WTO Ministerial Section • Volume 9 • Number 36 • 26th October 2005

Ag: FIPs Ministers’ Meet Ends Abruptly; EU To Make New Offer On Market Access?

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The Doha Round negotiations risk collapse, warned the US and the EU on 19 October, after meetings among major trading powers broke down over farm trade reform. The chair of the WTO agriculture negotiations, Ambassador Crawford Falconer of New Zealand, warned Members on 21 October that if they failed to resolve their major differences within ten days, it would be impossible for them to reach agreement at the Hong Kong Ministerial Conference in December.

Ministerial-level talks in Geneva among the US, the EU, Brazil, India and Australia (the Five Interested Parties, FIPs) fell apart on 19 October, after they were unable to narrow their differences on tariff reduction. The EU’s offer on market access remains significantly less ambitious than those from the other FIPs countries. The FIPs ministers’ talks scheduled for the following day were cancelled, as was a session with ministers from six other states, including Canada, Japan, and Switzerland. These high-level gatherings coincided with an ‘agriculture week’ at the WTO during which Members remained far apart on how to reduce tariffs (see BRIDGES Weekly, 19 October 2005).

The breakdown last week is considered a grave setback to the talks, and indicates that Members may be unable to agree on modalities including numerical targets for tariff cuts before Hong Kong. Some sources have gone so far as to express concerns that the Ministerial Conference may be cancelled, while others have dismissed such suggestions as calculated to motivate progress. Members are now expecting a revised offer by the EU towards the end of the week.

EU under increasing pressure from US, Cairns group, G-20

US Trade Representative Rob Portman blamed the EU’s failure to come up with a new, deeper proposal on market access for the breakdown in Geneva. Australian Trade Minister Mark Vaile also claimed that the EU was jeopardising the talks, warning that "other areas such as industrials and services, will remain stalled" until the EU makes a significant market access offer. Similar views were voiced by the G-20 group of major developing countries, which includes Brazil, China and India, as well as the 17-country Cairns Group of farm exporters.

Portman told a 20 October press conference in Geneva that an EU proposal would "not be credible" unless it is between the 75 percent average tariff cut for developed countries proposed by the US and the 54 percent average reduction sought by the G-20. The Cairns Group has also urged the EU to come up with a proposal in that range. In contrast, the EU’s most recent proposal would have rich countries cut tariffs by an average of 24.5 percent (see BRIDGES Weekly, 12 October 2005).

In spite of the heavy pressure from its trading partners to produce a more ambitious offer, opposition to further tariff cuts from within the EU has limited EU Trade Commissioner Peter Mandelson’s ability to negotiate. Mandelson maintains that the EU would have to see satisfactory progress on non-agricultural market access (NAMA) and services before offering any further concessions in agriculture. In a 19 October letter addressed to WTO Director-General Pascal Lamy and circulated to FIPs trade ministers, Mandelson said that while progress on agriculture might "unlock" the rest of the negotiations, "it is equally true that a combination of inactivity in non-agricultural sectors and unreasonable demands on agricultural market access can also keep the negotiations completely ‘locked.’"

Brazil, India and the US, however, saw the sequencing differently, and maintained that progress on agriculture was necessary before there could be movement in other areas.

G-10, ACP in EU camp on market access

However, not all Members would like to see the EU offer to make deeper tariff cuts. A number of countries have taken positions in favour of the EU on market access. A delegate from a country belonging to the African, Caribbean and Pacific (ACP) group expressed grave concern that the emerging concept of a "middle ground" is migrating towards the US and Cairns group positions, rather than taking G-10 and ACP positions into account.

On 21 October, the ACP countries tabled a new proposal on market access that calls for the overall average tariff reduction by developing countries not to exceed 24 percent, coupled with progress on the development aspects of the agriculture negotiations (see related story, this issue). While presenting the proposal to WTO Member delegations, the Ambassador of Mauritius pointed to the size of the constituency that supported it — the ACP Group accounts for 79 of the WTO’s 148 Member states.

Though it strikes many of the same notes as the ACP paper on development, the G-20 proposal provides for a maximum average cut of 36 percent by developing countries.

The G-10, a group of net food importers with heavily protected agricultural sectors that includes Japan, Switzerland, and Norway, supported the flexibility provided for in the ACP proposal. They expressed opposition to the proposals from major trading nations calling for deep cuts on farm import tariffs. According to the group, the EU should seek to find a middle ground between agricultural exporters and the "friends of flexibility," namely countries such as the ACP and G-10. The G-10 also said that it wanted to see progress in other areas of the negotiations.

Internal Schisms Over Agriculture Dogging The EU

The EU is expected to circulate a revised market access offer towards the end of the week. However, EU member states are deeply divided on how to proceed, and are engaged in intense internal discussions on the Doha Round. Mandelson told EU development ministers on 24 October "If we want the US to reform its own domestic subsidy regime and if we want the Brazilians to cut industrial tariffs and open up on services, we have to move on agricultural tariffs, there’s no other way."

On 25 October, France circulated a text among EU agriculture ministers that called for the EU’s executive European Commission not to present a new market access offer. France has previously threatened to block the negotiations over the issue. Nevertheless, that same day EU Commissioners expressed their full support to Mandelson to put forward a new offer on farm subsidies — one that would be explicitly linked to progress in other areas of the negotiations. "This offer would be a conditional offer which would enable other WTO members to make further moves in relation to agriculture, industrial goods and services," said EU Commission spokesperson Peter Powers. The offer is likely to elaborate on farm tariff cuts under a four-tier approach. In addition, it would include a list of sensitive products and their import tariffs. US Trade Representative Rob Portman has cautioned, however, that the new offer may not be enough to break the deadlock in the agriculture negotiations.

Sources report that any new EU proposal will probably not be circulated before a 27 October meeting of EU heads of state outside London. A 27 October senior officials meeting in Geneva has been cancelled. However, trade negotiators remain permanently ‘on call,’ and the FIPs have reportedly scheduled a teleconference for 28 October.

In light of the state of the talks, Falconer has indicated that 25 November is the earliest that Members could hope for a draft Hong Kong text, rather than at the mid-November target date.

ICTSD will provide an update on the negotiations in the next issue of BRIDGES Weekly.

ICTSD reporting; "US, EU warn WTO deal in danger as talks fail", REUTERS, 19 October 2005; "Australian Trade Minister says EU putting WTO talks at risk", AGENCE FRANCE PRESSE, 20 October 2005; "EU under pressure over slack pace of WTO talks", AGENCE FRANCE PRESSE, 20 October 2005; "WTO members remain far apart on farm trade liberalization", Kyodo News, 21 October 2005; "Blame game follows failure of FIPs Ministers’ meeting", THIRD WORLD NETWORK INFORMATION SERVICE, 21 October 2005; "Statement by EU Trade Commissioner following WTO talks in Geneva", EU Trade News, 21 October 2005; "Pressure mounts on EU to break WTO deadlock", REUTERS, 21 October 2005, "Food importers warn over WTO summit", AGENCE FRANCE PRESSE, 21 October 2005; "WTO chief says EU, US position in trade talks too far apart", AGENCE FRANCE PRESSE, 22 October 2005; "Mandelson says EU has to cut farm tariffs as trade talks balance on knife edge," ASSOCIATED PRESS, 24 October 2005, "USTR Portman says signs ‘Not Encouraging’ that EU will come up with solid Ag proposal", WTO REPORTER, 26 October 2005; "EU faces crunch week to save global trade talks," REUTERS, 24 October 2005.