TWN Info Service on WTO and Trade Issues (Nov07/13)

8 November 2007

The following article was published in the SUNS on 2 November and is reproduced with permission.  Any reproduction and recirculation requires the permission of SUNS (

Best wishes
Martin Khor

Chair's SP proposal causes confusion and consternation
Published in SUNS #6357 dated 2 November 2007
By Martin Khor (TWN), Geneva, 1 Nov 2007

Diplomats from developing countries are still confused over the proposals on special products put forward by the Chair of the WTO's agriculture negotiations, Ambassador Crawford Falconer of New Zealand.

The proposals had been orally presented by Falconer at a "Room E" meeting, to which only 36 delegations are invited. Since he did not provide a written paper, different diplomats present had differing interpretations of what the Chair meant.

The confusion is over at least two issues - the number of special products and the treatment that SPs will receive (i. e. in relation to tariff reduction).

On the issue of number, according to the diplomats, Falconer had proposed that the number of special products would be 5% in each of the four tariff bands of the tariff-reduction formula.

However, it is not clear whether he meant 5% of the tariff lines within each of the four bands (which would mean that the special products would be only 5% of the total tariff lines); or whether he meant that 20% of the total tariff lines could be designated as SPs, and that these would have to be distributed equally to products in the four bands (which means that in each band, there can be a number of SPs equivalent to 5% of the total tariff lines).

The difference between the two interpretations is immense. In the first case, only 5% of total tariff lines are eligible to be designated by the developing countries as SPs; while in the second case, 20% of tariff lines can be so designated.

The G33 proposal is that at least 20% of tariff lines can be self-designated by countries as SPs. Thus, diplomats from many G33 countries would be happy if the Chair's proposal is that indeed 20% of tariff lines can be made SPs.

However, other diplomats interpreted his proposal to mean that only 5% within each band can be designated as SPs. This would mean that only 5% of all tariff lines can be SPs.

In addition, according to some diplomats, Falconer had mentioned that there could also be a certain percentage of special products for which no tariff reduction would be required. The diplomats said that Falconer indicated that the number to be agreed on would have to be the result of a political decision, and would thus have to be decided by Ministers.

Falconer in a paper (known as the "Challenge paper") issued earlier this year had indicated that he was thinking of 8% of tariff lines as the number that can be designated as SPs.

Thus, according to some diplomats, he may have meant that SPs comprise 5% of tariff lines subject to the formula cut but enjoying a lesser than normal cut, plus a few percentage of tariff lines that are exempt from any cut.

If this is the case, then the G33 members find this number to be much too small, and are likely to reject the proposal.

On the second issue, it is also unclear what Falconer had in mind on the treatment of SPs. He had indicated that SPs would have a "deviation" of 5 percentage points, which is taken to mean that the reduction rate for SPs would be 5 points less than the "normal."

A few diplomats took this to mean that the deviation is in relation to treatment of "sensitive products" that developing countries will be entitled to. This would be calculated as taking the tiered formula as applied to developed countries, then taking two thirds of those reduction rates (as developing countries are expected to undertake only two-thirds of the commitments of developed countries), and then apply another deduction of one third to two thirds (this is expected to be the treatment for "sensitive products"), and then deduct another 5 percentage points (the 5 percent deviation for special products).

This is on the assumption that special products would be treated as something like "super-sensitive products," in that a special product would get an additional 5 points off from whatever reduction rates would apply to a sensitive product within each band.

It has been the expectation of G33 members that special products would enjoy better treatment than sensitive products (which is a category that is being demanded by developed countries to enable them to shield their sensitive products from full formula cuts).

However, several diplomats in the past two days have come to the conclusion that Falconer did not mean to give such a "super-sensitive" privilege to special products, and that the deviation he proposed was simply in relation to the normal cuts in each band of the formula.

In this interpretation, the reduction rates of special products would be calculated as follows: Take the tiered formula with four tariff bands as applied to developed countries, with a reduction rate for each band; then take two thirds of these reduction rates (since developing countries are expected to undertake only two-thirds the commitments of developed countries); then deduct 5 percentage points from the reduction rates applicable in each of the four bands.

In this scenario, the "treatment" given to special products would be very minimal, as the SPs would only enjoy a "discount" or "deviation" of merely 5 percentage points.

This is far below what has been demanded by the G33. Its official position has been that at least 20% of tariff lines can be self-designated as SPs, and that half of the SPs are to be exempted from tariff reduction, while a quarter of the SPs would be subjected to 5% tariff reduction and the remaining quarter would be subjected to 10% reduction. Small and vulnerable economies and recently acceded members are also to be given extra flexibilities.

"If the Chair means that the deviation of 5% is from the reduction rates in the tiered formula as it applies to developing countries, then this is very stingy, and indeed it is insulting to the concept of special treatment for special products," said a diplomat of a G33 country that has been active in the negotiations.

The confusion and the disappointment caused by the Chair's orally presented proposal has prompted several delegations to insist that he put his thinking on paper, so that there is no mistaking what he means.

The issue is expected to be further clarified at a Room E agriculture meeting to be held on Thursday afternoon. At that meeting, G33 members are also expected to raise serious objections to the Chair's proposal.