WTO Agriculture Talks: 'First approximation' unlikely by end July

By Kanaga Raja*,
Geneva 7 July 2005
Published in SUNS on 8 July 2005

Negotiations on agriculture ended Wednesday with the Chairperson Tim Groser concluding that the chances are unlikely at this stage that he will be able to produce a 'first approximation' of the full modalities on agriculture by the end of July.

At the three-day technical consultations on 4-6 July, members held discussions on theformula for tariff reduction, Special Products and the Special Safeguard Mechanism,and State Trading Enterprises and Food Aid.

The agriculture week of negotiations had originally been scheduled to end on 8 July,with Groser indicating before the negotiations began on 4 July that he was reservingthe whole of the period from 6 July evening to 8 July to prepare a paper (not yet thefirst approximation).

However on Wednesday evening, Groser declared the week of agriculturenegotiations to be over.

Groser informed members at the end of the meeting that he still needs a lot morepolitical guidance if he is to produce a paper at the end of July in the form that he hadenvisaged when he first used the phrase 'first approximation' at the end of last year.

While he did not discount the possibility of a 'first approximation' by end July, he saidthat at this stage the chances are unlikely, although he added that he will 'absolutely'continue to make progress by the end of the month.

According to trade officials, this was taken to mean that Groser is keeping open thequestion of what type of paper he might produce at the end of July.

Groser said that while he had received some political guidance during the week, hestill needed a lot more. He added that if progress is to be made, it would have to besomething along the lines of his status report circulated on 27 June, and somepoliticians would have to get involved. However, delegates have to brief theirministers carefully as they prepare for the mini-ministerial meeting in China (12-13July), he said.

He cautioned against trying to deal with all issues at the same time. Trying to do'everything today', means 'nothing gets done', he said.

According to trade officials, while Groser did not spell out what the problems were,his references to an issue that 'took an enormous amount of time' (the four-monthdelay in clearing up the issue of ad valorem equivalents), and the assessment in hisstatus report, seem to indicate that the problems lie in market access and members'failure to converge on the structure of the tariff reduction formula.

Groser warned that the more things are left until after July, the more problems lie instore.

Groser said that he did not plan to revise his assessment of the status of his talks,which he circulated as a status report on 27 June.

Groser concluded by reminding negotiators that the key document is the 1 August2004 framework, which contains the 'acquis' - what has been acquired or achieved- of the negotiations.

During the informal consultations on the tariff reduction formula and other marketaccess issues, differences appeared to remain over the formula for tariff reduction.According to trade officials, some countries said that they wanted to see movementaway from entrenched positions.

Continuing to favour a Uruguay Round approach (average percentage cuts withminimum cuts in each tier) were the G-10 (Switzerland speaking, with otherssupporting), the EU, Turkey, Kenya and Jamaica.

Some described the Swiss formula (or some other form of 'progressivity' - i.e.steeper cuts on higher tariffs) within each tier as 'unacceptable' (the G-10, India, andthe ACP represented by Mauritius).

New Zealand and Argentina said that the advocates of the Uruguay Round approachhad not moved whereas the other side had. They, along with Canada, Brazil andothers said that it is clear that both approaches are untenable and that an alternativehas to be found.

According to trade officials, Brazil raised some concerns over countries' entrenchedpositions, rendering negotiators 'totally incapable of moving on this'.

A 'first approximation' will not be possible if there is no convergence on thestructure of the tariff reduction formula and the entire Doha negotiations will be injeopardy, Brazil said.

New Zealand, Argentina, Canada, the US, Pakistan, Peru and Thailand called forprogressive cuts in each tier.

Australia suggested a formula with progressive cuts in each tier, and three tiers withthresholds at about 20% and 80%. The cuts would be set at the thresholds and thosebetween the thresholds (i.e. within each tier) would be calculated by 'drawing a linebetween' the threshold cuts.

Australia said this would avoid the problem of the same cut on 21% and 79% tariffs,and would have the additional advantage of making the thresholds less controversial,since crossing the threshold would not involve a big change.

The EU said that Australia is proposing thresholds that are closer to its own view.

A number of countries opposed the mechanical approach to setting thresholdsproposed by Canada at the last meeting (all countries' tariff lines or products wouldbe listed in order of each, and thresholds would be set so that each tier has the samenumber of products).

Some Latin American countries called for full liberalization of tropical products andcrops produced as alternatives to narcotics.

With respect to related market access issues, Brazil welcomed a proposal from theG-10 on 'sensitive products' (which are available to all countries) because it providesan idea on how to move forward that can be discussed. The G-10 proposes a trade-offbetween tariff reduction and tariff quota expansion on sensitive products - if the cutsare smaller, the quota would be expanded more.

During the discussions on Special Products (SP) and the Special SafeguardMechanism (SSM), several countries welcomed a G-33 announcement on 'specialproducts' (available only to developing countries), which the group described as aconcession.

The G-33 (Indonesia and a number of other developing countries seeking broadexemptions for access to poorer countries' markets) said that its members are workingon indicators for the three criteria for choosing special products agreed in the August2004 framework: food security, livelihood security and rural development.

Developing countries would then use those indicators in order to choose which oftheir products are going to be 'special products'. The G-33 members said that theyneed some time before they can produce the indicators.

The G-33 reminded members that 'the Ministers of the G-33 meeting in Jakarta on11-12 June, conveyed a message to the WTO membership and made an importantcontribution to necessary progress towards Hong Kong.' That is, Ministers haveinstructed their negotiators 'to intensify the technical work on special products andcome up with a set of operational indicators based on food security, livelihoodsecurity and rural development needs, which would assist developing countries todesignate their own special products'.

The G-33 said that it 'is thus working hard on the operationalization of the threecriteria of food security, livelihood security and rural development needs as agreedin the July framework and the Doha mandate.'

Among non-members of the group, Brazil, Argentina, Chile, Colombia, Malaysia, theUS and New Zealand welcomed the proposal as a move away from what they hadpreviously seen as a proposed blank cheque for developing countries to pick theirspecial products.

Several members such as Chile, Costa Rica and Thailand also articulated concernsthat special products may hamper South-South trade. Malaysia and Thailand said thatspecial products will affect their export of agricultural products.

Chile remarked that the indicators should be used to pick non-commercial products.A number of G-33 members responded by arguing that they need to protect 'specialproducts' for commercial reasons as well as for development and political reasons.

In its statement, the G-33 said that 'the group expects that members will recognisethat negotiations towards full modalities on Special Products cannot be approachedfrom a limited purely commercial perspective.'

The US clarified its position that special products should at least see some tariffreductions. 'For these products, we really don't have high ambitions,' the US said. Ifa case can be made about the vulnerability of the producers, then smaller cuts, or tariffquotas or some other means could be used to provide no more than a minimal amountof market access, the US added.

There were divergences in opinions over the special safeguard mechanism, partly overwhether members should try to work on this before or after the end of July, and partlywhether the mechanism should be triggered by surges in the volumes of imports orby price falls or by both.

Some developed country members such as the US and the EU were opposed to SSMbeing triggered by both changes in price and volume. They argued that since the SSMis to deal only with import surges, a volume trigger would be sufficient.

The G-33 reiterated its 'objective in establishing an effective mechanism to addressimport surges and price depressions.'

'In this context, and as a unique special and differential treatment provision, thedesign of the SSM must reflect the particular circumstances of developing countries,as well as their institutional capacities. Arbitrary restrictions that may undermine theeffectiveness of the mechanism need to be avoided,' the G-33 said.

Newly acceded members such as Moldova and Georgia supported the G-33 SSMproposal. They said that they did not receive such treatment during their accessionprocess to the WTO, and that such a measure would be helpful.

On state trading enterprises, which was discussed Wednesday, members appeared toaccept Groser's proposal that he should focus now on 'financial privileges' (subsidies,government financing and underwriting of losses) leaving the more contentiousquestions of monopoly power and other issues such as price discrimination until afterJuly.

Differences remained on food aid questions such as whether the aid should only bein cash or whether aid in kind should be allowed. Some countries argued that thereshould be no changes on food aid at all. According to trade officials, Groserintervened at one stage to emphasize that no one is proposing to curb emergency foodaid.

A group of low-income transition economies introduced a new paper(TN/AG/GEN/10, from Armenia, Georgia, Kyrgyz Republic, and Moldova) callingfor the same treatment as least-developed countries and others at a similar level ofvulnerability, particularly since their tariffs are already low.

According to trade officials, members also welcomed Groser's 'status report'circulated on 27 June. Several described it as a contribution to the transparency of thenegotiations. Venezuela called for similar reports in other negotiations in the WTO.

Several countries had slightly different assessments of some of the details andsuggested that it should be 'recalibrated'.

Groser said that recalibration was precisely the purpose of circulating the text aboutone month before he is due to produce his 'first approximation' of the 'fullmodalities' that members want to agree in Hong Kong in December.

In his status report, Groser outlined his view of the situation in a wide range ofsubjects, what he considers to be needed by the end of July, and what could benegotiated afterwards.

He identified market access as the least advanced of the three pillars (the other twoare domestic support and export subsidies). In his report, he stressed the need for asequence in the negotiations, which means that some questions (such as the structureof the tariff reduction formula) have to be settled before others (see SUNS #5831).

No further meetings on the agriculture negotiations have been scheduled for thismonth, trade officials said.

Trade observers note however that a number of developments make it difficult for theoutlines of a draft modalities agreement, even with political directions, to emergebefore end of July, and an agreement on modalities to be achieved by the Hong KongMinisterial (December 2004).

After the emphatic French and Dutch 'NO' to the EU constitution, the future of the EUand the ratification process have created great acrimony and bitterness - with no wayforward easily evident. Though the rejection of the constitution does not abrogate theRome and Nice treaties of the EU, there is great political uncertainty, since the Frenchand Dutch 'NO' are not only against their governments, but the Brussels EUdecision-making, with no accountability to the public.

On top of it, the EU budget process is also in disarray - with considerable bitternessand public brawling between the Prime Minister Tony Blair and French PresidentJacques Chirac, with several other EU members supporting Chirac. Most EUmembers seem to think that no compromise or agreement on the budget is likely withBlair heading the EU till end December, when the EU presidency changes.

The EU Trade Commissioner Peter Mendelson and the EU Agriculture CommissionerMariann Fischer-Boel are sharply disagreeing in public about 'trade-offs'. Mendelson(as the US etc) is propagating the view that for the EC to cut its agriculture supportand market access etc, there must be large market openings by major developingcountries (Brazil, China, India etc) under non-agricultural market access (NAMA),and services including financial services. The EC Agriculture Commissioner on theother hand has said that the only trade-off in agriculture had to be within the threepillars of reform - domestic support, export subsidy and market access. Even if allthese can be reconciled, it is difficult to see any of this happening during the UKpresidency, and before the Hong Kong Ministerial.

(* With inputs from Goh Chien Yen.)