Moving 'In Concert' in Geneva

Brazil is more than willing to come forward with an improved offer on reducing tariffs for industrials beyond its 54 percent cut already announced if the European Union improves its stance on agricultural market access and the United States further reduces its own domestic farm supports, said Brasilia's chief trade negotiator in Geneva yesterday (WTD, 2/23/06).

Ambassador Clodoaldo Hugueney spoke for three hours at an informal conversation with experts sponsored by the Carnegie Endowment for International Peace.

The senior Brazilian negotiator suggested that all three the United States, the EU and the G-20 must come forward with better offers at least by the time of the March 10 Group-of-Six ministerial meeting in London in order to move the negotiations ahead "in concert."

Brazil's offer on nonagricultural market access albeit from bound tariffs ambassador said, Brazil would lower its industrial tariffs by at least one percent from 11 percent to 10 percent ad valorem. The amount of trade impacted would be some $12 billion not a small consideration, he added.

The United States has suggested 75-percent average cuts in agricultural tariffs; the EU is proposing cuts of some 39 percent. The G-20 is proposing 54 percent cuts which he described as a good middle ground.

Meanwhile the Brazilian ambassador and titular head of the Group-of-20 developing country coalition maintained that the EU proposal from last October does not diverge from what Brussels is already doing in agriculture. He also blasted Brussels insistence on selecting 8 percent of all its tariffs lines as "sensitive" exempt from formula cuts in the final agreement. The United States and the G-20 want no more than one percent designated "sensitive."

Three 'Boxes'

Mr. Hugueney agreed that the maintenance of the "blue" box is probably necessary to systematically reduce trade-distorting farm spending over time. But, he added, it is imperative that negotiators agree to significant reductions for the "amber" and "blue" boxes. The G-20 sides with the United States that the 5-percent cap on "blue box" spending go down to 2.5 percent. Brasilia also wants better disciplines for applying "blue box" rules to such programs as the US counter-cyclical program. He insisted there be some guidelines and regular surveillance of the "green" box to ensure that no trade-distorting domestic programs escape scrutiny.

The Brazilian also insisted that limits in each box also apply to specific commodities.

According to his own country's studies, even 60-percent reductions in the "amber" box would have very little impact on real US farm spending, given the amount of "water" the United States currently enjoys. Spending from 2001 would fall from a current level of $22 billion to $21 billion, the ambassador stated.

Agricultural market access is the key component of the Doha Development Agenda, Mr. Hugueney added.

Figuring out the "theoretical" impact of the various formulas on trade now under discussion in the agriculture negotiations will be difficult, Mr. Hugueney stated. Performing the same exercise for industrial products would be much easier but presents various problems for different members.

Since the end of the Hong Kong ministerial in December, Brazil has attempted to get together a "NAMA-11" coalition to come up with a common position on reducing industrial tariffs. That did not work out because of the broad diversity of views among developing countries.

For advanced countries like Brazil, it is important to maintain the focus on high tariffs in industrial nations as well as on tariff peaks for goods such as leather products, processed steel and porcelain. For other developing countries "less-than-full-reciprocity" is an important component of the Hong Kong declaration but, so far, has been difficult to flesh out. Special and Differential Treatment for developing countries also is crucial to the success of the round, but little likewise has been agreed.

Mr. Hugueney explained the importance of cutting from "bound" tariffs for developing countries. Even though the United States and the EU are adamant that cuts come from applied levels, developing countries often rely on their ability to quickly raise tariffs for various reasons. He said, however, that all countries should at least "bind" their tariffs; several Southeast Asian nations have so-called "unbound" tariffs.

The ambassador added that Brazil has little interest in "sectoral" tariff agreements although it is going along with similar exercises in the services negotiations.

Lack of agreement in the long-lagging services negotiations would likely not delay a final DDA agreement, Mr. Hugueney commented. From the beginning, he said, services has been on a separate track and presents much different trade opportunities and problems than industrial and agricultural tariffs.

The Brazilian trade negotiator met with senior US trade officials yesterday.