TWN Info Service on WTO and Trade Issues (June08/20)
28 June 2008
Third World Network

Trade: G20 warns of recipe for failure and "race to the bottom"
Published in SUNS #6502 dated 24 June 2008

Geneva, 23 Jun (Martin Khor) -- The G20 developing countries in the WTO have reminded developed countries that agriculture remains the core of the Doha Round, and many issues remain unresolved. It warned that the renewed attempts by developed countries to extract a price from developing countries in other areas, especially NAMA, is a "recipe for failure."

The G20 criticised recent trends in the agriculture negotiations which it said were focusing on giving extra flexibilities and accommodations to the developed countries that were engaged in a "race to the bottom on the level of ambition on agriculture".

The G20 statement, issued after a meeting of the group on 20 June, is a response to recent media reports quoting leading officials of the European Commission and the United States that it is now up to major developing countries to move on opening their markets in NAMA (non agricultural market access) and services, since there has been good progress in agriculture (implying that there is agreement on the adequacy of developed countries' obligations in that sector).

"Negotiations in Agriculture are far from stabilized," countered the G20. "Progress in agriculture will determine the pace of NAMA and other areas of the negotiations and, indeed, the very decision to move to the next phase of negotiations."

The G20 statement started with the point that the Doha Round is at a critical juncture, and it wanted to comment on the current situation of the agriculture negotiations and its implications for the overall balance of the Round.

The group reiterated its well-known stand that agriculture is the engine of this Development Round.

Consequently, the level of ambition in agriculture will determine the level of ambition in other areas, particularly NAMA.

"The renewed attempt of some developed members to revert this logic and to try to extract a disproportionate price from developing countries in other areas is a recipe for failure," said the G20. "This is a Round to redress fundamental distortions in international trade rules and, thus, to contribute to development. These distortions reside mainly in Agriculture and linked to developed-country levels of subsidies and cumulative layers of market protection."

The G20 remarked that in the present agriculture negotiations, the focus is on "additional flexibilities" and "accommodations", with the developed countries "seeking to promote a race to the bottom on the level of ambition in agriculture."

The statement then highlighted some elements that remain open and that will have a bearing on the overall level of ambition in the Round.

On Domestic Support, said the G20, "we need a clear indication of the contributions of the main subsidisers. In the Agriculture text, we have an architecture and several layers of specific flexibilities for developed countries. But so far, we have no indication on what those countries are prepared to do in terms of the ranges."

The G-20 said that it had consistently reiterated the mandate for substantial reduction in domestic support levels. "We have been stressing the central linkage between effective cuts in OTDS (overall trade distorting support) and product-specific disciplines. Only substantial and effective cuts will deliver on the Mandate."

The range in the Agriculture text must be seen in light of the new circumstances in agriculture trade due to rising food prices, said the G20.

"The USA 2008 Farm Bill is a discouraging signal," it added.

On Cotton, a central issue due to its impacts in terms of development, particularly in poor African countries, a solution is not within sight.

Furthermore, said the G20, we must ensure that "green box" domestic support payments have no, or at most minimal effects on production. "We cannot allow for the disguised transferring of distorting subsidies to the Green Box. Developed countries bear the main responsibility for this reform. They must demonstrate their readiness to make a decisive contribution for the success of the negotiations."

On the Market Access pillar, the G20 critically remarked that the method for achieving convergence has been the constant accommodation of developed countries' sensitivities and concerns.

Nevertheless, this (i. e. the accommodation of members' sensitivities) has not been pursued across the board in other areas of the Single Undertaking, said the G20, referring to the neglect of the concerns of developing countries in other issues.

This (the accommodation of developed countries' sensitivities) has a price in terms of the level of ambition, said the G20. The options on the table do not seem to fulfill the mandate for substantial improvements in market access.

The G20 said that it will assess the balance in the Market Access pillar and its relation to the NAMA text as mandated by Paragraph 24 of the Hong Kong Ministerial Declaration, making the following points:

* The ambition of cuts in the tiered formula for developed countries depends largely on the cuts for the top band. A true minimum average cut of 54% for developed countries must be part of an ambitious result.

* The tariff capping, an integral part of the formula and of the G-20 proposal, must be part of any final Modality text. Its inclusion has received the support of a large number of developing and developed countries. Without the capping, we will be reinforcing disparities between agriculture and non-agriculture market access, a result that contradicts the Mandate.

* Full tariff simplification must be achieved. A true process of reform in agriculture trade would be incomplete with the partial simplification of tariffs.

* The SSG (the existing special agriculture safeguard) in developed countries must be eliminated for all products from the beginning of the implementation period.

* On sensitive products, there must be meaningful TRQ expansion that effectively compensates for the deviation from the formula. Some low level of ambition has already been locked-in in one of the options in the Chair's text and some developed countries are still seeking additional levels of flexibilities. The G20 stresses that no TRQ should be created. TRQ creation would be a step backwards and would compromise the objective of long-term reform in Agriculture.

The G20 statement highlighted the importance of making special and differential treatment and other flexibilities for SVEs (small vulnerable economies) and RAMs (recently acceded members) operative and integral to the negotiations in the three pillars.

The G20 also highlighted the importance of special products in addressing the food security, rural development and livelihood concerns of developing countries, and of the special safeguard mechanism for developing countries.

On Export Competition, the G20 emphasised that the concerns of the NFIDCs (net food importing developing countries) and LDCs with regard to export credits must be fully addressed.

"In brief, negotiations in Agriculture are far from stabilized," stressed the G20. "Several substantive points unfortunately remain open. As a substance-driven process, progress in agriculture will determine the pace of NAMA and other areas of the negotiations and, indeed, the very decision to move to the next phase of negotiations."

The G20 concluded that it is prepared to work hard towards a balanced, ambitious and development-oriented outcome in the agriculture negotiations. +