WTO members discuss 'tiered' tariff cuts in agriculture

By Goh Chien Yen (TWN),
Geneva, 1 June 2005

Agriculture negotiations resumed in the WTO from 30 May to 3 June, with members engaging since 30 May on issues relating to market access for the first time after an understanding was reached earlier this month among the major countries on the conversion of non ad valorem duties to ad valorem equivalents.

As announced at the General Council meeting last week, the agriculture negotiationscontinued to be chaired by Tim Groser, who had stepped down as New ZealandAmbassador to stand for parliamentary elections due to be held by late September. Heis expected to remain as Chair of the Special Session of the WTO Committee onAgriculture until the beginning of the summer break at the end of July.

Various aspects of the tiered approach for making tariff reductions remain to bedecided by the negotiations, including the number of tiers, the level of threshold foreach tier (what the cut-off point should be), the formula or approach to be applied formaking tariff reductions within each band, and whether there should be a tariff cap.

The WTO members also recognize that the approach for making tariff reductions isinextricably linked to the issues of sensitive products, special products and specialsafeguard mechanism (SSM). The Chair noted that while it is not possible to discussall these issues simultaneously, it is important to bear in mind that they areinter-related.

On the number of tiers or bands in which the tariff profiles of members would fallunder, it emerged in the first few days of discussion this week that several developedcountry members such as the US, the EU and the G10 think that having three or fourtiers would be about right.

Some debate ensued whether this should be the case for both developing anddeveloped country members. Some members said there should be the same numberof bands for all members, but there could be different treatment for tariff reductionwithin each band for developing countries. For example, Brazil pointed out that itstariff profile is such that it would require more than 3 bands.

On the question of the level of threshold for each band that will determine how thetariff lines are to be distributed between the different bands, Switzerland (speakingon behalf of the G10) suggested that this could be done by splitting more or lessequally the tariff lines between the bands.

Kenya pointed out that many developing countries have bound their agriculture tariffsat a single rate under the Uruguay Round. Hence, there should be sufficient flexibilityin choosing the number of tariff lines to be placed in each band, otherwise all theirtariff lines may end up in a single upper band, where deeper cuts on the tariffs maybe required. This will lead to many developing countries, especially those in Africa,making far deeper commitments in tariff reductions.

With respect to the kind of approach to be adopted for making tariff reductions withineach band, members appear to be sharply divided between those supporting a Swissnon-linear formula and those calling for a Uruguay Round linear-cut approach. TheSwiss formula would lead to cuts applied more steeply the higher the tariffs, while inthe linear-cut approach all tariffs are cut by the same rate, within the same band.

The US and the Cairns Group members argued that the Uruguay Round approach (tobe used in the tiers) had already been rejected when this was first proposed someyears ago by Stuart Harbinson, the former chair of the Special Session of theCommittee on Agriculture. They said that experience shows that this approach hasfailed to achieve effective market access and hence a Swiss formula is required.

Other members such as the G10 and India have argued emphatically that the UruguayRound approach is the only way to proceed.

Under the Uruguay Round, developing countries were obliged to make an overallaverage cut of 24%, with a minimum cut of 10% per tariff line, and developedcountries had to make an average tariff cut of 36%, with a minimum cut of 15% perline.

Canada proposed a progressive tariff reduction formula, the result of which is a formof harmonization. Instead of applying a single rate of reduction to a single tariff line,that tariff line would be broken down into four parts, as an illustrated example in theCanadian proposal, where different rates of tariff reduction would apply. 'The overalltariff cut is the sum of the individual cuts required for the portion of the tariff fallingwithin each band,' Canada said.

Under this formula, higher portions of the tariff line will be subject to deeper cuts. As an example given by Canada in its proposal, instead of simply reducing a tariffline of 200% by 80%, this tariff line would have four portions, for example, up to15%, this portion will be cut by 45%, the next 20% will be cut by 55%, thesubsequent 25% will be cut by 65%. The final remaining 140% will be cut by 75%.Therefore, the 200% initial tariff line will be cut to 61% as the final tariff.

China also proposed in the negotiations a formula with a 'combination of bothnon-linear and linear elements in each tier.' According to the Chinese proposal, 'allbound tariffs should be divided including potential sensitive products to several bandsaccording to the levels of tariff rates from low to high.'

In the approach proposed by China, within each band, members may choose apercentage of tariff lines to be cut by a Uruguay-type formula, and the remainder oftariff lines to be cut by a Swiss type formula. The higher the tariff rate band, thebigger the proportion of Swiss type formula should apply. Also, the higher the tariffrate band, the bigger should be: (I) the simple average reduction rate, (ii) the rate ofminimum cut of each tariff line in the Uruguay Round approach, and (iii) thecoefficients of the Swiss type formula.

Reacting to members' strong positions on the type of approach to be used in each bandfor making tariff reductions, Groser said that 'members should unlock themselvesfrom certain ideas', adding that the debate is really about the degree of harmonization.He also indicated to members that he would not be producing a formula for them bythe end of July.