Agriculture: No convergence from week of consultations

A week-long series of meetings on agriculture on 13-17 February at the WTO did not result in more convergence on the issues covered, although positions of various countries or groupings were further clarified.

This appears to be the conclusion arising from the statement of the chair of the agriculture negotiations as well as from some trade diplomats involved in the negotiations.

The week started and ended with an informal meeting to which all members could take part. In between were a series of consultations which interestingly involved only about 20 delegations.

At an informal plenary meeting on Friday (17 February), the chair of the negotiations reported that he would begin drafting 'reference papers' on food aid and some aspects of domestic support, which he will circulate to members in a week or two.

It is understood that the 'reference papers' are inputs or building blocks towards the drafting of texts on modalities.

Chairperson of the Special Session of the Committee on Agriculture, Ambassador Crawford Falconer of New Zealand, informed members of his intentions on Friday (17 February) following three days of consultations (14-16 February) which involved about 20 members.

Apart from the one export competition issue of food aid, the 'reference papers' would also include several aspects of the issue of domestic support that includes the new Blue Box, the Green Box and the base period for product-specific Aggregate Measure of Support.

Also at the informal meeting Friday, the four West African proponents of the cotton initiative (Benin, Burkina Faso, Chad and Mali) circulated a new paper TN/AG/GEN/12) proposing that for cotton, the cut in trade-distorting domestic support should be three times the cut agreed for agriculture as a whole, and the time taken for the cut should be one third of the norm. (See separate article.)

The 'agriculture week' of negotiations began on Monday with an informal plenary meeting open to all members. The Chair then conducted consultations with various groups as well as bilateral meetings during the rest of the week. Members met again in an informal plenary session on Friday, where the Chair reported on the outcome of his consultations.

The Hong Kong Ministerial Conference has set 30 April as the deadline for concluding full modalities in agriculture and non agricultural market access.

Falconer informed members that the three days' of consultations that he held among some twenty delegations were "engaged, focused and disciplined".

The consultations covered some issues in all three pillars: food aid under export competition; a group of issues under domestic support; and under market access, sensitive products (to be allowed to deviate from the tariff reduction formula) and the special safeguard mechanism for developing countries.

Falconer had indicated previously that his drafts would be designed to evolve into draft modalities, based on inputs from the negotiations.

On the whole, he reported, there has been some convergence and more clarity about the eventual shape of draft "modalities", but the discussion has not entered "the zone of a deal".

Although the discussion on sensitive products and the special safeguard mechanism was useful, Falconer said that he sees little that he can add to what already exists on paper because there has been little convergence.

Falconer said that the consultation on food aid went so well that members agreed to spend all the available time on this. The three other scheduled subjects (under export competition) will now have to be discussed later, he added. The three subjects are export credit, state trading enterprises and the schedule for eliminating export subsidies.

The result is that on food aid, a "shape" or "shadowy outline" is emerging, Falconer said.

On the "safe box" (genuine emergency aid, which ministers said in Hong Kong should be protected), participants discussed the use of "triggers" i. e. appeals for emergency food aid from international organizations (the World Food Programme, the UN, etc). The question is whether these triggers would be sufficient or whether additional definitions of emergencies are needed, the Chair said.

At the very least, participants recognize that sometimes donor governments might have to act immediately, before the international organizations can declare an emergency, implying that definitions for this situation would also be needed for the "safe box", he added.

For food aid that is outside the "safe box" (i. e. not an immediate emergency), the debate continues on whether this should be only cash, not monetized (sold to raise cash) and re-exported. Falconer reported that even though differences remain, members are clearly trying to accommodate each others' concerns - for example, those supporting monetization have shown a new willingness to discuss disciplines (for example, to prevent the aid displacing commercial sales).

On the issue of domestic support, Falconer reported that participants were more willing to allay others' concerns although there was "nothing particularly new" in the basic positions.

On the "new Blue Box" (payments not requiring production and not subject to production limits but related to prices, introduced in the July 2004 framework), one side of the argument advocated "shrinking" i. e. reducing the payment in order to limit its trade-distortion, while the other side felt that this does not go far enough, Falconer said, adding that the discussion was useful but showed little convergence.

Similarly, there had been little convergence on two other issues - on the Green Box (proposals for new criteria that would make it easier for developing countries to support development objectives, as well as possible disciplines on existing criteria), and the Base Period for Product-specific Amber Box (AMS) supports.

On the base period for product-specific AMS, one group of countries advocates using the Uruguay Round implementation period, while another smaller group prefers a different period, he said.

On all of these issues, he said he will prepare a "reference paper".

Participants appeared to agree on the thresholds for the tiers in the formulas for cutting AMS and overall distorting domestic support. But this is only because the thresholds are already implied by the Hong Kong Declaration.

Falconer said some countries questioned whether thresholds are needed at all since the Declaration already says which members fall into which tier, but the overall view is that specifying the thresholds will help transparency.

On market access, participants discussed questions raised by two informal papers (one by the US on the treatment of sensitive products, and the other by New Zealand on using domestic consumption as a base for quota expansion).

In both cases, the discussion was useful but positions remain unchanged. Falconer said he sees little point in trying to draft his own paper.

The discussion on the Special Safeguard Mechanism was "de facto" based on the G-33 paper, the Chair said. Some G-33 members supported the paper, while some non-members expressed some doubts.

As regards to Ad Valorem Equivalents, the Secretariat will organize a meeting to deal with some outstanding issues on how to convert tariffs that are not percentages into percentages of the price for the purpose of slotting products into appropriate tiers in the formula.

Only a handful of members spoke at the informal meeting. Apart from Benin, which introduced the proposal on cotton, Ecuador said it may have something to report soon on tropical products.

Cuba and Sri Lanka expressed concern about whether their views were reflected in the smaller group consultations because they did not participate.

The next 'agriculture week' of negotiations is scheduled for 20-24 March.

Meanwhile, trade diplomats involved in the week's negotiations provided further details on the discussions on some issues.

On Tuesday (14 February), the discussion focused on domestic support. On the Blue Box, the EU indicated that it may consider lowering the cap on the "new blue box", which has been fixed at 5% of production value by the August 2004 Framework, but provided that there will be tighter disciplines on the new Blue Box.

The US, which is on the defensive on the new Blue Box, countered that domestic support is linked to market access and said that the US proposal on domestic support results in real cuts, so the US needs a high ambition result in market access.

There was also discussion on the product-specific AMS. In the Framework, members had agreed to cap the product-specific AMS. On the choice of base period, almost all the members in the room, except the US, supported the use of the Uruguay Round implementation period (1995-2000).

The US wanted to use the latest period instead, by which was meant 1999-2001, the latest years for which the US has notified their level of domestic support to the WTO.

Analysts point out that using the more recent period is to the advantage of the US, since its spending on AMS has increased over the recent years, compared with the period of the Uruguay Round implementation.

On Thursday (16 February), the discussion was on market access issues, the treatment of sensitive products and special safeguard mechanism (SSM) for developing countries.

On sensitive products, the G-10 had proposed a sliding scale approach. The concept is as follows. Supposing there is agreement that tariff of a non-sensitive product will be cut by 50%, while for a sensitive product the cut will be by half of that (25%) and its tariff rate quota (TRQ) commitment will be increased by 10%. The sliding scale would allow a sensitive product to have deeper cut and less TRQ expansion, or vice visa.

During the discussion, the US opposed the sliding scale approach, saying it would give too much freedom to importing countries. Other members, such as the G-10 and EU, did not agree with the US argument.

On the base for calculating TRQ expansion, the EU insisted on using import value; the G-20 and the US favoured using the value of domestic consumption; while the G-10 suggested using a combination of both. There was no convergence on this issue.

The discussion on SSM focused on the G-33 proposal. Some exporting countries said they cannot accept the idea that the product coverage for the SSM is unlimited. G-33 countries said that they had already opened their markets in various products during the Uruguay Round, which had resulted in many problems.

Moreover, it is difficult to foresee in which products there would be problems in the future as a result of market opening in this Round, said the G-33. They insisted that the product coverage of SSM should be unlimited.