News and Analysis • Volume 12 • Number 2 • March 2008
Market Access Continues to Divide Farm Negotiations
Derogations from new market access disciplines in agricultural trade were once again the focus of WTO discussions in March. While limited progress was achieved on sensitive products, deep divisions persist on exemptions available only to developing countries.
Both developed and developing countries will be able to apply smaller tariff cuts to a number of ‘sensitive’ products than would be required by the general formula. Increased market access must be provided, however, though a combination of tariff reductions and larger import quotas.
Sensitive products are expected to provide the greatest market access gains in the Doha Round, and quota expansion is considered the most efficient way to secure those gains. While it has already been agreed that the expansion will be on based domestic consumption, highly technical discussions among major exporters and importers on the calculation method used for such data dominated the agriculture talks in the latter half of March.
When Canada, the EU, Japan, Norway, Switzerland and the US first released their data month ago, top exporters Argentina, Australia, Brazil, New Zealand and Uruguay complained that the information was incomplete and implied even less market-opening than expected. By late March, most of the data gaps had been filled, with information missing only from Switzerland on certain products and from the EU on fruit and vegetables.
Despite New Proposal, Processed Goods Still Problematic
Although a complex and still ill-understood compromise on how to calculate quota expansion was reached by six countries in early April, agricultural exporters remain concerned about its implications. They fear that the proposed calculation methodology would result in processed forms of certain highly protected products accounting for too great a proportion of domestic consumption, which would decrease the relative consumption share of unprocessed commodities, which make up the bulk of their exports (see page 1).
Under the six-country proposal, some 481 tariff lines likely to be designed as ‘sensitive’ would be divided into broad categories, such as barley, wheat, butter or ice cream. This classification would be further split between ‘core’ products, mostly comprised of raw materials, and more highly processed ‘non-core’ products that could account for no more than ten percent of total (separate methodologies were suggested for calculating domestic consumption of dairy products and for fruit and vegetables). The purpose of these divisions was to ensure that the majority of countries’ estimates of domestic consumption would count as relatively basic commodities. Broadly speaking, this approach would result in at least 90 percent of domestic consumption being counted as relatively unprocessed ‘core’ products .
The share of domestic consumption allocated to the different core products within a particular category could well affect would-be exporters differently. For instance, the ‘beef and veal’ category includes no less than nine ‘core’ products, each of which is assigned a percentage of domestic consumption. It is conceivable that one beef exporter might prefer a higher percentage for frozen meat, while another would want fresh meat to receive a higher weighting.
G-33 Scorns New Paper on Special Products
In late February, the depth of divisions on another key issue in the talks was evident in reactions to a new paper from a group of developed and developing country exporters on the Special Products (SPs) that developing countries alone will be able to shield from tariff cuts.
The document, sponsored by Australia, Canada, Costa Rica, Malaysia, New Zealand, Paraguay, Thailand the US and Uruguay, proposed restricting the number of SPs to no more than 8 percent of tariff lines, to be divided into two tiers of 4 percent each. Products in each category would be subject to cuts of 25 and 15 percent respectively.
The sponsors suggested that an additional category of ‘super specials’ – taken from the second tier and representing no more than 1 percent of all tariff lines – could be eligible for lower tariff cuts (and could possibly be completely exempt from them). However, these would have to fulfil a series of requirements, such as not accounting for more than a certain percentage of the value of total agricultural imports.
The rationale behind the Special Product designation is that developing countries need additional derogations from market opening commitments due to their food security, livelihood security and rural development needs. This view is particularly strongly defended by the G-33 coalition of developing countries, which include India, Indonesia and China. The group has proposed allowing up to 20 percent of tariff lines to be designated as ‘special’. It also insist that 8 percent of tariff lines be exempt from any cut (Bridges Year 12 No.1 page 1), and has rejected efforts to impose trade-related conditions upon what it argues is essentially a tool to help protect subsistence farmers and rural communities.
Negotiators from the G-33 described the exporters’ new proposal as a ‘maximalist’ negotiating position that was unhelpful in forging consensus at this stage in the talks.
Ambassador Crawford Falconer, who chairs the agriculture negotiations, warned that the indicators proposed by the G-33 for guiding the selection of SPs may be too broad. He implied that one in particular – granting eligibility to any product that has received Amber or Blue Box trade-distorting support in any year since 1995 – should be discussed further, as it could allow almost any product to be selected as ‘special’.
Tropical Products
Informal consultations also took place in March between the Tropical Products Group and other WTO Members on the list of products the group has proposed for tariff elimination or steep cuts. Costa Rica reported that some of the responses were constructive, but said the proponents were seeking more, particularly from those countries that currently have the highest tariffs.