A possible further revision of the 19 May draft modalities for concluding the Doha Round negotiations on agriculture could help senior officials inch toward a compromise on some important technical issues ahead of a ministerial showdown expected in late June or early July.
However, it should be said at the outset that key differences remain unresolved. These include in particular the extent of subsidy and tariff cuts, which by common consent will be left for ministers to decide.
Significantly divergent draft provisions reflect the deep and persistent divide that still prevails on the number and treatment of the Special Products that developing countries will be able to slate for gentler tariff reductions on food security, livelihood security and rural development grounds, as well as the special safeguard mechanism under which developing countries will be allowed to raise applied tariffs to mitigate the impacts of sudden rises in import volumes or declines in prices. Given the continued lack of convergence, these issues are also likely to end up on the ministerial plate.
However, chair Crawford Falconer said that ongoing negotiations on tropical products and preference erosion could still bear fruit before the talks move into a horizontal phase where senior negotiators will start considering tradeoffs between agriculture and non-agricultural market access (NAMA).
Market Access Remains the Thorniest Area
Of the three areas of the agriculture talks, market access remains the most problematic. While Members have long agreed that tariffs will be classified into a series of bands, with the highest duties subject to the largest cuts, agreement is still lacking on the percentage by which tariffs in each band will be reduced. The May 2008 draft provides figures for the percentage cuts in the lower bands, taking the mid-point of the indicative ranges the chair had proposed previously. Cuts for the highest band, which are the most controversial, are still expressed as a range, and – unlike the lower bands – are still in square brackets denoting lack of consensus.
Also controversial has been the inclusion of a minimum 54-percent average cut for developed countries, which in the latest draft is no longer in square brackets. One source suggested that Members would now be unlikely to have difficulty achieving this, as the new text allows them to take into consideration, when calculating this average, the enhanced liberalisation relating to tropical products and the tariff ‘escalation’ on processed products.
Special Safeguard Mechanism: Two Very Different Options
Whether duties imposed by developing countries under the special safeguard mechanism (SSM) could exceed their bound Uruguay Round tariffs has been one the most hotly contested issues in the negotiations, and clearly remains so still.
The revised text on the SSM reorganises the options that the chair had set out before, setting them out as two broad options for negotiators to decide on (see in PDF).
Option A would allow applied tariffs to be raised as soon as imports exceed the preceding three-year rolling average by 5 percent. If the surge is more than 30 percent over the baseline, the applied tariff could be at least doubled. Importantly, Option A could result in a safeguard duty that exceeds the Uruguay Round bound tariff. This would be particularly easy when the post-Doha rate is low (see table in PDF).
Option B has much higher volume triggers. It would also limit applied tariff increases to the Uruguay Round bound level even when the import surge exceeds 55 percent. For volume increases between 35 and 55 percent, the tariff could be raised at most to the mid-point between Uruguay Round and the new, lower Doha Round bound rates. When faced with a 30 percent surge, a developing country could raise its applied tariff only to the Doha Round bound level. Since all WTO Members have the right to increase applied tariffs up their bound levels, developing countries would need no SSM provision to take such action.
In practice, the Uruguay Round limitation is likely to affect products not subject to full formula reductions. For any ‘special’ products totally exempt from tariff cuts (see below), the SSM could not be used at all.
SSM duties would normally apply for 12 months, the text says, unless seasonal products are involved, in which case the limit would be six months. In addition, the mechanism could not be invoked for more than three to eight products (these numbers are bracketed) in a given 12-month period.
Special Products Text Revised Developing countries may designate a proportion of their agricultural tariff lines as ‘special’ based on their food security, livelihood security and rural development needs. These products are eligible for ‘more favourable treatment’. The number SP tariff lines and the nature of ‘more favourable treatment’ remain among the most polarising issues in the negotiations.
The revised text captures the extent of the divisions through including the highest and lowest proposals put forward by Members. For instance, developing countries could be allowed to designate a minimum of 8 percent and a maximum of 20 percent of their tariff lines as special. Either 40 percent or none of these Special Products would be exempt from undertaking tariff cuts. Remaining tariff lines would undertake an average 15-percent cut, with a minimum 12-percent and maximum 20-percent cut per line. This simplifies the previous draft, which had suggested up to three different categories of SP tariff lines.
The G-33 coalition of developing countries has rejected the lower figures included in the revision (Bridges Year 12 No.2 page 5).
Sensitive Products Compromise
It has been agreed since July 2004, that all WTO Members may designate a certain number of their agricultural tariff lines as sensitive. The current, still bracketed, figures suggest that the limit be 4-6 percent of all tariff lines for developed countries and onethird more for developing countries.
Tariffs on these products will be cut less steeply than the formula would require, but ‘substantial improvement’ in market access must be offered, notably through the expansion of existing import quotas. How to calculate the amount by which a given quota must be enlarged dominated the agriculture negotiations in the recent weeks.
Although agreement has been reached that quota expansion should be based on the domestic consumption of the product in question, lack of data and the level of precision – ‘beef ’ in general or specific cuts of beef – made it difficult to would-be exporters to assess how much their market access would improve.
The May modalities revision includes, as one of two options, the complex methodology for designating sensitive products first put forward in early April by Australia, Brazil, Canada, Japan, the EU and the US informally dubbed the G-6 (Bridges Year 12 No.2 page 1). It provides countries with a means to allocate, at the more detailed 8- digit tariff level under the harmonised system, product-specific domestic consumption data which is often available only at the broader 6-digit level. Members had earlier agreed that domestic consumption figures will be used as the basis for quota expansion.
While some countries, such as Argentina, still oppose this approach, others have agreed that it could serve as a basis for further negotiations. Developed country Members which still have more than 4 percent of their tariffs above 100 percent after the tariff cut formula has been applied will have to offer additional quota expansion, which the new draft stipulates should be 0.5 percent of domestic consumption. The draft also includes some additional options for developing countries that have to expand import quotas for their sensitive products.
Tropical Products and Preference Erosion
The group of Latin American countries that favour enhanced liberalisation for tropical products has continued to negotiate informally with the EU, as indeed has the African, Caribbean and Pacific (ACP) group of countries that are concerned about the erosion of preferential access to developed country markets. For some particularly controversial products, such as bananas and sugar, the two groups seek opposing treatment. Tropical liberalisation proponents were reported to be continuing detailed negotiations on individual tariff lines with various developed country importers, in the hope of establishing either one common list of products for enhanced liberalisation or a set of country-specific liberalisation commitments.
More Leeway for New WTO Members’ High Tariffs
The text provides some new flexibility for ‘recently acceded Members’ (RAMs) – a group of countries, including China, that have argued that they have already undertaken onerous accession commitments recently, and thus should be treated more leniently. Whereas the previous draft proposed allowing these countries to moderate by 7.5 percent the tariffs cuts they make in all bands, the new one would allow cuts to tariffs in the top two bands to be moderated by up to 10 percentage points, and those in the bottom two bands to be moderated by five percentage points.
Options for Current Special Safeguard
Whether to eliminate or retain the existing ‘special agricultural safeguard’ (SSG) has also been contentious, with efficient agricultural exporters in the Cairns Group calling for its immediate termination, and importing Members such as the EU, Japan and Switzerland favouring its continuation. The latest draft again offers two options: either eliminate it for developed countries, or reduce its use to 1.5 percent of their scheduled tariff lines. For developing countries, it proposes a new figure of 3 percent of lines.
Domestic Subsidies
The draft retains the bracketed 66 or 73 percent proposed cut for overall trade-distorting subsidies for the US and Japan, as well as the 75 or 85 percent cut for the EU. All other Members would have to undertake a 50 or 60 percent cut. The US in particular is under pressure from other Members to reduce its maximum permitted subsidy level. The new draft now contains an annex giving a detailed breakdown of US subsidies that could be subject to requirements under the less trade-distorting Amber Box, as well as a cleaned up version of proposed Green Box disciplines aimed at ensuring that subsidies in this category really are ‘minimally’ trade-distorting.
Changes to Text Still Possible
At the time of writing, Members were scheduled to meet towards mid-June to take stock of informal consultations on a number of issues. Chair Falconer held out hope that at least options on the SSM could still be streamlined, and that ongoing negotiations on tropical products/preference erosion could yield enough progress to be reflected in a revised text, possibly to be issued in the latter half of June. It was hoped that the exercise would lead to a draft with as few ‘moving parts’ as possible to facilitate ministerial decision-making.