TWN Info Service on Trade and WTO Issues (July08/21)
22  July 2008
Third World Network

Trade: G33 complains about SSM, SP in final agriculture meeting
Published in SUNS #6520 dated 18 July 2008

Geneva, 17 July (Martin Khor) -- Continued serious divisions on special products (SP) and special safeguard mechanism (SSM), as well as lack of agreement on the interface between tropical products and preference products are still among the most critical unresolved agriculture issues on the eve of the WTO's mini-Ministerial week.

At the same time, delegations are also still awaiting any signal or change in the position of the United States on domestic support, especially the key figure on overall trade-distorting domestic support (OTDS).

At an open-ended meeting on agriculture this morning convened by Ambassador Crawford Falconer of New Zealand to discuss reactions to the revised draft modalities (issued on 10 July), the G33 group of developing countries with defensive interests in agriculture made several strong criticisms on the text in relation to SP and SSM.

Some G33 members, including India and China, supported the group's statement and added their own critical points. Other groupings, including the G20, the Africa Group, the ACP, Cairns Group and G10 also made statements. The United States and European Union appeared to strongly support the Chair's draft in general.

Falconer, who chairs the Doha agriculture negotiating group, told the meeting he had held some consultations after his text was issued, with further discussions on SP, SSM and in quota tariffs. He was disappointed not to be able to come up with a new annex on tropical and preference products as there had not been agreement on this and he doubted he would be able to issue a revision (with this annex) before the mini-Ministerial starts on Monday. After that, the process is beyond his control, he told members.

The meeting heard reports from the two groups of countries, those advocating steeper and quicker cuts in tropical products, and those who want slower cuts in products currently covered by preferences. There is an overlap of some products in the two lists, and this is the source of the problem.

Costa Rica (for the tropical products countries) said the overlapping products had been cut to 42, and with the exclusion of another 30, there are only 12 products remaining which have to be acted on. Mauritius, for the ACP group (which is advocating the longer implementation period for preference products), agreed there were 12 overlapping products that remain to be resolved.

On the domestic support pillar, there was little discussion on OTDS, amber box, blue box and de minimis support of the developed countries, according to a trade official. The key decisions on figures (many of which are in brackets) and rules have to be decided at the political level next week.

On proposed changes to the Green Box, the EU with the support of the G10 were in favour of the new language in the text on "fixed and unchanging base period", but Argentina was in favour of retaining the existing text in Annex 2 of the agreement on agriculture. In the market access pillar, the G10 signalled that the higher numbers in the 66-73% range for developed countries' tariff cuts in the top tier of tariffs (higher than 75%) was unacceptable to them.

On the capping of tariffs at 100% by developed countries, the G10 had a problem with the Chair's suggestion that tariffs above 100% are only allowed for sensitive products and that there has to be "payment" for this through expanding the tariff quotas for products exceeding the cap. The G10 did not want the payment condition. It also objected that the 100% cap be placed on non-sensitive products.

On SP, the G33 insisted that some SPs should explicitly be allowed zero tariff cut (exemption from tariff reduction). Some Cairns Group members on the other hand said that all products should be subjected to cuts. On SSM, the G33 and its members strongly criticised the text for being restrictive in many ways, including that the triggers are too tough, the remedy (raising the duty) is too small and that there are too many constraints on exceeding the pre-Doha bound rates.

On the other hand, a few exporting developing countries said the SSM triggers are too lenient and the additional duties should not allow the tariffs to go beyond the present (or pre-Doha) bound rates.

There were also disagreements on in-quota tariffs (how high or low they should be set, including whether they should be at zero) and on tariff quota administration
(with China saying that developing countries should be exempt from having to take action (as referred to in Annex E of the Chair's text) in the event of under-fill, i. e. that actual imports do not come up to the amount set for the quota.

According to a trade official, at the end of the meeting, Falconer said that what he had heard from members showed there was no convergence on the issues that are divisive. If that remains, then "what you see is what you will get".

In its statement, the G20, represented by Indian Commerce Secretary Mr. G. K. Pillai, said the group regards the text as a good basis for the next phase of negotiations, and it appreciated the inclusion of a number of G20 positions and ideas in the three pillars. "We have a clearer picture of possible landing zones," said G20."We have reached the moment of truth. Developed countries must clearly state what they are prepared to do. Developed countries must now show whether they are prepared to live up to the Mandate for substantial reductions in trade-distorting domestic support; for substantial improvements in market access; for the elimination of all export subsidies."

The G20 reiterated the centrality of Agriculture in the Doha Round. "Members should be clear that the G-20 and, in fact, all developing countries will be united by the principle that the level of ambition in agriculture will determine the level of ambition in other areas, particularly NAMA. It is the contribution of developed countries to agriculture reform that will determine the level of ambition in this Development Round."

On Domestic Support, developed countries must demonstrate their readiness to make a decisive contribution for effective cuts in OTDS and effective product-specific disciplines, said the G20. Results for Cotton that respect the mandate are absolutely essential. Green payments must have no, or at most minimal, effects on production. "We are convinced, however, that those several layers of specific flexibilities for developed countries in product-specific disciplines should have been eliminated in your text," added the G20.

On Market Access, "once again the method in your paper for achieving convergence has been the constant accommodation of developed countries' sensitivities and concerns," said the G20. The whole category of "sensitive products" and the very option of partial designation are major concessions from developing to developed countries. The "'buy out" capping for Iceland, Japan, Norway and Switzerland on paragraph 76, which will apply for both sensitive and non-sensitive products, is an additional instance of flexibility.

This has a price in terms of the level of ambition in developed-country market access, said the G20. "We now have diametrically opposed options for key issues: sensitive products; SSG; tariff simplification; TRQ creation. Depending on the option taken, a completely different picture will emerge. "We stress that not all the alternatives will fulfil the Doha Mandate for substantial improvements in market access and the Hong Kong Mandate for balance between Agriculture and NAMA (Paragraph 24). "Particularly, the G-20 remains firmly against new TRQ creation, which would be a step backwards and would compromise the objective of long-term reform in Agriculture. Furthermore, a true process of reform in agriculture trade would be incomplete with the partial elimination of the SSG or the partial simplification of tariffs."

On Export Competition, the G20 said there are a few points we need to address on Food Aid. The elimination of export subsidies by 2013 is correctly preserved. The concerns of the NFIDCs must be fully addressed. The G20 also highlighted the importance of making S&D treatment and other flexibilities for SVEs and RAMs operative and integral to the negotiations in the three pillars. It also highlighted the importance of SPs, in addressing the food security, rural development and livelihood concerns of developing countries, and of the SSM. It is prepared to work constructively to find a balanced solution for these issues of interest and concern to developing countries, according to the mandate.

The Group of 33, represented by Indonesian Ambassador Mr. Gusmardi Bustami. said the new draft is more simple, without too many square brackets. But this does not mean that convergence or agreement has been reached in areas that were shown in square brackets in previous draft texts. The G33 said it had made constructive movements from its initial positions on SPs and SSM - even though no encouraging flexibilities have been demonstrated by our negotiating partners.

"The G-33 would make it clear, that the specific architecture, elements and figures of SPs & SSM suggested in the draft text, are unacceptable. The Group does not view it as a fair, balanced and workable basis which would eventually create a constructive negotiation for success, as well as in securing the development dimensions of the Doha Round through sufficient and effective SDT provisions."

The G33 said it had demanded that key elements of SPs and SSM conveyed by the Group must be sufficiently incorporated in the new text. Only by that, could the Group accept that Ministers from the developing world and LDCs, have been provided with a fair, balanced, constructive and workable basis for a forthcoming negotiations on SPs and SSM. Unfortunately, this is not the case.

The G33 listed the following as its disappointment on SPs:

-- The concept of an overall average cut for all SPs is definitely not a workable suggestion. Instead, the draft text has chosen to maintain the possibility of no lines taking zero cut. The G33 reiterated that the zero cut treatment principle in SPs shall be part of a final outcome. There must be a simple and explicit tier with zero cut treatment. The absence of a zero cut treatment for a significant percentage of tariff lines will not be regarded as a feasible final outcome to the Group.

-- The cuts for non-zero SPs should not be higher than the cuts for sensitive products or ordinary agriculture products. The G33 had shown a constructive movement by considering a two-tier approach instead of insisting for a three-tier treatment of SPs. However, the draft has instead suggested an overall average cut approach for all SPs, including those which may not take any cuts. This would lead to a much higher cut on the non-zero SPs which could be higher than the cuts taken by sensitive products;

-- On footnote 19, the G33 sought clarification whether this would represent the Group's Hybrid Approach of a minimum number of SPs;

-- The deletion from the text of the option to transfer Sensitive Products entitlement to Special Products is unjustifiable and therefore should be reinstated.

-- The Group's request for an explicit provision on No TRQ Commitments and No Tariff Capping for SPs, including no reduction of in-quota tariffs has still not been accommodated. Thus, paragraph 105 which provides for the elimination or reduction of in-quota tariffs for all TRQ products is unacceptable. The group observed however that Paragraph 76 may to certain extent reflect the notion of no tariff capping for SPs.

-- The specific provisions on RAMs should be improved according to the basic structure of SPs treatment, rather than be shrunk in a manner of one tenth.

On SSM, the G33 said while the draft text has brought the triggers closer to the G33 positions, all the other elements accommodate the views and positions of the exporting countries. Said the group: "It is therefore clear that continued and unbalanced attempts are being made to make the SSM difficult and burdensome to operate, ineffective and meaningless. It is indeed another major disappointment for the Group." It gave the following examples:

-- The suggested remedies in paragraph 124 and paragraphs 133 to 136. The proposed remedies for volume based SSM are so low that they render the mechanism virtually not available for use. Simulations show that except for a few tariffs at the lower end, the application of the proposed remedies - even on the Doha bound rates - do not take the bound tariffs to the Pre-Doha bound level. The provision of breaching the Pre-Doha bound rates in Paragraphs 134, 135 and 136 is, therefore, rendered useless as the occasion to breach the Pre-Doha bound tariffs does not even arise.

-- In a few cases where the Pre-Doha bound levels are actually approached, the limit of breaching the UR bound levels by a mere 15, 20 or 40 is highly restrictive. Similarly, the draft text has maintained that the Pre-Doha bound levels would be acceded only for 2-6 products or 10-15 percent of tariff lines - despite the G33's position that the product coverage should only be in terms of a percentage of tariff lines and not in terms of number of products. Furthermore, going beyond the Pre-Doha bound levels is not permitted for a second consecutive period. All these conditions severely constrain the effectiveness of the SSM.

-- The condition in Paragraph 124 (d) severely constrains the use of the volume based SSM. It is not clear as to how will it be ascertained, whether and when, the absolute level of imports is negligible in relation to domestic production and consumption.

-- The cross-check in Paragraph 128 is of a mandatory nature and restricts the use of price based SSM. In all previous texts, the cross check mechanism was depicted on the "best endeavour basis", which has now been withdrawn, thereby accommodating the position of the exporters and ignoring that of the G33.

-- On paragraphs 126 and 129, the G33 has always maintained that the preferential trade should be included in the calculation of volume and price triggers. The G33 was willing to accommodate the proposal of the Chair in Rev. 1 draft text that preferential trade would be included only if the remedies are also imposed on preferential partners. The Rev. 2 and latest texts depart altogether from this position by mandating that only MFN trade will be used in the calculation of triggers.

The G33 also commented on other elements of the text on SSM which it said had neglected the group's requests: the usage of a preceding three year period instead of a most recent three year period, for which data are available; the application of additional duties on applied tariffs; paragraph 125, particularly the sentence in brackets; paragraph 131, limiting the duration of remedies only to two consecutive periods and linking it to seasonal products. Seasonal products in agriculture might as well be the same as all of agriculture products; paragraph 132, in particular the usage of "ongoing calculations" and the 15 days notifications; Footnote 22, the notion "publicly disclosed" - especially if it is made obligatory before any invocation of the SSM.

The G33 also questioned why paragraphs 135 and 136 (on exceeding the pre-Doha tariff levels) should be singled out to be presented in square brackets, while other existing elements of SPs and SSM which of course have not been agreed upon, are not put in square brackets. Consequently, paragraph 133 should also be eliminated or put in square brackets.

The Group had expressed willingness to negotiate on a two-windows approach (to the question of whether the pre-Doha bound rates could be exceeded). Most importantly, the second window (which shall consist of a reasonable and logical percentage of tariff lines, and not products) would allow for remedies that would go beyond the pre-Doha bound level, without any capping.

The G33 said the current paragraphs of 134 for LDCs, 135 for SVEs and 136 for developing countries are still too restrictive. "We just cannot imagine how the SSM - with such stringent restrictions - would be of any use in effectively addressing factual problems of import surges and price declines, in a trade distorted regime," said the G33. It added that the text should have explicitly written in Paragraphs 134, 135 and 136 that the Price Based SSM remedy can go beyond the Pre-Doha bindings.

"The G-33's fundamental positions on SPs & SSM, have not been fairly reflected in this Third Revised Draft Text," concluded the group. "The Group expects that a more balanced and workable draft text on Agriculture should have been feasible to be presented to our Ministers. Only a fair and more balanced draft text would guarantee any future constructive negotiations and, eventually achieve meaningful Doha development outcomes for all."

The G33 reminded members of the Hong Kong mandate on SP and SSM and said its request is simple: an appropriate number of SPs to provide the comfort level in the context of our food security and livelihood security and work towards rural development; and a Special Safeguard Mechanism that will be operable, effective and worth using in the case of need. "Anything less is not only unacceptable to the G-33, but also in direct conflict with the Hong Kong Ministerial Declaration which calls for appropriate number of SPs and stipulates that SSM is a "right" of developing country Members," it stressed.

China said there was an imbalance between what the developed and developing countries are asked to do in agriculture. The developed countries' interests are looked after while the developing countries' interests are not addressed, especially on SP, SSM and RAMs. There is need for improvement before the mini-Ministerial. It stressed that some SPs must be allowed to be exempted from tariff cuts, that the conditions for use of the SSM are too restrictive and that developing countries must be exempted from actions in relation to under-fill of tariff quota.

Argentina said it was important to succeed (in bringing down subsidies) as the big losers of the effects of subsidies are developing countries, for example, African countries had fallen from being net exporters to net importers of food because of the distortions. It asked that in OTDS there should be the highest cut as there is a lot of "water" (between allowed and actual levels), and on market access the highest cuts are also needed due to the high prices prevailing. Tariff caps are important. The SSG should be eliminated despite what the EU says, and the SSM must be such that duties remain within the Uruguay Round rates.

The United States spoke extensively about how the present text had improved over the initial July 2007 draft, with most progress being made in market access, and with the unprecedented clarity now on sensitive products. The EU said the text made the options clearer. It liked the language on the Green Box. There should not be too large a quota nor too steep a reduction in tariff quotas. Products should be allowed to be designated sensitive products even if there are no tariff quotas in the products at present. Elimination of the SSG for developed countries is not an option.

India, represented by Amb. Ujal Singh Bhatia, noted that the concerns of the developed countries have been safeguarded through various carve outs running right through the text. "We are, however, disappointed that the latest revision of the agriculture text does not adequately reflect our concerns on some issues that are of greatest significance to us," noting that its most pressing concerns are the proposals for SSM and SP. India was glad that the product limitation for the use of the SSM has been removed, but said the volume triggers need to be re-worked and the price trigger is still at an unacceptably high level.

"There are many restrictive features in the text, which will make the operation of the SSM extremely difficult in practical terms. The remedies under both the volume and price triggers are still far from adequate and would not serve to effectively protect our extremely vulnerable farmers from import surges and price dips. The number of lines that can breach the Uruguay Round bound rates is unacceptable and must be enhanced substantially. The remedies under the volume trigger are much lower than the G-33 proposals and would not permit us to even reach our Uruguay Round bound tariff levels in many cases, leave alone breaching these levels.

"The developing countries must have an SSM that is simple and easy to operate and cannot in any way be less effective than the Special Safeguards that have been enjoyed primarily by the developed countries for thirteen years and are also proposed to be continued into the Doha Round, albeit with a numerical limitation."

On Special Products, India said the revised proposals have been considerably simplified. However, the reduction of the upper ceiling on the number of SPs that would be free from tariff cuts, from 8% in the earlier text to 6% in the current draft, is a matter of concern. "The two measures of SPs and SSM are intended to address the concerns of billions of poor and vulnerable farmers in developing countries and reduce their vulnerability to price shocks emanating from the global market," said India. "Without full comfort on both these measures, developing countries would obviously be hard pressed to show flexibility in other areas of the negotiations."

On Sensitive Products, India noted the extremely complex architecture worked out to protect the concerns of all developed countries and the commercial interests of primarily their rich farmers. However, while developing countries can also use the measure, the price that they are being asked to pay is excessive. A deviation of
25% is too little, especially when developed countries are getting a 67% deviation. The market access for developing countries in developed country markets is being circumscribed through other measures, which needs to be disciplined, added India.

"A major goal of the Doha Round is to correct the fundamental structural flaws in global agricultural trade perpetuated through the lavish subsidies provided by rich countries to their farmers. This goal has acquired even greater urgency in the current global food scenario," said India. Yet, even in the new text the level of ambition for cutting subsidies is extremely modest given the mandate of substantial and effective reduction.

"In the context of the sharp increase in global food prices and the projections of the high levels continuing for quite some time, public stockholding for food security purposes in developing countries has assumed added significance. It is, therefore, difficult to comprehend and accept why such a programme in the Green Box is the only one still being subjected to Amber Box constraints, while ironically, there are no disciplines on some manifestly trade distorting features in other programmes in the Green Box, which are of course being used almost exclusively by the developed countries. This question is too important to be left unaddressed at this stage. It needs urgent resolution."

India added that the lack of balance between agriculture and NAMA remains unchanged, as reflected in the extremely diffident proposal on tariff simplification, and the absence of any meaningful proposal on tariff capping, in spite of the near unanimous support for such proposals among all the developing countries and a number of developed countries. In fact, by allowing even some non-sensitive products to escape any capping and take convenient shelter under the umbrella of tariff quota expansion, the already weak provision on tariff capping has been further diluted. The outcome on tariff simplification and tariff capping has to be robust enough to stand the test of paragraph 24 of the mandate.

"While India is committed to taking the Doha Round towards a successful conclusion and to make an equitable contribution, it cannot be expected to make only sacrifices," it concluded. It asked for a spirit of cooperation and accommodation, so that we can close the Round while fully honouring the development mandate. +