MARKET ACCESS FLEXIBILITIES UP FOR DISCUSSION IN WTO FARM TALKS

Even as ministerial-level talks between five influential WTO Members fell apart in Geneva last week (see related story, this issue), trade negotiators continued to hold informal meetings. Market access remains a major point of contention, and not just from countries that would like to see steeper reductions in farm tariffs. The group of African, Caribbean and Pacific (ACP) countries made a new market access proposal that highlighted the vulnerability of many developing countries to the unrestrained opening of markets.

Many groups of Members have come forward with specific proposals outlining the flexibilities that they would like to be accorded in the application of the tariff reduction formula.

ACP countries call attention to development issues

The ACP group tabled its new proposal at a 21 October informal meeting of the Special (negotiating) Session of the Committee on Agriculture. Its formula would classify tariffs into four tiers for reduction: for developing countries, products with tariffs of 0-50 percent, 50-100 percent, 100-150 percent and over 150 percent; the corresponding tiers for developed countries would be 0-20, 20-50, 50-80 and over 80 percent. Developing countries would make tariff cuts ranging from 15 to 30 percent; those required of developed countries were not specified.

While the pressure mounts on the EU to come forward with a more ambitious market access proposal, the ACP Group noted that a large number of developing countries -- including its 79 WTO Members -- actually favour a more cautious approach to farm tariff reduction.

The ACP proposal also provides for special consideration for developing countries that bound their tariffs at a very high uniform rate during the Uruguay Round -- otherwise, these countries' tariffs would fall into high tiers in all of the current market access proposals, where they would be slated for steep percentage reductions.

The ACP Group expressed the view that negotiations among the Five Interested Parties (FIPs) were racing ahead without paying adequate heed to issues of importance to many developing countries, and called for a transparent and inclusive negotiating process.

ACP countries promised to table a more detailed proposal on the erosion of long-standing preferences -- one of their key concerns. Their request that "products relating to long-standing preferences shall be designated as sensitive products" -- which would allow developed countries to somewhat mitigate the extent of preference erosion -- ran up against the G-20's suggestion that developed countries be prohibited from listing tropical products as sensitive. At the 21 October meeting, a number of developing countries looking for expanded market access for tropical products said that the ACP's proposed approach might hurt their exports both to developing and developed countries.

Different groups put forward views on sensitive products

The issue of sensitive products, which both developing and developed countries may designate for tariff cuts more lenient than those required by the formula, has pitted relatively protectionist Members like the EU and G-10 (net food importing, mainly developed countries), against the US and Cairns Group countries, which are looking for expanded market access. Following its recent paper on market access (see BRIDGES Weekly, 12 October 2005), the G-20 tabled a new proposal on sensitive products on 19 October.

The new G-20 paper would allow developed country Members to designate a maximum of one percent of their tariff lines as 'sensitive.' Overall, a reduction 30 percent lower than the regular tariff cut within a tier would be the maximum permitted deviation. However, all sensitive products would be subject to tariff rate quota (TRQ) expansion, and the more lenient the tariff cut applied, the greater the TRQ expansion. Similarly, the more tariff lines a country chooses to designate as sensitive, the less flexible their treatment would be. Sensitive products would, as all other products, be subject to tariff caps, and Members would be prohibited from creating new TRQs for products that do not currently have any. The paper also requested Members to table their "wish lists" for sensitive products before the Hong Kong Ministerial Conference in December.

The G-20 paper also spelled out principles for special and differential treatment (S&D) with regard to sensitive products. Developing countries would be able to designate 50 percent more sensitive products than developed countries, i.e., 1.5 percent of tariff lines. Their particular situations -- including features such as the importance of subsistence farming to domestic consumption -- would be taken into account when considering TRQ expansion. Developing countries would also be allowed to create a limited number of TRQs for products without them that they choose to designate as sensitive. Least-developed countries would be exempted from TRQ expansions.

Australia also presented a paper on sensitive products on 19 October, seeking a simple approach with flexibility for sensitive products built directly into the tiered market access formula. For each tier, a standard combination of a tariff reduction and TRQ expansion would apply; the higher the tier, the larger the combined tariff cut and TRQ expansion required for a sensitive product in the tier. Sensitive products would be limited to "a limited number of total dutiable agricultural tariff lines covering no more than a small proportion of imports."

The US, in its recent market access proposal, had called for a "minimal number of 'sensitive products' subject to lesser tariff reductions: one percent of tariff lines, with full compensation via TRQ expansion."

The EU, on the other hand, had suggested allowing up to eight percent of tariff lines to be designated as sensitive and made subject to lesser tariff cuts within their respective tariff tier, albeit in combination with TRQ expansion. It would exempt such products from a tariff cap.

The G-10 proposal outlined two options for market access, and required Members to choose between a more flexible formula and designating more products as sensitive. Members opting for the flexible formula would be allowed to make constrained deviations from the average cut for products within each tier, but would be allowed fewer sensitive products than countries that choose the less flexible formula.

According to this proposal, market access for sensitive products would be expanded through a standard combination of a tariff cut and TRQ expansion. Lower tariff cuts for such products would have to be compensated for by larger TRQ expansions, and vice versa. The G-10 would give special consideration to products with TRQs that already are large as compared to domestic consumption. It would also grant Members with a large number of tariff lines in the highest tiers additional sensitive products, in order to account for differences in tariff structures. The G-10 opposes any tariff caps.

G-33 outlines thinking on Special Products

The G-33, which supports allowing developing countries to designate 'Special Products' (SPs) for low tariff cuts based on food security, livelihood security and rural development criteria, tabled a paper on 12 October on how SPs could be identified. The paper went on to be endorsed by the ACP countries' market access proposal, which called for SPs to be completely exempt from tariff cuts and TRQ commitments.

Noting that each country's situation is unique and that Members will apply their own set of indicators when designating their respective SPs, the paper elaborated on indicators under each of the three broad sets of criteria. National level food security concerns included access to food across regions and in individual households, as well as the share of a product in average caloric intake. International ones included countries' vulnerability to supply interruptions.

With regard to assessing the importance of products to livelihood security, the paper focused heavily on the role of small and resource-poor farmers in the production of particular crops that may be displaced by imports. It also said that the needs of special groups, such as tribal communities or women, or products from disadvantaged geographical regions could be taken into account. On rural development, the paper noted the need for options to improve the living conditions of rural populations, based both on existing products and the potential for value addition in rural areas. The G-33 noted that countries should have the flexibility to designate new SPs in place of existing ones as circumstances change.

Notably, the G-33 paper contended that products whose world market prices are distorted by rich country subsidies should be automatically eligible for SP status.

Although discussions in Geneva have slowed down in anticipation of a new market access offer by the EU, negotiators are permanently on call. Agriculture Chair Ambassador Crawford Falconer of New Zealand has committed to holding briefings for the full Membership on a regular basis, and is planning what he terms an information 'clinic' early next week.

ICTSD will provide an update on the negotiations in the next issue of BRIDGES Weekly.

ICTSD reporting.