TWN Info Service on WTO and Trade Issues (May08/29)
29 May 2008
Third World Network

Trade: Developing countries criticise imbalances in agriculture text
Published in SUNS #6483 dated 28 May 2008

Geneva, 27 May (Martin Khor) -- As WTO members gave their initial responses to the new agriculture modalities draft at a meeting on 26 May, it was clear that many complex issues remain unresolved and that there will be more than an uphill task to bridge the gaps which in some ways have become wider.

Several developing countries and their groupings, including the G20, complained that the new text had been catering to the sensitivities of developed countries and given them even more flexibilities to reduce their level of commitment, which would affect the extent of market access into these developed countries.

On the other hand, developing countries with defensive interests, led by the G33, expressed their concerns that their interests had not been reflected in the new paper, especially on special products (SP) and special safeguard mechanism (SSM).

Many developing countries, including the ACP Group, the G33 and India, called on the Chair to issue another revised text before the start of the horizontal process. They wanted the horizontal process to start only after adequate progress in the agriculture negotiating group and a new revised text.

In a strongly worded statement, India warned that "forcing a horizontal discussion with so many untied loose ends is doomed to failure." It told the agriculture negotiating group that "abdicating responsibility for narrowing differences and seeking convergence, and transferring the onus for such convergence to the horizontal process is a fool's errand."

The European Commission in turn warned other members that they cannot expect any more concessions from the EU. It was time to "move on" and those who push for slippage (i. e. more time for discussion) were pushing for failure.

Several members remarked that the new US Farm Bill had an adverse effect on the WTO negotiations. The US did not refer to the Farm Bill in its statement. Speaking to reporters after the meeting, Ambassador Crawford Falconer of New Zealand, chair of the agriculture negotiations, admitted that the Farm Bill has complicated matters for the WTO agriculture talks.

The concern of the countries who spoke was that the Farm Bill could lead to the US increasing instead of reducing its domestic support. Canada said that under some reasonable assumptions, the bill could allow support on a single product that would approach the US's limit for distorting support under the draft "modalities".

It was agreed that more discussion will be held in a small-group format (involving 37 delegations), starting with domestic support on Tuesday afternoon, with another meeting on Thursday, an open-ended meeting on Friday, and possibly more meetings next week.

Falconer told reporters: "There are fewer and fewer issues that need to be fixed," but "there are still differences" and some of these will have to be settled by ministers.

Several speakers indicated that the text can be used for further negotiation. But some said the Chair had removed square brackets from some items even though they had not been agreed.

On market access, there were differences on whether a tariff cap should be imposed for developed countries. This was favoured by the Cairns Group and G20, with the G20 (represented by Brazil) saying that the text's alternative formulation is inadequate. The G10 (Switzerland, Japan speaking) were strongly against any tariff caps.

Another issue of contention was sensitive products. While the text was seen as making progress in this area, other countries complained that the new proposal on calculating the expansion of tariff quota for these products was complex and was designed to cater to sensitivities of particular developed countries.

However, Canada, which was one of the proponents of the proposal, said it opposed expanding tariff quotas on sensitive products, and to cutting tariffs on quantities outside the quotas.

The G33, represented by Indonesia, and some of its members, complained that some of the group's proposals were not included in the text, especially aspects of SPs and SSM.

On the other hand, Thailand and Paraguay, which are against the G33 on these two issues, said they kept to their view that there be a smaller number of SPs and opposed that some SPs be exempted from tariff cuts.

The US was concerned that the options for flexibilities for developing countries may mean very small or no increases in market access, or even reductions in access. It wanted to be assured that there would be some access.

On domestic support, some countries voiced concerns about special flexibilities designed for some members, especially the US. The G20 called again for changes in disciplines on Green Box subsidies. The G10 was opposed to this.

On cotton, the four African countries (C4) asking for accelerated cuts on cotton subsidies (represented by Burkina Faso) complained that the US had not submitted a counterproposal to their proposal and that the EU was rejecting a "systemic" approach. The US accepted that there had been little progress in cotton. The EU defended itself and its own proposal which it said was in support of the C4 proposal.

The global crisis of rising food prices was touched on by some speakers. For example, India wanted a paradigm change in the negotiations, aimed at cutting distortions such as subsidies while prioritizing foods security concerns of developing countries.

Other countries, especially Cuba, called for more flexibility in food aid and in developing countries' repayment periods for export credit. Japan asked members to consider its proposal (with Switzerland, also supported by Kuwait) to discipline export restraints.

The G33 (represented by Indonesian Ambassador Gusmardi Bustami) said the group was deeply concerned that new and even more divergent elements on SPs and SSM have been brought into the new revised draft text. It referred especially to Paragraphs 118, 120, 125, 128, 129, 131 and Footnote 17.

All this has significantly disrupted the balance of a workable draft text on SPs and SSM, said the G33. It was "very concerned with the new imbalances which exist in the current draft modalities text."

The new draft text shows that the SP and SSM issues had been dealt with in an arbitrary way. This, said the G33, is in contrast to other issues in other areas where the various views have been accommodated or treated in a more balanced manner.

The G33 said that since last September, it had shown willingness to engage constructively, but its views on SPs and SSM have not been incorporated. Even the most recent new positions of the group (the concept of a percentage of tariff lines in the product coverage of the SSM, the ad-valorem price based SSM, and the specific flexibilities for RAMs on SP cuts) have not been reflected in the new draft.

For the G33, a workable revised draft text is the only way to move to the next level of negotiations. It called for another new revised draft text - at least, on SPs and SSM - which is more balanced, factual and comprehensive.

"Any horizontal process shall only proceed once we all have the same level of comfort and confidence on all the agriculture issues," said the G33. "This suitable level of comfort can only be achieved through another new revised draft text on SPs & SSM. After all, we have all committed to the substance driven process in our negotiations."

In light of the wish of the Membership to put substance over process, the G33 stands ready to engage in intensive negotiations (in the agriculture group) well into the early part of June.

On the suggestions by other members on transparency on SPs, the G33 said that having transparency on SPs, before we can even agree on the full modalities, would not be constructive at all. With this kind of proposal, how can we expect to advance or reach possible convergences, firstly, on other fundamental elements of SPs and SSM, said the G33.

It added that transparency on SPs shall materialize only when there is an agreement on the modalities.

India said that the unfolding global food crisis has serious implications for the Doha Round. Last week, the FAO reported that the global food price index has risen by 53% this year over last year to the highest level on record and that the food import bill of vulnerable country groups this year could be 4 times as much as in 2000.

The report emphasizes that urgent, new steps are needed to prevent the negative impact from escalating [food prices] and recommends measures to quickly boost crop production by focusing on long-term solutions. Food riots have already been reported in around 30 countries.

India said this stark reality must inform our negotiations. "Clearly, we need a paradigm shift in our approach to global agriculture and the results of our negotiations must reflect this.

"The clear implication is that the twin objectives of the negotiations have to be: (I) an ambitious outcome aimed at substantially reducing the distortions in agricultural production and trade and (ii) according primacy to the food security concerns of developing countries."

Elaborating, India said an effective reduction in domestic subsidies calls for a real cut, in line with the mandate, and doing away with carve outs created for individual developed countries.

To a large extent, the ambition in the Round will be determined by the ambition we achieve on this issue. Special dispensations for individual developed Members in product-specific disciplines in AMS or Blue Box are simply not justified, said India, adding: "Surely, record levels of global prices for most agriculture crops justify faster slashing of subsidies.

"We are also dismayed to note that a long-standing proposal of the G20 to provide income disciplines in the Green Box provision of decoupled income support, which has been found to be significantly trade distorting, has been ignored completely in the text. On the other hand, peripheral issues like historical updates of the base period, a demand of the heaviest subsidisers, find more than a modicum of comfort in your text.

"Your latest text reflects that we have not made progress since July 2007 on any domestic subsidy issue. This is a matter of serious concern as we cannot expect developing countries to exhibit flexibility on issues of interest to them while the major issue of subsidies is left to be decided at the end."

India said that regrettably, the carve outs for developed Members is not restricted to the Domestic Support pillar. In Market Access too, the revised text not only maintains certain dispensations for developed countries, but also adds new flexibilities.

For example, the minimum 54% cut in the formula for developed countries has been made less stringent by including additional cuts relating to Tariff Escalation and Tropical Products. The removal of the word "dutiable" from Sensitive Products provisions, the tailor-made flexibilities carved out for individual Members in the partial designation methodology and the absence of Tariff Capping in the text despite an overwhelming majority of the Membership being in its favour, are just some examples of S&D provisions for developed countries which reduce the level of ambition of the Round, said India.

On the other hand, added India, the text on issues of vital concern to developing countries and to India - that of Special Products and SSM - does not reflect "where the Members are" in the negotiations in this area and there are a number of "inventions" or "imaginations" (to use the Chair's own words) in the text on Special Products and SSM despite his commitment to the contrary at the May 9 agriculture meeting.

There was no convergence on average cut for the Special Products in the non zero category or on differentiated treatment for Special Products converted from Sensitive Products or on the exchange rate, said India.

"Yet, your text suggests agreement on these issues. Similarly, in SSM, the issues of cross check, exclusion of preferential trade from the calculation of volume or price triggers, duration of the volume based remedy or the duration of the measure itself, witnessed substantial divergence in Room E between the proponents and others. However, these are reflected in the text without square brackets and thus tend to prejudice our negotiating positions."

Finally, under the Export Competition pillar, India was disappointed that the maximum repayment period of 360 days that it had sought has not been reflected in the text.

Similarly, its proposal for the amendment of Article 9.4 of the Agreement on Agriculture to provide more certainty to developing countries that they can avail of transport subsidies for 5 more years than the developed countries even if they had not scheduled any such subsidies in the Uruguay Round, also does not find reflection in the text.

On the negotiating process, India said that given the nature and extent of divergence on various issues, it expects that a new revised text incorporating the discussions in the negotiating group will be issued before we move on to the horizontal process. "Forcing a horizontal discussion with so many untied loose ends is doomed to failure."

India was open to any proposals of the Chair to continue the group's negotiations. "But, about one thing we are certain - abdicating responsibility for narrowing differences and seeking convergence, and transferring the onus for such convergence to the horizontal process is a fool's errand."

China said there is much work needed to reduce outstanding issues before there is a good basis for the horizontal process. It called for sufficient time for consultations in the negotiating group before we can enter the next stage.

China added that imbalances have not been well addressed, in terms of the different concerns of developed and developing countries. On one hand, developed countries' concerns have been well accommodated through many flexibilities on OTDS reduction, disciplines on product-specific AMS and Blue Box payments, TRQ expansion on sensitive products and tariff capping.

On the other hand, concerns of developing countries on food security and livelihood security are not well addressed, including SP, SSM and the TRQ under-fill mechanism.

It called on further improvement on OTDS and product-specific disciplines, to prevent concentration of support and ensure effective cuts. Actually, said China, the round is all about the phase-out of trade distortions in agriculture.

On SP and SSM, there are still huge gaps between the text and our expectations, said China. There are fundamentally contradicting opinions on SP. Given the huge gaps, China was not confident of the overall outcome unless there is further improvement.

On recently acceded members (RAMs), China was surprised by changes to provisions for RAMs on flexibilities in tariff reduction and SPs. It is hard to understand these changes which are not originating from open discussions in whatever formats. It sought clarification from the Chair on the changes which are inconsistent with the principle of "the higher the tariff, the deeper the cut." The RAM issue must be effectively addressed, said China.

China also had serious concerns on the text regarding reduction of in-quota tariff and the TRQ under-fill mechanism, which is not mandated by the July framework. China had no intention of discussing or creating such a mechanism which had no legal basis.

Nigeria, represented by Ambassador Yonov Agah, said the changes made in the text on SP and SSM would prejudice its position on those issues. In particular, it was concerned that the new elements introduced on SSM can constrain the utility of this instrument. This treatment is at variance with the flexibilities or alternative scenarios accorded to sensitive products.

Since the FAO's empirical evidence shows that a developing country can experience many simultaneous import surges at the same time and in many products, it is better to reflect the G33 position which does not want any restrictions on the number of times the SSM can be invoked, said Nigeria.

Indeed, the present text does not conform to the principles and architecture on the use of the SSG by mostly developed countries. Some of them have invoked the SSG more frequently than it is being envisaged for the SSM. To provide the mandate that the SSM be more flexible than the SSG, Nigeria asked the Chair that ensure that in his next draft that the value and usefulness of the SSM as a development tool is fully realised.

It also urged the Chair to retain his February 2008 text on the use of SSM for both MFN trade as well as products affected by FTAs.

Cuba said that to enter a horizontal process, the overwhelming majority of pending issues must be resolved, and under the mandates of real and effective participation of all delegations in the negotiations and decisions making.

Its main disagreement with the text is that on domestic support, the figures had not changed although the actual expenditure of the developed countries have considerably diminished, due to the high food prices worldwide. The figures proposed in this text, which would leave several billion of dollars above the subsidies actually applied are not justified, are not necessary, and will not lead us to an acceptable and balanced outcome conform with the development mandate of this Round.

The concessions that developing countries could accept in access to agricultural and non-agricultural markets depend essentially on the concessions that developed countries assume in the issue pending now for decades on a real reform of their agriculture, which would include a real reduction of their subsidies.

The texts of Agriculture and (NAMA) as they are today, present an imbalance between the concessions within an area and also between the two areas of negotiation (agriculture and NAMA) clearly in favour of the developed countries. Correcting this unbalance in agriculture is an indispensable prerequisite before developing countries can accept the concessions proposed in the text.

Moreover, said Cuba, we are not clear about the meaning of this exercise when the US Congress has approved a new farm bill that maintains and increases domestic support in several products beyond what we are negotiating here. Also, the US President does not have Congressional authorization to negotiate in the WTO, so the eventual outcome of these negotiations risk falling into a legal limbo or may be modified by the new government and Congress that will arise from the US elections.

On these issues we need clarification and clear and firm commitments by the authorities of the executive and legislative of that country, said Cuba. It also criticized the difference in treatment of the SSG and the SSM in the Chair's text.

The Africa Group, represented by Cote D'Ivoire, also said flexibilities had been provided to developed countries in other areas, but the options proposed by the Chair for the SSM will constrain our ability to use this instrument effectively as a development tool. The Group said this is a serious area of imbalance in the text.

The African Group emphasized that any remedy chosen for SSM should allow duties to be raised beyond the Uruguay Round bound rates as needed. +