Bridges Weekly Trade News Digest • Volume 9 • Number 10 • 23rd March 2005

Agriculture Negotiations: Technical Work Ongoing

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The latest ‘agriculture week’ at the WTO ended on 18 March. Informal negotiations continue, however, on the process for converting ’specific’ agricultural tariffs based on imported quantities into ‘ad valorem’ equivalents (AVEs), i.e., tariffs based upon the price of the product. Establishing AVEs is a pre-condition for addressing the tariff reduction formula that is a central pillar of ongoing agriculture negotiations. The special (negotiating) session of the Committee on Agriculture was not formally closed, however. The body’s chair, Ambassador Tim Groser of New Zealand, suspended the meeting on 17 March with the intention of reconvening the group after the informal consultations in order for Members to formally agree on an AVE conversion process. While no date has been set for its resumption, Members will most likely reconvene after a ministerial-level meeting of the Cairns group scheduled for 30 March - 1 April in Cartagena, Colombia.

Groser assured Members at the 21 March informal meeting of the Trade Negotiations Committee (TNC) that the agriculture talks have not broken down, and that the ongoing technical talks are proceeding in a constructive spirit. The ‘agriculture week,’ which began on 14 March (see BRIDGES Weekly, 16 March 2005), concluded the first assessment of all issues in the July Package (available here).

Complex AVE conversions pit importers against exporters

The issue of AVE conversion has pitted the EU and G-10 countries (food importing, mostly developed countries such as Switzerland and Norway) against the US, the Cairns group of agricultural exporters and the G-20 (which comprises several key developing countries). The former groups make use of a large number of specific tariffs.

AVE conversion is straightforward for some tariff lines; Members are set to use the ‘unit value’ method in these cases, basing the conversion on notified import values in the WTO Integrated Database (IDB) and import volumes.

Complications arise, however, with products such as sugar and some cheeses, for example, where preferences or tariff quotas are involved. In such cases, import prices often differ significantly from the world prices compiled in the UN commodity trade statistics (ComTrade) database. Agricultural exporters would like to see the conversion based on the lower world prices, which would lead to higher AVEs, and eventually, steeper tariff cuts. The US has proposed a formula for filtering out cases in which there are significant gaps between world prices and import prices, based on comparisons between the WTO and UN sets of data. The AVE conversion could then proceed differently in these cases — although the method for doing so is yet to be decided.

The US and Cairns group want the lower ComTrade prices to be used. The EU and G-10 have countered that those prices are insufficient, since they ignore the reasons for which import prices can be higher than world prices. For example, they argue, some cheeses are more expensive than others due to qualitative factors. However, ComTrade data does not distinguish between different cheeses, while the IDB does.

Delegates’ failure to agree on the methodology for AVE conversion during the agriculture week puts them behind the schedule agreed by key WTO Members at a mini-ministerial meeting in Kenya in early March (see BRIDGES Weekly, 9 March 2005).

At the informal TNC meeting on 21 March, WTO Director-General Supachai Panitchpakdi urged Members to find an expeditious solution to the AVE conversion issue in order to keep the Doha Round as a whole on track, and called on delegates "…to make every effort to work with each other and with the chair to resolve it sooner rather than later, so that the focus can turn rapidly to the negotiation of the tiered formula for tariff reductions and related market access issues in agriculture".

The current work involves significant number crunching, as Members test out different methodologies proposed for AVE conversion with actual data. Once AVEs are agreed, the work on negotiating the tiered tariff reduction formula (under which higher tariffs will be cut more sharply) can proceed.

Other issues on the agenda

In addition to discussing AVE conversion, Members concluded their first assessment of all issues in the July package, addressing "issues of interest but not yet agreed" (sectoral initiatives, differential export taxes and geographic indications) as well as some remaining market access issues, as well as monitoring and surveillance.

The agriculture negotiations at the WTO have been held in three different settings: in informal negotiating sessions open to the full Membership allowing for a first reading of issues; in more focused open-ended technical consultations that delve deeper into the issues; and in small group consultations involving technical experts.

Overall, Members disagreed on whether "issues of interest but not yet agreed" should be addressed at this stage in the negotiations. Argentina said there was no agreement on whether such subsidiary issues should be negotiated at all. Disagreement over the role of geographic indications (GIs) made up part of the debate. The EU and Bulgaria, proponents of extending GI protections to products beyond wines and spirits, linked progress in the three pillars of the agriculture negotiations (market access, export competition and domestic support) directly to further protection of GIs. Several countries felt GIs should be left to the TRIPS Council.

On the issue of ’sectoral initiatives’ that would result in early liberalisation in particular sectors, Colombia and Costa Rica put forward cut flowers as a candidate for significant tariff reduction, given the export interest of developing countries in this area. The US proposed that beef, pork, poultry, oilseeds, barley, fruits and vegetables, distilled spirits, and some processed products should be included as sectoral initiatives, arguing that not only should tariffs be brought down, but subsidies should also expeditiously eliminated in these sectors. Agricultural sectoral initiatives have not been discussed in such concrete terms before, and while several exporters agreed with the approach in principle, Australia preferred to focus on overall tariff reduction at this stage. India cautioned that sectoral initiatives might undermine special and differential treatment for developing countries.

Delegates also discussed the schedule for eliminating export subsidies and support, with major developing countries calling for a down payment and a frontloaded schedule for reductions. On tariff escalation, speakers noted that an ambitious tariff reduction formula would take care of some related problems in these areas as well. Members continued to disagree on whether specific duties need to be simplified, and whether a special safeguard to protect developed countries against import surges should be retained. Issues related to the specific situations of least-developed countries and recently-acceded Members will be substantively addressed later on in the negotiations. On monitoring and surveillance, the G-20 suggested a new committee be established to handle implementation.

The next ‘agriculture week’ is scheduled for 13-19 April. Cairns Group ministers will meet from 30 March to 1 April in Cartagena, Colombia.

ICTSD reporting; "WTO Farm Talks Chair Downplays Setback in Securing Tariff Conversion Pact," WTO REPORTER, 22 March 2005.