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TWN Info on WTO and Trade Issues (May07/02)

2 May 2006


Agriculture Chair suggests Uruguay Round approach for developing countries

The Chair of the WTO's Doha negotiations on agriculture has suggested that WTO members consider simplifying the framework for cutting developing countries' agricultural tariffs by requiring only an average tariff cut, similar to the approach taken in the Uruguay Round.

This suggestion comes at the end of the 26-page "Challenge Paper" of Ambassador Crawford Falconer of New Zealand. It was perhaps the most radical of his proposals.

In his discussion on special products and special safeguard mechanism, Falconer's paper does not show sympathy. His views conflict with those of the G33 and other groupings such as the ACP group and the LDCs.

However, he in the end balances this with a new proposal that WTO members should consider changing the framework on market access for developing countries, and that a Uruguay Round "average cut" approach be adopted instead.

Earlier, Falconer's paper suggested that the "centre of gravity" lies in allowing only 5 to 8 percent of tariff lines to be designated as "special products" by developing countries. This contrasts with the G33 view that developing countries can self-designate at least 20% of tariff lines as special products.

Falconer also proposes only limited special treatment for special products by rejecting the G33 proposal that some SPs be exempted from tariff reduction.

Below is a report of the market access part of Falconer’s paper.  It was published in SUNS on 1 May.

With best wishes
Martin Khor
TWN

Agriculture Chair suggests Uruguay Round approach for developing countries

By Martin Khor (TWN) Geneva, 30 April 2007

The Chair of the WTO's Doha negotiations on agriculture has suggested that WTO members consider simplifying the framework for cutting developing countries' agricultural tariffs by requiring only an average tariff cut, similar to the approach taken in the Uruguay Round.

This suggestion comes at the end of the 26-page "Challenge Paper" of Ambassador Crawford Falconer of New Zealand. It was perhaps the most radical of his proposals aimed at breaking the deadlock in the Doha agriculture talks.

In his discussion on special products and special safeguard mechanism, two key instruments for developing countries with defensive interests and concerned about import surges, Falconer's paper does not show sympathy. His views conflict with those of the G33 and other groupings such as the ACP group and the LDCs.

However, he in the end balances this with a new proposal that WTO members should consider changing the framework on market access for developing countries, and that a Uruguay Round "average cut" approach be adopted instead.

Earlier, Falconer's paper suggested that the "centre of gravity" lies in allowing only 5 to 8 percent of tariff lines to be designated as "special products" by developing countries. This contrasts with the view of the G33 developing countries, the main proponents of special products, which have proposed that developing countries can self-designate at least 20% of tariff lines as special products.

Falconer also proposes only limited special treatment for special products. His paper seems to discount altogether the possibility that special products, or any or some of them, would be exempted from tariff reduction, or the tariff-reduction formula.

This is in contrast with the G33 proposal that SPs be exempted from the formula, and that at least 50% of SPs will not be subject to tariff reduction; another 25% of SPs will be subject to 5% tariff reduction; and the remaining SPs are subject to not more than 10% reduction.

He suggests that "the centre of gravity" should be roughly two thirds cuts for developing countries as compared to developed countries' reduction rates in the tiered formula, and that SPs be given more flexible treatment.

For the non-SP developing-country products, "the cuts envisaged would seem to be in ranges from at least the mid-twenties tiering upwards into the thirties and indeterminately at this point beyond (i.e. depending on the precise bands and on the assumption of two-thirds being the basic principle applicable)," says Falconer.

In his view of flexible treatment for SPs, the SPs would also be subjected to cuts according to the formula, but at reduced rates. He envisages that there will be a minimum cut or "floor" in the range of 10-20 per cent.

Falconer also proposes that there be constraints in the selection of SPs. He says that the Hong Kong Ministerial clarifies that self-designation is to be guided by indicators, and that those indicators are to be based on the criteria.

He then argues that the indicators "would have to transparently, objectively and intelligibly exhibit their rationale". His "working conclusion" is that the indicators have to be open to empirical observation and verification. The indicators should involve data that can be tested for by utilising internationally recognised sources.

This idea is similar to the one in the recent paper by Pakistan that proposed that "scores" be given to potential SPs, according to data from indicators, and only those products that meet a minimum score can be designated as SPs.

The Pakistani paper was heavily criticised by members of the G33 and other developing-country groupings, which argued that the SP instrument should be simple to use, and that constraining it with difficult system of indicators and scores would render the instrument inoperable.

A similar criticism of the Falconer paper can be expected.

On the key and controversial issue of "special safeguard mechanism", the Falconer paper curiously has only one short but cryptic comment to make: "My sense is that, at the very least, there will be a very considerably reduced coverage for the special safeguard mechanism in the event that it is agreed to continue with it."

This remark is bound to create controversy and opposition, for it seems to imply that there is a possibility to discontinue with the concept altogether. The SSM is held by the G33 as a very important component of their proposals, the other being SPs. One possibility is that Falconer was referring to the special safeguard (set up in the Uruguay Round) currently used mainly by developed countries, and not to the SSM proposed by developing countries for their use in the Doha negotiations.

While Falconer appears not to be sympathetic to the G33 cause when discussing SPs and SSM, his final section of the paper entitled A Final Thought on Developing Country Market Access springs a surprise.

For here, Falconer puts forward the view that: "In the framework we made things absurdly complicated for ourselves and that this is the fundamental reason why we have come to realise we are in such difficulties now. Some Members at that time were driven to want to maintain the "integrity" of the tiered formula as it would apply to developing countries also.

"But it was a very radical departure from the past, and, although it was in the end agreed, the "quid pro quo" was a corresponding set of provisions reflected in the framework, all of which have the practical effect of counterbalancing that seeming zeal to have a tiered formula applicable to developing countries.

"While the tiered formula appears to have been an article of faith, it is an irony that as a matter of fact among developed countries it is not in fact so decisive as those that were its principal proponents at the time had hoped it would be. By which I mean the spreads are closer, there is much more recognition that sensitivities are make or break and more interest than at that time on overall cut. Don't get me wrong. It is there, and it is a given. It will and has to be respected as far as developed (countries) are concerned.

"My real point is to ask the question as it relates to developing (countries) one last time before it is too late. Is it in fact the case that, given where we are now, it is so decisive for developing (countries)?

"Because every time it is, as it were, on the left hand side of the ledger, the inevitable consequence is that there seem to be all sorts of complications inevitably piling up on the right hand side of the ledger. Such that we have got to the point that I don't frankly think many or any Members really concretely know what it is that they are actually expecting to have to do or "give" on the one side or "receive" on the other.

"So here's a radical thought to discard if you choose: Would it in fact not be better to use a different approach entirely: drop the tiered approach, drop the complicated flexibilities, two-third proportionalities, all the specials debate etc. etc. all of which threatens to amount to an ever more  complicated and ever-cascading  exercise in stalemate negotiation and counterbalancing complications.

"And just go to something more simple and straightforward and, above all, clear: where everybody knows what they are doing and which, quite frankly, most developing Members could probably reasonably manage given what is going on in the real world.

"For instance, one could cut through all the bands and proportions and just go for a straight overall average cut target for developing countries to meet however they choose, provided they simply make a minimum specified cut (which is of course well below the average target) on each line.

"It was good enough for developed countries in the Uruguay Round. Wouldn't it be basically good enough for developing in this one? And where, for some developing countries, even this would still have a disproportionate impact, you have a provision to manage that for them. And the formulation that was actually used last time in the Uruguay Round doesn't look to me like a bad candidate to actually use this time for developing (countries)."

In another part of the paper, Falconer proposes that  "sensitive products" (a category championed by defensive developed countries including the EU and the G10 that includes Japan, Switzerland and Norway) be restricted to 1 to 5 per cent of tariff lines.

The paper also deals at some length with the tiered formula for reducing tariffs. He senses that the "centre of gravity is, overall, between where the US and the EU are" and he thinks that "there is well and truly "still in play" an outcome that would deliver an overall cut above 50%."

The cuts for developing countries in the formula would be two thirds the rates of developed counties.

"One practical way is to try the following. First, there will indeed be an overall outcome figure that is a minimum target: two-thirds of the average cut for developed countries.

"The preferred manner to get to that target is that a developing Member applies the same thresholds and two thirds of the cuts within the bands. But, if application of that approach would lead to an overall cut in excess of two-thirds of the developed country average, the developing Member would still have to apply two-thirds of the cuts within each band but may modify all the thresholds by such a fixed percentage (it needs to be fixed in order avoid any incentive to manipulate this unpredictably) as would lead to the overall two-thirds cut. In no case would the thresholds be more than is envisaged in the G20 proposal."

 


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