WTO agriculture talks centre on 'FIPS-plus' process

By Goh Chien Yen, Geneva, 25 July 2005

Negotiations on agriculture in the World Trade Organisation have been taking place in a small group involving 14 WTO member countries (known as the extended FIPs, five interested parties) since last Thursday night to explore possible convergence on several disputed issues in advance of the General Council meeting on 27 and 29 July.

The meeting has been dubbed an 'extended FIPS' or 'FIPS-plus' process, referringto extra members being added to the core group of 'five interested parties' (theUnited States, European Union, India, Brazil and Australia) that have been meetingregularly on agriculture issues.

The other members involved in the meeting, chaired by Tim Groser, chair of theSpecial Session of the Committee on Agriculture, and which is taking place outsidethe WTO, are Argentina, Korea, Japan, China, Benin, Malaysia, Switzerland,Indonesia and Canada.

Most other WTO members that are not invited to the meeting were mainly in the darkas to the discussions.

According to trade diplomats, the 'extended FIPS group' held discussions on marketaccess, domestic support and sensitive products on Thursday and Friday, on food aidand state trading enterprises on Saturday and on domestic support Monday.

On Friday afternoon, Brazilian Ambassador Luis Felipe Sexias Correa told journalistsat the WTO that 'at this point the [agriculture] negotiations are too difficult and thereis no movement.'

From his viewpoint, the developed countries had not shown signs yet of moving. Hesaid that at the mini-Ministerial at Dalian, the EC said that they would put in a writtenproposal on market access, but it had not yet done so. The US had not signaled itsintention to move in domestic support, especially on the new blue box. And the G10grouping of countries was articulating well known positions and not moving at all,he added.

According to another trade diplomat who attended the FIP-plus meeting, the US hadindicated that the domestic support discussions had already been exhausted andnothing more could be developed at this stage unless there is movement on marketaccess.

Earlier, Groser, in a meeting with G33 members on 20 July, had mentioned that thetwo outstanding problems in the negotiations presently were whether the EC wouldbe able to compromise on the formula for reducing tariffs, and whether the US wouldmove on the issue of blue box domestic subsidies.According to a diplomat, Groser indicated that the US was seeking a linkage betweenEU willingness to move on the market access formula and its own willingness tomove on reducing overall domestic support (which also affects the blue box support).

The US would like one more band in the tiered formula proposed by the G20 formaking reductions in domestic support, so that it can take advantage of a lower bandwith a lower rate of reduction, according to the diplomat.

During the FIP-plus discussion on market access at the end of last week, the USsuggested a mixed formula for making tariff reductions, according to diplomats. Inthis mixed formula, tariff lines which fall into the higher band(s) would be reducedusing a Swiss formula, those lines in the middle band(s) would be cut be using alinear formula, and those lines which are in the lower band(s) would be subjected toa Uruguay Round approach. Under an Uruguay Round approach these tariff lineswould be subjected to an average target level of reduction with minimum cuts pertariff line.

On the tiered formula for making tariff reductions, the US proposed four bands forboth developed and developing countries with the following thresholds: 0-20%,21-40%, 40-60%, and tariff lines above 60% in the fourth band.

According to a trade diplomat, the US also suggested two other possible options: touse the G20 proposal of a linear formula cut in each band with further adjustments toensure deeper cuts; and to apply the concept of progessivity in each band.

At the meeting, the EC reportedly agreed with the G20 proposal of having linear cutsin each band. However, it wanted further flexibilities as well. On the point ofadditional flexibilities, Australia and the US disagreed with the EU arguing thatmembers already have recourse to sensitive products.

The EC also proposed three bands in the tiered formula for making tariff reductionswith differing thresholds for developed and developing countries. For the developedcountries, the thresholds for the three bands are: 0-20%, 20-100% and above 100%. For developing countries, the EC proposed the following thresholds: 0-30%, 30-150%and lines above 150%. In addition, the EC said that developing countries would bemaking two-thirds of the cut that would be required for developed country members.

[The G20 had earlier, at the Dalian Mini-Ministerial, presented its proposedtariff-reduction formula. This involves the following elements. Firstly, developedcountries' tariffs are to be categorized in 5 thresholds (0-20%; 21-40%; 40-60%,61-80%; and above 80%). There would be 4 thresholds for developing countries:0-30%; 31-80%. 81 to 130% and above 130%.

Secondly, there would be linear cuts for lines in each threshold, with the rate ofreduction being steeper, the higher the threshold. Thirdly, the rates of reduction fordeveloping countries would be lower than those for developed countries.

Finally, the G20 proposed that developed countries would cap their tariffs at 100%and developing countries at 150%.]

Members of the G10 present at the FIPS-plus meeting supported the EC proposal.However, they rejected the G20 proposal on tariff capping.

The G20 members present at the FIPs plus meeting said that they wanted to see theEC proposal in writing.

On the issue of sensitive products which was discussed in the FIP plus meeting on 22July, the G10 submitted drafting language for a 'first approximation' that could beadopted by members during the General Council meeting.

On the selection of sensitive products, the G10 proposed the following text: 'EachMember may designate an appropriate percentage number [n], to be negotiated, oftariff lines to be treated as sensitive. This number will vary according to its tariffstructure including existing commitments for these products.'

On the treatment of sensitive products, the G10 proposed the following: 'Sensitiveproducts shall be taken out of the tariff reduction formula for other products. Themagnitude of market access improvement for sensitive products will be less than thatfor other products.

'Market access improvement for these products will be achieved through a standardcombination, to be negotiated, of tariff cut and TRQ commitments for each product.Deviations from the standard combination will be possible along a sliding scalesystem, to be negotiated.'

The G10 also proposed during the meeting that 'sensitive products shall be taken outof the tariff reduction formula for other products and put into a separate box,regardless of their tariff levels.' This was supported by the EC.

However, the US and Canada wanted to see linkages between tariff reduction forsensitive products with the main formula for making tariff cuts for other products.

A smaller group of countries continued to meet on 23 July to discuss the issues offood aid and state trading enterprises. Today, the extended FIPS group was to extendits discussion on domestic support, and possibly market access.

An informal meeting of heads of delegation is scheduled for 26 July, during whichGroser is to report to members on the outcomes of the consultations.