News and Analysis • Volume 12 • Number 18 • 21st May 2008

WTO AG Chair’s Revised Text Charts Slow Progress On Sensitive Products

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A long-awaited revised draft agriculture deal for the troubled WTO Doha Round was circulated on 19 May by the chair of the farm talks. While the text incorporates gradual progress in areas such as Members’ ’sensitive’ farm products, it leaves untouched most of the controversial ‘headline numbers’ such as the percentage cuts for overall trade-distorting subsidies, and in many other areas simply restructures or clarifies negotiating options.

The much-heralded draft has been seen as a vital stepping stone towards the launch of a ‘horizontal process’ in which senior officials begin making tradeoffs between agriculture, industrial tariffs, and possible other negotiating areas. This in turn has been seen as crucial if Members are to narrow down the number of outstanding decisions that trade ministers must take at an eventual high-level meeting - needed soon, say negotiators, for a Doha deal to be finalised by the year’s end.

The draft text dramatically reduces the number of pairs of square brackets (negotiating short-hand for issues that do not yet command consensus), from 235 to 32 - something long considered necessary if ministers are to be presented with a manageable sub-set of questions. However, delegates cautioned that the text in fact still contains numerous unresolved issues: in most cases, the chair had simply redrafted the text to express the divergence in new ways, such as by expressing options in ‘either/or’ format.

In some areas of the talks in which progress has been made recently, such as liberalisation for tropical products, the chair indicated that he had largely retained the language of his previous draft, as agreement on those issues had not yet been reached (see BRIDGES Weekly, 13 February 2008, http://www.ictsd.org/weekly/08-02-13/story1.htm). However, the options in these areas no longer reflected current reality, he warned.

In other controversial areas - such as the hotly contested ’special products’ that developing countries will be able to slate for gentler tariff reductions on food security, livelihood security and rural development grounds - the text reflected only minor changes from the last version. Sources suggested that this was not entirely surprising, given that negotiators’ attention for the last two months has been devoted almost entirely to the consultations on sensitive products.

Several delegates said that the draft contained no big surprises. The chair, Ambassador Crawford Falconer (New Zealand), has consistently emphasised that he prefers to let Members lead the process, reflecting convergence only where it really exists.

Falconer emphasised the urgency of concluding a deal soon, and suggested that negotiators were nearing the end. Speaking to the press immediately following release of the text, he said that Members were “getting pretty close to the last Russian doll” - a reference to the successive drafts that have been required to narrow down negotiating options and capture emerging consensus.

Market access: still the thorniest area

Of the three areas of the agriculture talks, market access continued to be the most problematic, said delegates. Domestic subsidies and export competition were ’stable’, many indicated, with just a few very political decisions remaining.

While Members have long agreed that tariffs will be classified into a series of bands, with the highest tariffs undertaking the largest cuts, there is still no agreement on the percentage by which tariffs in each band will be reduced. Falconer’s latest draft provides figures for the percentage cuts in the lower bands, taking the mid-point of the indicative ranges he had given in previous versions of the text. Cuts for the highest band, which are the most controversial, are still expressed as a range, and - unlike the lower bands - are still in square brackets.

Also controversial has been the inclusion of a minimum 54-percent average cut for developed countries, which in the latest draft is no longer in square brackets. One source suggested that Members would now be unlikely to have difficulty achieving this, as the new text allows them to take into consideration, when calculating this average, the enhanced liberalisation relating to tropical products and the tariff ‘escalation’ on processed products.

Sensitive products: text incorporates new compromise

Falconer’s revised text includes, as one of two options, the complex methodology that a group of six countries has agreed on as the basis for designating ’sensitive products’ - goods that developed and developing countries will be able to slate for smaller tariff cuts in exchange for expanded market access through quotas.

The methodology was first put forward on 4 April by Australia, Brazil, Canada, Japan, the EU and the US - informally dubbed the G-6 (see BRIDGES Weekly, 11 April 2008, http://www.ictsd.org/weekly/08-04-11/story1.htm). It provides countries with a means to allocate, at the more detailed 8-digit tariff level under the harmonised system, product-specific domestic consumption data which is often available only at the broader 6-digit level. Members had earlier agreed that domestic consumption figures would be used as the basis for quota expansion.

While some countries, such as Argentina, oppose this approach, others have agreed that it could serve as a basis for further negotiations.

Developed country Members which still have more than four percent of their tariffs above 100 percent after the tariff cut formula has been applied will have to offer additional quota expansion, which the new draft stipulates should be 0.5 percent of domestic consumption. The draft also includes some additional options for developing countries that have to expand import quotas for their sensitive products.

Tropical products and preference erosion

The group of Latin American countries that favour enhanced liberalisation for tropical products has continued to negotiate informally with the EU, as indeed has the African, Caribbean and Pacific (ACP) group of countries that are concerned about the erosion of preferential access to developed country markets. For a number of particularly controversial products, and in particular bananas and sugar, the two developing country groups have diametrically opposed objectives. Tropical liberalisation proponents were reported to be continuing detailed negotiations on individual tariff lines with various developed country importers, in the hope of establishing either one common list of products for enhanced liberalisation or a set of country-specific liberalisation commitments.

Special products text revised

On special products, the text includes bracketed clauses that could allow developing countries to designate a minimum of 8 percent and a maximum of 20 percent of their tariff lines as special, broadly retaining these from previous iterations of the draft. Either 40 percent or none of these lines would be exempt from undertaking tariff cuts: remaining tariff lines would undertake an average 15-percent cut, with a minimum 12-percent and maximum 20-percent cut per line. The previous draft had included up to three categories of tariff lines, one of which would be exempt from cuts and two of which would be subject to different degrees of gentler reductions.

Special safeguard mechanism: two options

The revised text on the special safeguard mechanism (SSM) reorganises the options that the chair had set out before, setting them out as two broad options for negotiators to decide on. Members are invited to choose between two approaches. Under one option, easier-to-trigger safeguard remedies are not constrained by the maximum permitted ‘bound’ tariff levels that applied after the conclusion of the Uruguay Round. Under the second option, safeguard remedies would be harder to trigger and Members would be limited to Uruguay Round bound levels for large surges, and Doha Round bound tariff levels for smaller ones.

One delegate from the G-33 group of SSM proponents suggested that the either/or approach would not be suitable for facilitating ministerial-level decisions. Another argued that the chair had been relatively happy to include flexibilities for sensitive products at the behest of developed countries, but less keen to accord comparable flexibility to developing countries for special products.

Additional safeguard duties would normally apply for 12 months, the text says, unless seasonal products are involved, in which case a 6-month period would be used. One delegate pointed out that most agricultural products are however seasonal.

Previous references to preferential trade agreements have been replaced by a new provision that stipulates that the safeguard would be triggered only by multilateral trade flows.

A separate safeguard mechanism, the ’special agricultural safeguard’ (SSG), has also proved controversial, with efficient agricultural exporters in the Cairns Group calling for its immediate elimination, and importing Members such as the EU, Japan and Switzerland favouring its continuation. Developing country Members, while technically allowed to use the safeguard, have complained that they have in practice been unable to do so - a major factor in leading the G-33 to press for the creation of the new SSM. The latest draft would either eliminate the SSG for developed countries, or reduce it to 1.5 percent of scheduled tariff lines. For developing countries, it proposes a new figure of 3 percent of lines.

Tariff simplification and escalation

Coverage of the new text on tariff simplification has been expanded to include bracketed language that would cover all bound tariffs; it has also been simplified and shortened to include fewer exceptions.

On tariff escalation, the chair’s revised draft provides greater specificity to the cut undertaken by processed products with high tariffs, which would fall in the top band of the general tariff cut formula. These tariffs will be reduced by 6 percentage points more than the cut that would normally have been required.

New WTO Members given more leeway for high tariffs

The text provides some new flexibility for ‘recently acceded Members’ (RAMs) - a group of countries, including China, that have argued that they have already undertaken onerous accession commitments recently, and thus should be treated more leniently. Whereas the previous draft proposed allowing these countries to moderate by 7.5 percent the tariffs cuts they make in all bands, the new one would allow cuts to tariffs in the top two bands to be moderated by up to 10 percentage points, and those in the bottom two bands to be moderated by five percentage points.

Domestic subsidies and export competition

The draft retains the bracketed 66- or 73-percent proposed cut for overall trade-distorting subsidies for the US and Japan, as well as the 75- or 85-percent cut for the EU. All other Members would have to undertake a 50- or 60-percent cut. The US in particular has been under pressure from other Members to reduce its maximum permitted subsidy level as part of the negotiations.

The new draft now contains an annex giving a detailed breakdown of US subsidies that could be subject to requirements under the less trade-distorting ‘blue box’ - a development that one delegate described as helpful.

Outstanding issues in the export competition part of the negotiations, such as rules on export credits and food aid, were described by the chair as being not formally agreed but “pretty much ready.”

Towards an end-June ministerial meeting?

Falconer has announced that an informal meeting open to all Members will be held on the afternoon of 26 May for negotiators to provide initial reactions to the draft. Some developing countries nonetheless told Bridges that any reactions at that stage would necessarily be preliminary responses only, and that adequate time would have to be allowed for capitals to thoroughly analyse the new draft.

The chair has indicated that, if Members then show willingness to narrow their differences, he could hold further small-group consultations with the approximately three dozen delegations he has been convening since September. These are intended to represent a cross-section of negotiating interests. Another informal meeting of the full membership would then be held on the afternoon of 30 May, to report on progress.

Delegates speculated that trade ministers could be brought to Geneva around the end of June if sufficient advances can be achieved in the talks in the days and weeks ahead. However, they also warned that, on many highly technical parts of the draft text, such as the SSM, positions remained so far apart that it might be counterproductive to bring ministers together beforehand.

ICTSD reporting.