Bridges Weekly Trade News Digest • Volume 7 • Number 10 • 20th March 2003
Agriculture: Only Minor Modifications In Harbinson’s Revised Modalities Draft
On 18 March, Stuart Harbinson, Chair of the special (negotiating) session of the WTO Committee on Agriculture (CoA), issued a revision of his first draft modalities for the ongoing agriculture negotiations. The modalities, scheduled to be agreed by 31 March, are to set out the scope of the negotiations, the methodology to be followed during the actual process, and the end-results expected in the agriculture negotiations. Harbinson, who had been tasked with preparing an "improved second modalities" draft following the first draft from 17 February, found himself unable to do so due to "insufficient collective guidance" received from Members. He was only able to present "an initial, limited revision of certain elements of the first draft of modalities," he stated in the 18 March document. While the main features of the original draft remained largely unchanged, some pro- developing country modifications have been made, for example with respect to market access, a new special safeguard mechanism, and trade preferences. The US, and Cairns Group leader Australia, have rejected the revised draft as not being ambitious enough. Japan, a ‘Friend of Multifunctionality,’ criticised the revised paper as being too similar to the original. The EU and Switzerland underscored that it remains unbalanced, and EU Trade Commissioner Pascal Lamy said that the draft is not comprehensive as it does not include non-trade concerns nor a peace clause.Harbinson criticises Members’ lack of guidance
In his introductory remarks to the revised modalities document (WTO document TN/AG/W/1/Rev.1, viewable at: http://www.wto.org/english/tratop_e/agric_e/negoti_mod2stdraft_e.htm), the CoA negotiating session Chair explained that, in their reactions to the original draft during the negotiations in late February, various Members had "indicated that the draft did not correspond in various ways with their vision of the modalities to be established" (BRIDGES Weekly, 5 March 2003). Others, however, had "found the paper useful or expressed interest in various ideas presented," Harbinson said. Nevertheless, due to a lack of "collective guidance", he saw himself unable to "significantly to modify the first draft as submitted on 17 February 2003," he said.
Nevertheless, Harbinson called on Members to constructively engage in negotiations during the forthcoming — and officially the last — modalities negotiating session taking place from 25 to 31 March, so as to "create the space for establishing modalities in line with the Doha mandate". However, "we would need a wonder to have trading partners agreeing on modalities by end-March," a source close to the negotiations stated.
Main elements remain, S&D strengthened
The revised first modalities draft leaves the core elements of the original approach on new commitments with regard to market access, export competition and domestic support untouched (see BRIDGES Weekly, 12 February 2003). Despite hefty criticism from the ‘Friends of Multifuntionality’ (including the EU, Japan and Switzerland) and calls for a better reflection of non- trade concerns (NTCs) such as food safety and consumer protection in the modalities, the Harbinson draft left the question of how such NTCs could be addressed open. Instead, he pointed to the fact that NTCs have already "been taken into account in various parts of the present text (and not only in market access)". However, he recognised that further consideration would need to be given to those issues.
Several modifications have been made with respect to special and differential treatment (S&D) for developing country Members.
Regarding market access, Harbinson added a further tariff band to his original three-pronged tariff reduction model. According to the revised modalities draft, the original tariff band ranging from 120 to 20 percent (with an average cut of 33 percent, and a minimum cut of 23 percent) would be split into a 120 to 60 percent as well as a 60 to 20 percent category, with average cuts of 35 and 20 percent and minimum cuts per tariff line of 20 and 15 percent, respectively. In addition, the tariff reductions would be less in the 20 percent downwards band (25 percent average, 15 percent minimum cut) as compared to the earlier proposal (27 percent and 17 percent).
Moreover, the ‘best endeavour’ language in the original text requiring developed countries to provide inter alia "fullest liberalisation" of trade in tropical products, "whether in primary or in processed form", has been made mandatory.
Furthermore, due to progress on a new special safeguard (SSG) mechanism for developing countries, the original proposal providing that this new SSG would be restricted to only a few "strategic products" denominated by developing countries, has been dropped. The text now states that "an outline of a possible new special safeguard… is currently subject to technical work and will be included at the appropriate stage in" an annex to the modalities draft.
On trade preferences, the revised draft gives some additional leeway with regard to developed country Members’ tariff reduction commitments if they relate to the erosion of long-standing preferential trade terms for developing countries. In addition, the new text now requires preference-providing Members to "undertake targeted technical assistance programmes and other measures, as appropriate, to support preference-receiving countries in efforts to diversify their economies and exports".
Study sees developed countries as main beneficiaries
Harbinson’s revisions come after the release of a study prepared by the Danish Research Institute for Food Economics (viewable at http://www.ictsd.org/issarea/ag/resources/index.htm) that analyses the balance in Harbinson’s original first draft, as well as the distribution of the estimated global welfare gains resulting from further agriculture trade liberalisation along the lines of the original modalities text. The study finds that 80 percent of the expected US$100 billion increase in global real income from the liberalisation would accrue to OECD countries, while the remaining US$20 billion would be distributed amongst a relatively large number of developing countries, including the least-developed countries (LDCs).
The study further shows that the original modalities would result in negative welfare effects in net food-importing developing countries (NFIDCs), due to higher food import prices. Also, receivers of trade preferences would be negatively affected as "such preferences are by definition eroded in any trade liberalisation scenario".
ICTSD reporting; "Agriculture: Few changes in second Harbinson Ag draft; Chair faults Members for lack of guidance," WTO REPORTER, 19 March 2003; "Agriculture: US trade official criticises Harbinson proposal, blames EU for delay in talks," WTO REPORTER, 19 March 2003; "Japan opposes revised proposal from WTO Ag chief," DOW JONES, 19 March 2003; "Australia rejects revised WTO plan to liberalise Ag trade," DOW JONES, 19 March 2003.