Bridges Weekly Trade News Digest • Volume 12 • Number 41 • 3rd December 2008

Ag Negotiators Face Time Pressure in Search for Doha Deal

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Time will be a major constraint if WTO Members are to try to strike framework accords on farm and manufacturing trade by the end of the year, according to Geneva-based agriculture negotiators.

In preparation for a potential meeting of trade ministers at WTO headquarters from 13-15 December, updated draft agreement texts are expected from the chairs of the agriculture and non-agricultural market access (NAMA) negotiating committees later this week.

Trade diplomats expect the chair of the agriculture negotiations to release a draft agreement this Thursday or Friday. Senior officials and ministers will arrive the following week to assess the draft text.

Delegates are pointing to the limited amount of time between the release of the draft text and the start of what would be a very short ‘mini-ministerial’ meeting. Although the last such summit, in July of this year, ran days longer than originally planned as ministers searched for an agreement, a gathering in the third week of December would face a hard limit in the shape of the WTO’s end of year holiday.

Key areas of the agriculture negotiations remain unfinished. These include the ’special safeguard mechanism’ (SSM) for developing country farmers on which the July ‘mini-ministerial’ ran aground, but also issues related to ’sensitive products’ slated for gentler tariff cuts, the creation of tariff rate quotas (TRQs) for products not currently subject to import quotas, tariff simplification, cotton, and preference erosion.

Given the short timeframe officials will need to move rapidly towards convergence if they are to meet governments’ stated goal of concluding framework deals on agriculture and non-agricultural market access by the end of the year.

The chair of the WTO farm talks, Ambassador Crawford Falconer (New Zealand), has been consulting with Members in an attempt to find common ground on the issues that need to be resolved. He said late last week that the informal talks had not led to a “clear cut agreement” or “closure that is definitive.”

Sensitive products and TRQ creation

Technical talks aimed at helping countries clarify precisely what they stand to gain and lose from the complex agriculture negotiations have been held up by Members’ failure to advance on issues such as sensitive products and new TRQs.

On sensitive products, farm goods that will be allowed a reduced tariff cut in exchange for expanded low-tariff import quotas, negotiators still want to know which specific tariff lines their trading partners intend to declare sensitive, and which they want to make eligible for TRQ creation, among other arcane-but-commercially-significant details. Previous efforts at clarification, such as the release by importers of data that would help determine future import quota levels, has not been enough to enable a final agreement.

TRQ creation, a measure that would allow countries to create import quotas for agricultural products that have not thus far been subject to them, is expected to be included in the new text issued by Ambassador Falconer. Exporters have resisted allowing countries to create new TRQs as part of the Doha Round, fearing additional barriers to their exports. However, they may be able to accept terms that would ensure that would require their trading partners to create low-tariff import quotas large enough to provide meaningful commercial opportunities.

The G-20 group of developing countries circulated what it called a compromise paper on sensitive products to Members last week. The proposal would allow the creation of TRQs for up to 1 percent of tariff lines — which the bloc has opposed in the past — so long as in-quota duties are zero, and increased market access is greater than that for other sensitive products. The proposal was well received by some members but has been rejected by the G-10, a group of import sensitive countries including Switzerland and Japan.

Delegates and the chair have mentioned the need for measures of transparency, such as providing the WTO Membership with a list of products that would be eligible for new TRQs.

Canada and Japan have sought special exemptions that would allow them to increase their sensitive product entitlement to 6 and 8 percent of all tariff lines, respectively (as compared to the 4 and 6 percent of tariff lines under the most recent draft agreement). Some delegates expect these specific needs to be addressed through a footnote, at least for Canada, in exchange for a ‘payment’ in the form of larger-than-usual expansions to import quotas.

The Special Safeguard Mechanism

A delegate said that “there is no indication on where there is convergence” on the SSM, a contentious instrument that would allow developing countries to protect farmers against surges in imports by raising tariffs beyond bound levels. Despite hints of movement, precise details remain elusive.

Differences on the SSM have hinged on the ‘trigger’, or percentage increase in import volume (or decrease in import price) beyond which a developing country might apply extra duties, as well as on the extent of these remedial tariffs — notably, whether they should be able to surpass the bound ceiling tariffs rates that countries have prior to implementing cuts under a Doha agreement.

The ideas discussed so far in consultations include softening the triggers used, accommodating ‘natural trade growth’ so that it does not set off safeguard tariffs, flexibility on the duration of SSM remedies, and the idea of an SSM ‘holiday’.

In recent consultations, members of the G-33, a group of import sensitive developing countries that has championed the notion of the SSM, has suggested that they are open to discussing a two-tiered ‘trigger’: a 20 percent increase in imports over normal levels would bring on a certain level of remedial duties, and a 40 percent increase would entail additional remedies. The G-33 had previously wanted a three-tiered trigger, compared to the single-tier, at 40 percent, favoured by the US. In response to the US view, a delegate commented, “our farmers are already dead” by the time imports surge by 40 percent.

The need for a computational trigger, or a trigger that accounts for ‘normal trade growth,’ has been suggested by exporters such as Australia. A proposal to do this would calculate normal import levels on the basis of a 3 year rolling average of imports which excludes months in which the SSM is used.

The duration for which the SSM is applied has been a controversial issue for most exporters, concerned that the SSM could serve as a permanent restriction on trade. They would like to limit the duration of an SSM remedy to a few months. Discussions have previously hovered around an 8-12 month period, although recent talks have shown a greater willingness by import-sensitive developing countries to consider a 6-9 month period, with an additional 3 month spill over. It is unclear what sort of cycle this period might apply to - fiscal years and agricultural cycles have been mentioned as alternatives to calendar years.

Proposals for an SSM holiday, or periods when it may not be applied, have oscillated from one year on and one off, to two years on and one year off.

Exceeding the Uruguay Round (i.e., pre-Doha Round) bound rate has also been a contentious issue surrounding the SSM. Some countries have insisted that in order to provide farmers with the amount of protection they need, it may be necessary to breach their Uruguay Round bound rates.

Officials have suggested that a volume based SSM may be allowed to exceed Uruguay Round bound rates, since previous revisions of the draft modalities have left the issue ambiguous for a price based SSM.

Tariff simplification

The proposal by Uruguay to allow some tariffs to not be fully converted to their ad valorem equivalent (i.e., as a percentage of the value of the product) has been well received by many developed countries seeking a compromise. However, the proposal has faced strong criticism from agricultural exporters, particularly Argentina, which sees it as a violation of an essential element of negotiations in this area.

Other areas of negotiations, such as cotton and preference erosion, have not had discernible movement that trade officials are able to comment on.

In response to the push towards a deal by the end of the year, a delegate responded that the only way that their agriculture exporting developing country was expected to overcome the financial crisis was through “increased market access.”

The still hypothetical mini-ministerial gathering will face serious challenges. Not only do Members still need time to delineate the exact details of an agreement, but they, by some accounts, will not have sufficient time to analyse the contents of a deal.

Concerned by the building momentum towards a deal, a delegate cautioned that the “financial crisis is in the moment. However, trade rules will be around for a long long time.” Emphasizing the role of negotiations “to lay a foundation for trade” she noted that “this is a test of enormous responsibility.”

ICTSD reporting.