Bridges Weekly Trade News Digest • Volume 9 • Number 15 • 4th May 2005

Agriculture: Ministers Meet In Paris To Remove AVE Stumbling Block


The so called "five interested parties" (FIPs) — Australia, Brazil, EU, India and US — failed to make a breakthrough on agriculture technicalities during a 2-3 May meeting in Paris. The meeting was held in advance of a 4 May ‘mini-ministerial’ gathering of representatives from influential WTO Member countries on the sidelines of the annual Organisation for Economic Cooperation and Development (OECD) meeting there. In Geneva, WTO agriculture talks had been suspended on 19 April after a reported deal on the process for converting ’specific’ agricultural tariffs based on import quantities into ‘ad valorem’ equivalents (AVEs), i.e., tariffs based on the price of the product, fell through (see BRIDGES Weekly, 20 April 2005). On 4 May, ministers from around 30 countries continued talks on the issue.

Speaking to ministers on 4 May, WTO Director-General Supachai Panitchpakdi stressed that making progress at this moment was critical, given that "We are fast approaching the time when we should be able to start to see the outline of potential outcomes at our Sixth Ministerial Conference in Hong Kong, China in December." He warned that technical issues such as AVE conversion had to be resolved and said "it is unimaginable to me that we could leave Paris without resolving this issue."

In advance of the meeting, EU Trade Commissioner Peter Mandelson called AVE conversion a "thorny issue," stressing that "We need to find a basis for an agreement to put into the Geneva negotiating machinery." Recently confirmed US Trade Representative Robert Portman, on his way into the meeting, said "There are some stumbling blocks at the moment, but I’m optimistic about making progress on them, even this afternoon." Other participants, however, sent less optimistic signals, many blaming the EU for holding up an agreement.

Tensions grow over AVE hitch

AVE conversion has pitted the EU and G-10 countries against the US, the Cairns Group of agricultural exporters and the G-20 (which includes major developing countries such as Brazil, India and South Africa). The former groups make use of a large number of specific tariffs; these need to be converted to AVEs in order for countries to proceed with their work on the tiered tariff reduction formula (under which higher tariffs will be reduced more steeply).

AVE conversion is straightforward for some tariff lines; Members are set to use the ‘unit value’ method in these cases, basing the conversion on import volumes and notified import values in the WTO Integrated Database (IDB). Complications arise, however, with some products, such as sugar and cheeses, where preferences or tariff quotas are involved. In such cases, import prices often differ significantly from 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 EU and G-10 counter that this approach would fail to adequately reflect qualitative factors related to certain products. In their near-deal two weeks ago, Members had agreed to use weighted averages of the IDB and ComTrade data to derive AVEs for complex cases (such as 75/25). The prices of basic products, such as sugar, would have been closer to ComTrade prices, while the prices of processed goods would have been closer to the IDB price. Due to a misunderstanding, however, Members were not clear as to at what point the weighted averages would be calculated — before or after the AVE conversion — and they failed to agree on this point. The EU was of the opinion that the weighting should take place before AVE conversion, while the rest of the FIPs said it should be done once the conversion, based on the IDB and ComTrade data, had already been carried out.

Meeting on 2-3 May at the senior official and ministerial levels, the FIPs had hoped to find a new compromise. Australia and Brazil reportedly said they could consider the sequencing favoured by the EU, but in this case would look for a weighted proportion closer to ComTrade data. The EU was not able to reconsider the IDB/ComTrade proportions, however, so no final compromise was agreed.

Already as the AVE deal fell through in April, a number of countries blamed the EU for backpedaling on it due to pressure from certain EU members states — something the EU has strongly denied.

The EU also presented a new proposal spanning all three pillars of the agriculture negotiations (market access, export competition and domestic support) at the meeting. The proposal was well received by all Members, however, with some countries complaining that it strayed away from the task at hand, namely, resolving the AVE hitch. According to the proposal, reform of each pillar should be implemented in three stages.

Developing countries blame the EU

A number of developing countries blamed the EU for holding up agreement on the AVE issue, which is now putting the Doha Round as a whole at risk. Argentine Commerce Secretary Alfredo Chiaradia (present in Paris, though Argentina is not one of the FIPs) said outright that "The problem is Europe… We hope for an agreement, but it depends on the Europeans, frankly. We keep on throwing out alternatives, but they keep saying no; we throw out another alternative, they again say no." Brazilian Trade Minister Celso Amorim, for his part, said "some countries with a strong desire to maintain protectionism" were "politicising an issue which is essentially technical."

The G-20 and G-10 also met at the sidelines of the meetings.

The next ‘agriculture week’ at the WTO is scheduled to start on 30 May. Members are seeking to produce a ‘first approximation’ of agriculture modalities by July, with actual modalities — percentages of tariff cuts, reduction formulae, criteria for domestic support, deadlines, and transition timeframes — to be completed by the December WTO Ministerial Conference in Hong Kong.

ICTSD will round up coverage of the Paris meeting in the next issue of BRIDGES Weekly.

"Ministers Very Close to Farm-Duty Accord, U.S. Says," BLOOMBERG, 4 May 2005; "EU’s Mandelson calls for end to dispute on farm import duties," AFX NEWS, 4 May 2005; "US’s Portman sees progress on farm duty row today," AFX NEWS, 4 May 2005; "Officials Play Down Prospects for Paris Deal On Tariff Conversions; EU Offers Ag Proposal," WTO REPORTER, 4 May 2005; "FIPs Group Fails to Break Deadlock On Tariff Conversions; Talks to Continue," WTO REPORTER, 4 May 2005; "OECD Council at Ministerial Level: Trade Negotiations under the Doha Development Round," WTO RELEASE, 4 May 2005; "Kamal Nath to address OECD meet tomorrow," THE HINDU, 2 May 2005.