Agriculture Modalities draft issued, with warning against false solutions

The two papers on draft possible modalities for agriculture and non-agricultural market access (NAMA) for the WTO negotiations were issued on Thursday (22 June) at lunch-time, a day after they were expected to be sent to Members. A meeting on Friday morning will allow members to give their comments on the agriculture paper.

The 72-page agriculture paper covers draft modalities for the "three pillars" of market access, domestic support and export competition, with some of the substance in its 13 annexes. It is fronted by an interesting cover letter from the paper's author, the chair of the agriculture committee (special session), Ambassador Crawford Falconer, to Pascal Lamy in his capacity as Chair of the Trade Negotiations Committee.

The letter stresses that the paper is not agreed by Members even as a draft, but is intended to reflect in a balanced way the state of discussions, with the Chair's role being to "reflect consensus, or where this is not possible, different positions on issues." Crawford stressed that it is only the Members themselves that can establish Modalities.

He remarked that there should be no surprises in the paper, as Members made it clear that they do not expect invented "solutions" out of thin air. If they were to appear, they would serve no practical purpose given that they are severed any real emergent consensus or convergence.

Falconer said the paper reflects "the reality of where we are. When all is said and done, where there are divergences, there are divergences. There is no point deluding oneself on that. Indeed, it would be a profound error to do so.

"Brushing things under the carpet or wishing things were otherwise than they are is no way to resolve differences. Dealing with them honestly and fairly can be the only way that has any chance of moving us forward. I have not, therefore, attempted to invent solutions where none has so far emerged. To do so would not only go against our agreed procedures but also against a Chair's more fundamental duty to deal honestly and fairly with the Membership."

Some diplomats, giving their first reactions, remarked that Crawford's letter was very pointed in stressing that there should not be an attempt to foist on to the WTO membership a set of solutions in the form of modalities, that do not reflect a genuine consensus or convergence of views among all members.

Such a message is extremely topical, coming as it does on the eve of a series of meetings, the most of important of which involve meetings of senior officials and Ministers of a few members (such as the G6) and of a "mini Ministerial Green Room" to which only a selected few members (their identities and the criteria for their selection remain unknown) are invited.

Many developing-country diplomats have voiced their apprehension on the inability of their countries to actively participate in the decision-making, and are concerned that their positions in both agriculture and NAMA may be brushed aside as they are unable to position themselves to project their issues and views.

Crawford's modalities paper draws on the many "Chair's reference papers" on various topics that he has issued over the past several months. The main characteristic is that there are 760 square brackets, denoting the many differences (some of them deep) and options that remain to be bridged. This also reflects the uphill task of concluding modalities by the end of this month.

In the market access section, the paper puts forward the following with regard to the tiered formula for tariff reduction for developed countries:
in the tier of tariffs greater than 0 and less than or equal to [20-30] the reduction shall be [20-65] per cent; in the tier greater than [20-30] per cent and less than or equal to [40-60] per cent, the reduction shall be [30-75] per cent; in the tier greater than [60-90] per cent, the reduction shall be [42-90] per cent.

The average reduction in bound duties by developed country Members shall in any case be [at least [...] per cent [with additional tariff reductions beyond those otherwise required for any particular band, if necessary, to achieve this objective].

The formula for developing country Members is as follows: for the tier greater than 0 and less than or equal to [20-50] per cent, the reduction shall be [15-slightly less than 65] per cent; for the tier greater than [20-50] per cent and less than or equal to [40-100] per cent, the reduction shall be [20-slightly less than 75] per cent; for the tier greater than [40-100] per cent and less than or equal to [60-150] per cent, the reduction shall be [25-slightly less than 85] per cent; and for tariffs greater than [60-150] per cent, the reduction shall be [30-slightly less than 90] per cent.

The maximum average reduction in bound duties any developing country Member shall be required to undertake is [ ] per cent. Should the above formula imply an average reduction of more than [ ] per cent for a developing country Member, that developing country Member shall have the flexibility to apply lesser reductions, at its discretion, so that the average reduction is no more than [ ] per cent.]

The draft also proposes (but in brackets) special treatment for developing countries with ceiling bindings and homogeneous low bindings, in that they be subject to the overall average reduction only.

Also within brackets, the draft suggests tariff caps of 75-100 per cent for developed countries and of 150 for developing countries.

For sensitive products, the draft says developed countries can designate 1 to 15 per cent of tariff lines (to be decided on), with developing countries having the right to designate up to 50% more than the absolute number of lines designated by the developed country having the highest number. Almost the whole paragraph is in brackets.

Duties on developed countries' sensitive products shall be reduced by 20-70 per cent of the reduction required by the tiered formula, while developing countries can avail themselves of the same, but the figure is not indicated.

The paper also deals with tariff quota expansion and tariff escalation. On special agricultural safeguard, the options are given as to having to expire, or continue.

On special products, the draft says developing countries can self-designate special products, but in brackets gives the opposing proposals of at least 20 per cent of tariff lines (the G33 proposal) or up to only 5 tariff lines (the US proposal).

Also in brackets are the proposals of opponents of SPs, that to be a candidate for designation as a "Special Product", a product must be produced domestically or be a close substitute of products produced domestically, a certain per cent of domestic consumption of the product must be met through domestic production; or the product must represent more than a certain per cent of agriculture GDP; or the product must contribute at least a certain per cent of the total nutritional value (dietary and calorific requirement) of the population.

Also in brackets is the proposal of SP opponents that a tariff line shall not be designated as a "Special Product" if developing country Members export more than a certain per cent of world exports of that product; or the product is eligible for the Special Safeguard Mechanism.

Also in brackets are the opposing views that (a) the right to self-designate any product as SP shall not be questioned at any stage of the negotiating processes, and
(b) show compliance with the criteria, each developing country designating a product as "SP" shall, demonstrate, how the product concerned meets the criteria of food security, livelihood security and rural development.

On treatment of SPs, the G33 proposal is in brackets, that 50% of SPs be not subject to tariff reduction, 25% be subject to 5% reduction and another 25% be subject to 10% reduction. But also in brackets is the view that SPs be subject to a reduction that is an unspecified per cent of the formula rate.

On Special Safeguard Mechanism, there are many square brackets around how many products are eligible for use of the mechanism by developing countries.
An annex on the trigger to enable the SSM to be used, and the remedy (the additional duties that can be imposed) is also filled with several options, representing the views of the proponents (the G33) as well as those members, especially the US, that want very restrictive conditions for use and remedy.

The paper also deals with tropical products, preference erosion, recently acceded members ands LDCs, small and vulnerable economies (SVEs) and cotton.

On the domestic support pillar, the paper also presents side by side the various views, ranges of reduction and options, on the various forms of domestic support: AMS, de minimis, blue box and overall trade-distorting support, as well as the Green Box.

On the amber box (AMS), those members with AMS levels greater than $25 billion shall reduce by 70-83 per cent; those with $15-25 billion will reduce by 60-70% and those with less than $15 billion shall reduce by 37-60 per cent. The figures are all in brackets. There are also figures for product-specific caps.

For de minimis support, this shall be reduced by 50 or 80 per cent (to be decided on) by developed countries, with SDT for developing countries.

The section on the blue box has a very detailed section on criteria. It says the maximum value shall not exceed (2.5) per cent of total agricultural value. There shall also be caps to individual products, which are to be decided on.

In a section on Overall Trade-Distorting Domestic Support, the following tiered formula is given: for base level greater than $60 billion, the reduction shall be [70-80] per cent; for base level of $10-60 billion, the reduction shall be [53-75] per cent; for base level up to $10 billion, the reduction is [31-70] per cent.

An annex on the Green Box support also provides many proposals for textual changes, most of them in brackets.

The paper also has a section on export competition. This, together with annexes, deals with the various export competition issues: export subsidy, export credits and guarantees, state trading enterprises, food aid.

There are also sections on export prohibitions and restrictions, as well as on commodities (where the operational proposal of the Africa Group has been placed in an annex).