Tariff rate quotas • Volume 12 • Number 15 • 30th April 2008

Agriculture Negotiators Ask For More Time, Extending Push For Modalities Deal

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The release of a key negotiating text in the Doha Round farm trade talks has been postponed until mid-May, as delegates have asked for more time to try to resolve differences on certain specific issues in the troubled negotiations.

The delay - the text was initially expected by the end of April - calls into question whether governments will be in a position to reach a framework accord on agriculture and industrial goods trade by the end of May.

At a 30 April meeting of the agriculture negotiations committee, Chair Ambassador Crawford Falconer (New Zealand) said that he would not issue an updated text outlining elements of a potential Doha deal before the week of 12 May. This followed requests for a postponement from several delegations seeking more time to bridge gaps between their positions.

One of the thorniest issues countries are dealing with is how to deal with ’sensitive’ farm products, which all Members will be allowed to subject to gentler tariff cuts in exchange for expanding access through import quotas. Also problematic is the tension between separate mandates for speedy trade liberalisation for tropical products and addressing the erosion of longstanding trade preferences for some of the same crops, notably sugar and bananas.

At the heart of recent disagreements over sensitive products has been the inability of farm exporters and importers to agree on how to measure domestic consumption for different foods.

Domestic consumption will be the basis for calculating the size of tariff rate quota expansion, with future quotas to account for at least a certain percentage of consumption. However, calculating consumption for different foods has not proved simple. Part of the reason for this is that consumption data often does not exist at the high degree of specificity (say, particular cuts of beef instead of frozen boneless beef in general) at which import-wary countries wanted to designate products as sensitive, so as to pinpoint protection across a wider range of commodities. This absence of data necessitates the use of various estimates and proxies. Also controversial has been how to account for processed products in domestic consumption: efficient exporters do not want highly-processed products like sugary drinks and pasta to end up reducing the consumption figures for the primary commodities (such as sugar and wheat) for which they are most eager to secure greater market access.

Though confusingly technical, the domestic consumption data issue is crucial: some farm exporters insist that any market access gains they achieve in the agriculture talks will hinge on how the matter is resolved. Without specific figures on consumption, the efficient exporters argue, they cannot know how they stand to be affected by a Doha deal, since their main exports are likely to be designated sensitive in key target markets.

Early in April, six major importers and exporters — Australia, Brazil, Canada, Japan, the EU and the US — reached an outline compromise on calculating domestic consumption levels (see BRIDGES Weekly, 11 April 2008, http://www.ictsd.org/weekly/08-04-11/story1.htm).

When the details of the complicated mathematical approaches for different products were circulated to other WTO Members, many asked for further explanation. The six countries did not manage to circulate explanatory notes on the compromise until an 18 April meeting of the agriculture negotiating committee. At the time, other Members asked for more time to analyse the data, as well as for an opportunity to ask questions about the potential compromise.

Broadly speaking, the compromise divides likely sensitive products into different product categories such as barley, beef and veal, and butter. Then, it requires the vast majority of domestic consumption of sensitive products - at least 90 percent - to be counted as relatively unprocessed ‘core’ commodities. However, which specific products qualify as ‘core’, and the share of domestic consumption assigned to them, has been the subject of continuing horse-trading, sources say. For sensitive products ‘partially’ designated at both the 6-digit and more specific 8-digit level of the harmonised system of customs classification, the 18 April explanatory note describes a ‘two-step’ process. In the first step, domestic consumption of a given product is determined at the 6-digit level. The second step utilises a proxy to determine consumption at the 8-digit level (for which actual data is rarely available).

Asked about the complexity of the potential compromise, one negotiator described it as the “predictable outcome” of an attempt to accommodate each country’s objectives and “reverse-engineer” them into an overall deal.

Furthermore, the terms of the compromise are far from set in stone - even its six sponsors have been haggling about how to treat different products, both amongst each other and in a larger group of a dozen Members (known as the ‘friends of the chair’) that have been meeting to discuss sensitive products since last year. Indeed, sources report that some changes have been made to the outline deal.

Two of the most contentious aspects in the debate on sensitive products have been the ’sub-categorisation’ of product categories, and tariff quota ’sub-allocation’.

The former would allow a Member to divide a product category into two - cheese, for instance, could be divided into ‘industrial’ and ‘other’ cheese. The ‘two-step’ process for calculating domestic consumption would then be applied to each of the sub-categories. The 18 April explanatory paper acknowledges that this could yield a lower domestic consumption figure than what would have been obtained for cheese as a single category. Therefore, it called for some conditions to be placed on sub-categorisation, such as a minimum quota expansion requirement.

While the initial compromise proposal made by the six exporters and importers would have allowed Members to divide up to two product categories in two, sources report that the revised version they circulated on 30 April did not contain any provisions permitting sub-categorisation.

However, sub-allocation - allowing more than one tariff quota to be established for a given product category - remains controversial. The earlier proposal would have allowed Members to maintain two separate tariff quotas for up to three different product categories. Although this would be restricted to product categories with ten or more lines at the 6-digit level, the explanatory note pointed out that grains, meats, sugar, and several dairy products would meet this criterion.

Splitting a tariff quota for apples into allocations for red and green apples, to take a hypothetical example, could make some would-be exporters anxious, since it would potentially mean guaranteed commercial opportunities for green apples that would otherwise have been unlikely to displace red ones in a given market.

Sources say that Canada has been recalcitrant in the discussions, pushing for an outcome that would allow it to provide greater protection to some products, such as cheese.

In general, importing countries are arguing for sub-allocation on the grounds that they cannot accept a minimum, or floor, tariff rate quota expansion, without some flexibility for their particular interests. The EU said the flexibilities entailed by the proposal were an essential means of achieving an ambitious overall result on market access.

One complaint voiced by a number of countries is that the potential compromise is designed only to deal with specific concerns among the six Members that authored it. Argentina and some others criticised it for failing to adequately accommodate concerns from the rest of the WTO Membership.

Some developing countries dislike the relatively narrowly defined product categories for fruits and vegetables. China and India argued that if modalities for sensitive products were tailored to the needs of individual countries, the same should be done for the ’special’ products that developing countries alone will be allowed to fully or partially shield from tariff cuts for food and livelihood security reasons.

The group of countries seeking liberalised trade in tropical products, and the preference-receiving members of the African, Caribbean, and Pacific (ACP) group, have both been meeting their respective industrialised country markets. Costa Rica, on behalf of the tropical products group, has said that it was working with importing countries to agree on a list of products that would be designated as tropical. Sources suggest that bananas may have been removed from a list of products eligible for designation as sensitive. ACP countries wanted some of their key exports designated as sensitive elsewhere, in order to preserve relatively higher tariffs and thus the ACP’s margin of preferential market access.

Looking forward

Sources suggest that Falconer largely knows what the next version of his draft text will look like, and is waiting to put in provisions to capture any progress that delegates make on issues such as sensitive and tropical products.

The potential compromise on sensitive products is set to be examined by a group of about three dozen countries representing the spectrum of negotiating interests (the so-called ‘Room E’ consultations). The negotiating committee may meet again on 8-9 May to discuss how to proceed.

One trade diplomat suggested that a ‘horizontal process’ of cross-sectoral negotiations among senior officials could start as early as the week of 12 May, which is when Falconer suggested that he might release the text. Another speculated that in the interest of time, Members could conceivably proceed straight to these horizontal talks without an examination of the forthcoming agriculture and industrial goods texts in the respective issue-specific negotiating committees.

In the horizontal talks, officials would be expected to make the cross-sectoral trade-offs necessary to put ministers in a position to finalise a framework deal on agriculture and industrial goods trade. Although delegates are not ruling out the possibility that this might happen by the end of May, they are now conceding that a ‘mini-ministerial’ meeting might be more likely in July.

ICTSD reporting.