on the consequential extent of liberalisation for such products.

On special and differential treatment, just as for developed countries, there is a working hypothesis for four bands for developing countries, the paper says. There is no disagreement on lesser cuts within the bands. A certain body of opinion is open to considering cuts of two-thirds of the amount of the cuts for developed countries as a plausible zone in which to search more intensively for convergence. But significant disagreement on that remains, and divergence is, if anything, somewhat more marked on the connected issue of higher thresholds for developing countries.

Some Members continue to reject completely the concept of a tariff cap for developing countries. Others have proposed a cap at 150%.

For sensitive products, there is no disagreement that there should be greater flexibility for developing countries, but the extent of this needs to be further defined, necessarily (but by no means exclusively) in light of where the zone of convergence for developed countries is eventually established.

Regarding the designation of special products, the paper says that there has been a strong divergence between those Members which consider that, prior to establishment of schedules, a list of non-exhaustive and illustrative criteria-based indicators should be established and those Members which are looking for a list which would act as filter or screen for the selection of such products. Latterly, it has been proposed that a developing country Member should have the right to designate at least 20% of its agricultural tariff lines as Special Products, and be further entitled to designate an SP where, for that product, an AMS has been notified and exports have taken place. This issue needs to be resolved as part of modalities so that there is assurance of the basis upon which Members may designate special products.

The paper also notes that some moves towards convergence on treatment of SPs have been made recently. Some Members consider that special products should be fully exempt from any new market access commitments whatsoever and have automatic access to the SSM. Others have argued that there should be some degree of market opening for these products, albeit reflecting more flexible treatment than for other products. In the presence of this fundamental divergence, it has clearly been impossible to undertake any definition of what such flexibility would be.

On the special safeguard mechanism, the paper says that there is agreement that there would be a special safeguard mechanism and that it should be tailored to the particular circumstances and needs of developing countries. There is no material disagreement with the view that it should have a quantity trigger. Nor is there disagreement with the view that it should at least be capable of addressing effectively what might be described as import 'surges'. Divergence remains over whether, or if so how, situations that are lesser than 'surge' are to be dealt with. There is, however, agreement that any remedy should be of a temporary nature. There remains strong divergence however on whether or, if so how, a special safeguard should be 'price-based' to deal specifically with price effects.

There is some discernible openness, albeit at varying levels, to at least consider coverage of products that are likely to undergo significant liberalisation effects, and/or are already bound at low levels and/or are special products. Beyond that, however, there remains a fundamental divergence between those considering all products should be eligible for such a mechanism and those opposing such a blanket approach.

As regards other elements, the paper noted that there has been no further material convergence on matters covered by paragraphs 35 and 37 of the July Framework text. Concrete proposals have been made on how to implement the July Framework on tropical and diversification products, but there remains divergence over the precise interpretation of this section of the July Framework, and no common approach has been established. Nor is there any convergence on how, as a practical matter, this element of the Framework relates to the Framework provisions regarding preference erosion and long-standing preferences.

On the LDCs, the paper says that there is no questioning of the terms of paragraph 45 of the July Framework agreement, which exempts the LDCs from any reduction commitment.

On cotton, the paper says that while there is genuine recognition of the problem to be addressed and concrete proposals have been made, Members remain at this point short of concrete and specific achievement. There is no disagreement with the view that all forms of export subsidies are to be eliminated for cotton although the timing and speed remains to be specified. Proposals to eliminate them immediately or from day one of the implementation period are not at this point shared by all Members. In the case of trade distorting support, proponents seek full elimination with 'front-loaded' implementation.

There is a view that the extent to which this can occur, and its timing, can only be determined in the context of an overall agreement. Another view is that there could be at least substantial and front-loaded reduction on cotton specifically from day one of implementation, with the major implementation achieved within twelve months, and the remainder to be completed within a period shorter than the overall implementation period for agriculture, the paper said.