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TWN Info Service on WTO and Trade Issues (Feb08/12)

20 February 2008


Below please see a report on the WTO informal meeting on agriculture held on Friday 15 Feb, during which many WTO members and groupings presented their initial views on the agriculture Chair's revised modalities text.

This report was published in the SUNS on 18 Feb. 2008. Any reproduction requires the permission of SUNS (sunstwn@bluewin.ch).

Best wishes
Martin Khor
TWN


Agriculture: WTO Members react to Falconer's revised draft text
Published in SUNS #6416 dated 18 February 2008
By Kanaga Raja (SUNS), Geneva, 15 Feb 2008

The Special Safeguard Mechanism (SSM) for developing countries in the revised draft modalities text is "extremely inadequate" and the proposed architecture for the SSM would only provide a "stringent, restrictive, burdensome, ineffective and non-operational mechanism" for developing countries and LDCs, Indonesia, for the G33 developing countries, declared Friday at the World Trade Organization.

The G33 was providing a preliminary reaction to the revised draft modalities text that the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, had issued on 8 February.

The informal meeting of the Special Session of the WTO Agriculture Committee, where the agriculture negotiations are taking place, heard the initial reactions of the major groupings of countries at the WTO including the G20, the G33, the G10 and the Cairns Group, followed by individual-country views.

Falconer had convened the informal open-ended meeting so that members can have the opportunity to comment on his revised draft modalities text, after a brief period of reflection since 8 February.

The agriculture chair is convening "Room E" meetings (among a small representative group of countries) next week for more detailed discussions before another open-ended informal meeting is to be held on 22 February.

Speaking to journalists after the informal meeting, Falconer was of the view that members were quite happy with the process, and are ready to keep down to work. They said that they were ready to get back to Room E and work hard next week.

He said that he did not get any hint of anybody being prepared to change their position on anything they said, but added that he would have been very surprised if they had. "It was pretty much what I would have expected, and we will see how we get on in the Room E process next week."

Falconer said "I think you would need to see tangible signs of movement at officials' level in the next couple of weeks, i. e. where things are being narrowed down in order to believe that they are serious about getting it to a stage where ministers can handle a handful of issues."

Pointing out that he remains optimistic, Falconer said that we will see if we can narrow things down next week. We will have to look thematically at the key areas, he said, adding that more emphasis and focus will need to be placed on market access.

A good bit of time will need to be spent on SPs, SSM, tropical products and preferences. "We need to spend more time on those because they are more controversial and they are absolutely crucial to getting the job done."

He warned that if no progress is made at the end of next week, "it is pretty hard to see why you would bother continuing."

In a detailed statement at the meeting, the G33 while appreciating the incorporation of some of the group's architecture and positions on Special Products in the draft text, said that other important elements and options remain of great concern to it.

The G33 also viewed the contents of the draft text on the Special Safeguard Mechanism as "extremely inadequate". It complained that "the proposed architectures on the SSM would eventually and only provide a stringent, restrictive, burdensome, ineffective and non-operational mechanism for developing countries and LDCs."

While welcoming the revised draft as a good basis for further work and appreciating the inclusion of several of the group's positions in the paper, the G20 said that some issues remain open and others are not adequately addressed. The G20 also stressed that the constant accommodation of developed countries' sensitivities, in the three pillars, has a price in terms of the level of ambition.

Indonesia, speaking on behalf of the G33, said that it has been the group's fundamental position that the agriculture negotiations shall remain a "substance-driven process".

Moreover, no "self imposed calendar, topped down and non-inclusive approach" should be entertained in our collective efforts, said the G33.

Indonesia added that the substance-driven process shall take as long as it takes towards a point that a Draft Text Modalities for Agriculture is indeed mature in providing considerable comfort to all parties and Members, to move to another step or process.

The G33 "cannot enter into a horizontal process unless the majority of issues, with inclusion of SP and SSM, have been negotiated and agreed for all Members in the multilateral forum," Indonesia added.

The G33 said that it was encouraged by how some of the draft text on Special Products (SPs) has been featured. The Group appreciated the incorporation of some of the G33's architecture and positions on SPs in the draft text.

Nevertheless, said the G33, other important elements and options remain of great concern to the Group, and need to be addressed.

On treatment, the G33 pointed out, the whole principle of a zero cut treatment for SPs shall not be regarded as an option. It is a must and should not be attributed with square brackets. The percentage of zero cut for SPs shall be 8% of total agriculture tariff lines. The maximum cut that should be applied to any tariff line which is designated as SPs should be 12%.

The G33 also said that its three-graded approach remains the practical and workable solution to the treatment of SPs.

It shall be clearly stipulated in an agriculture modalities text that there will be no TRQ commitments and no tariff capping on SPs.

The G33 also said that Footnote 14 should not be put as a footnote, but shall be incorporated into the text's body. Yet, the minimum number of SPs shall be 12%.

(Footnote 14 in the text says: Below the minimum entitlement of 8% referred to in the next sentence, the developing country Member concerned need not resort to guidance by those indicators.)

Footnote 15 still represents a misleading notion on an appropriate architecture of the exchange mechanism from Sensitive Products to SPs, which developing countries are entitled to both of them. Moreover, a provision of an exchange mechanism from Sensitive Products to SPs shall be incorporated into the text's body.

(Footnote 15 says: Where a Member finds that it would not, after guidance by indicators, be entitled to any additional Special Products beyond the minimum provided for in this paragraph, that Member may, in effect, "transfer" any unused Sensitive Products entitlement to obtain thereby additional Special Products, subject to the following: (a) that the maximum entitlement for transfer cannot be more than would be consistent with respecting the overall ceiling of [12] [20] per cent of tariff lines for Special Products; and (b) that the tariff reduction treatment for the tariff lines concerned shall be in conformity with the tariff cut entitlements for Special Products under this paragraph, except that sensitive product "transfers" cannot be used for [additional] "no cut" Special Products.)

The G33 said that it continues to support the Chair's effort in finding the operable and more flexible solution for the Small and Vulnerable Economies (SVEs) and other beneficiary countries as well as Recently Acceded Members (RAMs).

Paragraph 124 (relating to SVEs) shall be clarified in order to clearly state that the SVEs have the alternative of not applying the tiered formula, in order to designate as many tariff lines as they choose as SPs, provided that they meet the overall average cut of 24%. In addition, it should be clear that the SVEs will not be obliged to apply any minimum tariff cut per tariff line in general, and not only on SPs.

On paragraph 125 (relating to RAMs), the G33 said that it appreciated and took note of certain flexibilities provided for RAMs in individual elements of SPs. The G33 is currently still in the process of assessing the implications of these flexibilities and the Group is ready to further work with all Members to come up with a balanced outcome in this regard, which would fully address the particular concerns of RAMs.

The G33 however viewed the contents of the draft text on the Special Safeguard Mechanism (SSM) as extremely inadequate. The proposed architectures on the SSM would eventually and only provide a stringent, restrictive, burdensome, ineffective and non-operational mechanism for developing countries and LDCs.

Moreover, said the G33, the draft text on SSM has also suggested a new kind of differentiation of treatments among the developing countries.

"This is simply unacceptable," the G33 said, adding that it would not accept any "reverse engineering of Special and Differential Treatment" between the SSM and existing or any possible revised SSG (special safeguard).

In short, stressed the G33, the SSM shall be effective, more liberal, flexible, practical and operable than the existing including any possible revised SSG. - on product coverage, triggers and the remedies.

The SSM shall not be designed with layers and multiples of limitations for developing countries and LDCs to use, which in the end, would only provide an ineffective mechanism. Furthermore, the SSM is a trade measure and shall be a permanent mechanism as long as there is abnormality and imbalances in the world trading system.

The G33 said that it has repeatedly made clear that its proposal on SSM remains on the table with a concrete and legal text-based proposal. Along this line, the G33 said that it appreciated and supported the text in paragraphs 129 (in relation to imports under any scheduled tariff rate quota commitment), 134 (where preferential trade is included in the calculation of volume or price triggers), 135 (referring to shipment of products before the imposition of additional duty) and 139 (in relation to the relevant articles of the Agreement on Agriculture being amended to reflect the above modalities).

The G33 also noted that while it has evidently been flexible, constructive and making significant movements, everyone should also acknowledge that no major movements or flexibilities have been demonstrated in other crucial agriculture issues, whether in the market access pillar or domestic support.

The G33 said that it had high expectations that a revised draft text on SSM would be somehow balanced, logical and operable. "Yet, as it stands now - the draft text on SSM cannot be regarded to have accommodated these important aspects of a mechanism, which has been solely mandated for developing countries and LDCs as an integral part of Special and Differential Treatment."

The G33 called for a fair and balanced solution with respect to SPs and SSM as an integral part of Special and Differential Treatment, with Sensitive Products and SSG.

The Group said that the fact should also be taken into account that for most developing countries, "it is deeply felt that we have been given very little time to analyse and digest the Second Revised Draft Text Modalities for Agriculture." The Group recommended that the two issues of SPs and SSM be taken up in the later parts of next week's Room E meetings.

Brazil, speaking for the G20, regarded the Chair's revised draft modalities text "as a good basis for further work." It appreciated the inclusion of several G20 positions in the paper, especially in domestic support and export competition.

Noting that for the first time, there is a complete modalities text on agriculture, the G20 stressed that as agriculture is the centre of this Development Round, ambition in agriculture will determine the ambition in other areas.

"In order to assess that level of ambition and enable us to move to a horizontal negotiation, we need now to improve the text by reducing the number of brackets and narrowing the gaps, whilst preserving the level of ambition of the Mandate and the need for S&D (Special and Differential Treatment). This should be the main outcome of next round of discussions."

The G20 said that some issues remain open in the new draft text, while others are not adequately addressed. While welcoming the Chair's effort to try to accommodate different sensitivities and concerns, the G20 said, "yet, the constant accommodation of developed countries' sensitivities, in the three pillars, has a price in terms of the level of ambition."

Clarity is fundamental for assessing the overall balance in the text, said the G20, particularly in the market access pillar, and its relation to the NAMA text, as mandated by paragraph 24 of the Hong Kong Ministerial Declaration.

Depending on choices made on issues like sensitive products, SSG, tariff simplification, tariff escalation, tariff capping, a completely different picture would emerge. Not all the alternatives would fulfil the Mandate for substantial improvements in market access, said the G20.

Noting that its comments are of a preliminary nature, the G20 said that on domestic support, there has been good progress in clarifying language, especially in relation to new commitments, as OTDS (overall trade distorting domestic support) and product-specific disciplines. In terms of ambition, the G20 reiterated the mandate for substantial reduction in domestic support levels and the central linkage between effective cuts in OTDS and product-specific disciplines. These disciplines should not allow for concentration of support and should be effective.

Specifically, on the Green Box, the G20 recognized some improvements in relation to the previous draft. "We remain to be convinced that the draft delivers on a green box that must be non or minimally trade-distorting for developed countries."

On cotton, the G20 welcomed the inclusion of the demands of the Cotton-4, which the G20 fully supports.

On market access, the G20 took note of its formula tiers for developed and developing countries in the Chair's text, although the level of ambition for cuts are still open. The Group also welcomed the introduction of a minimum average cut of 54% for developed countries, contained in the group's original proposal.

However, said the G20, the tariff capping, an integral part of the formula and of the G20 proposal, remains absent. Caps must apply for both sensitive and non-sensitive products. The G20's new proposal is a good basis and should now be incorporated in the text. "Otherwise, we will be reinforcing disparities between agriculture and non-agriculture market access, a result at odds with the Mandate."

In terms of flexibilities for developed countries, the G20 said that there is still no clarity with regard to the results for sensitive products. "This has less to do with the text than with the necessary data for determining domestic consumption as a basis for TRQ expansion. This is a key issue for clarity, transparency and predictability; a solution must be found in the coming week."

The G20 reiterated its position on the elimination of the SSG from the beginning of the implementation period and its approach for tariff simplification. A true process of reform in agriculture trade would be incomplete with the partial elimination of the SSG or partial simplification of tariffs. These issues are central for determining the level of ambition in market access.

On export competition, the G20 said that the pillar seems to be more stabilized. The group recognized the inclusion of some positive elements in the disciplines. The elimination of export subsidies by 2013 is correctly preserved. The G20 also welcomed the inclusion of some elements of the group's contribution on export credits.

The G10 also said that the Chair's text provides a basis for further work in the weeks ahead.

The G10 said that as net importers, its members, compared to other participants, pay the highest bill in the agriculture negotiations. In order to sell the outcome of the Doha Development Round politically, the burden has to be equitably shared among the Members.

"Therefore, we still wonder whether those who have offensive interests in the agricultural negotiations are willing to be forthcoming in other areas under the 'single undertaking', and we need a clear answer from their side soon," said the G10.

The G10 said that unlike the revised NAMA modalities text, where quite a number of issues were loosened and the level of ambition lowered, the group noted that the revised agriculture modalities text introduces new and additional elements in the market access pillar with the effect of further increasing the level of ambition.

In the G10's view, the introduction of a minimum average cut on final bound tariffs is an additional stringent requirement with is simply unnecessary when you operate under a tiered formula with its strong harmonising effect on tariff reductions and "we reject it as such".

On the selection and treatment of sensitive products, the G10 said that although the number of sensitive products remain too low, the group recognises that the word "dutiable" is finally put in brackets. To only take into account dutiable tariff lines for the selection of sensitive products or other stipulations is not acceptable and penalises Members which have already brought a number of tariff lines down to zero.

The group reiterated that the correlation between tariff reduction deviation and TRQ expansion must be decided based on the principle of "lee than full compensation" in order to give the necessary flexibility for the treatment of these products as stipulated in the Framework Agreement.

The G10 believed that when existing bound quota volume represents 10% or more of domestic consumption, the expansion should be moderated by 1/3. Additionally, when the existing bound quota volume represents 30% or more of domestic consumption, the expansion should be reduced even further.

The G10 said that its position on tariff capping is well known, namely that this notion has to be rejected.

The G10 also said that the SSG is an important tool and should be maintained for the ongoing reform process. "We are prepared to reduce the percentage of tariff lines covered by the SSG but the extent of reduction will depend on the overall outcome."

The Cairns Group welcomed the revised draft agriculture text. "It is clear that, notwithstanding the progress captured, there is much work ahead if we are to fulfil the mandate of substantial reform in all three pillars. This is particularly so in market access, where modalities must provide clarity on precisely how access will be opened across the breadth of the pillar, and how the distortions created by highly protected products will be addressed."

The Group noted that the ranges of ambition in a number of areas are still wide apart. It welcomed the progress on sensitive products but said that more work is clearly required.

The Group said that it also expects the elimination of the Special Agricultural Safeguard from the beginning of the implementation period, and the removal of in-quota rates in developed country markets.

There is a need to find acceptable areas of convergence for all Members in relation to SPs and the SSM. And a tariff cap should be reinstated to preserve the integrity of the tiered formula and address the imbalance between agricultural and industrial tariffs.

On domestic support, the Group recognized the progress captured in the text. Disciplines must be precise, easily implemented and subject to a robust system of monitoring and surveillance.

It reiterated that the major subsidizers can and must do more to ensure effective cuts in OTDS. Product-specific limits will also need to provide genuine disciplines on recent support without top-up flexibilities. It welcomed the retention of the proposals on cotton.

There is also important work still ahead to ensure that the Green Box support remains genuinely non-trade distorting, said the Cairns Group. +

 


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