Sensitive products are key

A DEAL on "sensitive products" is one of the keys to unlocking progress in World Trade Organization talks on market access, Canada's lead agricultural negotiator Steve Verheul said recently.

In this assessment, Verheul joins others. A survey of negotiators conducted at Australia's University of Adelaide found that 78% think a deal on sensitive products is the key to the talks. In an interview with Feedstuffs, a senior official in the U.S. dairy industry agreed.

Countries have linked how far they are willing to go in cutting tariffs with the treatment they receive on sensitive products. Since U.S. negotiators said how far they move on domestic supports depends on what they get on market access, the tariff talks are seen as critical.

Currently there are two central questions on sensitive products, Verheul suggested: (1) the level of ambition (i.e., percentage of tariff lines a country can designate as sensitive) and (2) how these products are subsequently treated.

Verheul and others have argued that the best course for negotiators is to flesh out first how sensitive products are treated, leaving the level of ambition to a second step.

U.S. move?

Eventually, negotiators will have to deal with the numbers.

Here, Verheul said there are three basic proposals on the table:

* G-20 and Cairns Group -- designating 1% of tariff lines as sensitive;
* The EU and Canada -- designating 7-8% of tariff lines, and
* G-10 countries -- designating 15% of tariff lines.

U.S. negotiators have, in the past, suggested 3% as a likely number. They now appear more willing to side with the G-20's 1%.

However, Verheul told the annual policy meeting of Dairy Farmers of Canada earlier this month in Ottawa, Ont., that this low number may cause difficulties in the U.S.

"This would not allow the U.S. to get many products into the sensitive category," he explained.

His argument is that if, as many assume, the Bush Administration will, in the end, want to declare sugar, citrus and dairy as sensitive, then 1% or even 3% may be too small.

Jaime Castaneda, senior vice president for government relations and trade with the Arlington, Va.-based National Milk Producers Federation, agreed with Verheul's argument -- up to a point.

"His analysis makes sense, but the conclusion is not accurate," Castaneda explained.

He cited the example of the U.S. peanut program, which used an internal reform process to move away from the shelter of high import tariffs.

Even so, Castaneda agreed with Verheul that the Bush Administration will likely move beyond the 1-3% level.

He suggested that while the G-10 proposal of 15% "is not an option," there is a "place to negotiate" between the European Union-Canadian proposal of 7-8% and the U.S.-G-20's 1-3%.

"The U.S. is definitely going to be willing to look at other numbers," he told Feedstuffs.

Currently, about 400 tariff lines cover U.S. dairy products. Around 200 of these -- slightly less than Canada's -- involve tariff rate quotas.