WTO Ministerial Section • Volume 9 • Number 28 • 3rd August 2005
Agriculture: Following July Stalemate, Intense Negotiations Expected in Lead-Up to Hong Kong
Despite intense negotiations in different formats — many of which relied on a group of 14 key countries including the EU, US, Brazil, India — WTO Members did not reach a concrete outcome on agriculture at the end of July. As a result, delegates now have just three months to arrive at agreement on agriculture modalities (the formulas, percentages and timeframes for tariff and subsidy cuts) at the WTO’s Hong Kong Ministerial Conference in December — a goal they have set for themselves in order to complete the Doha Round in 2006.
Trade delegates had hoped to agree on "first approximations" for a Hong Kong agriculture deal at the end of July (see BRIDGES Weekly, 27 July 2005). However, despite the last-minute presence of trade ministers in Geneva, delegates were unable to forge any further agreement. Tim Groser, the former New Zealand ambassador who has been chairing the agriculture talks, instead delivered an assessment of the agriculture negotiations at the Trade Negotiations Committee (TNC) on 28 July. He stressed that "The agriculture negotiations are stalled — there is no way to conceal that reality. But a set of clear political decisions — none of them easy, but at least we can now more readily identify the essential decisions — can restart this negotiation and still pave the way for a successful Ministerial meeting in December." Several trade delegates noted that the outcome was no surprise, considering the state of the talks.
Outgoing WTO Director-General Supachai Panitchpakdi, in his last statement to the TNC, which he chaired, emphasised that "what has been hampering our work in Geneva is not so much a dearth of ideas but a certain reluctance on the part of key players to engage in real negotiations on the proposals put on the table. This must change and it must change immediately." He repeated his assessment at a closing meeting of the General Council on 29 July.
Supachai stresses the need to focus on substance
In his statement to the TNC, Supachai stressed the huge amount of work in the area of agriculture that lay ahead on the road to Hong Kong, as well as the importance of actually agreeing on modalities at the summit. He lamented the amount of time negotiators had spent on the technical issue of how to convert ’specific’ agricultural tariffs based on quantities imported into ‘ad valorem’ equivalents (AVEs), i.e., tariffs based on the price of the product (see BRIDGES Weekly, 11 May 2005), and said this gateway issue had held up overall progress in the negotiations for months
He pinpointed the structure of a tiered formula for market access as the key issue for which a solution was needed, since delays on the formula inevitably cause all other issues to remain on hold as well. The formula for cutting domestic subsidies also requires urgent resolution. After highlighting issues in all three pillars of the agriculture talks that delegates must resolve as quickly as possible, Supachai turned to the issue of cotton, noting that there was little hope for movement on cotton in the absence of progress in the overall agriculture negotiations. He also called for development assistance to developing country producers, given the current fall in global cotton prices.
State of play in the three agriculture pillars
Tim Groser, speaking to the TNC on 28 August, delivered an assessment of the state of the negotiations, pointing to issues that are currently posing difficulties in the talks and are likely to be the focus of Members’ attention. Given that no new text was agreed, the negotiations will be firmly anchored in the Doha Declaration itself, as well as in last year’s July Package.
On market access — the most challenging area of the talks — chasms remain between high-tariff countries and agriculture exporters. Before being able to move to other issues, such as tariff escalation or preference erosion, delegates have to agree on the basic structure of the formula — the number of tiers tariffs will be divided into, and how the cuts will be made within each tier. Future work will be based on a G-20 proposal on market access, tabled as a compromise at the Dalian mini-ministerial in mid-July (see BRIDGES Weekly, 13 July 2005). Although not all delegations agree with all elements of it, they are willing to base further talks on it. Members’ disagreement on the issue of tariff caps came out strongly in the latest rounds of talks, however, with G-10 countries, the EU and the African, Caribbean and Pacific (ACP) countries reluctant to accept caps on their tariff peaks. ACP countries have also made the point that the tariff ceilings they agreed to in the Uruguay round under special and differential treatment should be given special consideration, so as not to all be automatically slated for tough reduction. In general, Members differed on whether flexibility (for sensitive products) should be built directly into the tariff reduction formula, or treated outside of it.
In the area of domestic support, the main subsidisers still disagree on the structure of the tiered formula for making cuts to trade distorting support. The EU supports a three-tier formula that would have it make the largest cuts percentage-wise, with the US and Japan falling into the second category. The US prefers a formula in which Japan would fall into a higher tier than the US. They also have to make progress on Blue Box (partially decoupled farm payments under production-limiting programmes) criteria and on the review and clarification of the Green Box (minimally distorting subsidies). On the Blue Box, the US is planning to shelter its counter-cyclical payments — subsidies to farmers that increase with a fall in the value of season-average market prices for commodities — and is linking tightening criteria to concessions by others in the market access pillar. Regarding the Green Box, Groser noted that those countries making most use of it would need to seriously consider proposals by others on the tightening the criteria. Meanwhile, some new provisions focusing on the needs in developing countries (for example, land reform) would need to be included.
Under export competition, WTO Members largely agree on the changes needed to phase out regular export subsidies (although they have yet to set the final end date). However, they have still to agree on new disciplines on state trading enterprises and food aid.
On the road to Hong Kong
In the absence of a July agreement, the pressure on negotiators will be immense in the lead-up to the Hong Kong Ministerial Conference, with Geneva delegates doing the groundwork for a political deal. While saying that the outcome was by no means unexpected, some delegates expressed concern at the amount of work ahead. One trade source noted that many issues of importance to developing countries, such as the special safeguard mechanism to protect against import surges or preference erosion, would need sufficient elaboration — and time will be difficult to come by, given that key issues such as the market access formula needed to be resolved first. However, the situation was by no means hopeless, speculated one delegate, who felt some of the important actors had been disengaged over the last months, and if they managed to forge some key compromises that could help unblock the situation this could even lead to rapid progress. Others, however, raised concerns over the negotiating format, and the fact that many smaller countries had been out of the loop. In the end, their concerns would have to be taken on board in order for the Membership to reach a deal. The last two weeks had, in some way, been indicative of the problem of lack of information and communication, which had contributed to the modest outcome.
Commenting on the situation, EU Trade Commissioner Peter Mandelson said "We cannot go on as we are with any reasonable chance of success." US Trade Representative Rob Portman remained optimistic, saying "I see the will to succeed and I see progress — slow but sure…" Australian Deputy Prime Minister Mark Vaile, however, commented that "The failure to make progress on agriculture, and particularly agricultural market access, has again proved the critical stumbling block… We now face a major challenge if we are to lay the basis at the WTO Ministerial Meeting in Hong Kong in December for completing the Doha Round."
The G-20 is planning on meeting at the ministerial level in September in Pakistan to co-ordinate positions, possibly along with the G-33. According to trade sources, a mini-ministerial may take place in Geneva in early October, once Pascal Lamy has taken the helm at the WTO.
Following the August recess at the WTO, Groser will be replaced by his compatriot Crawford Falconer, the newly-installed New Zealand Ambassador to the WTO. The first agriculture week is currently scheduled to begin on 26 September.
ICTSD reporting; "New WTO Farm Head Says It’s Time For Tough Decisions," NEW ZEALAND HERALD, 3 August 2005; "WTO Chief Says Trade Deal Still Possible By Year End," REUTERS, 28 July 2005; "Impatience Up on Stalled WTO Trade Talks," ASSOCIATED PRESS, 28 July 2005; "Australia slams WTO failure to meet negotiations deadline," AGENCE FRANCE PRESSE, 29 July 2005.