Exploring the Realm of the Possible
On 30 April, the chair of the WTO agriculture negotiations Crawford Falconer released an outspoken assessment of where he saw ‘centres of gravity’ emerging across a wide range of areas.
While no Member found the document entirely – and some not even remotely – to its taste, there was a palpable feeling of relief that the negotiating process was resuming at the multilateral level after months of waiting for a breakthrough to occur outside the WTO.
Ambassador Falconer stressed that although his 28-page ‘challenges paper’ did offer an assessment of the ‘basic centre of gravity’ for a potential Doha Round agriculture deal, it was not a negotiating draft. Rather, it aimed to “promote serious engagement that sharpens the appetite for decision.” He cautioned that his sense of the broad parameters for an agreement was “not a matter of what I think is fair or right or even where the majority is. It is a more hard-nosed view of what I think is within the realm of the possible.”
Reacting to several Members’ comments that the paper lacked balance, the chair suggested that at least it had succeeded in engaging the membership on substance. “Everybody was doing what I would have expected, which is actually negotiating – they are all now trying to tug the blanket firmly to their side of the bed,” he said.
Key Points of the Paper
First, Ambassador Falconer stated that it was ‘frankly inconceivable’ that the US could come out of the negotiations “with an entitlement to spend more on overall trade distorting domestic support than it had when it came in.” The centre of gravity in play for the US, he concluded, would be somewhere between US$10-18 billion instead of the US$22 billion proposed by the US in October 2005. The EU and Japan want the US to go down to US$15 billion, while the G-20 coalition is seeking a US$12 billion spending cap. The EU would need to cut its own overall trade-distorting domestic support by more than 70 percent at a minimum, Mr Falconer said.
If the US is under pressure to lower subsidies, the EU faces strong demands to go further in lowering tariffs. So far, both have refused to move from their initial positions: the EU is not willing to cut its highest tariffs by more than 60 percent and the US insists that the reduction should be at least 83 percent. Mr Falconer said his sense was that the negotiations would have to deliver an overall cut above 50 percent for a deal to be possible. The EU’s current formal offer would result in a 39-percent overall reduction.
The number and treatment of ‘sensitive’ products that will not be subject to standard formula cuts are also major points of contention. Ambassador Falconer said tariffs on sensitive products would probably need to be cut by one- to two-thirds of the reduction that would be achieved through the formula. The likely number of sensitive products would be between one and five percent of all agricultural tariff lines.
Only developing countries have the option to designate ‘special products’ based on their food security, livelihood security and rural development needs (see page 3). Mr Falconer acknowledged that existing positions were far apart on this issue, but added that “those positions will not work. And everybody knows it.” Controversially, he argued that special products could not be entirely exempted from tariff cuts, and predicted that the membership might not accept more than five to eight percent of tariff lines to be designated as ‘special’. The G-33 coalition of developing countries had proposed that the ceiling must not be lower than 20 percent.
As a parting shot, Ambassador Falconer offered a ‘radical thought’ for Members to consider with regard to developing country market access. “Drop the tiered approach, drop the complicated flexibilities, two-third proportionalities, all the ‘specials’ debate,” he said. Instead, he proposed that developing countries could opt for a Uruguay Round-type of tariff reduction formula, cutting through “all the bands and proportions and just go for a straight overall average cut target for developing countries to meet however they choose, provided they simply make a minimum specified cut (which is of course well below the average target) on each line.”
See page 6 for further details of the challenges paper.
Initial Reactions
Predictably, virtually every Member that took the floor at the 7 May meeting of the Committee on Agriculture found fault with the document. The G-33 coalition of developing countries raised serious concerns about imbalances in the paper, which they said paid much greater attention to developed countries’ political sensitivities than those of developing countries. The group also emphasised that negotiations on ‘special products’ could not be based on the number of tariff lines alone, but should also take into account the indicators for their selection developed by the G-33 (Bridges Year 11 No.2 page 6). The G-20 cautioned that balance would not be found by averaging negotiating positions, but by “reference to the mandate and to the outcome in other areas of the negotiations.”
China noted that exemption from tariff cuts was one way to treat special products, and should be allowed at least for small and vulnerable economies, as well as very low tariffs. India’s commerce minister Kamal Nath warned that any outcome that would perpetuate structural flaws and distortions in agricultural trade, or not address the sensitivities of developing and least-developed countries, would run counter to the Doha Round’s development mandate and risk another failure of the negotiations.
Japan objected to Mr Falconer’s assessment that the cap for ‘sensitive’ would not exceed five percent at the most. Japan currently imposes high tariffs on 140 products, including rice, wheat, sugar and dairy products. These would be reduced to 66 if the five-percent limit percent were to be applied. Switzerland said the paper would not provide an acceptable basis for further negotiations. French agriculture minister Dominique Bussereau issued a statement asserting that the centres of gravity identified by Mr Falconer were beyond the EU’s margin of manoeuvre.
The US stressed that tariffs, rather than subsidies, were the main obstacle to market access, while the EU reiterated its long-standing position that to achieve an appropriate balance, it would be necessary to make equivalent concessions in the three pillars of the negotiations, i.e. market access (tariffs), domestic support and export competition.
Several developing countries said they were still assessing the implications of Ambassador Falconer’s suggestion that they could opt for a Uruguay Round approach to tariff reduction.
Next Steps
Around 14 May, Ambassador Falconer was expected to release a second challenges paper on issues not covered in the 30 April document. These include, inter alia, his thoughts on Green Box disciplines, tropical products and preference erosion. As of 21 May, intensive meetings will take place between the chair and smaller groups, as well as the membership at large. A new negotiating draft – or ‘modalities’ paper – is likely to be issued by late June.
G-4 trade ministers were to meet in Paris on 17-18 May. They are scheduled to continue negotiations in London on 10 June (the trade ministers of Japan and Australia may be invited to join these gatherings). The G-4 may also reconvene during the week of 14-19 June.