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TWN Info Service on WTO and Trade Issues (Jan08/03)

28 January 2008


Below is an article on recent negotiations on SPs (Part 2) that was published in SUNS on 16 Jan 2008.   Permission is required for any reproduction from the SUNS (sunstwn@bluewin.ch).

Best wishes
Martin Khor
TWN


Agriculture: Recent developments in SPs (Part 2):
G33 disagrees with Chair's proposal on special products Published in SUNS #6393 dated 16 January 2008

Kuala Lumpur, 15 Jan (Martin Khor) -- The G33, comprising more than 40 developing countries with defensive interests in agriculture at the World Trade Organisation, has strongly criticised the latest proposal of the Chair of the WTO's agriculture negotiations on the issue of special products (SPs).

The G33 is the champion of the SPs concept. It has argued that developing countries must be able to exempt agricultural products from the full force of tariff cuts to be laid out in a general tariff-reduction formula still under negotiations, because developing countries have to give priority to food security, farmers' livelihoods and rural development needs.

The G33 has provided its own proposals on the number of SPs that developing countries can self-designate, and the special treatment they should have, the most recent proposal having been issued on 14 December 2007. This proposal was subsequently published as WTO Document TN/AG/GEN/27 dated 17 December 2007.

Although a majority of developing countries support the G33 on SPs, some developed countries led by the United States and a number of developing countries with an export-orientation in agriculture, have resisted the G33's strong position on SPs and have counter-proposed that there should be small numbers of SPs, that stricter criteria should be applied for products to be eligible to be classified as SPs, and that they not be provided a treatment that in their view is too lenient as compared to "normal" products.

In this situation of contention, the chair of the WTO's Doha negotiations on agriculture, Ambassador Crawford Falconer of New Zealand, issued his Background Paper number 15 on SPs, providing his views as well as a proposed draft text on the possible number of SPs and options for the treatment of SPs.

Falconer's paper on SPs was at variance with the G33's position in several aspects.

(See article in SUNS #6392 dated 15 January 2008.)

At a small-group "Room E" agriculture meeting involving 37 delegations at the WTO on 9 January, the G33 presented a lengthy and detailed response to the Chair's paper on SPs, pointing out its areas of disagreement as well as some points of the paper which it welcomed. The SUNS has obtained a copy of the G33 statement.

The G33, represented by its coordinator Indonesia, told Falconer that his series of Working Documents had been useful so far. Unfortunately, the Working Document on Special Products falls far short of expectations.

"The Group is immensely disappointed with the Working Document on SPs," said the G33. It reminded the meeting that the G33 had submitted a new revised proposal on SPs (WTO Document TN/AG/GEN/27) in December in the hope of arriving at a balanced, holistic and integrated solution for SPs.

The G-33's new Proposal represents new movements from the Group's positions on SPs, in the spirit of advancing the negotiations with the expectation that other Members would show corresponding movements and flexibilities.

"Your Working Document Chair, however, does not appear to have taken cognizance of this G-33 proposal," said the G33.

The Group acknowledged that there were positive points in the Working Document, among which are the recognition of the following:

-- The guaranteed minimum number of SPs shall be greater than the number of Sensitive Products for developing country Members;

-- The Hybrid Approach as the approach for the self-designation of SPs;

-- The role of the indicators as part of the mandates and as an essential instrument to the implementation of the Hybrid Approach; and

-- The integration of the concept and mandate of SPs within the overall 24% maximum average tariff cut for small, vulnerable economies (SVEs) and other countries in Footnote 3 (of the Chair's July 2007 draft modalities paper).

But the G33 also found substantial gaps or differences between the Chair's paper and the G33's new proposal.

The G33 told the Chair that he had observed that the number of SPs shall be greater than the number of Sensitive Products that a developing Member may have.

However, in his Working Document on Sensitive Products, developed countries have been allowed a maximum of [6] [8] percent of their tariff lines as Sensitive Products. The number of Sensitive Products for a developing country Member, being one-third higher, should then be [8] [10.7] percent. Therefore, the minimum number of SPs has to be higher than [8] [10.7] percent, said the G33.

[The Chair's working document in para 16 rather confusingly suggests the minimum number of special products to be 7% of tariff lines (in one part of the para) and 8% of tariff lines (in another part of the para).]

The G-33 said it welcomed the hybrid approach proposed by the Chair. Clearly, there is merit in the proposal that the number of SPs will not require compliance with indicators, namely, 8 percent.

"However, the Group cannot understand the rationale behind the imposition of an upper limit of 12 percent. Once guidance by indicators has been accepted as a principle, then we have to accept that such guidance may well lead to a higher number."

The G-33 stressed that it was particularly disappointed about how the Working Document has handled the treatment of SPs.

"An overall average cut of 36 percent is to be undertaken by developing countries," it stated. "The tariff cuts on SPs proposed in the two categories imply a deviation of about 50 percent from the overall cut.

"This is well below the deviation allowed to developed countries for their Sensitive Products. SPs have to get more favourable treatment than Sensitive Products. For the G-33, this is a fundamental principle that must be respected.

"To the G-33, a one half deviation is unacceptable. The actual cuts for SPs cannot exceed more than 12% whereas a two-third deviation of 36% will be 12%."

The G33 coordinator stressed that moreover, the G-33 cannot see the logical reason of linking the number of SPs with its treatment (a link which the Chair had insisted on making in his paper).

"Let me reiterate that the Group has significantly moved from its previous position and are now proposing a maximum number of SPs of 20 percent of total agricultural tariff lines. As a logical consequence, the difference between the agreed minimum and maximum numbers of SPs shall be provided through the indicators."

The G33 emphasised that there is a difference between sensitive and special products. "Sensitive Products are based on commercial considerations. Special Products are grounded in food security, livelihood security and rural development concerns of millions of poor, low income and subsistence farmers in developing countries.

"The two are simply not comparable and have completely different rationale. Any proposal that gives a lower deviation for SPs is irrational. It can never be acceptable to the Group under any circumstances whatsoever. SPs must and shall not be linked to the treatment of Sensitive Products nor the notion that its flexibilities have been reflected by the no tariff quota expansion commitment."

The G33 went on to stress the importance to it of its position that a significant number of SPs should be exempted from any tariff reduction.

Said the G33 coordinator: "The G33 has repeatedly underscored that a no-commitment tier or zero cut treatment is a fundamental aspect for SPs, and this is entirely consistent with the mandates. It is impossible for any G-33 Member to accept a deal on SPs unless there are substantial numbers of lines exempted from tariff cuts. Accordingly, the G-33 in its latest proposal had asked for a minimum of 40% of SPs to receive zero cut treatment."

The Group recalled that the very initial and primary objective of SPs is to provide the maximum flexibility for a significant number of agricultural tariff lines that shall be exempt from any tariff cuts or reductions.

"The G-33 will therefore not accept any design of SPs that would not make available a significant number of agricultural tariff lines in a no-commitment tier or category. All G-33 Members, and not "some" -- as mentioned in the Working Document -- have the strong interest for a substantial number of SPs with a zero cut treatment. The G-33 finds that the Working Document is a step backwards on defining this very essential category of SPs."

The G33 concurred with the Chair's paper that the Group's indicators remain on the table. There has been no further discussion and no other proposals on the indicators.

"Therefore, it is only valid that the G33 indicators be formally adopted and be included into the next Revised Draft Text. As we have repeatedly stated, the G33 remains open and ready to further discuss the details of the indicators. Yet no such discussions have transpired, thus far."

Referring to another aspect of the Chair's working document, the G33 said that the concept or structure of an overall average rate with a minimum and maximum cut is difficult to accept.

"The Group has intensively worked hard to come up with a new proposal and position on the numbers of the Graded Approach. And therefore it views that the 3 graded approach as the most feasible and practical approach."

The G33 then made specific comments on Paragraphs 17, 19 and 20 of the Chair's paper, which provide draft text on SPs. [These paras and the footnotes linked to them have been reproduced in an article in SUNS #6392 dated 15 January 2008.]

First, the footnote 2 in Para 17 is very ambiguous, particularly on the transfer mechanism or entitlement (in which developing countries can transfer their unused sensitive products to become extra special products).

The Working Document has provided for a conversion of unused Sensitive Product entitlement to SPs only if a developing country does not or cannot use the second category of entitlement of SPs which affords them a zero cut.

"This is as if they would be able to use their entitlement for SPs with zero cuts only if they sacrifice their entitlement for Sensitive Products. The G33 reiterates that developing countries are entitled to both Sensitive Products and SPs separately and any conversion from unused Sensitive Products to SPs must be over and above the SPs entitlement of the developing countries."

Referring to Para 19 of the Chair's working document, the G33 said that its own new proposal on Footnote 3 has outlined the preferred notion to this specific provision. At this stage, beneficiary Members of Footnote 3 from the Group may need further clarification on how Para 19 stands right now.

On Para 20, the G-33 said it took note of the Chair's recognition of additional flexibilities for recently acceded members (RAMs). However, it is far from being sufficient and will not effectively address the concerns of RAMs. Given the particular nature of their tariff structure, the additional flexibilities shall be included not only in terms of numbers of SPs, but also in terms of treatment, especially in terms of the zero tariff cut.

The G33 statement then gave its views on the number of tariff lines that should be eligible to be designated as SPs.

"The G-33 would accept 12% as the guaranteed minimum number and 20% as the maximum number of SPs. The remaining self-designation of 8% shall be guided by indicators. The percentage of SPs tariff lines with a zero cut treatment in grade 1 shall be 40%. The G-33 would remain flexible subject to further negotiations on the treatment of SPs in the remaining grades 2 and 3."

[In this part of its Room E statement, the G33 had for the first time supplemented its 14 December 2007 proposal with numbers on the minimum number of SPs, and on the number of SPs that can be added to the minimum should this be guided by the indicators. The December proposal had introduced the concepts but did not provide figures.

[On the treatment of SPs, the G33 was referring here to its December 2007 proposal, in which SPs are placed into three grades or categories. Grade 1 contains 40% of SP tariff lines and are exempted from any tariff cuts. Grade 2 contains 30% of SPs which are subjected to a cut of 8%. Grade 3 contains 30% of SPs which are subjected to 12% cut. In the Room E statement, the G33 reiterated its openness to further negotiate the numbers in Grades 2 and 3.]

The G33 then concluded its Room E statement by stating that it "expects a much more balanced revised draft text on agriculture modalities, within and among the three pillars."

On 11 January, Falconer convened an open-ended agriculture meeting (open to all members), which discussed the progress of the negotiations since the agriculture negotiations resumed on 3 January. (See report in SUNS #6392 dated 15 January 2008).

At the meeting, the G33 made a statement, which summarized its presentation made two days earlier at the Room E meeting.

The following part of the G33 statement is a useful summary of its current position on SPs:

"The G33 would accept 12% as the guaranteed minimum number and 20% as the maximum number of SPs. The remaining self-designation of 8% shall be guided by indicators.

"The percentage of SPs tariff lines with a zero cut treatment in grade 1 shall be 40% of the maximum number of SPs tariff lines, or 8% of total agriculture tariff lines.

"Moreover, a one half deviation is unacceptable. SPs actual cuts cannot exceed more than 12% whereas a two-third deviation of 36% will be 12%.

"The additional flexibilities for RAMs shall be included not only in terms of numbers of SPs, but also in terms of treatment, especially in terms of the zero tariff cut."

NOTE: In his working document number 15 on Special Products, the Chair provided several alternative options on the treatment of SPs. In one of the two bracketed options in Para 18, the paper states that "A maximum of 8 per cent of special product tariff lines shall not be required to face tariff cuts." This was reproduced in an article in the SUNS of 15 January 2008. The Chair, Crawford Falconer, reportedly clarified at a Room E meeting last week that in Para 18 he actually meant 8% of agricultural tariff lines and not special product tariff lines, and that this option was to reflect the G33 proposal. However, an official amendment to his working document does not seem to have been made as yet.

(This is the second part of a two-part series of articles on the recent WTO agriculture negotiations on special products. The first part was published in SUNS #6392 dated 15 January 2008). +

 


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