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TWN Info Service on WTO and Trade Issues (Sept07/03)

13 September  2007


Review of Chair's agriculture modality paper as regards market access

Negotiations on agriculture modalities are now taking place in the WTO among a small group of about 35 delegations, with the first topic being market access.  The meeting began 5 September on market access in developed countries' markets. It continued on 10 Sept. with market access in developing countries.

The report below also gives a summary and analysis of the issues involved in market access as it affects developing countries.

It was published in the SUNS on 11 Sept.  It is re-circulated here with the permission of the SUNS, solely for the benefit of readers of TWN Info Service on WTO and Trade Issues.  Any re-publication or re-circulation requires the permission of the SUNS (sunstwn@bluewin.ch).

With best wishes
Martin Khor
TWN

Review of Chair's agriculture modality paper as regards market access

By Martin Khor (TWN), Geneva, 10 Sept 2007

Negotiations on agriculture modalities have begun at the World Trade Organisation among a small group of about 35 delegations, with the first topic on the agenda being market access.

The meeting began last Wednesday (5 September) with a whole-day meeting on market access in developed countries' markets. It continues this afternoon with market access in developing countries.

The meeting is held in Room E, a relatively small room in the WTO, and thus is known as a "Room E meeting."

Since only a small group is invited, the WTO's agriculture negotiations are now mainly conducted through a "Green Room" process, in which only selected members are invited (by the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand) to participate.

According to trade diplomats who were present, the Room E meeting last Wednesday was rather uneventful, with no sign of "movement" on the part of major developed countries in terms of offering new concessions.

In fact, the meeting ended earlier than expected. This could also be because Falconer urged members not to repeat known positions, but to speak up if they had something new to say.

Diplomats from some developing countries were of the view that the major developed country members such as the United States, the European Union and Japan were not willing, at least at this stage, to announce any new offers.

"Since this is the case, the situation does not seem bright for the market access talks to move forward," said one diplomat. "When it comes to the turn of developing countries, they may also not see the need to make new concessions, since the major countries are not indicating any new concession on their part."

However, several diplomats also added that developing countries and their groupings were determined to "engage actively" in the negotiations, to give the talks the opportunity of success.

According to a trade delegation source, the EU indicated that it could accept the middle ground of the range of tariff cuts (66-73 per cent) in the top tier of the tiered formula for tariff reduction (proposed by the Chair in his modalities paper) provided that a deviation of two-thirds (as against the general cut for the tier) is allowed for sensitive products.

The G10 (developed countries with defensive interests in agriculture) reportedly said that the tiered formula figures proposed by the Chair were too burdensome for them.

Much of the discussion was on the selection of sensitive products, with a group of members (EU and G10) asking that importing countries make use of the 8-digit level in the harmonised system of commodity description and coding in the selection of their sensitive products, while countries with an export interest insisted that the 6-digit level be used so that there would be more transparency (for exporters to know which products would be included as sensitive).

The meeting did not come to an agreement on this issue, which will be the subject of technical work by a smaller group of interested members.

On Monday, discussion in the Room E process will start on market access and developing countries, and it is expected to continue till Thursday. On Friday, Falconer will convene an informal open-ended meeting (open to all members) to provide a forum for information sharing and general statements.

Among the issues expected to be covered are the tiered tariff-reduction formula as applied to developing countries, flexibilities for small and vulnerable economies and other members (in deviating from the formula), special products (SPs) and the special safeguard mechanism (SSM).

Other issues that have not been covered in detail in the Chair's modalities papers, such as how to deal with tariff escalation, commodities and erosion of margins of long-standing tariff preferences, are also expected to be discussed.

Most developing countries have a defensive, rather than offensive, interest in the Doha negotiations on agriculture, and the groupings of these countries (such as the G33 and the ACP Group) can be expected to defend their position that the outcome of the negotiations should not harm food security, livelihood of small farmers or rural development prospects in their countries.

A review of the Chair's modalities paper of 17 July indicates that these countries have a lot of work to do, to persuade the Chair and other members to be sympathetic to their position.

As pointed out by many developing countries during the end-of-July session responding to the Falconer draft, the Chair's proposed modalities for the tiered formula allows for more lenient treatment of developed countries and more strict treatment of developing countries as compared to the G20 proposal.

The Chair proposes to use the same four bands of tariff ranges as the G20 proposal for developed countries (0-20, 20-50, 50-75 and above 75 per cent) and developing countries (0-30, 30-80, 80-130 and above 130 per cent).

However, the Chair proposed that the cuts for developed countries, following the above bands, be 48-52, 55-60, 62-65 and 66-73 per cent for developed countries, which are well below the G20 proposal of cuts for the important two upper bands
(the G20 proposal is for cuts of 45, 55, 65 and 75 per cent for the four bands).

On the other hand, the Chair proposed cuts for developing countries, following the above bands, of two-thirds the ranges for developed countries, which work out to be 32-34, 36-40, 41-43 and 44-48 per cent. These are significantly higher than the G20's proposed cuts for developing countries for the same bands, which are 25, 30, 35 and 40 per cent.

Moreover, while the G20 says that the developing countries' overall average cut should not exceed 36%, the Chair's draft says that developing countries will have a maximum average cut of (36) (40) per cent. The brackets reflect the Chair's proposed range, which is 36 to 40 per cent.

The Chair's proposal is even more onerous on developing countries when compared to the ACP Group proposal, which has a different set of bands and significantly lower cuts per band than compared even with the G20 proposal. The ACP Group as well as the African Group have proposed that the average cut for developing countries should not exceed 24%.

The Chair, however, has offered flexibilities for small and vulnerable economies (SVEs) to have 10 percentage points lower in the cut in each band, and the countries can also adjust at their own discretion so that they end up with a 24% overall average cut.

Moreover, SVEs and countries with ceiling bindings (or homogenous low bindings) can opt out of the reduction through the tiered formula, but choose to be subjected only to the overall average reduction. It is not clear from the Chair's text whether he means the average reduction for SVEs (24%) or for developing countries in general - which is (36) (40) per cent.

The strategy of the Chair appears to be to allow more lenient treatment to SVEs
(with the categorisation of SVEs also expanded in the modalities paper to include more members), so that the other developing countries can be afforded more strict treatment (i. e. to undergo deeper cuts).

Relating to LDCs (which are not subjected to any tariff reductions), the Chair in his so-called "Challenge paper" (which was issued in May) suggested that the developed countries that are unable to provide duty- and quota-free access for all LDC products at this stage, will have to provide this status to the remaining products by the end of the implementation period of the Doha Round. This suggestion is no longer in the present text.

The issue of the selection and treatment of special products is expected to figure quite prominently in this week's Room E discussion.

A controversial question is whether developing countries can select their special products according to the main approach of a specified number (for example, the G33 proposal is that at least 20% of tariff lines can be designated as SPs, to be guided by indicators), or the main approach of indicators (i. e. that only products that fulfil the standard of agreed indicators, which will have data and thresholds attached to them, can be selected as SPs).

In the Chair's draft, he firstly suggests to work on the basis of the G33 list (which has 12 indicators, reduced from the original 24).

Second, he suggests to "try to quantify operationally" concepts such as "significant proportion" etc.

This proposal of quantification may give rise to several problems, which may be used by members that do not like the SP concept to make its use operationally difficult. Moreover, different countries have different conditions, making it harder to choose uniform thresholds.

Mr. Bhagirath Lal Das, a renowned expert on WTO rules, has pointed out that many existing WTO agreements give guidelines and criteria (for example, to show that "injury" has occurred) with relevant factors listed in qualitative terms but with no attempt to quantify these factors, and with no specific thresholds.

For example, the Agreement on Subsidies states that a determination of injury shall be based on evidence regarding volume of the subsidised imports and the impact of these on domestic producers; Article 15.2 states that the authorities shall consider whether there has been a "significant increase" in subsidised imports, and whether there has been a "significant price undercutting" by the subsidised imports. There are no quantification or thresholds for these.

It can thus be argued by those with defensive interests in agriculture that wish to make operational use of the SP instrument that: (1) It has been agreed that the self-designation of SPs is to be "guided" by indicators but not "driven" by the indicators and thresholds; (2) To make the selection of SPs solely determined by indicators would be to negate the principle of self-designation; (3) Taking only or mainly the indicators approach would make the process cumbersome and the SP instrument difficult to use; (4) Other WTO agreements list factors and criteria that are relevant, but do not quantify these factors nor provide threshold limits; (5) Therefore, qualitative guidelines for SPs are sufficient.

Third, the Chair suggests that the indicators have to be transparent (accessible), objective and thereby open to verification. These would use international data or data at national level in a form accessible to other Members.

This proposal poses many difficulties for countries wishing to use the SP instrument. For example:

-- Data may not be available from international agencies for several indicators and for several countries.

-- There is a bias towards using only indicators where data is available, and this may exclude the more important indicators in favour of those indicators where it is easier to have thresholds and data.

-- Countries where data collection is not so developed will be at a disadvantage, especially if they are required not only to provide data but also in a form that is accessible (so that other Members can check and be satisfied, or they can raise objections).

-- Being "open to verification" also implies that other Members can have the right to verify if the data is correct and whether the designation by a country of an SP is appropriate. It is not clear what would be the rules of such "verification." Would the objection by one Member or a few Members (and thus there being a lack of consensus) mean that the indicator or data is not verified? Can the designation of an SP be challenged through dispute settlement on the basis of not meeting the verification test?

-- There is now little time for countries to do the selection of SPs, prepare indicators, get through the verification process, and prepare schedules.

There is a justificable argument that the SP instrument has to be simple to use and to be operational, and this would be negated if the selection of SPs is caught up in cumbersome procedures, verification and challenges, as this would discourage the use of the instrument by members, and thus be not operational.

Fourth, the Chair suggests a combination approach - the use of numbers ("a certain minimum percentage of SPs" that can be higher than sensitive products) as well as indicators. This can be a useful possible approach, provided the number to be agreed on is adequate.

The G33 proposal is for members to be able to designate at least 20% of tariff lines. For some countries, it is easier and more advantageous to make use of the numbers approach, while other members may find the indicators approach more advantageous.

If a minimum number is used (e. g, at least 20%), then some countries that make extensive use of indicators can compare and can exceed this minimum if the indicators result in a larger number.

Developing countries with defensive interests and concerns that cheap and often subsidised imports can damage food security and farmers' livelihood security are likely to argue that their case for a significant number of SPs is justified especially since the agricultural subsidies of developed countries (and thus, the trade distortions caused by these subsidies) are set to continue even after the end of the Round.

 


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