Setback for WTO Ag Talks as Members Fail to Finalize Deal on Tariff Conversions

GENEVA--The World Trade Organization negotiations on agriculture suffered a setback March 17 after WTO members broke off talks on establishing a common methodology for farm tariff conversions.Negotiators had been holding talks in Geneva since March 13 in an effort to hammer out a deal on how to convert specific tariffs and other non-ad valorem tariffs into ad valorem equivalents (AVEs) for use in an eventual tariff-cutting formula.

But officials taking part in the negotiations said the talks were suspended late March 17 due to continued differences between the European Union and the G-10 alliance on one side, and farm exporting nations such as Brazil and the United States on the other, regarding the conversion of specific tariffs for products traded under the most distorted markets.

The officials said that the chairman of the WTO's negotiating group on agriculture, New Zealand's Tim Groser, gave no indication when the talks would be reconvened. But one trade diplomat told BNA that the delay would no doubt impact efforts to finalize the methodology and complete the conversions for submission to the WTO by the end of April.

'There may be some slippage,' admitted one negotiator. 'But I'm not pressing the panic button yet. We're halfway there and I'm hopeful we can get something in the next few weeks.'

Completing the tariff conversions is considered by many WTO members as a precondition for negotiations on the tariff formula, the key element of the market access pillar on agriculture. WTO members agreed as part of their Aug. 1 framework package for advancing the Doha Round trade talks to negotiate a 'tiered' formula under which the degree of the duty cut would be determined by which tariff band a product falls under, with products in the higher bands subject to deeper cuts.

Essential to this is the conversion of specific tariffs--those expressed as a fixed monetary value (such as $10 per ton)--and other non-ad valorem tariffs into ad valorem equivalents (expressed as a percentage of the value of the product). Without the conversion, members will be unable to determine under which band a specific tariff will fall, making it much harder to negotiate the final tariff-cutting figures which they are due to finalize by the WTO's Hong Kong ministerial conference in December.Groser Deadline Close to Blown

Groser warned on Feb. 14 that WTO members would need to agree on a conversion methodology 'within weeks' if the goal of finalizing a formula for Hong Kong was to be met. Trade ministers gathered at a March 2-4 WTO 'mini-ministerial' in Kenya urged their negotiators to finalize the conversion methodology at the March 14-18 meeting of the agriculture negotiating group so that members could complete the conversions and submit them to the WTO by the next negotiating group meeting scheduled for mid-April.The United States, the European Union, Switzerland, Norway, and Bulgaria are the WTO members with the most specific tariffs on agricultural imports.The EU's 25 member states have more than 7,000 non-ad valorem tariff lines, while nearly all of Switzerland's farm tariff lines are specific tariffs.

WTO members agree that the conversion will be made using the unit value method, under which the value of imports is first divided by the import volume to determine the unit value. The ad valorem equivalent would then be calculated as the specific duty expressed as a percentage of the resulting unit value.

However, the negotiations have stumbled over how to calculate values for products traded in highly-distorted markets (such as under preferential arrangements or under tariff quotas) where 'normal' global prices do not exist, with cheese and meat products being cited as examples. In particular, the EU and G-10 countries disagree with farm exporting nations on how to treat products that pass through a 'filter' which compares values and quantities reported to the WTO's integrated database (IDB) with those under the United Nations Comtrade database.

Officials with farm exporting countries complain the EU and G-10 (which includes Switzerland, Norway and Bulgaria) want to deal with these products by splitting the difference between their distorted market prices and Comtrade prices, even though the latter already contains the distorted prices.