Bridges Weekly Trade News Digest • Volume 8 • Number 14 • 22nd April 2004

Market Access Discussed During Second ‘Agriculture Week’


Members are meeting from 19-23 April for a second ‘agriculture week’ seeking to rebuild momentum in the agriculture negotiations. In a formal plenary session held on Monday, 19 April, New Zealand’s Timothy Groser, who chairs the talks, called on Members to focus on market access — the issue where the widest gaps in positions prevail. Sources reported that members of the G-20 group of developing countries and the Cairns group of agricultural exporters were trying to ‘kill’ the so-called blended tariff reduction formula championed by the EC and US, replacing it with a banded formula developed by former agriculture chair Stuart Harbinson in a 2003 modalities drafts. Developed countries such as the US, EC, Canada, Switzerland and Japan were reportedly rejecting this move. The current ‘agriculture week’ will be concluded with informal and formal special (negotiating) sessions on 23 April.

Agriculture talks kick off

On 19 April, Members met for a half-hour informal meeting to kick off four days of bilateral and plurilateral consultations. At the informal meeting, Committee on Agriculture (CoA) special session Chair Timothy Groser proposed that Members focus on market access in their upcoming discussions. Groser, in his wrap-up of the March ‘agriculture week,’ characterised market access as the area of negotiation where "not even the outline of a possible basis for a political decision is evident" (see BRIDGES Weekly, 31 March). In contrast, "some shape" had emerged during the last negotiating week on how to settle key issues on domestic support and export competition, Groser said.

"Blended formula dead"

During the agriculture talks so far, most WTO Members, and particularly the G-20 and Cairns Group countries, have indicated that they have problems with the so-called blended tariff reduction formula. The blended formula combines elements of the so-called Uruguay Round (UR) formula, with sets an average reduction with a minimum reduction per tariff line — to be applied to certain "import sensitive" products — and the Swiss formula, which would bring down all tariffs horizontally to a maximum ceiling (effectively addressing tariff peaks). It also involves a commitment to provide zero-tariff access to a certain number of products. According to sources, both G-20 and Cairns are currently in the process of consolidating their approach to market access and "exploring new alternatives" for the tariff reduction methodology. The two groups, which partly have overlapping membership, are reportedly aiming to agree on a common position on market access by the end of the 19-23 April negotiating week.

Both groupings have lately proposed returning to the so-called banded formula developed by former CoA special session Chair Stuart Harbinson in his 2003 modalities drafts (see BRIDGES Weekly, 20 March 2003). Under this approach, the UR formula would be applied across-the-board, but very high tariffs would be subject to much deeper average and minimum cuts than low ones.

During the consultations on 19 and 20 April, developed countries such as the EC, US, G-10 members (including Switzerland, Norway and Japan) and Cairns group member Canada reportedly voiced opposition to the banded approach. While the US criticised the approach for failing to bring about significant new market access, the EC, Canada — and the G-10 countries in particular — said the banded formula would prevent countries from effectively protecting their sensitive sectors. "It would be like placing a bomb in the negotiations," a G-10 official warned.

However, G-10 countries also stoutly oppose the blended formula, especially in combination with a maximum ceiling for tariff rates and an obligation to expand all tariff rate quotas. On the other hand, the pro-liberalisation camp — including most Cairns group and G-20 members — regards the blended formula as too weak, as it would not provide for real new market openings in the North. Many developing countries, such as India, further criticise the blended formula for discriminating against developing countries which — due to their specific tariff profiles — would have to make larger overall reductions than their developed country counterparts.

In the face of the fact that most Members do not seem comfortable with the blended reduction approach, many observers doubted that this formula would be incorporated in the modalities ‘framework’ to be established before the WTO summer break. "The blended formula is dead," a developed country delegate remarked.

The blended formula was developed by the US and EC in the immediate lead-up to Cancun, and later found its way into the various framework draft texts. As the blended formula merges elements of the very flexible UR reduction formula with the ambitious Swiss formula, it is seen by many as a tailor-made tool to accommodate the US’s call for substantial market access improvements, while providing the EC with enough flexibility to protect sensitive products such as dairy, beef and sugar.

Mercosur to stay firm in G-20

The four members of the South American free trade pact Mercosur — Argentina (G-20/Cairns), Brazil (G-20/Cairns), Paraguay (G-20/Cairns) and Uruguay (Cairns) — have rejected recent accusations that they might water down their demands for subsidy and tariff reduction at the WTO in exchange for preferential access under the ongoing EU-Mercosur free trade talks (see related story, this issue) to otherwise protected EC markets such as dairy and beef. In consultations prior to the 19-23 April ‘agriculture week’, Argentina, Brazil and Paraguay reportedly reassured their G-20 partners that the WTO negotiations and the EU-Mercosur bilateral talks were two separate tracks, and that the WTO negotiating stance of the group would not be affected. Some had warned earlier that the EC could make an attempt to split the G-20 by conditioning increased import quotas for key Mercosur products through the regional agreement on the latter group easing pressure on the EC to significantly reduce its subsidies and agricultural tariffs at the WTO.

Zoellick plans "micro-ministerial" in late April

Geneva sources revealed that US Trade Representative Robert Zoellick had scheduled an informal ministerial-level meeting on 30 April in London, aimed at forging common ground between a core group of senior decision-makers. Reportedly, the EC, Brazil (G-20/Cairns), India (G-20), Mexico (G-20), South Africa (G-20/Africa Group) and Kenya (G-33/Africa Group) were invited to the meeting. Notably, no member of the G-10 of net-food importers would be represented at the 30 April meeting. G-10 member Japan cautioned that the planned meeting "may lack some balance" if Japan — globally the largest agricultural net-importer — were to be excluded.

"This smells like a serious effort to get things going," a Geneva trade delegate commented rumours about the planned meeting. Another said that it was intended as a "micro-ministerial" prior to a planned WTO ‘mini-ministerial’ on 14 May in Paris at the margins of the annual ministerial meeting of the Organisation for Economic Cooperation and Development (OECD).

The next issue of BRIDGES Weekly will provide a final report on the ongoing ‘agriculture week’.

ICTSD reporting; "Agriculture: developed countries warn against revival of ‘banding’ formula for tariffs in WTO talks," WTO REPORTER, 21 April 2004; "Agriculture: Zoellick seeks ministerial push to WTO negotiations on agriculture," WTO REPORTER, 16 April 2004; "Exclusive talks planned to break Doha stalemate," FT, 16 April 2004; "Agriculture: Mercosur countries vow to continue push for subsidy cuts in WTO agriculture talks," WTO REPORTER, 19 April 2004.