WTO Ministerial Section • Volume 9 • Number 34 • 12th October 2005

US, EU Divided on Agricultural Market Access

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The US and the EU are sharply divided on the extent to which they want farm tariffs reduced in the Doha Round WTO negotiations, following three days of high-level meetings in Zurich and Geneva that saw the two economic heavyweights exchange new and revised proposals on agricultural market access.

The G-20 added to the discussions on 12 October, when it agreed on a market access proposal that provided for significantly different treatment for developed and developing countries.

The G-10 countries, which heavily protect their agriculture sectors, put forward a proposal that rejects maximum levels for tariffs, so called tariff caps.

US tables formula in Zurich; cuts too high for EU’s comfort

US trade officials have insisted that in order to agree to "substantial" reductions in domestic support, they would have to see a marked expansion of market access for farm products. The EU and the US have been discussing ’scenarios’ for tariff reduction in recent weeks, all of them based on a tiered formula that would require steeper cuts to tariffs classified in higher bands (see BRIDGES Weekly, 5 October 2005).

At a 10 October ‘mini-ministerial’ meeting in Zurich, the US tabled a formula that established four identical bands for developing and developed countries — below 20 percent, 20-40 percent, 40-60 percent, and above 60 percent. It would have tariff cuts rise progressively through each band, with developed countries making reductions of 55-65, 65-75, 75-85, and 85-90 percent respectively within the four bands. The US did not specify the depth of tariff cuts it would seek from developing countries, but said that they would only be "slightly" lower than those undertaken by developed countries. It also suggested capping developed country tariffs at 75 percent and limiting the number of ’sensitive products’ that Members can designate for relatively low tariff reductions to one percent of dutiable tariff lines.

The EU responded at an 11 October informal meeting in Geneva, with an offer to give up its demand for "pivots" that would have provided Members a measure of flexibility in cutting tariffs on particular products within each band (see BRIDGES Weekly, 28 September 2005). Its proposal would cut tariffs on products in the lowest band by 20 percent, rising to 50 percent for tariffs above 90 percent. However, although the EU signaled that it was willing to lower its number of sensitive products from ten to eight percent of tariff lines, the 160 products that this would cover remained far higher than the one percent figure put forward by the US. A 10 October memo circulated to ministers in Zurich indicated that the EU accepts the G-20’s proposed farm tariff caps of 100 percent for developed countries and 150 percent for developing ones.

US Trade Representative Robert Portman dismissed the EU proposal, arguing that it did not do enough to cut tariffs. Stressing the importance of market access to Hong Kong and the Doha Round, he alleged that the EU’s approach would lower its tariffs by an average level of 24.5 percent, saying "I don’t think anybody considers that adequate." Australian Trade Minister Mark Vaile also challenged the EU to come up with a more ambitious market access proposal.

On the same day, EU Trade Commissioner Peter Mandelson told journalists that he would consult with member state governments in order to produce a new proposal on tariff reduction next week. He has stressed that the EU wants large developing countries such as Brazil, China, and India to open their markets to non-farm exports, saying that without it "no outcome on agriculture or other parts of our negotiation" is possible.

Indian Commerce Minister Kamal Nath told the Financial Times on 9 October that the US and the EU were "offering postdated cheques on subsidies but asking for cash up front on [industrial] market access." Nath expressed opposition to the US proposal for progressively higher tariffs within each band, arguing that it was tantamount to the harmonising Swiss formula approach that Members had already rejected.

G-20 proposal

The G-20’s market access proposal of 12 October is substantially different in structure, calling for an average minimum tariff reduction of 54 percent in developed countries and an average maximum tariff cut of 36 percent in developing countries. To accomplish this, the G-20 proposes establishing different sets of tiers for developing and developed countries, coupled with higher tariff cuts for the latter. It would have developing countries make cuts of 25, 30, 35, and 40 percent in respective bands of under 30 percent, 30-80 percent, 80-130 percent, and over 130 percent. In their tiers of under 20 percent, 20-50 percent, 50-75 percent, and over 75 percent, developed countries would be required to make higher cuts of 45, 55, 65, and 75 percent respectively.

The G-20 proposal says that the different thresholds and tariff reductions are necessary in order to ensure that developing countries do not end up with a disproportionate burden of commitments. However, a developed country trade negotiator, when asked to comment on the paper, expressed disappointment with its proposed level of access to developing country markets.

Tariff caps — present in the US, EU, and G-20 proposals — are anathema to the G-10 countries, which reject "the notion of capping agricultural tariffs" in their proposal. The G-10, which includes Switzerland, Japan, Norway, and Korea, does not put forward specific percentages for tariff cuts, but proposes a ‘credit’-based model that could potentially grant countries a significant measure of flexibility for cuts within each tariff band in exchange for a slightly higher average tariff reduction.

G-33 calls attention to developing country issues

Following the Zurich meeting, Kenyan Trade and Industry minister Mukhisa Kituyi called for more attention to developing country issues, warning that "The [Hong Kong] meeting runs the risk of failure unless the developed world stops treating developing countries’ concerns as an afterthought."

The G-33 group of developing countries, which support allowing developing countries to designate ‘Special Products’ (SPs) for low tariff cuts based on food security, livelihood security and rural development criteria, expressed their deep disappointment with the negotiations "both in terms of substance and process." The group, which also supports the creation of a ‘Special Safeguard Mechanism’ (SSM) to help developing countries protect themselves from import surges, called for a more inclusive process that would full reflect special and differential treatment (S&D) in the talks. Regarding the market access formula, the G-33 said the different tariff structures of developed and developing countries need to be taken into account, and that tariff thresholds for developed and developed countries must be set at different levels. It also called for proportionality in the commitments undertaken by developing and developed countries.

In its market access proposal, the G-20 reiterated its commitment to both SPs and the SSM as a form of S&D for developing countries.

A number off issues flagged by the G-20 and G-33 are likely to see further discussion in the near future. The G-20’s market access paper said the group would submit proposals on topics including remedial action developing countries could take against subsidised imports from developed countries, tariff escalation, and tropical products. The G-33 is set to table an illustrative proposal on indicators for food security, livelihood security and rural development, the three criteria on which SPs would be based. According to the group, the proposal will provide guidelines for developing countries in their national processes for selecting SPs, as the three criteria have to be considered in the context of differing conditions across countries and even regions within them.

ICTSD will provide an updated report on the agriculture negotiations in the next issue of BRIDGES Weekly.

View full copies of the proposals here:US ProposalEU ProposalG20 ProposalG10 Proposal

ICTSD reporting; "U.S. Proposal for Bold Reform in Global Agriculture Trade," US TRADE REPRESENTATIVE FACT SHEET, 10 October 2005; "Key trade ministers end farm meet, no breakthrough," REUTERS, 12 October 2005; "Developing countries say they will ask U.S., EU to make deeper cuts in farm aid," ASSOCIATED PRESS, 11 October 2005; "WTO Talks Might Flop, Says Minister," EAST AFRICAN STANDARD, 12 October 2005; "Press Release," US MISSION TO THE WTO, 12 October 2005; "G-20 Urges More U.S. Farm Subsidy Cuts; U.S. Wants Better Market Access Proposals," WTO REPORTER, 12 October 2005; "France says EU has already done its part to cut farm subsidies," FORBES, 10 October 2005; "Oxfam: US farm subsidies offer ’smoke and mirrors’," PRESS RELEASE, 10 October 2005;"EU offers counter-bid on farm trade," FINANCIAL TIMES, 10 October 2005; "Kamal Nath Rejects New US, EU Agri Market Access Proposals - Protects India’s Agri Concerns In WTO," GOVERNMENT OF INDIA PRESS INFORMATION BUREAU PRESS RELEASE, 12 October 2005; "India rejects US, EU offers for farm tariff reduction," 13 October 2005.