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TWN Info Service on WTO and Trade Issues (July06/05)

6 July 2006
 

US KEEPS STRESS ON MARKET ACCESS, COMPLAINS ABOUT 3 S'S

United States Trade Representative Susan Schwab and Agriculture Secretary Mike Johanns on Saturday (1 July) made it a point to continue to stress the importance, for the US, of seeing greater market openings, complaining that the WTO's Ministerial-level talks failed to move forward in that regard.

They also complained that what they called the three S's - sensitive products, special products and special safeguard mechanism - would block market access in agriculture.

They were giving a media briefing shortly before a meeting of Ministers concluded without any breakthroughs on issues relating to the modalities for agriculture and non-agriculture market access (NAMA).

Below is a report on the US press conference.  It was published in the SUNS.

With best wishes
Martin Khor
TWN

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US KEEPS STRESS ON MARKET ACCESS, COMPLAINS ABOUT 3 S'S

By Kanaga Raja (SUNS), Geneva 2 July 2006


United States Trade Representative Susan Schwab and Agriculture Secretary Mike Johanns on Saturday (1 July) made it a point to continue to stress the importance, for the US, of seeing greater market openings, complaining that the WTO's Ministerial-level talks failed to move forward in that regard.

They also complained that what they called the three S's - sensitive products, special products and special safeguard mechanism - would block market access in agriculture.

They were giving a media briefing shortly before a meeting of Ministers here concluded without any breakthroughs on issues relating to the modalities for agriculture and non-agriculture market access (NAMA).

Schwab said that Ministers had come to Geneva to seek a breakthrough by breaking the impasse in agriculture and industrial market access. The big task this week had been to deliver on the Doha promise to substantially improve market access in agriculture and industrial goods. She recalled that the US took a risk last October by putting on the table a major agricultural offer, expecting it would be matched by similar bold moves by others. ''Regrettably, that hasn't happened yet.''

The US had been similarly bold in terms of market access proposals in the manufacturing sector. The necessary progress has not been seen and the focus has been on 'loopholes' up to this point, or exemptions to liberalization, rather than to the offers that ''deliver the kind of market opening needed to spur new trade flows and to realize the promise of a true development round,'' she said.

For agriculture, she added, there are two principal shortcomings. First, the tariff cutting formulas that are currently on the table do not really deliver the kinds of cuts that are required to expand trade flows. Second, possible gains from tariff formulas are undermined by loopholes proposed by both developed and developing countries. She referred to these as the three S's - sensitive products, special products, and special safeguards for agriculture. For industrial goods, the blockage is due to a combination of an unambitious formula with ambitious flexibilities.

''Until we improve these flaws, we will not fulfill our promise in Doha," said Schwab. ''Market access contributes fundamentally to development... The core contribution to development comes from global market opening. In other words, creating new flows that will be the yardstick that is used to measure our success.''

Johanns said that the US remains very committed to the round. The US proposal of last was based upon the notion that ''we had to achieve market access as a condition to that proposal.''

He was worried following the debate at the meeting over the three S's - sensitive products, SPs and SSM. The advanced developing countries would benefit from this in a very significant way. Under the G33 proposal, 94-98% of the developing countries' market would be blocked to US producers. ''I don't know of anybody that could make a case that turns out to be a fair result when it comes to market access,'' he said.

Add to that the potential for sensitive product designation by developed countries and the special safeguard mechanisms available to developing countries. Johanns argued that if the G20 proposal is added in, then the market access drops to about 40%. That is not robust market access. It will not even meet the Uruguay Round, he said.  The US was willing to do its part by cut its subsidies dramatically, but in return, ''we have to see market access. This weekend, quite honestly, there certainly was not a step forward in that regard.''

Answering a question, Schwab said that the impasse did not mean that the Round was dead. She pointed to the Uruguay Round where there was in essence a collapse in 1990 but then in 1993, the round was ultimately closed. "Certainly we're not prepared to give up.''

In agriculture, she said, ''it's very clear that with respect to domestic subsidies, for example, we have well-defined parameters. The Amber Box, the Green Box, the Blue Box. When it comes to the loopholes, we find we really have a Black Box. Until we figure out what's in it, this is not a negotiation that is going to come together.''

Asked how the US was going to ensure that it was not part of the problem in terms of coming up with a fresh offer on domestic support, Schwab said that the US was very forthcoming in October and put the most ambitious offer that is sitting on the table in terms of agriculture. The US offer talks about significant cuts - 60% in the Amber Box; 53% overall. This would require significant major reforms in US farm programs.

The US has never taken the position that it's offer was the be-all and end-all, she said, adding: ''the US is not in a position, nor should our trading partners be in a position, to settle for some mediocre version of a trade round that doesn't deliver real market access and new trade flows. Therefore, there is a calibration that is necessary, and until and unless there is more market access on the table, it's hard to imagine having a further dialogue on domestic support.''

Johanns reiterated that the US offer in October is a very bold one that would have tremendous impact on the US farm program. ''But again, the important point is that market access was a key, not to us, but to this round. The success of this round will be judged by how much trade occurs between countries in the world.''

He added that with the three S's, the loopholes, ''we all of a sudden begin to realize that the market access even under the most minimum approach wasn't there. If you in effect allow for developing countries, for example, to have a process that shields 94-98% of their market, my goodness, how could you possibly argue that you made progress?''

Schwab stressed that the US was by no means the largest user of domestic subsidies in agriculture. The EU subsidizes at a rate three times that of the US. Under the US proposal, the US would cut 60% in the Amber Box. If the US subsidized, at the end of this round, at the same rate as the EU, adjusted for differences in production, and the EU did a 75% cut in its Amber Box so that at the end of the process, we weren't at a 3 to 1 ratio or a 2 to 1 ratio, we were at a 1 to 1 ratio, the US cut in the Amber Box would be 34%, not 60%.

Schwab said that market access in agriculture was not just for US agricultural exporters, and the developing countries stand the most to gain, including through South-South trade. In terms of agriculture and non-agricultural products, 70% of the tariffs paid by developing countries are paid to other developing countries.

She acknowledged that ''there are going to be segments of any of our economies that are hurt, and I think it is important that we not dismiss this notion that there are sensitive products, there are special products. We fully accept that they need to be there. The question is at what point are you moving beyond reasonable, and just using this as an excuse, as a loophole, to block market access?''

Johanns said that US growth in imports in agricultural products is faster than growth in exports. The US used to have a surplus, but now it was even, with a lot of imports coming from developing countries. The advanced developing countries are world class competitors and are true beneficiaries of the opportunity to trade.

Asked as to whether there was a narrowing of differences in the meeting over the 3 S's, Schwab said there was not. She added that stepping back from the tiers and the cuts, they went through every one of these very specific and very arcane treatment of sensitive products, what is the basis for Tariff Rate Quotas, the growth rates for Tariff Rate Quotas, the maximum deviation if you're going to have a sensitive product, and the number of lines or proportion of your trade that would be covered by special products.

''We did not find closure or even narrow the range in any one of those,'' she said, adding: ''I think that was really sort of a turning point for us because we came here thinking okay, let's see if we can push forward in terms of the market access side of the equation to sort of loosen things up so that we can get into a negotiation on all the other items. That was...not a step backwards, but it was a real eye opener.

''If you look at the G20 proposal on cuts and you apply these loopholes, you could be talking about a 40%, not a 52% cut, and that takes you well below what was accomplished in the Uruguay Round, and let us note for the record that the Uruguay Round was not applauded for its outcomes in agriculture,'' Schwab said.

Johanns said that when the October offer by the US was built, the US Congress was consulted and was told that in return for cutting money out of key farm programs, the US was going to ask for market access. ''At the end of this weekend, the Ambassador and I cannot go back home and say to our Congress that we've delivered on market access. In fact, when we have to explain to them what the three S's mean, we will be asked over and over again, isn't this a retreat from market access? And we'll have to answer that," Johanns said.

''Now, are they very clear about the need for market access? Absolutely, just like we are. Because that's the key to the round. That's what's going to make this round successful. That's what's going to give the world opportunity. That's what's going to allow developing countries to continue to grow and expand. That's what's going to improve the world economy for least developed countries. So, even today the US Congress is with us,'' he added.

 


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