Bridges Weekly Trade News Digest • Volume 9 • Number 32 • 28th September 2005

Agriculture Negotiations: Paris Meet Yields No Concrete Results

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Three days of high-level meetings in Paris between ministers and senior trade officials from key WTO Members did not unblock the Doha Round agriculture talks, which are holding up the negotiations as a whole. Nevertheless, participants said they felt the talks had been useful and clarified the stances of the major players.

EU Trade Commissioner Peter Mandelson and Agriculture Commissioner Mariann Fischer Boel met with their US counterparts Robert Portman and Mike Johanns on 22 September. They picked up from discussions on reducing tariffs and subsidies they had held in Washington the week before (see BRIDGES Weekly, 21 September 2005, http://www.ictsd.org/weekly/05-09-21/story4.htm).

They were joined the following day by Brazilian Foreign Minister Celso Amorim and Indian Commerce Minister Kamal Nath. Representatives from the ‘new Quad’ met with Australia, as well as with China, Switzerland, Japan, Argentina, and Malaysia on 24 September.

EU tables market access scenarios with built-in flexibilities

Different scenarios for market access topped the agenda, with the EU tabling four options based on a G-20 proposal for tariff reduction. Each scenario would divide countries’ tariffs into four bands, and allow developing countries to make cuts two-thirds the size of those made by developed countries. The four varied in ambition: the average reductions ranged from 24.5 to 36.4 percent, with tariffs in the highest bands to be cut most steeply.

In addition, the EU proposed building flexibility directly into the formula in the form of "pivots." According to this approach, a 10 percent pivot in a band with a 50 percent reduction requirement would leave Members the option of cutting tariffs on some products by 40 percent, so long as other tariffs were cut more deeply to keep the average cut for the band at the target level. The EU said that building greater flexibility into the formula through the pivots would lower their need to resort to ’sensitive products,’ which fall outside the formula and are slated for milder tariff reduction.

The US and Brazil expressed skepticism about the pivot concept. They noted that sensitive products would have to undergo some tariff cuts as well as tariff rate quota (TRQ) expansion, and thus might expand market access more than a formula with pivots.

The US made a market access counter proposal with significantly steeper cuts, ranging between 55 and 85 percent, depending on the level of the current tariff. Cuts within each band would be progressively higher. The US further suggested capping tariffs at below 100 percent (the G-20 proposal called a 100 percent cap for developed countries and 150 percent for developing countries). The US scenario did not suggest particular flexibilities for developing countries.

Speaking to journalists at the close of meetings on 23 September, US Trade Representative Portman said "The major accomplishment and achievement is that we’re now speaking off the same sheet, literally,” referring to the G-20 proposal on market access. "I am more optimistic with the talks today that we will be able to bridge our differences," he added.

A number of trade officials were less upbeat. They noted that although the participants had discussed different scenarios and tabled numbers, they had nothing concrete to show for the talks, and the differences among them remained wide. "Both sides now have a clearer idea of the other’s bottom line and how difficult it will be to bring their political constituencies along," noted one trade observer.

US inertia on domestic support

Less progress was made than expected on domestic support, where the US is under pressure from its trading partners to make some concessions. Although lower in real terms than those provided by the EU, US subsidies have been growing over the last year, and its so-called ‘counter-cyclical’ payments that compensate farmers when world market prices are low have come under fire from other WTO Members. The US plans to move them into the ‘Blue Box’ (partially de-coupled payments), where they would not be subject to the steeper cuts foreseen for Amber Box (trade distorting) support. Participants at the Paris meeting were disappointed that Washington did not table scenarios for reduction of domestic support at the meeting.

The EU informally said it would be able to cut domestic somewhat more than the 60 percent it had indicated in earlier talks, as long as others move in parallel.

In a speech in Washington after the meetings, Brazilian Foreign Minister Celso Amorim said "The final result cannot be a result that leaves everything as it is, just taking out some of what people at the WTO call ‘water,’" referring to the term given to the gap between Members’ maximum permissible level of domestic support and the subsidies that they actually provide. Cuts to US agricultural subsidies "must be real, otherwise there’ll be no breakthrough," he added.

Difficulties on the home front

Both the EU and US are facing internal constraints on their ability to move on agriculture. At a meeting on 19 September, EU agriculture ministers called on the European Commission to hold back on market access, especially given that the US is not moving with regard to internal support. Likewise, US lawmakers are actively following the talks, and demanding a good deal on market access before the US does anything on domestic support. The current Farm Bill, which introduced the controversial counter-cyclical payments, is set to expire in 2007 when Congress will replace it with a new one. Portman has stressed that "we will not be writing the farm bill in the WTO."

Next steps

In Geneva, the chair of the Special (negotiating) Session of the WTO Committee on Agriculture, Ambassador Crawford Falconer of New Zealand, has scheduled an informal stock-taking session for 29 September. He also invited Members to an informal consultation for transparency purposes on 30 September, where he will discuss recent developments in the farm trade talks. The next official "agriculture week" will begin on 17 October.

While recognising the need for political leadership from key Members, some delegates from smaller developing countries have expressed concerns about being excluded from the process.

Geneva delegates are permanently ‘on call’ during the short period left before the December Ministerial Conference in Hong Kong, and continue to hold discussions among each other in different configurations. Portman has called an informal mini-ministerial in Zurich on 10 October to follow up on the Paris meeting.

ICTSD reporting; "Key WTO players to meet in Switzerland next month," XFN-ASIA, 28 September 2005; "U.S. farm subsidy cuts needed for WTO deal - Brazil," REUTERS, 27 September 2005; "EU Signals Movement on Domestic Support, Seeks Significant Cuts From United States," WTO REPORTER, 27 September; "Doha talks go slow on farm issues," FINANCIAL TIMES, 25 September; "U.S., EU, Brazil, India Claim Progress in WTO Negotiations," BLOOMBERG, 23 September 2005; "Despite positive spin, trade talks still stuck," REUTERS, 23 September 2005.