WTO Farm Talks Chair Downplays Setback in Securing Tariff Conversion Pact

GENEVA--The chairman of the World Trade Organization's negotiating group on agriculture downplayed March 21 the failure of WTO members to secure an agreement on how to convert specific tariffs and other forms of non-ad valorem tariffs into ad valorem equivalents (AVEs).Outlining the state of the Doha Round agriculture talks at an informal meeting of the WTO's Trade Negotiations Committee (TNC), New Zealand ambassador and chairman Tim Groser said the AVE discussions were not blocked and were not at the point of breaking down, according to officials attending the meeting.

Groser, however, did not give any indication when the talks would resume.An agreement on the conversion methodology was supposed to be concluded at a 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.

But the talks were suspended 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 non-ad valorem tariffs for products traded under the most distorted markets.

The conversions are a necessary first step for an eventual deal on a formula for reducing tariffs in agricultural imports. A deal on a formula is a central element of a 'modalities' package for the Doha Round talks on agriculture which WTO members are aiming to conclude by the time of the organization's December 2005 ministerial conference.Supachai Wants Solution Found Soon

WTO Director-General Supachai Panitchpakdi told the informal TNC meeting that it was 'essential' a solution to the AVE issue be found soon 'in order to keep the momentum and to avoid serious spill-over effects into other areas' under the Doha Round mandate.'I therefore urge everyone to make every effort to work with each other and with the chair to resolve it sooner rather than later, so that the focus can turn rapidly to the negotiation of the tiered formula for tariff reductions and related market access issues in agriculture,' Supachai added.

Completing the tariff conversions is considered by many WTO members as a precondition for negotiations on the tariff formula. 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.

While WTO members have agreed on the general principles for making the tariff conversions (using the unit value methodology), 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.

In particular, the EU and some G-10 countries disagree with farm exporting nations on how to treat products blocked up in a 'filter' used to calculate estimated prices for use in the unit value methodology.Hard to Set Biscuit, Cheese Tariffs Lines

Representatives from farm exporting nations blamed the EU for the delay, arguing that Brussels is resisting any conversions based on comparisons between import prices and any alternative estimates of world prices which could lead to higher AVE conversions and ultimately bigger reduction commitments under the tiered formula.A U.S. official said some 200 EU agricultural tariff lines were problematic out of the more than 7,000 non-ad valorem tariffs that would need to be converted into AVEs, with tariff lines on products such as biscuits and cheeses among the most difficult.

The official said it was still possible to finalize a deal and to do all the necessary tariff conversions by April if the talks on the methodology were resumed soon. But other officials expressed doubt whether Groser was likely to call any resumption of the AVE talks before the beginning of April.

EU agriculture spokesman Michael Mann denied that Brussels was to blame for the delay. 'We're certainly not holding things up,' he declared. 'We've been participating actively in the discussions and have submitted all the data that's required of us.'

Mann said that as far as the European Commission was concerned, the failure to secure a deal on tariff conversions did not mean the WTO agriculture talks were in crisis. We're now at the stage of brainstorming and coming up with a compromise,' he declared. 'As far as we're concerned, this is not a big setback at all.'

In a joint statement issued March 19, trade ministers from the Group of 20 developing country alliance noted the 'crucial importance' of the AVE conversion for completing the tariff reduction formula and warned against 'attempts at hiding the true level of protection' in the exercise.