TWN Info Service on WTO and Trade Issues (July 07/14)

27 July 2007

Agriculture negotiations for 2 weeks from 3 September without deadline

WTO negotiations on agriculture modalities will start on 3 September for at least a fortnight and without a deadline, according to Ambassador Crawford Falconer, chair of the agriculture negotiations.

He said this at the end of the informal meeting on 24 July which heard initial reactions of WTO members to the text on draft modalities that Falconer issued on 17 July. (See previous TWN Info on this meeting).

Below is the second report on this meeting, including the positions of US, China, Nigeria, Africa Group, EU, etc.

With best wishes
Martin Khor

Agriculture negotiations for 2 weeks from 3 September without deadline

By Martin Khor (TWN), Geneva, 25 July 2007

Intense negotiations on agriculture modalities will start on 3 September for at least a fortnight and without a deadline, according to the Chair of the WTO's Committee on Agriculture (Special Session), Ambassador Crawford Falconer of New Zealand.

He said this at the end of the Committee's informal meeting on 24 July which heard initial reactions of WTO members to the text on draft modalities that Falconer issued on 17 July. (See SUNS #6300 dated 25 July for the initial article on this meeting).

Falconer told the meeting that he detected a desire to negotiate, based on his text, and described the present climate as a significant moment, if not a turning point in the negotiations. He said that he will hold negotiations meetings in the two weeks beginning 3 September, with no "artificial deadlines" set but with the aim of drafting further revisions.

He commented that his draft had "done 90% of its job". He told members that they will have to compromise and change their positions if the negotiations are to progress.

Speaking to the media, Falconer said that he would be happy if there is a text-based discussion in September. "Based on what I heard, that will happen. We'll keep going as long as it takes. There is no deadline. When it makes progress, we'll revise the text. It won't happen in a few weeks."

Asked about the apparent difference in reception by the WTO members to his draft and the NAMA draft of Ambassador Don Stephenson of Canada, Falconer said that the drafts should not be compared like in a beauty contest. Asked if the NAMA text got a negative response, whether that would have an effect on his own agriculture text, Falconer said: "I don't know."

Trade officials said that the 51 speakers at the meeting welcomed the Falconer draft but that they all registered their reservations and dissatisfaction with some parts of the text.

Several diplomats who were at the meeting said privately that, judging by the statements, the different delegations appeared to be entrenched in their previous positions, and there was "no movement."

There appeared to be a mood of delegations not wanting to "rock the boat" and to be careful to avoid being blamed for hindering the continuation of the negotiations. Also, most delegations felt that there was enough in the Falconer draft for it to be used in the further negotiations, even if no one was satisfied with it.

Briefing journalists on the United States' position, Joe Glauber, the US special envoy on agriculture negotiations, said that the text shows progress but there is more to do. The US saw "great disparity" between the pillars with a lot of work done on domestic support and export competition but a significant lack of details in market access. He said that in September this gap in market access in particular has to be filled up.

On the text's figures for the limits to overall trade distorting support (OTDS), Glauber said that the proposed levels for the US would amount to real reductions, since in five of the past eight years, it has exceeded the upper end of the proposed new limits. He reiterated that the US was willing to move on OTDS but this would have to be commensurate with the offers of others on market access.

Asked if the US could accept an OTDS limit in the "low teens" (as demanded by the G20, the African Group and others), Glauber said: "That's out of the question." On the text's proposal on reducing cotton subsidies, he also said it was not acceptable.

On special products, Glauber said the text lacks specifics and there needs to be clarity on that. He said that the US is engaging with the G33 at the technical level on indicators.

At the meeting, the European Communities said that listening to the other groups (G20, Cairns Group), it wondered if we are in a real negotiation as it did not see real signs of movement compared to their well known positions.

The EC could accept the text as a working basis for negotiations but registered some concerns, and in some cases the proposals overstepped some of its fundamental "red lines."

Among the concerns it raised were the arrangements on tariff rate quota expansion for sensitive products, the designation of sensitive products (which is not covered in the text), and the need of the EC for continuing the special safeguard (SSG) for limited products.

On the ranges of cuts proposed, the EC said that for market access, the upper parts of the ranges are out of the question, and this is also the case for the OTDS cut in the top tier.

The EC also needs to ensure that policies falling under the Green Box can be maintained. There is need to leave flexibility to allow newcomers to benefit from Green Box payments under para 6 and this omission is an oversight. It also has reservations on changes proposed to paras 11 to 13 in the existing Green Box where the change can have perverse effects.

On export competition, the EC insists on full parallelism, is pleased about the elimination of monopoly powers of state trading enterprises in the text, wants further work on food aid outside the safe box, and cannot accept exceptions for export credits except for LDCs and "technical exceptions" for breeding cattle and seeds in terms of duration beyond 180 days.

The EC also said that there would be no agreement on agricultural and NAMA modalities without an agreement on geographical indicators (extension and negotiation of a register).

The African Group, represented by Uganda, said that the draft was a work in progress, the level of specificity differs between different elements, and the issues given less specificity were of great importance to the group and must be fully addressed in the next draft. The process can move forward only if it is based on full modalities addressing the development dimension.

On OTDS, the Group reiterated the need for real and effective cuts and its level should not exceed the low teens. On the Green Box, the disciplines must be stricter to ensure that there is no box shifting.

On cotton, the Group welcomed the proposals under the three pillars, and stressed also the need to take up the development aspect and to set up a mechanism to deal with the loss of revenue to Africa resulting from the decline in world prices.

On market access, the Group supported an average cut of at least 54% for developed countries and at most 36% for developing countries.

On special safeguard mechanism (SSM), the African Group criticized the proposed modalities which limit the scope of SSM that will apply, contrary to proposals of developing countries. It was also disappointed with lack of specificity on special products, and on the lack of proposed solutions for tariff escalation and preferences.

It welcomed the language on commodities but asked that all elements of the Group's proposal including clarification of Article XXXVIII of GATT 1994 be included.

It had expected the paper to indicate how the duty-free and quota-free market access for LDCs would be operationalised and was concerned that there has been a regression on this issue.

On export competition, the Group was concerned that some issues of concern to it were left out. On food aid, the declaration of an emergency, and the roles of recipient government, regional organizations and NGOs are unresolved and on export credits the flexibilities for LDCs and NFIDCs (net food importing developing countries) are not clearly spelt out.

Nigeria, represented by Ambassador Yonov Agah, said that firstly, the document does not contain the same detail in all its sections. It also does not make specific recommendations in many areas, including Special Products, Special Safeguard Mechanism, long-standing preferences, tariff escalation, tariff simplification and commodities.

"We are, therefore, concerned that this approach would lead to partial modalities, which we remain unwilling to support or approve," said Nigeria.

"We insist on full modalities largely because that is the only approach that would enable us to empirically assess not only the overall balance in the agriculture negotiations, but also the balance between agriculture and NAMA. We also consider full modalities as an insurance policy against delaying solutions on certain issues to a later stage, which may be subsequently overlooked or ignored with impunity."

Second, Nigeria noted that the majority of the key figures proposed for cuts in domestic support, tariffs, and export competition appear as ranges. While some delegations have already indicated their unwillingness to support a final Doha Round agreement that would reflect these ranges, its concern is more fundamental. Nigeria implied that they result in an imbalance between developed and developing countries.

For example, with regard to OTDS, the range proposed contrasts sharply with the African Group and G20 proposals of $10-12 billion and $12 billion, respectively. However, regarding tariff cuts for developing countries, the text proposed a maximum average reduction range of 36% to 40% compared with the G20 proposal of a maximum of 36% and the ACP and African Group proposal of a maximum of 24%.

"We consider this punitive, as it obliges us to negotiate outside those ranges that are consistent with our level of development and the policy space that we consider necessary for the achievement of our development objectives," said Nigeria. "As one delegation has aptly captured it, your proposals have constrained us to negotiate north of the G20 wherever we have defensive interest and south of the G20 where we have offensive interests. We, therefore, consider this as a contradiction of the spirit of a development round."

Third, the draft has "ignored the views of the majority who want disciplines on the Green Box as well as a monitoring and surveillance mechanism to prevent box shifting and abuse in developed countries" and also "provided no criteria for important areas like direct payments; and no indicators or thresholds on criteria for decoupled payments."

Fourth, Nigeria urged the Chair to give priority to those areas that clearly require further work, in order to increase the level of comfort within the entire membership.

China, represented by Ambassador Sun Zhenyu, said that the paper offers a good starting point for further negotiations. It then stated some concerns. On domestic support, China firmly holds the view that the effective cut in OTDS is a benchmark for this Round, and there has to be hard work for a cut toward very low teens and for strengthening of disciplines.

On market access, China appreciated the adoption of the thresholds proposed by the G20, but noted that the proposed cuts for the developed countries in the paper are south of the G20 proposal and the cuts for the developing countries north of G20. The original G20 proposal on tariff cuts by developing countries is much more rational and should be adopted.

China added that there seems to be a different approach towards treatment of sensitivities of developed and developing countries. There are specific proposals on numbers and treatment of sensitive products for developed countries. Concerns of developed countries with different tariff structures are addressed in great specificity.

However, the S&D (special and differential) treatment for developing countries is not so clear. On SP, China was disappointed that the Chair continues to rule out necessary exemptions for treatment of some of the most sensitive SP products. The concept of thresholds and verifications for the indicators are also problematic.

On SSM, China believed that the disciplines should not be more restrictive than SSG. We need more clarification on the restricted and tailored circumstances where existing Uruguay Round bound rates can be exceeded due to more severe level of fluctuation, said China.

On Recently Acceded Members (RAMs), China appreciated the improvements in the paper. "In order to balance the higher formula cut by the developing countries in the two lower bands, we need some more flexibilities and a number of very sensitive SP products which affect the livelihood of millions of poor farmers should be exempted from tariff cut," it said.

On export competition, the state trading enterprises from developing countries which enjoy special privileges to preserve domestic consumer price stability and to ensure food security should be permitted to maintain monopoly power. The share of world exports should not be taken as a criterion.

The Philippines said that it could not "find the logic" in the ranges for the general formula in which the reduction rates for the developed countries moved southwards (from the G20 proposal) and the rates for the developing countries moved northwards. This has put a disproportionate burden on developing countries who committed more during the Uruguay Round.

The Philippines was also critical of the draft's view on treatment on SPs. On SSM, it referred to the possibility of breaching the Uruguay Round bound rates and reiterated "that based on our difficult implementation experience in this area, for a trade remedy to be truly effective, it must be sufficient. There is simply no point in applying a trade remedy if it cannot sufficiently address the anomaly."

Venezuela, represented by Ambassador Oscar Carvallo, said that the draft suffers from an inequality in the treatment of issues, neglecting some issues that are very important for some developing countries and thus is far from containing "full modalities." It wanted these issues to be the first to be resolved in September.

It also supported the views, in line with the Chair, that advancing in this direction implies focusing on substance rather than an imposed deadline. The process must be guided by the mandates, especially in relation to SDT, less than full reciprocity and proportionality in developing countries' commitments.

Venezuela also strongly criticized the NAMA draft for closing the door to negotiations, in contrast to the opening of the negotiating door by the agriculture draft.

The Cairns Group welcomed the draft as providing a good starting point for negotiations. It said that the market access pillar requires much greater clarity, on sensitive products, tropical products, SSG, SSM, tariff caps, SPs, in-quota rates, tariff escalation, tariff simplification and tariff quota administration.

It said that for the top tier formula cut, anything below the Cairns Group proposal of 75% would magnify the problem. It was concerned at the low ambition on sensitive products (numbers and treatment). The SSG has to be eliminated. On domestic support, the discussion should now focus on the "low teens" for OTDS.

The G10 took an opposite view from the Cairns Group. It said that the draft's level of ambition for tariff cuts is extremely high, while the flexibilities are too narrow. On sensitive products, the rules are too stringent, the payment through TRQ expansion too costly and the number too limited. The G10 said that "we cannot accept to be penalized for our tariff structures beyond the effects of a strongly harmonizing formula we have agreed to."

It wanted the SSG to be maintained and the rules of the Green Box must continue to promote further farm reforms including new programmes and provisions for newcomers.

Japan's Ambassador said that if there is no tangible result by autumn, the Round will be put in a freezer and thus this time it is truly "now or never" to make progress.

Japan's Agriculture Vice Minister Mr. Hidenori Murakami spelt out problems that Japan had with the agriculture text. These include sensitive products (number and treatment), tariff reduction rate of the top band, and reduction rate for OTDS.