TWN Info Service on WTO and Trade Issues (Apr08/09)
23 April 2008
Third World Network

Agriculture: Talks adjourned till 18 April, key issues unresolved
Published in SUNS #6457 dated 17 April 2008 

Geneva, 16 Apr (Kanaga Raja) -- An informal meeting of the Special Session of the WTO Committee on Agriculture that took place on Tuesday was adjourned until Friday afternoon, with the Chair of the negotiations saying that he was making use of the break to allow members to continue to work on resolving their differences on the issues of sensitive products, and tropical and preference products.

The informal meeting on Tuesday was slated to be the last meeting of the full membership before the Chair, Ambassador Crawford Falconer of New Zealand, sets about revising his draft modalities text.

The informal meeting was held for Falconer to report to the full membership on the latest round of negotiations spanning just over a week among a group of some 37 representative delegations (in Room E at the WTO).

A major highlight of the informal meeting on Tuesday was the differences of interpretation that emerged among a key group of six countries - the United States, the European Union, Australia, Brazil, Japan and Canada - which had recently introduced a paper on possible partial designation modalities for sensitive products. (See SUNS #6449 dated 7 April 2008.)

The differences were over an explanatory note that the six countries had planned to circulate to the rest of the membership - and which is now delayed. One issue concerning "sub-categorization" of products remains unresolved, with Australia voicing some concerns.

"On the sensitive products, to be honest, they don't even seem now to agree among themselves on what they agreed, so it's a little bit unsurprising that the rest of the membership is kind of scratching its head saying 'well, how are we supposed to agree to something you are still disagreeing among yourselves'," Falconer told journalists after the informal meeting. (see below).

While expressing concern about the delay in the written explanations, Falconer nevertheless told the informal meeting that the compromise is "clearly very significant".

Meanwhile, a group of tropical products exporters has been working with counterparts - particularly developed country importers - on a compromise list of products that would receive faster and deeper liberalization than normal, at the same time taking the importers' sensitivities into account.

According to trade officials, the group has asked for a few more days to finish the consultations and promised to report to the Chair and members on 18 April. However, the question of how to deal with the overlap between tropical products and those receiving trade preferences also has to be resolved.

"A number of questions are being raised as to the chances of success of a horizontal (process for negotiating agriculture and NAMA) in these circumstances," Ambassador Ujal Singh Bhatia of India commented to journalists.

At the informal meeting, India also stressed the need to acknowledge that the political uncertainty regarding the Doha Round negotiations have deepened with recent developments in the US. It cited the vote in the US Congress over the Colombia free trade agreement, which it said raises fresh questions about the possibility of conclusion of the Doha Round this year.

According to trade officials, with a number of delegations still on the list of those waiting to speak, and a number of issues still under discussion among members, the informal meeting on Tuesday was adjourned until Friday afternoon.

Falconer said that he was making use of the break to allow members to continue to work on resolving their differences on two issues (sensitive products and tropical and preference products), to report back on Friday and to allow the membership as a whole to decide how these issues should be handled.

According to trade officials, the Chair reported - and members confirmed - that they have made some progress in the latest round of negotiations among a group of 37 representative delegations, but smaller groups among them are still trying to reach a compromise on sensitive products and on tropical and preference products. Beyond that, a number of other issues are also "loose ends".

Describing the negotiations among the 37 delegations, Falconer said: "I detected clearly some significant progress, ... some signs of real negotiation on some sensitive and delicate issues." Unlike six or even three months ago, members are now putting their "final cards" on the table, he said, adding however that some serious differences also need to be resolved.

One of the questions that Falconer asked members to decide on Friday is how to handle some of these unresolved issues in his next revised draft "modalities", which he said is unofficially expected in the week of 28 April. For example, trade officials said, on sensitive products he could simply insert the text that the group of six members have already submitted, even though it is not accepted even among the six, or he could provide alternative options, or the members could produce an accepted compromise for him to use - which would take more time.

Falconer reported that the emphasis of the recent meetings was on market access issues, with less time spent on domestic support and export competition.

On sensitive products, the US spoke on behalf of the six countries that have been working on the method for calculating domestic consumption. It reported that the original 4-page summary of the method, which a number of members found difficult to understand, has now increased to 12 pages.

One issue remains to be resolved among the six, the US said. This concerns "sub-categories" of products and whether the result should still be a single quota for the whole product category or whether the quota could be split between two sub-categories.

During the debate, Australia argued for keeping a single quota, while the EU said that members should be able to split the quota.

Falconer reported some concerns that other members had raised in his Room E discussions. Some countries were concerned about the impact on particular products that they export - some developing countries want to add products that are sensitive for them to the list of candidate sensitive products; and the Tropical Products Group want some of their products removed from the list, he said.

A number of countries (Argentina, New Zealand, Uruguay, amongst others) said that this issue would need to be clarified before they can agree on "modalities", including a chance to look at the data to see what the real implications are.

Separate from the question of estimating domestic consumption, members' positions are converging on some proposals for developing countries, said Falconer. Those who want to declare products currently without tariff quotas as sensitive products (not allowed for developed countries) could be allowed to do so without creating new quotas if the tariffs take the full cut from the formula but over a longer period, he said.

However, other proposals such as a smaller cut over a shorter period, face opposition, the Chair said, adding that some countries might be able to create Special Products instead of using their right to designate sensitive products.

With respect to tariff quotas - in-quota tariff rates and quota administration, Falconer said that members carefully avoided the "elephant in the room" of whether new quotas can be created, an issue over which they are sharply divided. He reported some flexibility on in-quota tariff rates, but no consensus yet.

There was also some flexibility, but no consensus, on in-quota rates for developing countries, some moving away from their insistence on no cuts, he said. And on quota administration, where one of the main concerns is about a "quota fill mechanism" turning into an obligation to fill quotas, some members are working among themselves on compromise text that would allow the mechanism to operate without being an obligation to fill.

On tariff simplification, the Chair said that members on both sides of the debate did not seem interested in a complicated compromise, preferring to leave to ministers the straight question of whether all products should end up with ad valorem duties. However, members did seem to agree that the more complex types of tariffs should be replaced by simpler forms.

On tariff escalation, Falconer reported a likely convergence on how the relevant products would be treated (an identified processed product would take the steeper tariff cut of the band in the formula above the one it is in, and an additional cut if it is in the top band). More controversial is the list of products that would be covered. The Chair predicted that this would mainly be "vegetarian" - cereals and cocoa/chocolate.

On Special Products and the Special Safeguard Mechanism, the discussion "went backward" with positions hardening, said Falconer. He said that the positions that members have adopted reveal a preference to leave this to ministers to decide - to leave them the "maximum negotiating room". "So, you're stacking up issues for ministers to resolve," he said.

The G33 voiced concerns over a group of exporters (Australia, Canada, Costa Rica, Malaysia, New Zealand, Paraguay, Thailand, the US, and Uruguay) for submitting a paper containing proposals that the G33 had already rejected.

(According to trade officials, these proposals include a smaller number of Special Products (8%) than the G33 has proposed (around 20%), none with zero cuts, and "filters" to rule out products that are important for exporters' trade.)

As regards tropical products and preferences, trade officials said that in addition to the Tropical Products Group's report on its consultations with developed-country importers, the meeting also heard countries receiving preferences (particularly, the African-Caribbean-Pacific Group) reject the argument that the mandate gives priority to tropical products.

The Chair reported that there was little or no discussion on other market access issues, reflecting little change in positions.

On the Green Box, trade officials said that the main stumbling block is on how to deal with exceptional changes to base reference periods for income supports that are "decoupled" from production. Falconer said that the two sides understand each others' concerns better although they have not found a way to deal with it.

Countries worried about the effect of changing reference periods have proposed constraining the effect by banning an increase in the overall budget; those seeking some flexibility say that this goes too far. Both sides recognize that the real issue is the effect on production, not the budget as such, the Chair said.

On the issue of developing countries' stock-holding (supports allowed without limit because they do not distort trade, or do so minimally), some progress has been made on writing the provisions so that developing countries can intervene in the market by buying at above market prices in order to stock food for food security, without falling foul of disciplines on distorting support, said Falconer.

There was little discussion this time on export competition, with the Chair saying that he has already described the positions on export finance and food aid.

A range of countries spoke at the informal meeting, as well as country groupings such as the African Group, the G33, the Least Developed Countries, the Small, Vulnerable Economies, and the G10.

According to trade officials, three groups of issues were mentioned repeatedly: the method of estimating domestic consumption, which will be used to calculate the size of tariff quotas on sensitive products; tropical and preference products; and Special Products and Special Safeguard Mechanism.

Trade officials said that while many members accepted the need for urgency, several said that the pace should be set by the content, and not by timetables. Argentina and India voiced strong concerns about what they saw as the folly of trying to move to a "horizontal" process when there are too many unresolved issues or before relevant data are circulated.

Indonesia, speaking on behalf of the G33, acknowledged that unless positive efforts are made to narrow the existing gaps and the Members walk an extra mile to move towards possible convergence, the revision of the draft modalities would not be an easy task for the Chair.

The Group expressed deep disappointment at the hardening stance some Members have chosen to take, in regard to Special Products (SPs) and Special Safeguard Mechanism (SSM). Coming out with new, but extreme contributions at this late stage of the negotiations is indeed discouraging.

"What makes it worse is that, its contents are completely divergent. It has only served to widen the existing gaps between the positions on different issues, rather than converging towards a possible mutually acceptable solution," said the G33.

Most of the maximalist positions taken in the new job document are those, which have been rejected by the G33 time and again, after intense discussions. Moreover, these extreme positions were not even on the table for any negotiations in the recent months. For example, said the G33, the so-called filters in the document are in the nature of the negative indicators which were proposed by two members in early 2006 and have since been rejected by the Group.

Similarly, the insistence that the maximum number of entitlement for SPs will be 8% - even when the draft modalities as well as the revised version propose a minimum of 8% SPs, without use of any indicators - only conveys the impression that there is no inclination whatsoever for convergence or a mutually acceptable solution.

Such suggestions are indeed not constructive and not acceptable to the Group, said Indonesia, adding that it was very disappointing for the Group to see that the very recent Room E negotiations and engagements on SPs and SSM have been driven to the opposite direction.

Noting that hardening stance at these late stages were re-introduced, the G33 said that it cannot see this as an encouraging engagement to move the agriculture negotiations forward, especially in the effort of closing the remaining gaps or to achieving possible convergences. The G33 said that it has repeatedly underscored the political and economic importance of sufficient number of tariff lines with zero cuts. It reiterated again that the concept of some SPs with no cuts, is not negotiable for all Members of the G33.

The Group further expected that the Chair's upcoming revised draft text would have clear modalities on the strict observance of the principle of self-designation, an effective exchange mechanism between sensitive products and SPs as well as no TRQ commitments on SPs.

Indonesia stressed that the G33 would also like to record its serious concerns on the suggestion made for the identification of SPs prior to the modalities stage. This is not only because of its timing, but also with its clear infringement of the self-designation principle of SPs. "These kinds of calls are indeed in contrary to our mandate. At our current stage of negotiations, we are still far away from seeing a list of products - even for sensitive products," said the G33, adding that it sees no merit in engaging in such a discussion, prior to the modalities stage.

In regard to product coverage in the SSM, the G33 said that it has made a significant movement from its original position of all products to specific percentage of tariff lines in a given twelve-month period. Following this, the G33 hoped to have a constructive engagement and similar movement from others. "Unfortunately, there was neither."

Recalling the clear mandate for the SSM, the G33 emphasized that continuing distortions, including those caused by subsidies, require developing countries to safeguard their essential development concerns. An effective, simple and easy to operate SSM is crucial to guard against any market instability resulting from import surges or price depressions and, as long as there is abnormality in the world trading system.

Therefore, said the G33, the mechanism must be neither more cumbersome nor stringent than the existing SSG (special agricultural safeguard) - be it in terms of product coverage, triggers or remedies. For the G33, the concerns of small, poor and subsistence farmers in the developing world cannot be compromised for pure and exclusive commercial considerations or interests.

The G33 stressed that SPs and SSM are core development issues not only politically but also because of the diverse economic compulsions existing in the developing countries. The outcome of the Doha negotiations will be sustainable only if it enables the developing countries to meet their development objectives.

Reiterating that the issue of developing countries' flexibilities is not part of the problem, but it is indeed part of the solution, the G33 said that the interest and needs of developing countries should rightly be placed at the heart of the Round, so that the development dimension of the Round is appropriately delivered.

In both SPs and SSM, the gaps between the positions of the proponents and that of the others continue to remain wide. No shortcuts or an imaginary text in the revised version of modalities can bridge these gaps.

While the Group would like to have an expeditious outcome, it would not favour an incomplete text or a solution thrust upon the Members. Instead, a mutually negotiated complete text of modalities is the ideal route to arrive at a solution that is acceptable to everyone.

India said that "at this crucial juncture, we have to clearly define our priorities based on our common commitment to an early and successful conclusion of the Round. We have to ask ourselves whether in the face of continuing differences on key issues, we have a good basis for a meaningful horizontal process."

"There are some areas which lend themselves easily to trade-offs in a horizontal process. There are others where the concerns are too fundamental for that and which need to be substantially resolved before we got into the horizontal process." In the latter category, India included issues such as SPs/SSM, Preferences, Tropical Products, among others.

"The discussion on these issues last week clearly demonstrated that we have a lot of ground to cover on these issues," said India, adding that the "discussion on SPs/SSM specially provided us no comfort."

The discussions on these issues have gone backwards. In SPs, the proposal submitted by some members in April has pushed the clock backwards. "It is obvious that we need to continue our efforts to find common ground on these areas which are central to our concerns on these negotiations, before we get into a horizontal process."

India also noted that there is need to acknowledge that the political uncertainty regarding the Doha Round negotiations have deepened with recent developments in the US. The vote in the US Congress over the Colombia agreement raises fresh questions about the possibility of conclusion of the Doha Round this year.

"In this background, it is all the more important that we get into the horizontal process with adequate preparation to ensure a reasonable chance of success. We cannot afford a failure of the horizontal process. Such a failure will be fatal to the prospects of the Round."

"It is therefore essential that we get into the horizontal process with a clear understanding on the contours of a package on key areas like SPs/SSM, Preferences, Tropical Products etc," said India, adding that if more discussions are necessary for that paper, they should be scheduled. "We cannot be hostage to artificial deadlines."

Speaking to journalists after the informal meeting, Falconer said: "On the sensitive products, to be honest, they (the six countries) don't even seem now to agree among themselves what they agreed, so it's a little bit unsurprising that the rest of the membership is kind of scratching its head saying 'well, how are we supposed to agree to something you are still disagreeing among yourselves'."

In response to a question, Falconer did not think that the work of the six countries was unravelling. "It sounds like they got a loose thread there."

There is obviously a disagreement about what they thought they had agreed to among themselves. As long as they have that disagreement among themselves, they are hardly in a position to convince everybody else that they should sign up to something that they don't quite understand the implications of up to now, he added.

According to Falconer, the problem was essentially about the size of the tariff quotas that they produce at the tariff-line level and it had to do with the question of sub-allocation and sub-categorization and the way in which that could be used in some members' views to shrink the outcome. +