TWN Info Service on WTO and Trade Issues (Apr08/05)
22 April 2008
Third World Network

Agriculture: G33 states current stand on SP and SSM
Published in SUNS #6455 dated 15 April 2008

Geneva, 13 Apr (Martin Khor) -- The positions of the G33 and a group of agriculture exporters led by the US are still far apart, and perhaps even further apart than before, on the issue of the number and treatment of special products (SP) that developing countries can have in the agriculture outcome of the Doha negotiations at the WTO.

At the agriculture talks in a Room E small-group format last Friday (11 April), the G33 - representing over 40 developing countries with defensive interests in agriculture and the main proponents of SP and the Special Safeguard Mechanism (SSM) - reiterated their positions on both SP and SSM in detailed talking points.

This is probably the last time that the G33 as well as other WTO members were given the opportunity to state their positions on these two critical issues of SP and SSM, before the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, produces his new draft of a agriculture modalities text.

The United States and eight other countries (Australia, Canada, Costa Rica, Malaysia, New Zealand, Paraguay, Thailand and Uruguay) presented a new paper on "elements of special product modalities". It had a restrictive view on the number of SP (8% of tariff lines) that developing countries can select.

It also had a restrictive view on treatment. Of the 8% of tariff lines that can be designated as SPs, there would be two tiers with Tier One having 4% of tariff lines that would be cut by 25%, and Tier Two having 4% of tariff lines to be cut by 15%.

The group's proposal also includes a category termed "super specials" in which 1% of total tariff lines that are within the 4% of tariff lines in Tier Two could have a smaller cut than the 15% cut required under Tier Two. It did not specify what this smaller cut would entail.

However, there are four more restrictions on the "super specials." A product would not be eligible for this "super special" minimal cut: (a) if imports of that product account for 0.5% of the value of the member's total agricultural imports; (b) if imports of all such products collectively account for more than 8% of the value of the member's total agricultural products; ( c) if imports of that product from other developing countries account for 40% or more of the member's total imports of that product; or (d) if the special product cut on any tariff line would leave the bound rate above the applied rate.

The special product cuts shall be included in the average cut referred to in paragraph 65 of the Chair's 8 February text, added the paper.

The paper by this US-led group is an updated version of an earlier informal paper that lacked some of the numbers of the new paper, and which had been presented at an earlier Room E meeting in February.

At that earlier meeting, members of the G33 had strongly attacked the exporters' proposal. However, the group of 9 members presented their paper again, this time with numbers filled up for the "super specials".

At the 11 April meeting, the G33 again criticized the exporters' paper. Indonesia, which coordinates the G33, reminded the meeting that the G33 had already provided its comments at the 25 February Room E meeting on the earlier paper of the US and others.

The G33 coordinator, Ambassador Gusmardi of Indonesia, said that it is clear that the new paper even widens the gap of differences on this important issue. It reaffirmed that the G33 does not see the proposal as being constructive in the efforts to move forward.

The G33 told the Chair that his 8 February draft modalities text on SPs to a certain extent already provides an architecture and a basis to advance further. To further restrict the modalities on SPs as proposed (by the group of 9) is therefore "not acceptable" and cannot be regarded as a constructive way forward.

The G33 also questioned the mandate which would justify the proposal, especially on the notion of allocating self-designated SPs on the basis of their treatment. The G33 cannot further consider this proposal.

The G33 also reminded the meeting that it had already been agreed that SPs will be self-designated. Self-designation shall therefore logically be also on the allocation of the SPs to the 3 grades of treatment proposed by the G33.

In this regard, as the Group has underlined over and over again, the zero cut treatment principle shall be an integral part of the final outcome.

The G33 added that SPs is an integral part of special and differential treatment for developing countries as well as a stand-alone issue. Therefore, SPs shall not be included in the average cut referred to in Paragraph 65 of the Chair's 8 February text.

Earlier in the meeting, Indonesia on behalf of the G33 presented a summary of the group's position on SPs, referring to various paragraphs of the Chair's 8 February modalities draft.

On Para 123, the G33 said it was firm with its existing positions. In particular, the G33 stressed again that the hybrid approach remains the most appropriate architecture in designating SPs. A minimum number shall be available and it has to be higher than the Sensitive Products number for developing countries.

This is the underlying reason why it (the designation of SPs up to a certain number) does not need to be guided by the indicators. The minimum number also remains valid since not all small, vulnerable economies (SVEs) and other beneficiary countries will be in a position to utilize the Paragraph 124 provision.

The G33 also clarified that under the hybrid approach, its members shall be using the indicators as been provided in Annex F to designate additional SPs above the minimum number.

Nevertheless, any further discussions on the indicators shall only be possible, only after there is an agreement or after the hybrid approach has been accepted.

The G33 emphasised that the "zero cut treatment" principle (i. e. that a certain number of SPs will not be subject to any tariff cut) shall be an integral part of the final outcome. The G33 stressed that from the very beginning, the initial intention of SPs has been to provide exemptions from any tariff cut, as an integral part of Special and Differential Treatment for developing countries.

Thus, this category of SPs is of paramount concern to all G33 Members and the most critical element for the Group when defining the overall balance. The G33 also strongly urged that a future revised Draft Text shall reflect this clear political reality to our Ministers.

On Para 124, the G33 stressed that SVEs and other beneficiary countries shall have the options of utilizing the Paragraph 124 or 123 provisions. SVEs Members opting for Paragraph 123 shall be entitled to moderate their cuts in Paragraph 64 by a further 10 ad valorem percentage points in each band, plus the SPs entitlement outlined in Paragraph 123.

Alternatively, SVEs and other beneficiary countries opting for Paragraph 124 would only need to meet the overall average cut of 24 percent. These Members shall not be required to undertake any minimum cut per tariff line and may designate as many tariff lines as they choose as SPs, provided they meet the overall average cut of 24 percent. Therefore, the tariff lines designated as SPs need not be guided by the indicators.

On Para 125 for Recently Acceded Members (RAMs), the G33 proposed that the threshold level above which indicators are not required to be used shall be at least 2 percent higher. The maximum number of SP tariff line entitlement shall be at least 1 percent greater. In addition, there shall be an entitlement for RAMs to take tariff cuts half that of the cuts applicable to normal cuts for SPs. Lastly, tariff lines eligible for no cut shall be at least 1 percent higher than generally applicable.

The G33 also said that it strongly viewed that the concept of an exchange mechanism from Sensitive Products to SPs shall be adequately reflected in the modalities for SPs.

This specific concept is highly important for the G33 since not all developing countries will be in a position to fully utilize its Sensitive Products entitlement. Therefore, as has been suggested in the Draft Text, the inability of Members not to use the indicators cannot be a pre-condition to recourse to the exchange mechanism.

The G33 said that its proposal on this essential concept of "exchange mechanism" remains on the table - with the following key elements:

First, the rate of transfer shall be 3 to 2. For example, 3 percent of Sensitive Products can be converted to 2 percent of SPs.

Second, since SPs and Sensitive Products are two separate entitlements, the transferred SPs shall be over and above the SPs designated under Paragraph 123. Therefore, the maximum entitlement of tariff lines for SPs shall be adjusted to 25 percent.

Third, there shall be no new differentiation of SP treatment due to the exchange mechanism. Whether or not it is transferred from Sensitive Products, the same treatment shall be applied to a SP. In other words, the total number of SPs shall be allocated in accordance with the proportion under Paragraph 123.

The G33 said that it had earlier requested that the provisions of no TRQ (tariff rate quota) commitments and no tariff capping on SPs, should be clearly stipulated in the SPs modalities. The G33 proposed that a text language on "no TRQ commitment" shall comprise the following elements.

First, all products including those which have existing TRQs can be designated as SPs, whether designated under Paragraph 123 or 124.

Second, such designated SPs would not be subject to any creation of new TRQs or expansion of TRQs or change in in-quota tariff rate.

The Room E meeting on 11 April also discussed the Special Safeguard Mechanism (SSM) for developing countries.

The G33, again represented by Indonesia, presented its positions on this issue, focusing on three aspects: (1) product coverage; (2) the application of the additional duties on the applied or bound tariffs as well as the Chile Price Band Case; and (3) the remedy which must go beyond the Uruguay Round Bound Level.

On product coverage, the G33 said it would show flexibility by proposing that the product coverage shall be the maximum percentage of tariff lines to which any developed country Member was entitled to for the special agricultural safeguard (SSG) in the Uruguay Round.

The G33 retained its underlying view that the SSM shall be more effective, flexible, practical and operable for developing Members than the existing or any possible revised SSG. Thus, the maximum SSG entitlements in the Uruguay Round should be the minimum benchmark for the limitations of the SSM product coverage.

Indonesia underlined that this is a new and significant movement by the G33, from its previous position, of all agriculture products (being eligible for use in SSM, without restriction by number).

On the second aspect, the G33 noted that Paragraph 128 has suggested that the additional duty to be imposed would be applied on the Member's applied tariffs. The G33 acknowledged that its proposal on SSM did not clarify whether the additional duties are to be applied on the applied or on the bound tariffs.

The G33 said that, nevertheless, the existing SSG is also silent about this. The revised SSG proposals in the draft modalities also do not specifically mention whether the additional duty would be applied on applied tariffs or on bound tariffs.

The G33, as beneficiaries of the SSM, was of the view that the application of additional duties will be within the rights and national policy of a Member to decide. It is also clear for the G33 that Members will not need the instrument of an SSM in order to raise its duty from applied levels to bound levels. It is obviously the sovereign right of a Member to raise its applied tariffs to the bound levels.

As for the Chile Price Band Case, the G33 said that the Appellate Body had emphasized that variable import levies are measures which are inherently variable, as they "incorporate a scheme or formula which causes and ensures that levies change automatically and continuously".

The Appellate Body had also further emphasized that the frequency of changing the tariffs may not be a determinative criterion to stamp the action as resorting to "variable import levy". Moreover, "no specific frequency of change in resulting duties" is required for this.

According to the Appellate Body, for a levy to be considered inherently variable, what should be assessed is (I) the "extent to which changes are automatic and are based on an underlying mechanism or formula"; and (ii) whether there was a "strong element of automaticity in the measure at issue."

Therefore, said the G33, when a Member raises its applied tariffs to the bound levels, its action does not have any of the elements that would characterize it as a "variable import levy". It is neither automatic nor continuous and is not based on a scheme or a formula which would change the tariffs automatically without any legislative or administrative action.

The G33 was of the view that the ruling of the Appellate Body in the Chile Price Band Case does not inhibit a developing country Member to raise its applied tariffs to bound levels, which is its sovereign right and for which it does not need the SSM or any other instrument.

The G33 stressed that a safeguard measure is in principle required by a developing country Member not to increase its applied tariffs to bound levels - but to go beyond the bound tariffs. It is therefore fundamental that the additional duty in the volume-based SSM not to be applied only on the applied tariffs.

Since a Member is free to raise its applied tariffs to bound levels and may obviously opt to do so before considering applying additional SSM duties, effectively speaking, the SSM duties would be applied on bound tariffs and not on applied tariffs, stressed the G33.

However, if any Member wishes to apply the additional duties on the applied tariffs and not on the bound tariffs, it is free to do so and no one should have an objection to it, added the G33. That is the logical reason that the application of additional duties shall be within the rights and national policy of a Member to decide.

The G33 stated that in this respect, the exception that has been provided for the SSG in Article 4.2 of the Agreement of Agriculture - shall be also provided for the SSM as well. This is to ensure that the SSM remains a functional mechanism just like the SSG.

On another points, the G33 stressed that the remedy of the SSM must go beyond the Uruguay Round Bound Level and that this shall be part of any outcome of the SSM modalities. Even the proposed amendments to the SSG for developed countries allow for going beyond bound rates, as stated in Para 120(a).

To ensure that the SSM provides a mechanism which is more functional and operational than the existing SSG, the SSM remedies shall be applied without any artificial cap - whether a Uruguay Round or Doha bound cap.

The whole and basic principle must and shall be that all developing countries, including LDCs and SVEs, are entitled to the remedies that can go beyond the Uruguay Round bound level, said the G33.

This is a paramount condition that shall be attached to the SSM. Any emergency situation in any developing country shall be addressed adequately without any restrictions or limitations.

The G33 said that as it had stated in its last Room E intervention, this principle and crucial element of the remedies must and shall be agreed initially, before the G-33 would be in any position to consider other important elements of the SSM. This would also include the future possibility that LDCs and SVEs shall have a more favorable provision on the SSM.

Indonesia concluded that the G33 had provided its detailed views, stands and positions on the SSM during previous Room E Meetings, and "it all remains as been stated."

Nevertheless, the Group wanted to re-emphasize the following elements which still need to be incorporated into the SSM modalities:

  • First, the inclusion of the price-based SSM remedies being assessed on an ad-valorem basis; 
  • Second, the inclusion of the whole Article 7 of the G33 proposal on SSM, which would already constitute Paragraph 132 as a best endeavour and the transparency aspect of the SSM in Paragraph 137;
  • Third, the inclusion of Article 8 of the G33 proposal on SSM, which would reflect a provision that Members undertake not to have recourse in respect of such measures to the provisions of paragraph 3 of Article 19 of GATT or Paragraph 2 of Article 8 of the Agreement on Safeguards; 
  • Finally, the SSM shall remain in force as long as world production and trade abnormalities and distortions remain in the world trading system. +