Bridges Weekly Trade News Digest • Volume 9 • Number 5 • 16th February 2005
Tariff Conversion Main Sticking Point Of Agriculture Week
WTO delegates convened for the first ‘agriculture week’ of the year from 7-11 February. The meeting ended in an impasse over the conversion of tariffs based on quantities into ‘ad valorem’ equivalents (AVEs), i.e., tariffs based on the price of the product. Wrapping up the agriculture week in a formal meeting of the Committee on Agriculture (CoA) special (negotiating) session on 11 February, Chair Tim Groser of New Zealand urged Members to find agreement on the conversion of specific duties to AVEs. He repeated his concern over the technical impasse over ad valorem conversion at a 14 February meeting of the Trade Negotiations Committee (TNC; see related story, this issue), saying that unless agreement is found over the next couple of weeks, "our whole game plan is in jeopardy." Several Members echoed Groser’s plea, stressing the need to find a swift solution to the problem.
Members met informally in the special session of the CoA from 7-8 February to discuss, among others, the effects of and responses to the erosion of trade preferences for poor countries (see BRIDGES Weekly, 9 February 2005). In technical consultations from 9-10 February, Members discussed export credits and related special and differential treatment for developing countries. They wrapped up in a formal session on 11 February, which was preceded by the inconclusive debate on tariff conversion.
The agriculture negotiations are held in three different settings: in informal negotiating sessions open to the full Membership allowing for a first reading of issues; in more focused open-ended technical consultations that delve deeper into the issues; and in small group consultations involving technical experts.
Ad valorem conversion - ag week sticking point
The agriculture week provided Members with the opportunity to comment on a draft circulated in January by Chair Groser on how to convert ’specific’ duties to AVEs. A number of Members, such as the EU and G-10 group of net food-importing countries (including Switzerland and Japan), currently have tariffs in place that are based on the quantity or similar characteristics of particular imports. Several Members stressed that it was necessary to convert all such tariffs into more transparent, price-based AVEs before agreeing on the tariff-reduction formula. The G-10, however, said the formula should be agreed before the conversion process takes place.
Groser noted that since the conversion process is complex, a ‘fair approximation’ of AVEs should be the current aim, allowing Members to distinguish what tier a product would fall into. The different tiers would face different levels of tariff cuts under the formula on which Members agree to base their tariff reductions. A number of developing countries called for strict criteria for the conversion process, while the EU wanted more flexibility.
The verification stage of the conversion process turned out to be particularly controversial. The countries with specific duties generally preferred a flexible approach to the matter, without cumbersome verification requirements. Groser noted the need for a common formula that decreases the risk for "evasion, trickery, misunderstanding, call it what you like." In the future, Members will also have to agree on how to deal with so-called ’sensitive products’ that will be subject to less stringent tariff-reduction requirements - many of these are currently shielded behind specific tariff barriers. Chair Groser will revise his draft on AVEs following the latest set of talks as well as upcoming consultations.
Subsidy cuts: 20 percent down payment not sufficient
During the informal discussions at the beginning of the week, Members conducted a ‘first reading’ of the formula for cutting trade distorting domestic subsidies. Delegates noted that while they had agreed in the July Package (WT/L/579) to a down payment of a 20 percent cut in trade-distorting support during the first year of implementation, the effect of this cut would not be significant due to the gaps between countries’ allowed support levels and their actual support levels. The G-10 group of agricultural importers stressed that these gaps exist because countries have taken unilateral liberalisation measures, and argue that they should not be penalised for having done so by being asked to cut their support more. Others, such as New Zealand, countered that the original support allowances had been inflated.
In discussions on classifying countries for the purpose of determining the level of cuts they would be required to make in their subsidies, Canada singled out the EU as the most significant subsidiser, and said it should be placed in the highest tier. The US and Japan would fall into the next tier, meaning they would have to slash their distorting subsidies almost as sharply. Other countries would be placed in lower tiers. While these three Members provide the greatest levels of support in absolute terms, Australia and New Zealand — opposed by Switzerland — said that the amount of support should be considered in relation to a country’s size.
Other issues
Members also discussed export credits, an area well advanced in the negotiations. In the July Package, countries made a commitment to fully phase out export subsidies and other forms of trade-distorting export support, with the exact date to be negotiated. At the current meeting, Members considered what flexibilities should be granted to developing countries. Senegal (speaking for the LDC group) and Kenya, and some other Members proposed that longer repayment periods and lower interest rates for credits should be permissible for developing countries. Others cautioned, however, that such flexibilities might create loopholes and undermine the effectiveness of the commitment to end export subsidies. Malaysia suggested that subsidised credit should be allowed in order to promote South-South trade.
During the final meeting on 11 February, the G-20 and several other delegations opposed the inclusion in the upcoming set of discussions of "issues of interest but not agreed," such as geographic indications. They argued that core issues needed to be resolved first. The EU stressed that everything included in the July Package was part of the deal, and work should go ahead on all items.
The next agriculture week is scheduled for 14-18 March. Prior to this, Members will meet informally on or around 21 February to try to hash out a solution related to AVEs. Key ministers will convene in a mini-ministerial meeting in Kenya from 2-4 March that will include discussion on thorny agriculture issues. Members hope to agree on a ‘first approximation’ of negotiating modalities by the end of July, and on the full modalities by the next WTO ministerial meeting in December. After the modalities — tariff- and subsidy-reduction formulae, criteria for domestic support, schedules, deadlines, and transition periods — are agreed, Members will need to fill in their respective schedules of commitments.
ICTSD reporting; "WTO Ag Talks Chairman Warns Members Tariff Conversion Spat Must Settle in Weeks," WTO REPORTER, 15 February 2005.