Bridges Weekly Trade News Digest • Volume 6 • Number 29 • 6th August 2002
US Agriculture Proposal Receives Mixed Reviews - Sets The Stage For Market Access Discussions
On 25 July, the US released its proposal for the ongoing agricultural negotiations at the WTO. Coming just a day before a 26-27 July meeting in Japan of agriculture ministers from the ‘Quint’ groups of countries (US, EU, Canada, Japan and Australia), this led to preliminary discussions on the proposal by some of the world’s largest agricultural traders. The timing also allowed the US to submit the proposal to the Committee on Agriculture’s 29-30 July inter-sessional consultations on market access — just prior to the WTO’s summer break. While some Members supported the proposal (notably the 18-member Cairns group of agriculture-exporting countries), others questioned its credibility in light of the US’ recent subsidy-raising farm bill (see BRIDGES Weekly, 15 May 2002). Detractors pointed out that the new US agriculture proposal puts the bulk of the onus for reforms on other Members (especially the EC & Japan) and not on the US itself. The EC and Japan, for their part, indicated that they felt it was unrealistic and went too far.
US aims for agriculture
The US proposal for agricultural reforms touches on the three pillars of the WTO Agreement on Agriculture: export competition, market access, and domestic support. Regarding export competition, it calls for, inter alia, the elimination of export subsidies over a five-year period (in equal annual increments), the elimination of state-trading enterprises, the prohibition of agricultural export taxes and the establishment of rules for governing export credit activity.
On market access, the proposal suggests, among other measures, across- the-board tariff cuts on agricultural products resulting in a maximum tariff rate of 25 percent over a five year phase-in period (thus cutting higher tariffs more than lower tariffs), followed by a move to eliminate all agricultural tariffs afterward. It also looks to expand tariff-rate quotas (applying a specific tariff rate for a certain quantity of imports, and a second (higher) one on imports above that quota amount) by 20 percent. Further, the US proposes eliminating the special agricultural safeguard (which allows Members to enact emergency import curbs on agricultural products).
With respect to domestic support, the US is seeking to bring the ‘blue box’ subsidies (’less-distorting’, production-linked support) into the ‘amber box’ (trade-distorting support). Members have committed to reductions on the latter, but not on the former. This combined ‘box’ would then be subject to a limit of support of five percent of the total value of agricultural production. The proposal also suggests maintaining the basic criteria for non-trade distorting support (Green Box).
‘Quint’ has mixed feelings on US proposal
At the 26-27 July meeting of agricultural ministers from the US, EU, Canada, Japan and Australia, scant consensus prevailed on how to proceed with the WTO negotiations, other than the need to end them quickly and successfully. US Agriculture Secretary Ann Veneman took the opportunity to comment that "[...] by putting forward this new proposal we are saying very clearly that we want to maintain a leadership position in these negotiations and that we are willing to make changes to our farm programmes if other countries are willing to do the same." Canadian and Australian ministers welcomed the US’ "reengagement with the negotiations" despite the fact that both countries differed on how the reforms should be carried out. "The US have been perceived to have lost leadership in these issues because of their own farm bill and the perception that the US was asking other parts of the world to do things that they were not prepared to do themselves," said Australian Agriculture Minister Warren Truss. "This [proposal...] does involve some pain for the US, though perhaps not unsurprisingly it does have a greater impact on countries like Europe and Japan because they have bigger subsidy programmes in the first place."
EC Farm Commissioner Franz Fischler indicated that he felt the report was "not a very good basis to find a compromise in the negotiations." Japan’s Agriculture Minister Tsutomu Takebe was more scathing, calling the plan lopsided and focussed excessively on slashing tariffs while not doing enough to address concerns about preserving the environment or traditional farming practices.
US proposal takes centre stage at market access consultations
The informal WTO inter-sessional consultations on market access in agriculture on 29-30 July had six items up for discussion: tariffs, tariff-rate quotas (TRQs), TRQ administration, special safeguard measures, state-trading enterprises, and other market access issues. Due to time constraints, however, the last two were not discussed, and will be tacked onto the beginning of the 2 September special (negotiating) session on market access.
On tariffs, Members disagreed over what formula to use for reduction commitments (see BRIDGES Weekly, 26 June 2002). The current tariff- setting system has allowed countries intent on shielding domestic farmers from cheaper imports to maintain higher rates in sensitive areas via tariff peaks (higher tariffs for sensitive products) and tariff escalation (rising tariffs with increased value added). The US proposal, supported by the Cairns group, goes against this methodology by calling for across-the-board tariff cuts. Based on the US proposal, this would see the average global tariff on agricultural products drop from 62 percent to 15 percent (the current US average is 12 percent). Other Members, especially the EC, Japan, Switzerland, Norway and Korea, called for maintaining the formula used during the Uruguay Round negotiations, which allows for use of measure such as tariff peaks and tariff escalation.
On TRQs, the US and the Cairns Group (minus Canada) supported a 20 percent expansion of all TRQs. Some in the Cairns Group wanted an even larger expansion of these quotas. Neither Japan nor the EC supported the proposal. Members generally agree on increased administration of TRQs, but hold different views over how such an increase should be implemented.
The agreed timetable for the forthcoming negotiations are: 2-4 September: special sessions on market access; 5-6 September: intersessional consultation on domestic support; and 23-15 and 27 September: special sessions on domestic support.
A mid-November meeting will provide Members with the opportunity to address so-called inter-pillar issues. In these sessions, Members are required to translate their proposals tabled during phases one (2000- 2001) and two (2001-2002) into legal and technical language applicable to modalities. Article 14 of the Doha Declaration provides that negotiating modalities are to be established by 31 March 2003.
The full text of the US proposal can be found at http://www.fas.usda.gov/itp/wto/proposal.htm.
"World farm powers divided at end of trade talks," REUTERS, 27 July 2002; "Farm summit ends in row over U.S.-backed free-trade plan," AP, 27 July 2002; "WTO begins informal talks on farm market access," KYODO NEWS, July 29 2002; "WTO nations disagree on formula to cut farm produce tariffs," KYODO NEWS, 30 July 2002; GENEVA WATCH, 1 August 2002.