Agriculture: Divisions evident in debate on Chair's market access paper

WTO members held a first discussion on Monday (12 June) on a paper suggesting modalities on agriculture market access issues that was issued by the chair of the WTO agriculture negotiations, Ambassador Crawford Falconer of New Zealand.

The meeting did not produce any closer convergence of views. This has led some trade diplomats to conclude that it would be difficult to finalise the modalities on agriculture by the end of June, which is the latest deadline.

At the close of Monday's meeting, Falconer concluded that he had heard little that was new, with only one or two delegations offering ideas on how they might be more flexible.

Members appear to be waiting for a breakthrough in one or two key questions, leading to other issues falling into place, he said. However, he questioned whether this would work during the short time remaining. "Somewhere, somehow, there will have to be movement", was his conclusion.

Most of the Monday discussion focused on the Chairperson's "consolidated reference paper" on market access issues, which had been issued late on Friday (9 June).

The paper is in the form of "draft possible modalities on agriculture", structured according to the issues of definitions, tariff-reduction formula, tariff cap, sensitive products, other issues (including tariff escalation, commodities, tariff simplification, tariff quotas, special agricultural safeguard), and special and differential treatment (including special products or SPs, special safeguard mechanism or SSM, tropical products, preference erosion, recently acceded members, LDCs, cotton, and small and vulnerable economies).

Although the paper is in the form of possible modalities, almost all of the issues are in paragraphs that contain many square brackets, indicating that there are several options on these issues (including but not only on the figures). This reflects the differences among various members and their groupings on almost all the market access issues.

The paper also has an introduction explaining its background and its methodology. The Chairperson has also written notes on the state of play and on his perceptions on several of the issues, which are placed in boxes.

There are also 7 annexes, including on conversion of non ad valorem duties into ad valorem equivalents, tariff escalation, illustrative list for designation of SPs, SSM for developing countries, and tropical products. Clarifying the status of the annexes, Falconer said some of them were lifted from existing proposals as an illustration and because there are no alternative proposals.

At the meeting, the issues on which there was most dispute included the possible "middle ground" for the tariff reduction formula, the selection and treatment of sensitive products and associated quotas, additional flexibility for developing countries through SPs and SSM, the proposed lists of tropical products, and flexibilities for small and vulnerable economies.

On the status of the modalities, Argentina said the modalities should be legally binding, implying that failure to comply with the modalities could be brought to the WTO dispute settlement process. However, the G10 and EU opposed this, stating that only the schedules (on tariffs and subsidies) should be binding.

Countries from the G20, especially Argentina, said that paragraph 24 of the Hong Kong Declaration (which matches the levels of ambition in market access for agriculture and for NAMA or non-agriculture market access) should be mentioned in the modalities. This was opposed by Mauritius which said that small economies should not be bound by this.

On the tariff formula, the Chairperson's paper suggested that the middle ground (for the numbers to be agreed to) might be somewhere close to the G20 proposal. This interpretation was accepted by the G20 members as well as the Cairns Group (Australia speaking, supported by Canada).

The EU and the G10 said having a middle ground around the G20 position would be too difficult for them. The G10 said that it had never considered the G20 position as a possible middle ground, as the proposal as a whole is "not within our envisageable landing zone because of our tariff structures."

Canada made a suggestion that countries with many products in the highest tier (which would result in the steepest cuts) could be allowed to limit the products in the highest tier to 25% of their products.

On special treatment for developing countries affected by the formula, several delegations that spoke seemed to accept the notion of developing countries making two thirds (or less) of the cuts for developed countries. However, there was need to clarify some issues such as the thresholds for the tiers in the tariff formula for developing countries.

The G33 in a statement reiterated that "overall proportionality of less than two-thirds must be agreed in the overall tariff reductions. Further, the developing country thresholds must be substantially higher than those of developed countries in order to take into account the different tariff structures of developing countries."

On the issue of having a cap (or maximum level) imposed on tariffs, the G10 (represented by Switzerland) said they were against a cap as it could cause a disproportionate burden on countries caught by the cap. It said if the tariff cap is dropped, this could enable it to have more flexibility in other areas. Canada proposed a compromise in which there would generally be a cap, but with some flexibility for countries having the biggest difficulty.

On sensitive products, there were continuing considerable differences on many issues. These included how many sensitive products could be selected, the relationship between the deviation from the tariff reduction formula and quota expansion, the basis for quota expansion (whether this should be related to domestic consumption, quota size or import quantities), whether there could be new quotas, and whether rules on administering the quotas should include adjustments in response to underfilled quotas.

On tariff simplification, Argentina and others continued to advocate that tariffs be bound as ad valorem (percentages of the value). The G10 and EU indicated willingness to simplify complex tariffs but not necessarily as ad valorem rates.

On the existing special safeguard, the G-10 and EU continued to insist that this should be allowed to remain available so long as agriculture is being reformed. On the other hand, the G20, the US and the Cairns Group continued to maintain that the safeguard should expire.

The related issues of special products (SPs) and special safeguard mechanism (SSM) for developing countries continued to produce serious differences. The G33 (with over 40 members, led by Indonesia) argued strongly for broad flexibility in the use of these two instruments to be established.

According to the G33, these instruments are vital for the development in countries with poor and vulnerable farmers, whose interests should not be subordinate to those of a minority of exporting countries.

"The G33's proposals emphasise the importance of SPs and SSM to deliver effectively on development imperatives of the vast bulk of developing countries," said the G33 in a statement. "They serve full justice to the letter and spirit of the mandate. The proposals of a few other members however seek to introduce an overt trade orientation favouring just their self-interests, thereby undermining the mandate itself."

Referring to the Chair's paper's reference to SPs, the G33 stressed that the right to self-designate SPs should not be subverted in any draft modalities. This right should not be questioned at any stage, including in the verification of members' schedules.

The G33 expressed concern with the last sentence of para 17 (of the Chair's paper) where an attempt was made to go beyond the need for transparency (on the selection of SPs), and to shift the burden of proof to the designating member. Where there is doubt of non-compliance, the onus is always on those that doubt it, said the G33.

On the treatment of SPs, the G33 requested the Chair to reflect the G33 position that SPs shall have the right to the SSM. In para 22, the G33 had also proposed an additional 15% of tariff lines designated as SPs to be exempted from tariff reduction to address the special circumstances of developing countries.

Thailand and Malaysia were among countries that argued against the flexible use of SPs and SSM. Thailand said there were also poor farmers in exporting countries and not only in importing countries and their needs had to be catered for as well. Malaysia said it was looking for possible links to be established between special products and sensitive products.

On tropical and diversification products, there was a debate on the proposed list of products. The reference paper uses a list proposed by the Latin American countries pushing for liberalization in these products. The EU said the list is too sweeping and advocated reverting to a list that had been negotiated - but not agreed to - during the Uruguay Round.

On the treatment of recently-acceded members, China, Ecuador and Chinese Taipei indicated that they broadly favour the ideas in the draft.

On the treatment of small and vulnerable economies, Dominican Republic spoke up on behalf of the small economies in support of the proposed flexibilities in the paper. However, some other countries (Uruguay and Costa Rica) argued that the proposed flexibilities had not been discussed by the full membership, and that they could affect their exporting interests.

On the issue of commodities, the African Group (represented by Benin) presented its latest paper (TN/AG/GEN/18) on the topic. The paper proposed that the WTO clarify that developing countries are allowed to form producers' groups to manage supply, and that export restrictions and export taxes on commodities are also allowed.

On Friday, the discussion on the Chair's market access paper will continue, to hear other delegations that are yet to speak, and the Chairperson is also expected to make concluding remarks. The Friday agriculture meeting will then focus on export competition issues.