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TWN Info Service on WTO and Trade Issues (Mar06/15)

29 March 2006


Agriculture: No 'material progress' in WTO talks since Hong Kong


On 20 March, the chair of the WTO agriculture negotiations told a meeting of the agriculture committee that despite various consultations, he has not seen any 'material progress' in the agriculture negotiations since the Hong Kong Ministerial Conference in December.

Ambassador Crawford Falconer of New Zealand, in opening the week of agriculture negotiations, said that achieving modalities by the end of April is still possible but progress needs to be achieved urgently.

Two new papers were introduced: One on food aid from the African Group and the Least Developed Countries and the other from Argentina on comparing market access ambition in agriculture and non-agricultural products.

The paper on food aid was broadly welcomed with most speakers supporting the drift of the paper.

Argentina's paper, which uses a number of calculations to compare the outcomes of proposals in the two negotiating groups (agriculture and NAMA), received support from a number of countries but was opposed by others such as the EU and the G-10.

Below is a report of the 20 March meeting. It was published in the SUNS of 22 March.


With best wishes
Martin Khor
TWN

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Agriculture: No 'material progress' in WTO talks since Hong Kong

By Kanaga Raja (South North Development Monitor): Geneva, 21 Mar 2006


The Chair of the Special Session of the WTO Committee on Agriculture told members at an informal meeting Monday that despite various consultations, he has not seen any 'material progress' in the agriculture negotiations since the Hong Kong Ministerial Conference in December.

Ambassador Crawford Falconer of New Zealand, in opening the week of agriculture negotiations on Monday 20 March, said that achieving modalities by the end of April is still possible but progress needs to be achieved urgently.

Two new papers (already circulated to members and available on the WTO's website) were introduced at the informal meeting: One on food aid from the African Group and the Least Developed Countries (TN/AG/GEN/13); and the other from Argentina on comparing market access ambition in agriculture and non-agricultural products (TN/AG/GEN/14).

The paper on food aid was broadly welcomed with most speakers supporting the drift of the paper. It is expected to be discussed in greater detail on Wednesday.

Argentina's paper, which uses a number of calculations to compare the outcomes of proposals in the two negotiating groups (agriculture and NAMA), received support from a number of countries but was opposed by others such as the EU and the G-10 (Switzerland speaking).

Australia, Pakistan, Thailand, India, Malaysia, the US and several others said that the paper shows the discrepancy between some countries' ambitious proposals for non-agricultural products and their lack of ambition in agriculture.

Those opposing the Argentina paper argued that paragraph 24 of the Hong Kong Ministerial Declaration (the basis of Argentina's study) did not envisage this level of numerical comparison between the two subjects.

The ACP Group (Mauritius speaking) raised concerns with respect to the interests of countries with long-standing preferences and asked the Chairperson when he intends to hold consultations on this issue.

Falconer said that he was always ready to hold consultations but he needed to know that members would bring something new to the table.

The joint submission by the African and LDC Groups on food aid was presented by Benin (the African Group coordinator) and envisages criteria for considering some types of food aid as genuinely for emergencies (and in the "safe box") and disciplines for other food aid.

The groups underscored that food-insecure countries and countries susceptible to natural disasters including drought and famine, and floods still need food aid.

In recognition of this fact, Ministers reaffirmed, in the Hong Kong Ministerial Declaration, their "... commitment to maintain an adequate level [of food aid] and to take into account the interests of food aid recipient countries. To this end, a 'safe box' for bona fide food aid will be provided to ensure that there is no unintended impediment to dealing with emergency situations. Beyond that, we will ensure elimination of commercial displacement. To this end, we will agree effective disciplines on in-kind food aid, monetisation and re-exports so that there can be no loop-hole for continuing export subsidisation."

The joint submission said that any disciplines on food aid should not have the effect of hindering the delivery of food aid to needy countries and communities. It is therefore important to have commitment by cooperating partners in the context of the Food Aid Convention to make food aid available at all times.

On 'Emergency Food Aid', the African and LDC Groups proposed that the "Safe Box" be used for emergency food aid and shall not be subject to any disciplines.

The "Safe Box" shall include food aid that meets the following criteria: (i) is provided in response to emergency situations as defined by a relevant UN agency; (ii) is based on declaration of an emergency subject to what is mentioned in paragraph 1.3 (of the paper); (iii) is based on independent assessments of genuine food needs of people in immediate distress; and (iv) is provided in adequate quantities for as long as the emergency lasts.

Paragraph 1.3 of the Groups' paper says that a declaration of an emergency situation and assessment of genuine food needs of people in immediate distress as mentioned above can only be done by a recipient country authority concerned, whether local, regional or central government in collaboration with a relevant international humanitarian assistance body, or by a relevant international humanitarian assistance body in collaboration with the recipient country authority concerned.

A notification will be required on an ex-post basis by donors and the relevant international humanitarian assistance bodies, in order to ensure transparency.

On 'Non-emergency Food Aid', the paper categorizes this to include all food aid that does not fall under the Safe Box category.

In order to ensure that it does not displace commercial trade and does not adversely affect local production, non-emergency food aid shall be subject to the following disciplines:

(i) shall be demand driven;

(ii) shall be provided in fully grant form;

(iii) shall not be tied either directly or indirectly to commercial exports of goods or services to the recipient country;

(iv) shall take fully into account local market conditions of the same or substitute commodities and, as much as possible, be sourced locally, sub-regionally or regionally;

(v) shall be aimed at addressing developmental objectives, including through targeted delivery to well-identified vulnerable population groups to address specific nutritional needs;

(vi) shall not be contingent on advancing market development objectives of the donor country;

(vii) may be monetised, under exceptional circumstances, to fund activities that are directly related to the delivery of the food aid to, or facilitating procurement of agriculture inputs, where necessary by the final recipients. Monetisation should only be carried out under the auspices of a UN agency and the recipient governmental authority, to ensure that there is minimal risk of commercial displacement and disincentive to local production;

(viii) There shall be no re-exportation of food aid.

Transparency shall be paramount in any food aid operation, the joint submission says. Therefore, all non-emergency food aid shall be subject to monitoring, notification and reporting requirements, both ex-ante and ex-post, ensuring full transparency and compliance with the above disciplines.

The Argentina paper (TN/AG/GEN/14) on comparing market access ambitions is also the same paper (TN/MA/W/67) prepared for the Negotiating Group on Market Access whose negotiations are also taking place this week. The paper contains several tables of calculations to compare the outcomes of proposals in both agriculture and NAMA.

The Argentina paper says that its aim is to address the question of how the consistency of the agriculture and NAMA proposals with paragraph 24 of the Hong Kong Ministerial Declaration can effectively be gauged.

(Under paragraph 24 of the Hong Kong Ministerial Declaration, the Ministers instruct negotiators to ensure that there is a comparably high level of ambition in market access for agriculture and NAMA. This ambition is to be achieved in a balanced and proportionate manner consistent with the principle of special and differential treatment.)

To this end, the paper says, it is proposed that work should focus on four central elements: (1) cutting formulas; (2) flexibilities and sensitive products; (3) maximum tariffs and the relationship between bound and applied tariffs; and (4) tariff simplification.

On cutting formulas, the paper says that agriculture and NAMA have different methodologies for reduction formulas.

In agriculture, four bands are envisaged for the cuts, though the ceilings and floors of the bands and the cut percentages to apply within each one are yet to be defined.

In NAMA, on the other hand, the plan is to work on the basis of a "Swiss formula with coefficients", which will be so defined as to observe the principle of special and differential treatment and less than full reciprocity commitments for the developing countries.

The fact that there are different methodologies makes the "comparison" required by paragraph 24 difficult, the paper says. It is therefore necessary to work on an empirical basis, verifying that the ex-post outcomes of applying linear cuts or coefficients, as the case may be, lead to relative equivalence ("comparability") in the impact of the cuts.

Taking the example of the European Union's proposals on NAMA and agriculture, it can be seen that empirical analysis reveals obvious disparity, with very ambitious positions for NAMA and very defensive ones for agriculture, the paper adds.

Applying the Swiss formula coefficient 10 proposed by the EU in NAMA would mean that a 35% tariff (which is close to the developing countries' average Uruguay Round bindings) would drop to 7.78%, equivalent to a linear cut of 77.8%. In agriculture, on the other hand, the European Union's proposal for the same 35% tariff would give a new tariff of 19.25% on the basis of its proposed 45% linear cut. This linear cut is equivalent to what would be obtained by applying a Swiss formula with a coefficient of 42.78.

The disparity between these two situations is plain, as the Swiss formula coefficient 10 that the EU proposes for NAMA would have to be multiplied by more than 4 in order to reach the Swiss formula equivalent referred to in the previous paragraph. Such an outcome is clearly not what Ministers had in mind as a comparably high level of ambition in these two negotiating areas, the Argentina paper says.

As to flexibilities and sensitive products, the paper says that according to paragraph 8 of Annex B (on NAMA) of the Work Programme approved by the General Council on 1 August 2004, developing countries would be free not to apply cuts to, or not to bind, up to 5% of all tariff lines, not exceeding 5% of the total value of their respective imports. Alternatively, they could apply a tariff cut of up to 50% of the agreed overall reduction provided that this covers no more than 10% of total tariff lines and does not exceed 10% of the total value of their imports.

As to the matter of sensitive products in agriculture, total tariff lines and the value of the trade that may be affected have as yet to be defined. In agriculture, the exclusion from overall reduction commitments of a few tariff lines that cover products of high commercial importance can seriously restrict trade for a large proportion of exports from developing countries, the paper says.

On maximum tariffs and the relationship between bound and applied tariffs, the paper says that on trade in agriculture, in the absence of tariff quotas with reduced or zero tariffs, for many tariff lines there would be no imports in the developed countries. This is not a fact to be overlooked given the significant number of products at HS8-digit level with AVE tariffs of more than 30%: 486 in the European Union, 126 in the United States and 195 in Japan (9 digits).

Of these, the tariff lines with rates of over 100% amount to 15.2% in the European Union, 16.7% in the United States and 68.2% in Japan. The maximum tariff in AVE terms is 408% in the European Union, 440% in the United States and 1,738% in Japan.

The situation is different in NAMA, where many developing countries have a maximum bound tariff of 35% ad valorem, which allows import flow as the trade statistics of these countries show. This rate will be reduced even further as a result of the negotiations. Any tariff reduction in NAMA, even if it does not reduce the applied rate in all tariff lines, will afford security of market access.

The same cannot be said of agriculture, the paper notes. The incidence of high tariffs on trade can be seen in two significant examples. In the European Union, 33.6% of agricultural imports are subject to AVE tariffs of 30% or more. Of these imports, 82.6% are intra-EU and the remaining

17.4% are from third countries and enter almost exclusively through tariff quotas. Extra-EU imports of goods with tariffs of 30% or more amount to only 5.8% of the total value of EU agricultural imports. Much the same is true of the US, where goods with AVE tariffs of over

30% account for only 1.2% of the value of agricultural imports. Here too, most imports enter under tariff quotas. The high overall tariff is in practice prohibitive.

The paper adds that the "tariffication" of agriculture during the Uruguay Round was based on extremely low international prices or artificially high internal prices and so resulted in very high equivalent tariffs, which in practice do not allow trade. Tariff quotas are used as a make-do solution. They could be assimilated to a lower applied tariff, but with a quantitative restriction in addition.

The difference between bound tariffs and applied tariffs in NAMA, on the other hand, is the outcome of an autonomous reduction in tariffs which would allow trade at bound rates, but which - for reasons of public policy - the developing countries have decided to reduce, maintaining the political leeway that a better level of binding would afford.

Accordingly, a reduction in applied tariffs in agriculture, if it gave rise to further high tariffs, would have an insignificant trade effect - even less of an effect than might result from the certainty that would be afforded by the possibility of entering a market at a reasonable tariff level in NAMA, even if it were - temporarily - higher than the applied rate. In concrete terms, expectations of market access are much higher with a bound tariff of 30% and an applied tariff of 20%, than with a bound and applied rate of 100%.

On tariff simplification, the Argentina paper says that the report by the Chair of the NAMA negotiating group indicates that agreement was reached on binding the tariffs resulting from the negotiations in ad valorem terms. For the purpose of comparing ambition, a similar measure is needed for agriculture, on the one hand because of the increased protection that could arise from the use of specific tariffs where there are price fluctuations, and on the other, for reasons of transparency regarding border protection measures.

Also at the informal meeting, Australia reported some progress in consultations that the Cairns Group has held with other members on disciplines for the Green Box, the special safeguard mechanism, food aid, special products and to a lesser extent sensitive products. Without going into details, Australia said the discussions are sufficiently well advanced, with the hope that they can move "to another stage" within the week.

Canada said that it has been involved in simulating various proposals for tariff reductions and the treatment of sensitive products, product- by-product, for 10 members: Australia, Canada, the EU, Japan, Norway, the US, Brazil, Egypt, India and Malaysia.

The simulations were based on the thresholds for the tariff formula tiers as proposed by the G-20, with the assumption that sensitive products would have half the cut specified by the formula, and the selection of 1%, 8%, 15% or zero tariff lines (i. e. products as defined in tariff schedules) as sensitive products (both as percentages of all products or all dutiable products).

Consultations are expected to continue during the week, with a meeting open to all members scheduled for Wednesday and Friday morning, followed by another informal "special session" on Friday afternoon.

 


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